UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number: 811-21829
BBH TRUST
On behalf of the following series:
BBH U.S. Government Money Market Fund
(Exact name of registrant as specified in charter)
140 Broadway, New York, NY 10005
(Address of principal executive offices) (Zip Code)
Corporation Services Company
2711 Centerville Road, Suite 400, Wilmington, DE 19808
(Name and address of agent for service)
Registrant's telephone number, including area code: (800) 575-1265
Date of fiscal year end: June 30
Date of reporting period: December 31, 2016
Item 1. Report to Stockholders.
BBH U.S. GOVERNMENT MONEY MARKET FUND
PORTFOLIO ALLOCATION
December 31, 2016 (unaudited)
U.S. $ Value | Percent of Net Assets | |||||||||
U.S. Government Agency Obligations | $ | 515,657,826 | 22.3 | % | ||||||
U.S. Treasury Bills | 1,604,131,395 | 69.5 | ||||||||
Repurchase Agreements | 175,000,000 | 7.6 | ||||||||
Cash and Other Assets in Excess of Liabilities | 13,292,630 | 0.6 | ||||||||
NET ASSETS | $ | 2,308,081,851 | 100.0 | % |
The accompanying notes are an integral part of these financial statements.
BBH U.S. GOVERNMENT MONEY MARKET FUND
PORTFOLIO OF INVESTMENTS
December 31, 2016 (unaudited)
Principal Amount | Maturity Date | �� | Interest Rate | Value | ||||||||||||
U.S. GOVERNMENT AGENCY OBLIGATIONS (22.3%) | ||||||||||||||||
$ 23,000,000 | Fannie Mae Discount Notes1 | 01/11/17 | 0.410 | % | $ | 22,997,381 | ||||||||||
20,900,000 | Fannie Mae Discount Notes1 | 02/08/17 | 0.491 | 20,889,190 | ||||||||||||
22,000,000 | Fannie Mae Discount Notes1 | 02/15/17 | 0.481 | 21,986,800 | ||||||||||||
65,000,000 | Federal Home Loan Bank Discount Notes1 | 01/11/17 | 0.400 | 64,992,778 | ||||||||||||
55,000,000 | Federal Home Loan Bank Discount Notes1,2 | 01/13/17 | 0.482 | 54,991,167 | ||||||||||||
50,000,000 | Federal Home Loan Bank Discount Notes1 | 02/02/17 | 0.460 | 49,979,556 | ||||||||||||
25,000,000 | Federal Home Loan Bank Discount Notes1 | 02/28/17 | 0.521 | 24,979,055 | ||||||||||||
45,000,000 | Federal Home Loan Bank Discount Notes1 | 03/08/17 | 0.526 | 44,956,687 | ||||||||||||
75,000,000 | Federal Home Loan Bank Discount Notes1 | 03/17/17 | 0.551 | 74,914,062 | ||||||||||||
135,000,000 | Freddie Mac Discount Notes1,2 | 01/19/17 | 0.428 | 134,971,150 | ||||||||||||
Total U.S. Government Agency Obligations (Identified cost $515,657,826) | 515,657,826 | |||||||||||||||
U.S. TREASURY BILLS (69.5%) | ||||||||||||||||
50,000,000 | U.S. Treasury Bill1,2 | 01/12/17 | 0.330 | 49,994,970 | ||||||||||||
340,000,000 | U.S. Treasury Bill1,2 | 01/19/17 | 0.312 | 339,947,004 | ||||||||||||
100,000,000 | U.S. Treasury Bill1,2 | 01/26/17 | 0.352 | 99,975,538 | ||||||||||||
300,000,000 | U.S. Treasury Bill1,2 | 02/02/17 | 0.323 | 299,913,862 | ||||||||||||
130,000,000 | U.S. Treasury Bill1,2 | 02/09/17 | 0.404 | 129,943,112 | ||||||||||||
115,000,000 | U.S. Treasury Bill1,2 | 02/16/17 | 0.435 | 114,936,169 | ||||||||||||
120,000,000 | U.S. Treasury Bill1,2 | 02/23/17 | 0.481 | 119,915,145 | ||||||||||||
140,000,000 | U.S. Treasury Bill1,2 | 03/02/17 | 0.477 | 139,888,783 | ||||||||||||
100,000,000 | U.S. Treasury Bill1,2 | 03/09/17 | 0.496 | 99,907,731 | ||||||||||||
95,000,000 | U.S. Treasury Bill1,2 | 03/16/17 | 0.504 | 94,901,744 | ||||||||||||
65,000,000 | U.S. Treasury Bill1,2 | 03/23/17 | 0.508 | 64,925,750 |
The accompanying notes are an integral part of these financial statements.
financial statements december 31, 2016 | 3 |
BBH U.S. GOVERNMENT MONEY MARKET FUND
PORTFOLIO OF INVESTMENTS (continued)
December 31, 2016 (unaudited)
Principal Amount | Maturity Date | Interest Rate | Value | |||||||||||||
U.S. TREASURY BILLS (continued) | ||||||||||||||||
$ 25,000,000 | U.S. Treasury Bill1 | 05/04/17 | 0.569 | % | $ | 24,951,483 | ||||||||||
25,000,000 | U.S. Treasury Bill1 | 06/15/17 | 0.612 | 24,930,104 | ||||||||||||
Total U.S. Treasury Bills (Identified cost $1,604,131,395) | 1,604,131,395 | |||||||||||||||
REPURCHASE AGREEMENTS (7.6%) | ||||||||||||||||
55,000,000 | BNP Paribas (Agreement dated 12/30/16 collateralized by FAMC 0.810%-1.700%, due 03/23/17-02/28/19, original par $23,000, value $23,079, FHLMC 2.280%-6.000%, due 04/01/25-11/01/44, original par $13,894,752, value $3,598,559, FNMA 3.500%-7.500%, due 01/01/18-09/01/46, original par $64,916,952, value $17,802,603, GNMA 2.000%-4.500%, due 08/20/21-08/20/46, original par $505,325,213, value $34,575,557, U.S. Treasury Securities 0.000%-3.500%, due 01/05/17-05/15/20, original par $98,400, value $100,227) | 01/03/17 | 0.480 | 55,000,000 | ||||||||||||
65,000,000 | National Australia Bank Ltd. (Agreement dated 12/30/16 collateralized by U.S. Treasury Inflation Indexed Notes 0.125%, due 4/15/20, original par $63,670,000, value $66,300,000) | 01/03/17 | 0.300 | 65,000,000 |
The accompanying notes are an integral part of these financial statements.
BBH U.S. GOVERNMENT MONEY MARKET FUND
PORTFOLIO OF INVESTMENTS (continued)
December 31, 2016 (unaudited)
Principal Amount | Maturity Date | Interest Rate | Value | |||||||||||||
REPURCHASE AGREEMENTS (continued) | ||||||||||||||||
$ 55,000,000 | Societe Generale (Agreement dated 12/30/16 collateralized by GNMA 2.000%-3.500%, due 12/20/27-11/20/45, original par $730,401,518, value $8,655,966, U.S. Treasury Securities 0.750%-8.000%, due 01/15/19-11/15/21, original par $42,945,900, value $47,444,034) | 01/03/17 | 0.510 | % | $ | 55,000,000 | ||||||||||
Total Repurchase Agreements (Identified cost $175,000,000) | 175,000,000 | |||||||||||||||
TOTAL INVESTMENTS (Identified cost $2,294,789,221)3 | 99.4 | % | $ | 2,294,789,221 | ||||||||||||
CASH AND OTHER ASSETS IN EXCESS OF LIABILITIES | 0.6 | % | 13,292,630 | |||||||||||||
NET ASSETS | 100.0 | % | $ | 2,308,081,851 |
1 | Coupon represents a yield to maturity. |
2 | Coupon represents a weighted average yield. |
3 | The cost of securities for federal income tax purpose is substantially the same as for financial reporting purposes. |
The accompanying notes are an integral part of these financial statements.
financial statements december 31, 2016 | 5 |
BBH U.S. GOVERNMENT MONEY MARKET FUND
PORTFOLIO OF INVESTMENTS (continued)
December 31, 2016 (unaudited)
— | Level 1 – unadjusted quoted prices in active markets for identical investments. |
— | Level 2 – significant other observable inputs (including quoted prices for similar investments, interest rates, prepayment speeds, credit risk, etc.). |
— | Level 3 – significant unobservable inputs (including the Fund’s own assumptions in determining the fair value of investments). |
The accompanying notes are an integral part of these financial statements.
BBH U.S. GOVERNMENT MONEY MARKET FUND
PORTFOLIO OF INVESTMENTS (continued)
December 31, 2016 (unaudited)
Investments, at value | Unadjusted Quoted Prices in Active Markets for Identical Investments (Level 1)* | Significant Other Observable Inputs (Level 2)* | Significant Unobservable Inputs (Level 3)* | Balance as of December 31, 2016 | ||||||||||||||
U.S. Government Agency Obligations | $ | – | $ | 515,657,826 | $ | – | $ | 515,657,826 | ||||||||||
U.S. Treasury Bills | – | 1,604,131,395 | – | 1,604,131,395 | ||||||||||||||
Repurchase Agreements | – | 175,000,000 | – | 175,000,000 | ||||||||||||||
Total Investment, at value | $ | – | $ | 2,294,789,221 | $ | – | $ | 2,294,789,221 |
* | The Fund’s policy is to disclose transfers between levels based on valuations at the end of the reporting period. There were no transfers between Levels 1, 2 or 3 during the period ended December 31, 2016. |
The accompanying notes are an integral part of these financial statements.
financial statements december 31, 2016 | 7 |
BBH U.S. GOVERNMENT MONEY MARKET FUND
STATEMENT OF ASSETS AND LIABILITIES
December 31, 2016 (unaudited)
ASSETS: | ||||||
Investments, at amortized cost with approximates fair value | $ | 2,119,789,221 | ||||
Repurchase agreements (Identified cost $175,000,000) | 175,000,000 | |||||
Cash | 13,977,325 | |||||
Receivables for: | ||||||
Interest | 4,108 | |||||
Prepaid assets | 10,485 | |||||
Total Assets | 2,308,781,139 | |||||
LIABILITIES: | ||||||
Payables for: | ||||||
Investment advisory and administrative fees | 493,585 | |||||
Custody and fund accounting fees | 79,063 | |||||
Professional fees | 43,097 | |||||
Dividends declared | 36,775 | |||||
Shareholder servicing fees | 7,790 | |||||
Distributor fees | 5,689 | |||||
Transfer agent fees | 4,432 | |||||
Board of Trustees’ fees | 3,223 | |||||
Accrued expenses and other liabilities | 25,634 | |||||
Total Liabilities | 699,288 | |||||
NET ASSETS | $ | 2,308,081,851 | ||||
Net Assets Consist of: | ||||||
Paid-in capital | $ | 2,308,082,712 | ||||
Distributions in excess of net investment income | (861 | ) | ||||
Net Assets | $ | 2,308,081,851 | ||||
NET ASSET VALUE AND OFFERING PRICE PER SHARE | ||||||
REGULAR SHARES |
($50,573,520 ÷ 50,577,727 shares outstanding) | $1.00 | |||||
INSTITUTIONAL SHARES | ||||||
($2,257,508,331 ÷ 2,257,510,166 shares outstanding) | $1.00 |
The accompanying notes are an integral part of these financial statements.
BBH U.S. GOVERNMENT MONEY MARKET FUND
STATEMENT OF OPERATIONS
For the six months ended December 31, 2016 (unaudited)
NET INVESTMENT INCOME: | ||||||
Income: | ||||||
Interest and other income | $ | 3,433,707 | ||||
Expenses: | ||||||
Investment advisory and administrative fees | 2,462,018 | |||||
Custody and fund accounting fees | 112,746 | |||||
Shareholder servicing fees | 49,663 | |||||
Professional fees | 30,723 | |||||
Board of Trustees’ fees | 27,810 | |||||
Distributor fees | 15,869 | |||||
Transfer agent fees | 11,002 | |||||
Miscellaneous expenses | 68,821 | |||||
Total Expenses | 2,778,652 | |||||
Investment advisory and administrative fee/shareholder servicing fee waivers | (48,908 | ) | ||||
Expense offset arrangement | (41,619 | ) | ||||
Net Expenses | 2,688,125 | |||||
Net Investment Income | 745,582 | |||||
NET REALIZED LOSS: | ||||||
Net realized loss on investments | (4,288 | ) | ||||
Net Increase in Net Assets Resulting from Operations | $ | 741,294 |
The accompanying notes are an integral part of these financial statements.
financial statements december 31, 2016 | 9 |
BBH U.S. GOVERNMENT MONEY MARKET FUND
STATEMENTS OF CHANGES IN NET ASSETS
For the six months ended December 31, 2016 (unaudited) | For the year ended June 30, 2016 | |||||||||
INCREASE IN NET ASSETS: | ||||||||||
Operations: | ||||||||||
Net investment income | $ | 745,582 | $ | 431,980 | ||||||
Net realized gain (loss) on investments | (4,288 | ) | 34,951 | |||||||
Net increase in net assets resulting from operations | 741,294 | 466,931 | ||||||||
Distributions declared: | ||||||||||
From net investment income: | ||||||||||
Regular Shares | (2,483 | ) | (66,230 | ) �� | ||||||
Institutional Shares | (738,811 | ) | (400,701 | ) | ||||||
Total distributions declared | (741,294 | ) | (466,931 | ) | ||||||
From Fund Share (Principal) Transactions at Net Asset Value of $1.00 per share: | ||||||||||
Fund shares sold and fund shares issued in connection with reinvestments of dividends | 3,145,155,434 | 8,356,421,845 | ||||||||
Fund shares repurchased | (2,491,542,538 | ) | (8,266,399,633 | ) | ||||||
Net increase in net assets resulting from fund share transactions | 653,612,896 | 90,022,212 | ||||||||
Total increase in net assets | 653,612,896 | 90,022,212 | ||||||||
NET ASSETS: | ||||||||||
Beginning of period | 1,654,468,955 | 1,564,446,743 | ||||||||
End of period (including distributions in excess of net investment income of $861 and $861, respectively) | $ | 2,308,081,851 | $ | 1,654,468,955 |
The accompanying notes are an integral part of these financial statements.
BBH U.S. GOVERNMENT MONEY MARKET FUND
FINANCIAL HIGHLIGHTS
Selected per share data and ratios for a Regular Share outstanding throughout each period.
For the years ended June 30, | |||||||||||||||||||||||||||
For the six months ended December 31, 2016 (unaudited) | 2016 | 2015 | 2014 | 2013 | 2012 | ||||||||||||||||||||||
Net asset value, beginning of period | $ | 1.00 | $ | 1.00 | $ | 1.00 | $ | 1.00 | $ | 1.00 | $ | 1.00 | |||||||||||||||
Income from investment operations: | |||||||||||||||||||||||||||
Net investment income1,2 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | |||||||||||||||||||||
Distributions to shareholders: | |||||||||||||||||||||||||||
From net investment income2 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | |||||||||||||||||||||
From net realized gains | — | — | 0.00 | 2 | — | — | — | ||||||||||||||||||||
Total distributions2 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | |||||||||||||||||||||
Net asset value, end of period | $ | 1.00 | $ | 1.00 | $ | 1.00 | $ | 1.00 | $ | 1.00 | $ | 1.00 | |||||||||||||||
Total return | 0.01 | %3 | 0.01 | % | 0.01 | % | 0.01 | % | 0.01 | % | 0.01 | % | |||||||||||||||
Ratios/Supplemental data: | |||||||||||||||||||||||||||
Net assets, end of period (in millions) | $ | 51 | $ | 49 | $ | 1,127 | $ | 1,151 | $ | 1,181 | $ | 1,006 | |||||||||||||||
Ratio of expenses to average net assets before reductions | 0.49 | %4 | 0.48 | % | 0.51 | % | 0.50 | % | 0.51 | % | 0.52 | % | |||||||||||||||
Expense reimbursement5 | 0.20 | %4 | 0.38 | % | 0.44 | % | 0.43 | % | 0.38 | % | 0.36 | % | |||||||||||||||
Expense offset arrangement6 | 0.00 | %4 | 0.00 | % | 0.00 | % | 0.00 | % | 0.00 | % | 0.00 | % | |||||||||||||||
Ratio of expenses to average net assets net of reductions | 0.29 | %4 | 0.10 | % | 0.07 | % | 0.07 | % | 0.13 | % | 0.16 | % | |||||||||||||||
Ratio of net investment income to average net assets | 0.01 | %4 | 0.01 | % | 0.01 | % | 0.01 | % | 0.01 | % | 0.01 | % |
1 | Calculated using average shares outstanding for the period. |
2 | Less than $0.01 per share. |
3 | Not annualized. |
4 | Annualized. |
5 | During the period ended December 31, 2016 and years ended June 30, 2016, 2015, 2014, 2013 and 2012, the investment advisory and administrative fee/shareholder servicing fee waivers, as a result of a minimum yield agreement, were $48,908, $2,511,954, $5,166,811, $5,511,949, $4,803,182 and $4,247,736, respectively. |
6 | Less than 0.01%. |
The accompanying notes are an integral part of these financial statements.
financial statements december 31, 2016 | 11 |
BBH U.S. GOVERNMENT MONEY MARKET FUND
FINANCIAL HIGHLIGHTS (continued)
Selected per share data and ratios for an Institutional Share outstanding throughout each period.
For the years ended June 30, | |||||||||||||||||||||||||||
For the six months ended December 31, 2016 (unaudited) | 2016 | 2015 | 2014 | 2013 | 2012 | ||||||||||||||||||||||
Net asset value, beginning of period | $ | 1.00 | $ | 1.00 | $ | 1.00 | $ | 1.00 | $ | 1.00 | $ | 1.00 | |||||||||||||||
Income from investment operations: | |||||||||||||||||||||||||||
Net investment income1,2 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | |||||||||||||||||||||
Distributions to shareholders: | |||||||||||||||||||||||||||
From net investment income2 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | |||||||||||||||||||||
From net realized gains | — | — | 0.00 | 2 | — | — | — | ||||||||||||||||||||
Total distributions2 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | |||||||||||||||||||||
Net asset value, end of period | $ | 1.00 | $ | 1.00 | $ | 1.00 | $ | 1.00 | $ | 1.00 | $ | 1.00 | |||||||||||||||
Total return | 0.03 | %3 | 0.02 | % | 0.01 | % | 0.01 | % | 0.01 | % | 0.01 | % | |||||||||||||||
Ratios/Supplemental data: | |||||||||||||||||||||||||||
Net assets, end of period (in millions) | $ | 2,258 | $ | 1,605 | $438 | $467 | $532 | $534 | |||||||||||||||||||
Ratio of expenses to average net assets before reductions | 0.24 | %4 | 0.25 | % | 0.26 | % | 0.26 | % | 0.26 | % | 0.27 | % | |||||||||||||||
Expense reimbursement5 | — | 0.05 | % | 0.19 | % | 0.19 | % | 0.13 | % | 0.11 | % | ||||||||||||||||
Expense offset arrangement6 | 0.00 | %4 | 0.00 | % | 0.00 | % | 0.00 | % | 0.00 | % | 0.00 | % | |||||||||||||||
Ratio of expenses to average net assets net of reductions | 0.24 | %4 | 0.20 | % | 0.07 | % | 0.07 | % | 0.13 | % | 0.16 | % | |||||||||||||||
Ratio of net investment income to average net assets | 0.07 | %4 | 0.03 | % | 0.01 | % | 0.01 | % | 0.01 | % | 0.01 | % |
1 | Calculated using average shares outstanding for the period. |
2 | Less than $0.01 per share. |
3 | Not annualized. |
4 | Annualized. |
5 | During the period ended December 31, 2016 and years ended June 30, 2016, 2015, 2014, 2013 and 2012, the investment advisory and administrative fee waivers, as a result of a minimum yield agreement, were $–, $573,823, $1,015,043, $1,046,949, $666,139 and $699,105, respectively. |
6 | Less than 0.01%. |
The accompanying notes are an integral part of these financial statements.
BBH U.S. GOVERNMENT MONEY MARKET FUND
NOTES TO FINANCIAL STATEMENTS
December 31, 2016 (unaudited)
1. | Organization. The Fund is a separate series of BBH Trust (the “Trust”), which is registered under the 1940 Act, as an open-end management investment company. The Trust was originally organized as a Massachusetts business trust on June 7, 1983 and re-organized as a Delaware statutory trust on June 12, 2007. The Fund commenced operations on December 12, 1983. The Declaration of Trust permits the Board of Trustees of the Trust (the “Board”) to create an unlimited number of series, each of which may issue a separate class of shares. The Fund currently offers two classes of shares, Regular Shares and Institutional Shares. At December 31, 2016, there were six series of the Trust. |
In July 2014, the U.S. Securities and Exchange Commission (the “SEC”) adopted amendments to the governing rules for money market funds, such amendments becoming effective over a two-year implementation period. As part of these rule changes, effective April 1, 2016, the Fund converted to a government money market fund and in so doing changed its name to the BBH U.S. Government Money Market Fund. |
2. | Significant Accounting Policies. The Fund’s financial statements are prepared in accordance with Generally Accepted Accounting Principles in the United States of America (“GAAP”). The Fund is an investment company and accordingly follows the investment company accounting and reporting guidance of the Financial Accounting Standards Board (FASB) Accounting Standard Codification Topic 946 Financial Services — Investment Companies. The following summarizes significant accounting policies of the Fund: |
A. | Valuation of Investments. The Fund values its investments at amortized cost, which approximates fair value. The amortized cost method values a security at its cost at the time of purchase and thereafter assumes a constant amortization to maturity of any discount or premium. The Fund’s use of amortized cost is in compliance with Rule 2a-7 of the 1940 Act. In the event that security valuations do not approximate fair value, securities may be valued as determined in accordance with procedures adopted by the Board. |
B. | Accounting for Investments and Income. Investment transactions are accounted for on the trade date. Realized gains and losses on investment transactions are determined based on the identified cost method. Interest income is accrued as earned and consists of interest accrued, accretion of discount on debt securities (including both original issue and market discount) and premium amortization on the investments of the Fund. |
C. | Fund Expenses. Most expenses of the Trust can be directly attributed to a specific fund. Expenses which cannot be directly attributed to a fund are apportioned amongst each fund in the Trust equally. Expense estimates are accrued in the period to which they relate and adjustments are made when actual amounts are known. |
financial statements december 31, 2016 | 13 |
BBH U.S. GOVERNMENT MONEY MARKET FUND
NOTES TO FINANCIAL STATEMENTS (continued)
December 31, 2016 (unaudited)
D. | Repurchase Agreements. The Fund may enter into repurchase agreements. Repurchase agreements are transactions in which the Fund buys a security from a dealer or bank and agrees to sell the security back at a mutually agreed upon time and price. The repurchase price normally is in excess of the purchase price, reflecting an agreed upon interest rate. The rate is effective for the period of time that assets of the Fund are invested in the agreement and is not related to the coupon rate on the underlying security. The Fund will enter into repurchase agreements only with banks and other recognized financial institutions, such as securities dealers, deemed creditworthy by the investment adviser. The Fund’s custodian or sub-custodian will take possession of the securities subject to repurchase agreements. The investment adviser, custodian or sub-custodian will monitor the marked-to-market value of the underlying collateral each day to ensure that the value of the security always equals or exceeds the repurchase price. |
E. | Federal Income Taxes. It is the Trust’s policy to comply with the requirements of the Internal Revenue Code (the “Code”) applicable to regulated investment companies and to distribute substantially all of its taxable income to its shareholders. Accordingly, no federal income tax provision is required. The Fund files a tax return annually using tax accounting methods required under provisions of the Code, which may differ from GAAP, which is the basis on which these financial statements are prepared. Accordingly, the amount of net investment income and net realized gain reported in these financial statements may differ from that reported on the Fund’s tax return, due to certain book-to-tax timing differences such as losses deferred due to “wash sale” transactions and utilization of capital loss carryforwards. These differences result in temporary |
BBH U.S. GOVERNMENT MONEY MARKET FUND
NOTES TO FINANCIAL STATEMENTS (continued)
December 31, 2016 (unaudited)
over-distributions for financial statement purposes and are classified as distributions in excess of accumulated net realized gains or net investment income. These distributions do not constitute a return of capital. Permanent differences are reclassified in the Statement of Assets & Liabilities based upon their tax classification. As such, the character of distributions to shareholders reported in the Financial Highlights table may differ from that reported to shareholders on Form 1099-DIV. |
F. | Dividends and Distributions to Shareholders. Dividends and distributions from net investment income to shareholders are declared daily and paid monthly to shareholders. Distributions from net capital gains, if any, are generally declared and paid annually and are recorded on the ex-dividend date. The Fund declared dividends in the amounts of $2,483 and $738,811 to Regular and Institutional shareholders, respectively, during the six months ended December 31, 2016. |
Distributions paid from: | |||||||||||||||||||
Ordinary income | Net long-term capital gain | Total taxable distributions | Total distributions paid | ||||||||||||||||
2016: | $ | 466,931 | – | $ | 466,931 | $ | 466,931 | ||||||||||||
2015: | 176,714 | – | 176,714 | 176,714 |
financial statements december 31, 2016 | 15 |
BBH U.S. GOVERNMENT MONEY MARKET FUND
NOTES TO FINANCIAL STATEMENTS (continued)
December 31, 2016 (unaudited)
Undistributed ordinary income | Undistributed long-term capital gain | Accumulated earnings | Accumulated capital and other losses | Other book/tax temporary differences | Unrealized appreciation/ (depreciation) | Total accumulated earnings/ (deficit) | |||||||||||||||||||||||
2016: | $ | 64,713 | – | $ | 64,713 | – | $ | (65,574 | ) | – | $ | (861 | ) | ||||||||||||||||
2015: | 20,293 | – | 20,293 | – | (22,269 | ) | – | (1,976 | ) |
G. | Use of Estimates. The preparation of the financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of income and expense during the reporting period. Actual results could differ from these estimates. |
3. | Fees and Other Transactions with Affiliates. |
A. | Investment Advisory and Administrative Fees. Effective June 12, 2007, under a combined Investment Advisory and Administrative Services Agreement (“Agreement”) with the Trust, Brown Brothers Harriman & Co. (“BBH”) through a separately identifiable department (“SID” or “Investment Adviser”) provides investment advisory and portfolio management services to the Fund. BBH also provides administrative services to the Fund. The Fund pays a combined fee for investment advisory and administrative services calculated daily and incurred monthly at an annual rate equivalent to 0.25% on the first $1,000,000,000 of the Fund’s average daily net assets and 0.20% of the Fund’s average daily net assets in excess of $1,000,000,000. For the six months ended December 31, 2016, the Fund incurred $2,462,018 for services under the Agreement. |
BBH U.S. GOVERNMENT MONEY MARKET FUND
NOTES TO FINANCIAL STATEMENTS (continued)
December 31, 2016 (unaudited)
B. | Investment Advisory and Administrative Fee Waiver. Effective July 6, 2009, BBH voluntarily began to waive its Investment Advisory and Administrative Fee and credit daily to the Fund an amount which would maintain the minimum annualized yield of the Fund at 1 basis point (0.01%). The amount credited each day would be an offset to the daily accrual of the Investment Advisory and Administrative Fee. This is a voluntary waiver that can be changed at any time at the sole discretion of BBH. For the six months ended December 31, 2016, BBH waived fees in the amount of $48,604 and $0 for Regular Shares and Institutional Shares, respectively. |
C. | Shareholder Servicing Fees. The Trust has a shareholder servicing agreement with BBH. BBH receives a fee from the Regular Shares of the Fund calculated daily and incurred monthly at an annual rate of 0.20% of the Regular Shares average daily net assets. For the six months ended December 31, 2016, the Regular Shares of the Fund incurred $49,663 in shareholder servicing fees. |
D. | Shareholder Servicing Fee Waiver. Effective May 1, 2010, BBH voluntarily began to waive its Shareholder Servicing Fee for the Regular Shares only when the Investment Advisory and Administrative Fee waiver is not enough to maintain the minimum daily yield of the Fund at 1 basis point (0.01%). The amount credited each day would be an offset to the daily accrual of the Shareholder Servicing Fee. This is a voluntary waiver that can be changed at any time at the sole discretion of BBH. For the six months ended December 31, 2016, BBH waived fees in the amount of $304. |
E. | Custody and Fund Accounting Fees. BBH acts as a custodian and fund accountant and receives custody and fund accounting fees from the Fund calculated daily and incurred monthly. BBH holds all of the Fund’s cash and investments and calculates the Fund’s daily net asset value. The custody fee is an asset and transaction based fee. The fund accounting fee is an asset based fee calculated at 0.004% per annum of average daily net assets. For the year ended December 31, 2016, the Fund incurred $112,746 in custody and fund accounting fees. These fees for the Fund were reduced by $41,619 as a result of an expense offset arrangement with the Fund’s custodian. The credit amount (if any) is disclosed in the Statement of Operations as a reduction to the Fund’s expenses. In the event that the Fund is overdrawn, under the custody agreement with BBH, BBH will make overnight loans to the Fund to cover overdrafts. Pursuant to their agreement, the Fund will pay the Federal Funds overnight investment rate on the day of the overdraft. The total interest incurred by the Fund for the six months ended December 31, 2016 was $12,995. |
F. | Board of Trustees’ Fees. Each Trustee who is not an “interested person” as defined under the 1940 Act receives an annual fee as well as reimbursement for reasonable out-of-pocket expenses from the Fund. For the six months ended December 31, 2016, the Fund incurred $27,810 in non-interested Trustee compensation and reimbursements. |
financial statements december 31, 2016 | 17 |
BBH U.S. GOVERNMENT MONEY MARKET FUND
NOTES TO FINANCIAL STATEMENTS (continued)
December 31, 2016 (unaudited)
4. | Shares of Beneficial Interest. The Trust is permitted to issue an unlimited number of Regular Shares and Institutional Shares of beneficial interest, at no par value. Transactions in Regular Shares and Institutional Shares were as follows: |
For the six months ended December 31, 2016 (unaudited) | For the year ended June 30, 2016 | |||||||||||||||||
Shares | Dollars | Shares | Dollars | |||||||||||||||
Regular Shares | ||||||||||||||||||
Shares sold | 85,515,283 | $ | 85,515,283 | 3,008,915,920 | $ | 3,008,915,920 | ||||||||||||
Shares issued in connection with reinvestments of dividends | 1,677 | 1,677 | 4,022 | 4,022 | ||||||||||||||
Shares repurchased | (84,136,898 | ) | (84,136,898 | ) | (4,086,366,846 | ) | (4,086,366,846 | ) | ||||||||||
Net increase/(decrease) | 1,380,062 | $ | 1,380,062 | (1,077,446,904 | ) | $ | (1,077,446,904 | ) | ||||||||||
Institutional Shares | ||||||||||||||||||
Shares sold | 3,059,631,631 | $ | 3,059,631,631 | 5,347,489,506 | $ | 5,347,489,506 | ||||||||||||
Shares issued in connection with reinvestments of dividends | 6,843 | 6,843 | 12,397 | 12,397 | ||||||||||||||
Shares repurchased | (2,407,405,640 | ) | (2,407,405,640 | ) | (4,180,032,787 | ) | (4,180,032,787 | ) | ||||||||||
Net increase | 652,232,834 | $ | 652,232,834 | 1,167,469,116 | $ | 1,167,469,116 |
5. | Principal Risk Factors and Indemnifications. |
A. | Principal Risk Factors. Investing in the Fund may involve certain risks, as discussed in the Fund’s prospectus, including but not limited to, those described below: |
BBH U.S. GOVERNMENT MONEY MARKET FUND
NOTES TO FINANCIAL STATEMENTS (continued)
December 31, 2016 (unaudited)
in securities and enters into transactions where risks exist due to fluctuations in the market (market risk), failure of a counterparty to a transaction to perform (credit risk) or changes in interest rates (interest rate risk). The Fund is subject to the risk that the securities selected by the investment adviser may underperform (management risk). Even though the Fund’s investments in repurchase agreements are collateralized at all times, there is some risk to the Fund if the other party to the agreement should default on its obligations (repurchase agreement risk). The Fund’s investments in certain U.S. government agency securities may not be backed by the U.S. Treasury and may be supported only by the credit of the issuer (U.S. government agency securities risk). The U.S. Securities and Exchange Commission recently adopted additional money market fund regulations that the Fund will become subject to over the course of the next two years and may impact the operation and performance of the Fund (regulatory risk). The Fund’s shareholders may be adversely impacted by asset allocation decisions made by the Fund’s investment adviser whose discretionary clients make up a large percentage of the Fund’s shareholders (shareholder concentration risk). The absence of an active market for variable and floating rate securities could make it difficult for the Fund to dispose of such securities if the issuer defaults (variable and floating rate instrument risk). The Fund’s exposure to these risks with respect to these financial assets held by the Fund is reflected in their value as recorded in the Fund’s Statement of Assets and Liabilities.
B. | Indemnifications. Under the Trust’s organizational documents, its officers and Trustees may be indemnified against certain liabilities and expenses arising out of the performance of their duties to the Fund, and shareholders are indemnified against personal liability for the obligations of the Trust. Additionally, in the normal course of business, the Fund enters into agreements with service providers that may contain indemnification clauses. The Fund’s maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Fund that have not yet occurred. The risk of material loss from such claims is considered remote. |
6. | Money Market Reform. On July 23, 2014, the SEC adopted amendments to the governing rules for money market funds. The amendments require that, following a two-year implementation timeframe, institutional prime money market funds adopt a market-based floating net asset value. Other types of money market funds, including government money market funds, may continue to transact fund shares at a NAV calculated using the amortized cost valuation method. The rule changes also either permit or require liquidity-based redemption fees and gates (depending upon the type of money market fund), and require enhanced disclosures and stress testing. For government money market funds the liquidity-based redemption fees and gates are permitted, however, the Fund’s Board of Trustees has determined not to impose any liquidity fees or redemption gates on the Fund. Government money market funds, as defined by these amendments, are money market funds that invest 99.5% or more of |
financial statements december 31, 2016 | 19 |
BBH U.S. GOVERNMENT MONEY MARKET FUND
NOTES TO FINANCIAL STATEMENTS (continued)
December 31, 2016 (unaudited)
their total assets in cash, government securities, and/or repurchase agreements that are collateralized fully by cash or government securities. The degree to which a money market fund will be impacted by the rule amendments will depend upon the type of fund and type of investors (retail or institutional). | ||
In response to these amendments, on January 27, 2016, the Fund amended its prospectus to state that it intended to operate as a government money market fund. Effective April 1, 2016, the Fund converted to a government money market fund and in so doing changed its name to the BBH U.S. Government Money Market Fund. | ||
7. | Subsequent Events. Management has evaluated events and transactions that have occurred since December 31, 2016 through the date the financial statements were issued and determined that there were none that would require recognition or additional disclosure in the financial statements. |
BBH U.S. GOVERNMENT MONEY MARKET FUND
DISCLOSURE OF FUND EXPENSES
December 31, 2016 (unaudited)
financial statements december 31, 2016 | 21 |
BBH U.S. GOVERNMENT MONEY MARKET FUND
DISCLOSURE OF FUND EXPENSES (continued)
December 31, 2016 (unaudited)
Beginning Account Value July 1, 2016 | Ending Account Value December 31, 2016 | Expenses Paid During Period July 1, 2016 to December 31, 20161 | ||||||||||||
Regular Shares | ||||||||||||||
Actual | $ | 1,000 | $ | 1,000 | $ | 1.46 | ||||||||
Hypothetical2 | $ | 1,000 | $ | 1,024 | $ | 1.48 |
Beginning Account Value July 1, 2016 | Ending Account Value December 31, 2016 | Expenses Paid During Period July 1, 2016 to December 31, 20161 | ||||||||||||
Institutional Shares | ||||||||||||||
Actual | $ | 1,000 | $ | 1,000 | $ | 1.21 | ||||||||
Hypothetical2 | $ | 1,000 | $ | 1,024 | $ | 1.22 |
1 | Expenses are equal to the Fund’s annualized net expense ratio of 0.29% and 0.24% for Regular and Institutional Shares, respectively, multiplied by 184/365 (to reflect the one half-year period). |
2 | Assumes a return of 5% before expenses. For the purpose of the calculation, the applicable annualized expense ratio for each class of shares is subtracted from the assumed return before expenses. |
BBH U.S. GOVERNMENT MONEY MARKET FUND
DISCLOSURE OF ADVISOR SELECTION
December 31, 2016 (unaudited)
financial statements december 31, 2016 | 23 |
BBH U.S. GOVERNMENT MONEY MARKET FUND
DISCLOSURE OF ADVISOR SELECTION (continued)
December 31, 2016 (unaudited)
BBH U.S. GOVERNMENT MONEY MARKET FUND
DISCLOSURE OF ADVISOR SELECTION (continued)
December 31, 2016 (unaudited)
financial statements december 31, 2016 | 25 |
BBH U.S. GOVERNMENT MONEY MARKET FUND
CONFLICTS OF INTEREST
December 31, 2016 (unaudited)
BBH U.S. GOVERNMENT MONEY MARKET FUND
CONFLICTS OF INTEREST (continued)
December 31, 2016 (unaudited)
behalf of its discretionary investment advisory clients could significantly reduce the asset size of the Fund, which might have an adverse effect on the Fund’s investment flexibility, portfolio diversification and expense ratio.
financial statements december 31, 2016 | 27 |
Administrator Brown Brothers Harriman & Co. 140 Broadway New York, NY 10005 Distributor ALPS Distributors, Inc. 1290 Broadway, Suite 1100 Denver, CO 80203 Shareholder Servicing Agent Brown Brothers Harriman & Co. 140 Broadway New York, NY 10005 1-800-575-1265 | Investment Adviser Brown Brothers Harriman Mutual Fund Advisory Department 140 Broadway New York, NY 10005 |
By telephone: | Call 1-800-575-1265 | |||
By E-mail send your request to: | bbhfunds@bbh.com | |||
On the internet: | www.bbhfunds.com |
Item 2. Code of Ethics.
Not required for this semi-annual report on Form N-CSR.
|
Item 3. Audit Committee Financial Expert.
Not required for this semi-annual report on Form N-CSR.
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Item 4. Principal Accountant Fees and Services.
Not required for this semi-annual report on Form N-CSR.
|
Item 5. Audit Committee of Listed Registrants.
(a) | Not required for this semi-annual report on Form N-CSR.
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(b) | Not required. |
Item 6. Investments.
(a) | This schedule is included as part of the report to shareholders filed under Item 1 of this Form N-CSR.
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(b) | Not applicable. |
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies.
Not applicable. |
Item 8. Portfolio Managers of Closed-End Management Investment Companies.
Not applicable. |
Item 9. Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers.
Not applicable. |
Item 10. Submission of Matters to a Vote of Security Holders.
Not applicable. |
Item 11. Controls and Procedures.
(a) | The Registrant’s principal executive and financial officers have concluded that the Registrant’s disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940, as amended (the “1940 Act”)) are effective, as of a date within 90 days of the filing date of this Form N-CSR, based on their evaluation of these controls and procedures required by Rule 30a-3(b) under the 1940 Act and Rules 13a-15(b) or 15d-15(b) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”).
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(b) | There were no changes in the Registrant's internal control over financial reporting (as defined in Rule 30a-3(d) under the 1940 Act) that occurred during the Registrant's second fiscal quarter of the period covered by this Form N-CSR, that have materially affected, or are reasonably likely to materially affect, the Registrant's internal control over financial reporting. |
Item 12. Exhibits.
(a)(1) | Not required for this semi-annual report on Form N-CSR.
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(a)(2) | Certifications required by Rule 30a-2(a) under the 1940 Act and Section 302 of the Sarbanes-Oxley Act of 2002 are filed as Exhibit 12(a)(2) to this Form N-CSR.
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(a)(3) | Not applicable. |
(b) | Certifications required by Rule 30a-2(b) under the 1940 Act and Section 906 of the Sarbanes-Oxley Act of 2002 are furnished as Exhibit 12(b) to this Form N-CSR. |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
(Registrant) BBH Trust
By: (Signature and Title)
/s/ Jean- Pierre Paquin
Jean-Pierre Paquin
Title: President (Principal Executive Officer)
Date: March 10, 2017
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
By: (Signature and Title)
/s/ Jean- Pierre Paquin
Jean-Pierre Paquin
Title: President (Principal Executive Officer)
Date: March 10, 2017
By: (Signature and Title)
/s/ Charles H. Schreiber
Charles H. Schreiber
Title: Treasurer (Principal Financial Officer)
Date: March 10, 2017