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 Partner Fund – Select Short Term Assets
BBH Partner Fund – Small Cap Equity
BBH Select Series – Mid Cap Fund
BBH Partner Fund – International Equity
BBH Limited Duration Fund
BBH Income Fund
BBH Select Series – Large Cap Fund
BBH Intermediate Municipal Bond Fund
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: October 31
Date of reporting period: October 31, 2021
Form N-CSR is to be used by management investment companies to file reports with the Commission not later than 10 days after the transmission to stockholders of any report that is required to be transmitted to stockholders under Rule 30e-1 under the Investment Company Act of 1940 (17 CFR 270.30e-1). The Commission may use the information provided on Form N-CSR in its regulatory, disclosure review, inspection, and policymaking roles.
A registrant is required to disclose the information specified by Form N-CSR, and the Commission will make this information public. A registrant is not required to respond to the collection of information contained in Form N-CSR unless the Form displays a currently valid Office of Management and Budget (“OMB”) control number. Please direct comments concerning the accuracy of the information collection burden estimate and any suggestions for reducing the burden to Secretary, Securities and Exchange Commission, 450 Fifth Street, NW, Washington, DC 20549-0609. The OMB has reviewed this collection of information under the clearance requirements of 44 U.S.C. § 3507.
Item 1. Report to Stockholders. |
Annual Report
OCTOBER 31, 2021
Bbh Partner Fund – Select Short Term Assets
BBH PARTNER FUND - SELECT SHORT TERM ASSETS
MANAGEMENT’S DISCUSSION OF FUND PERFORMANCE
October 31, 2021
Intermediate-term corporate indexes eked out paltry gains, as risk spreads compressed and credit-related performance just offset the impact of rising rates. This created an accommodative environment for active fixed income strategies to outperform market indexes. We are proud to report that the BBH Select Short-Term Assets Fund gained 0.02% for the 10-month period ending October 31, 2021, exceeding the -0.26% return of the Bloomberg U.S. 1-3 Year Treasury Index.
Heavy issuance was a distinguishing feature of the past 12 months, as the lower rate environment combined with increased investor appetite for yield to fuel record levels of issuance in several market sectors, including corporate bonds, loans, mortgage- and asset-backed securities, and commercial mortgage-backed securities. Issuance in all sectors was met with remarkable demand, with many deals being oversubscribed at their prevailing yields. We maintained our valuation and fundamental research disciplines and participated in issuances only when the yields offered were adequate and our research revealed the issue to be durable – able to perform through a variety of macroeconomic and industry environments. This credit and valuation discipline may seem less necessary in a period of strong growth and tight spread levels, but our experience suggests such discipline is rewarded when market risks re-emerge. It is unfortunately difficult to predict when and how risks events will manifest.
Since the Fund’s inception, short-term rates hovered near historical lows while credit risk spreads started at relatively low levels then narrowed to levels not seen since the 1990s. Our highly selective and valuation-focused approach made it increasingly challenging to source new opportunities in mainstream bond sectors in this market. Despite the challenging environment, we were able to identify and invest in many credits that were durable, were fundamentally sound, and offered appealing compensation for the Fund. The Fund’s allocation to these credits, particularly within corporate securities, were notable contributors to performance results over the past year.
The Fund’s overall duration profile was managed in a range of 0.7 – 1.1 year over the past year*. The Fund’s duration profile detracted modestly from results, as short-term rates rose from their historic lows at the Fund’s inception.
As we look forward, we balance an opportunistic mindset with the proper caution required in a low yield and risk spread environment. The Federal Reserve plans to curb new purchases of Treasuries and agency mortgage-backed securities. The macroeconomic environment may challenge fixed income returns in the near-term. The fed funds futures market predicts the Federal Reserve will raise policy rates three times in 2022 (by 0.25% in each occurrence). Inflationary pressures seem to be mounting, and while the high levels of recent inflation data may be transitory, near-term inflation may settle at levels higher than what prevailed pre-pandemic. Treasury Inflation-Protected Securities (TIPS) are valued with breakeven inflation rates – the inflation rates that would need to prevail so their yields would equal those of traditional, nominal Treasury securities – of 2.5% – 3.0% at various maturities over the next ten years. Forward-looking forecasts of various inflation indexes estimate annual inflation rates of 2.0% - 2.5% over the next three to four years. With the 2-year Treasury offered at 0.50%, the 10-year Treasury offered at 1.55%, and the average yield of investment-grade corporate bonds at 2.22%, either current yields rise to offer compensation for inflation or estimates of forward-looking inflation are too high.
________________
* | Duration is a measure of the portfolio’s return sensitivity to changes in interest rates. |
2
BBH PARTNER FUND - SELECT SHORT TERM ASSETS
MANAGEMENT’S DISCUSSION OF FUND PERFORMANCE (continued)
October 31, 2021
We believe the Select Short-Term Assets Fund is positioned well to perform amidst such risks. The portfolio’s credit composition emphasizes instruments with short duration profiles. We believe these positions allow the Fund to enhance income versus cash alternatives while remaining defensive in the face of more-hawkish policies from the Fed. The Fund’s duration was 0.72 years offering investors a prudent way of taking modestly higher interest rate risk than cash alternatives to earn higher yields while maintaining positive returns over a short-term horizon. Further, the duration profile allows cash flows to be reinvested rapidly if rates rise, mitigating the overall effects of rising rates on the portfolio.
The markets appear to be at a delicate balance where yields have stabilized and spreads are at decades-long lows. Macroeconomic risks linger, and the most profound risks may be unidentified by the markets right now. We are confident that our approach and process will allow us to adapt to changes, capitalize on opportunities, and perform through a variety of environments. Thank you for the trust placed in BBH, and we look forward to engaging with you in 2022 and beyond.
financial statements october 31, 2021 | 3 |
BBH PARTNER FUND - SELECT SHORT TERM ASSETS
MANAGEMENT’S DISCUSSION OF FUND PERFORMANCE (continued)
October 31, 2021
Growth of $10,000 Invested in BBH Partner Fund - Select Short-Term Assets
The graph below illustrates the hypothetical investment of $10,0001 in the Fund since inception (January 20, 2021) to October 31, 2021 as compared to the Bloomberg Short Treasury TR Index.
The annualized gross expense ratio as shown in the March 1, 2021 prospectus for the Fund was 0.36%.
Performance data quoted represents past performance which is no guarantee of future results. Investment return and principal value will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Fund performance changes over time and current performance may be lower or higher than what is stated. Fund shares redeemed within 30 days of purchase are subject to a redemption fee of 2.00%. Returns do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. For performance current to the most recent month-end please call 1-800-575-1265.
Hypothetical performance results are calculated on a total return basis and include all portfolio income, unrealized and realized capital gains, losses and reinvestment of dividends and other earnings. No one shareholder has actually achieved these results and no representation is being made that any actual shareholder achieved, or is likely to achieve, similar results to those shown. Hypothetical performance does not represent actual trading and may not reflect the impact of material economic and market factors. Undue reliance should not be placed on hypothetical performance results in making an investment decision.
________________
1 | The Fund’s performance assumes the reinvestment of all dividends and distributions. The Bloomberg Short Treasury TR Index has been adjusted to reflect reinvestment of dividends on securities in the index. The Bloomberg Short Treasury TR Index is not adjusted to reflect sales charges, expenses or other fees that the Securities and Exchange Commission requires to be reflected in the Fund’s performance. The index is unmanaged. Investments cannot be made in an index. |
4
BBH PARTNER FUND - SELECT SHORT TERM ASSETS
REPORT OF INDEPENDENT REGISTERED ACCOUNTING FIRM
To the Trustees of the BBH Trust and Shareholders of BBH Partner Fund – Select Short Term Assets:
Opinion on the Financial Statements and Financial Highlights
We have audited the accompanying statement of assets and liabilities, including the portfolio of investments, of BBH Partner Fund – Select Short Term Assets (the "Fund"), one of the funds within BBH Trust, as of October 31, 2021, the related statement of operations, statement of changes in net assets and financial highlights for the period from January 20, 2021 (commencement of operations) to October 31, 2021, and the related notes. In our opinion, the financial statements and financial highlights present fairly, in all material respects, the financial position of the Fund as of October 31, 2021, the results of its operations, the changes in its net assets and the financial highlights for the period from January 20, 2021 (commencement of operations) to October 31, 2021, in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements and financial highlights are the responsibility of the BBH Trust's management. Our responsibility is to express an opinion on the Fund's financial statements and financial highlights based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the BBH Trust in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement, whether due to error or fraud. The BBH Trust is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the BBH Trust’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements and financial highlights, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements and financial highlights. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements and financial highlights. Our procedures included confirmation of securities owned as of October 31, 2021, by correspondence with the custodian and brokers. We believe that our audits provide a reasonable basis for our opinion.
/s/ DELOITTE & TOUCHE LLP
Boston, Massachusetts
December 21, 2021
We have served as the auditor of one or more Brown Brothers Harriman investment companies since 1991.
financial statements october 31, 2021 | 5 |
BBH PARTNER FUND - SELECT SHORT TERM ASSETS
PORTFOLIO ALLOCATION
October 31, 2021
BREAKDOWN BY SECURITY TYPE
U.S. $ Value | Percent of Net Assets | ||||||
Asset Backed Securities | $ | 60,681,132 | 20.7 | % | |||
Commercial Mortgage Backed Securities | 18,026,703 | 6.1 | |||||
Corporate Bonds | 166,864,211 | 56.8 | |||||
Residential Mortgage Backed Securities | 4,800,540 | 1.6 | |||||
U.S. Treasury Bills | 42,093,317 | 14.3 | |||||
Cash and Other Assets in Excess of Liabilities | 1,331,518 | 0.5 | |||||
NET ASSETS | $ | 293,797,421 | 100.0 | % |
All data as of October 31, 2021. The Fund’s sector diversification is expressed as a percentage of net assets and may vary over time.
The accompanying notes are an integral part of these financial statements.
6
BBH PARTNER FUND - SELECT SHORT TERM ASSETS
PORTFOLIO OF INVESTMENTS
October 31, 2021
Principal Amount | Maturity Date | Interest Rate | Value | ||||||||||||
| ASSET BACKED SECURITIES (20.7%) |
|
|
| |||||||||||
$ | 2,480,000 | California Street CLO IX LP 2012-9A (3-Month USD-LIBOR + 1.100%)1,2 | 07/16/32 | 1.182 | % | $ | 2,479,927 | ||||||||
1,830,000 | Carlyle Global Market Strategies CLO Ltd. 2012-4A (3-Month USD-LIBOR + 1.080%)1,2 | 04/22/32 | 1.208 | 1,828,313 | |||||||||||
3,000,000 | Credit Acceptance Auto Loan Trust 2021-2A1 | 02/15/30 | 0.960 | 2,992,374 | |||||||||||
4,276,975 | Dell Equipment Finance Trust 2019-21 | 10/22/24 | 1.910 | 4,304,876 | |||||||||||
| 3,900,000 | Donlen Fleet Lease Funding 2 LLC 2021-21 | 12/11/34 | 0.560 | 3,899,404 | ||||||||||
858,120 | Drive Auto Receivables Trust 2021-1 | 12/15/23 | 0.360 | 858,359 | |||||||||||
2,830,000 | Dryden 72 CLO, Ltd. 2019-72A (3-Month USD-LIBOR + 1.080%)1,2 | 05/15/32 | 1.205 | 2,826,813 | |||||||||||
1,648,114 | Enterprise Fleet Financing LLC 2019-21 | 02/20/25 | 2.290 | 1,665,115 | |||||||||||
508,263 | Exeter Automobile Receivables Trust 2021-1A | 06/15/23 | 0.300 | 508,264 | |||||||||||
3,638,214 | Foursight Capital Automobile Receivables Trust 2021-11 | 08/15/24 | 0.400 | 3,638,188 | |||||||||||
3,524,626 | FREED ABS Trust 2021-1CP1 | 03/20/28 | 0.660 | 3,525,689 | |||||||||||
6,000,000 | Madison Park Funding XXV, Ltd. 2017-25A (3-Month USD-LIBOR + 0.970%)1,2 | 04/25/29 | 1.094 | 6,002,981 | |||||||||||
5,100,000 | Neuberger Berman Loan Advisers CLO 25, Ltd. 2017-25A (3-Month USD-LIBOR + 0.930%)1,2 | 10/18/29 | 1.052 | 5,101,275 | |||||||||||
5,000,000 | Northwoods Capital XVII Ltd. 2018-17A (3-Month USD-LIBOR + 1.060%)1,2 | 04/22/31 | 1.188 | 4,987,500 | |||||||||||
1,820,000 | OnDeck Asset Securitization Trust III LLC 2021-1A1 | 05/17/27 | 1.590 | 1,812,393 | |||||||||||
2,762,176 | Oscar US Funding XII LLC 2021-1A1 | 03/11/24 | 0.400 | 2,748,602 | |||||||||||
1,230,000 | Parliament CLO II, Ltd. 2021-2A (3-Month USD-LIBOR + 1.350%)1,2 | 08/20/32 | 1.482 | 1,229,933 | |||||||||||
2,750,000 | Pawneee Equipment Receivables LLC Series 2021-11 | 07/15/27 | 1.100 | 2,742,550 | |||||||||||
2,527,409 | United Auto Credit Securitization Trust 2021-11 | 07/10/23 | 0.340 | 2,527,700 | |||||||||||
5,001,187 | Westlake Automobile Receivables Trust 2021-1A1 | 10/15/24 | 0.390 | 5,000,876 | |||||||||||
Total Asset Backed Securities (Cost $60,736,753) | 60,681,132 |
The accompanying notes are an integral part of these financial statements.
financial statements october 31, 2021 | 7 |
BBH PARTNER FUND - SELECT SHORT TERM ASSETS
PORTFOLIO OF INVESTMENTS (continued)
October 31, 2021
Principal Amount | Maturity Date | Interest Rate | Value | ||||||||||||
| COMMERCIAL MORTGAGE BACKED SECURITIES (6.1%) |
|
|
| |||||||||||
$ | 4,439,095 | ACRE Commercial Mortgage Ltd. 2021-FL4 (1-Month USD-LIBOR + 0.830%)1,2 | 12/18/37 | 0.910 | % | $ | 4,424,712 | ||||||||
5,550,000 | BXMT, Ltd. 2020-FL2 (30-Day SOFR + 1.014%)1,2. | 02/15/38 | 1.064 | 5,539,455 | |||||||||||
2,110,000 | MHC Commercial Mortgage Trust 2021-MHC (1-Month USD-LIBOR + 0.801%)1,2 | 04/15/38 | 0.891 | 2,110,653 | |||||||||||
5,999,701 | PFP Ltd. 2021-7 (1-Month USD-LIBOR + 0.850%)1,2 | 04/14/38 | 0.940 | 5,951,883 | |||||||||||
Total Commercial Mortgage Backed Securities (Cost $18,098,011) | 18,026,703 | ||||||||||||||
| CORPORATE BONDS (56.8%) | ||||||||||||||
AEROSPACE/DEFENSE (1.8%) | |||||||||||||||
5,255,000 | Boeing Co. | 10/30/22 | 2.200 | 5,315,199 | |||||||||||
| AUTO MANUFACTURERS (1.0%) | ||||||||||||||
2,814,000 | General Motors Financial Co., Inc. | 01/14/22 | 3.450 | 2,824,018 | |||||||||||
| BANKS (14.8%) | ||||||||||||||
5,395,000 | BNZ International Funding, Ltd., London Branch1. | 03/01/23 | 3.375 | 5,596,535 | |||||||||||
3,335,000 | Canadian Imperial Bank of Commerce | 12/14/23 | 0.500 | 3,309,886 | |||||||||||
4,115,000 | Citigroup, Inc. | 12/08/21 | 2.900 | 4,116,877 | |||||||||||
5,755,000 | Goldman Sachs Group, Inc. | 01/27/23 | 0.481 | 5,739,318 | |||||||||||
5,580,000 | HSBC Holdings Plc (3-Month USD-LIBOR + 1.055%)2 | 03/13/23 | 3.262 | 5,635,015 | |||||||||||
2,000,000 | JPMorgan Chase & Co. | 09/23/22 | 3.250 | 2,051,785 | |||||||||||
1,960,000 | JPMorgan Chase & Co. (SOFR + 0.580%)2 | 03/16/24 | 0.697 | 1,960,405 | |||||||||||
5,640,000 | KeyBank NA | 03/10/23 | 1.250 | 5,696,421 | |||||||||||
5,465,000 | MUFG Americas Holdings Corp. | 06/18/22 | 3.500 | 5,574,013 | |||||||||||
1,615,000 | Santander Holdings USA, Inc. | 03/28/22 | 3.700 | 1,630,535 | |||||||||||
2,000,000 | Westpac Banking Corp. | 06/28/22 | 2.500 | 2,029,257 | |||||||||||
43,340,047 | |||||||||||||||
| BIOTECHNOLOGY (0.6%) | ||||||||||||||
1,750,000 | Gilead Sciences, Inc. | 09/29/23 | 0.750 | 1,746,328 | |||||||||||
| COMPUTERS (1.8%) | ||||||||||||||
5,000,000 | Hewlett Packard Enterprise Co | 10/02/23 | 4.450 | 5,318,347 | |||||||||||
| DIVERSIFIED FINANCIAL SERVICES (6.0%) | ||||||||||||||
1,045,000 | AerCap Ireland Capital DAC/AerCap Global Aviation Trust | 10/29/24 | 1.750 | 1,045,876 | |||||||||||
3,030,000 | Air Lease Corp. | 01/15/22 | 3.500 | 3,047,997 | |||||||||||
945,000 | Air Lease Corp. | 02/01/22 | 3.750 | 947,193 | |||||||||||
2,500,000 | American Express Co. | 05/20/22 | 2.750 | 2,527,843 |
The accompanying notes are an integral part of these financial statements.
8
BBH PARTNER FUND - SELECT SHORT TERM ASSETS
PORTFOLIO OF INVESTMENTS (continued)
October 31, 2021
Principal Amount | Maturity Date | Interest Rate | Value | ||||||||||||
CORPORATE BONDS (continued) | |||||||||||||||
DIVERSIFIED FINANCIAL SERVICES (continued) | |||||||||||||||
$ | 4,300,000 | Aviation Capital Group LLC1 | 01/20/22 | 2.875 | % | $ | 4,313,519 | ||||||||
5,510,000 | Capital One Financial Corp. | 05/11/23 | 2.600 | 5,663,211 | |||||||||||
17,545,639 | |||||||||||||||
ELECTRIC (8.0%) | |||||||||||||||
2,000,000 | Alexander Funding Trust1 | 11/15/23 | 1.841 | 2,031,414 | |||||||||||
5,050,000 | American Electric Power Co., Inc. | 12/01/21 | 3.650 | 5,063,809 | |||||||||||
3,655,000 | New York State Electric & Gas Corp. | 05/01/23 | 5.750 | 3,921,246 | |||||||||||
1,180,000 | NextEra Energy Capital Holdings, Inc. | 04/01/22 | 2.900 | 1,192,175 | |||||||||||
1,125,000 | NextEra Energy Capital Holdings, Inc. | 03/01/23 | 0.650 | 1,126,265 | |||||||||||
4,590,000 | Southern California Edison Co. | 04/01/24 | 1.100 | 4,600,191 | |||||||||||
5,635,000 | Virginia Electric & Power Co. | 01/15/22 | 2.950 | 5,642,068 | |||||||||||
23,577,168 | |||||||||||||||
HEALTHCARE-PRODUCTS (0.5%) | |||||||||||||||
1,350,000 | Zimmer Biomet Holdings, Inc. | 04/01/22 | 3.150 | 1,358,913 | |||||||||||
| INSURANCE (7.9%) | ||||||||||||||
5,250,000 | Athene Global Funding1 | 07/01/22 | 3.000 | 5,331,023 | |||||||||||
1,735,000 | Enstar Group, Ltd. | 03/10/22 | 4.500 | 1,753,657 | |||||||||||
1,600,000 | Five Corners Funding Trust1 | 11/15/23 | 4.419 | 1,716,782 | |||||||||||
5,625,000 | Guardian Life Global Funding1 | 05/08/22 | 2.500 | 5,686,345 | |||||||||||
5,760,000 | New York Life Global Funding1 | 10/21/23 | 0.400 | 5,743,270 | |||||||||||
3,000,000 | Northwestern Mutual Global Funding1 | 03/25/24 | 0.600 | 2,979,860 | |||||||||||
23,210,937 | |||||||||||||||
INVESTMENT COMPANIES (1.2%) | |||||||||||||||
1,800,000 | Ares Capital Corp. | 01/19/22 | 3.625 | 1,807,050 | |||||||||||
1,750,000 | Ares Capital Corp. | 02/10/23 | 3.500 | 1,803,643 | |||||||||||
3,610,693 | |||||||||||||||
MACHINERY-CONSTRUCTION & MINING (1.9%) | |||||||||||||||
5,605,000 | Caterpillar Financial Services Corp. | 09/06/22 | 1.900 | 5,680,865 | |||||||||||
| MEDIA (1.4%) | ||||||||||||||
4,000,000 | Sky Ltd.1 | 11/26/22 | 3.125 | 4,116,907 | |||||||||||
| OIL & GAS (3.9%) | ||||||||||||||
5,670,000 | Chevron Corp. | 06/24/23 | 3.191 | 5,875,827 | |||||||||||
5,605,000 | Exxon Mobil Corp. | 04/15/23 | 1.571 | 5,688,443 | |||||||||||
11,564,270 |
The accompanying notes are an integral part of these financial statements.
financial statements october 31, 2021 | 9 |
BBH PARTNER FUND - SELECT SHORT TERM ASSETS
PORTFOLIO OF INVESTMENTS (continued)
October 31, 2021
Principal Amount | Maturity Date | Interest Rate | Value | ||||||||||||
CORPORATE BONDS (continued) | |||||||||||||||
PHARMACEUTICALS (1.7%) | |||||||||||||||
$ | 2,500,000 | AbbVie, Inc. | 11/06/22 | 2.900 | % | $ | 2,556,821 | ||||||||
2,500,000 | AbbVie, Inc. | 11/21/22 | 2.300 | 2,543,301 | |||||||||||
5,100,122 | |||||||||||||||
| PIPELINES (1.1%) | ||||||||||||||
3,320,000 | Energy Transfer LP | 02/01/22 | 5.200 | 3,320,000 | |||||||||||
| SEMICONDUCTORS (0.7%) | ||||||||||||||
2,000,000 | QUALCOMM, Inc. | 01/30/23 | 2.600 | 2,049,583 | |||||||||||
SOFTWARE (2.5%) | |||||||||||||||
1,540,000 | Oracle Corp. | 05/15/22 | 2.500 | 1,552,297 | |||||||||||
5,540,000 | VMware, Inc. | 08/21/22 | 2.950 | 5,632,878 | |||||||||||
7,185,175 | |||||||||||||||
Total Corporate Bonds (Cost $167,137,301) | 166,864,211 | ||||||||||||||
| RESIDENTIAL MORTGAGE BACKED SECURITIES (1.6%) | ||||||||||||||
4,804,942 | RESIMAC Premier 2021-1A (1-Month USD-LIBOR + 0.700%)1,2 | 07/10/52 | 0.784 | 4,800,540 | |||||||||||
Total Residential Mortgage Backed Securities (Cost $4,804,942) | 4,800,540 | ||||||||||||||
| U.S. TREASURY BILLS (14.3%) | ||||||||||||||
2,250,000 | U.S. Treasury Bill3 | 12/30/21 | 0.000 | 2,249,686 | |||||||||||
10,600,000 | U.S. Treasury Bill3 | 01/27/22 | 0.000 | 10,598,527 | |||||||||||
19,400,000 | U.S. Treasury Bill3 | 02/10/22 | 0.000 | 19,397,006 | |||||||||||
6,100,000 | U.S. Treasury Bill3 | 02/24/22 | 0.000 | 6,098,904 | |||||||||||
3,750,000 | U.S. Treasury Bill3 | 03/10/22 | 0.000 | 3,749,194 | |||||||||||
Total U.S. Treasury Bills (Cost $42,094,824) | 42,093,317 |
TOTAL INVESTMENTS (Cost $292,871,831)4 | 99.5 | % | $ | 292,465,903 | ||
CASH AND OTHER ASSETS IN EXCESS OF LIABILITIES | 0.5 | % | 1,331,518 | |||
NET ASSETS | 100.00 | % | $ | 293,797,421 |
The accompanying notes are an integral part of these financial statements.
10
BBH PARTNER FUND - SELECT SHORT TERM ASSETS
PORTFOLIO OF INVESTMENTS (continued)
October 31, 2021
________________
1 | Security exempt from registration under Rule 144A of the Securities Act of 1933, as amended. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. Total market value of Rule 144A securities owned at October 31, 2021 was $119,657,407 or 40.7% of net assets. |
2 | Variable rate instrument. Interest rates change on specific dates (such as coupon or interest payment date). The yield shown represents the October 31, 2021 coupon or interest rate. |
3 | Security issued with zero coupon. Income is recognized through accretion of discount. |
4 | The aggregate cost for federal income tax purposes is $292,871,893, the aggregate gross unrealized appreciation is $31,760 and the aggregate gross unrealized depreciation is $437,750, resulting in net unrealized depreciation of $405,990. |
Abbreviations:
LIBOR – London Interbank Offered Rate.
SOFR – Secured Overnight Financing Rate.
The accompanying notes are an integral part of these financial statements.
financial statements october 31, 2021 | 11 |
BBH PARTNER FUND - SELECT SHORT TERM ASSETS
PORTFOLIO OF INVESTMENTS (continued)
October 31, 2021
FAIR VALUE MEASUREMENTS
The Fund is required to disclose information regarding the fair value measurements of the Fund’s assets and liabilities. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The disclosure requirement established a three-tier hierarchy to maximize the use of observable market data and minimize the use of unobservable inputs and to establish classification of fair value measurements for disclosure purposes. Inputs refer broadly to the assumptions that market participants would use in pricing the asset or liability, including, for example, the risk inherent in a particular valuation technique used to measure fair value, including the model and/or the risk inherent in the inputs to the valuation technique. Inputs may be observable or unobservable. Observable inputs are inputs that reflect the assumptions market participants would use in pricing the asset or liability developed based on market data obtained from sources independent of the reporting entity. Unobservable inputs are inputs that reflect the Fund’s own considerations about the assumptions market participants would use in pricing the asset or liability developed based on the best information available in the circumstances.
Authoritative guidance establishes three levels of the fair value hierarchy as follows:
— | Level 1 – unadjusted quoted prices in active markets for identical assets and liabilities. |
— | Level 2 – significant other observable inputs (including quoted prices for similar assets and liabilities, interest rates, prepayment speeds, credit risk, etc.). |
— | Level 3 – significant unobservable inputs (including the Fund’s own assumptions in determining the fair value of assets and liabilities). |
Inputs are used in applying the various valuation techniques and broadly refer to the assumptions that market participants use to make valuation decisions, including assumptions about risk. Inputs may include price information, specific and broad credit data, liquidity statistics, and other factors. A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. However, the determination of what constitutes “observable” requires judgment by the investment adviser. The investment adviser considers observable data to be that market data which is readily available, regularly distributed or updated, reliable and verifiable, not proprietary, and provided by independent sources that are actively involved in the relevant market. The categorization of a financial instrument within the hierarchy is based upon the pricing transparency of the instrument and does not necessarily correspond to the investment adviser’s perceived risk of that instrument.
Financial assets within Level 1 are based on quoted market prices in active markets. The Fund does not adjust the quoted price for these instruments.
The accompanying notes are an integral part of these financial statements.
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BBH PARTNER FUND - SELECT SHORT TERM ASSETS
PORTFOLIO OF INVESTMENTS (continued)
October 31, 2021
Financial instruments that trade in markets that are not considered to be active but are valued based on quoted market prices, dealer quotations or alternative pricing sources supported by observable inputs are classified within Level 2. These include investment-grade corporate bonds, U.S. Treasury notes and bonds, and certain non-U.S. sovereign obligations and over-the-counter derivatives. As Level 2 financial assets include positions that are not traded in active markets and/or are subject to transfer restrictions, valuations may be adjusted to reflect illiquidity and/or non-transferability, which are generally based on available market information.
Financial assets classified within Level 3 have significant unobservable inputs, as they trade infrequently. Level 3 financial assets may include asset backed securities and certain corporate debt securities.
Because of the inherent uncertainties of valuation, the values reflected in the financial statements may materially differ from the value received upon the actual sale of those investments.
The following table summarizes the valuation of the Fund’s investments by the above fair value hierarchy levels as of October 31, 2021.
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 October 31, 2021 | ||||||||||||||||
Asset Backed Securities | $ | – | $ | 60,681,132 | $ | – | $ | 60,681,132 | ||||||||||||
Commercial Mortgage Backed Securities | – | 18,026,703 | – | 18,026,703 | ||||||||||||||||
Corporate Bonds | – | 166,864,211 | – | 166,864,211 | ||||||||||||||||
Residential Mortgage Backed Securities | – | 4,800,540 | – | 4,800,540 | ||||||||||||||||
U.S. Treasury Bills | – | 42,093,317 | – | 42,093,317 | ||||||||||||||||
Total Investment, at value | $ | – | $ | 292,465,903 | $ | – | $ | 292,465,903 |
The accompanying notes are an integral part of these financial statements.
financial statements october 31, 2021 | 13 |
BBH PARTNER FUND - SELECT SHORT TERM ASSETS
STATEMENT OF ASSETS AND LIABILITIES
October 31, 2021
ASSETS: | ||||||
Investments in securities, at value (Cost $292,871,831) | $ | 292,465,903 | ||||
Cash | 176,772 | |||||
Receivables for: | ||||||
Interest | 1,308,633 | |||||
Investment advisory and administrative fee waiver reimbursement | 56,679 | |||||
Total Assets | 294,007,987 | |||||
LIABILITIES: | ||||||
Payables for: | ||||||
Investment advisory and administrative fees | 76,301 | |||||
Professional fees | 59,274 | |||||
Registration Expense | 42,909 | |||||
Custody and fund accounting fees | 9,696 | |||||
Dividends declared | 5,954 | |||||
Transfer agent fees | 5,455 | |||||
Board of Trustees' fees | 1,111 | |||||
Accrued expenses and other liabilities | 9,866 | |||||
Total Liabilities | 210,566 | |||||
NET ASSETS | $ | 293,797,421 | ||||
Net Assets Consist of: | ||||||
Paid-in capital | $ | 294,193,634 | ||||
Accumulated deficit | (396,213 | ) | ||||
Net Assets | $ | 293,797,421 | ||||
NET ASSET VALUE AND OFFERING PRICE PER SHARE | ||||||
($293,797,421 ÷ 29,422,199 shares outstanding) | $ | 9.99 |
The accompanying notes are an integral part of these financial statements.
14
BBH PARTNER FUND - SELECT SHORT TERM ASSETS
STATEMENT OF OPERATIONS
For the period from January 20, 2021 (commencement of operations) to October 31, 2021
NET INVESTMENT INCOME: | ||||
Income: | ||||
Interest income | $ | 1,174,374 | ||
Other income | 10 | |||
Total Income | 1,174,384 | |||
Expenses: | ||||
Investment advisory and administrative fees | 821,775 | |||
Professional fees | 70,233 | |||
Board of Trustees’ fees | 45,910 | |||
Registration fees | 45,909 | |||
Custody and fund accounting fees | 29,229 | |||
Transfer agent fees | 25,906 | |||
Miscellaneous expenses | 50,798 | |||
Total Expenses | 1,089,760 | |||
Investment advisory and administrative fee waiver | (286,212 | ) | ||
Net Expenses | 803,548 | |||
Net Investment Income | 370,836 | |||
NET REALIZED AND UNREALIZED LOSS: | ||||
Net realized gain on investments in securities | 32,964 | |||
Net change in unrealized appreciation/(depreciation) on investments in securities | (405,928 | ) | ||
Net Realized and Unrealized Loss | (372,964 | ) | ||
Net Decrease in Net Assets Resulting from Operations | $ | (2,128 | ) |
The accompanying notes are an integral part of these financial statements.
financial statements october 31, 2021 | 15 |
BBH PARTNER FUND - SELECT SHORT TERM ASSETS
STATEMENT OF CHANGES IN NET ASSETS
For the period from January 20, 2021 (commencement of operations) to October 31, 2021 | ||||||
INCREASE (DECREASE) IN NET ASSETS: | ||||||
Operations: | ||||||
Net investment income | $ | 370,836 | ||||
Net realized gain on investments in securities and foreign exchange transactions and translations | 32,964 | |||||
Net change in unrealized appreciation/(depreciation) on investments in securities and foreign currency translations | (405,928 | ) | ||||
Net decrease in net assets resulting from operations | (2,128 | ) | ||||
Total dividends and distributions declared | (394,085 | ) | ||||
Share transactions: | ||||||
Proceeds from sales of shares | 527,085,420 | |||||
Cost of shares redeemed | (232,891,786 | ) | ||||
Net increase in net assets resulting from share transactions | 294,193,634 | |||||
Total increase in net assets | 293,797,421 | |||||
NET ASSETS: | ||||||
Beginning of period | – | |||||
End of period | $ | 293,797,421 |
The accompanying notes are an integral part of these financial statements.
16
BBH PARTNER FUND - SELECT SHORT TERM ASSETS
FINANCIAL HIGHLIGHTS
Selected per share data and ratios for a share outstanding throughout the period.
For the period from January 20, 2021 (commencement of operations) to October 31, 2021 | ||||||
Net asset value, beginning of period | $ | 10.00 | ||||
Income from investment operations: | ||||||
Net investment income1 | 0.01 | |||||
Net realized and unrealized loss | (0.01 | ) | ||||
Total income from investment operations | 0.00 | 2 | ||||
Less dividends and distributions: | ||||||
From net investment income | (0.01 | ) | ||||
Net asset value, end of period | $ | 9.99 | ||||
Total return3 | 0.02 | %4 | ||||
Ratios/Supplemental data: | ||||||
Net assets, end of period (in millions) | $ | 294 | ||||
Ratio of expenses to average net assets before reductions | 0.39 | %5 | ||||
Fee waiver | (0.09 | )%5.6 | ||||
Ratio of expenses to average net assets after reductions | 0.30 | %5 | ||||
Ratio of net investment income to average net assets | 0.14 | %5 | ||||
Portfolio turnover rate | 42 | %4 |
____________
1 | Calculated using average shares outstanding for the period. |
2 | Less than $0.01. |
3 | Assumes the reinvestment of distributions. |
4 | Not annualized. |
5 | Annualized with the exception of audit fees, legal fees and registration fees. |
6 | The ratio of expenses to average net assets for the period ended October 31, 2021 reflect fees reduced as result of a voluntary operating expense waiver. For the period from January 20, 2021 to October 31, 2021 the waived fee was $286,212. |
The accompanying notes are an integral part of these financial statements.
financial statements october 31, 2021 | 17 |
BBH PARTNER FUND - SELECT SHORT TERM ASSETS
NOTES TO FINANCIAL STATEMENTS
October 31, 2021
1.Organization. The Fund is a separate, diversified series of BBH Trust (the “Trust”), which is registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as an open-end management investment company. The Trust was originally organized under the laws of the State of Maryland on July 16, 1990 as BBH Fund, Inc. and re-organized as a Delaware statutory trust on June 12, 2007. The Fund commenced operations on January 20, 2021 and currently concentrated their investments on the Total Fund share class. The investment objective of the Fund is to provide income balanced with low price volatility by investing in a well-diversified portfolio of durable performing fixed income instruments. As of October 31, 2021, there were nine series of the Trust.
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. Bonds and other fixed income securities, including restricted securities (other than short-term obligations but including listed issues) are valued at their most recent bid prices (sales price if the principal market is an exchange) in the principal market in which such securities are normally traded, on the basis of valuations furnished by a pricing service, use of which has been approved by the Board of Trustees (the “Board”). In making such valuations, the pricing service utilizes both dealer supplied valuations and electronic data processing techniques, which take into account appropriate factors such as institutional-size trading in similar groups of securities, yield, quality, coupon rate, maturity, type of issue, trading characteristics and other market data, without exclusive reliance upon quoted prices, or exchange or over-the-counter prices, since such valuations are believed to reflect more accurately the fair value of such securities.
Securities or other assets for which market quotations are not readily available are valued at fair value in accordance with procedures established by and under the general supervision and responsibility of the Board. Short-term investments, which mature in 60 days or less are valued at amortized cost if their original maturity was 60 days or less, or by amortizing their value on the 61st day prior to maturity, if their original maturity when acquired by the Fund was more than 60 days, unless the use of amortized cost is determined not to represent “fair value” 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 daily and consists of interest accrued, discount earned (including, if any, both original issue and market discount) and premium amortization on the investments of the Fund. Investment income is recorded net of any foreign taxes withheld where recovery of such tax is uncertain. Debt obligations may be placed on non-accrual status and related interest income may be reduced by ceasing current accruals and writing off interest receivable when the collection of all or a
18
BBH PARTNER FUND - SELECT SHORT TERM ASSETS
NOTES TO FINANCIAL STATEMENTS (continued)
October 31, 2021
portion of the interest has become doubtful based on consistently applied procedures. A debt obligation is removed from non-accrual status when the issuer resumes interest payments or when collectability of interest is reasonably assured.
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 generally apportioned among each fund in the Trust on a net assets basis or other suitable method. Expense estimates are accrued in the period to which they relate and adjustments are made when actual amounts are known.
D.Private Placement Securities. The Fund may purchase securities that are not registered under the Securities Act of 1933, as amended (“1933 Act”) but that can be sold to “qualified institutional buyers” in accordance with the requirements stated in Rule 144A or the requirements stated in Regulation S of the 1933 Act (“Private Placement Securities”). A Private Placement Security may be considered illiquid and therefore, under SEC Regulations for open-end investment companies, subject to the 15% limitation on the purchase of illiquid securities, unless it is determined on an ongoing basis that an adequate trading market exists for the security, which is the case for the Fund. Guidelines have been adopted and the daily function of determining and monitoring liquidity of Private Placement Securities has been delegated to the investment adviser. All relevant factors will be considered in determining the liquidity of Private Placement Securities and all investments in Private Placement Securities will be carefully monitored. Information regarding Private Placement Securities is included at the end of the Portfolio of Investments.
E.Loan Participations and Assignments. The Fund may invest in loan participations and assignments, which include institutionally traded floating and fixed-rate debt securities generally acquired as an assignment from another holder of, or participation interest in, loans originated by a bank or financial institution (the “Lender”) that acts as agent for all holders. Some loan participations and assignments may be purchased on a “when-issued” basis. The agent administers the terms of the loan, as specified in the loan agreement. When investing in a loan assignment, the Fund acquires the loan in whole or in part and becomes a lender under the loan agreement. The Fund generally has the right to enforce compliance with the terms of the loan agreement with the borrower.
Assignments and participations involve credit, interest rate, and liquidity risk. Interest rates on floating rate securities adjust with interest rate changes and/or issuer credit quality, and unexpected changes in such rates could result in losses to the Fund. The interest rates paid on a floating rate security in which the Fund invests generally are readjusted periodically to an increment over a designated benchmark rate, such as the one-month, three-month, six-month, or one-year London Interbank Offered Rate (“LIBOR”). LIBOR is a short-term interest rate that banks charge one another and is generally representative of the most competitive and current cash rates.
The Fund may have difficulty trading assignments and participations to third parties. There may be restrictions on transfer and only limited opportunities may exist to sell such securities in secondary
financial statements october 31, 2021 | 19 |
BBH PARTNER FUND - SELECT SHORT TERM ASSETS
NOTES TO FINANCIAL STATEMENTS (continued)
October 31, 2021
markets. As a result, the Fund may be unable to sell assignments or participations at the desired time or may be able to sell only at a price less than fair market value. The Fund utilizes an independent third party to value individual loan participations and assignments on a daily basis.
F.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 may result in temporary 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 between paid-in capital and retained earnings/(accumulated deficit) within the Statement of Assets and 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.
The Fund is subject to the provisions of Accounting Standards Codification 740 Income Taxes (“ASC 740”). ASC 740 sets forth a minimum threshold for financial statement recognition of the benefit of a tax position taken or expected to be taken in a tax return. The Fund recognizes interest and penalties, if any, related to unrecognized tax benefits as an income tax expense in the Statement of Operations. During the period ended October 31, 2021, the Fund did not incur any such interest or penalties. The Fund is subject to examination by U.S. federal and state tax authorities for returns filed for open tax period since January 20, 2021 (commencement of operations). The Fund is not aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will significantly change in the next twelve months.
G.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 and distributions in the amount of $394,085 to shareholders during the period ended October 31, 2021.
20
BBH PARTNER FUND - SELECT SHORT TERM ASSETS
NOTES TO FINANCIAL STATEMENTS (continued)
October 31, 2021
The tax character of distributions paid during the period ended October 31, 2021 was as follows:
Distributions paid from: | ||||||||||||||||||||
Ordinary income | Net long-term capital gain | Total taxable distributions | Tax return of capital | Total distributions paid | ||||||||||||||||
2021: | $ | 394,085 | $ | — | $ | 394,085 | $ | — | $ | 394,085 |
As of October 31, 2021, the components of retained earnings/(accumulated deficit) was as follows:
Components of retained earnings/(accumulated deficit): | ||||||||||||||||||||||||
Undistributed ordinary income | Undistributed long-term capital gain | Accumulated capital and other losses | Other book/tax temporary differences | Book Unrealized appreciation/ (depreciation) | Total retained earnings/ (accumulated deficit) | |||||||||||||||||||
2021: | $ | 9,777 | $ | — | $ | — | $ | (62) | $ | (405,928) | $ | (396,213) |
The Fund is permitted to carryforward capital losses for an unlimited period and they will retain their character as either short-term or long-term capital losses rather than being considered all short-term capital losses.
Total distributions paid may differ from amounts reported in the Statements of Changes in Net Assets because, for tax purposes, dividends are recognized when actually paid.
The differences between book-basis and tax-basis unrealized appreciation/(depreciation) is attributable primarily to the tax deferral of losses on wash sales and paydowns on fixed income securities.
To the extent future capital gains are offset by capital loss carryforwards, if any, such gains will not be distributed.
H.Use of Estimates. The preparation of the financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities in the financial statements, disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of increase and decrease in net assets from operations during the reporting period. Actual results could differ from these estimates.
financial statements october 31, 2021 | 21 |
BBH PARTNER FUND - SELECT SHORT TERM ASSETS
NOTES TO FINANCIAL STATEMENTS (continued)
October 31, 2021
3. Fees and Other Transactions with Affiliates.
A.Investment Advisory and Administrative Fees. 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, portfolio management and administrative services to the Fund. The Fund pays a combined fee for investment advisory and administrative services calculated daily and paid monthly at an annual rate equivalent to 0.30% per annum on the first $1 billion of the Fund’s average daily net assets and 0.25% per annum on the Fund’s average daily net assets over $1 billion. For the period ended October 31, 2021, the Fund incurred $821,775 for services under the Agreement.
B.Investment Advisory and Administrative Fee Waivers. The Investment Adviser voluntarily agreed to limit the annual fund operating expenses (excluding interest, taxes, brokerage commissions, other expenditures that are capitalized in accordance with GAAP and other extraordinary expenses not incurred in the ordinary course of the Fund’s business). This is a voluntary waiver that can be changed at any time at the sole discretion of the Investment Adviser. For the period ended October 31, 2021, the Investment Adviser waived fees in the amount of $286,212.
C.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% of the Fund’s net asset value. The period ended October 31, 2021, the Fund incurred $29,229 in custody and fund accounting fees. As per agreement with the Fund’s custodian, the Fund receives interest income on cash balances held by the custodian at the BBH Base Rate. The BBH Base Rate is defined as BBH’s effective trading rate in local money markets on each day. The total interest earned by the Fund for the period ended October 31, 2021 was $1,062. This amount is included in “Interest income” in the Statement of Operations. 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 period ended October 31, 2021, was $34. This amount is included under line item “Custody and fund accounting fees” in the Statement of Operations.
D.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 period ended October 31, 2021, the Fund incurred $45,910 in independent Trustee compensation and expense reimbursements.
E.Officers of the Trust. Officers of the Trust are also employees of BBH. Officers are paid no fees by the Trust for their services to the Trust.
22
BBH PARTNER FUND - SELECT SHORT TERM ASSETS
NOTES TO FINANCIAL STATEMENTS (continued)
October 31, 2021
4.Investment Transactions. For the period ended October 31, 2021, the cost of purchases and the proceeds of sales of investment securities, other than short-term investments, were $318,199,694 and $98,972,065, respectively.
5.Shares of Beneficial Interest. The Trust is permitted to issue an unlimited number of shares of beneficial interest, at no par value. Transactions in shares were as follows:
For the period ended October 31, 2021* | ||||||||
Shares | Dollars | |||||||
| ||||||||
Shares sold | 52,713,222 | $ | 527,085,420 | |||||
Shares redeemed | (23,291,023 | ) | (232,891,786 | ) | ||||
Net increase | 29,422,199 | $ | 294,193,634 |
* The period represented is from January 20, 2021 (commencement of operations) to October 31, 2021.
6. 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:
A shareholder may lose money by investing in the Fund (investment risk). The Fund is actively managed and the decisions by the Investment Adviser may cause the Fund to incur losses or miss profit opportunities (management risk). In the normal course of business, the Fund invests in securities and enters into transactions where risks exist due to failure of a counterparty to a transaction to perform (credit risk), changes in interest rates (interest rate risk), higher volatility for securities with longer maturities (maturity risk), financial performance or leverage of the issuer (issuer risk), difficulty in being able to purchase or sell a security (liquidity risk), or certain risks associated with investing in foreign securities not present in domestic investments, including, but not limited to, recovery of tax withheld by foreign jurisdictions (foreign investment risk). The Fund’s use of derivatives creates risks that are different from, or possibly greater than, the risks associated with investing directly in securities as the Fund could lose more than the principal amount invested (derivatives risk). The Fund invests in asset-backed and mortgage-backed securities (mortgage-backed securities risk) which are subject to the risk that borrowers may default on the obligations that underlie these securities. In addition, these securities may be paid off sooner (prepayment risk) or later than expected which may increase the volatility of securities during periods of fluctuating interest rates. The Fund may invest in bonds issued by foreign governments which may be unable or unwilling to make interest payments and/or repay the principal owed (sovereign debt risk). The Fund’s use of borrowing, in reverse repurchase agreements and investment in some derivatives, involves leverage. Leverage tends to exaggerate the effect of any increase or decrease in the value of the Fund’s securities and may cause the Fund to be more volatile
financial statements october 31, 2021 | 23 |
BBH PARTNER FUND - SELECT SHORT TERM ASSETS
NOTES TO FINANCIAL STATEMENTS (continued)
October 31, 2021
(leverage risk). The value of securities held by the Fund may decline in response to certain events, including: those directly involving the companies or issuers whose securities are held by the Fund; conditions affecting the general economy; overall market changes; local, regional or political, social or economic instability; and currency and interest rate and price fluctuations (market risk). The Fund’s shareholders may be adversely impacted by asset allocation decisions made by an investment adviser whose discretionary clients make up a large percentage of the Fund’s shareholders (shareholder concentration risk). While the U.S. Government has historically provided financial support to U.S. government-sponsored agencies or instrumentalities during times of financial stress, such as the various actions taken to stabilize the Federal National Mortgage Association and Federal Home Loan Mortgage Corporation during the credit crisis of 2008, no assurance can be given that it will do so in the future. Such securities are neither issued nor guaranteed by the U.S. Treasury (U.S. Government Agency Securities Risk). The Fund may invest in private placement securities that are issued pursuant to Regulation S and Rule 144A which have not been registered with the U.S. Securities and Exchange Commission (“SEC”). These securities may be subject to contractual restrictions which prohibit or limit their resale (private placement risk). The unavailability and/ or discontinuation of LIBOR may affect the value, liquidity or return on certain fund investments that mature later than 2021 and may result in costs incurred in connection with closing out positions and entering into new positions. Any pricing adjustments to the fund’s investments resulting from a substitute reference rate may also adversely affect the fund’s performance and/or net asset value (LIBOR transition risk). The extent of the Fund’s exposure to these risks in respect to these financial assets is included in their value as recorded in the Fund’s Statement of Assets and Liabilities.
In 2020, the COVID-19 outbreak was declared a pandemic by the World Health Organization. The situation is dynamic with various cities and countries around the world responding in different ways to address the outbreak. The rapid development and fluidity of this situation precludes any prediction as its ultimate impact, which may have a continued adverse impact on economic and market conditions and trigger a period of global economic slowdown. Management is monitoring developments relating to COVID-19 and is coordinating its operational response based on existing business continuity plans and on guidance from global health organizations, relevant governments, and general pandemic response best practices.
Please refer to the Fund’s prospectus for a complete description of the principal risks of investing in the Fund.
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.
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BBH PARTNER FUND - SELECT SHORT TERM ASSETS
NOTES TO FINANCIAL STATEMENTS (continued)
October 31, 2021
7.Subsequent Events. BBH&Co. ("BBH"), the custodian and fund accountant for the Fund, has entered into an agreement with State Street Corporation (“State Street”) under which State Street will acquire BBH’s Investor Services business; which includes those services provided to the Fund. The transaction is expected to be completed in the first quarter of 2022, subject to customary closing conditions and regulatory approvals. Investment advisory, portfolio management and administrative services provided to BBH Trust by BBH through its SID are not impacted by the agreement with State Street.
Management has evaluated events and transactions that have occurred since October 31, 2021 through the date the financial statements were issued and determined that there were no other subsequent events that would require recognition or additional disclosure in the financial statements.
financial statements october 31, 2021 | 25 |
BBH PARTNER FUND - SELECT SHORT TERM ASSETS
DISCLOSURE OF FUND EXPENSES
October 31, 2021 (unaudited)
EXAMPLE
As a shareholder of the Fund, you may incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments, reinvested distributions, or other distributions; redemption fees; and exchange fees; and (2) ongoing costs, including management fees; and other Fund expenses. This Example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The Example is based on an investment of $1,000 invested at the beginning of the six-month period and held for the entire period (May 1, 2021 to October 31, 2021).
ACTUAL EXPENSES
The first line of the table provides information about actual account values and actual expenses. You may use information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled “Expenses Paid During the Period” to estimate the expenses you paid on your account during the period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The second line of the table provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid during the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% Hypothetical Example with the 5% hypothetical examples that appear in the shareholder reports of other funds.
26
BBH PARTNER FUND - SELECT SHORT TERM ASSETS
DISCLOSURE OF FUND EXPENSES (continued)
October 31, 2021 (unaudited)
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as redemption fees or exchange fees. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
Beginning Account Value May 1, 2021 | Ending Account Value October 31, 2021 | Expenses Paid During Period May 1, 2021 to October 31, 20211 | |||||||||||||
Actual | $ | 1,000 | $ | 1,000 | $ | 0.76 | |||||||||
Hypothetical2 | $ | 1,000 | $ | 1,024 | $ | 0.77 |
____________
1 | Expenses are equal to the Fund’s annualized expense ratio of 0.15% multiplied by the average account value over the period, multiplied by 184/365. |
2 | Assumes a return of 5% before expenses. For the purposes of the calculation, the applicable annualized expenses ratio is subtracted from the assumed return before expenses. |
financial statements October 31, 2021 | 27 |
BBH PARTNER FUND - SELECT SHORT TERM ASSETS
CONFLICTS OF INTEREST
October 31, 2021 (unaudited)
Conflicts of Interest
BBH, including the Investment Adviser, provides discretionary and non-discretionary investment management services and products to corporations, institutions and individual investors throughout the world. As a result, in the ordinary course of its businesses, BBH, including the Investment Adviser, may engage in activities in which its interests or the interests of its clients may conflict with or be adverse to the interests of the Funds. In addition, certain of such clients (including the Funds) utilize the services of BBH for which they will pay to BBH customary fees and expenses that will not be shared with the Funds.
The Investment Adviser and the Sub-Adviser have adopted and implemented policies and procedures that seek to manage conflicts of interest. Pursuant to such policies and procedures, the Investment Adviser and the Sub-Adviser monitor a variety of areas, including compliance with fund investment guidelines, the investment in only those securities that have been approved for purchase, and compliance with their respective Code of Ethics.
The Trust also manages these conflicts of interest. For example, the Trust has designated a Chief Compliance Officer (“CCO”) and has adopted and implemented policies and procedures designed to manage the conflicts identified below and other conflicts that may arise in the course of the Funds’ operations in such a way as to safeguard the Funds from being negatively affected as a result of any such potential conflicts. From time to time, the Trustees receive reports from the Investment Adviser, the Sub-Adviser and the Trust’s CCO on areas of potential conflict.
Investors should carefully review the following, which describes potential and actual conflicts of interest that BBH, the Investment Adviser and Sub-Adviser can face in the operation of their respective investment management services. This section is not, and is not intended to be, a complete enumeration or explanation of all of the potential conflicts of interest that may arise. The Investment Adviser, the Sub-Adviser and the Funds have adopted policies and procedures reasonably designed to appropriately prevent, limit or mitigate the conflicts of interest described below. Additional information about potential conflicts of interest regarding the Investment Adviser is set forth in the Investment Adviser’s Form ADV. A copy of Part 1 and Part 2A of the Investment Adviser’s Form ADV is available on the SEC’s website (www.adviserinfo.sec.gov). In addition, many of the activities that create these conflicts of interest are limited and/or prohibited by law, unless an exception is available.
Other Clients and Allocation of Investment Opportunities. BBH, the Investment Adviser, and the Sub-Adviser manage funds and accounts of clients other than the Funds (“Other Clients”). In general, BBH, the Investment Adviser, and the Sub-Adviser face conflicts of interest when they render investment advisory services to different clients and, from time to time, provide dissimilar investment advice to different clients. Investment decisions will not necessarily be made in parallel among the Funds and Other Clients. Investments made by the Funds do not, and are not intended to, replicate the investments, or the investment methods and strategies, of Other Clients. Accordingly, such Other Clients’ accounts may produce results that are materially different from those experienced by the Funds. Certain other conflicts of interest may arise in connection with a portfolio manager’s management of the Funds’ investments, on the one hand, and the investments of other funds or accounts for which the portfolio manager is responsible, on the other. For example, it is possible that the various funds or accounts managed by the Investment Adviser or Sub-Adviser
28
BBH PARTNER FUND - SELECT SHORT TERM ASSETS
CONFLICTS OF INTEREST (continued)
October 31, 2021 (unaudited)
could have different investment strategies that, at times, might conflict with one another to the possible detriment of the Funds. From time to time, the Investment Adviser and Sub-Adviser, sponsor and with other investment pools and accounts which engage in the same or similar businesses as the Funds using the same or similar investment strategies. To the extent that the same investment opportunities might be desirable for more than one account or fund, possible conflicts could arise in determining how to allocate them because the Investment Adviser or Sub-Adviser may have an incentive to allocate investment opportunities to certain accounts or funds. However, BBH and the Investment Adviser have implemented policies and procedures designed to ensure that information relevant to investment decisions is disseminated promptly within its portfolio management teams and investment opportunities are allocated equitably among different clients. The policies and procedures require, among other things, objective allocation for limited investment opportunities, and documentation and review of justifications for any decisions to make investments only for select accounts or in a manner disproportionate to the size of the account. Nevertheless, access to investment opportunities may be allocated differently among accounts due to the particular characteristics of an account, such as size of the account, cash position, tax status, risk tolerance and investment restrictions or for other reasons.
Actual or potential conflicts of interest may also arise when a portfolio manager has management responsibilities to multiple accounts or funds, resulting in unequal commitment of time and attention to the portfolio management of the funds or accounts.
Affiliated Service Providers. Other potential conflicts might include conflicts between the Funds and its affiliated and unaffiliated service providers (e.g. conflicting duties of loyalty). In addition to providing investment management services through the SID, BBH provides administrative, custody, shareholder servicing and fund accounting services to the Funds. BBH may have conflicting duties of loyalty while servicing the Funds and/or opportunities to further its own interest to the detriment of the Funds. For example, in negotiating fee arrangements with affiliated service providers, BBH may have an incentive to agree to higher fees than it would in the case of unaffiliated providers. BBH acting in its capacity as the Funds’ administrator is the primary valuation agent of the Funds. BBH values securities and assets in the Funds according to the Funds’ valuation policies. Because the Investment Adviser’s advisory and administrative fees are calculated by reference to the Funds’ net assets, BBH and its affiliates may have an incentive to seek to overvalue certain assets.
Aggregation. Potential conflicts of interest also arise with the aggregation of trade orders. Purchases and sales of securities for the Funds may be aggregated with orders for other client accounts managed by the Sub-Adviser. The Sub-Adviser, however, is not required to aggregate orders if portfolio management decisions for different accounts are made separately, or if it is determined that aggregating is not practicable, or in cases involving client direction. Prevailing trading activity frequently may make impossible the receipt of the same price or execution on the entire volume of securities purchased or sold. When this occurs, the various prices may be averaged, and the Funds will be charged or credited with the average price. Thus, the effect of the aggregation may operate on some occasions to the disadvantage of the Funds. In addition, under certain circumstances, the Funds will not be charged the same commission or commission equivalent rates in connection with an aggregated order.
financial statements October 31, 2021 | 29 |
BBH PARTNER FUND - SELECT SHORT TERM ASSETS
CONFLICTS OF INTEREST (continued)
October 31, 2021 (unaudited)
Cross Trades. Under certain circumstances, the Investment Adviser, on behalf of the Funds, may seek to buy from or sell securities to another fund or account advised by BBH, the Investment Adviser. Subject to applicable law and regulation, BBH, the Investment Adviser may (but is not required to) effect purchases and sales between BBH, the Investment Adviser clients (“cross trades”), including the Funds, if BBH, the Investment Adviser or the Sub-Adviser believe such transactions are appropriate based on each party’s investment objectives and guidelines. There may be potential conflicts of interest or regulatory issues relating to these transactions which could limit the Investment Adviser’s decision to engage in these transactions for the Funds. BBH, the Investment Adviser and/or the Sub-Adviser may have a potentially conflicting division of loyalties and responsibilities to the parties in such transactions.
Soft Dollars. The Investment Adviser may direct brokerage transactions and/or payment of a portion of client commissions (“soft dollars”) to specific brokers or dealers or other providers to pay for research or other appropriate services which provide, in the Investment Adviser’s view, appropriate assistance in the investment decision-making process (including with respect to futures, fixed price offerings and over-the-counter transactions). The use of a broker that provides research and securities transaction services may result in a higher commission than that offered by a broker who does not provide such services. The Investment Adviser will determine in good faith whether the amount of commission is reasonable in relation to the value of research and services provided and whether the services provide lawful and appropriate assistance in its investment decision-making responsibilities.
Research or other services obtained in this manner may be used in servicing any or all of the Funds and other accounts managed by the Investment Adviser, including in connection with accounts that do not pay commissions to the broker related to the research or other service arrangements. Such products and services may disproportionately benefit other client accounts relative to the Funds based on the amount of brokerage commissions paid by the Funds and such other accounts. To the extent that the Sub-Adviser uses soft dollars, it will not have to pay for those products and services itself.
BBH may receive research that is bundled with the trade execution, clearing, and/or settlement services provided by a particular broker-dealer. To the extent that the Sub-Adviser receives research on this basis, many of the same conflicts related to traditional soft dollars may exist. For example, the research effectively will be paid by client commissions that also will be used to pay for the execution, clearing, and settlement services provided by the broker-dealer and will not be paid by the Sub-Adviser.
Arrangements regarding compensation and delegation of responsibility may create conflicts relating to selection of brokers or dealers to execute Fund portfolio trades and/or specific uses of commissions from Fund portfolio trades, administration of investment advice and valuation of securities.
Investments in BBH Funds. From time to time BBH may invest a portion of the assets of its discretionary investment advisory clients in the Funds. That investment by BBH on behalf of its discretionary investment advisory clients in the Funds may be significant at times.
Increasing a Fund’s assets may enhance investment flexibility and diversification and may contribute to economies of scale that tend to reduce the Funds’ expense ratio. In selecting the Funds for its discretionary
30
BBH PARTNER FUND - SELECT SHORT TERM ASSETS
CONFLICTS OF INTEREST (continued)
October 31, 2021 (unaudited)
investment advisory clients, BBH may limit its selection to funds managed by BBH or the Investment Adviser. BBH may not consider or canvass the universe of unaffiliated investment companies available, even though there may be unaffiliated investment companies that may be more appropriate or that have superior performance. BBH, the Investment Adviser and their affiliates providing services to the Funds benefit from additional fees when the Funds is included as an investment by a discretionary investment advisory client.
BBH reserves the right to redeem at any time some or all of the shares of the Funds acquired for its discretionary investment advisory clients’ accounts. A large redemption of shares of the Funds by BBH on behalf of its discretionary investment advisory clients could significantly reduce the asset size of the Funds, which might have an adverse effect on the Funds’ investment flexibility, portfolio diversification and expense ratio.
Valuation. When market quotations are not readily available, or are believed by BBH to be unreliable, the Funds’ investments will be valued at fair value by BBH pursuant to procedures adopted by the Funds’ Board of Trustees. When determining an asset’s “fair value”, BBH seeks to determine the price that a Fund might reasonably expect to receive from the current sale of that asset in an arm’s-length transaction. The price generally may not be determined based on what the Funds might reasonably expect to receive for selling an asset at a later time or if it holds the asset to maturity. While fair value determinations will be based upon all available factors that BBH deems relevant at the time of the determination and may be based on analytical values determined by BBH using proprietary or third-party valuation models, fair value represents only a good faith approximation of the value of a security. The fair value of one or more securities may not, in retrospect, be the price at which those assets could have been sold during the period in which the particular fair values were used in determining the Funds’ net asset value. As a result, the Funds’ sale or redemption of its shares at net asset value, at a time when a holding or holdings are valued by BBH (pursuant to Board-adopted procedures) at fair value, may have the effect of diluting or increasing the economic interest of existing shareholders.
Referral Arrangements. BBH may enter into advisory and/or referral arrangements with third parties. Such arrangements may include compensation paid by BBH to the third party. BBH may pay a solicitation fee for referrals and/or advisory or incentive fees. BBH may benefit from increased amounts of assets under management.
Personal Trading. BBH, including the Investment Adviser, and any of their respective partners, principals, directors, officers, employees, affiliates or agents, face conflicts of interest when transacting in securities for their own accounts because they could benefit by trading in the same securities as the Funds, which could have an adverse effect on the Funds. However, the Investment Adviser has implemented policies and procedures concerning personal trading by BBH Partners and employees. The policy and procedures are intended to prevent BBH Partners and employees from trading in the same securities as the Funds. However, BBH, including the Investment Adviser, has implemented policies and procedures concerning personal trading by BBH Partners and employees. The policies and procedures are intended to prevent BBH Partners and employees with access to Fund material non-public information from trading in the same securities as the Funds.
financial statements October 31, 2021 | 31 |
BBH PARTNER FUND - SELECT SHORT TERM ASSETS
CONFLICTS OF INTEREST (continued)
October 31, 2021 (unaudited)
Gifts and Entertainment. From time to time, employees of BBH, including the Investment Adviser, and any of their respective partners, principals, directors, officers, employees, affiliates or agents, may receive gifts and/or entertainment from clients, intermediaries, or service providers to the Funds or BBH, including the Investment Adviser, which could have the appearance of affecting or may potentially affect the judgment of the employees, or the manner in which they conduct business. The Investment Adviser has implemented policies and procedures concerning gifts and entertainment to mitigate any impact on the judgment of BBH Partners and employees. BBH, including the Investment Adviser, has implemented policies and procedures concerning gifts and entertainment to mitigate any impact on the judgment of BBH Partners and employees.
32
BBH PARTNER FUND - SELECT SHORT TERM ASSETS
ADDITIONAL FEDERAL TAX INFORMATION
October 31, 2021 (unaudited)
The qualified investment income (“QII”) percentage for the period ended October 31, 2021 was 69.21%. In January 2022, shareholders will receive Form 1099-DIV, which will include their share of qualified dividends distributed during the calendar year 2021. Shareholders are advised to check with their tax advisers for information on the treatment of these amounts on their individual income tax returns.
financial statements October 31, 2021 | 33 |
TRUSTEES AND OFFICERS OF BBH PARTNER FUND - SELECT SHORT TERM ASSETS
(unaudited)
Information pertaining to the Trustees and executive officers of the Trust as of October 31, 2021 is set forth below. The mailing address for each Trustee is c/o BBH Trust, 140 Broadway, New York, NY 10005.
Name and Birth Year | Position(s) Held with the Trust | Term of Office and Length of Time Served# | Principal Occupation(s) During Past 5 Years | Number of Portfolios in Fund Complex Overseen by Trustee^ | Other Public Company or Investment Company Directorships held by Trustee During Past 5 Years | |||||
Independent Trustees | ||||||||||
H. Whitney Wagner Birth Year: 1956 | Chairman of the Board and Trustee | Chairman Since 2014; Trustee Since 2007 and 2006-2007 with the Predecessor Trust | President, Clear Brook Advisors, a registered investment adviser. | 9 | None. | |||||
Andrew S. Frazier Birth Year: 1948 | Trustee | Since 2010 | Retired. | 9 | None. | |||||
Mark M. Collins Birth Year: 1956 | Trustee | Since 2011 | Partner of Brown Investment Advisory Incorporated, a registered investment adviser. | 9 | Chairman of Dillon Trust Company. | |||||
John M. Tesoro Birth Year: 1952 | Trustee | Since 2014 | Retired. | 9 | Trustee, Bridge Builder Trust (8 Funds); Director, Teton Advisors, Inc. (a registered investment adviser). | |||||
Joan A. Binstock Birth Year: 1954 | Trustee | Since 2019 | Partner, Chief Financial and Operations Officer, Lord Abbett & Co. LLC (1999-2018); Lovell Minnick Partners, Advisers Counsel (2018-present). | 9 | Independent Director, Morgan Stanley Direct Lending Fund; KKR Real Estate Interval Fund. |
34
TRUSTEES AND OFFICERS OF BBH PARTNER FUND - SELECT SHORT TERM ASSETS
(unaudited)
Name, Address and Birth Year | Position(s) Held with the Trust | Term of Office and Length of Time Served# | Principal Occupation(s) During Past 5 Years | Number of Portfolios in Fund Complex Overseen by Trustee^ | Other Public Company or Investment Company Directorships held by Trustee During Past 5 Years | |||||
Interested Trustees | ||||||||||
Susan C. Livingston+ 50 Post Office Square Boston, MA 02110 Birth Year: 1957 | Trustee | Since 2011 | Partner (since 1998) and Senior Client Advocate (since 2010) for BBH&Co. | 9 | None. | |||||
John A. Gehret+ 140 Broadway New York, NY 10005 Birth Year: 1959 | Trustee | Since 2011 | Limited Partner of BBH&Co. (2012-present). | 9 | None. |
financial statements October 31, 2021 | 35 |
TRUSTEES AND OFFICERS OF BBH PARTNER FUND - SELECT SHORT TERM ASSETS
(unaudited)
Name, Address and Birth Year | Position(s) Held with the Trust | Term of Office and Length of Time Served# | Principal Occupation(s) During Past 5 Years | |||
Officers | ||||||
Jean-Pierre Paquin 140 Broadway New York, NY 10005 Birth Year: 1973 | President and Principal Executive Officer | Since 2016 | Partner of BBH&Co. since 2015; joined BBH&Co. in 1996. | |||
Daniel Greifenkamp 140 Broadway New York, NY 10005 Birth Year: 1969 | Vice President | Since 2016 | Managing Director of BBH&Co. since 2014; joined BBH&Co. in 2011. | |||
Charles H. Schreiber 140 Broadway New York, NY 10005 Birth Year: 1957 | Treasurer and Principal Financial Officer | Since 2007 2006-2007 with the Predecessor Trust | Senior Vice President of BBH&Co. since 2001; joined BBH&Co. in 1999. | |||
Paul F. Gallagher 140 Broadway New York, NY 10005 Birth Year: 1959 | Chief Compliance Officer (“CCO”) | Since 2015 | Senior Vice President of BBH&Co. since 2015. | |||
Kristin Marvin 140 Broadway New York, NY 10005 Birth Year: 1981 | Anti-Money Laundering Officer (“AMLO”) | Since 2021 | Assistant Vice President of BBH&Co. since March 2020; Program Manager, Ares Management Corporation, April 2015 - March 2020. |
36
TRUSTEES AND OFFICERS OF BBH PARTNER FUND - SELECT SHORT TERM ASSETS
(unaudited)
Name, Address and Birth Year | Position(s) Held with the Trust | Term of Office and Length of Time Served# | Principal Occupation(s) During Past 5 Years | |||
Suzan M. Barron 50 Post Office Square Boston, MA 02110 Birth Year: 1964 | Secretary | Since 2009 | Senior Vice President and Senior Investor Services Counsel of BBH&Co. since 2005. | |||
Crystal Cheung 140 Broadway New York, NY 10005 Birth Year: 1974 | Assistant Treasurer | Since 2018 | Assistant Vice President of BBH&Co. since 2016; joined BBH&Co. in 2014. | |||
Dania C. Piscetta 50 Post Office Square Boston, MA 02110 Birth Year: 1989 | Assistant Secretary | Since 2021 | Assistant Vice President of BBH&Co. since 2021; Assistant Vice President and Legal Associate of Wellington Management Company LLP. April 2018 - March 2021; Senior Compliance Analyst, Fidelity Investments, May 2016 – April 2018. |
________________
# | All officers of the Trust hold office for one year and until their respective successors are chosen and qualified (subject to the ability of the Trustees to remove any officer in accordance with the Trust’s By-laws). Mr. Wagner previously served on the Board of Trustees of the Predecessor Trust. |
+ | Ms. Livingston and Mr. Gehret are “interested persons” of the Trust as defined in the 1940 Act because of their positions as Partner and Limited Partner of BBH&Co., respectively. |
^ | The Fund Complex consists of the Trust, which has nine series, and each is counted as one “Portfolio” for purposes of this table. |
financial statements October 31, 2021 | 37 |
BBH PARTNER FUND - SELECT SHORT TERM ASSETS
OPERATION AND EFFECTIVENESS OF THE FUND’S LIQUIDITY RISK MANAGEMENT PROGRAM
October 31, 2021 (unaudited)
The Securities and Exchange Commission adopted Rule 22e-4 under the Investment Company Act of 1940, as amended (the “Liquidity Rule”) to promote effective liquidity risk management throughout the open-end investment company industry in order to reduce the risk that funds will be unable to meet their redemption obligations and mitigate dilution of the interests of fund shareholders.
The Board of Trustees (the “Board”) of BBH Trust met on March 9, 2021 to review the liquidity risk management program (the “Program”) for the funds of BBH Trust (the “Funds”) pursuant to the Liquidity Rule. The Board has appointed three members of the Brown Brothers Harriman & Co. Mutual Fund Advisory Department, the Investment Adviser to the Funds, as the Program Administrator for each Fund’s Program. The Program Administrator provided the Board with a report (the “Report”) that addressed the operations of the Program and assessed its adequacy and effectiveness of the Program. The Report covered the period from February 1, 2020 through January 31, 2021 (the “Reporting Period”).
The Report noted that the Program complied with the key factors for consideration under the Liquidity Rule for assessing, managing and periodically reviewing a Fund’s liquidity risk, including the following points.
Liquidity classification. The Report described the Program’s liquidity classification methodology for categorizing the Funds’ investments into one of four liquidity buckets.
Highly Liquid Investment Minimum. The Report noted that one aspect of the Liquidity Rule is a requirement that funds that are expected to have less than 50% of assets classified as other than “highly liquid” should establish a minimum percentage of highly liquid assets that the fund is expected to hold on an on-going basis. The Program Administrator monitors the percentages of assets in each category on an ongoing basis and, given that no Fund has approached the 50% threshold, has made the determination that it is not necessary to assign a Highly Liquid Investment Minimum as provided for in the Liquidity Rule to any of the Funds.
The Fund’s investment strategy and liquidity of portfolio investments during normal and reasonably foreseeable stressed market conditions. During the Reporting Period, the Program Administrator reviewed whether each Fund’s investment strategy is appropriate for an open-end fund structure with a focus on Funds with more significant and consistent holdings of less liquid and illiquid assets and factored a Fund’s concentration in an issuer into the liquidity classification methodology by taking issuer position sizes into account.
Short-term and long-term cash flow projections during normal and reasonably foreseeable stressed market conditions. During the Reporting Period, the Program Administrator reviewed historical redemption activity and used this information as a component to establish each Fund’s reasonably anticipated trading size. The Program Administrator also took into consideration other factors such as shareholder ownership concentration, applicable distribution channels and the degree of certainty associated with a Fund’s short-term and long-term cash flow projections.
Holdings of cash and cash equivalents. The Program Administrator considered the degree to which each Fund held cash and cash equivalents as a component of each Fund’s ability to meet redemption requests.
38
BBH PARTNER FUND - SELECT SHORT TERM ASSETS
OPERATION AND EFFECTIVENESS OF THE FUND’S LIQUIDITY RISK MANAGEMENT PROGRAM (continued)
October 31, 2021 (unaudited)
There were no material changes to the Program during the Reporting Period. The Program Administrator has informed the Board that it believes that the Fund’s Program is adequately designed, has been implemented as intended, and has operated effectively since its implementation. No material exceptions have been noted since the implementation of the Program, and there were no liquidity events that impacted the Fund or its ability to meet redemption requests on a timely basis during the Reporting Period.
financial statements October 31, 2021 | 39 |
Administrator Brown Brothers Harriman & Co. 140 Broadway New York, NY 10005
Distributor ALPS Distributors, Inc. 1290 Broadway, Suite 1000 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 |
To obtain information or make shareholder inquiries:
By telephone: | Call 1-800-575-1265 |
By E-mail send your request to: | bbhfunds@bbh.com |
On the internet: | www.bbhfunds.com |
This report is submitted for the general information of shareholders and is not authorized for distribution to prospective investors unless preceded or accompanied by an effective prospectus. Nothing herein contained is to be considered an offer of sale or a solicitation of an offer to buy shares of the Fund.
For more complete information, visit www.bbhfunds.com for a prospectus. You should consider the Fund’s investment objectives, risks, charges and expenses carefully before you invest. Information about these and other important subjects is in the Fund’s prospectus, which you should read carefully before investing.
Holdings and allocations are subject to change. Fund holdings should not be relied on in making investment decisions and should not be construed as research or investment advice regarding particular securities. Current and future holdings are subject to risk.
The Fund files a complete schedule of portfolio holdings with the Securities and Exchange Commission (SEC) for the first and third quarters of each fiscal year as an exhibit to its reports on Form N-PORT. The Fund’s Forms N-PORT are available electronically on the SEC’s website (sec.gov). For a complete list of a fund’s portfolio holdings, view the most recent holdings listing, semi-annual report, or annual report on the Fund’s web site at http://www.bbhfunds.com.
A summary of the Fund’s Proxy Voting Policy that the Fund uses to determine how to vote proxies, if any, relating to securities held in the Fund’s portfolio, as well as a record of how the Fund voted any such proxies during the most recent 12-month period ended June 30, is available, without charge, upon request by calling the toll-free number listed above. This information is also available on the SEC’s website at www.sec.gov.
NOT FDIC INSURED NO BANK GUARANTEE MAY LOSE VALUE
Annual Report
OCTOBER 31, 2021
BBH Partner Fund - Small Cap Equity
BBH PARTNER FUND - SMALL CAP EQUITY
MANAGEMENT’S DISCUSSION OF FUND PERFORMANCE
October 31, 2021
Since inception on July 8, 2021, the BBH Partner Fund – Small Cap Equity (“the Fund” or “BBH Small Cap”) returned -1.50%, net of fees, while the Fund’s benchmark, the Russell 2000, returned 3.22%.
For the period, the Fund underperformed its benchmark, largely driven by individual security performance from the following holdings: Stitch Fix Inc, Astronics Corp, Cimpress PLC, Agilysys Inc and Despegar.com Corp. The largest positive contributors to performance during the same time period include: Mimecast Ltd, InMode Ltd, Zuora Inc, Papa John’s International Inc and Onto Innovation Inc.
The Fund’s Sub-advisor, Bares Capital Management, LLC (“Bares”), has invested the Fund in a concentrated portfolio of small cap companies that Bares believes can compound intrinsic value at high rates over the long-term. The key criteria that Bares uses to evaluate a company are as follows:
•
Competitive Advantage: to assess a company’s competitive position, the Bares team performs a Porter’s 5 Forces analysis to determine buyer power, supplier power, the threat of substitutes and new entrants, and the competitive rivalry and industry dynamics. They will also analyze the sources of a company’s “moat,” which can be any of the following, including a significant cost advantage, efficient scale, network effects, switching costs, or the possession of intangible assets such as brand power.
•
Management Talent: the Bares team focuses on assessing management’s ability to execute and operate the business, whether they are trustworthy and transparent, and that their incentives are aligned with minority shareholders. Bares must be able to trust that the management team will use capital efficiently to generate the highest returns, which could include reinvesting in the core business, acquiring another company, or repurchasing its own shares in the open market.
•
Growth Potential: the Bares team aims to identify and evaluate companies with underappreciated sources of growth. In addition to determining a reasonable estimate of a business’ total addressable market, the team also qualitatively determines a company’s runway for growth and will selectively reassess the long-term potential if they believe growth can continue at an elevated rate.
Bares believes that the companies with the greatest potential to compound intrinsic value at above-average rates have durable competitive advantages, large growth opportunities, superior returns on equity (achieved without excessive leverage) and that are led by skilled managers who are good stewards of shareholder capital. To find such companies, the Bares team places heavy emphasis on assessing the quality of a business and its management team through extensive, on the ground due diligence and research.
________________
Returns of less than a year are not annualized. The Fund is new with a limited operating history. |
financial statements october 31, 2021 | 3 |
BBH PARTNER FUND - SMALL CAP EQUITY
MANAGEMENT’S DISCUSSION OF FUND PERFORMANCE (continued)
October 31, 2021
Growth of $10,000 Invested in BBH Partner Fund – Small Cap Equity
The graph below illustrates the hypothetical investment of $10,0001 in the Class I shares of the Fund since inception (July 8, 2021) to October 31, 2021 as compared to the Russell 2000 TR USD.
The annualized gross expense ratio as shown in the June 28, 2021 prospectus for Class I shares was 0.95%.
Performance data quoted represents past performance which is no guarantee of future results. Investment return and principal value will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Fund performance changes over time and current performance may be lower or higher than what is stated. Fund shares redeemed within 30 days of purchase are subject to a redemption fee of 2.00%. Returns do not reflect the deductions of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. For performance current to the most recent month-end please call 1-800-575-1265.
Hypothetical performance results are calculated on a total return basis and include all portfolio income, unrealized and realized capital gains, losses and reinvestment of dividends and other earnings. No one shareholder has actually achieved these results and no representation is being made that any actual shareholder achieved, or is likely to achieve, similar results to those shown. Hypothetical performance does not represent actual trading and may not reflect the impact of material economic and market factors. Undue reliance should not be placed on hypothetical performance results in making an investment decision.
________________
1 | The Fund’s performance assumes the reinvestment of all dividends and distributions. The Russel 2000 TR USD index has been adjusted to reflect reinvestment of dividends on securities in the index. The Russel 2000 TR USD index is not adjusted to reflect sales charges, expenses or other fees that the Securities and Exchange Commission requires to be reflected in the Fund’s performance. The Russell 2000 TR USD is a stock index that tracks 2,000 publicly traded small-capitalization companies. The index is unmanaged. Investments cannot be made in an index. |
The Fund seeks to generate attractive returns over time but does not attempt to mirror a benchmark or an index. The composition of the Russell 2000 Index is materially different than the Fund’s holdings. |
4
BBH PARTNER FUND - SMALL CAP EQUITY
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
October 31, 2021
To the Trustees of the BBH Trust and Shareholders of BBH Partner Fund – Small Cap Equity:
Opinion on the Financial Statements and Financial Highlights
We have audited the accompanying statement of assets and liabilities, including the portfolio of investments, of BBH Partner Fund – Small Cap Equity (the "Fund"), one of the funds within BBH Trust, as of October 31, 2021, the related statement of operations, statement of changes in net assets and financial highlights for period from July 8, 2021 (commencement of operations) to October 31, 2021, and the related notes. In our opinion, the financial statements and financial highlights present fairly, in all material respects, the financial position of the Fund as of October 31, 2021, the results of its operations, and the changes in its net assets and the financial highlights for the period from July 8, 2021 (commencement of operations) to October 31, 2021, in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements and financial highlights are the responsibility of the BBH Trust's management. Our responsibility is to express an opinion on the Fund's financial statements and financial highlights based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the BBH Trust in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement, whether due to error or fraud. The BBH Trust is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the BBH Trust’s internal control over financial reporting. Accordingly, we express no such opinion.
financial statements october 31, 2021 | 5 |
BBH PARTNER FUND - SMALL CAP EQUITY
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM (continued)
October 31, 2021
Our audits included performing procedures to assess the risks of material misstatement of the financial statements and financial highlights, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements and financial highlights. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements and financial highlights. Our procedures included confirmation of securities owned as of October 31, 2021, by correspondence with the custodian and brokers. We believe that our audits provide a reasonable basis for our opinion.
/s/ DELOITTE & TOUCHE LLP
Boston, Massachusetts
December 21, 2021
We have served as the auditor of one or more Brown Brothers Harriman investment companies since 1991.
6
BBH PARTNER FUND - SMALL CAP EQUITY
PORTFOLIO ALLOCATION
October 31, 2021
SECTOR DIVERSIFICATION
U.S. $ Value | Percent of Net Assets | ||||||
Common Stock: | |||||||
Basic Materials | $ | 12,271,417 | 3.8 | % | |||
Communications | 65,795,781 | 20.5 | |||||
Consumer Cyclical | 31,180,433 | 9.7 | |||||
Consumer Non-cyclical | 74,693,296 | 23.1 | |||||
Industrials | 8,086,210 | 2.5 | |||||
Technology | 91,618,043 | 28.4 | |||||
Cash and Other Assets in Excess of Liabilities | 38,833,563 | 12.0 | |||||
NET ASSETS | $ | 322,478,743 | 100.0 | % |
All data as of October 31, 2021. The Fund's sector diversification is expressed as a percentage of net assets and may vary over time.
The accompanying notes are an integral part of these financial statements.
financial statements october 31, 2021 | 7 |
BBH PARTNER FUND - SMALL CAP EQUITY
PORTFOLIO OF INVESTMENTS
October 31, 2021
Shares | Value | ||||||||||
COMMON STOCK (88.0%) | |||||||||||
BASIC MATERIALS (3.8%) | |||||||||||
$ | 540,353 | Element Solutions, Inc. | $ | 12,271,417 | |||||||
Total Basic Materials | 12,271,417 | ||||||||||
| COMMUNICATIONS (20.5%) | ||||||||||
1,000,000 | Despegar.com Corp. (British Virgin Islands)1 | 11,120,000 | |||||||||
267,270 | Mimecast, Ltd. (Jersey)1 | 20,162,849 | |||||||||
760,000 | Stitch Fix, Inc. (Class A)1 | 26,296,000 | |||||||||
431,335 | WideOpenWest, Inc.1 | 8,216,932 | |||||||||
Total Communications | 65,795,781 | ||||||||||
| CONSUMER CYCLICAL (9.7%) | ||||||||||
113,660 | Papa John's International, Inc. | 14,102,933 | |||||||||
225,000 | XPEL, Inc.1 | 17,077,500 | |||||||||
Total Consumer Cyclical | 31,180,433 | ||||||||||
| CONSUMER NON-CYCLICAL (23.1%) | ||||||||||
330,000 | Alarm.com Holdings, Inc.1 | 27,805,800 | |||||||||
170,000 | Cimpress , Plc. (Ireland)1 | 15,184,400 | |||||||||
283,984 | EVERTEC, Inc. (Puerto Rico) | 12,838,917 | |||||||||
31,910 | Heska Corp.1 | 7,132,842 | |||||||||
100,000 | Inmode, Ltd. (Israel)1 | 9,474,000 | |||||||||
60,486 | iRadimed Corp.1 | 2,257,337 | |||||||||
Total Consumer Non-cyclical | 74,693,296 | ||||||||||
INDUSTRIALS (2.5%) | |||||||||||
626,838 | Astronics Corp.1 | 8,086,210 | |||||||||
Total Industrials | 8,086,210 | ||||||||||
TECHNOLOGY (28.4%) | |||||||||||
330,224 | Agilysys, Inc.1 | 15,758,289 | |||||||||
136,905 | Health Catalyst, Inc.1 | 7,206,679 | |||||||||
400,000 | Model N, Inc.1 | 12,964,000 | |||||||||
157,500 | Onto Innovation, Inc.1 | 12,475,575 | |||||||||
590,000 | PagerDuty, Inc.1 | 24,632,500 | |||||||||
850,000 | Zuora, Inc. (Class A)1 | 18,581,000 | |||||||||
Total Technology | 91,618,043 | ||||||||||
Total Common Stock | |||||||||||
(Cost $288,800,463) | 283,645,180 |
TOTAL INVESTMENTS (Cost $288,800,463)2 | 88.0 | % | $ | 283,645,180 | ||
CASH AND OTHER ASSETS IN EXCESS OF LIABILITIES | 12.0 | % | 38,833,563 | |||
NET ASSETS | 100.00 | % | $ | 322,478,743 |
The accompanying notes are an integral part of these financial statements.
8
BBH PARTNER FUND - SMALL CAP EQUITY
PORTFOLIO OF INVESTMENTS (continued)
October 31, 2021
1 | Non-income producing security. |
2 | The aggregate cost for federal income tax purposes is $288,800,463, the aggregate gross unrealized appreciation is $18,235,629 and the aggregate gross unrealized depreciation is $23,390,912, resulting in net unrealized depreciation of $5,155,283. |
The accompanying notes are an integral part of these financial statements.
financial statements october 31, 2021 | 9 |
BBH PARTNER FUND - SMALL CAP EQUITY
PORTFOLIO OF INVESTMENTS (continued)
October 31, 2021
FAIR VALUE MEASUREMENTS
The Fund is required to disclose information regarding the fair value measurements of the Fund’s assets and liabilities. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The disclosure requirement established a three-tier hierarchy to maximize the use of observable market data and minimize the use of unobservable inputs and to establish classification of fair value measurements for disclosure purposes. Inputs refer broadly to the assumptions that market participants would use in pricing the asset or liability, including for example, the risk inherent in a particular valuation technique used to measure fair value including such a pricing model and/or the risk inherent in the inputs to the valuation technique. Inputs may be observable or unobservable. Observable inputs are inputs that reflect the assumptions market participants would use in pricing the asset or liability developed based on market data obtained from sources independent of the reporting entity. Unobservable inputs are inputs that reflect the Fund’s own considerations about the assumptions market participants would use in pricing the asset or liability developed based on the best information available in the circumstances.
Authoritative guidance establishes three levels of the fair value hierarchy as follows:
— | Level 1 – unadjusted quoted prices in active markets for identical assets and liabilities. |
— | Level 2 – significant other observable inputs (including quoted prices for similar assets and liabilities, interest rates, prepayment speeds, credit risk, etc.). |
— | Level 3 – significant unobservable inputs (including the Fund’s own assumptions in determining the fair value of assets and liabilities). |
Inputs are used in applying the various valuation techniques and broadly refer to the assumptions that market participants use to make valuation decisions, including assumptions about risk. Inputs may include price information, specific and broad credit data, liquidity statistics, and other factors. A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. However, the determination of what constitutes “observable” requires judgment by the investment adviser. The investment adviser considers observable data to be that market data which is readily available, regularly distributed or updated, reliable and verifiable, not proprietary, and provided by independent sources that are actively involved in the relevant market. The categorization of a financial instrument within the hierarchy is based upon the pricing transparency of the instrument and does not necessarily correspond to the investment adviser’s perceived risk of that instrument.
Financial assets within Level 1 are based on quoted market prices in active markets. The Fund does not adjust the quoted price for these instruments.
The accompanying notes are an integral part of these financial statements.
10
BBH PARTNER FUND - SMALL CAP EQUITY
PORTFOLIO OF INVESTMENTS (continued)
October 31, 2021
Financial instruments that trade in markets that are not considered to be active but are valued based on quoted market prices, dealer quotations or alternative pricing sources supported by observable inputs are classified within Level 2. These include investment-grade corporate bonds, U.S. Treasury notes and bonds, and certain non-U.S. sovereign obligations, listed equities and over-the-counter derivatives and foreign equity securities whose values could be impacted by events occurring before the Fund’s pricing time, but after the close of the securities’ primary markets and are, therefore, fair valued according to procedures adopted by the Board of Trustees. As Level 2 financial assets include positions that are not traded in active markets and/or are subject to transfer restrictions, valuations may be adjusted to reflect illiquidity and/or non-transferability, which are generally based on available market information.
Financial assets classified within Level 3 have significant unobservable inputs, as they trade infrequently. Level 3 financial assets include private equity and certain corporate debt securities.
Because of the inherent uncertainties of valuation, the values reflected in the financial statements may materially differ from the value received upon the actual sale of those investments.
The following table summarizes the valuation of the Fund’s investments by the above fair value hierarchy levels as of October 31, 2021.
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 October 31, 2021 | ||||||||||||||||
Common Stock: | ||||||||||||||||||||
Basic Materials | $ | 12,271,417 | $ | – | $ | – | $ | 12,271,417 | ||||||||||||
Communications | 65,795,781 | – | – | 65,795,781 | ||||||||||||||||
Consumer Cyclical | 31,180,433 | – | – | 31,180,433 | ||||||||||||||||
Consumer Non-cyclical | 74,693,296 | – | – | 74,693,296 | ||||||||||||||||
Industrials | 8,086,210 | – | – | 8,086,210 | ||||||||||||||||
Technology | 91,618,043 | – | – | 91,618,043 | ||||||||||||||||
Total Investment, at value | $ | 283,645,180 | $ | – | $ | – | $ | 283,645,180 |
The accompanying notes are an integral part of these financial statements.
financial statements october 31, 2021 | 11 |
BBH PARTNER FUND - SMALL CAP EQUITY
STATEMENT OF ASSETS AND LIABILITIES
October 31, 2021
ASSETS: | ||||||
Investments in securities, at value (Cost $288,800,463) | $ | 283,645,180 | ||||
Cash | 38,084,916 | |||||
Receivables for: | ||||||
Investments sold. | 4,100,759 | |||||
Shares sold | 1,360,000 | |||||
Dividends | 12,779 | |||||
Investment advisory and administrative fee waiver reimbursement | 9,509 | |||||
Interest | 1,542 | |||||
Total Assets | 327,214,685 | |||||
LIABILITIES: | ||||||
Payables for: | ||||||
Investments purchased | 4,439,509 | |||||
Investment advisory and administrative fees | 216,464 | |||||
Professional fees. | 49,974 | |||||
Custody and fund accounting fees | 10,000 | |||||
Shares redeemed. | 5,500 | |||||
Transfer agent fees | 5,426 | |||||
Board of Trustees' fees. | 1,111 | |||||
Accrued expenses and other liabilities | 7,958 | |||||
Total Liabilities | 4,735,942 | |||||
NET ASSETS | $ | 322,478,743 | ||||
Net Assets Consist of: | ||||||
Paid-in capital | $ | 325,583,164 | ||||
Accumulated deficit | (3,104,421 | ) | ||||
Net Assets | $ | 322,478,743 | ||||
NET ASSET VALUE AND OFFERING PRICE PER SHARE | ||||||
($322,478,743 ÷ 32,737,341 shares outstanding) | $ | 9.85 |
The accompanying notes are an integral part of these financial statements.
12
BBH PARTNER FUND - SMALL CAP EQUITY
STATEMENT OF OPERATIONS
For the period from July 8, 2021 (commencement of operations) to October 31, 2021
NET INVESTMENT INCOME: | ||||
Income: | ||||
Dividends (net of foreign withholding taxes of $1,420) | $ | 99,181 | ||
Interest income | 8,240 | |||
Total Income | 107,421 | |||
Expenses: | ||||
Investment advisory and administrative fees | 729,310 | |||
Professional fees. | 49,974 | |||
Board of Trustees' fees | 14,690 | |||
Custody and fund accounting fees | 10,316 | |||
Transfer agent fees | 10,114 | |||
Miscellaneous expenses | 41,616 | |||
Total Expenses | 856,020 | |||
Investment advisory and administrative fee waiver | (40,593 | ) | ||
Net Expenses | 815,427 | |||
Net Investment Loss | (708,006 | ) | ||
NET REALIZED AND UNREALIZED LOSS: | ||||
Net realized gain on investments in securities | 2,758,868 | |||
Net change in unrealized appreciation/(depreciation) on investments in securities | (5,155,283 | ) | ||
Net Realized and Unrealized Loss | (2,396,415 | ) | ||
Net Decrease in Net Assets Resulting from Operations | $ | (3,104,421 | ) |
The accompanying notes are an integral part of these financial statements.
financial statements october 31, 2021 | 13 |
BBH PARTNER FUND - SMALL CAP EQUITY
STATEMENT OF CHANGES IN NET ASSETS
For the period from July 8, 2021 (commencement of operations) to October 31, 2021 | ||||||
INCREASE (DECREASE) IN NET ASSETS: | ||||||
Operations: | ||||||
Net investment income | $ | (708,006 | ) | |||
Net realized gain on investments in securities and foreign exchange transactions and translations | 2,758,868 | |||||
Net change in unrealized appreciation/(depreciation) on investments in securities and foreign currency translations | (5,155,283 | ) | ||||
Net decrease in net assets resulting from operations | (3,104,421 | ) | ||||
Share transactions: | ||||||
Proceeds from sales of shares | 327,054,355 | |||||
Cost of shares redeemed | (1,471,191 | ) | ||||
Net increase in net assets resulting from share transactions | 325,583,164 | |||||
Total increase in net assets | 322,478,743 | |||||
NET ASSETS: | ||||||
Beginning of period | – | |||||
End of period | $ | 322,478,743 |
The accompanying notes are an integral part of these financial statements.
14
BBH PARTNER FUND - SMALL CAP EQUITY
FINANCIAL HIGHLIGHTS
Selected per share data and ratios for a Class I share outstanding throughout each period.
For the period from July 8, 2021 (commencement of operations) to October 31, 2021 | ||||||
Net asset value, beginning of period | $ | 10.00 | ||||
Income from investment operations: | ||||||
Net investment loss1 | (0.03 | ) | ||||
Net realized and unrealized loss | (0.12 | ) | ||||
Total loss from investment operations | (0.15 | ) | ||||
Less dividends and distributions: | ||||||
From investment income | — | |||||
Total dividends and distributions | — | |||||
Net asset value, end of period | $ | 9.85 | ||||
Total return | (1.50 | )%2 | ||||
Ratios/Supplemental data: | ||||||
Net assets, end of period (in millions) | $ | 322 | ||||
Ratio of expenses to average net assets before reductions | 0.93 | %3 | ||||
Fee waiver | (0.01 | )%3,4 | ||||
Ratio of expenses to average net assets after reductions | 0.92 | %3 | ||||
Ratio of net investment income to average net assets | (0.83 | )%3 | ||||
Portfolio turnover rate | 3 | %2 |
____________
1 | Calculated using average shares outstanding for the period. |
2 | Not annualized. |
3 | Annualized with the exception of audit fees, legal fees and registration fees. |
4 | The ratio of expenses to average net assets for the period ended October 31, 2021 reflect fees reduced as result of a voluntary operating expense waiver. For the period from July 8, 2021 to October 31, 2021 the waived fee was $40,593. |
The accompanying notes are an integral part of these financial statements.
financial statements october 31, 2021 | 15 |
BBH PARTNER FUND - SMALL CAP EQUITY
NOTES TO FINANCIAL STATEMENTS
As of and for the period ended October 31, 2021
1.Organization. The Fund is a separate, non-diversified series of BBH Trust (the “Trust”), which is registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as an open-end management investment company. The Trust was originally organized under the laws of the State of Maryland on July 16, 1990 as BBH Fund, Inc. and re-organized as a Delaware statutory trust on June 12, 2007. The Fund commenced operations on July 8, 2021 and offers one share class, Class I. Class I shares is not automatically convert to any other share class of the Fund. The investment objective of the Fund is to provide investors with long-term growth of capital. As of October 31, 2021, there were nine series of the Trust.
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. (1) The value of investments listed on a securities exchange is based on the last sale price on that exchange prior to the time when assets are valued, or in the absence of recorded sales, at the average of readily available closing bid and asked prices on such exchange; (2) securities not traded on an exchange are valued at the average of the quoted bid and asked prices in the over-the-counter market; (3) securities or other assets for which market quotations are not readily available are valued at fair value in accordance with procedures established by and under the general supervision and responsibility of the Board of Trustees (the “Board”); (4) short-term investments, which mature in 60 days or less are valued at amortized cost if their original maturity was 60 days or less, or by amortizing their value on the 61st day prior to maturity, if their original maturity when acquired by the Fund was more than 60 days, unless the use of amortized cost is determined not to represent “fair value” 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. Dividend income and other distributions received from portfolio securities are recorded on the ex-dividend date. Non-cash dividends included in dividend income, if any, are recorded at the fair market value of securities received at ex-date. Distributions received on securities that represent a return of capital are recorded as a reduction of cost of investments. Distributions received on securities that represent a capital gain are recorded as a realized gain. Interest income is accrued daily. Investment income is recorded net of any foreign taxes withheld where recovery of such tax is uncertain.
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 generally apportioned among each fund in the Trust
16
BBH PARTNER FUND - SMALL CAP EQUITY
NOTES TO FINANCIAL STATEMENTS (continued)
As of and for the period ended October 31, 2021
on a net assets basis or other suitable method. Expense estimates are accrued in the period to which they relate and adjustments are made when actual amounts are known.
D. 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 may result in temporary 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 between paid-in capital and retained earnings/(accumulated deficit) within the Statement of Assets and 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.
The Fund is subject to the provisions of Accounting Standards Codification 740 Income Taxes (“ASC 740”). ASC 740 sets forth a minimum threshold for financial statement recognition of the benefit of a tax position taken or expected to be taken in a tax return. The Fund did not have any unrecognized tax benefits as of October 31, 2021, nor were there any increases or decreases in unrecognized tax benefits for the year then ended. The Fund recognizes interest and penalties, if any, related to unrecognized tax benefits as an income tax expense in the Statement of Operations. During the period ended October 31, 2021, the Fund did not incur any such interest or penalties. The Fund is subject to examination by U.S. federal and state tax authorities for returns filed for open tax period since July 8, 2021 (commencement of operations). The Fund is not aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will significantly change in the next twelve months.
E.Dividends and Distributions to Shareholders. Dividends and distributions from net investment income to shareholders, if any, are paid annually and are recorded on the ex-dividend date. 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 and distributions in the amount of $0 to Class I shares shareholders, during the period ended October 31, 2021.
financial statements october 31, 2021 | 17 |
BBH PARTNER FUND - SMALL CAP EQUITY
NOTES TO FINANCIAL STATEMENTS (continued)
As of and for the period ended October 31, 2021
As of October 31, 2021 the components of retained earnings/(accumulated deficit) was as follows:
Components of retained earnings/(accumulated deficit): | ||||||||||||||||||||||||
Undistributed ordinary income | Undistributed long-term capital gain | Accumulated capital and other losses | Other book/tax temporary differences | Unrealized appreciation/ (depreciation) | Total retained earnings/ (accumulated deficit) | |||||||||||||||||||
2021: | $ 2,050,862 | $ — | $ — | $ — | $ (5,155,283) | $ (3,104,421) |
The Fund had did not have a net capital loss carryforwards as of October 31, 2021.
The Fund is permitted to carryforward capital losses for an unlimited period and they will retain their character as either short-term or long-term capital losses rather than being considered all short-term capital losses.
The differences between book-basis and tax-basis unrealized appreciation/(depreciation) would be attributable primarily to the tax deferral of losses on wash sales, if applicable.
To the extent future capital gains are offset by capital loss carryforwards, if any, such gains will not be distributed.
F.Use of Estimates. The preparation of the financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities in the financial statements, disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of increase and decrease in net assets from operations during the reporting period. Actual results could differ from these estimates.
3. Fees and Other Transactions with Affiliates
A.Investment Advisory and Administrative Fees. 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, portfolio management and administrative services to the Fund. BBH employs a “manager-of-managers” investment approach, whereby it allocates the Fund’s assets to the Fund’s sub-adviser, currently Bares Capital Management, Inc. (“Bares Capital Management” or the “Sub-adviser”). The Sub-adviser is responsible for investing the assets of the Fund and the Investment Adviser oversees the Sub-adviser and evaluates its performance results. The Fund pays a combined fee for investment advisory and administrative services calculated daily and paid monthly at an annual rate equivalent to 0.85% per annum on the first $3 billion of the Fund’s average daily net assets and 0.80% per annum on the Fund’s average daily net assets over $3 billion. The Investment Adviser pays
18
BBH PARTNER FUND - SMALL CAP EQUITY
NOTES TO FINANCIAL STATEMENTS (continued)
As of and for the period ended October 31, 2021
its Sub-adviser a percentage from its investment advisory and administrative fees. For period ended October 31, 2021, the Fund incurred 729,310 under the Agreement.
B.Investment Advisory and Administrative Fee Waivers. The Investment Adviser voluntarily agreed to limit the annual fund operating expenses (excluding interest, taxes, brokerage commissions, other expenditures that are capitalized in accordance with GAAP and other extraordinary expenses not incurred in the ordinary course of the Fund’s business) of Class I. This is a voluntary waiver that can be changed at any time at the sole discretion of the Investment Adviser. For the period ended October 31, 2021, the Investment Adviser waived fees in the amount of $40,593 for Class I.
C.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% of the Fund’s net asset value. For the period ended October 31, 2021, the Fund incurred $10,316 in custody and fund accounting fees. As per agreement with the Fund’s custodian, the Fund receives interest income on cash balances held by the custodian at the BBH Base Rate. The BBH Base Rate is defined as BBH’s effective trading rate in local money markets on each day. The total interest earned by the Fund for the period ended October 31, 2021 was $8,240. This amount is included in "interest income" in the Statement of Operations. 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 period ended October 31, 2021, was $735. This amount is included under line item “Custody and fund accounting fees” in the Statement of Operations.
D.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 period ended October 31, 2021, the Fund incurred $14,690 in independent Trustee compensation and expense reimbursements.
E.Officers of the Trust. Officers of the Trust are also employees of BBH. Officers are paid no fees by the Trust for their services to the Trust.
4.Investment Transactions. For the period ended October 31, 2021, the cost of purchases and the proceeds of sales of investment securities, other than short-term investments, were $294,104,758 and $8,063,163, respectively.
financial statements october 31, 2021 | 19 |
BBH PARTNER FUND - SMALL CAP EQUITY
NOTES TO FINANCIAL STATEMENTS (continued)
As of and for the period ended October 31, 2021
5.Shares of Beneficial Interest. The Trust is permitted to issue an unlimited number of Class I shares of beneficial interest at no par value. Transactions in Class I shares were as follows:
For the period ended October 31, 2021* | ||||||||
Shares | Dollars | |||||||
Class I | ||||||||
Shares sold | 32,889,385 | $ | 327,054,355 | |||||
Shares redeemed | (152,044 | ) | (1,471,191 | ) | ||||
Net increase | 32,737,341 | $ | 325,583,164 |
* The period represented is from July 8, 2021 (commencement of operations) to October 31, 2021.
6. 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:
A shareholder may lose money by investing in the Fund (investment risk). The Fund is actively managed and the decisions by the Investment Adviser may cause the Fund to incur losses or miss profit opportunities (management risk). Price movements may occur due to factors affecting individual companies, such as the issuance of an unfavorable earnings report, or other events affecting particular industries or the equity market as a whole (equity securities risk). Small cap companies, when compared to larger companies, may experience lower trading volume and could be subject to greater and less predictable price changes (Small Cap Company risk). The fund will invest 25% or more of its net assets in the Software & Services Industry Group. When a fund focuses its investments in a particular industry, group of industries, or sector, financial, economic business and other developments affecting issuers in those industries or groups of industries will have a greater effect on the fund than if the fund did not focus on an industry or group of industries (Software & Service Industry Group Concentration risk). The value of securities held by the Fund may fall due to changing economic, political, regulatory or market conditions, or due to a company’s or issuer’s individual situation. Natural disasters, the spread of infectious illness and other public health emergencies, recession, terrorism and other unforeseeable events may lead to increased market volatility and may have adverse effects on world economies and markets generally (market risk). In the normal course of business, the Fund invests in securities and enters into transactions where risks exist due to assumption of large positions in securities of a small number of issuers (non-diversification risk). The Fund’s shareholders may be adversely impacted by asset allocation decisions made by an investment adviser whose discretionary clients make up a large percentage of the Fund’s shareholders (Large Shareholder risk). The extent of the Fund’s exposure to these risks in respect to these financial assets is included in their value as recorded in the Fund’s Statement of Assets and Liabilities.
20
BBH PARTNER FUND - SMALL CAP EQUITY
NOTES TO FINANCIAL STATEMENTS (continued)
As of and for the period ended October 31, 2021
In 2020, the COVID-19 outbreak was declared a pandemic by the World Health Organization. The situation is dynamic with various cities and countries around the world responding in different ways to address the outbreak. The rapid development and fluidity of this situation precludes any prediction as its ultimate impact, which may have a continued adverse impact on economic and market conditions and trigger a period of global economic slowdown. Management is monitoring developments relating to COVID-19 and is coordinating its operational response based on existing business continuity plans and on guidance from global health organizations, relevant governments, and general pandemic response best practices.
Please refer to the Fund’s prospectus for a complete description of the principal risks of investing in the Fund.
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.
7.Subsequent Events. BBH&Co. ("BBH"), the custodian and fund accountant for the Fund, has entered into an agreement with State Street Corporation (“State Street”) under which State Street will acquire BBH’s Investor Services business; which includes those services provided to the Fund. The transaction is expected to be completed in the first quarter of 2022, subject to customary closing conditions and regulatory approvals. Investment advisory, portfolio management and administrative services provided to BBH Trust by BBH through its SID are not impacted by the agreement with State Street.
Management has evaluated events and transactions that have occurred since October 31, 2021 through the date the financial statements were issued and determined that there were no other subsequent events that would require recognition or additional disclosure in the financial statements.
financial statements october 31, 2021 | 21 |
BBH PARTNER FUND - SMALL CAP EQUITY
DISCLOSURE OF FUND EXPENSES
October 31, 2021 (unaudited)
EXAMPLE
As a shareholder of the Fund, you may incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments, reinvested distributions, or other distributions; redemption fees; and exchange fees; and (2) ongoing costs, including management fees; distribution 12b-1 fees; and other Fund expenses. This Example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The Example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period (July 8, 2021 to October 31, 2021).
ACTUAL EXPENSES
The first line of the table below provides information about actual account values and actual expenses. You may use information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled “Expenses Paid During the Period” to estimate the expenses you paid on your account during the period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The second line of the table below provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid during the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% Hypothetical Example with the 5% hypothetical examples that appear in the shareholder reports of other funds.
22
BBH PARTNER FUND - SMALL CAP EQUITY
DISCLOSURE OF FUND EXPENSES (continued)
October 31, 2021 (unaudited)
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as redemption fees or exchange fees. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
Beginning Account Value July 8, 2021 | Ending Account Value October 31, 2021 | Expenses Paid During Period July 8, 2021 to October 31, 20211 | |||||||||||||
Class I | |||||||||||||||
Actual | $ | 1,000 | $ | 985 | $ | 2.88 | |||||||||
Hypothetical2 | $ | 1,000 | $ | 1,013 | $ | 2.92 |
____________
1 | Expenses are equal to the Fund’s annualized expense ratio of 0.92% for Class I, multiplied by the average account value over the period, multiplied by 115/365. |
2 | Assumes a return of 5% before expenses. For the purposes of the calculation, the applicable annualized expense ratio for each class of shares is subtracted from the assumed return before expenses. |
financial statements October 31, 2021 | 23 |
BBH PARTNER FUND - SMALL CAP EQUITY
DISCLOSURE OF ADVISOR SELECTION
October 31, 2021 (unaudited)
Investment Advisory and Administrative Services and Sub-Advisory Agreements Approval
The 1940 Act requires that a fund’s investment advisory agreements must be approved both by a fund’s board of trustees and by a majority of the trustees who are not parties to the investment advisory agreements or “interested persons” of any party (“Independent Trustees”), cast in person at a meeting called for the purpose of voting on such approval. However, due to the ongoing COVID-19 pandemic the U.S. Securities and Exchange Commission provided exemptive relief from the in-person provisions of Section 15 of the 1940 Act related to the approval certain agreements on March 25, 2020 (“Exemptive Relief”).
The Board, a majority of which is comprised of Independent Trustees, held a meeting on June 16, 2021, in reliance on the Exemptive Order, to consider the combined Amended and Restated Investment Advisory and Administrative Services Agreement (the “Agreement”) between the Trust and the Investment Adviser with respect to the Fund. The Board approved the Agreement at that time. In approving the Agreement, the Board determined that the terms of the Agreement were fair and reasonable and in the best interest of the Fund and its shareholders.
Throughout the year, the Board requested, received and assessed a variety of materials provided by the Investment Adviser and BBH, including, among other things, information about the nature, extent and quality of the services provided and to be provided to the Trust and the Fund by the Investment Adviser and BBH, including investment management and administrative services, the oversight of Fund service providers, marketing, risk oversight, compliance, and the ability to meet applicable legal and regulatory requirements. The Board received and reviewed a comparative fee and expense information for the Fund as compared to similar funds at the meeting held on June 16, 2021. The Board reviewed this report with fund management, the Adviser and counsel to the Trust (“Fund Counsel”). The Board received from, and discussed with, Fund Counsel a memorandum regarding the responsibilities of trustees for the approval of investment advisory agreements under the 1940 Act, as well as the guidance provided in Gartenburg v. Merrill Lynch Asset Management, Inc., which was affirmed in Jones v. Harris Associates, L.P. In addition, the Board met in executive session outside the presence of Fund management.
In approving the Agreement, the Board considered: (a) the nature, extent and quality of services provided by the Investment Adviser; (b) the advisory fee and the cost of the services to be realized by the Investment Adviser from its relationship with the Fund; (c) the Fund’s costs to investors compared to the costs of comparative funds; (d) the sharing of potential economies of scale; and (e) other factors deemed relevant by the Board. The following is a summary of certain factors the Board considered in making its determination to approve the Agreement. No single factor reviewed by the Board was identified as the principal factor in determining whether to approve the Agreement, and individual Trustees may have given different weight to various factors. The Board reviewed these factors with Fund Counsel. The Board concluded that the fees to be paid by the Fund to the Investment Adviser were reasonable.
Nature, Extent and Quality of Services
The Board noted that, under the Agreement and with respect to the Fund, the Investment Adviser, subject to the supervision of the Board, is responsible for providing a continuous investment program and making purchases and sales of portfolio securities consistent with the Fund’s investment objective and policies. The Board further noted that, as a combined investment advisory and administration agreement, the Agreement
24
BBH PARTNER FUND - SMALL CAP EQUITY
DISCLOSURE OF ADVISOR SELECTION (continued)
October 31, 2021 (unaudited)
also contemplates the provision of administrative services by the Investment Adviser to the Fund within the same fee structure. The Board received and considered information during the Meeting, and over the course of the previous year, regarding the nature, extent and quality of services provided to the Trust and those that would be provided to the Fund by the Investment Adviser including: portfolio management, the supervision of operations and compliance, preparation of regulatory filings, disclosures to Fund shareholders, general oversight of service providers, organizing Board meetings and preparing the materials for such Board meetings, assistance to the Board (including the Independent Trustees in their capacity as Trustees), legal and Chief Compliance Officer services for the Trust, and other services necessary for the operation of the Fund. The Board considered the resources of the Investment Adviser and BBH, as a whole, dedicated to the Fund noting that, pursuant to separate agreements, BBH also provides custody and fund accounting services to the Fund. The Board considered the depth and range of services provided pursuant to the Agreement, noting that the Investment Adviser also coordinates the provision of services to the Fund by affiliated and nonaffiliated service providers.
The Board considered the scope and quality of services provided by the Investment Adviser under the Agreement. The Board reviewed the qualifications of the key investment personnel primarily responsible for the day-to-day portfolio management of the Fund. The Board also considered the policies and practices followed by BBH and the Investment Adviser. The Board concluded that, overall, it was satisfied with the nature, extent and quality of the investment advisory and administrative services provided, and expected to be provided, to the Fund pursuant to the Agreement.
Costs of Services Provided
The Board considered the fee rates paid by the Fund to the Investment Adviser and BBH in light of the nature, extent and quality of the services provided to the Fund. The Board considered the depth and range of services provided pursuant to the Advisory Agreement, noting that the Investment Adviser also coordinates the provision of services to the Fund by affiliated and nonaffiliated service providers. The Board received and considered information comparing the Fund’s investment advisory and administration fee and the Fund’s net total expenses with those of other comparable mutual funds, such peer group and comparisons having been selected and calculated by an independent third party, noting that the Fund compared favorably to the selected peer-set. The Board recognized that it is difficult to make comparisons of the fee rate, or of combined advisory and administration fees, because there are variations in the services that are included in the fees paid by other funds. The Board concluded that the advisory and administration fee appeared to be both reasonable in light of the services rendered and the result of arm’s length negotiations.
The Board also considered the effect of fall-out benefits to the Investment Adviser and BBH such as the increased visibility of BBH’s investment management business due to the distribution of the Trust’s funds. The Board considered other benefits received by BBH and the Investment Adviser as a result of their relationships with the Fund. These other benefits include fees received for being the Fund’s custodian and fund accounting agent. In light of the costs of providing services pursuant to the Agreement as well as the Investment Adviser and BBH’s commitment to the Fund, the ancillary benefits that the Investment Adviser and BBH received were considered reasonable.
financial statements October 31, 2021 | 25 |
BBH PARTNER FUND - SMALL CAP EQUITY
DISCLOSURE OF ADVISOR SELECTION (continued)
October 31, 2021 (unaudited)
Economies of Scale
The Board also considered the existence of any economies of scale and whether those economies are passed along to the Fund’s shareholders through a graduated investment advisory fee schedule or other means, including any fee waivers by the Investment Adviser and BBH. The Board considered the fee schedule for the Fund, including applicable breakpoints. The Board concluded that the fees to be paid by the Fund to the Investment Adviser were reasonable based on the comparative expense information and the cost of the services provided by the Investment Adviser.
Approval of New Sub-Advisory Agreement
The Board, a majority of which is comprised of Independent Trustees, held a meeting on June 16, 2021, in reliance on the Exemptive Order, to consider the combined Sub-Advisory Agreement (the “Sub-Advisory Agreement”) between the Investment Adviser and Bares Capital Management, Inc. (“Bares”) (the “Sub-Advisory Agreement”). Following their review and consideration, the Board, including the Independent Trustees, determined that the terms of the Sub-Advisory Agreement were reasonable and unanimously approved the Sub-Advisory Agreement for an initial period of two-years.
In connection with the approval of the Sub-advisory Agreement, the Board was provided written materials prepared by BBH, the Investment Adviser and Bares and received oral presentations from BBH, Investment Adviser and Bares personnel. The Board received from, and discussed with, Fund Counsel a memorandum regarding the responsibilities of trustees for the approval of investment advisory agreements, including sub-advisory agreements, under the 1940 Act, as well as the guidance provided in Gartenburg v. Merrill Lynch Asset Management, Inc., which was affirmed in Jones v. Harris Associates, L.P. In addition, the Board met in executive session outside the presence of Fund management.
The following is a summary of the factors the Board considered in making its determination to approve the Sub-Advisory Agreement. No single factor reviewed by the Board was identified as the principal factor in determining whether to approve the Sub-Advisory Agreement, and individual Trustees may have given different weight to various factors. The Board reviewed these factors with Fund Counsel. The Board concluded that the terms of the Sub-Advisory Agreement are fair and reasonable and that the fee to be paid to Bares was reasonable in light of the services to be provided.
Nature, Extent and Quality of the Services
In evaluating the nature, extent and quality of the services to be provided by Bares under the Sub-Advisory Agreement, the Board considered, among other things, information provided by the Investment Adviser and Bares regarding the operations, facilities, organization and personnel of Bares, the anticipated ability of Bares to perform its duties under the Sub-Advisory Agreement, and the anticipated investment program and other practices of the Fund. The Board considered that, although Bares did not have prior experience managing registered investment companies, Bares is an experienced and respected asset management firm and that the Investment Adviser believed that Bares has the capabilities, experience, resources and personnel necessary to provide sub-advisory services to the Fund based on the assessment of Bares’ organization and investment talent. The Board considered whether Bares would be able to provide sub-advisory services that are appropriate in scope and extent in light of the investment program for the Fund and whether Bares’ portfolio management team had demonstrated its ability to adhere to compliance
26
BBH PARTNER FUND - SMALL CAP EQUITY
DISCLOSURE OF ADVISOR SELECTION (continued)
October 31, 2021 (unaudited)
procedures. The Board also considered the quality of the investment research capabilities of Bares and the resources it has dedicated to performing services for the Fund. On the basis of these considerations, together with other information considered, the Board determined that it was satisfied with the nature, extent and quality of the services to be provided by Bares.
Performance
The Board considered Bares’ performance relating to its other accounts, including pooled investment vehicles, investment management experience, capabilities and resources. The Board further considered information regarding Bares’ investment philosophy, the proposed portfolio construction for the Fund, and investment techniques to be employed. On the basis of this information and the Board’s assessment of the nature, extent and quality of the services to be provided by Bares, the Board concluded that Bares is capable of generating an appropriate level of investment performance.
Cost of Services to be Provided
The Board considered the proposed sub-advisory fee schedule under the Sub-Advisory Agreement , noting that the Investment Adviser would be responsible for paying the sub-advisory fee out of the fee it receives from the Fund. The Board considered whether there will be any incidental benefits expected to be derived by Bares from its relationship with the Fund. On the basis of these considerations, together with other information considered, the Board determined that the sub-advisory fee to be received by Bares under the Sub-Advisory Agreement is reasonable in light of the sub-advisory services to be provided.
Economies of Scale
In evaluating the extent to which the sub-advisory fees payable under the Sub-Advisory Agreement reflect economies of scale or would permit economies of scale to be realized in the future, the Board considered the sub-advisory fee schedule and the existence of breakpoints in both the advisory and sub-advisory fee schedules. The Board concluded that the fees to be paid by the Fund to the Investment Adviser and the fees paid by the Investment Adviser to Bares were reasonable based on the comparative expense information and the cost of the services provided by the Investment Adviser.
financial statements October 31, 2021 | 27 |
BBH PARTNER FUND - SMALL CAP EQUITY
CONFLICTS OF INTEREST
October 31, 2021 (unaudited)
Description of Potential Material Conflicts of Interest - Investment Adviser
BBH, including the Investment Adviser, provides discretionary and non-discretionary investment management services and products to corporations, institutions and individual investors throughout the world. As a result, in the ordinary course of its businesses, BBH, including the Investment Adviser, may engage in activities in which its interests or the interests of its clients may conflict with or be adverse to the interests of the Funds. In addition, certain of such clients (including the Funds) utilize the services of BBH for which they will pay to BBH customary fees and expenses that will not be shared with the Funds.
The Investment Adviser and the Sub-Adviser have adopted and implemented policies and procedures that seek to manage conflicts of interest. Pursuant to such policies and procedures, the Investment Adviser and the Sub-Adviser monitor a variety of areas, including compliance with fund investment guidelines, the investment in only those securities that have been approved for purchase, and compliance with their respective Code of Ethics.
The Trust also manages these conflicts of interest. For example, the Trust has designated a Chief Compliance Officer (“CCO”) and has adopted and implemented policies and procedures designed to manage the conflicts identified below and other conflicts that may arise in the course of the Funds’ operations in such a way as to safeguard the Funds from being negatively affected as a result of any such potential conflicts. From time to time, the Trustees receive reports from the Investment Adviser, the Sub-Adviser and the Trust’s CCO on areas of potential conflict.
Investors should carefully review the following, which describes potential and actual conflicts of interest that BBH, the Investment Adviser and Sub-Adviser can face in the operation of their respective investment management services. This section is not, and is not intended to be, a complete enumeration or explanation of all of the potential conflicts of interest that may arise. The Investment Adviser, the Sub-Adviser and the Funds have adopted policies and procedures reasonably designed to appropriately prevent, limit or mitigate the conflicts of interest described below. Additional information about potential conflicts of interest regarding the Investment Adviser is set forth in the Investment Adviser’s Form ADV. A copy of Part 1 and Part 2A of the Investment Adviser’s Form ADV is available on the SEC’s website (www.adviserinfo.sec.gov). In addition, many of the activities that create these conflicts of interest are limited and/or prohibited by law, unless an exception is available.
Other Clients and Allocation of Investment Opportunities. BBH, the Investment Adviser, and the Sub-Adviser manage funds and accounts of clients other than the Funds (“Other Clients”). In general, BBH, the Investment Adviser, and the Sub-Adviser face conflicts of interest when they render investment advisory services to different clients and, from time to time, provide dissimilar investment advice to different clients. Investment decisions will not necessarily be made in parallel among the Funds and Other Clients. Investments made by the Funds do not, and are not intended to, replicate the investments, or the investment methods and strategies, of Other Clients. Accordingly, such Other Clients’ accounts may produce results that are materially different from those experienced by the Funds. Certain other conflicts of interest may arise in connection with a portfolio manager’s management of the Funds’ investments, on the one hand, and the investments of other funds or accounts for which the portfolio manager is responsible, on the other. For example, it is possible that the various funds or accounts managed by the Investment Adviser or Sub-Adviser
28
BBH PARTNER FUND - SMALL CAP EQUITY
CONFLICTS OF INTEREST (continued)
October 31, 2021 (unaudited)
could have different investment strategies that, at times, might conflict with one another to the possible detriment of the Funds. From time to time, the Investment Adviser and Sub-Adviser, sponsor and with other investment pools and accounts which engage in the same or similar businesses as the Funds using the same or similar investment strategies. To the extent that the same investment opportunities might be desirable for more than one account or fund, possible conflicts could arise in determining how to allocate them because the Investment Adviser or Sub-Adviser may have an incentive to allocate investment opportunities to certain accounts or funds. However, BBH and the Investment Adviser have implemented policies and procedures designed to ensure that information relevant to investment decisions is disseminated promptly within its portfolio management teams and investment opportunities are allocated equitably among different clients. The policies and procedures require, among other things, objective allocation for limited investment opportunities, and documentation and review of justifications for any decisions to make investments only for select accounts or in a manner disproportionate to the size of the account. Nevertheless, access to investment opportunities may be allocated differently among accounts due to the particular characteristics of an account, such as size of the account, cash position, tax status, risk tolerance and investment restrictions or for other reasons.
Actual or potential conflicts of interest may also arise when a portfolio manager has management responsibilities to multiple accounts or funds, resulting in unequal commitment of time and attention to the portfolio management of the funds or accounts.
Affiliated Service Providers. Other potential conflicts might include conflicts between the Funds and its affiliated and unaffiliated service providers (e.g. conflicting duties of loyalty). In addition to providing investment management services through the SID, BBH provides administrative, custody, shareholder servicing and fund accounting services to the Funds. BBH may have conflicting duties of loyalty while servicing the Funds and/or opportunities to further its own interest to the detriment of the Funds. For example, in negotiating fee arrangements with affiliated service providers, BBH may have an incentive to agree to higher fees than it would in the case of unaffiliated providers. BBH acting in its capacity as the Funds’ administrator is the primary valuation agent of the Funds. BBH values securities and assets in the Funds according to the Funds’ valuation policies. Because the Investment Adviser’s advisory and administrative fees are calculated by reference to the Funds’ net assets, BBH and its affiliates may have an incentive to seek to overvalue certain assets.
Aggregation. Potential conflicts of interest also arise with the aggregation of trade orders. Purchases and sales of securities for the Funds may be aggregated with orders for other client accounts managed by the Sub-Adviser. The Sub-Adviser, however, is not required to aggregate orders if portfolio management decisions for different accounts are made separately, or if it is determined that aggregating is not practicable, or in cases involving client direction. Prevailing trading activity frequently may make impossible the receipt of the same price or execution on the entire volume of securities purchased or sold. When this occurs, the various prices may be averaged, and the Funds will be charged or credited with the average price. Thus, the effect of the aggregation may operate on some occasions to the disadvantage of the Funds. In addition, under certain circumstances, the Funds will not be charged the same commission or commission equivalent rates in connection with an aggregated order.
financial statements October 31, 2021 | 29 |
BBH PARTNER FUND - SMALL CAP EQUITY
CONFLICTS OF INTEREST (continued)
October 31, 2021 (unaudited)
Cross Trades. Under certain circumstances, the Investment Adviser, on behalf of the Funds, may seek to buy from or sell securities to another fund or account advised by BBH, the Investment Adviser. Subject to applicable law and regulation, BBH, the Investment Adviser may (but is not required to) effect purchases and sales between BBH, the Investment Adviser clients (“cross trades”), including the Funds, if BBH, the Investment Adviser or the Sub-Adviser believe such transactions are appropriate based on each party’s investment objectives and guidelines. There may be potential conflicts of interest or regulatory issues relating to these transactions which could limit the Investment Adviser’s decision to engage in these transactions for the Funds. BBH, the Investment Adviser and/or the Sub-Adviser may have a potentially conflicting division of loyalties and responsibilities to the parties in such transactions.
Soft Dollars. The Investment Adviser may direct brokerage transactions and/or payment of a portion of client commissions (“soft dollars”) to specific brokers or dealers or other providers to pay for research or other appropriate services which provide, in the Investment Adviser’s view, appropriate assistance in the investment decision-making process (including with respect to futures, fixed price offerings and over-the-counter transactions). The use of a broker that provides research and securities transaction services may result in a higher commission than that offered by a broker who does not provide such services. The Investment Adviser will determine in good faith whether the amount of commission is reasonable in relation to the value of research and services provided and whether the services provide lawful and appropriate assistance in its investment decision-making responsibilities.
Research or other services obtained in this manner may be used in servicing any or all of the Funds and other accounts managed by the Investment Adviser, including in connection with accounts that do not pay commissions to the broker related to the research or other service arrangements. Such products and services may disproportionately benefit other client accounts relative to the Funds based on the amount of brokerage commissions paid by the Funds and such other accounts. To the extent that the Sub-Adviser uses soft dollars, it will not have to pay for those products and services itself.
BBH may receive research that is bundled with the trade execution, clearing, and/or settlement services provided by a particular broker-dealer. To the extent that the Sub-Adviser receives research on this basis, many of the same conflicts related to traditional soft dollars may exist. For example, the research effectively will be paid by client commissions that also will be used to pay for the execution, clearing, and settlement services provided by the broker-dealer and will not be paid by the Sub-Adviser.
Arrangements regarding compensation and delegation of responsibility may create conflicts relating to selection of brokers or dealers to execute Fund portfolio trades and/or specific uses of commissions from Fund portfolio trades, administration of investment advice and valuation of securities.
Investments in BBH Funds. From time to time BBH may invest a portion of the assets of its discretionary investment advisory clients in the Funds. That investment by BBH on behalf of its discretionary investment advisory clients in the Funds may be significant at times.
Increasing a Fund’s assets may enhance investment flexibility and diversification and may contribute to economies of scale that tend to reduce the Funds’ expense ratio. In selecting the Funds for its discretionary
30
BBH PARTNER FUND - SMALL CAP EQUITY
CONFLICTS OF INTEREST (continued)
October 31, 2021 (unaudited)
investment advisory clients, BBH may limit its selection to funds managed by BBH or the Investment Adviser. BBH may not consider or canvass the universe of unaffiliated investment companies available, even though there may be unaffiliated investment companies that may be more appropriate or that have superior performance. BBH, the Investment Adviser and their affiliates providing services to the Funds benefit from additional fees when the Funds is included as an investment by a discretionary investment advisory client.
BBH reserves the right to redeem at any time some or all of the shares of the Funds acquired for its discretionary investment advisory clients’ accounts. A large redemption of shares of the Funds by BBH on behalf of its discretionary investment advisory clients could significantly reduce the asset size of the Funds, which might have an adverse effect on the Funds’ investment flexibility, portfolio diversification and expense ratio.
Valuation. When market quotations are not readily available, or are believed by BBH to be unreliable, the Funds’ investments will be valued at fair value by BBH pursuant to procedures adopted by the Funds’ Board of Trustees. When determining an asset’s “fair value”, BBH seeks to determine the price that a Fund might reasonably expect to receive from the current sale of that asset in an arm’s-length transaction. The price generally may not be determined based on what the Funds might reasonably expect to receive for selling an asset at a later time or if it holds the asset to maturity. While fair value determinations will be based upon all available factors that BBH deems relevant at the time of the determination and may be based on analytical values determined by BBH using proprietary or third-party valuation models, fair value represents only a good faith approximation of the value of a security. The fair value of one or more securities may not, in retrospect, be the price at which those assets could have been sold during the period in which the particular fair values were used in determining the Funds’ net asset value. As a result, the Funds’ sale or redemption of its shares at net asset value, at a time when a holding or holdings are valued by BBH (pursuant to Board-adopted procedures) at fair value, may have the effect of diluting or increasing the economic interest of existing shareholders.
Referral Arrangements. BBH may enter into advisory and/or referral arrangements with third parties. Such arrangements may include compensation paid by BBH to the third party. BBH may pay a solicitation fee for referrals and/or advisory or incentive fees. BBH may benefit from increased amounts of assets under management.
Personal Trading. BBH, including the Investment Adviser, and any of their respective partners, principals, directors, officers, employees, affiliates or agents, face conflicts of interest when transacting in securities for their own accounts because they could benefit by trading in the same securities as the Funds, which could have an adverse effect on the Funds. However, the Investment Adviser has implemented policies and procedures concerning personal trading by BBH Partners and employees. The policy and procedures are intended to prevent BBH Partners and employees from trading in the same securities as the Funds. However, BBH, including the Investment Adviser, has implemented policies and procedures concerning personal trading by BBH Partners and employees. The policies and procedures are intended to prevent BBH Partners and employees with access to Fund material non-public information from trading in the same securities as the Funds.
financial statements October 31, 2021 | 31 |
BBH PARTNER FUND - SMALL CAP EQUITY
CONFLICTS OF INTEREST (continued)
October 31, 2021 (unaudited)
Gifts and Entertainment. From time to time, employees of BBH, including the Investment Adviser, and any of their respective partners, principals, directors, officers, employees, affiliates or agents, may receive gifts and/or entertainment from clients, intermediaries, or service providers to the Funds or BBH, including the Investment Adviser, which could have the appearance of affecting or may potentially affect the judgment of the employees, or the manner in which they conduct business. The Investment Adviser has implemented policies and procedures concerning gifts and entertainment to mitigate any impact on the judgment of BBH Partners and employees. BBH, including the Investment Adviser, has implemented policies and procedures concerning gifts and entertainment to mitigate any impact on the judgment of BBH Partners and employees.
32
BBH PARTNER FUND - SMALL CAP EQUITY
ADDITIONAL FEDERAL TAX INFORMATION
October 31, 2021 (unaudited)
In January 2022, shareholders will receive Form 1099-DIV, which will include their share of qualified dividends distributed during the calendar year 2021. Shareholders are advised to check with their tax advisers for information on the treatment of these amounts on their individual income tax returns. The amounts which represent income derived from sources within, and taxes paid to foreign counties or possessions of the United States are as follows:
Foreign Source Income | Foreign Taxes Paid | |||
$ - | $ 2,840 |
financial statements October 31, 2021 | 33 |
TRUSTEES AND OFFICERS OF BBH PARTNER FUND - SMALL CAP EQUITY
(unaudited)
Information pertaining to the Trustees and executive officers of the Trust as of October 31, 2021 is set forth below. The mailing address for each Trustee is c/o BBH Trust, 140 Broadway, New York, NY 10005.
Name and Birth Year | Position(s) Held with the Trust | Term of Office and Length of Time Served# | Principal Occupation(s) During Past 5 Years | Number of Portfolios in Fund Complex Overseen by Trustee^ | Other Public Company or Investment Company Directorships held by Trustee During Past 5 Years | |||||
Independent Trustees | ||||||||||
H. Whitney Wagner Birth Year: 1956 | Chairman of the Board and Trustee | Chairman Since 2014; Trustee Since 2007 and 2006-2007 with the Predecessor Trust | President, Clear Brook Advisors, a registered investment advisor. | 9 | None. | |||||
Andrew S. Frazier Birth Year: 1948 | Trustee | Since 2010 | Retired. | 9 | None. | |||||
Mark M. Collins Birth Year: 1956 | Trustee | Since 2011 | Partner of Brown Investment Advisory Incorporated, a registered investment advisor. | 9 | Chairman of Dillon Trust Company. | |||||
John M. Tesoro Birth Year: 1952 | Trustee | Since 2014 | Retired. | 9 | Trustee, Bridge Builder Trust (8 Funds), Director, Teton Advisers, Inc. (a registered investment adviser). | |||||
Joan A. Binstock Birth Year: 1954 | Trustee | Since 2019 | Partner, Chief Financial and Operations Officer, Lord Abbett & Co. LLC (1999-2018); Lovell Minnick Partners, Advisers Counsel (2018- Present). | 9 | Independent Director, Morgan Stanley Direct Lending Fund; KKR Real Estate Interval Fund. |
34
TRUSTEES AND OFFICERS OF BBH PARTNER FUND - SMALL CAP EQUITY
(unaudited)
Name, Address and Birth Year | Position(s) Held with the Trust | Term of Office and Length of Time Served# | Principal Occupation(s) During Past 5 Years | Number of Portfolios in Fund Complex Overseen by Trustee^ | Other Public Company or Investment Company Directorships held by Trustee During Past 5 Years | |||||
Interested Trustees | ||||||||||
Susan C. Livingston+ 50 Post Office Square Boston, MA 02110 Birth Year: 1957 | Trustee | Since 2011 | Partner (since 1998) and Senior Client Advocate (since 2010) for BBH&Co. | 9 | None. | |||||
John A. Gehret+ 140 Broadway New York, NY 10005 Birth Year: 1959 | Trustee | Since 2011 | Limited Partner of BBH&Co. (2012-present). | 9 | None. |
financial statements October 31, 2021 | 35 |
TRUSTEES AND OFFICERS OF BBH PARTNER FUND - SMALL CAP EQUITY
(unaudited)
Name, Address and Birth Year | Position(s) Held with the Trust | Term of Office and Length of Time Served# | Principal Occupation(s) During Past 5 Years | |||
Officers | ||||||
Jean-Pierre Paquin 140 Broadway New York, NY 10005 Birth Year: 1973 | President and Principal Executive Officer | Since 2016 | Partner of BBH&Co. since 2015; joined BBH&Co. in 1996. | |||
Daniel Greifenkamp 140 Broadway New York, NY 10005 Birth Year: 1969 | Vice President | Since 2016 | Managing Director of BBH&Co. since 2014; joined BBH&Co. in 2011. | |||
Charles H. Schreiber 140 Broadway New York, NY 10005 Birth Year: 1957 | Treasurer and Principal Financial Officer | Since 2007 2006-2007 with the Predecessor Trust | Senior Vice President of BBH&Co. since 2001; joined BBH&Co. in 1999. | |||
Paul F. Gallagher 140 Broadway New York, NY 10005 Birth Year: 1959 | Chief Compliance Officer (“CCO”) | Since 2015 | Senior Vice President of BBH&Co. since 2015. | |||
Kristin Marvin 140 Broadway New York, NY 10005 Birth Year: 1981 | Anti-Money Laundering Officer (“AMLO”) | Since 2021 | Assistant Vice President of BBH&Co. since March 2020; Program Manager, Ares Management Corporation, April 2015 - March 2020. |
36
TRUSTEES AND OFFICERS OF BBH PARTNER FUND - SMALL CAP EQUITY
(unaudited)
Name, Address and Birth Year | Position(s) Held with the Trust | Term of Office and Length of Time Served# | Principal Occupation(s) During Past 5 Years | |||
Suzan M. Barron 50 Post Office Square Boston, MA 02110 Birth Year: 1964 | Secretary | Since 2009 | Senior Vice President and Senior Investor Services Counsel of BBH&Co. since 2005. | |||
Crystal Cheung 140 Broadway New York, NY 10005 Birth Year: 1974 | Assistant Treasurer | Since 2018 | Assistant Vice President of BBH&Co. since 2016; joined BBH&Co. 2014. | |||
Dania C. Piscetta 50 Post Office Square Boston, MA 02110 Birth Year: 1989 | Assistant Secretary | Since 2021 | Assistant Vice President of BBH&Co. since June 2021; joined BBH&Co. in 2021; Assistant Vice President and Legal Associate of Wellington Management Company LLP, April 2018 - March 2021; Senior Compliance Analyst, Fidelity Investments, May 2016 – April 2018. |
________________
# | All officers of the Trust hold office for one year and until their respective successors are chosen and qualified (subject to the ability of the Trustees to remove any officer in accordance with the Trust’s By-laws). Mr. Wagner previously served on the Board of Trustees of the Predecessor Trust. |
+ | Ms. Livingston and Mr. Gehret are “interested persons” of the Trust as defined in the 1940 Act because of their positions as Partner and Limited Partner of BBH&Co., respectively. |
^ | The Fund Complex consists of the Trust, which has nine series, and each is counted as one “Portfolio” for purposes of this table. |
financial statements October 31, 2021 | 37 |
BBH PARTNER FUND - SMALL CAP EQUITY
OPERATION AND EFFECTIVNESS OF THE FUND’S LIQUIDITY RISK MANAGEMENT PROGRAM
October 31, 2021 (unaudited)
The Securities and Exchange Commission adopted Rule 22e-4 under the Investment Company Act of 1940, as amended (the “Liquidity Rule”) to promote effective liquidity risk management throughout the open-end investment company industry in order to reduce the risk that funds will be unable to meet their redemption obligations and mitigate dilution of the interests of fund shareholders.
The Board of Trustees (the “Board”) of BBH Trust met on March 9, 2021 to review the liquidity risk management program (the “Program”) for the funds of BBH Trust (the “Funds”) pursuant to the Liquidity Rule. The Board has appointed three members of the Brown Brothers Harriman & Co. Mutual Fund Advisory Department, the Investment Adviser to the Funds, as the Program Administrator for each Fund’s Program. The Program Administrator provided the Board with a report (the “Report”) that addressed the operations of the Program and assessed its adequacy and effectiveness of the Program. The Report covered the period from February 1, 2020 through January 31, 2021 (the “Reporting Period”).
The Report noted that the Program complied with the key factors for consideration under the Liquidity Rule for assessing, managing and periodically reviewing a Fund’s liquidity risk, including the following points.
Liquidity classification. The Report described the Program’s liquidity classification methodology for categorizing the Funds’ investments into one of four liquidity buckets.
Highly Liquid Investment Minimum. The Report noted that one aspect of the Liquidity Rule is a requirement that funds that are expected to have less than 50% of assets classified as other than “highly liquid” should establish a minimum percentage of highly liquid assets that the fund is expected to hold on an on-going basis. The Program Administrator monitors the percentages of assets in each category on an ongoing basis and, given that no Fund has approached the 50% threshold, has made the determination that it is not necessary to assign a Highly Liquid Investment Minimum as provided for in the Liquidity Rule to any of the Funds.
The Fund’s investment strategy and liquidity of portfolio investments during normal and reasonably foreseeable stressed market conditions. During the Reporting Period, the Program Administrator reviewed whether each Fund’s investment strategy is appropriate for an open-end fund structure with a focus on Funds with more significant and consistent holdings of less liquid and illiquid assets and factored a Fund’s concentration in an issuer into the liquidity classification methodology by taking issuer position sizes into account.
Short-term and long-term cash flow projections during normal and reasonably foreseeable stressed market conditions. During the Reporting Period, the Program Administrator reviewed historical redemption activity and used this information as a component to establish each Fund’s reasonably anticipated trading size. The Program Administrator also took into consideration other factors such as shareholder ownership concentration, applicable distribution channels and the degree of certainty associated with a Fund’s short-term and long-term cash flow projections.
Holdings of cash and cash equivalents. The Program Administrator considered the degree to which each Fund held cash and cash equivalents as a component of each Fund’s ability to meet redemption requests.
38
BBH PARTNER FUND - SMALL CAP EQUITY
OPERATION AND EFFECTIVENESS OF THE FUND’S LIQUIDITY RISK MANAGEMENT PROGRAM (continued)
October 31, 2021 (unaudited)
There were no material changes to the Program during the Reporting Period. The Program Administrator has informed the Board that it believes that the Fund’s Program is adequately designed, has been implemented as intended, and has operated effectively since its implementation. No material exceptions have been noted since the implementation of the Program, and there were no liquidity events that impacted the Fund or its ability to meet redemption requests on a timely basis during the Reporting Period.
financial statements October 31, 2021 | 39 |
Administrator Brown Brothers Harriman & Co. 140 Broadway New York, NY 10005
Distributor ALPS Distributors, Inc. 1290 Broadway, Suite 1000 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 |
To obtain information or make shareholder inquiries:
By telephone: | Call 1-800-575-1265 |
By E-mail send your request to: | bbhfunds@bbh.com |
On the internet: | www.bbhfunds.com |
This report is submitted for the general information of shareholders and is not authorized for distribution to prospective investors unless preceded or accompanied by an effective prospectus. Nothing herein contained is to be considered an offer of sale or a solicitation of an offer to buy shares of the Fund.
For more complete information, visit www.bbhfunds.com for a prospectus. You should consider the Fund’s investment objectives, risks, charges and expenses carefully before you invest. Information about these and other important subjects is in the Fund’s prospectus, which you should read carefully before investing.
Holdings and allocations are subject to change. Fund holdings should not be relied on in making investment decisions and should not be construed as research or investment advice regarding particular securities. Current and future holdings are subject to risk.
The Fund files a complete schedule of portfolio holdings with the Securities and Exchange Commission (SEC) for the first and third quarters of each fiscal year as an exhibit to its reports on Form N-PORT. The Fund’s Forms N-PORT are available electronically on the SEC’s website (sec.gov). For a complete list of a fund’s portfolio holdings, view the most recent holdings listing, semi-annual report, or annual report on the Fund’s web site at http://www.bbhfunds.com.
A summary of the Fund’s Proxy Voting Policy that the Fund uses to determine how to vote proxies, if any, relating to securities held in the Fund’s portfolio, as well as a record of how the Fund voted any such proxies during the most recent 12-month period ended June 30, is available, without charge, upon request by calling the toll-free number listed above. This information is also available on the SEC’s website at www.sec.gov.
NOT FDIC INSURED NO BANK GUARANTEE MAY LOSE VALUE
Annual Report
OCTOBER 31, 2021
BBH Select Series - Mid Cap Fund
BBH SELECT SERIES - MID CAP FUND
MANAGEMENT’S DISCUSSION OF FUND PERFORMANCE
October 31, 2021
This is the inaugural annual report for the BBH Select Series – Mid Cap Fund (“the Fund”), which launched on May 24, 2021. The Fund seeks to generate attractive compounded investment returns over full market cycles, while reducing the likelihood of permanent loss of capital on any single investment. To achieve this, the Fund’s strategy is to invest in a select number of high-quality business franchises, as defined by the four pillars of our investment criteria – business quality, attractive financial returns, strong management, and growth potential. By adhering to our disciplined criteria and process, and investing at a discount to our estimate of intrinsic value, we believe we can establish a strong margin of safety for our investments in companies that have the potential to compound attractive investment returns over many years.*
Given that there are few companies which meet our investment criteria, and the benefits of compounding accrue over time, we seek to hold a concentrated portfolio with low turnover. We expect the Fund’s holdings to range from 20-30 companies over time. Due to the Fund’s concentrated nature, the performance of the Fund will likely differ meaningfully – both positively and negatively – from relevant indexes at various points within a long-term market cycle as we maintain our independent perspective and focus on long-term compounding.
The Fund rose by 6.80% net of fees from inception on May 24, 2021 to fiscal year ended October 31, 2021. During the same period, the Russell Midcap Index rose by 7.51%.
While we prefer to focus on company fundamentals and do not invest with a top down perspective, we have observed strong sector and thematic rotational trends between growth and value, large cap and small cap, and a wide range of returns by sector. The divergence between various factors and the volatility of returns since inception is likely driven by a growing list of market concerns, as the economy struggles to sustain the strong growth it initially enjoyed emerging from the pandemic. These concerns include the Delta variant, inflation, the debt ceiling, supply chain tightness, energy shortages, a Chinese economic slowdown, and the potential acceleration of monetary tightening by the Federal Reserve. By and large, we were very pleased with our portfolio companies’ ability to navigate these conditions as evidenced by strong reported earnings results. Notwithstanding the market gyrations, we ascribe higher intrinsic values to the majority of our portfolio companies today than we did at the inception of the Fund. Our investment strategy does not change based on the market backdrop. We remain always focused on the quality of our companies and anticipate that this will serve us well across a wide variety of market conditions and through full market cycles.
financial statements october 31, 2021 | 3 |
BBH SELECT SERIES - MID CAP FUND
MANAGEMENT’S DISCUSSION OF FUND PERFORMANCE (continued)
October 31, 2021
The Fund’s largest positive contributors from inception on May 24, 2021 to fiscal year ended October 31, 2021 were Charles River Laboratories International Inc., Entegris Inc., and Brown & Brown Inc. As a leading early-stage contract research organization (CRO) providing discovery, safety assessment, and other services to pharmaceutical and biotechnology companies, Charles River has experienced a step change in its growth profile that we believe will prove to be very long duration and is driven by increased outsourcing of drug development to achieve greater productivity and increased funding for drug development overall. Entegris is a key supplier to the semiconductor industry of essential filtration products, materials, and related delivery equipment that enable the high precision fabrication of chips, and demand for their services is tied both to the volume of chips produced and the increased complexity of new chip designs that are fundamental to artificial intelligence, 5G, cloud data centers, and other advanced technologies. Brown & Brown is a leading property & casualty insurance broker with a focus on the US domestic mid-sized commercial market, a segment that has enjoyed strong growth in 2021 delivering the best results in company history for the first nine months of the year against a backdrop of strong increases in premium rates.
The Fund’s largest detractors from inception on May 24, 2021 to fiscal year ended October 31, 2021 were IPG Photonics Corp., AptarGroup Inc., and Crown Holdings Inc. As the leading producer of fiber laser products used in cutting and welding applications, IPG has been directly impacted by moderating Chinese industrial activity. Aptar is a leading supplier of dispensers, closures, and active packaging solutions for the pharmaceutical, beauty, home, personal care, food, and beverage markets, and many of these end markets continue to be disrupted by the ongoing pandemic and its variants. Crown is a leading manufacturer of aluminum beverage cans and industrial transit packaging, and its share price has been impacted by market concerns regarding future potential overcapacity despite a chronically undersupplied North American market.
As of October 31, 2021, the Fund had positions in 23 companies with approximately 56% of the assets held in the ten largest holdings. The weighted average market cap of our holdings was $15.7 billion, and our portfolio turnover from inception to fiscal year end was 3%. The Fund ended the fiscal year trading at roughly 91% of our underlying intrinsic value estimates on a weighted average basis.
________________
There is no assurance the objective will be achieved. Holdings are subject to change.
* | Intrinsic value is an estimate of the present value of the cash that a business can generate and distribute to shareholders over its remaining life. |
4
BBH SELECT SERIES - MID CAP FUND
MANAGEMENT’S DISCUSSION OF FUND PERFORMANCE (continued)
October 31, 2021
Growth of $10,000 Invested in BBH Select Series – Mid Cap Fund
The graph below illustrates the hypothetical investment of $10,0001 in the Class I shares of the Fund since inception (May 24, 2021) to October 31, 2021 as compared to the RMCCTR.
The annualized gross expense ratios as shown in the May 24, 2021 prospectus for Class I was 1.40%.
Performance data quoted represents past performance which is no guarantee of future results. Investment return and principal value will fluctuate, so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Fund performance changes over time and current performance may be lower or higher than what is stated. Fund shares redeemed within 30 days of purchase are subject to a redemption fee of 2.00%. Returns do not reflect the deductions of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. For performance current to the most recent month-end please call 1-800-575-1265.
Hypothetical performance results are calculated on a total return basis and include all portfolio income, unrealized and realized capital gains, losses and reinvestment of dividends and other earnings. No one shareholder has actually achieved these results and no representation is being made that any actual shareholder achieved, or is likely to achieve, similar results to those shown. Hypothetical performance does not represent actual trading and may not reflect the impact of material economic and market factors. Undue reliance should not be placed on hypothetical performance results in making an investment decision.
________________
1 | The Fund’s performance assumes the reinvestment of all dividends and distributions. The Russell Mid Cap Total Return Index (“RMCCTR”) has been adjusted to reflect reinvestment of dividends on securities. The RMCCTR is not adjusted to reflect sales charges, expenses or other fees that the Securities and Exchange Commission requires to be reflected in the Fund’s performance. The RMCCTR is an unmanaged weighted index of 800 medium-capitalization stocks. The index is unmanaged. Investments cannot be made in an index. |
financial statements october 31, 2021 | 5 |
BBH SELECT SERIES - MID CAP FUND
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
October 31, 2021
To the Trustees of the BBH Trust and Shareholders of BBH Select Series – Mid Cap Fund:
Opinion on the Financial Statements and Financial Highlights
We have audited the accompanying statement of assets and liabilities, including the portfolio of investments, of BBH Select Series – Mid Cap Fund (the "Fund"), one of the funds within BBH Trust, as of October 31, 2021, the related statement of operations, statement of changes in net assets and financial highlights for the period from May 24, 2021 (commencement of operations) to October 31, 2021, and the related notes. In our opinion, the financial statements and financial highlights present fairly, in all material respects, the financial position of the Fund as of October 31, 2021, the results of its operations, and the changes in its net assets and the financial highlights for the period from May 24, 2021 (commencement of operations) to October 31, 2021, in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements and financial highlights are the responsibility of the BBH Trust's management. Our responsibility is to express an opinion on the Fund's financial statements and financial highlights based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the BBH Trust in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement, whether due to error or fraud. The BBH Trust is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the BBH Trust’s internal control over financial reporting. Accordingly, we express no such opinion.
6
BBH SELECT SERIES - MID CAP FUND
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM (continued)
October 31, 2021
Our audits included performing procedures to assess the risks of material misstatement of the financial statements and financial highlights, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements and financial highlights. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements and financial highlights. Our procedures included confirmation of securities owned as of October 31, 2021, by correspondence with the custodian and brokers. We believe that our audits provide a reasonable basis for our opinion.
/s/ DELOITTE & TOUCHE LLP
Boston, Massachusetts
December 21, 2021
We have served as the auditor of one or more Brown Brothers Harriman investment companies since 1991.
financial statements october 31, 2021 | 7 |
BBH SELECT SERIES - MID CAP FUND
PORTFOLIO ALLOCATION
October 31, 2021
SECTOR DIVERSIFICATION
U.S. $ Value | Percent of Net Assets | ||||||
Common Stock: | |||||||
Communications | $ | 503,509 | 3.6 | % | |||
Consumer Cyclical | 1,884,762 | 13.7 | |||||
Consumer Non-cyclical | 2,184,010 | 15.8 | |||||
Financials | 1,392,532 | 10.1 | |||||
Industrials | 3,680,352 | 26.6 | |||||
Technology | 3,727,557 | 26.9 | |||||
Cash and Other Assets in Excess of Liabilities | 461,131 | 3.3 | |||||
NET ASSETS | $ | 13,833,853 | 100.0 | % |
All data as of October 31, 2021. BBH Select Series – Mid Cap Fund’s (the “Fund”) sector diversification is expressed as a percentage of net assets and may vary over time.
The accompanying notes are an integral part of these financial statements.
8
BBH SELECT SERIES - MID CAP FUND
PORTFOLIO OF INVESTMENTS
October 31, 2021
Shares | Value | ||||||||||||||
COMMON STOCK (96.7%) | |||||||||||||||
COMMUNICATIONS (3.6%) | |||||||||||||||
1,229 | Arista Networks, Inc.1 | $ | 503,509 | ||||||||||||
Total Communications | 503,509 | ||||||||||||||
| CONSUMER CYCLICAL (13.7%) | ||||||||||||||
137 | NVR, Inc.1 | 670,588 | |||||||||||||
2,214 | Watsco, Inc. | 641,130 | |||||||||||||
6,784 | Wyndham Hotels & Resorts, Inc. | 573,044 | |||||||||||||
Total Consumer Cyclical | 1,884,762 | ||||||||||||||
| CONSUMER NON-CYCLICAL (15.8%) | ||||||||||||||
7,731 | AMN Healthcare Services, Inc.1 | 763,050 | |||||||||||||
3,805 | Bruker Corp. | 305,542 | |||||||||||||
2,486 | Charles River Laboratories International, Inc.1 | 1,115,418 | |||||||||||||
Total Consumer Non-cyclical | 2,184,010 | ||||||||||||||
| FINANCIALS (10.1%) | ||||||||||||||
14,574 | Brown & Brown, Inc. | 919,765 | |||||||||||||
659 | SVB Financial Group1 | 472,767 | |||||||||||||
Total Financials | 1,392,532 | ||||||||||||||
| INDUSTRIALS (26.6%) | ||||||||||||||
4,926 | Advanced Drainage Systems, Inc. | 555,653 | |||||||||||||
4,242 | AptarGroup, Inc. | 512,349 | |||||||||||||
7,151 | Crown Holdings, Inc. | 743,632 | |||||||||||||
3,380 | Graco, Inc. | 254,108 | |||||||||||||
3,530 | HEICO Corp. (Class A) | 443,650 | |||||||||||||
6,653 | Mercury Systems, Inc.1 | 342,896 | |||||||||||||
1,847 | Toro Co. | 176,333 | |||||||||||||
3,428 | Vulcan Materials Co. | 651,731 | |||||||||||||
Total Industrials | 3,680,352 |
The accompanying notes are an integral part of these financial statements.
financial statements october 31, 2021 | 9 |
BBH SELECT SERIES - MID CAP FUND
PORTFOLIO OF INVESTMENTS (continued)
October 31, 2021
Shares | Value | ||||||||||||||
COMMON STOCK (96.7%) (continued) | |||||||||||||||
TECHNOLOGY (26.9%) | |||||||||||||||
8,656 | Black Knight, Inc.1 | $ | 606,872 | ||||||||||||
1,984 | Broadridge Financial Solutions, Inc. | 353,965 | |||||||||||||
6,715 | Entegris, Inc. | 945,338 | |||||||||||||
5,215 | Guidewire Software, Inc.1 | 655,682 | |||||||||||||
3,051 | IPG Photonics Corp.1 | 485,140 | |||||||||||||
3,760 | Take-Two Interactive Software, Inc.1 | 680,560 | |||||||||||||
Total Technology | 3,727,557 | ||||||||||||||
Total Common Stock (Cost $12,517,521) | $ | 13,372,722 |
TOTAL INVESTMENTS (Cost $12,517,521)2 | 96.7 | % | $ | 13,372,722 | |||
CASH AND OTHER ASSETS IN EXCESS OF LIABILITIES | 3.3 | % | 461,131 | ||||
NET ASSETS | 100.00 | % | $ | 13,833,853 |
________________
1 | Non-income producing security. |
2 | The aggregate cost for federal income tax purposes is $12,517,521, the aggregate gross unrealized appreciation is $1,232,595 and the aggregate gross unrealized depreciation is $377,394, resulting in net unrealized appreciation of $855,201. |
The accompanying notes are an integral part of these financial statements.
10
BBH SELECT SERIES - MID CAP FUND
PORTFOLIO OF INVESTMENTS (continued)
October 31, 2021
FAIR VALUE MEASUREMENTS
The Fund is required to disclose information regarding the fair value measurements of the Fund’s assets and liabilities. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The disclosure requirement established a three-tier hierarchy to maximize the use of observable market data and minimize the use of unobservable inputs and to establish classification of fair value measurements for disclosure purposes. Inputs refer broadly to the assumptions that market participants would use in pricing the asset or liability, including for example, the risk inherent in a particular valuation technique used to measure fair value including such a pricing model and/or the risk inherent in the inputs to the valuation technique. Inputs may be observable or unobservable. Observable inputs are inputs that reflect the assumptions market participants would use in pricing the asset or liability developed based on market data obtained from sources independent of the reporting entity. Unobservable inputs are inputs that reflect the Fund’s own considerations about the assumptions market participants would use in pricing the asset or liability developed based on the best information available in the circumstances.
Authoritative guidance establishes three levels of the fair value hierarchy as follows:
— | Level 1 – unadjusted quoted prices in active markets for identical assets and liabilities. |
— | Level 2 – significant other observable inputs (including quoted prices for similar assets and liabilities, interest rates, prepayment speeds, credit risk, etc.). |
— | Level 3 – significant unobservable inputs (including the Fund’s own assumptions in determining the fair value of assets and liabilities). |
Inputs are used in applying the various valuation techniques and broadly refer to the assumptions that market participants use to make valuation decisions, including assumptions about risk. Inputs may include price information, specific and broad credit data, liquidity statistics, and other factors. A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. However, the determination of what constitutes “observable” requires judgment by the investment adviser. The investment adviser considers observable data to be that market data which is readily available, regularly distributed or updated, reliable and verifiable, not proprietary, and provided by independent sources that are actively involved in the relevant market. The categorization of a financial instrument within the hierarchy is based upon the pricing transparency of the instrument and does not necessarily correspond to the investment adviser’s perceived risk of that instrument.
The accompanying notes are an integral part of these financial statements.
financial statements october 31, 2021 | 11 |
BBH SELECT SERIES - MID CAP FUND
PORTFOLIO OF INVESTMENTS (continued)
October 31, 2021
Financial assets within Level 1 are based on quoted market prices in active markets. The Fund does not adjust the quoted price for these instruments.
Financial instruments that trade in markets that are not considered to be active but are valued based on quoted market prices, dealer quotations or alternative pricing sources supported by observable inputs are classified within Level 2. These include investment-grade corporate bonds, U.S. Treasury notes and bonds, and certain non-U.S. sovereign obligations, listed equities and over-the-counter derivatives and foreign equity securities whose values could be impacted by events occurring before the Fund’s pricing time, but after the close of the securities’ primary markets and are, therefore, fair valued according to procedures adopted by the Board of Trustees. As Level 2 financial assets include positions that are not traded in active markets and/or are subject to transfer restrictions, valuations may be adjusted to reflect illiquidity and/or non-transferability, which are generally based on available market information.
Financial assets classified within Level 3 have significant unobservable inputs, as they trade infrequently. Level 3 financial assets include private equity and certain corporate debt securities.
Because of the inherent uncertainties of valuation, the values reflected in the financial statements may materially differ from the value received upon the actual sale of those investments.
The following table summarizes the valuation of the Fund’s investments by the above fair value hierarchy levels as of October 31, 2021.
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 October 31, 2021 | ||||||||||||||||
Common Stock: | ||||||||||||||||||||
Communications | $ | 503,509 | $ | — | $ | — | $ | 503,509 | ||||||||||||
Consumer Cyclical | 1,884,762 | — | — | 1,884,762 | ||||||||||||||||
Consumer Non-cyclical | 2,184,010 | — | — | 2,184,010 | ||||||||||||||||
Financials | 1,392,532 | — | — | 1,392,532 | ||||||||||||||||
Industrials | 3,680,352 | — | — | 3,680,352 | ||||||||||||||||
Technology | 3,727,557 | — | — | 3,727,557 | ||||||||||||||||
Investments, at value | $ | 13,372,722 | $ | — | $ | — | $ | 13,372,722 |
The accompanying notes are an integral part of these financial statements.
12
BBH SELECT SERIES - MID CAP FUND
STATEMENT OF ASSETS AND LIABILITIES
October 31, 2021
ASSETS: | ||||
Investments in securities, at value (Cost $12,517,521) | $ | 13,372,722 | ||
Cash | 254,722 | |||
Receivables for: | ||||
Shares sold | 250,000 | |||
Investment advisory and administrative fee waiver reimbursement | 27,722 | |||
Dividends | 2,783 | |||
Interest | 21 | |||
Total Assets | 13,907,970 | |||
LIABILITIES: | ||||
Payables for: | ||||
Professional fees | 50,374 | |||
Investment advisory and administrative fees | 8,432 | |||
Transfer agent fees | 5,200 | |||
Custody and fund accounting fees | 1,200 | |||
Board of Trustees' fees | 1,111 | |||
Accrued expenses and other liabilities | 7,800 | |||
Total Liabilities | 74,117 | |||
NET ASSETS | $ | 13,833,853 | ||
Net Assets Consist of: | ||||
Paid-in capital | $ | 12,978,652 | ||
Retained earnings | 855,201 | |||
Net Assets | $ | 13,833,853 | ||
| ||||
NET ASSET VALUE AND OFFERING PRICE PER SHARE | ||||
CLASS I SHARES | ||||
($13,833,853 ÷ 1,295,383 shares outstanding) | $10.68 |
The accompanying notes are an integral part of these financial statements.
financial statements october 31, 2021 | 13 |
BBH SELECT SERIES - MID CAP FUND
STATEMENT OF OPERATIONS
For the period from May 24, 2021 (commencement of operations) to October 31, 2021
NET INVESTMENT INCOME: | ||||
Income: | ||||
Dividends | $ | 27,740 | ||
Interest income | 95 | |||
Total Income | 27,835 | |||
| ||||
Expenses: | ||||
Professional fees | 50,374 | |||
Investment advisory and administrative fees | 42,044 | |||
Board of Trustees' fees | 28,991 | |||
Transfer agent fees | 14,342 | |||
Custody and fund accounting fees | 2,038 | |||
Miscellaneous expenses | 47,823 | |||
Total Expenses | 185,612 | |||
Investment advisory and administrative fee waiver | (135,159 | ) | ||
Net Expenses | 50,453 | |||
Net Investment Loss | (22,618 | ) | ||
| ||||
NET REALIZED AND UNREALIZED GAIN: | ||||
Net realized gain on investments in securities | 12,020 | |||
Net change in unrealized appreciation/(depreciation) on investments in securities | 855,201 | |||
Net Realized and Unrealized Gain | 867,221 | |||
Net Increase in Net Assets Resulting from Operations | $ | 844,603 |
The accompanying notes are an integral part of these financial statements.
14
BBH SELECT SERIES - MID CAP FUND
STATEMENT OF CHANGES IN NET ASSETS
For the period from May 24, 2021 (commencement of operations) to October 31, 2021 | ||||||
INCREASE (DECREASE) IN NET ASSETS: | ||||||
Operations: | ||||||
Net investment loss | $ | (22,618 | ) | |||
Net realized gain on investments in securities | 12,020 | |||||
Net change in unrealized appreciation/(depreciation) on investments in securities | 855,201 | |||||
Net increase in net assets resulting from operations | 844,603 | |||||
Share transactions: | ||||||
Proceeds from sales of shares | 12,989,250 | |||||
Net increase in net assets resulting from share transactions | 12,989,250 | |||||
Total increase in net assets | 13,833,853 | |||||
NET ASSETS: | ||||||
Beginning of period | – | |||||
End of period | $ | 13,833,853 |
The accompanying notes are an integral part of these financial statements.
financial statements october 31, 2021 | 15 |
BBH SELECT SERIES - MID CAP FUND
FINANCIAL HIGHLIGHTS
Selected per share data and ratios for a Class I share outstanding throughout each period.
For the period from May 24, 2021 (commencement of operations) to October 31, 2021 | ||||||
Net asset value, beginning of period | $10.00 | |||||
Income from investment operations: | ||||||
Net investment loss1 | (0.02 | ) | ||||
Net realized and unrealized gain | 0.70 | |||||
Total income from investment operations | 0.68 | | ||||
Less dividends and distributions: | ||||||
From investment income | – | |||||
Total dividends and distributions | – | |||||
Net asset value, end of period | $10.68 | |||||
Total return | 6.80 | %2 | ||||
Ratios/Supplemental data: | ||||||
Net assets, end of period (in millions) | $14 | |||||
Ratio of expenses to average net assets before reductions | 2.46 | %3 | ||||
Fee waiver | (1.56 | )%3,4 | ||||
Ratio of expenses to average net assets after reductions | 0.90 | %3 | ||||
Ratio of net investment income to average net assets | (0.40 | )%3 | ||||
Portfolio turnover rate | 3 | %2 |
____________
1 Calculated using average shares outstanding for the period.
2 Not annualized.
3 Annualized with the exception of audit fees, legal fees and registration fees.
4 | The ratio of expenses to average net assets for the period ended October 31, 2021 reflect fees reduced as result of a contractual operating expense limitation of the share class of 0.90%. The Agreement is effective through March 1, 2022 and may only be terminated during its term with approval of the Fund’s Board of Trustees. For the period from May 24, 2021 to October 31, 2021 the waived fee was $135,159. |
The accompanying notes are an integral part of these financial statements.
16
BBH SELECT SERIES - MID CAP FUND
NOTES TO FINANCIAL STATEMENTS
As of and for the period ended October 31, 2021
1.Organization. The Fund is a separate, non-diversified series of BBH Trust (the “Trust”), which is registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as an open-end management investment company. The Trust was originally organized under the laws of the State of Maryland on July 16, 1990 as BBH Fund, Inc. and re-organized as a Delaware statutory trust on June 12, 2007. The Fund commenced operations on May 24, 2021 and offers two share classes, Class I and Retail Class. As of October 31, 2021, Retail Class shares are not available for purchase by investors but may be offered in the future. The investment objective of the Fund is to provide investors with long-term growth of capital. As of October 31, 2021, there were nine series of the Trust.
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. (1) The value of investments listed on a securities exchange is based on the last sale price on that exchange prior to the time when assets are valued, or in the absence of recorded sales, at the average of readily available closing bid and asked prices on such exchange; (2) securities not traded on an exchange are valued at the average of the quoted bid and asked prices in the over-the-counter market; (3) securities or other assets for which market quotations are not readily available are valued at fair value in accordance with procedures established by and under the general supervision and responsibility of the Board of Trustees (the “Board”); (4) short-term investments, which mature in 60 days or less are valued at amortized cost if their original maturity was 60 days or less, or by amortizing their value on the 61st day prior to maturity, if their original maturity when acquired by the Fund was more than 60 days, unless the use of amortized cost is determined not to represent “fair value” 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. Dividend income and other distributions received from portfolio securities are recorded on the ex-dividend date. Non-cash dividends included in dividend income, if any, are recorded at the fair market value of securities received at ex-date. Distributions received on securities that represent a return of capital are recorded as a reduction of cost of investments. Distributions received on securities that represent a capital gain are recorded as a realized gain. Interest income is accrued daily. Investment income is recorded net of any foreign taxes withheld where recovery of such tax is uncertain.
financial statements october 31, 2021 | 17 |
BBH SELECT SERIES - MID CAP FUND
NOTES TO FINANCIAL STATEMENTS (continued)
As of and for the period ended October 31, 2021
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 generally apportioned among each fund in the Trust on a net assets basis or other suitable method. Expense estimates are accrued in the period to which they relate and adjustments are made when actual amounts are known.
D.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 may result in temporary 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 between paid-in capital and retained earnings/(accumulated deficit) within the Statement of Assets and 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.
The Fund is subject to the provisions of Accounting Standards Codification 740 Income Taxes (“ASC 740”). ASC 740 sets forth a minimum threshold for financial statement recognition of the benefit of a tax position taken or expected to be taken in a tax return. The Fund did not have any unrecognized tax benefits as of October 31, 2021, nor were there any increases or decreases in unrecognized tax benefits for the year then ended. The Fund recognizes interest and penalties, if any, related to unrecognized tax benefits as an income tax expense in the Statement of Operations. During the period ended October 31, 2021, the Fund did not incur any such interest or penalties. The Fund is subject to examination by U.S. federal and state tax authorities for returns filed for open tax period since May 24, 2021 (commencement of operations). The Fund is not aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will significantly change in the next twelve months.
E.Dividends and Distributions to Shareholders. Dividends and distributions from net investment income to shareholders, if any, are paid annually and are recorded on the ex-dividend date. Distributions from net capital gains, if any, are generally declared and paid annually and are recorded on the ex-dividend date. The Fund did not declare any dividends and distributions to shareholders during the period ended October 31, 2021.
18
BBH SELECT SERIES - MID CAP FUND
NOTES TO FINANCIAL STATEMENTS (continued)
As of and for the period ended October 31, 2021
As of October 31, 2021 the components of retained earnings/(accumulated deficit) were as follows:
Components of retained earnings/(accumulated deficit): | ||||||||||||||||||||||||||||||
Undistributed ordinary income | Undistributed long-term capital gain | Accumulated capital and other losses | Other book/tax temporary differences | Unrealized appreciation/ (depreciation) | Total retained earnings/ (accumulated deficit) | |||||||||||||||||||||||||
2021: | $ | — | $ | — | $ | — | $ | — | $ | 855,201 | $ | 855,201 |
The Fund did not have a net capital loss carryforward at October 31, 2021.
The Fund is permitted to carryforward capital losses for an unlimited period and they will retain their character as either short-term or long-term capital losses rather than being considered all short-term capital losses.
The differences between book-basis and tax-basis unrealized appreciation/(depreciation) would be attributable primarily to the tax deferral of losses on wash sales, if applicable.
To the extent future capital gains are offset by capital loss carryforwards, if any, such gains will not be distributed.
F.Use of Estimates. The preparation of the financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities in the financial statements, disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of increase and decrease in net assets from operations during the reporting period. Actual results could differ from these estimates.
3. Fees and Other Transactions with Affiliates.
A.Investment Advisory and Administrative Fees. 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, portfolio management and administrative services to the Fund. The Fund pays a combined fee for investment advisory and administrative services calculated daily and paid monthly at an annual rate equivalent to 0.75% per annum on the first $3 billion of the Fund’s average daily net assets and 0.70% per annum on the Fund’s average daily net assets over $3 billion. For period ended October 31, 2021, the Fund incurred $42,044 under the Agreement.
financial statements october 31, 2021 | 19 |
BBH SELECT SERIES - MID CAP FUND
NOTES TO FINANCIAL STATEMENTS (continued)
As of and for the period ended October 31, 2021
B.Investment Advisory and Administrative Fee Waivers. Effective May 24, 2021 (commencement of operations), the Investment Adviser contractually agreed to limit the annual fund operating expenses (excluding interest, taxes, brokerage commissions, other expenditures that are capitalized in accordance with GAAP, other extraordinary expenses not incurred in the ordinary course of the Fund’s business) to 0.90%. The agreement will terminate on March 1, 2022, unless it is renewed by all parties to the agreement. The agreement may only be terminated during its term with approval of the Fund’s Board of Trustees. For the period ended October 31, 2021, the Investment Adviser waived fees in the amount of $135,159.
C.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% of the Fund’s net asset value. For the period ended October 31, 2021, the Fund incurred $2,038 in custody and fund accounting fees. As per agreement with the Fund’s custodian, the Fund receives interest income on cash balances held by the custodian at the BBH Base Rate. The BBH Base Rate is defined as BBH’s effective trading rate in local money markets on each day. The total interest earned by the Fund for the period ended October 31, 2021 was $95. This amount is included in ²interest income² in the Statement of Operations. 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 Fund did not include any such fees in the period ended October 31, 2021. This amount, if any, is included under line item “Custody and fund accounting fees” in the Statement of Operations.
D.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 period ended October 31, 2021, the Fund incurred $28,991 in independent Trustee compensation and expense reimbursements.
E.Officers of the Trust. Officers of the Trust are also employees of BBH. Officers are paid no fees by the Trust for their services to the Trust.
4.Investment Transactions. For the period ended October 31, 2021, the cost of purchases and the proceeds of sales of investment securities, other than short-term investments, were $12,868,567 and $363,066, respectively.
20
BBH SELECT SERIES - MID CAP FUND
NOTES TO FINANCIAL STATEMENTS (continued)
As of and for the period ended October 31, 2021
5.Shares of Beneficial Interest. The Trust is permitted to issue an unlimited number of Class I shares of beneficial interest at no par value. Transactions in Class I shares were as follows:
For the period ended October 31, 2021* | ||||||||
Shares | Dollars | |||||||
| ||||||||
Shares sold | 1,295,383 | $ | 12,989,250 | |||||
Net increase | 1,295,383 | $ | 12,989,250 |
* The period represented is from May 24, 2021 (commencement of operations) to October 31, 2021.
6. 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:
A shareholder may lose money by investing in the Fund (investment risk). The Fund is actively managed and the decisions by the Investment Adviser may cause the Fund to incur losses or miss profit opportunities (management risk). Price movements may occur due to factors affecting individual companies, such as the issuance of an unfavorable earnings report, or other events affecting particular industries or the equity market as a whole (equity securities risk). Mid cap companies, when compared to larger companies, may experience lower trade volume and could be subject to greater and less predictable price changes (Mid Cap Company risk). The value of securities held by the Fund may fall due to changing economic, political, regulatory or market conditions, or due to a company’s or issuer’s individual situation. Natural disasters, the spread of infectious illness and other public health emergencies, recession, terrorism and other unforeseeable events may lead to increased market volatility and may have adverse effects on world economies and markets generally (market risk). In the normal course of business, the Fund invests in securities and enters into transactions where risks exist due to assumption of large positions in securities of a small number of issuers (non-diversification risk). There are certain risks associated with investing in foreign securities not present in domestic investments, including, but not limited to, recovery of tax withheld by foreign jurisdictions (foreign investment risk). Investments in other investment companies are subject to market and selection risk, as well as the specific risks associated with the investment companies' portfolio securities (investment in other investment companies risk). Initial public offerings (“IPOs”) are new issues of equity securities, as such they have no trading history and there may be limited information about the companies for a very limited period. Additionally, the prices of securities sold in IPOs may be highly volatile (IPO risk). Preferred securities are subject to issuer-specific and market risks. Generally, issuers only pay dividends after the company makes required payments to holders of bonds and other debt, as such the value of preferred securities may react more strongly to market conditions than bonds and other debts (Preferred Securities risk). The Fund’s shareholders may be adversely impacted by asset
financial statements october 31, 2021 | 21 |
BBH SELECT SERIES - MID CAP FUND
NOTES TO FINANCIAL STATEMENTS (continued)
As of and for the period ended October 31, 2021
allocation decisions made by an investment adviser whose discretionary clients make up a large percentage of the Fund’s shareholders (shareholder concentration risk). The extent of the Fund’s exposure to these risks in respect to these financial assets is included in their value as recorded in the Fund’s Statement of Assets and Liabilities.
In 2020, the COVID-19 outbreak was declared a pandemic by the World Health Organization. The situation is dynamic with various cities and countries around the world responding in different ways to address the outbreak. The rapid development and fluidity of this situation precludes any prediction as its ultimate impact, which may have a continued adverse impact on economic and market conditions and trigger a period of global economic slowdown. Management is monitoring developments relating to COVID-19 and is coordinating its operational response based on existing business continuity plans and on guidance from global health organizations, relevant governments, and general pandemic response best practices.
Please refer to the Fund’s prospectus for a complete description of the principal risks of investing in the Fund.
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.
7.Subsequent Events. BBH&Co. ("BBH"), the custodian and fund accountant for the Fund, has entered into an agreement with State Street Corporation (“State Street”) under which State Street will acquire BBH’s Investor Services business; which includes those services provided to the Fund. The transaction is expected to be completed in the first quarter of 2022, subject to customary closing conditions and regulatory approvals. Investment advisory, portfolio management and administrative services provided to BBH Trust by BBH through its SID are not impacted by the agreement with State Street.
Management has evaluated events and transactions that have occurred since October 31, 2021 through the date the financial statements were issued and determined that there were no other subsequent events that would require recognition or additional disclosure in the financial statements.
22
BBH SELECT SERIES - MID CAP FUND
DISCLOSURE OF FUND EXPENSES
October 31, 2021 (unaudited)
EXAMPLE
As a shareholder of the Fund, you may incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments, reinvested distributions, or other distributions; redemption fees; and exchange fees; and (2) ongoing costs, including management fees; distribution 12b-1 fees; and other Fund expenses. This Example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The Example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period (May 24, 2021 to October 31, 2021).
ACTUAL EXPENSES
The first line of the table below provides information about actual account values and actual expenses. You may use information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled “Expenses Paid During the Period” to estimate the expenses you paid on your account during the period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The second line of the table below provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid during the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% Hypothetical Example with the 5% hypothetical examples that appear in the shareholder reports of other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as redemption fees or exchange fees. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
Beginning Account Value May 24, 2021 | Ending Account Value October 31, 2021 | Expenses Paid During Period May 24, 2021 to October 31, 20211 | |||||||||||||
Actual | $ | 1,000 | $ | 1,068 | $ | 4.08 | |||||||||
Hypothetical2 | $ | 1,000 | $ | 1,018 | $ | 3.98 |
_________________
1 | Expenses are equal to the Fund’s annualized expense ratio of 0.90%, multiplied by the average account value over the period, multiplied by 160/365. |
2 | Assumes a return of 5% before expenses. For the purposes of the calculation, the applicable annualized expense ratio for each class of shares is subtracted from the assumed return before expenses. |
financial statements October 31, 2021 | 23 |
BBH SELECT SERIES - MID CAP FUND
DISCLOSURE OF ADVISOR SELECTION
October 31, 2021 (unaudited)
Investment Advisory and Administrative Services Agreement Approval
The 1940 Act requires that a fund’s investment advisory agreements must be approved both by a fund’s board of trustees and by a majority of the trustees who are not parties to the investment advisory agreements or “interested persons” of any party (“Independent Trustees”), cast in person at a meeting called for the purpose of voting on such approval. However, due to the ongoing COVID-19 pandemic the U.S. Securities and Exchange Commission provided exemptive relief from the in-person provisions of Section 15 of the 1940 Act related to the approval certain agreements on March 25, 2020 (“Exemptive Relief”).
The Board, a majority of which is comprised of Independent Trustees, held a meeting on May 10, 2021, in reliance on the Exemptive Order, to consider the combined Amended and Restated Investment Advisory and Administrative Services Agreement (the “Agreement”) between the Trust and the Investment Adviser with respect to the Fund. The Board approved the Agreement at that time. In approving the Agreement, the Board determined that the terms of the Agreement were fair and reasonable and in the best interest of the Fund and its shareholders.
Throughout the year, the Board requested, received and assessed a variety of materials provided by the Investment Adviser and BBH, including, among other things, information about the nature, extent and quality of the services provided and to be provided to the Trust and the Fund by the Investment Adviser and BBH, including investment management and administrative services, the oversight of Fund service providers, marketing, risk oversight, compliance, and the ability to meet applicable legal and regulatory requirements. The Board received and reviewed a comparative fee and expense information for the Fund as compared to similar funds at the meeting held on May 10, 2021. The Board reviewed this report with fund management, the Adviser and counsel to the Trust (“Fund Counsel”).The Board received from, and discussed with, Fund Counsel a memorandum regarding the responsibilities of trustees for the approval of investment advisory agreements under the 1940 Act, as well as the guidance provided in Gartenburg v. Merrill Lynch Asset Management, Inc., which was affirmed in Jones v. Harris Associates, L.P.
In approving the Agreement, the Board considered: (a) the nature, extent and quality of services provided by the Investment Adviser; (b) the advisory fee and the cost of the services to be realized by the Investment Adviser from its relationship with the Fund; (c) the Fund’s costs to investors compared to the costs of comparative funds; (d) the sharing of potential economies of scale; and (e) other factors deemed relevant by the Board. The following is a summary of certain factors the Board considered in making its determination to approve the Agreement. No single factor reviewed by the Board was identified as the principal factor in determining whether to approve the Agreement, and individual Trustees may have given different weight to various factors. The Board reviewed these factors with Fund Counsel. The Board concluded that the fees to be paid by the Fund to the Investment Adviser were reasonable.
24
BBH SELECT SERIES - MID CAP FUND
DISCLOSURE OF ADVISOR SELECTION (continued)
October 31, 2021 (unaudited)
Nature, Extent and Quality of Services
The Board noted that, under the Agreement and with respect to the Fund, the Investment Adviser, subject to the supervision of the Board, is responsible for providing a continuous investment program and making purchases and sales of portfolio securities consistent with the Fund’s investment objective and policies. The Board further noted that, as a combined investment advisory and administration agreement, the Agreement also contemplates the provision of administrative services by the Investment Adviser to the Fund within the same fee structure. The Board received and considered information during the Meeting, and over the course of the previous year, regarding the nature, extent and quality of services provided to the Trust and those that would be provided to the Fund by the Investment Adviser including: portfolio management, the supervision of operations and compliance, preparation of regulatory filings, disclosures to Fund shareholders, general oversight of service providers, organizing Board meetings and preparing the materials for such Board meetings, assistance to the Board (including the Independent Trustees in their capacity as Trustees), legal and Chief Compliance Officer services for the Trust, and other services necessary for the operation of the Fund. The Board considered the resources of the Investment Adviser and BBH, as a whole, dedicated to the Fund noting that, pursuant to separate agreements, BBH also provides custody and fund accounting services to the Fund. The Board considered the depth and range of services provided pursuant to the Agreement, noting that the Investment Adviser also coordinates the provision of services to the Fund by affiliated and nonaffiliated service providers.
The Board considered the scope and quality of services provided by the Investment Adviser under the Agreement. The Board reviewed the qualifications of the key investment personnel primarily responsible for the day-to-day portfolio management of the Fund. The Board also considered the policies and practices followed by BBH and the Investment Adviser. The Board concluded that, overall, it was satisfied with the nature, extent and quality of the investment advisory and administrative services provided, and expected to be provided, to the Fund pursuant to the Agreement.
Costs of Services Provided
The Board considered the fee rates paid by the Fund to the Investment Adviser and BBH in light of the nature, extent and quality of the services provided to the Fund. The Board also considered and reviewed the fee waiver arrangement in place for the Fund and considered the actual fee rates after taking into account the fee waiver. The Board noted that they had received and considered information comparing the Fund’s combined investment advisory and administration fee and the Fund’s net operating expenses with those of other comparable mutual funds. The Board recognized that it is difficult to make comparisons of the fee rate, or of combined advisory and administration fees, because there are variations in the services that are included in the fees paid by other funds. The Board concluded that the advisory and administration fee appeared to be both reasonable in light of the services rendered and the result of arm’s length negotiations.
financial statements October 31, 2021 | 25 |
BBH SELECT SERIES - MID CAP FUND
DISCLOSURE OF ADVISOR SELECTION (continued)
October 31, 2021 (unaudited)
The Board also considered the effect of fall-out benefits to the Investment Adviser and BBH such as the increased visibility of BBH’s investment management business due to the distribution of the Trust’s funds. The Board considered other benefits received by BBH and the Investment Adviser as a result of their relationships with the Fund. These other benefits include fees received for being the Fund’s custodian and fund accounting agent. In light of the costs of providing services pursuant to the Agreement as well as the Investment Adviser and BBH’s commitment to the Fund, the ancillary benefits that the Investment Adviser and BBH received were considered reasonable.
Economies of Scale
The Board also considered the existence of any economies of scale and whether those economies are passed along to the Fund’s shareholders through a graduated investment advisory fee schedule or other means, including any fee waivers by the Investment Adviser and BBH. The Board considered the fee schedule for the Fund, including applicable breakpoints. The Board concluded that the fees to be paid by the Fund to the Investment Adviser were reasonable based on the comparative expense information and the cost of the services provided by the Investment Adviser.
26
BBH SELECT SERIES - MID CAP FUND
CONFLICTS OF INTEREST
October 31, 2021 (unaudited)
Description of Potential Material Conflicts of Interest - Investment Adviser
BBH, including the Investment Adviser, provides discretionary and non-discretionary investment management services and products to corporations, institutions and individual investors throughout the world. As a result, in the ordinary course of its businesses, BBH, including the Investment Adviser, may engage in activities in which its interests or the interests of its clients may conflict with or be adverse to the interests of the Funds. In addition, certain of such clients (including the Funds) utilize the services of BBH for which they will pay to BBH customary fees and expenses that will not be shared with the Funds.
The Investment Adviser and the Sub-Adviser have adopted and implemented policies and procedures that seek to manage conflicts of interest. Pursuant to such policies and procedures, the Investment Adviser and the Sub-Adviser monitor a variety of areas, including compliance with fund investment guidelines, the investment in only those securities that have been approved for purchase, and compliance with their respective Code of Ethics.
The Trust also manages these conflicts of interest. For example, the Trust has designated a Chief Compliance Officer (“CCO”) and has adopted and implemented policies and procedures designed to manage the conflicts identified below and other conflicts that may arise in the course of the Funds’ operations in such a way as to safeguard the Funds from being negatively affected as a result of any such potential conflicts. From time to time, the Trustees receive reports from the Investment Adviser, the Sub-Adviser and the Trust’s CCO on areas of potential conflict.
Investors should carefully review the following, which describes potential and actual conflicts of interest that BBH, the Investment Adviser and Sub-Adviser can face in the operation of their respective investment management services. This section is not, and is not intended to be, a complete enumeration or explanation of all of the potential conflicts of interest that may arise. The Investment Adviser, the Sub-Adviser and the Funds have adopted policies and procedures reasonably designed to appropriately prevent, limit or mitigate the conflicts of interest described below. Additional information about potential conflicts of interest regarding the Investment Adviser is set forth in the Investment Adviser’s Form ADV. A copy of Part 1 and Part 2A of the Investment Adviser’s Form ADV is available on the SEC’s website (www.adviserinfo.sec.gov). In addition, many of the activities that create these conflicts of interest are limited and/or prohibited by law, unless an exception is available.
Other Clients and Allocation of Investment Opportunities. BBH, the Investment Adviser, and the Sub-Adviser manage funds and accounts of clients other than the Funds (“Other Clients”). In general, BBH, the Investment Adviser, and the Sub-Adviser face conflicts of interest when they render investment advisory services to different clients and, from time to time, provide dissimilar investment advice to different clients. Investment decisions will not necessarily be made in parallel among the Funds and Other Clients. Investments made by the Funds do not, and are not intended to, replicate the investments, or the investment methods and strategies, of Other Clients. Accordingly, such Other Clients’ accounts may produce results that are materially different from those experienced by the Funds. Certain other conflicts of interest may arise in connection with a portfolio manager’s management of the Funds’ investments, on the one hand, and the investments of other funds or accounts for which the portfolio manager is responsible, on the other. For example, it is possible that the various funds or accounts managed by the Investment Adviser or Sub-Adviser
financial statements October 31, 2021 | 27 |
BBH SELECT SERIES - MID CAP FUND
CONFLICTS OF INTEREST (continued)
October 31, 2021 (unaudited)
could have different investment strategies that, at times, might conflict with one another to the possible detriment of the Funds. From time to time, the Investment Adviser and Sub-Adviser, sponsor and with other investment pools and accounts which engage in the same or similar businesses as the Funds using the same or similar investment strategies. To the extent that the same investment opportunities might be desirable for more than one account or fund, possible conflicts could arise in determining how to allocate them because the Investment Adviser or Sub-Adviser may have an incentive to allocate investment opportunities to certain accounts or funds. However, BBH and the Investment Adviser have implemented policies and procedures designed to ensure that information relevant to investment decisions is disseminated promptly within its portfolio management teams and investment opportunities are allocated equitably among different clients. The policies and procedures require, among other things, objective allocation for limited investment opportunities, and documentation and review of justifications for any decisions to make investments only for select accounts or in a manner disproportionate to the size of the account. Nevertheless, access to investment opportunities may be allocated differently among accounts due to the particular characteristics of an account, such as size of the account, cash position, tax status, risk tolerance and investment restrictions or for other reasons.
Actual or potential conflicts of interest may also arise when a portfolio manager has management responsibilities to multiple accounts or funds, resulting in unequal commitment of time and attention to the portfolio management of the funds or accounts.
Affiliated Service Providers. Other potential conflicts might include conflicts between the Funds and its affiliated and unaffiliated service providers (e.g. conflicting duties of loyalty). In addition to providing investment management services through the SID, BBH provides administrative, custody, shareholder servicing and fund accounting services to the Funds. BBH may have conflicting duties of loyalty while servicing the Funds and/or opportunities to further its own interest to the detriment of the Funds. For example, in negotiating fee arrangements with affiliated service providers, BBH may have an incentive to agree to higher fees than it would in the case of unaffiliated providers. BBH acting in its capacity as the Funds’ administrator is the primary valuation agent of the Funds. BBH values securities and assets in the Funds according to the Funds’ valuation policies. Because the Investment Adviser’s advisory and administrative fees are calculated by reference to the Funds’ net assets, BBH and its affiliates may have an incentive to seek to overvalue certain assets.
Aggregation. Potential conflicts of interest also arise with the aggregation of trade orders. Purchases and sales of securities for the Funds may be aggregated with orders for other client accounts managed by the Sub-Adviser. The Sub-Adviser, however, is not required to aggregate orders if portfolio management decisions for different accounts are made separately, or if it is determined that aggregating is not practicable, or in cases involving client direction. Prevailing trading activity frequently may make impossible the receipt of the same price or execution on the entire volume of securities purchased or sold. When this occurs, the various prices may be averaged, and the Funds will be charged or credited with the average price. Thus, the effect of the aggregation may operate on some occasions to the disadvantage of the Funds. In addition, under certain circumstances, the Funds will not be charged the same commission or commission equivalent rates in connection with an aggregated order.
28
BBH SELECT SERIES - MID CAP FUND
CONFLICTS OF INTEREST (continued)
October 31, 2021 (unaudited)
Cross Trades. Under certain circumstances, the Investment Adviser, on behalf of the Funds, may seek to buy from or sell securities to another fund or account advised by BBH, the Investment Adviser. Subject to applicable law and regulation, BBH, the Investment Adviser may (but is not required to) effect purchases and sales between BBH, the Investment Adviser clients (“cross trades”), including the Funds, if BBH, the Investment Adviser or the Sub-Adviser believe such transactions are appropriate based on each party’s investment objectives and guidelines. There may be potential conflicts of interest or regulatory issues relating to these transactions which could limit the Investment Adviser’s decision to engage in these transactions for the Funds. BBH, the Investment Adviser and/or the Sub-Adviser may have a potentially conflicting division of loyalties and responsibilities to the parties in such transactions.
Soft Dollars. The Investment Adviser may direct brokerage transactions and/or payment of a portion of client commissions (“soft dollars”) to specific brokers or dealers or other providers to pay for research or other appropriate services which provide, in the Investment Adviser’s view, appropriate assistance in the investment decision-making process (including with respect to futures, fixed price offerings and over-the-counter transactions). The use of a broker that provides research and securities transaction services may result in a higher commission than that offered by a broker who does not provide such services. The Investment Adviser will determine in good faith whether the amount of commission is reasonable in relation to the value of research and services provided and whether the services provide lawful and appropriate assistance in its investment decision-making responsibilities.
Research or other services obtained in this manner may be used in servicing any or all of the Funds and other accounts managed by the Investment Adviser, including in connection with accounts that do not pay commissions to the broker related to the research or other service arrangements. Such products and services may disproportionately benefit other client accounts relative to the Funds based on the amount of brokerage commissions paid by the Funds and such other accounts. To the extent that the Sub-Adviser uses soft dollars, it will not have to pay for those products and services itself.
BBH may receive research that is bundled with the trade execution, clearing, and/or settlement services provided by a particular broker-dealer. To the extent that the Sub-Adviser receives research on this basis, many of the same conflicts related to traditional soft dollars may exist. For example, the research effectively will be paid by client commissions that also will be used to pay for the execution, clearing, and settlement services provided by the broker-dealer and will not be paid by the Sub-Adviser.
Arrangements regarding compensation and delegation of responsibility may create conflicts relating to selection of brokers or dealers to execute Fund portfolio trades and/or specific uses of commissions from Fund portfolio trades, administration of investment advice and valuation of securities.
Investments in BBH Funds. From time to time BBH may invest a portion of the assets of its discretionary investment advisory clients in the Funds. That investment by BBH on behalf of its discretionary investment advisory clients in the Funds may be significant at times.
financial statements October 31, 2021 | 29 |
BBH SELECT SERIES - MID CAP FUND
CONFLICTS OF INTEREST (continued)
October 31, 2021 (unaudited)
Increasing a Fund’s assets may enhance investment flexibility and diversification and may contribute to economies of scale that tend to reduce the Funds’ expense ratio. In selecting the Funds for its discretionary investment advisory clients, BBH may limit its selection to funds managed by BBH or the Investment Adviser. BBH may not consider or canvass the universe of unaffiliated investment companies available, even though there may be unaffiliated investment companies that may be more appropriate or that have superior performance. BBH, the Investment Adviser and their affiliates providing services to the Funds benefit from additional fees when the Funds is included as an investment by a discretionary investment advisory client.
BBH reserves the right to redeem at any time some or all of the shares of the Funds acquired for its discretionary investment advisory clients’ accounts. A large redemption of shares of the Funds by BBH on behalf of its discretionary investment advisory clients could significantly reduce the asset size of the Funds, which might have an adverse effect on the Funds’ investment flexibility, portfolio diversification and expense ratio.
Valuation. When market quotations are not readily available, or are believed by BBH to be unreliable, the Funds’ investments will be valued at fair value by BBH pursuant to procedures adopted by the Funds’ Board of Trustees. When determining an asset’s “fair value”, BBH seeks to determine the price that a Fund might reasonably expect to receive from the current sale of that asset in an arm’s-length transaction. The price generally may not be determined based on what the Funds might reasonably expect to receive for selling an asset at a later time or if it holds the asset to maturity. While fair value determinations will be based upon all available factors that BBH deems relevant at the time of the determination and may be based on analytical values determined by BBH using proprietary or third-party valuation models, fair value represents only a good faith approximation of the value of a security. The fair value of one or more securities may not, in retrospect, be the price at which those assets could have been sold during the period in which the particular fair values were used in determining the Funds’ net asset value. As a result, the Funds’ sale or redemption of its shares at net asset value, at a time when a holding or holdings are valued by BBH (pursuant to Board-adopted procedures) at fair value, may have the effect of diluting or increasing the economic interest of existing shareholders.
Referral Arrangements. BBH may enter into advisory and/or referral arrangements with third parties. Such arrangements may include compensation paid by BBH to the third party. BBH may pay a solicitation fee for referrals and/or advisory or incentive fees. BBH may benefit from increased amounts of assets under management.
30
BBH SELECT SERIES - MID CAP FUND
CONFLICTS OF INTEREST (continued)
October 31, 2021 (unaudited)
Personal Trading. BBH, including the Investment Adviser, and any of their respective partners, principals, directors, officers, employees, affiliates or agents, face conflicts of interest when transacting in securities for their own accounts because they could benefit by trading in the same securities as the Funds, which could have an adverse effect on the Funds. However, the Investment Adviser has implemented policies and procedures concerning personal trading by BBH Partners and employees. The policy and procedures are intended to prevent BBH Partners and employees from trading in the same securities as the Funds. However, BBH, including the Investment Adviser, has implemented policies and procedures concerning personal trading by BBH Partners and employees. The policies and procedures are intended to prevent BBH Partners and employees with access to Fund material non-public information from trading in the same securities as the Funds.
Gifts and Entertainment. From time to time, employees of BBH, including the Investment Adviser, and any of their respective partners, principals, directors, officers, employees, affiliates or agents, may receive gifts and/or entertainment from clients, intermediaries, or service providers to the Funds or BBH, including the Investment Adviser, which could have the appearance of affecting or may potentially affect the judgment of the employees, or the manner in which they conduct business. The Investment Adviser has implemented policies and procedures concerning gifts and entertainment to mitigate any impact on the judgment of BBH Partners and employees. BBH, including the Investment Adviser, has implemented policies and procedures concerning gifts and entertainment to mitigate any impact on the judgment of BBH Partners and employees.
financial statements October 31, 2021 | 31 |
BBH SELECT SERIES - MID CAP FUND
ADDITIONAL FEDERAL TAX INFORMATION
October 31, 2021 (unaudited)
In January 2022, shareholders will receive Form 1099-DIV, which will include their share of qualified dividends distributed during the calendar year 2021. Shareholders are advised to check with their tax advisers for information on the treatment of these amounts on their individual income tax returns.
32
TRUSTEES AND OFFICERS OF BBH SELECT SERIES - MID CAP FUND
(unaudited)
Information pertaining to the Trustees and executive officers of the Trust as of October 31, 2021 is set forth below. The mailing address for each Trustee is c/o BBH Trust, 140 Broadway, New York, NY 10005.
Name and Birth Year | Position(s) Held with the Trust | Term of Office and Length of Time Served# | Principal Occupation(s) During Past 5 Years | Number of Portfolios in Fund Complex Overseen by Trustee^ | Other Public Company or Investment Company Directorships held by Trustee During Past 5 Years | |||||
Independent Trustees | ||||||||||
H. Whitney Wagner Birth Year: 1956 | Chairman of the Board and Trustee | Chairman Since 2014; Trustee Since 2007 and 2006-2007 with the Predecessor Trust | President, Clear Brook Advisors, a registered investment advisor. | 9 | None. | |||||
Andrew S. Frazier Birth Year: 1948 | Trustee | Since 2010 | Retired. | 9 | None. | |||||
Mark M. Collins Birth Year: 1956 | Trustee | Since 2011 | Partner of Brown Investment Advisory Incorporated, a registered investment advisor. | 9 | Chairman of Dillon Trust Company. | |||||
John M. Tesoro Birth Year: 1952 | Trustee | Since 2014 | Retired. | 9 | Trustee, Bridge Builder Trust (8 Funds), Director, Teton Advisers, Inc. (a registered investment adviser). | |||||
Joan A. Binstock Birth Year: 1954 | Trustee | Since 2019 | Partner, Chief Financial and Operations Officer, Lord Abbett & Co. LLC (1999-2018); Lovell Minnick Partners, Advisers Counsel (2018-Present). | 9 | Independent Director, Morgan Stanley Direct Lending Fund; KKR Real Estate Interval Fund. |
financial statements October 31, 2021 | 33 |
TRUSTEES AND OFFICERS OF BBH SELECT SERIES - MID CAP FUND
(unaudited)
Name, Address and Birth Year | Position(s) Held with the Trust | Term of Office and Length of Time Served# | Principal Occupation(s) During Past 5 Years | Number of Portfolios in Fund Complex Overseen by Trustee^ | Other Public Company or Investment Company Directorships held by Trustee During Past 5 Years | |||||
Interested Trustees | ||||||||||
Susan C. Livingston+ 50 Post Office Square Boston, MA 02110 Birth Year: 1957 | Trustee | Since 2011 | Partner (since 1998) and Senior Client Advocate (since 2010) for BBH&Co. | 9 | None. | |||||
John A. Gehret+ 140 Broadway New York, NY 10005 Birth Year: 1959 | Trustee | Since 2011 | Limited Partner of BBH&Co. (2012-present). | 9 | None. |
34
TRUSTEES AND OFFICERS OF BBH SELECT SERIES - MID CAP FUND
(unaudited)
Name, Address and Birth Year | Position(s) Held with the Trust | Term of Office and Length of Time Served# | Principal Occupation(s) During Past 5 Years | |||
Officers | ||||||
Jean-Pierre Paquin 140 Broadway New York, NY 10005 Birth Year: 1973 | President and Principal Executive Officer | Since 2016 | Partner of BBH&Co. since 2015; joined BBH&Co. in 1996. | |||
Daniel Greifenkamp 140 Broadway New York, NY 10005 Birth Year: 1969 | Vice President | Since 2016 | Managing Director of BBH&Co. since 2014; joined BBH&Co. in 2011. | |||
Charles H. Schreiber 140 Broadway New York, NY 10005 Birth Year: 1957 | Treasurer and Principal Financial Officer | Since 2007 2006-2007 with the Predecessor Trust | Senior Vice President of BBH&Co. since 2001; joined BBH&Co. in 1999. | |||
Paul F. Gallagher 140 Broadway New York, NY 10005 Birth Year: 1959 | Chief Compliance Officer (“CCO”) | Since 2015 | Senior Vice President of BBH&Co. since 2015. | |||
Kristin Marvin 140 Broadway New York, NY 10005 Birth Year: 1981 | Anti-Money Laundering Officer (“AMLO”) | Since 2021 | Assistant Vice President of BBH&Co. since March 2020; Program Manager, Ares Management Corporation, April 2015 - March 2020. |
financial statements October 31, 2021 | 35 |
TRUSTEES AND OFFICERS OF BBH SELECT SERIES - MID CAP FUND
(unaudited)
Name, Address and Birth Year | Position(s) Held with the Trust | Term of Office and Length of Time Served# | Principal Occupation(s) During Past 5 Years | |||
Suzan M. Barron 50 Post Office Square Boston, MA 02110 Birth Year: 1964 | Secretary | Since 2009 | Senior Vice President and Senior Investor Services Counsel, BBH&Co. since 2005. | |||
Crystal Cheung 140 Broadway New York, NY 10005 Birth Year: 1974 | Assistant Treasurer | Since 2018 | Assistant Vice President of BBH&Co. since 2016; joined BBH&Co. 2014. | |||
Dania C. Piscetta 50 Post Office Square Boston, MA 02110 Birth Year: 1989 | Assistant Secretary | Since 2021 | Assistant Vice President of BBH&Co. since June 2021; joined BBH&Co. in 2021; Assistant Vice President and Legal Associate of Wellington Management Company LLP, April 2018 - March 2021; Senior Compliance Analyst, Fidelity Investments, May 2016 – April 2018. |
________________
# | All officers of the Trust hold office for one year and until their respective successors are chosen and qualified (subject to the ability of the Trustees to remove any officer in accordance with the Trust’s By-laws). Mr. Wagner previously served on the Board of Trustees of the Predecessor Trust. |
+ | Ms. Livingston and Mr. Gehret are “interested persons” of the Trust as defined in the 1940 Act because of their positions as Partner and Limited Partner of BBH&Co., respectively. |
^ | The Fund Complex consists of the Trust, which has nine series, and each is counted as one “Portfolio” for purposes of this table. |
36
TRUSTEES AND OFFICERS OF BBH SELECT SERIES - MID CAP FUND
OPERATION AND EFFECTIVENESS OF THE FUND’S LIQUIDITY RISK MANAGEMENT PROGRAM
October 31, 2021 (unaudited)
The Securities and Exchange Commission adopted Rule 22e-4 under the Investment Company Act of 1940, as amended (the “Liquidity Rule”) to promote effective liquidity risk management throughout the open-end investment company industry in order to reduce the risk that funds will be unable to meet their redemption obligations and mitigate dilution of the interests of fund shareholders.
The Board of Trustees (the “Board”) of BBH Trust met on March 9, 2021 to review the liquidity risk management program (the “Program”) for the funds of BBH Trust (the “Funds”) pursuant to the Liquidity Rule. The Board has appointed three members of the Brown Brothers Harriman & Co. Mutual Fund Advisory Department, the Investment Adviser to the Funds, as the Program Administrator for each Fund’s Program. The Program Administrator provided the Board with a report (the “Report”) that addressed the operations of the Program and assessed its adequacy and effectiveness of the Program. The Report covered the period from February 1, 2020 through January 31, 2021 (the “Reporting Period”).
The Report noted that the Program complied with the key factors for consideration under the Liquidity Rule for assessing, managing and periodically reviewing a Fund’s liquidity risk, including the following points.
Liquidity classification. The Report described the Program’s liquidity classification methodology for categorizing the Funds’ investments into one of four liquidity buckets.
Highly Liquid Investment Minimum. The Report noted that one aspect of the Liquidity Rule is a requirement that funds that are expected to have less than 50% of assets classified as other than “highly liquid” should establish a minimum percentage of highly liquid assets that the fund is expected to hold on an on-going basis. The Program Administrator monitors the percentages of assets in each category on an ongoing basis and, given that no Fund has approached the 50% threshold, has made the determination that it is not necessary to assign a Highly Liquid Investment Minimum as provided for in the Liquidity Rule to any of the Funds.
The Fund’s investment strategy and liquidity of portfolio investments during normal and reasonably foreseeable stressed market conditions. During the Reporting Period, the Program Administrator reviewed whether each Fund’s investment strategy is appropriate for an open-end fund structure with a focus on Funds with more significant and consistent holdings of less liquid and illiquid assets and factored a Fund’s concentration in an issuer into the liquidity classification methodology by taking issuer position sizes into account.
Short-term and long-term cash flow projections during normal and reasonably foreseeable stressed market conditions. During the Reporting Period, the Program Administrator reviewed historical redemption activity and used this information as a component to establish each Fund’s reasonably anticipated trading size. The Program Administrator also took into consideration other factors such as shareholder ownership concentration, applicable distribution channels and the degree of certainty associated with a Fund’s short-term and long-term cash flow projections.
Holdings of cash and cash equivalents. The Program Administrator considered the degree to which each Fund held cash and cash equivalents as a component of each Fund’s ability to meet redemption requests.
financial statements October 31, 2021 | 37 |
TRUSTEES AND OFFICERS OF BBH SELECT SERIES - MID CAP FUND
OPERATION AND EFFECTIVENESS OF THE FUND’S LIQUIDITY RISK MANAGEMENT PROGRAM (continued)
October 31, 2021 (unaudited)
There were no material changes to the Program during the Reporting Period. The Program Administrator has informed the Board that it believes that the Fund’s Program is adequately designed, has been implemented as intended, and has operated effectively since its implementation. No material exceptions have been noted since the implementation of the Program, and there were no liquidity events that impacted the Fund or its ability to meet redemption requests on a timely basis during the Reporting Period.
38
Administrator Brown Brothers Harriman & Co. 140 Broadway New York, NY 10005
Distributor ALPS Distributors, Inc. 1290 Broadway, Suite 1000 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 |
To obtain information or make shareholder inquiries:
By telephone: | Call 1-800-575-1265 |
By E-mail send your request to: | bbhfunds@bbh.com |
On the internet: | www.bbhfunds.com |
This report is submitted for the general information of shareholders and is not authorized for distribution to prospective investors unless preceded or accompanied by an effective prospectus. Nothing herein contained is to be considered an offer of sale or a solicitation of an offer to buy shares of the Fund.
For more complete information, visit www.bbhfunds.com for a prospectus. You should consider the Fund’s investment objectives, risks, charges and expenses carefully before you invest. Information about these and other important subjects is in the Fund’s prospectus, which you should read carefully before investing.
Holdings and allocations are subject to change. Fund holdings should not be relied on in making investment decisions and should not be construed as research or investment advice regarding particular securities. Current and future holdings are subject to risk.
The Fund files a complete schedule of portfolio holdings with the Securities and Exchange Commission (SEC) for the first and third quarters of each fiscal year as an exhibit to its reports on Form N-PORT. The Fund’s Forms N-PORT are available electronically on the SEC’s website (sec.gov). For a complete list of a fund’s portfolio holdings, view the most recent holdings listing, semi-annual report, or annual report on the Fund’s web site at http://www.bbhfunds.com.
A summary of the Fund’s Proxy Voting Policy that the Fund uses to determine how to vote proxies, if any, relating to securities held in the Fund’s portfolio, as well as a record of how the Fund voted any such proxies during the most recent 12-month period ended June 30, is available, without charge, upon request by calling the toll-free number listed above. This information is also available on the SEC’s website at www.sec.gov.
NOT FDIC INSURED NO BANK GUARANTEE MAY LOSE VALUE
Annual Report
OCTOBER 31, 2021
BBH Partner Fund – International Equity
BBH PARTNER FUND – INTERNATIONAL EQUITY
MANAGEMENT’S DISCUSSION OF FUND PERFORMANCE
October 31, 2021
The BBH Partner Fund – International Equity (“the Fund” or “BBH International”) returned 22.38%, net of fees, for the fiscal year ended October 31, 2021. During the same twelve-month period, the Fund’s benchmark, the MSCI Europe, Australasia Far East Index (the “EAFE”) returned 34.18%. From the inception of the Fund through October 31, 2021, the Fund has compounded at an annualized rate of 7.60%, net of fees, while the MSCI EAFE has returned 6.20% per year.
Since Select Equity Group (“SEG”), as sub-adviser, began the management of the Fund’s portfolio on February 24, 2017, the Fund has returned 12.75% (annualized, net of fees), while the MSCI EAFE returned 9.03% (annualized).
For fiscal 2021, the Fund underperformed its benchmark driven by security selection within Consumer Discretionary, an overweight to China, and individual security performance from the following holdings: Worldline SA, Alibaba Group Holding, Nintendo Co Ltd, Clarivate PLC and Fidelity National Information Services. The largest contributors to performance during the same time period include: ASML Holding NV, Constellation Software Inc, Alcon Inc, IHS Markit Ltd, Brookfield Asset Management Inc and strong stock selection in the Industrials sector relative to MSCI EAFE index.
Select Equity Group invests in a concentrated portfolio of predominantly non-U.S. domiciled businesses that are deemed to be “Select Equity pedigree”. The key criteria used to evaluate a company are as follows:
•
Predictable Growth: SEG typically looks for businesses that are able to grow earnings per share and free cash flow at a double-digit rate per year throughout the cycle. Additionally, the team prefers companies that can achieve this growth in a highly predictable and sustainable manner.
•
Strong Returns on Invested Capital (ROIC): the team looks for companies that have strong ROICs, better than average returns on assets, etc. that are achieved through having strong and growing margins and low capital intensity.
•
Defensible Competitive Moat(s): the team spends most of their time assessing the nature of a company’s “moat”. Companies with strong moats and/or natural barriers to entry that protect a company’s competitive advantage enable continued earnings per share and ROIC growth.
•
Capital Stewardship: strong management teams with good capital allocation skills are essential to perpetuating the above characteristics of a company.
SEG believes that, with patience, the market will provide an attractive opportunity to invest at what the investment team deems a fair valuation. The Firm has maintained a research-intensive, value-based approach to investing in high-quality businesses.
________________
Portfolio holdings are subject to change. |
The Fund seeks to generate attractive returns over time but does not attempt to mirror a benchmark or an index. The composition of the MSCI EAFE Index is materially different than the Fund's holdings. |
financial statements october 31, 2021 | 3 |
BBH PARTNER FUND – INTERNATIONAL EQUITY
MANAGEMENT’S DISCUSSION OF FUND PERFORMANCE (continued)
October 31, 2021
Growth of $10,000 Invested in BBH Partner Fund – International Equity
The graph below illustrates the hypothetical investment of $10,0001 in the Class I shares of the Fund (Effective February 24, 2017, the Fund’s Class N shares were converted into Class I shares) over the ten years ended October 31, 2021 as compared to the MSCI EAFE.
The annualized gross expense ratio as in the March 1, 2021 prospectus for Class I shares was 0.69%. Performance data quoted represents past performance which is no guarantee of future results. Investment return and principal value will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Fund performance changes over time and current performance may be lower or higher than what is stated. Fund shares redeemed within 30 days of purchase are subject to a redemption fee of 2.00%. Returns do not reflect the deductions of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. For performance current to the most recent month-end please call 1-800-575-1265.
Hypothetical performance results are calculated on a total return basis and include all portfolio income, unrealized and realized capital gains, losses and reinvestment of dividends and other earnings. No one shareholder has actually achieved these results and no representation is being made that any actual shareholder achieved, or is likely to achieve, similar results to those shown. Hypothetical performance does not represent actual trading and may not reflect the impact of material economic and market factors. Undue reliance should not be placed on hypothetical performance results in making an investment decision.
________________
1 | The Fund’s performance assumes the reinvestment of all dividends and distributions. The EAFE has been adjusted to reflect reinvestment of dividends on securities in the index. The EAFE is not adjusted to reflect sales charges, expenses or other fees that the Securities and Exchange Commission requires to be reflected in the Fund’s performance. |
4
BBH PARTNER FUND – INTERNATIONAL EQUITY
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Trustees of the BBH Trust and Shareholders of BBH Partner Fund – International Equity:
Opinion on the Financial Statements and Financial Highlights
We have audited the accompanying statement of assets and liabilities, including the portfolio of investments of BBH Partner Fund – International Equity (the "Fund"), one of the funds within BBH Trust, as of October 31, 2021, the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, the financial highlights for each of the five years in the period then ended, and the related notes. In our opinion, the financial statements and financial highlights present fairly, in all material respects, the financial position of the Fund as of October 31, 2021, and the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended, in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements and financial highlights are the responsibility of the BBH Trust's management. Our responsibility is to express an opinion on the Fund's financial statements and financial highlights based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the BBH Trust in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement, whether due to error or fraud. The BBH Trust is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the BBH Trust’s internal control over financial reporting. Accordingly, we express no such opinion.
financial statements october 31, 2021 | 5 |
BBH PARTNER FUND – INTERNATIONAL EQUITY
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM (continued)
Our audits included performing procedures to assess the risks of material misstatement of the financial statements and financial highlights, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements and financial highlights. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements and financial highlights. Our procedures included confirmation of securities owned as of October 31, 2021, by correspondence with the custodian and brokers; when replies were not received from brokers, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinion.
/s/ DELOITTE & TOUCHE LLP
Boston, Massachusetts
December 21, 2021
We have served as the auditor of one or more Brown Brothers Harriman investment companies since 1991.
6
BBH PARTNER FUND – INTERNATIONAL EQUITY
PORTFOLIO ALLOCATION
October 31, 2021
COUNTRY DIVERSIFICATION
U.S. $ Value | Percent of Net Assets | ||||||
Common Stock: | |||||||
Bermuda | $ | 30,329,916 | 1.1 | % | |||
Canada | 321,394,045 | 11.8 | |||||
Cayman Islands | 112,023,160 | 4.1 | |||||
France | 216,335,589 | 8.0 | |||||
Germany | 241,992,454 | 8.8 | |||||
Hong Kong | 115,032,605 | 4.2 | |||||
Ireland | 114,707,138 | 4.3 | |||||
Japan | 208,430,336 | 7.7 | |||||
Jersey | 178,410,485 | 6.6 | |||||
Luxembourg | 17,355,029 | 0.6 | |||||
Netherlands | 193,421,047 | 7.1 | |||||
South Korea | 2,301,904 | 0.1 | |||||
Spain | 209,486,259 | 7.7 | |||||
Sweden | 39,812,798 | 1.5 | |||||
Switzerland | 182,367,577 | 6.7 | |||||
Taiwan | 48,779,460 | 1.8 | |||||
United Kingdom | 180,292,804 | 6.7 | |||||
United States | 138,916,320 | 5.1 | |||||
Registered Investment Companies: | |||||||
United States | 106,700,000 | 3.9 | |||||
Warrants: | |||||||
Switzerland | 412,911 | 0.0 | |||||
Cash and Other Assets in Excess of Liabilities | 59,864,079 | 2.2 | |||||
NET ASSETS | $ | 2,718,365,916 | 100.0 | % |
All data as of October 31, 2021. The Fund’s country diversification is expressed as a percentage of net assets and may vary over time. The Fund’s country diversification is derived from respective security’s country of incorporation.
The accompanying notes are an integral part of these financial statements.
financial statements october 31, 2021 | 7 |
BBH PARTNER FUND – INTERNATIONAL EQUITY
PORTFOLIO ALLOCATION (continued)
October 31, 2021
SECTOR DIVERSIFICATION
U.S. $ Value | Percent of Net Assets | ||||||
Common Stock: | |||||||
Communications | $ | 154,099,583 | 5.7 | % | |||
Consumer Cyclical | 216,053,311 | 8.0 | |||||
Consumer Non-Cyclical | 764,859,600 | 28.1 | |||||
Financials | 470,132,795 | 17.3 | |||||
Industrials | 488,584,465 | 18.0 | |||||
Technology | 457,659,172 | 16.8 | |||||
Registered Investment Companies | 106,700,000 | 3.9 | |||||
Warrants: | |||||||
Consumer Cyclical | 412,911 | 0.0 | |||||
Cash and Other Assets in Excess of Liabilities | 59,864,079 | 2.2 | |||||
NET ASSETS | $ | 2,718,365,916 | 100.0 | % |
All data as of October 31, 2021. The Fund’s sector diversification is expressed as a percentage of net assets and may vary over time.
The accompanying notes are an integral part of these financial statements.
8
BBH PARTNER FUND – INTERNATIONAL EQUITY
PORTFOLIO OF INVESTMENTS
October 31, 2021
Shares/ Units | Value | |||||
COMMON STOCK (93.9%) | ||||||
| BERMUDA (1.1%) | |||||
CONSUMER NON-CYCLICAL | ||||||
232,022 | IHS Markit, Ltd. | $ | 30,329,916 | |||
Total Bermuda | 30,329,916 | |||||
| CANADA (11.8%) | |||||
CONSUMER CYCLICAL | ||||||
1,040,669 | Alimentation Couche-Tard, Inc. (Class B) | 38,956,377 | ||||
FINANCIALS | ||||||
2,024,790 | Brookfield Asset Management, Inc. (Class A) | 122,005,007 | ||||
INDUSTRIALS | ||||||
1,150,848 | Canadian Pacific Railway, Ltd. | 88,899,423 | ||||
TECHNOLOGY | ||||||
40,784 | Constellation Software, Inc. | 71,533,238 | ||||
Total Canada | 321,394,045 | |||||
| CAYMAN ISLANDS (4.1%) | |||||
COMMUNICATIONS | ||||||
1,463,822 | Alibaba Group Holding, Ltd.1 | 30,290,093 | ||||
2,080,680 | JD.com, Inc. (Class A)1 | 81,733,067 | ||||
Total Cayman Islands | 112,023,160 | |||||
| FRANCE (8.0%) | |||||
CONSUMER NON-CYCLICAL | ||||||
353,185 | Worldline S.A.1,2 | 20,589,620 | ||||
INDUSTRIALS | ||||||
949,175 | Safran S.A. | 127,493,223 | ||||
128,707 | Schneider Electric SE | 22,239,641 | ||||
499,343 | Thales S.A. | 46,013,105 | ||||
195,745,969 | ||||||
Total France | 216,335,589 |
The accompanying notes are an integral part of these financial statements.
financial statements october 31, 2021 | 9 |
BBH PARTNER FUND – INTERNATIONAL EQUITY
PORTFOLIO OF INVESTMENTS (continued)
October 31, 2021
Shares/ Units | Value | |||||
COMMON STOCK (continued) | ||||||
GERMANY (8.8%) | ||||||
CONSUMER CYCLICAL | ||||||
213,772 | Adidas AG | $ | 69,936,892 | |||
CONSUMER NON-CYCLICAL | ||||||
132,691 | Merck KGaA | 31,298,552 | ||||
FINANCIALS | ||||||
219,343 | Deutsche Boerse AG | 36,377,928 | ||||
TECHNOLOGY | ||||||
721,455 | SAP SE | 104,379,082 | ||||
Total Germany | 241,992,454 | |||||
| HONG KONG (4.2%) | |||||
FINANCIALS | ||||||
7,278,260 | AIA Group, Ltd. | 82,263,121 | ||||
539,870 | Hong Kong Exchanges & Clearing, Ltd. | 32,769,484 | ||||
Total Hong Kong | 115,032,605 | |||||
| IRELAND (4.3%) | |||||
INDUSTRIALS | ||||||
2,254,742 | CRH, Plc. | 107,864,654 | ||||
TECHNOLOGY | ||||||
19,071 | Accenture, Plc. (Class A) | 6,842,484 | ||||
Total Ireland | 114,707,138 | |||||
| JAPAN (7.7%) | |||||
CONSUMER CYCLICAL | ||||||
6,240 | Nintendo Co., Ltd. | 2,757,033 | ||||
CONSUMER NON-CYCLICAL | ||||||
1,310,782 | Shiseido Co., Ltd. | 87,260,411 | ||||
INDUSTRIALS | ||||||
88,824 | Keyence Corp. | 53,528,886 | ||||
TECHNOLOGY | ||||||
351,915 | Obic Co., Ltd. | 64,884,006 | ||||
Total Japan | 208,430,336 |
The accompanying notes are an integral part of these financial statements.
10
BBH PARTNER FUND – INTERNATIONAL EQUITY
PORTFOLIO OF INVESTMENTS (continued)
October 31, 2021
Shares/ Units | Value | |||||
COMMON STOCK (continued) | ||||||
JERSEY (6.6%) | ||||||
CONSUMER NON-CYCLICAL | ||||||
2,141,310 | Experian, Plc. | $ | 97,927,693 | |||
TECHNOLOGY | ||||||
3,432,102 | Clarivate, Plc.1 | 80,482,792 | ||||
Total Jersey | 178,410,485 | |||||
| LUXEMBOURG (0.6%) | |||||
COMMUNICATIONS | ||||||
59,969 | Spotify Technology S.A.1 | 17,355,029 | ||||
Total Luxembourg | 17,355,029 | |||||
| NETHERLANDS (7.1%) | |||||
CONSUMER NON-CYCLICAL | ||||||
20,002 | Adyen NV1,2 | 60,357,348 | ||||
167,408 | Heineken NV | 18,552,361 | ||||
1,280,767 | Koninklijke Philips NV | 60,285,646 | ||||
139,195,355 | ||||||
TECHNOLOGY | ||||||
66,629 | ASML Holding NV | 54,225,692 | ||||
Total Netherlands | 193,421,047 | |||||
| SOUTH KOREA (0.1%) | |||||
CONSUMER NON-CYCLICAL | ||||||
2,306 | LG Household & Health Care, Ltd. | 2,301,904 | ||||
Total South Korea | 2,301,904 | |||||
| SPAIN (7.7%) | |||||
CONSUMER CYCLICAL | ||||||
2,369,608 | Industria de Diseno Textil S.A. | 85,588,787 | ||||
CONSUMER NON-CYCLICAL | ||||||
1,087,542 | Amadeus IT Group S.A.1 | 72,803,376 | ||||
2,234,060 | Grifols S.A. | 51,094,096 | ||||
123,897,472 | ||||||
Total Spain | 209,486,259 |
The accompanying notes are an integral part of these financial statements.
financial statements october 31, 2021 | 11 |
BBH PARTNER FUND – INTERNATIONAL EQUITY
PORTFOLIO OF INVESTMENTS (continued)
October 31, 2021
Shares/ Units | Value | |||||
COMMON STOCK (continued) | ||||||
SWEDEN (1.5%) | ||||||
COMMUNICATIONS | ||||||
2,259,540 | Telefonaktiebolaget LM Ericsson (Class B) | $ | 24,721,394 | |||
INDUSTRIALS | ||||||
514,930 | Assa Abloy AB (Class B) | 15,091,404 | ||||
Total Sweden | 39,812,798 | |||||
| SWITZERLAND (6.7%) | |||||
CONSUMER NON-CYCLICAL | ||||||
1,374,915 | Alcon, Inc. | 114,089,224 | ||||
FINANCIALS | ||||||
23,369 | Partners Group Holding AG | 40,824,224 | ||||
INDUSTRIALS | ||||||
80,999 | Sika AG | 27,454,129 | ||||
Total Switzerland | 182,367,577 | |||||
| TAIWAN (1.8%) | |||||
TECHNOLOGY | ||||||
429,019 | Taiwan Semiconductor Manufacturing Co., Ltd. ADR | 48,779,460 | ||||
Total Taiwan | 48,779,460 | |||||
| UNITED KINGDOM (6.7%) | |||||
CONSUMER NON-CYCLICAL | ||||||
300,867 | Reckitt Benckiser Group, Plc. | 24,399,773 | ||||
FINANCIALS | ||||||
32,426,953 | Melrose Industries, Plc. | 69,816,633 | ||||
4,205,221 | Prudential, Plc. | 86,076,398 | ||||
155,893,031 | ||||||
Total United Kingdom | 180,292,804 | |||||
| UNITED STATES (5.1%) | |||||
CONSUMER CYCLICAL | ||||||
40,373 | Lululemon Athletica, Inc.1 | 18,814,222 | ||||
CONSUMER NON-CYCLICAL | ||||||
528,971 | PerkinElmer, Inc. | 93,569,680 | ||||
TECHNOLOGY | ||||||
239,592 | Fidelity National Information Services, Inc. | 26,532,418 | ||||
Total United States | 138,916,320 | |||||
Total Common Stock (Cost $2,069,957,108) | 2,551,388,926 |
The accompanying notes are an integral part of these financial statements.
12
BBH PARTNER FUND – INTERNATIONAL EQUITY
PORTFOLIO OF INVESTMENTS (continued)
October 31, 2021
Shares/ Units | Value | |||||
REGISTERED INVESTMENT COMPANIES (3.9%) | ||||||
UNITED STATES (3.9%) | ||||||
106,700,000 | Morgan Stanley Institutional Liquidity Funds — Treasury Securities Portfolio, Institutional Share Class | $ | 106,700,000 | |||
| Total United States | 106,700,000 | ||||
| Total Registered Investment Companies (Cost $106,700,000) | 106,700,000 | ||||
| ||||||
WARRANTS (0.0%) | ||||||
SWITZERLAND (0.0%) | ||||||
573,446 | Cie Financiere Richemont S.A., expires 11/22/20231 | 412,911 | ||||
| Total Switzerland | 412,911 | ||||
| Total Warrants (Cost $–) | 412,911 | ||||
|
TOTAL INVESTMENTS (Cost $2,176,657,108)3 | 97.8 | % | $ | 2,658,501,837 | |||
CASH AND OTHER ASSETS IN EXCESS OF LIABILITIES | 2.2 | % | 59,864,079 | ||||
NET ASSETS | 100.00 | % | $ | 2,718,365,916 |
________________
1 | Non-income producing security. |
2 | Security exempt from registration under Rule 144A of the Securities Act of 1933, as amended. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. Total market value of Rule 144A securities owned at October 31, 2021 was $80,946,968 or 3.0% of net assets. |
3 | The aggregate cost for federal income tax purposes is $2,189,408,566, the aggregate gross unrealized appreciation is $549,566,249 and the aggregate gross unrealized depreciation is $80,472,978, resulting in net unrealized appreciation of $469,093,271. |
The Fund’s country diversification is based on the respective security’s country of incorporation.
Abbreviation:
ADR – American Depositary Receipt
The accompanying notes are an integral part of these financial statements.
financial statements october 31, 2021 | 13 |
BBH PARTNER FUND – INTERNATIONAL EQUITY
PORTFOLIO OF INVESTMENTS (continued)
October 31, 2021
FAIR VALUE MEASUREMENTS
The Fund is required to disclose information regarding the fair value measurements of the Fund’s assets and liabilities. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The disclosure requirement established a three-tier hierarchy to maximize the use of observable market data and minimize the use of unobservable inputs and to establish classification of fair value measurements for disclosure purposes. Inputs refer broadly to the assumptions that market participants would use in pricing the asset or liability, including, for example, the risk inherent in a particular valuation technique used to measure fair value, including the model and/or the risk inherent in the inputs to the valuation technique. Inputs may be observable or unobservable. Observable inputs are inputs that reflect the assumptions market participants would use in pricing the asset or liability developed based on market data obtained from sources independent of the reporting entity. Unobservable inputs are inputs that reflect the Fund’s own considerations about the assumptions market participants would use in pricing the asset or liability developed based on the best information available in the circumstances.
Authoritative guidance establishes three levels of the fair value hierarchy as follows:
— | Level 1 – unadjusted quoted prices in active markets for identical assets and liabilities. |
— | Level 2 – significant other observable inputs (including quoted prices for similar assets and liabilities, interest rates, prepayment speeds, credit risk, etc.). |
— | Level 3 – significant unobservable inputs (including the Fund’s own assumptions in determining the fair value of assets and liabilities). |
Inputs are used in applying the various valuation techniques and broadly refer to the assumptions that market participants use to make valuation decisions, including assumptions about risk. Inputs may include price information, specific and broad credit data, liquidity statistics, and other factors. A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. However, the determination of what constitutes “observable” requires judgment by the investment adviser. The investment adviser considers observable data to be that market data which is readily available, regularly distributed or updated, reliable and verifiable, not proprietary, and provided by independent sources that are actively involved in the relevant market. The categorization of a financial instrument within the hierarchy is based upon the pricing transparency of the instrument and does not necessarily correspond to the investment adviser’s perceived risk of that instrument.
The accompanying notes are an integral part of these financial statements.
14
BBH PARTNER FUND – INTERNATIONAL EQUITY
PORTFOLIO OF INVESTMENTS (continued)
October 31, 2021
Financial assets within Level 1 are based on quoted market prices in active markets. The Fund does not adjust the quoted price for these instruments.
Financial instruments that trade in markets that are not considered to be active but are valued based on quoted market prices, dealer quotations or alternative pricing sources supported by observable inputs are classified within Level 2. These include investment-grade corporate bonds, U.S. Treasury notes and bonds, and certain non-U.S. sovereign obligations and over-the-counter derivatives and foreign equity securities whose values could be impacted by events occurring before the Fund’s pricing time, but after the close of the securities’ primary markets and are, therefore, fair valued according to procedures adopted by the Board of Trustees. As Level 2 financial assets include positions that are not traded in active markets and/or are subject to transfer restrictions, valuations may be adjusted to reflect illiquidity and/or non-transferability, which are generally based on available market information.
Financial assets classified within Level 3 have significant unobservable inputs, as they trade infrequently. Level 3 financial assets include private equity and certain corporate debt securities.
Because of the inherent uncertainties of valuation, the values reflected in the financial statements may materially differ from the value received upon the actual sale of those investments.
The accompanying notes are an integral part of these financial statements.
financial statements october 31, 2021 | 15 |
BBH PARTNER FUND – INTERNATIONAL EQUITY
PORTFOLIO OF INVESTMENTS (continued)
October 31, 2021
The following table summarizes the valuation of the Fund’s investments by the above fair value hierarchy levels as of October 31, 2021.
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 October 31, 2021 | ||||||||||||
Common Stock: | ||||||||||||||||
Bermuda | $ | 30,329,916 | $ | – | $ | – | $ | 30,329,916 | ||||||||
Canada | 321,394,045 | – | – | 321,394,045 | ||||||||||||
Cayman Islands | – | 112,023,160 | – | 112,023,160 | ||||||||||||
France | – | 216,335,589 | – | 216,335,589 | ||||||||||||
Germany | – | 241,992,454 | – | 241,992,454 | ||||||||||||
Hong Kong | – | 115,032,605 | – | 115,032,605 | ||||||||||||
Ireland | 6,842,484 | 107,864,654 | – | 114,707,138 | ||||||||||||
Japan | – | 208,430,336 | – | 208,430,336 | ||||||||||||
Jersey | 80,482,792 | 97,927,693 | – | 178,410,485 | ||||||||||||
Luxembourg | 17,355,029 | – | – | 17,355,029 | ||||||||||||
Netherlands | – | 193,421,047 | – | 193,421,047 | ||||||||||||
South Korea | – | 2,301,904 | – | 2,301,904 | ||||||||||||
Spain | – | 209,486,259 | – | 209,486,259 | ||||||||||||
Sweden | – | 39,812,798 | – | 39,812,798 | ||||||||||||
Switzerland | – | 182,367,577 | – | 182,367,577 | ||||||||||||
Taiwan | 48,779,460 | – | – | 48,779,460 | ||||||||||||
United Kingdom | – | 180,292,804 | – | 180,292,804 | ||||||||||||
United States | 138,916,320 | – | – | 138,916,320 | ||||||||||||
Registered Investment Companies: | ||||||||||||||||
United States | 106,700,000 | – | – | 106,700,000 | ||||||||||||
Warrants: | ||||||||||||||||
Switzerland | – | 412,911 | – | 412,911 | ||||||||||||
Investments, at value | $ | 750,800,046 | $ | 1,907,701,791 | $ | – | $ | 2,658,501,837 |
The accompanying notes are an integral part of these financial statements.
16
BBH PARTNER FUND – INTERNATIONAL EQUITY
STATEMENT OF ASSETS AND LIABILITIES
October 31, 2021
ASSETS: | ||||||
Investments in securities, at value (Cost $2,176,657,108) | $ | 2,658,501,837 | ||||
Cash | 54,496,300 | |||||
Foreign currency at value (Identified cost $182,737) | 183,862 | |||||
Receivables for: | ||||||
Investments sold | 99,252,566 | |||||
Shares sold | 10,330,500 | |||||
Dividends | 4,221,236 | |||||
Interest | 1,801 | |||||
Prepaid assets | 29,940 | |||||
Total Assets | 2,827,018,042 | |||||
LIABILITIES: | ||||||
Payables for: | ||||||
Investments purchased | 106,628,579 | |||||
Investment advisory and administrative fees | 1,471,606 | |||||
Shares redeemed | 329,500 | |||||
Custody and fund accounting fees | 149,703 | |||||
Professional fees | 59,281 | |||||
Transfer agent fees | 5,658 | |||||
Board of Trustees' fees | 1,111 | |||||
Accrued expenses and other liabilities | 6,688 | |||||
Total Liabilities | 108,652,126 | |||||
NET ASSETS | $ | 2,718,365,916 | ||||
Net Assets Consist of: | ||||||
Paid-in capital | $ | 1,942,398,303 | ||||
Retained earnings | 775,967,613 | |||||
Net Assets | $ | 2,718,365,916 | ||||
NET ASSET VALUE AND OFFERING PRICE PER SHARE | ||||||
CLASS I SHARES | ||||||
($2,718,365,916 ÷ 128,860,831 shares outstanding) | $ | 21.10 |
The accompanying notes are an integral part of these financial statements.
financial statements october 31, 2021 | 17 |
BBH PARTNER FUND – INTERNATIONAL EQUITY
STATEMENT OF OPERATIONS
For the year ended October 31, 2021
NET INVESTMENT INCOME: | ||||
Income: | ||||
Dividends (net of foreign withholding taxes of $2,680,858) | $ | 33,871,639 | ||
Interest income | 27,964 | |||
Other income | 61 | |||
Total Income | 33,899,664 | |||
Expenses: | ||||
Investment advisory and administrative fees | 16,492,950 | |||
Custody and fund accounting fees | 576,392 | |||
Board of Trustees’ fees | 73,196 | |||
Professional fees | 68,141 | |||
Transfer agent fees | 33,896 | |||
Miscellaneous expenses | 92,361 | |||
Total Expenses | 17,336,936 | |||
Net Investment Income | 16,562,728 | |||
NET REALIZED AND UNREALIZED GAIN: | ||||
Net realized gain on investments in securities | 313,486,094 | |||
Net realized loss on foreign exchange transactions and translations | (119,972 | ) | ||
Net realized gain on investments in securities and foreign exchange transactions and translations | 313,366,122 | |||
Net change in unrealized appreciation/(depreciation) on investments in securities | 127,959,503 | |||
Net change in unrealized appreciation/(depreciation) on foreign currency translations | (83,985 | ) | ||
Net change in unrealized appreciation/(depreciation) on investments in securities and foreign currency translations | 127,875,518 | |||
Net Realized and Unrealized Gain | 441,241,640 | |||
Net Increase in Net Assets Resulting from Operations | $ | 457,804,368 |
The accompanying notes are an integral part of these financial statements.
18
BBH PARTNER FUND – INTERNATIONAL EQUITY
STATEMENTS OF CHANGES IN NET ASSETS
For the years ended October 31, | ||||||||
2021 | 2020 | |||||||
INCREASE IN NET ASSETS: | ||||||||
Operations: | ||||||||
Net investment income | $ | 16,562,728 | $ | 4,202,779 | ||||
Net realized gain on investments in securities and foreign exchange transactions and translations | 313,366,122 | 44,517,984 | ||||||
Net change in unrealized appreciation/(depreciation) on investments in securities and foreign currency translations | 127,875,518 | 156,313,921 | ||||||
Net increase in net assets resulting from operations | 457,804,368 | 205,034,684 | ||||||
Dividends and distributions declared: | ||||||||
Class I | (64,592,022 | ) | (30,519,179 | ) | ||||
Share transactions: | ||||||||
Proceeds from sales of shares | 459,117,145 | 310,598,256 | ||||||
Net asset value of shares issued to shareholders for reinvestment of dividends and distributions | 2,021,437 | 1,103,760 | ||||||
Cost of shares redeemed | (165,132,495 | ) | (247,264,351 | ) | ||||
Net increase in net assets resulting from share transactions | 296,006,087 | 64,437,665 | ||||||
Total increase in net assets | 689,218,433 | 238,953,170 | ||||||
NET ASSETS: | ||||||||
Beginning of year | 2,029,147,483 | 1,790,194,313 | ||||||
End of year | $ | 2,718,365,916 | $ | 2,029,147,483 |
The accompanying notes are an integral part of these financial statements.
financial statements october 31, 2021 | 19 |
BBH PARTNER FUND – INTERNATIONAL EQUITY
FINANCIAL HIGHLIGHTS
Selected per share data and ratios for a Class I share outstanding throughout each year.
For the years ended October 31, | ||||||||||||||||||||
2021 | 2020 | 2019 | 2018 | 2017* | ||||||||||||||||
Net asset value, beginning of year | $ | 17.73 | $ | 16.15 | $ | 14.90 | $ | 16.75 | $ | 14.46 | ||||||||||
Income from investment operations: | ||||||||||||||||||||
Net investment income1 | 0.14 | 0.04 | 0.10 | 0.18 | 0.14 | |||||||||||||||
Net realized and unrealized gain (loss) | 3.79 | 1.81 | 2.19 | (0.83 | ) | 2.47 | ||||||||||||||
Total income (loss) from investment operations | 3.93 | 1.85 | 2.29 | (0.65 | ) | 2.61 | ||||||||||||||
Less dividends and distributions: | ||||||||||||||||||||
From net investment income | (0.04 | ) | (0.09 | ) | (0.16 | ) | (0.10 | ) | (0.32 | ) | ||||||||||
From net realized gains | (0.52 | ) | (0.18 | ) | (0.88 | ) | (1.10 | ) | — | |||||||||||
Total dividends and distributions | (0.56 | ) | (0.27 | ) | (1.04 | ) | (1.20 | ) | (0.32 | ) | ||||||||||
Short-term redemption fees1 | — | — | — | — | 0.00 | 2 | ||||||||||||||
Net asset value, end of year | $ | 21.10 | $ | 17.73 | $ | 16.15 | $ | 14.90 | $ | 16.75 | ||||||||||
Total return3 | 22.38 | % | 11.59 | % | 16.92 | % | (4.12 | )% | 18.51 | % | ||||||||||
Ratios/Supplemental data: | ||||||||||||||||||||
Net assets, end of year (in millions) | $ | 2,718 | $ | 2,029 | $ | 1,790 | $ | 1,506 | $ | 1,426 | ||||||||||
Ratio of expenses to average net assets before reductions | 0.68 | % | 0.69 | % | 0.71 | % | 0.68 | % | 0.74 | % | ||||||||||
Expense offset arrangement | — | % | — | % | (0.01 | )% | (0.03 | )% | (0.01 | )% | ||||||||||
Ratio of expenses to average net assets after reductions | 0.68 | % | 0.69 | % | 0.70 | % | 0.65 | % | 0.73 | % | ||||||||||
Ratio of net investment income to average net assets | 0.65 | % | 0.22 | % | 0.66 | % | 1.15 | % | 0.91 | % | ||||||||||
Portfolio turnover rate | 86 | % | 77 | % | 135 | % | 124 | % | 130 | % |
____________
* | Effective February 24, 2017 Class N shares were converted into Class I shares. |
1 | Calculated using average shares outstanding for the year. |
2 | Less than $0.01. |
3 | Assumes the reinvestment of distributions. |
The accompanying notes are an integral part of these financial statements.
20
BBH PARTNER FUND – INTERNATIONAL EQUITY
NOTES TO FINANCIAL STATEMENTS
October 31, 2021
1.Organization. The Fund is a separate, diversified series of BBH Trust (the “Trust”), which is registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as an open-end management investment company. The Trust was originally organized under the laws of the State of Maryland on July 16, 1990 as BBH Fund, Inc. and re-organized as a Delaware statutory trust on June 12, 2007. The Fund commenced operations on June 6, 1997 and currently offers one class of shares, Class I. The investment objective of the Fund is to provide investors with long-term maximization of total return, primarily through capital appreciation. As of October 31, 2021, there were nine series of the Trust.
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. (1) The value of investments listed on a securities exchange is based on the last sale price on that exchange prior to the time when assets are valued, or in the absence of recorded sales, at the average of readily available closing bid and asked prices on such exchange; (2) securities not traded on an exchange are valued at the average of the quoted bid and asked prices in the over-the-counter market; (3) securities or other assets for which market quotations are not readily available are valued at fair value in accordance with procedures established by and under the general supervision and responsibility of the Board of Trustees (the “Board”); (4) for securities traded on international exchanges, if events which may affect the value of the Fund’s securities occur after the close of the primary exchange on which such securities trade and before the Fund’s net asset value is next determined, then those securities will be fair valued as determined in good faith under supervision of the Board. The Fund currently uses a systematic fair value model provided by an independent third party to adjust the observed values of international securities on a daily basis; (5) short-term investments, which mature in 60 days or less are valued at amortized cost if their original maturity was 60 days or less, or by amortizing their value on the 61st day prior to maturity, if their original maturity when acquired by the Fund was more than 60 days, unless the use of amortized cost is determined not to represent “fair value” 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. Dividend income and other distributions received from portfolio securities are recorded on the ex-dividend date. Non-cash dividends included in dividend income, if any, are recorded at the fair market value of securities received at ex-date. Distributions received on securities that represent a return of capital are recorded as a reduction of cost of investments. Distributions received on securities that represent a capital gain are recorded as a realized gain. Interest income is accrued daily. Investment income is recorded net of any foreign taxes withheld where recovery of such tax is uncertain.
financial statements october 31, 2021 | 21 |
BBH PARTNER FUND – INTERNATIONAL EQUITY
NOTES TO FINANCIAL STATEMENTS (continued)
October 31, 2021
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 generally apportioned among each fund in the Trust on a net assets basis or other suitable method. Expense estimates are accrued in the period to which they relate and adjustments are made when actual amounts are known.
D.Forward Foreign Currency Exchange Contracts. The Fund may enter into forward foreign currency exchange contracts (“Contracts”) in connection with planned purchases or sales of securities to economically hedge the U.S. dollar value of securities denominated in a particular currency, or to increase or shift its exposure to a currency other than U.S. dollars. The Fund has no specific limitation on the percentage of assets which may be committed to these types of Contracts. The Fund could be exposed to risks if the counterparties to the Contracts are unable to meet the terms of their Contracts or if the value of the foreign currency changes unfavorably. The U.S. dollar values of foreign currency underlying all contractual commitments held by the Fund are determined using forward foreign currency exchange rates supplied by a quotation service. During the year ended October 31, 2021, the Fund had no open contracts.
E.Foreign Currency Translations. The accounting records of the Fund are maintained in U.S. dollars. Foreign currency amounts are translated into U.S. dollars at the current rate of exchange of such currency against the U.S. dollar to determine the value of investments, assets and liabilities. Purchases and sales of securities, and income and expenses are translated at the prevailing rate of exchange on the respective dates of such transactions. Upon the purchase or sale of a security denominated in foreign currency, the Fund may enter into forward foreign currency exchange contracts for the purchase or sale, for a fixed amount of U.S. dollars, of the amount of foreign currency involved in the underlying security transaction. Reported net realized gains and losses on foreign exchange transactions and translations arise from the sales of portfolio securities, sales of foreign currencies, currency gains or losses realized between the trade and settlement dates on securities transactions, and the difference between the amounts of dividends, interest and foreign withholding taxes recorded on the Fund’s books and the U.S. dollar equivalent of the amounts actually received or paid. The effect of changes in foreign exchange rates on net realized gains and losses on foreign denominated securities is reflected in the net realized gain or loss on investments in securities and foreign exchange transactions and translations. Net unrealized appreciation or depreciation on foreign currency translations arise from changes in the value of the assets and liabilities, excluding investments in securities, at period end, resulting from changes in the exchange rate. The effect of changes in foreign exchange rates on net unrealized appreciation or depreciation on foreign denominated securities is reflected in net change in unrealized appreciation or depreciation on investments in securities and foreign currency translations within the Statement of Operations.
F.Rule 144A Securities. The Fund may purchase securities that are not registered under the Securities Act of 1933, as amended (“1933 Act”) but that can be sold to “qualified institutional buyers” in accordance with the requirements stated in Rule 144A under the 1933 Act (“Rule 144A Securities”). A Rule 144A Security may be considered illiquid, under SEC Regulations for open-end investment
22
BBH PARTNER FUND – INTERNATIONAL EQUITY
NOTES TO FINANCIAL STATEMENTS (continued)
October 31, 2021
companies, and therefore subject to the 15% limitation on the purchase of illiquid securities, unless it is determined on an ongoing basis that an adequate trading market exists for the security, which is the case for the Fund. Guidelines have been adopted and the daily function of determining and monitoring liquidity of Rule 144A Securities has been delegated to the investment adviser. All relevant factors will be considered in determining the liquidity of Rule 144A Securities and all investments in Rule 144A Securities will be carefully monitored. Information regarding Rule 144A Securities is included at the end of the Portfolio of Investments.
G.Federal Income Taxes. The Fund may be subject to foreign taxes on income, gains on investments or currency repatriation, a portion of which may be recoverable. The Fund will accrue such taxes and recoveries, as applicable, based upon its current interpretation of tax rules and regulations that exist in the markets in which it invests.
Realized gains in certain countries may be subject to foreign taxes at the Fund level, based on statutory rates. The Fund accrues for such foreign taxes on net realized and unrealized gains at the appropriate rate for each jurisdiction, as applicable. The amount, if any, is disclosed as a liability in the Statement of Assets and Liabilities and as an expense in the Statement of Operations.
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 may result in temporary 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 between paid-in capital and retained earnings/(accumulated deficit) within the Statement of Assets and 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.
The Fund is subject to the provisions of Accounting Standards Codification 740 Income Taxes (“ASC 740”). ASC 740 sets forth a minimum threshold for financial statement recognition of the benefit of a tax position taken or expected to be taken in a tax return. The Fund did not have any unrecognized tax benefits as of October 31, 2021, nor were there any increases or decreases in unrecognized tax benefits for the year then ended. The Fund recognizes interest and penalties, if any, related to unrecognized tax benefits as an income tax expense in the Statement of Operations. During the year ended October 31, 2021, the Fund did not incur any such interest or penalties. The Fund is subject to
financial statements october 31, 2021 | 23 |
BBH PARTNER FUND – INTERNATIONAL EQUITY
NOTES TO FINANCIAL STATEMENTS (continued)
October 31, 2021
examination by U.S. federal and state tax authorities for returns filed for the prior three years. The Fund is not aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will significantly change in the next twelve months.
H.Dividends and Distributions to Shareholders. Dividends and distributions from net investment income to shareholders, if any, are paid annually and are recorded on the ex-dividend date. 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 and distributions in the amount of $64,592,022 to Class I shares during the year ended October 31, 2021. In addition, the Fund designated a portion of the payment made to redeeming shareholders as a distribution for income tax purposes.
The tax character of distributions paid during the years ended October 31, 2021 and 2020, respectively, were as follows:
Distributions paid from: | |||||||||||||||||||||||||
Ordinary income | Net long-term capital gain | Total taxable distributions | Tax return of capital | Total distributions paid | |||||||||||||||||||||
2021 | $ | 37,710,191 | $ | 26,881,831 | $ | 64,592,022 | $ | — | $ | 64,592,022 | |||||||||||||||
2020: | 9,900,534 | 20,618,645 | 30,519,179 | — | 30,519,179 |
As of October 31, 2021 and 2020, respectively, the components of retained earnings/(accumulated deficit) were as follows:
Components of retained earnings/(accumulated deficit): | |||||||||||||||||||||||||||||
Undistributed ordinary income | Undistributed long-term capital gain | Accumulated capital and other losses | Other book/tax temporary differences | Unrealized appreciation/ (depreciation) | Total retained earnings/ (accumulated deficit) | ||||||||||||||||||||||||
2021: | $114,801,126 | $192,022,872 | $ | — | $(12,751,458 | ) | $481,895,073 | $775,967,613 | |||||||||||||||||||||
2020: | 37,703,687 | 26,880,257 | — | (22,135,724 | ) | 354,019,555 | 396,467,775 |
The Fund did not have a net capital loss carryforward at October 31, 2021.
The Fund is permitted to carryforward capital losses for an unlimited period and they will retain their character as either short-term or long-term capital losses rather than being considered all short-term capital losses.
Total distributions paid may differ from amounts reported in the Statements of Changes in Net Assets because, for tax purposes, dividends are recognized when actually paid.
The differences between book-basis and tax-basis unrealized appreciation/(depreciation) is attributable primarily to the tax deferral of losses on wash sales.
24
BBH PARTNER FUND – INTERNATIONAL EQUITY
NOTES TO FINANCIAL STATEMENTS (continued)
October 31, 2021
To the extent future capital gains are offset by capital loss carryforwards, if any, such gains will not be distributed.
I.Use of Estimates. The preparation of the financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities in the financial statements, disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of increase and decrease in net assets from operations during the reporting period. Actual results could differ from these estimates.
3. Fees and Other Transactions with Affiliates
A.Investment Advisory and Administrative Fees. 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, portfolio management and administrative services to the Fund. BBH employs a “manager-of-managers” investment approach, whereby it allocates the Fund’s assets to the Fund’s sub-adviser, currently Select Equity Group, L.P. (“Select Equity Group” or the “Sub-adviser”). The Sub-adviser is responsible for investing the assets of the Fund and the Investment Adviser oversees the Sub-adviser and evaluates its performance results. The Fund’s investment advisory and administrative services fee is calculated daily and paid monthly at an annual rate equivalent to 0.65% per annum on the first $3 billion of average daily net assets and 0.60% per annum on all average daily net assets over $3 billion. The Investment Adviser pays its Sub-adviser a percentage from its investment advisory and administrative fees. For the year ended October 31, 2021, the Fund incurred $16,492,950 for services under the Agreement.
B.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% of the Fund’s net asset value. For the year ended October 31, 2021, the Fund incurred $576,392 in custody and fund accounting fees. As per agreement with the Fund’s custodian, the Fund receives interest income on cash balances held by the custodian at the BBH Base Rate. The BBH Base Rate is defined as BBH’s effective trading rate in local money markets on each day. The total interest earned by the Fund for the year ended October 31, 2021 was $27,964. This amount is included in “Interest income” in the Statement of Operations. 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 year ended October 31, 2021, was $217. This amount is included under line item “Custody and fund accounting fees” in the Statement of Operations.
financial statements october 31, 2021 | 25 |
BBH PARTNER FUND – INTERNATIONAL EQUITY
NOTES TO FINANCIAL STATEMENTS (continued)
October 31, 2021
C.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 year ended October 31, 2021, the Fund incurred $73,196 in independent Trustee compensation and expense reimbursements.
D.Officers of the Trust. Officers of the Trust are also employees of BBH. Officers are paid no fees by the Trust for their services to the Trust.
4.Investment Transactions. For the year ended October 31, 2021, the cost of purchases and the proceeds of sales of investment securities, other than short-term investments, were $2,250,254,180 and $2,085,478,058, respectively.
5.Shares of Beneficial Interest. The Trust is permitted to issue an unlimited number of Class I shares of beneficial interest, at no par value. Transactions in Class I shares were as follows:
For the year ended October 31, 2021 | For the year ended October 31, 2020 | |||||||||||||||
Shares | Dollars | Shares | Dollars | |||||||||||||
Class I | ||||||||||||||||
Shares sold | 22,233,203 | $ | 459,117,145 | 19,197,875 | $ | 310,598,256 | ||||||||||
Shares issued in connection with reinvestments of dividends | 101,682 | 2,021,437 | 66,491 | 1,103,760 | ||||||||||||
Shares redeemed | (7,930,765 | ) | (165,132,495 | ) | (15,676,766 | ) | (247,264,351 | ) | ||||||||
Net increase | 14,404,120 | $ | 296,006,087 | 3,587,600 | $ | 64,437,665 |
6. 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:
A shareholder may lose money by investing in the Fund (investment risk). The Fund is actively managed and the decisions by the Sub- Adviser may cause the Fund to incur losses or miss profit opportunities (management risk). Price movements may occur due to factors affecting individual companies, such as the issuance of an unfavorable earnings report, or other events affecting particular industries or the equity market as a whole (equity securities risk). The value of securities held by the Fund may fall due to changing economic, political, regulatory or market conditions, or due to a company’s or issuer’s individual situation. Natural disasters, the spread of infectious illness and other public health emergencies, recession, terrorism and other unforeseeable events may lead to increased market volatility and may have adverse effects on world economies and markets generally (market risk). The Fund may, from time to time, invest in a limited number of issuers. As a result, the appreciation or depreciation of any one security held by the Fund will have a greater impact on the Fund’s net asset
26
BBH PARTNER FUND – INTERNATIONAL EQUITY
NOTES TO FINANCIAL STATEMENTS (continued)
October 31, 2021
value than it would if the Fund invested in a larger number of securities. Although that strategy has the potential to generate attractive returns over time, it also increases the Fund’s volatility and may lead to greater losses (concentrated portfolio holdings risk). There are certain risks associated with investing in foreign securities not present in domestic investments, including, but not limited to, recovery of tax withheld by foreign jurisdictions (foreign investment risk), capital controls imposed by foreign governments in response to economic or political events that may impact the ability of the Fund to buy, sell or otherwise transfer securities or currency (capital controls risk), and risks from investing in securities of issuers based in developing countries (emerging markets risk). Non-U.S. currencies invested in by the Fund may depreciate against the U.S. dollar (currency exchange rate risk). The Fund’s shareholders may be adversely impacted by asset allocation decisions made by an investment adviser whose discretionary clients make up a large percentage of the Fund’s shareholders (shareholder concentration risk). The derivatives held by the Fund including forwards and futures, may be riskier than other types of investments and may increase the volatility of the Fund (derivatives risk). Derivatives may be sensitive to changes in economic and market conditions and may create leverage, which could result in losses that significantly exceed the Fund’s original investment. Derivatives expose the Fund to counter-party risk, which is the risk that the derivative counterparty will not fulfill its contractual obligations (and includes credit risk associated with the counterparty). Because the Fund invests in large cap company securities, it may underperform other funds during periods when the Fund’s large cap securities are out of favor (large cap company risk). The extent of the Fund’s exposure to these risks in respect to these financial assets is included in their value as recorded in the Fund’s Statement of Assets and Liabilities.
In 2020, the COVID-19 outbreak was declared a pandemic by the World Health Organization. The situation is dynamic with various cities and countries around the world responding in different ways to address the outbreak. The rapid development and fluidity of this situation precludes any prediction as its ultimate impact, which may have a continued adverse impact on economic and market conditions and trigger a period of global economic slowdown. Management is monitoring developments relating to COVID-19 and is coordinating its operational response based on existing business continuity plans and on guidance from global health organizations, relevant governments, and general pandemic response best practices.
Please refer to the Fund’s prospectus for a complete description of the principal risks of investing in the Fund.
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.
financial statements october 31, 2021 | 27 |
BBH PARTNER FUND – INTERNATIONAL EQUITY
NOTES TO FINANCIAL STATEMENTS (continued)
October 31, 2021
7.Subsequent Events. BBH&Co. ("BBH"), the custodian and fund accountant for the Fund, has entered into an agreement with State Street Corporation (“State Street”) under which State Street will acquire BBH’s Investor Services business; which includes those services provided to the Fund. The transaction is expected to be completed in the first quarter of 2022, subject to customary closing conditions and regulatory approvals. Investment advisory, portfolio management and administrative services provided to BBH Trust by BBH through its SID are not impacted by the agreement with State Street.
Management has evaluated events and transactions that have occurred since October 31, 2021 through the date the financial statements were issued and determined that there were no other subsequent events that would require recognition or additional disclosure in the financial statements.
28
BBH PARTNER FUND – INTERNATIONAL EQUITY
DISCLOSURE OF FUND EXPENSES
October 31, 2021 (unaudited)
EXAMPLE
As a shareholder of the Fund, you may incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments, reinvested distributions, or other distributions; redemption fees; and exchange fees; and (2) ongoing costs, including management fees; and other Fund expenses. This Example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The Example is based on an investment of $1,000 invested at the beginning of the six-month period and held for the entire period (May 1, 2021 to October 31, 2021).
ACTUAL EXPENSES
The first line of the table below provides information about actual account values and actual expenses. You may use information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled “Expenses Paid During the Period” to estimate the expenses you paid on your account during the period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The second line of the table below provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid during the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% Hypothetical Example with the 5% hypothetical examples that appear in the shareholder reports of other funds.
financial statements october 31, 2021 | 29 |
BBH PARTNER FUND – INTERNATIONAL EQUITY
DISCLOSURE OF FUND EXPENSES (continued)
October 31, 2021 (unaudited)
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as redemption fees or exchange fees. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
Beginning Account Value May 1, 2021 | Ending Account Value October 31, 2021 | Expenses Paid During Period May 1, 2021 to October 31, 20211 | |||||||||||||
Class I | |||||||||||||||
Actual | $ | 1,000 | $ | 999 | $ | 3.44 | |||||||||
Hypothetical2 | $ | 1,000 | $ | 1,022 | $ | 3.48 |
____________
1 | Expenses are equal to the Fund’s annualized expense ratio of 0.68% for I shares, multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period). |
2 | Assumes a return of 5% before expenses. For the purposes of the calculation, the applicable annualized expenses ratio for each class of shares is subtracted from the assumed return before expenses. |
30
BBH PARTNER FUND – INTERNATIONAL EQUITY
CONFLICTS OF INTEREST
October 31, 2021 (unaudited)
Conflicts of Interest
BBH, including the Investment Adviser, provides discretionary and non-discretionary investment management services and products to corporations, institutions and individual investors throughout the world. As a result, in the ordinary course of its businesses, BBH, including the Investment Adviser, may engage in activities in which its interests or the interests of its clients may conflict with or be adverse to the interests of the Funds. In addition, certain of such clients (including the Funds) utilize the services of BBH for which they will pay to BBH customary fees and expenses that will not be shared with the Funds.
The Investment Adviser and the Sub-Adviser have adopted and implemented policies and procedures that seek to manage conflicts of interest. Pursuant to such policies and procedures, the Investment Adviser and the Sub-Adviser monitor a variety of areas, including compliance with fund investment guidelines, the investment in only those securities that have been approved for purchase, and compliance with their respective Code of Ethics.
The Trust also manages these conflicts of interest. For example, the Trust has designated a Chief Compliance Officer (“CCO”) and has adopted and implemented policies and procedures designed to manage the conflicts identified below and other conflicts that may arise in the course of the Funds’ operations in such a way as to safeguard the Funds from being negatively affected as a result of any such potential conflicts. From time to time, the Trustees receive reports from the Investment Adviser, the Sub-Adviser and the Trust’s CCO on areas of potential conflict.
Investors should carefully review the following, which describes potential and actual conflicts of interest that BBH, the Investment Adviser and Sub-Adviser can face in the operation of their respective investment management services. This section is not, and is not intended to be, a complete enumeration or explanation of all of the potential conflicts of interest that may arise. The Investment Adviser, the Sub-Adviser and the Funds have adopted policies and procedures reasonably designed to appropriately prevent, limit or mitigate the conflicts of interest described below. Additional information about potential conflicts of interest regarding the Investment Adviser is set forth in the Investment Adviser’s Form ADV. A copy of Part 1 and Part 2A of the Investment Adviser’s Form ADV is available on the SEC’s website (www.adviserinfo.sec.gov). In addition, many of the activities that create these conflicts of interest are limited and/or prohibited by law, unless an exception is available.
Other Clients and Allocation of Investment Opportunities. BBH, the Investment Adviser, and the Sub-Adviser manage funds and accounts of clients other than the Funds (“Other Clients”). In general, BBH, the Investment Adviser, and the Sub-Adviser face conflicts of interest when they render investment advisory services to different clients and, from time to time, provide dissimilar investment advice to different clients. Investment decisions will not necessarily be made in parallel among the Funds and Other Clients. Investments made by the Funds do not, and are not intended to, replicate the investments, or the investment methods and strategies, of Other Clients. Accordingly, such Other Clients’ accounts may produce results that are materially different from those experienced by the Funds. Certain other conflicts of interest may arise in connection with a portfolio manager’s management of the Funds’ investments, on the one hand, and the investments of other funds or accounts for which the portfolio manager is responsible, on the other. For example, it is possible that the various funds or accounts managed by the Investment Adviser or Sub-Adviser
financial statements October 31, 2021 | 31 |
BBH PARTNER FUND – INTERNATIONAL EQUITY
CONFLICTS OF INTEREST (continued)
October 31, 2021 (unaudited)
could have different investment strategies that, at times, might conflict with one another to the possible detriment of the Funds. From time to time, the Investment Adviser and Sub-Adviser, sponsor and with other investment pools and accounts which engage in the same or similar businesses as the Funds using the same or similar investment strategies. To the extent that the same investment opportunities might be desirable for more than one account or fund, possible conflicts could arise in determining how to allocate them because the Investment Adviser or Sub-Adviser may have an incentive to allocate investment opportunities to certain accounts or funds. However, BBH and the Investment Adviser have implemented policies and procedures designed to ensure that information relevant to investment decisions is disseminated promptly within its portfolio management teams and investment opportunities are allocated equitably among different clients. The policies and procedures require, among other things, objective allocation for limited investment opportunities, and documentation and review of justifications for any decisions to make investments only for select accounts or in a manner disproportionate to the size of the account. Nevertheless, access to investment opportunities may be allocated differently among accounts due to the particular characteristics of an account, such as size of the account, cash position, tax status, risk tolerance and investment restrictions or for other reasons.
Actual or potential conflicts of interest may also arise when a portfolio manager has management responsibilities to multiple accounts or funds, resulting in unequal commitment of time and attention to the portfolio management of the funds or accounts.
Affiliated Service Providers. Other potential conflicts might include conflicts between the Funds and its affiliated and unaffiliated service providers (e.g. conflicting duties of loyalty). In addition to providing investment management services through the SID, BBH provides administrative, custody, shareholder servicing and fund accounting services to the Funds. BBH may have conflicting duties of loyalty while servicing the Funds and/or opportunities to further its own interest to the detriment of the Funds. For example, in negotiating fee arrangements with affiliated service providers, BBH may have an incentive to agree to higher fees than it would in the case of unaffiliated providers. BBH acting in its capacity as the Funds’ administrator is the primary valuation agent of the Funds. BBH values securities and assets in the Funds according to the Funds’ valuation policies. Because the Investment Adviser’s advisory and administrative fees are calculated by reference to the Funds’ net assets, BBH and its affiliates may have an incentive to seek to overvalue certain assets.
Aggregation. Potential conflicts of interest also arise with the aggregation of trade orders. Purchases and sales of securities for the Funds may be aggregated with orders for other client accounts managed by the Sub-Adviser. The Sub-Adviser, however, is not required to aggregate orders if portfolio management decisions for different accounts are made separately, or if it is determined that aggregating is not practicable, or in cases involving client direction. Prevailing trading activity frequently may make impossible the receipt of the same price or execution on the entire volume of securities purchased or sold. When this occurs, the various prices may be averaged, and the Funds will be charged or credited with the average price. Thus, the effect of the aggregation may operate on some occasions to the disadvantage of the Funds. In addition, under certain circumstances, the Funds will not be charged the same commission or commission equivalent rates in connection with an aggregated order.
32
BBH PARTNER FUND – INTERNATIONAL EQUITY
CONFLICTS OF INTEREST (continued)
October 31, 2021 (unaudited)
Cross Trades. Under certain circumstances, the Investment Adviser, on behalf of the Funds, may seek to buy from or sell securities to another fund or account advised by BBH, the Investment Adviser. Subject to applicable law and regulation, BBH, the Investment Adviser may (but is not required to) effect purchases and sales between BBH, the Investment Adviser clients (“cross trades”), including the Funds, if BBH, the Investment Adviser or the Sub-Adviser believe such transactions are appropriate based on each party’s investment objectives and guidelines. There may be potential conflicts of interest or regulatory issues relating to these transactions which could limit the Investment Adviser’s decision to engage in these transactions for the Funds. BBH, the Investment Adviser and/or the Sub-Adviser may have a potentially conflicting division of loyalties and responsibilities to the parties in such transactions.
Soft Dollars. The Investment Adviser may direct brokerage transactions and/or payment of a portion of client commissions (“soft dollars”) to specific brokers or dealers or other providers to pay for research or other appropriate services which provide, in the Investment Adviser’s view, appropriate assistance in the investment decision-making process (including with respect to futures, fixed price offerings and over-the-counter transactions). The use of a broker that provides research and securities transaction services may result in a higher commission than that offered by a broker who does not provide such services. The Investment Adviser will determine in good faith whether the amount of commission is reasonable in relation to the value of research and services provided and whether the services provide lawful and appropriate assistance in its investment decision-making responsibilities.
Research or other services obtained in this manner may be used in servicing any or all of the Funds and other accounts managed by the Investment Adviser, including in connection with accounts that do not pay commissions to the broker related to the research or other service arrangements. Such products and services may disproportionately benefit other client accounts relative to the Funds based on the amount of brokerage commissions paid by the Funds and such other accounts. To the extent that the Sub-Adviser uses soft dollars, it will not have to pay for those products and services itself.
BBH may receive research that is bundled with the trade execution, clearing, and/or settlement services provided by a particular broker-dealer. To the extent that the Sub-Adviser receives research on this basis, many of the same conflicts related to traditional soft dollars may exist. For example, the research effectively will be paid by client commissions that also will be used to pay for the execution, clearing, and settlement services provided by the broker-dealer and will not be paid by the Sub-Adviser.
Arrangements regarding compensation and delegation of responsibility may create conflicts relating to selection of brokers or dealers to execute Fund portfolio trades and/or specific uses of commissions from Fund portfolio trades, administration of investment advice and valuation of securities.
Investments in BBH Funds. From time to time BBH may invest a portion of the assets of its discretionary investment advisory clients in the Funds. That investment by BBH on behalf of its discretionary investment advisory clients in the Funds may be significant at times.
Increasing a Fund’s assets may enhance investment flexibility and diversification and may contribute to economies of scale that tend to reduce the Funds’ expense ratio. In selecting the Funds for its discretionary
financial statements October 31, 2021 | 33 |
BBH PARTNER FUND – INTERNATIONAL EQUITY
CONFLICTS OF INTEREST (continued)
October 31, 2021 (unaudited)
investment advisory clients, BBH may limit its selection to funds managed by BBH or the Investment Adviser. BBH may not consider or canvass the universe of unaffiliated investment companies available, even though there may be unaffiliated investment companies that may be more appropriate or that have superior performance. BBH, the Investment Adviser and their affiliates providing services to the Funds benefit from additional fees when the Funds is included as an investment by a discretionary investment advisory client.
BBH reserves the right to redeem at any time some or all of the shares of the Funds acquired for its discretionary investment advisory clients’ accounts. A large redemption of shares of the Funds by BBH on behalf of its discretionary investment advisory clients could significantly reduce the asset size of the Funds, which might have an adverse effect on the Funds’ investment flexibility, portfolio diversification and expense ratio.
Valuation. When market quotations are not readily available, or are believed by BBH to be unreliable, the Funds’ investments will be valued at fair value by BBH pursuant to procedures adopted by the Funds’ Board of Trustees. When determining an asset’s “fair value”, BBH seeks to determine the price that a Fund might reasonably expect to receive from the current sale of that asset in an arm’s-length transaction. The price generally may not be determined based on what the Funds might reasonably expect to receive for selling an asset at a later time or if it holds the asset to maturity. While fair value determinations will be based upon all available factors that BBH deems relevant at the time of the determination and may be based on analytical values determined by BBH using proprietary or third-party valuation models, fair value represents only a good faith approximation of the value of a security. The fair value of one or more securities may not, in retrospect, be the price at which those assets could have been sold during the period in which the particular fair values were used in determining the Funds’ net asset value. As a result, the Funds’ sale or redemption of its shares at net asset value, at a time when a holding or holdings are valued by BBH (pursuant to Board-adopted procedures) at fair value, may have the effect of diluting or increasing the economic interest of existing shareholders.
Referral Arrangements. BBH may enter into advisory and/or referral arrangements with third parties. Such arrangements may include compensation paid by BBH to the third party. BBH may pay a solicitation fee for referrals and/or advisory or incentive fees. BBH may benefit from increased amounts of assets under management.
Personal Trading. BBH, including the Investment Adviser, and any of their respective partners, principals, directors, officers, employees, affiliates or agents, face conflicts of interest when transacting in securities for their own accounts because they could benefit by trading in the same securities as the Funds, which could have an adverse effect on the Funds. However, the Investment Adviser has implemented policies and procedures concerning personal trading by BBH Partners and employees. The policy and procedures are intended to prevent BBH Partners and employees from trading in the same securities as the Funds. However, BBH, including the Investment Adviser, has implemented policies and procedures concerning personal trading by BBH Partners and employees. The policies and procedures are intended to prevent BBH Partners and employees with access to Fund material non-public information from trading in the same securities as the Funds.
34
BBH PARTNER FUND – INTERNATIONAL EQUITY
CONFLICTS OF INTEREST (continued)
October 31, 2021 (unaudited)
Gifts and Entertainment. From time to time, employees of BBH, including the Investment Adviser, and any of their respective partners, principals, directors, officers, employees, affiliates or agents, may receive gifts and/or entertainment from clients, intermediaries, or service providers to the Funds or BBH, including the Investment Adviser, which could have the appearance of affecting or may potentially affect the judgment of the employees, or the manner in which they conduct business. The Investment Adviser has implemented policies and procedures concerning gifts and entertainment to mitigate any impact on the judgment of BBH Partners and employees. BBH, including the Investment Adviser, has implemented policies and procedures concerning gifts and entertainment to mitigate any impact on the judgment of BBH Partners and employees.
financial statements October 31, 2021 | 35 |
BBH PARTNER FUND – INTERNATIONAL EQUITY
ADDITIONAL FEDERAL TAX INFORMATION
October 31, 2021 (unaudited)
The Fund hereby designates $26,881,831 as an approximate amount of capital gain dividend for the purpose of dividends paid deduction.
Under Section 854(b)(2) of the Internal Revenue Code (the “Code”), the Fund designates up to a maximum of $37,710,191 as qualified dividends for purposes of the maximum rate under Section 1(h)(11) of the Code for the year ended October 31, 2021. In January 2022, shareholders will receive Form 1099-DIV, which will include their share of qualified dividends distributed during the calendar year 2021. Shareholders are advised to check with their tax advisers for information on the treatment of these amounts on their individual income tax returns. The amounts which represent income derived from sources within, and taxes paid to foreign counties or possessions of the United States are as follows:
Foreign Source Income | Foreign Taxes Paid | |||
$32,634,182 | $2,683,975 |
36
TRUSTEES AND OFFICERS OF BBH PARTNER FUND – INTERNATIONAL EQUITY
(unaudited)
Information pertaining to the Trustees and executive officers of the Trust as of October 31, 2021 is set forth below. The mailing address for each Trustee is c/o BBH Trust, 140 Broadway, New York, NY 10005.
Name and Birth Year | Position(s) Held with the Trust | Term of Office and Length of Time Served# | Principal Occupation(s) During Past 5 Years | Number of Portfolios in Fund Complex Overseen by Trustee^ | Other Public Company or Investment Company Directorships held by Trustee During Past 5 Years | |||||
Independent Trustees | ||||||||||
H. Whitney Wagner Birth Year: 1956 | Chairman of the Board and Trustee | Chairman Since 2014; Trustee Since 2007 and 2006-2007 with the Predecessor Trust | President, Clear Brook Advisors, a registered investment adviser. | 9 | None. | |||||
Andrew S. Frazier Birth Year: 1948 | Trustee | Since 2010 | Retired. | 9 | None. | |||||
Mark M. Collins Birth Year: 1956 | Trustee | Since 2011 | Partner of Brown Investment Advisory Incorporated, a registered investment adviser. | 9 | Chairman of Dillon Trust Company. | |||||
John M. Tesoro Birth Year: 1952 | Trustee | Since 2014 | Retired. | 9 | Trustee, Bridge Builder Trust (8 Funds); Director of Teton Advisors, Inc. (a registered investment adviser). | |||||
Joan A. Binstock Birth Year: 1954 | Trustee | Since 2019 | Partner, Chief Financial and Operations Officer, Lord Abbett & Co. LLC (1999-2018); Lovell Minnick Partners, Advisers Counsel (2018-present). | 9 | Independent Director, Morgan Stanley Direct Lending Fund; KKR Real Estate Interval Fund. |
financial statements October 31, 2021 | 37 |
TRUSTEES AND OFFICERS OF BBH PARTNER FUND – INTERNATIONAL EQUITY
(unaudited)
Name, Address and Birth Year | Position(s) Held with the Trust | Term of Office and Length of Time Served# | Principal Occupation(s) During Past 5 Years | Number of Portfolios in Fund Complex Overseen by Trustee^ | Other Public Company or Investment Company Directorships held by Trustee During Past 5 Years | |||||
Interested Trustees | ||||||||||
Susan C. Livingston+ 50 Post Office Square Boston, MA 02110 Birth Year: 1957 | Trustee | Since 2011 | Partner (since 1998) and Senior Client Advocate (since 2010) for BBH&Co. | 9 | None. | |||||
John A. Gehret+ 140 Broadway New York, NY 10005 Birth Year: 1959 | Trustee | Since 2011 | Limited Partner of BBH&Co. (2012-present). | 9 | None. |
38
TRUSTEES AND OFFICERS OF BBH PARTNER FUND – INTERNATIONAL EQUITY
(unaudited)
Name, Address and Birth Year | Position(s) Held with the Trust | Term of Office and Length of Time Served# | Principal Occupation(s) During Past 5 Years | |||
Officers | ||||||
Jean-Pierre Paquin 140 Broadway New York, NY 10005 Birth Year: 1973 | President and Principal Executive Officer | Since 2016 | Partner of BBH&Co. since 2015; joined BBH&Co. in 1996. | |||
Daniel Greifenkamp 140 Broadway New York, NY 10005 Birth Year: 1969 | Vice President | Since 2016 | Managing Director of BBH&Co. since 2014; joined BBH&Co. in 2011. | |||
Charles H. Schreiber 140 Broadway New York, NY 10005 Birth Year: 1957 | Treasurer and Principal Financial Officer | Since 2007 2006-2007 with the Predecessor Trust | Senior Vice President of BBH&Co. since 2001; joined BBH&Co. in 1999. | |||
Paul F. Gallagher 140 Broadway New York, NY 10005 Birth Year: 1959 | Chief Compliance Officer (“CCO”) | Since 2015 | Senior Vice President of BBH&Co. since 2015. | |||
Kristin Marvin 140 Broadway New York, NY 10005 Birth Year: 1981 | Anti-Money Laundering Officer (“AMLO”) | Since 2021 | Assistant Vice President of BBH&Co. since March 2020; Program Manager, Ares Management Corporation, April 2015 - March 2020. |
financial statements October 31, 2021 | 39 |
TRUSTEES AND OFFICERS OF BBH PARTNER FUND – INTERNATIONAL EQUITY
(unaudited)
Name, Address and Birth Year | Position(s) Held with the Trust | Term of Office and Length of Time Served# | Principal Occupation(s) During Past 5 Years | |||
Suzan M. Barron 50 Post Office Square Boston, MA 02110 Birth Year: 1964 | Secretary | Since 2009 | Senior Vice President and Senior Investor Services Counsel, BBH&Co. since 2005. | |||
Crystal Cheung 140 Broadway New York, NY 10005 Birth Year: 1974 | Assistant Treasurer | Since 2018 | Assistant Vice President of BBH&Co. since 2016; joined BBH&Co. in 2014. | |||
Dania C. Piscetta 50 Post Office Square Boston, MA 02110 Birth Year: 1989 | Assistant Secretary | Since 2021 | Assistant Vice President of BBH&Co. since 2021; joined BBH&Co. in 2021; Assistant Vice President and Legal Associate of Wellington Management Company LLP, April 2018 - March 2021; Senior Compliance Analyst, Fidelity Investments, May 2016 – April 2018. |
________________
# | All officers of the Trust hold office for one year and until their respective successors are chosen and qualified (subject to the ability of the Trustees to remove any officer in accordance with the Trust’s By-laws). Mr. Wagner previously served on the Board of Trustees of the Predecessor Trust. |
+ | Ms. Livingston and Mr. Gehret are “interested persons” of the Trust as defined in the 1940 Act because of their positions as Partner and Limited Partner of BBH&Co., respectively. |
^ | The Fund Complex consists of the Trust, which has nine series, and each is counted as one “Portfolio” for purposes of this table. |
40
BBH PARTNER FUND – INTERNATIONAL EQUITY
OPERATION AND EFFECTIVENESS OF THE FUND’S LIQUIDITY RISK MANAGEMENT PROGRAM
October 31, 2021 (unaudited)
The Securities and Exchange Commission adopted Rule 22e-4 under the Investment Company Act of 1940, as amended (the “Liquidity Rule”) to promote effective liquidity risk management throughout the open-end investment company industry in order to reduce the risk that funds will be unable to meet their redemption obligations and mitigate dilution of the interests of fund shareholders.
The Board of Trustees (the “Board”) of BBH Trust met on March 9, 2021 to review the liquidity risk management program (the “Program”) for the funds of BBH Trust (the “Funds”) pursuant to the Liquidity Rule. The Board has appointed three members of the Brown Brothers Harriman & Co. Mutual Fund Advisory Department, the Investment Adviser to the Funds, as the Program Administrator for each Fund’s Program. The Program Administrator provided the Board with a report (the “Report”) that addressed the operations of the Program and assessed its adequacy and effectiveness of the Program. The Report covered the period from February 1, 2020 through January 31, 2021 (the “Reporting Period”).
The Report noted that the Program complied with the key factors for consideration under the Liquidity Rule for assessing, managing and periodically reviewing a Fund’s liquidity risk, including the following points.
Liquidity classification. The Report described the Program’s liquidity classification methodology for categorizing the Funds’ investments into one of four liquidity buckets.
Highly Liquid Investment Minimum. The Report noted that one aspect of the Liquidity Rule is a requirement that funds that are expected to have less than 50% of assets classified as other than “highly liquid” should establish a minimum percentage of highly liquid assets that the fund is expected to hold on an on-going basis. The Program Administrator monitors the percentages of assets in each category on an ongoing basis and, given that no Fund has approached the 50% threshold, has made the determination that it is not necessary to assign a Highly Liquid Investment Minimum as provided for in the Liquidity Rule to any of the Funds.
The Fund’s investment strategy and liquidity of portfolio investments during normal and reasonably foreseeable stressed market conditions. During the Reporting Period, the Program Administrator reviewed whether each Fund’s investment strategy is appropriate for an open-end fund structure with a focus on Funds with more significant and consistent holdings of less liquid and illiquid assets and factored a Fund’s concentration in an issuer into the liquidity classification methodology by taking issuer position sizes into account.
Short-term and long-term cash flow projections during normal and reasonably foreseeable stressed market conditions. During the Reporting Period, the Program Administrator reviewed historical redemption activity and used this information as a component to establish each Fund’s reasonably anticipated trading size. The Program Administrator also took into consideration other factors such as shareholder ownership concentration, applicable distribution channels and the degree of certainty associated with a Fund’s short-term and long-term cash flow projections.
Holdings of cash and cash equivalents. The Program Administrator considered the degree to which each Fund held cash and cash equivalents as a component of each Fund’s ability to meet redemption requests.
financial statements October 31, 2021 | 41 |
BBH PARTNER FUND – INTERNATIONAL EQUITY
OPERATION AND EFFECTIVENESS OF THE FUND’S LIQUIDITY RISK MANAGEMENT PROGRAM (continued)
October 31, 2021 (unaudited)
There were no material changes to the Program during the Reporting Period. The Program Administrator has informed the Board that it believes that the Fund’s Program is adequately designed, has been implemented as intended, and has operated effectively since its implementation. No material exceptions have been noted since the implementation of the Program, and there were no liquidity events that impacted the Fund or its ability to meet redemption requests on a timely basis during the Reporting Period.
42
Administrator Brown Brothers Harriman & Co. 140 Broadway New York, NY 10005
Distributor ALPS Distributors, Inc. 1290 Broadway, Suite 1000 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 |
To obtain information or make shareholder inquiries:
By telephone: | Call 1-800-575-1265 |
By E-mail send your request to: | bbhfunds@bbh.com |
On the internet: | www.bbhfunds.com |
This report is submitted for the general information of shareholders and is not authorized for distribution to prospective investors unless preceded or accompanied by an effective prospectus. Nothing herein contained is to be considered an offer of sale or a solicitation of an offer to buy shares of the Fund.
For more complete information, visit www.bbhfunds.com for a prospectus. You should consider the Fund’s investment objectives, risks, charges and expenses carefully before you invest. Information about these and other important subjects is in the Fund’s prospectus, which you should read carefully before investing.
Holdings and allocations are subject to change. Fund holdings should not be relied on in making investment decisions and should not be construed as research or investment advice regarding particular securities. Current and future holdings are subject to risk.
The Fund files a complete schedule of portfolio holdings with the Securities and Exchange Commission (SEC) for the first and third quarters of each fiscal year as an exhibit to its reports on Form N-PORT. The Fund’s Forms N-PORT are available electronically on the SEC’s website (sec.gov). For a complete list of a fund’s portfolio holdings, view the most recent holdings listing, semi-annual report, or annual report on the Fund’s web site at http://www.bbhfunds.com.
A summary of the Fund’s Proxy Voting Policy that the Fund uses to determine how to vote proxies, if any, relating to securities held in the Fund’s portfolio, as well as a record of how the Fund voted any such proxies during the most recent 12-month period ended June 30, is available, without charge, upon request by calling the toll-free number listed above. This information is also available on the SEC’s website at www.sec.gov.
NOT FDIC INSURED NO BANK GUARANTEE MAY LOSE VALUE
Annual Report
OCTOBER 31, 2021
BBH Limited Duration Fund
BBH LIMITED DURATION FUND
MANAGEMENT’S DISCUSSION OF FUND PERFORMANCE
October 31, 2021
Intermediate-term corporate indexes eked out paltry gains, as risk spreads compressed and credit-related performance just offset the impact of rising rates. This created an accommodative environment for active fixed income strategies to outperform market indexes. We are proud to report that the BBH Limited Duration Fund gained 2.46% during its fiscal year (I Shares), exceeding the -0.26% return of the Bloomberg U.S. 1-3 Year Treasury Index and ranking in the 6th percentile out of 242 funds of its competitive Morningstar Ultrashort Bond fund peer group.*
Longer-term interest rates spiked and credit risk spreads narrowed substantially during the first few months of the fiscal year when markets were still recovering from the depths of the COVID-19 pandemic. Increased optimism over the advent of vaccinations returned investors to risk-taking instruments. Following those initial large moves in the fall and winter, the optimism dampened, but Investment-grade and high-yield credit spreads eventually narrowed to levels not seen since the 1990s.
Our highly selective and valuation-focused approach made it increasingly challenging to source new opportunities in mainstream bond sectors in this market. The Fund’s spread duration, a risk measure of how sensitive the portfolio value is to changes in “credit spreads” (the additional yield on credit instruments over a comparable-maturity Treasury), declined in tandem with the reduction of attractive opportunities. The Fund’s spread duration was 2.0 years at the start of the fiscal year and reached a low of 1.6 years on August 31, 2021.
Despite the challenging environment, we were able to identify and invest in many credits that were durable, were fundamentally sound, and offered appealing compensation for the Fund. Those credits tended to reside in less traditional segments of the fixed income market, such as nontraditional asset-backed securities** (ABS), business development company debt, and corporate loans. One shared characteristic among these opportunities is they have relatively short duration profiles (including lower “spread duration”, as discussed above). The Fund’s allocation to, and selection within, these segments were notable contributors to performance results over the past year.
Heavy issuance was a distinguishing feature of the past 12 months, as the lower rate environment combined with increased investor appetite for yield to fuel record levels of issuance in several market sectors, including corporate bonds, loans, mortgage- and asset-backed securities, and commercial mortgage-backed securities. Issuance in all sectors was met with remarkable demand, with many deals being oversubscribed at their prevailing yields. We maintained our valuation and fundamental research disciplines and participated in issuances only when the yields offered were adequate and our research revealed the issue to be durable – able to perform through a variety of macroeconomic and industry environments. This credit and valuation discipline may seem less necessary in a period of strong growth and tight spread levels, but our experience suggests such discipline is rewarded when market risks re-emerge. It is unfortunately difficult to predict when and how risks events will manifest.
________________
* | Morningstar rankings are based on risk-adjusted returns. |
** | Traditional ABS include prime auto backed loans, credit cards and student loans (FFELP). Non-traditional ABS include ABS backed by other collateral types. |
financial statements october 31, 2021 | 3 |
BBH LIMITED DURATION FUND
MANAGEMENT’S DISCUSSION OF FUND PERFORMANCE (continued)
October 31, 2021
The Fund’s overall duration profile was managed in a range of 0.8 – 1.0 year over the past year. This exposure reflects our investments in short-dated bonds and credit opportunities coupled with purchases or sales of Treasury futures to gain or reduce exposures to various points of the yield curve. The Fund’s short duration profile accordingly detracted modestly from results, as short-term rates rose from their historic lows at the start of the fiscal year.
As we look forward, we balance an opportunistic mindset with the proper caution required in a low yield and risk spread environment. The Federal Reserve plans to curb new purchases of Treasuries and agency mortgage-backed securities. The macroeconomic environment may challenge fixed income returns in the near-term. The fed funds futures market predicts the Federal Reserve will raise policy rates three times in 2022 (by 0.25% in each occurrence). Inflationary pressures continue, and while the high levels of recent inflation data may be transitory, near-term inflation may settle at levels higher than what prevailed pre-pandemic. Treasury Inflation-Protected Securities (TIPS) are valued with breakeven inflation rates – the inflation rates that would need to prevail so their yields would equal those of traditional, nominal Treasury securities – of 2.5% – 3.0% at various maturities over the next ten years. Forward-looking forecasts of various inflation indexes estimate annual inflation rates of 2.0% - 2.5% over the next three to four years. With the 2-year Treasury offered at 0.50%, the 10-year Treasury offered at 1.55%, and the average yield of investment-grade corporate bonds at 2.22%, either: current yields rise to offer compensation for inflation or estimates of forward-looking inflation are too high.
We believe the Limited Duration Fund is positioned well to perform amidst these risks. The portfolio’s credit composition emphasizes instruments with relatively short duration profiles that are less trafficked by bond market participants and offer higher yields. We believe these positions allow the Fund to enhance income versus cash alternatives while remaining defensive in the face of more-hawkish policies from the Fed. The Fund’s duration was 0.91 years, offering investors a prudent way of taking modestly more interest rate risk than cash alternatives to earn higher yields while maintaining a positive return over a six-month horizon. Further, the short duration profile allows cash flows to be reinvested rapidly if rates rise, mitigating the overall effects of rising rates on the portfolio. The Fund’s spread duration stood at 1.7 years. This level is lower than where it stood during the depths of pandemic when valuations rewarded increased risk taking, reflecting prudent credit positioning in a thinner value environment.
4
BBH LIMITED DURATION FUND
MANAGEMENT’S DISCUSSION OF FUND PERFORMANCE (continued)
October 31, 2021
The markets appear to be at a delicate balance where yields have stabilized and spreads are at decades-long lows. Macroeconomic risks linger, and the most profound risks may be unidentified by the markets right now. We are confident that our approach and process will allow us to adapt to changes, capitalize on opportunities, and perform through a variety of environments. Thank you for the trust placed in BBH, and we look forward to engaging with you in 2022 and beyond.
________________
The BBH Limited Duration Fund was ranked against the following numbers of U.S.-domiciled Ultrashort Bond category funds over the following time periods ending 10/31/2021: 242 funds in the last year, 213 funds in the last three years, 176 funds in the last five years and 88 funds in the last ten years. Class I ranked in the 6th percentile, 4th percentile, 5th percentile and 6th percentile, for the one, three-, five- and ten-year periods respectively. Class N ranked in the 7th percentile, 5th percentile, 5th percentile and 7th percentile, for the one, three-, five- and ten-year periods respectively. Past performance does not guarantee future results. |
Neither Morningstar nor its content providers are responsible for any damages or losses arising from any use of this information. |
financial statements october 31, 2021 | 5 |
BBH LIMITED DURATION FUND
MANAGEMENT’S DISCUSSION OF FUND PERFORMANCE (continued)
October 31, 2021
Growth of $10,000 Invested in BBH Limited Duration
The graph below illustrates the hypothetical investment of $10,0001 in the Class N shares of the Fund over the ten years ended October 31, 2021 as compared to the BCTSY.
The annualized gross expense ratios as in the March 1, 2021 prospectus for Class N and Class I shares were 0.49% and 0.27%, respectively.
Performance data quoted represents past performance which is no guarantee of future results. Investment return and principal value will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Fund performance changes over time and current performance may be lower or higher than what is stated. Returns do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. For performance current to the most recent month-end please call 1-800-575-1265.
________________
1 | The Fund’s performance assumes the reinvestment of all dividends and distributions. The Barclays Capital U.S. 1-3 Year Treasury Bond Index (“BCTSY”) has been adjusted to reflect reinvestment of dividends on securities in the index. The BCTSY is not adjusted to reflect sales charges, expenses or other fees that the Securities and Exchange Commission requires to be reflected in the Fund’s performance. |
The Reference Benchmark is an unmanaged weighted index comprised as follows: 40% Bloomberg Barclays Short-Term Corporate Index; 40% Bloomberg Barclays US Aggregate ABS Index; and 20% Bloomberg Barclays US Treasury Bills Index. The indexes are not available for direct investment. The Fund does not measure its performance success nor alter its construction in relation to any particular benchmark or index. | |
Bloomberg® and the Bloomberg indexes are service marks of Bloomberg Finance L.P. and its affiliates, including Bloomberg Index Services Limited (“BISL”), the administrator of the index (collectively, “Bloomberg”) and have been licensed for use for certain purposes by Brown Brothers Harriman & Co (BBH). Bloomberg is not affiliated with BBH, and Bloomberg does not approve, endorse, review, or recommend the BBH strategies. Bloomberg does not guarantee the timeliness, accurateness, or completeness of any data or information relating to the fund. |
6
BBH LIMITED DURATION FUND
REPORT OF INDEPENDENT REGISTERED ACCOUNTING FIRM
To the Trustees of the BBH Trust and Shareholders of BBH Limited Duration Fund:
Opinion on the Financial Statements and Financial Highlights
We have audited the accompanying statement of assets and liabilities, including the portfolio of investments, of BBH Limited Duration Fund (the "Fund"), one of the funds within BBH Trust, as of October 31, 2021, the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, the financial highlights for each of the five years in the period then ended, and the related notes. In our opinion, the financial statements and financial highlights present fairly, in all material respects, the financial position of the Fund as of October 31, 2021, and the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended, in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements and financial highlights are the responsibility of the BBH Trust's management. Our responsibility is to express an opinion on the Fund's financial statements and financial highlights based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the BBH Trust in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement, whether due to error or fraud. The BBH Trust is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the BBH Trust’s internal control over financial reporting. Accordingly, we express no such opinion.
financial statements october 31, 2021 | 7 |
BBH LIMITED DURATION FUND
REPORT OF INDEPENDENT REGISTERED ACCOUNTING FIRM (continued)
Our audits included performing procedures to assess the risks of material misstatement of the financial statements and financial highlights, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements and financial highlights. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements and financial highlights. Our procedures included confirmation of securities owned as of October 31, 2021, by correspondence with the custodian and brokers; when replies were not received from brokers, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinion.
/s/ DELOITTE & TOUCHE LLP
Boston, Massachusetts
December 21, 2021
We have served as the auditor of one or more Brown Brothers Harriman investment companies since 1991.
8
BBH LIMITED DURATION FUND
PORTFOLIO ALLOCATION
October 31, 2021
BREAKDOWN BY SECURITY TYPE
U.S. $ Value | Percent of Net Assets | ||||||
Asset Backed Securities | $ | 1,864,495,684 | 15.4 | % | |||
Commercial Mortgage Backed Securities | 374,017,088 | 3.1 | |||||
Corporate Bonds | 5,107,494,928 | 42.2 | |||||
Exchange-Traded Funds | 421,224,000 | 3.5 | |||||
Loan Participations and Assignments | 1,389,970,476 | 11.5 | |||||
Municipal Bonds | 154,117,171 | 1.3 | |||||
Residential Mortgage Backed Securities | 88,474,651 | 0.7 | |||||
U.S. Government Agency Obligations | 238,770,338 | 2.0 | |||||
U.S. Treasury Bills | 2,572,813,306 | 21.2 | |||||
Liabilities in Excess of Other Assets | (113,648,101 | ) | (0.9 | ) | |||
NET ASSETS | $ | 12,097,729,541 | 100.0 | % |
All data as of October 31, 2021. The Fund’s sector diversification is expressed as a percentage of net assets and may vary over time.
The accompanying notes are an integral part of these financial statements.
financial statements october 31, 2021 | 9 |
BBH LIMITED DURATION FUND
PORTFOLIO OF INVESTMENTS
October 31, 2021
Principal Amount | Maturity Date | Interest Rate | Value | |||||||||||
ASSET BACKED SECURITIES (15.4%) | ||||||||||||||
$ | 14,535,273 | AIM Aviation Finance, Ltd. 2015-1A1 | 02/15/40 | 4.213 | % | $ | 12,344,444 | |||||||
28,830,000 | AmeriCredit Automobile Receivables Trust 2021-2 | 11/18/24 | 0.260 | 28,823,225 | ||||||||||
3,146,535 | Amur Equipment Finance Receivables VI LLC 2018-2A1 | 07/20/22 | 3.890 | 3,170,982 | ||||||||||
7,097,174 | Amur Equipment Finance Receivables VII LLC 2019-1A1 | 06/20/24 | 2.630 | 7,178,577 | ||||||||||
11,767,474 | Bankers Healthcare Group Securitization Trust 2020-A1 | 09/17/31 | 2.560 | 11,917,168 | ||||||||||
10,305,430 | BCC Funding Corp. XVI LLC 2019-1A1 | 08/20/24 | 2.460 | 10,407,575 | ||||||||||
14,333,644 | Business Jet Securities LLC 2020-1A1 | 11/15/35 | 2.981 | 14,410,094 | ||||||||||
44,170,000 | California Street CLO IX LP 2012-9A (3-Month USD-LIBOR + 1.100%)1,2 | 07/16/32 | 1.181 | 44,168,704 | ||||||||||
22,591,546 | Capital Automotive LLC 2017-1A1 | 04/15/47 | 3.870 | 22,616,139 | ||||||||||
20,638,275 | CARS-DB4 LP 2020-1A1 | 02/15/50 | 3.190 | 20,915,938 | ||||||||||
23,745,152 | CF Hippolyta LLC 2020-11 | 07/15/60 | 1.690 | 23,744,504 | ||||||||||
20,452,503 | CFMT LLC 2021-HB51,2,3 | 02/25/31 | 0.801 | 20,442,436 | ||||||||||
12,327,224 | Chesapeake Funding II LLC 2019-1A1 | 04/15/31 | 2.940 | 12,444,465 | ||||||||||
21,831,951 | Chesapeake Funding II LLC 2020-1A1 | 08/16/32 | 0.870 | 21,903,278 | ||||||||||
13,210,560 | Chesterfield Financial Holdings LLC 2014-1A1,4 | 12/15/34 | 4.500 | 13,239,070 | ||||||||||
9,390,996 | CIG Auto Receivables Trust 2020-1A1 | 10/12/23 | 0.680 | 9,397,718 | ||||||||||
18,960,000 | Credit Acceptance Auto Loan Trust 2019-3A1 | 11/15/28 | 2.380 | 19,196,966 | ||||||||||
57,480,000 | Credit Acceptance Auto Loan Trust 2020-3A1 | 10/15/29 | 1.240 | 57,737,464 | ||||||||||
50,169,982 | Dell Equipment Finance Trust 2019-21 | 10/22/24 | 1.910 | 50,497,266 | ||||||||||
29,900,000 | Donlen Fleet Lease Funding 2 LLC 2021-21 | 12/11/34 | 0.560 | 29,895,428 | ||||||||||
13,408,659 | Drive Auto Receivables Trust 2021-1 | 12/15/23 | 0.360 | 13,412,393 | ||||||||||
17,180,000 | Dryden 93 CLO Ltd. 2021-93A (3-Month USD-LIBOR + 1.080%)1,2 | 01/15/34 | 1.212 | 17,180,000 | ||||||||||
5,114,927 | ECAF I, Ltd. 2015-1A1 | 06/15/40 | 3.473 | 4,936,150 | ||||||||||
17,170,000 | Elm Trust 2020-3A1 | 08/20/29 | 2.954 | 17,048,896 | ||||||||||
4,609,438 | Enterprise Fleet Financing LLC 2019-11 | 10/20/24 | 2.980 | 4,629,741 | ||||||||||
17,954,552 | Enterprise Fleet Financing LLC 2019-21 | 02/20/25 | 2.290 | 18,139,761 | ||||||||||
1,455,326 | Exeter Automobile Receivables Trust 2021-1A | 06/15/23 | 0.300 | 1,455,330 | ||||||||||
11,169,647 | FCI Funding LLC 2021-1A1 | 04/15/33 | 1.130 | 11,143,580 | ||||||||||
20,537,445 | FNA LLC 2019-14 | 12/10/31 | 3.000 | 20,615,487 | ||||||||||
9,750,000 | Foursight Capital Automobile Receivables Trust 2021-21 | 04/15/25 | 0.400 | 9,744,192 | ||||||||||
1,084,614 | FREED ABS Trust 2020-FP11 | 03/18/27 | 2.520 | 1,086,196 | ||||||||||
13,300,000 | FREED ABS Trust 2021-3FP1 | 11/20/28 | 0.620 | 13,297,899 | ||||||||||
25,225,321 | Global SC Finance VII Srl 2020-1A1 | 10/17/40 | 2.170 | 25,307,137 | ||||||||||
26,207,782 | Global SC Finance VII Srl 2020-2A1 | 11/19/40 | 2.260 | 26,364,550 | ||||||||||
50,750,000 | Golub Capital Partners ABS Funding 2019-1 Ltd. 2021-2A1 | 10/20/29 | 2.953 | 50,750,000 |
The accompanying notes are an integral part of these financial statements.
10
BBH LIMITED DURATION FUND
PORTFOLIO OF INVESTMENTS (continued)
October 31, 2021
Principal Amount | Maturity Date | Interest Rate | Value | |||||||||||
ASSET BACKED SECURITIES (continued) | ||||||||||||||
$ | 21,000,000 | HTS Fund I LLC 2021-11 | 08/25/36 | 1.411 | % | $ | 20,887,320 | |||||||
28,190,000 | Lendmark Funding Trust 2019-1A1 | 12/20/27 | 3.000 | 28,607,178 | ||||||||||
21,710,000 | Lendmark Funding Trust 2019-2A1 | 04/20/28 | 2.780 | 22,095,075 | ||||||||||
37,214,241 | Madison Park Funding X, Ltd. 2012-10A (3-Month USD-LIBOR + 1.010%)1,2 | 01/20/29 | 1.142 | 37,214,212 | ||||||||||
40,030,000 | Madison Park Funding XXV, Ltd. 2017-25A (3-Month USD-LIBOR + 0.970%)1,2 | 04/25/29 | 1.094 | 40,049,891 | ||||||||||
12,620,000 | Mariner Finance Issuance Trust 2019-AA1 | 07/20/32 | 2.960 | 12,823,769 | ||||||||||
16,460,000 | Mariner Finance Issuance Trust 2020-AA1 | 08/21/34 | 2.190 | 16,708,062 | ||||||||||
27,346,419 | Nationstar HECM Loan Trust 2020-1A1,2,3 | 09/25/30 | 1.269 | 27,406,100 | ||||||||||
27,120,000 | Navistar Financial Dealer Note Master Trust 2020-1 (1-Month USD-LIBOR + 0.950%)1,2 | 07/25/25 | 1.039 | 27,248,324 | ||||||||||
2,543,949 | New Mexico Educational Assistance Foundation 2013-1 (1-Month USD-LIBOR + 0.700%)2 | 01/02/25 | 0.782 | 2,544,430 | ||||||||||
40,570,000 | New Residential Advance Receivables Trust Advance Receivables Backed 2020-T11 | 08/15/53 | 1.426 | 40,409,903 | ||||||||||
3,354,549 | Newtek Small Business Loan Trust 2016-1A (1-Month USD-LIBOR + 3.000%)1,2 | 02/25/42 | 3.089 | 3,359,979 | ||||||||||
21,800,000 | NextGear Floorplan Master Owner Trust 2019-1A1 | 02/15/24 | 3.210 | 21,979,536 | ||||||||||
17,140,000 | NextGear Floorplan Master Owner Trust 2019-2A1 | 10/15/24 | 2.070 | 17,399,817 | ||||||||||
30,640,000 | NextGear Floorplan Master Owner Trust 2020-1A1 | 02/15/25 | 1.550 | 31,019,718 | ||||||||||
1,649,544 | NMEF Funding LLC 2019-A1 | 08/17/26 | 2.730 | 1,653,078 | ||||||||||
24,700,000 | NRZ Advance Receivables Trust 2015-ON1 2020-T21 | 09/15/53 | 1.475 | 24,715,803 | ||||||||||
10,200,000 | NRZ Advance Receivables Trust 2015-ON1 2020-T31 | 10/15/52 | 1.317 | 10,197,046 | ||||||||||
21,250,000 | OnDeck Asset Securitization Trust III LLC 2021-1A1 | 05/17/27 | 1.590 | 21,161,179 | ||||||||||
8,464,459 | OneMain Financial Issuance Trust 2019-1A1 | 02/14/31 | 3.480 | 8,473,112 | ||||||||||
26,430,000 | Oportun Funding XIII LLC 2019-A1 | 08/08/25 | 3.080 | 26,807,016 | ||||||||||
56,210,000 | Oportun Issuance Trust 2021-C1 | 10/08/31 | 2.180 | 56,203,491 | ||||||||||
21,200,000 | OSCAR US Funding Trust XIII LLC 2021-2A1 | 08/12/24 | 0.390 | 21,149,465 | ||||||||||
19,195,058 | OSCAR US Funding Trust XII LLC 2021-1A1 | 03/11/24 | 0.400 | 19,100,732 | ||||||||||
20,000,000 | Palmer Square Loan Funding, Ltd. 2019-3A (3-Month USD-LIBOR + 1.600%)1,2 | 08/20/27 | 1.731 | 20,004,336 | ||||||||||
15,000,000 | Palmer Square Loan Funding, Ltd. 2019-4A (3-Month USD-LIBOR + 1.600%)1,2 | 10/24/27 | 1.724 | 15,002,986 | ||||||||||
19,490,000 | Parliament Clo II, Ltd. 2021-2A (3-Month USD-LIBOR + 1.350%)1,2 | 08/20/32 | 1.482 | 19,488,933 | ||||||||||
15,458,889 | Pawnee Equipment Receivables Series LLC 2019-11 | 10/15/24 | 2.290 | 15,581,297 | ||||||||||
16,427,569 | Pawnee Equipment Receivables Series LLC 2020-11 | 11/17/25 | 1.370 | 16,505,626 |
The accompanying notes are an integral part of these financial statements.
financial statements october 31, 2021 | 11 |
BBH LIMITED DURATION FUND
PORTFOLIO OF INVESTMENTS (continued)
October 31, 2021
Principal Amount | Maturity Date | Interest Rate | Value | |||||||||||
ASSET BACKED SECURITIES (continued) | ||||||||||||||
$ | 18,200,000 | PFS Financing Corp. 2019-A1 | 04/15/24 | 2.860 | % | $ | 18,413,400 | |||||||
27,650,000 | PFS Financing Corp. 2019-C1 | 10/15/24 | 2.230 | 28,124,809 | ||||||||||
23,070,000 | PFS Financing Corp. 2020-F1 | 08/15/24 | 0.930 | 23,170,004 | ||||||||||
18,070,000 | Regional Management Issuance Trust 2020-11 | 10/15/30 | 2.340 | 18,297,496 | ||||||||||
27,400,000 | Republic Finance Issuance Trust 2019-A1 | 11/22/27 | 3.430 | 27,485,439 | ||||||||||
16,470,000 | Republic Finance Issuance Trust 2020-A1 | 11/20/30 | 2.470 | 16,769,299 | ||||||||||
23,087,618 | Santander Drive Auto Receivables Trust 2020-3 | 07/15/24 | 0.520 | 23,087,817 | ||||||||||
19,410,889 | Santander Drive Auto Receivables Trust 2021-2 | 04/15/24 | 0.280 | 19,417,120 | ||||||||||
65,000,000 | Santander Drive Auto Receivables Trust 2021-4 | 08/15/24 | 0.370 | 64,988,690 | ||||||||||
34,490,000 | Santander Revolving Auto Loan Trust 2019-A1 | 01/26/32 | 2.510 | 35,885,838 | ||||||||||
5,630,134 | SCF Equipment Leasing LLC 2019-2A1 | 06/20/24 | 2.220 | 5,653,122 | ||||||||||
10,849,599 | Shenton Aircraft Investment I, Ltd. 2015-1A1 | 10/15/42 | 4.750 | 10,475,958 | ||||||||||
50,438,133 | Stack Infrastructure Issuer LLC 2019-1A1 | 02/25/44 | 4.540 | 52,621,846 | ||||||||||
19,160,000 | Stack Infrastructure Issuer LLC 2020-1A1 | 08/25/45 | 1.893 | 19,098,652 | ||||||||||
27,996,299 | SWC Funding LLC 2018-1A1,4 | 08/15/33 | 4.750 | 27,756,005 | ||||||||||
50,790,000 | Symphony CLO XXI, Ltd. 2019-21A (3-Month USD-LIBOR + 1.060%)1,2 | 07/15/32 | 1.184 | 50,728,940 | ||||||||||
2,601,935 | Veros Automobile Receivables Trust 2020-11 | 09/15/23 | 1.670 | 2,604,902 | ||||||||||
43,645,640 | Westlake Automobile Receivables Trust 2020-3A1 | 05/15/24 | 0.560 | 43,684,467 | ||||||||||
32,090,948 | Westlake Automobile Receivables Trust 2021-1A1 | 10/15/24 | 0.390 | 32,088,955 | ||||||||||
47,730,000 | Westlake Automobile Receivables Trust 2021-2A1 | 04/15/25 | 0.320 | 47,717,027 | ||||||||||
1,067,978 | WRG Debt Funding II LLC 2017-11,4 | 03/15/26 | 4.458 | 1,065,731 | ||||||||||
Total Asset Backed Securities (Cost $1,858,516,602) | 1,864,495,684 | |||||||||||||
| COMMERCIAL MORTGAGE BACKED SECURITIES (3.1%) | |||||||||||||
26,807,000 | BB-UBS Trust 2012-TFT1,2,3 | 06/05/30 | 3.678 | 25,025,672 | ||||||||||
13,031,276 | BX Commercial Mortgage Trust 2019-XL (1-Month USD-LIBOR + 0.920%)1,2 | 10/15/36 | 1.010 | 13,035,293 | ||||||||||
25,084,425 | BX Trust 2019-RP (1-Month USD-LIBOR + 1.045%)1,2 | 06/15/34 | 1.135 | 25,021,466 | ||||||||||
39,480,000 | BXMT, Ltd. 2020-FL2 (30-Day SOFR + 1.014%)1,2 | 02/15/38 | 1.064 | 39,404,988 | ||||||||||
20,990,000 | BXMT, Ltd. 2020-FL3 (30-Day SOFR + 1.514%)1,2 | 03/15/37 | 1.564 | 21,010,490 | ||||||||||
17,250,000 | BXMT, Ltd. 2021-FL4 (1-Month USD-LIBOR + 1.050%)1,2 | 05/15/38 | 1.136 | 17,236,200 |
The accompanying notes are an integral part of these financial statements.
12
BBH LIMITED DURATION FUND
PORTFOLIO OF INVESTMENTS (continued)
October 31, 2021
Principal Amount | Maturity Date | Interest Rate | Value | |||||||||||
COMMERCIAL MORTGAGE BACKED SECURITIES (continued) | ||||||||||||||
$ | 31,329,000 | CG-CCRE Commercial Mortgage Trust 2014-FL2 (1-Month USD-LIBOR + 2.900%)1,2 | 11/15/31 | 2.990 | % | $ | 25,977,694 | |||||||
9,690,000 | Commercial Mortgage Pass Through Certificates 2013-GAM1,2,3 | 02/10/28 | 3.417 | 9,402,541 | ||||||||||
19,337,720 | HPLY Trust 2019-HIT (1-Month USD-LIBOR + 1.000%)1,2 | 11/15/36 | 1.090 | 19,326,063 | ||||||||||
18,040,000 | MED Trust 2021-MDLN (1-Month USD-LIBOR + 0.950%)1,2 | 11/15/38 | 1.050 | 18,040,000 | ||||||||||
33,690,000 | MHC Commercial Mortgage Trust 2021-MHC (1-Month USD-LIBOR + 0.801%)1,2 | 04/15/38 | 0.892 | 33,700,427 | ||||||||||
32,615,000 | Morgan Stanley Capital I Trust 2017-CLS (1-Month USD-LIBOR + 0.700%)1,2 | 11/15/34 | 0.790 | 32,595,170 | ||||||||||
28,602,573 | PFP, Ltd. 2021-7 (1-Month USD-LIBOR + 0.850%)1,2 | 04/14/38 | 0.940 | 28,374,610 | ||||||||||
24,260,000 | STWD, Ltd. 2019-FL1 (30-Day SOFR + 1.194%)1,2 | 07/15/38 | 1.244 | 24,221,184 | ||||||||||
41,657,788 | TPG Real Estate Finance Issuer, Ltd. 2018-FL2 (1-Month USD-LIBOR + 1.130%)1,2 | 11/15/37 | 1.216 | 41,645,290 | ||||||||||
Total Commercial Mortgage Backed Securities (Cost $381,672,892) | 374,017,088 | |||||||||||||
| CORPORATE BONDS (42.2%) | |||||||||||||
AUTO MANUFACTURERS (1.3%) | ||||||||||||||
20,585,000 | Daimler Finance North America LLC1 | 02/22/22 | 3.400 | 20,777,068 | ||||||||||
82,838,000 | General Motors Financial Co., Inc. | 01/14/22 | 3.450 | 83,132,923 | ||||||||||
15,132,000 | General Motors Financial Co., Inc. | 04/10/22 | 3.450 | 15,259,322 | ||||||||||
30,805,000 | General Motors Financial Co., Inc. | 06/30/22 | 3.150 | 31,267,740 | ||||||||||
7,750,000 | General Motors Financial Co., Inc. | 07/08/22 | 3.550 | 7,908,718 | ||||||||||
158,345,771 | ||||||||||||||
BANKS (13.9%) | ||||||||||||||
14,895,000 | ANZ New Zealand Int'l, Ltd., London Branch1 | 03/19/24 | 3.400 | 15,766,459 | ||||||||||
19,435,000 | ASB Bank, Ltd.1 | 06/14/23 | 3.750 | 20,420,080 | ||||||||||
34,375,000 | Australia & New Zealand Banking Group, Ltd. | 05/19/22 | 2.625 | 34,810,465 | ||||||||||
35,542,000 | Bank of America Corp. (3-Month USD-LIBOR + 1.160%)2 | 01/20/23 | 3.124 | 35,748,075 | ||||||||||
78,697,000 | Bank of America Corp. (3-Month USD-LIBOR + 0.930%)2 | 07/21/23 | 2.816 | 79,922,027 | ||||||||||
23,531,000 | Bank of Montreal | 03/26/22 | 2.900 | 23,769,934 | ||||||||||
54,710,000 | Bank of New Zealand1 | 02/20/24 | 3.500 | 57,810,053 | ||||||||||
85,200,000 | Bank of Nova Scotia | 03/07/22 | 2.700 | 85,891,916 | ||||||||||
32,500,000 | Bank of Nova Scotia (SOFR + 0.380%)2 | 07/31/24 | 0.430 | 32,544,525 | ||||||||||
26,935,000 | BNP Paribas S.A.1 | 05/23/22 | 2.950 | 27,311,861 | ||||||||||
14,660,000 | BNZ International Funding, Ltd., London Branch1 | 03/01/23 | 3.375 | 15,207,639 | ||||||||||
19,610,000 | Canadian Imperial Bank of Commerce (SOFR + 0.800%)2 | 03/17/23 | 0.849 | 19,748,171 |
The accompanying notes are an integral part of these financial statements.
financial statements october 31, 2021 | 13 |
BBH LIMITED DURATION FUND
PORTFOLIO OF INVESTMENTS (continued)
October 31, 2021
Principal Amount | Maturity Date | Interest Rate | Value | |||||||||||
CORPORATE BONDS (continued) | ||||||||||||||
BANKS (continued) | ||||||||||||||
$ | 12,895,000 | Canadian Imperial Bank of Commerce | 06/22/23 | 0.450 | % | $ | 12,847,782 | |||||||
60,560,000 | Canadian Imperial Bank of Commerce | 09/13/23 | 3.500 | 63,867,222 | ||||||||||
16,860,000 | Canadian Imperial Bank of Commerce | 10/18/24 | 1.000 | 16,788,514 | ||||||||||
33,260,000 | Citigroup, Inc. | 12/08/21 | 2.900 | 33,275,171 | ||||||||||
39,239,000 | Citigroup, Inc. | 10/27/22 | 2.700 | 40,030,881 | ||||||||||
40,893,000 | Citigroup, Inc. (3-Month USD-LIBOR + 0.950%)2 | 07/24/23 | 2.876 | 41,555,728 | ||||||||||
33,540,000 | Commonwealth Bank of Australia (SOFR + 0.400%)1,2 | 07/07/25 | 0.449 | 33,598,024 | ||||||||||
23,400,000 | DNB Bank ASA1 | 12/02/22 | 2.150 | 23,846,532 | ||||||||||
65,000,000 | DNB Bank ASA (1-Year CMT Index + 0.330%)1,2 | 09/30/25 | 0.856 | 64,543,558 | ||||||||||
10,635,000 | Fifth Third Bancorp | 01/25/24 | 3.650 | 11,250,103 | ||||||||||
31,800,000 | Goldman Sachs Group, Inc. | 01/27/23 | 0.481 | 31,713,347 | ||||||||||
16,845,000 | Goldman Sachs Group, Inc. | 03/08/23 | 0.523 | 16,814,067 | ||||||||||
50,978,000 | Goldman Sachs Group, Inc. (3-Month USD-LIBOR + 0.990%)2 | 07/24/23 | 2.905 | 51,786,670 | ||||||||||
26,887,000 | HSBC Holdings, Plc. | 03/30/22 | 4.000 | 27,294,948 | ||||||||||
29,665,000 | HSBC Holdings, Plc. (SOFR + 0.534%)2 | 08/17/24 | 0.732 | 29,536,837 | ||||||||||
33,350,000 | HSBC Holdings, Plc. (SOFR + 1.929%)2 | 06/04/26 | 2.099 | 33,764,186 | ||||||||||
62,235,000 | JPMorgan Chase & Co. (SOFR + 0.580%)2 | 03/16/24 | 0.697 | 62,247,873 | ||||||||||
33,270,000 | JPMorgan Chase & Co. (SOFR + 1.585%)2 | 03/13/26 | 2.005 | 33,904,607 | ||||||||||
19,761,000 | Lloyds Banking Group, Plc. | 01/11/22 | 3.000 | 19,862,062 | ||||||||||
33,923,000 | Lloyds Banking Group, Plc. | 03/12/24 | 3.900 | 36,195,962 | ||||||||||
24,769,000 | Mitsubishi UFJ Financial Group, Inc. | 02/22/22 | 2.998 | 24,971,405 | ||||||||||
48,955,000 | Mitsubishi UFJ Financial Group, Inc. | 03/07/22 | 3.218 | 49,433,461 | ||||||||||
39,660,000 | Mitsubishi UFJ Financial Group, Inc. | 07/17/25 | 1.412 | 39,575,770 | ||||||||||
105,556,000 | Morgan Stanley | 05/19/22 | 2.750 | 106,927,703 | ||||||||||
24,842,000 | Santander Holdings USA, Inc. | 03/28/22 | 3.700 | 25,080,957 | ||||||||||
16,070,000 | Santander Holdings USA, Inc. | 06/07/24 | 3.500 | 16,968,034 | ||||||||||
23,890,000 | Skandinaviska Enskilda Banken AB1 | 09/09/24 | 0.650 | 23,643,455 | ||||||||||
47,680,000 | Svenska Handelsbanken AB | 11/20/23 | 3.900 | 50,855,503 | ||||||||||
61,285,000 | Truist Bank | 03/09/23 | 1.250 | 61,888,652 | ||||||||||
21,430,000 | Truist Financial Corp. | 12/06/23 | 3.750 | 22,706,370 | ||||||||||
42,990,000 | US Bancorp (5-Year CMT Index + 2.541%)2,5 | 3.700 | 42,820,189 | |||||||||||
22,470,000 | US Bancorp | 05/12/25 | 1.450 | 22,686,481 | ||||||||||
13,500,000 | US Bank NA | 05/23/22 | 2.650 | 13,654,213 | ||||||||||
22,790,000 | Wells Fargo & Co. (SOFR + 1.600%)2 | 06/02/24 | 1.654 | 23,118,847 | ||||||||||
19,370,000 | Wells Fargo & Co. (SOFR + 2.000%)2 | 04/30/26 | 2.188 | 19,795,787 | ||||||||||
1,677,802,106 |
The accompanying notes are an integral part of these financial statements.
14
BBH LIMITED DURATION FUND
PORTFOLIO OF INVESTMENTS (continued)
October 31, 2021
Principal Amount | Maturity Date | Interest Rate | Value | |||||||||||
CORPORATE BONDS (continued) | ||||||||||||||
BIOTECHNOLOGY (0.9%) | ||||||||||||||
$ | 59,774,000 | Amgen, Inc. | 05/11/22 | 2.650 | % | $ | 60,391,623 | |||||||
18,240,000 | Amgen, Inc. | 05/15/22 | 3.625 | 18,380,061 | ||||||||||
25,120,000 | Gilead Sciences, Inc. | 09/29/23 | 0.750 | 25,067,286 | ||||||||||
103,838,970 | ||||||||||||||
COMPUTERS (0.1%) | ||||||||||||||
17,250,000 | Dell International LLC / EMC Corp. | 06/15/23 | 5.450 | 18,369,366 | ||||||||||
| DIVERSIFIED FINANCIAL SERVICES (4.8%) | |||||||||||||
11,426,000 | AerCap Ireland Capital DAC / AerCap Global Aviation Trust | 09/15/23 | 4.500 | 12,116,011 | ||||||||||
47,945,000 | AerCap Ireland Capital DAC / AerCap Global Aviation Trust | 02/15/24 | 3.150 | 49,810,393 | ||||||||||
21,450,000 | AerCap Ireland Capital DAC / AerCap Global Aviation Trust | 10/29/24 | 1.750 | 21,467,981 | ||||||||||
69,908,000 | Air Lease Corp. | 01/15/22 | 3.500 | 70,323,233 | ||||||||||
23,208,000 | Air Lease Corp. | 02/01/22 | 3.750 | 23,261,859 | ||||||||||
37,385,000 | Alliance Data Systems Corp.1 | 12/15/24 | 4.750 | 38,244,587 | ||||||||||
103,504,000 | American Express Co. | 08/01/22 | 2.500 | 104,901,784 | ||||||||||
32,260,000 | Aviation Capital Group LLC1 | 01/20/22 | 2.875 | 32,361,423 | ||||||||||
33,230,000 | Aviation Capital Group LLC1 | 12/15/24 | 5.500 | 36,887,365 | ||||||||||
33,535,000 | Avolon Holdings Funding, Ltd.1 | 01/15/26 | 5.500 | 37,568,822 | ||||||||||
46,600,000 | Blackstone Private Credit Fund1 | 09/15/24 | 1.750 | 46,167,185 | ||||||||||
16,045,000 | Capital One Financial Corp. | 05/11/23 | 2.600 | 16,491,147 | ||||||||||
14,430,000 | Credit Acceptance Corp.1 | 12/31/24 | 5.125 | 14,754,675 | ||||||||||
2,785,000 | Credit Acceptance Corp. | 03/15/26 | 6.625 | 2,899,881 | ||||||||||
48,895,000 | Drawbridge Special Opportunities Fund LP1 | 02/15/26 | 3.875 | 50,212,298 | ||||||||||
25,095,000 | Strategic Credit Opportunities Partners LLC | 04/01/26 | 4.250 | 25,509,695 | ||||||||||
582,978,339 | ||||||||||||||
ELECTRIC (3.5%) | ||||||||||||||
74,190,000 | Alexander Funding Trust1 | 11/15/23 | 1.841 | 75,355,315 | ||||||||||
33,445,000 | Dominion Energy, Inc. | 03/15/25 | 3.300 | 35,519,813 | ||||||||||
39,340,000 | Duke Energy Corp. (SOFR + 0.250%)2 | 06/10/23 | 0.299 | 39,346,252 | ||||||||||
61,690,000 | Edison International (5-Year CMT Index + 4.698%)2,5 | 5.375 | 63,694,925 | |||||||||||
12,750,000 | Edison International | 03/15/23 | 2.950 | 13,012,346 | ||||||||||
18,525,000 | Exelon Generation Co. LLC | 06/01/25 | 3.250 | 19,579,666 |
The accompanying notes are an integral part of these financial statements.
financial statements october 31, 2021 | 15 |
BBH LIMITED DURATION FUND
PORTFOLIO OF INVESTMENTS (continued)
October 31, 2021
Principal Amount | Maturity Date | Interest Rate | Value | |||||||||||
CORPORATE BONDS (continued) | ||||||||||||||
ELECTRIC (continued) | ||||||||||||||
$ | 25,345,000 | New York State Electric & Gas Corp. | 05/01/23 | 5.750 | % | $ | 27,191,236 | |||||||
42,459,000 | NextEra Energy Capital Holdings, Inc. | 04/01/22 | 2.900 | 42,897,065 | ||||||||||
42,385,000 | NextEra Energy Capital Holdings, Inc. | 03/01/23 | 0.650 | 42,432,665 | ||||||||||
24,425,000 | Southern California Edison Co. (SOFR + 0.350%)2 | 06/13/22 | 0.399 | 24,435,537 | ||||||||||
36,892,000 | Vistra Operations Co. LLC1 | 09/01/26 | 5.500 | 37,987,692 | ||||||||||
421,452,512 | ||||||||||||||
HEALTHCARE-PRODUCTS (0.5%) | ||||||||||||||
28,015,000 | Thermo Fisher Scientific, Inc. | 10/18/23 | 0.797 | 28,024,035 | ||||||||||
33,970,000 | Zimmer Biomet Holdings, Inc. | 04/01/22 | 3.150 | 34,194,283 | ||||||||||
62,218,318 | ||||||||||||||
HEALTHCARE-SERVICES (0.5%) | ||||||||||||||
60,630,000 | Sutter Health | 08/15/25 | 1.321 | 60,399,491 | ||||||||||
| INSURANCE (4.2%) | |||||||||||||
24,310,000 | Athene Global Funding1 | 01/25/22 | 4.000 | 24,515,016 | ||||||||||
20,325,000 | Athene Global Funding1 | 07/01/22 | 3.000 | 20,638,673 | ||||||||||
16,760,000 | Athene Global Funding1 | 01/08/24 | 0.950 | 16,745,239 | ||||||||||
18,000,000 | Athene Global Funding1 | 01/14/25 | 2.500 | 18,556,828 | ||||||||||
14,345,000 | Athene Global Funding1 | 06/29/25 | 2.550 | 14,836,541 | ||||||||||
47,588,000 | Enstar Group, Ltd. | 03/10/22 | 4.500 | 48,099,718 | ||||||||||
35,000,000 | F&G Global Funding1 | 09/20/24 | 0.900 | 34,666,935 | ||||||||||
50,000,000 | GA Global Funding Trust (SOFR + 0.500%)1,2 | 09/13/24 | 0.550 | 50,216,294 | ||||||||||
37,190,000 | Marsh & McLennan Cos, Inc. | 01/30/22 | 2.750 | 37,331,047 | ||||||||||
44,790,000 | Met Tower Global Funding1 | 09/14/26 | 1.250 | 44,139,654 | ||||||||||
74,165,000 | Northwestern Mutual Global Funding1 | 03/25/24 | 0.600 | 73,667,118 | ||||||||||
19,330,000 | Pacific Life Global Funding II1 | 06/24/25 | 1.200 | 19,239,237 | ||||||||||
29,855,000 | Protective Life Global Funding1 | 07/05/24 | 0.781 | 29,631,981 | ||||||||||
37,290,000 | Sirius International Group, Ltd.1 | 11/01/26 | 4.600 | 38,618,456 | ||||||||||
31,750,000 | United Insurance Holdings Corp. | 12/15/27 | 6.250 | 33,334,797 | ||||||||||
504,237,534 | ||||||||||||||
INTERNET (0.2%) | ||||||||||||||
19,060,000 | Expedia Group, Inc. | 12/15/23 | 3.600 | 20,047,844 | ||||||||||
| INVESTMENT COMPANIES (5.2%) | |||||||||||||
56,908,000 | Ares Capital Corp. | 01/19/22 | 3.625 | 57,130,885 | ||||||||||
33,512,000 | Ares Capital Corp. | 02/10/23 | 3.500 | 34,539,258 | ||||||||||
17,695,000 | BlackRock TCP Capital Corp. | 03/01/22 | 4.625 | 17,871,950 |
The accompanying notes are an integral part of these financial statements.
16
BBH LIMITED DURATION FUND
PORTFOLIO OF INVESTMENTS (continued)
October 31, 2021
Principal Amount | Maturity Date | Interest Rate | Value | |||||||||||
CORPORATE BONDS (continued) | ||||||||||||||
INVESTMENT COMPANIES (continued) | ||||||||||||||
$ | 41,185,000 | BlackRock TCP Capital Corp. | 08/23/24 | 3.900 | % | $ | 43,384,326 | |||||||
24,645,000 | Blackstone Secured Lending Fund | 07/14/23 | 3.650 | 25,626,590 | ||||||||||
19,925,000 | Blackstone Secured Lending Fund | 01/15/26 | 3.625 | 20,837,603 | ||||||||||
35,855,000 | Business Development Corp. of America1 | 12/30/22 | 4.750 | 36,890,794 | ||||||||||
18,375,000 | Business Development Corp. of America1 | 12/15/24 | 4.850 | 19,626,327 | ||||||||||
26,475,000 | Business Development Corp. of America | 03/30/26 | 3.250 | 26,559,360 | ||||||||||
31,955,000 | FS KKR Capital Corp. | 07/15/24 | 4.625 | 34,158,454 | ||||||||||
24,150,000 | FS KKR Capital Corp. | 02/01/25 | 4.125 | 25,504,624 | ||||||||||
42,821,000 | FS KKR Capital Corp.1 | 02/14/25 | 4.250 | 45,067,927 | ||||||||||
39,855,000 | Golub Capital BDC, Inc. | 04/15/24 | 3.375 | 41,291,019 | ||||||||||
49,650,000 | Main Street Capital Corp. | 05/01/24 | 5.200 | 53,618,022 | ||||||||||
33,980,000 | Main Street Capital Corp. | 07/14/26 | 3.000 | 34,296,267 | ||||||||||
31,201,000 | Owl Rock Capital Corp. | 04/15/24 | 5.250 | 33,742,914 | ||||||||||
10,000,000 | Owl Rock Capital Corp. | 03/30/25 | 4.000 | 10,487,222 | ||||||||||
27,070,000 | Owl Rock Capital Corp. II1 | 11/26/24 | 4.625 | 28,738,741 | ||||||||||
20,015,000 | Owl Rock Technology Finance Corp.1 | 12/15/25 | 4.750 | 21,630,973 | ||||||||||
17,345,000 | PennantPark Investment Corp. | 11/01/26 | 4.000 | 17,261,169 | ||||||||||
628,264,425 | ||||||||||||||
MACHINERY CONSTRUCTION & MINING (0.2%) | ||||||||||||||
24,145,000 | Caterpillar Financial Services Corp. | 07/07/23 | 0.650 | 24,198,290 | ||||||||||
| MACHINERY-DIVERSIFIED (0.1%) | |||||||||||||
17,865,000 | John Deere Capital Corp. | 01/10/22 | 3.200 | 17,964,511 | ||||||||||
| MEDIA (0.4%) | |||||||||||||
49,392,000 | Charter Communications Operating LLC / Charter Communications Operating Capital | 07/23/22 | 4.464 | 50,397,547 | ||||||||||
| OIL & GAS (1.1%) | |||||||||||||
35,498,000 | Apache Corp. | 11/15/25 | 4.625 | 38,266,489 | ||||||||||
61,645,000 | Occidental Petroleum Corp. | 08/15/22 | 2.700 | 62,415,563 | ||||||||||
17,822,000 | Ovintiv Exploration, Inc. | 07/01/24 | 5.625 | 19,622,905 | ||||||||||
10,072,000 | Woodside Finance, Ltd.1 | 09/15/26 | 3.700 | 10,808,062 | ||||||||||
131,113,019 |
The accompanying notes are an integral part of these financial statements.
financial statements october 31, 2021 | 17 |
BBH LIMITED DURATION FUND
PORTFOLIO OF INVESTMENTS (continued)
October 31, 2021
Principal Amount | Maturity Date | Interest Rate | Value | |||||||||||
PHARMACEUTICALS (0.7%) | ||||||||||||||
$ | 28,971,000 | AbbVie, Inc. | 03/15/22 | 3.450 | % | $ | 29,149,332 | |||||||
20,446,000 | AbbVie, Inc. | 10/01/22 | 3.250 | 20,802,752 | ||||||||||
32,890,000 | AbbVie, Inc. | 11/21/22 | 2.300 | 33,459,665 | ||||||||||
83,411,749 | ||||||||||||||
PIPELINES (1.2%) | ||||||||||||||
78,564,000 | Energy Transfer LP | 02/01/22 | 5.200 | 78,564,000 | ||||||||||
42,750,000 | EnLink Midstream Partners, LP | 06/01/25 | 4.150 | 44,625,870 | ||||||||||
24,865,000 | Northriver Midstream Finance LP Term B11 | 02/15/26 | 5.625 | 25,673,113 | ||||||||||
148,862,983 | ||||||||||||||
REAL ESTATE INVESTMENT TRUSTS (0.4%) | ||||||||||||||
23,540,000 | HAT Holdings I LLC / HAT Holdings II LLC1 | 06/15/26 | 3.375 | 23,334,025 | ||||||||||
19,215,000 | Scentre Group Trust 1 / Scentre Group Trust 21 | 01/28/26 | 3.625 | 20,622,021 | ||||||||||
43,956,046 | ||||||||||||||
RETAIL (0.1%) | ||||||||||||||
11,000,000 | Nordstrom, Inc. | 04/08/24 | 2.300 | 11,053,900 | ||||||||||
| SEMICONDUCTORS (0.3%) | |||||||||||||
33,545,000 | ams AG1 | 07/31/25 | 7.000 | 35,515,769 | ||||||||||
| SOFTWARE (1.5%) | |||||||||||||
104,097,000 | Oracle Corp. | 05/15/22 | 2.500 | 104,928,236 | ||||||||||
72,910,000 | VMware, Inc. | 08/21/22 | 2.950 | 74,132,329 | ||||||||||
179,060,565 | ||||||||||||||
TELECOMMUNICATIONS (0.8%) | ||||||||||||||
100,479,000 | AT&T, Inc. | 06/30/22 | 3.000 | 101,665,834 | ||||||||||
| TRANSPORTATION (0.3%) | |||||||||||||
41,623,000 | Union Pacific Corp. | 07/15/22 | 4.163 | 42,340,039 | ||||||||||
| Total Corporate Bonds (Cost $5,028,763,982) | 5,107,494,928 | ||||||||||||
| EXCHANGE-TRADED FUNDS (3.5%) | |||||||||||||
4,950,000 | iShares 1-5 Year Investment Grade Corporate Bond ETF | 268,785,000 | ||||||||||||
4,900,000 | SPDR Portfolio Short Term Corporate Bond ETF | 152,439,000 | ||||||||||||
Total Exchange-Traded Funds (Cost $425,467,000) | 421,224,000 |
The accompanying notes are an integral part of these financial statements.
18
BBH LIMITED DURATION FUND
PORTFOLIO OF INVESTMENTS (continued)
October 31, 2021
Principal Amount | Maturity Date | Interest Rate | Value | |||||||||||
LOAN PARTICIPATIONS AND ASSIGNMENTS (11.5%) | ||||||||||||||
$ | 36,085,000 | AAdvantage Loyality IP, Ltd. (3-Month USD-LIBOR + 4.750%)2 | 04/20/28 | 5.500 | % | $ | 37,562,320 | |||||||
21,931,314 | Allen Media LLC (Entertainment Studios) (3-Month USD-LIBOR + 5.500%)2 | 02/10/27 | 5.632 | 21,913,111 | ||||||||||
47,291,088 | Asplundh Tree Expert LLC (1-Month USD-LIBOR + 1.750%)2 | 09/07/27 | 1.837 | 47,048,012 | ||||||||||
12,000,000 | Avantor Funding, Inc. Term B5 (3-Month USD-LIBOR + 2.250%)2 | 11/08/27 | 2.750 | 11,990,040 | ||||||||||
20,775,495 | Avolon TLB Borrower 1 (US) LLC Term B3 (1-Month USD-LIBOR + 1.750%)2 | 01/15/25 | 2.500 | 20,744,747 | ||||||||||
14,887,500 | Avolon TLB Borrower 1 (US) LLC Term B5 (1-Month USD-LIBOR + 2.250%)2 | 12/01/27 | 2.750 | 14,898,666 | ||||||||||
56,503,132 | Axalta Coating Systems Dutch Holding B BV (Axalta Coating Systems U.S. Holdings, Inc.) Term B3 (3-Month USD-LIBOR + 1.750%)2 | 06/01/24 | 1.882 | 56,361,874 | ||||||||||
10,892,596 | BCP Renaissance Parent LLC (3-Month USD-LIBOR + 3.500%)2 | 10/31/24 | 4.500 | 10,851,749 | ||||||||||
139,659,618 | Boeing Co. (3-Month USD-LIBOR + 1.250%)2 | 02/07/22 | 1.366 | 139,436,163 | ||||||||||
36,341,206 | Buckeye Partners LP Term B1 (1-Month USD-LIBOR + 2.250%)2 | 11/01/26 | 2.334 | 36,155,139 | ||||||||||
36,546,488 | Charter Communications Operating LLC (CCo. Safari LLC) Term B1 (1-Month USD-LIBOR + 1.750%)2 | 04/30/25 | 1.840 | 36,491,668 | ||||||||||
24,491,572 | Clarios Global LP (1-Month USD-LIBOR + 3.250%)2 | 04/30/26 | 3.337 | 24,328,213 | ||||||||||
36,682,945 | Clean Harbors, Inc. (3-Month USD-LIBOR + 1.750%)2 | 06/28/24 | 1.837 | 36,672,673 | ||||||||||
10,000,000 | Clean Harbors, Inc. (1-Month USD-LIBOR + 2.000%)2 | 10/08/28 | 2.087 | 9,993,800 | ||||||||||
24,975,000 | DaVita, Inc. Term A (1-Month USD-LIBOR + 1.500%)2 | 08/12/24 | 1.587 | 24,787,688 | ||||||||||
16,411,006 | Dell International LLC Term B2 (1-Month USD-LIBOR + 1.750%)2 | 09/19/25 | 2.000 | 16,398,370 | ||||||||||
25,891,030 | Delos Finance S.a r.l. (3-Month USD-LIBOR + 1.750%)2. | 10/06/23 | 1.882 | 25,854,524 | ||||||||||
38,650,623 | Eastern Power LLC (TPF II LC, LLC) (3-Month USD-LIBOR + 3.750%)2 | 10/02/25 | 4.750 | 34,193,819 | ||||||||||
48,378,981 | Elanco Animal Health, Inc. (1-Month USD-LIBOR + 1.750%)2 | 08/01/27 | 1.832 | 47,946,956 | ||||||||||
2,562,217 | EnLink Midstream Partners, LP (1-Month USD-LIBOR + 1.500%)2 | 12/10/21 | 1.586 | 2,555,812 | ||||||||||
3,990,000 | HCA, Inc. Term B (1-Month USD-LIBOR + 1.750%)2 | 06/30/28 | 1.837 | 4,009,950 | ||||||||||
4,846,602 | Icon Plc. (3-Month USD-LIBOR + 2.500%)2 | 07/03/28 | 3.000 | 4,846,069 | ||||||||||
19,452,498 | Icon Plc. (3-Month USD-LIBOR + 2.500%)2 | 07/03/28 | 3.000 | 19,450,358 | ||||||||||
33,913,415 | Iridium Satellite LLC Term B2 (1-Month USD-LIBOR + 2.500%)2 | 11/04/26 | 3.250 | 33,934,781 |
The accompanying notes are an integral part of these financial statements.
financial statements october 31, 2021 | 19 |
BBH LIMITED DURATION FUND
PORTFOLIO OF INVESTMENTS (continued)
October 31, 2021
Principal Amount | Maturity Date | Interest Rate | Value | |||||||||||
LOAN PARTICIPATIONS AND ASSIGNMENTS (continued) | ||||||||||||||
$ | 36,962,363 | Jazz Pharmaceuticals, Inc. (1-Month USD-LIBOR + 3.500%)2 | 05/05/28 | 4.000 | % | $ | 37,008,565 | |||||||
52,745,719 | Lumen Technologies, Inc. Term A (1-Month USD-LIBOR + 2.000%)2 | 01/31/25 | 2.087 | 52,416,058 | ||||||||||
22,876,096 | Lumen Technologies, Inc. Term B (1-Month USD-LIBOR + 2.250%)2 | 03/15/27 | 2.337 | 22,571,158 | ||||||||||
36,785,000 | MPH Acquisition Holdings LLC (3-Month USD-LIBOR + 4.250%)2 | 09/01/28 | 4.750 | 35,834,843 | ||||||||||
38,805,737 | NorthRiver Midstream Finance LP Term B (3-Month USD-LIBOR + 3.250%)2 | 10/01/25 | 3.382 | 38,713,767 | ||||||||||
27,325,000 | NVA Holdings, Inc. Term A3 (1-Month USD-LIBOR + 1.750%)2 | 02/20/23 | 1.875 | 27,188,375 | ||||||||||
28,196,803 | NVA Holdings, Inc. Term A5 (1-Month USD-LIBOR + 2.000%)2 | 02/19/25 | 2.125 | 27,632,867 | ||||||||||
53,610,638 | Organon & Co. (3-Month USD-LIBOR + 3.000%)2 | 06/02/28 | 3.500 | 53,711,426 | ||||||||||
23,003,125 | Owens-Illinois Group, Inc. (1-Month USD-LIBOR + 1.500%)2 | 06/25/24 | 1.587 | 22,830,602 | ||||||||||
56,715,000 | PPD, Inc. (1-Month USD-LIBOR + 2.000%)2 | 01/13/28 | 2.500 | 56,582,287 | ||||||||||
7,549,364 | RPI Intermediate Finance Trust Term B1 (1-Month USD-LIBOR + 1.750%)2 | 02/11/27 | 1.837 | 7,522,941 | ||||||||||
45,000,000 | SkyMiles IP, Ltd. (3-Month USD-LIBOR + 3.750%)2 | 10/20/27 | 4.750 | 47,899,800 | ||||||||||
13,881,043 | SS&C Technologies Holdings, Inc. Term B3 (1-Month USD-LIBOR + 1.750%)2 | 04/16/25 | 1.837 | 13,727,797 | ||||||||||
9,775,789 | SS&C Technologies Holdings, Inc. Term B4 (1-Month USD-LIBOR + 1.750%)2 | 04/16/25 | 1.837 | 9,667,865 | ||||||||||
8,160,113 | SS&C Technologies Holdings, Inc. Term B5 (1-Month USD-LIBOR + 1.750%)2 | 04/16/25 | 1.837 | 8,056,076 | ||||||||||
17,580,338 | UGI Energy Services LLC (1-Month USD-LIBOR + 3.750%)2 | 08/13/26 | 3.837 | 17,635,364 | ||||||||||
48,381,875 | United AirLines, Inc. Term B (3-Month USD-LIBOR + 3.750%)2 | 04/21/28 | 4.500 | 49,029,708 | ||||||||||
20,998,381 | Vistra Operations Co. LLC (Tex Operations Co. LLC) (1-Month USD-LIBOR + 1.750%)2 | 12/31/25 | 1.840 | 20,788,397 | ||||||||||
40,338,824 | Wyndham Hotels & Resorts, Inc. Term B (1-Month USD-LIBOR + 1.750%)2 | 05/30/25 | 1.837 | 40,041,930 | ||||||||||
62,963,781 | Wynn Resorts, Ltd. Term A (1-Month USD-LIBOR + 1.750%)2 | 09/20/24 | 1.840 | 61,704,505 | ||||||||||
20,938,603 | Zebra Buyer LLC (3-Month USD-LIBOR + 3.250%)2 | 04/21/28 | 3.750 | 20,979,643 | ||||||||||
Total Loan Participations and Assignments (Cost $1,391,156,699) | 1,389,970,476 |
The accompanying notes are an integral part of these financial statements.
20
BBH LIMITED DURATION FUND
PORTFOLIO OF INVESTMENTS (continued)
October 31, 2021
Principal Amount | Maturity Date | Interest Rate | Value | |||||||||||
MUNICIPAL BONDS (1.3%) | ||||||||||||||
$ | 110,000 | Indiana Health & Educational Facilities Financing Authority, Revenue Bonds2,3 | 11/15/31 | 1.750 | % | $ | 110,000 | |||||||
7,070,000 | Indiana Health & Educational Facilities Financing Authority, Revenue Bonds2,3 | 11/15/31 | 1.750 | 7,070,000 | ||||||||||
10,100,000 | New Jersey Turnpike Authority, Revenue Bonds (1-Month USD-LIBOR + 0.700%)2 | 01/01/24 | 0.758 | 10,191,292 | ||||||||||
14,775,000 | Texas Municipal Gas Acquisition & Supply Corp. I, Revenue Bonds | 12/15/26 | 6.250 | 17,087,806 | ||||||||||
119,055,000 | Texas Municipal Gas Acquisition & Supply Corp. II, Revenue Bonds (3-Month USD-LIBOR + 0.690%)2 | 09/15/27 | 0.767 | 119,658,073 | ||||||||||
Total Municipal Bonds (Cost $152,425,297) | 154,117,171 | |||||||||||||
| RESIDENTIAL MORTGAGE BACKED SECURITIES (0.7%) | |||||||||||||
25,058,730 | Cascade Funding Mortgage Trust 2019-RM31,2,3 | 06/25/69 | 2.800 | 25,252,900 | ||||||||||
5,872,208 | Pepper Residential Securities Trust No. 23A (1-Month USD-LIBOR + 0.950%)1,2 | 08/18/60 | 1.036 | 5,786,237 | ||||||||||
3,521,790 | Pepper Residential Securities Trust No. 24A (1-Month USD-LIBOR + 0.900%)1,2 | 11/18/60 | 0.986 | 3,530,701 | ||||||||||
13,236,373 | RESIMAC Premier 2019-2A (1-Month USD-LIBOR + 0.950%)1,2 | 02/10/51 | 1.034 | 13,043,889 | ||||||||||
12,706,762 | RESIMAC Premier 2020-1A (1-Month USD-LIBOR + 1.050%)1,2 | 02/07/52 | 1.136 | 12,754,561 | ||||||||||
16,817,296 | RESIMAC Premier 2021-1A (1-Month USD-LIBOR + 0.700%)1,2 | 07/10/52 | 0.784 | 16,801,890 | ||||||||||
11,445,920 | RMF Proprietary Issuance Trust 2019-11,2,3 | 10/25/63 | 2.750 | 11,304,473 | ||||||||||
Total Residential Mortgage Backed Securities (Cost $88,568,422) | 88,474,651 | |||||||||||||
| U.S. GOVERNMENT AGENCY OBLIGATIONS (2.0%) | |||||||||||||
25,622,000 | Federal Farm Credit Banks Funding Corp. | 08/25/25 | 0.610 | 25,291,639 | ||||||||||
46,000,000 | Federal Home Loan Mortgage Corp. | 05/19/23 | 0.250 | 45,913,119 | ||||||||||
50,168,000 | Federal Home Loan Mortgage Corp. | 10/27/25 | 0.600 | 49,199,402 | ||||||||||
36,490,000 | Federal Home Loan Mortgage Corp. | 10/27/25 | 0.625 | 35,815,049 | ||||||||||
45,500,000 | Federal Home Loan Mortgage Corp. | 11/12/25 | 0.600 | 44,861,639 | ||||||||||
29,040,000 | Federal Home Loan Mortgage Corp. | 11/25/25 | 0.625 | 28,665,337 | ||||||||||
30,617 | Federal Home Loan Mortgage Corp. (FHLMC) Non Gold Guaranteed (1-Year USD-LIBOR + 1.761%)2 | 04/01/36 | 2.118 | 31,821 |
The accompanying notes are an integral part of these financial statements.
financial statements october 31, 2021 | 21 |
BBH LIMITED DURATION FUND
PORTFOLIO OF INVESTMENTS (continued)
October 31, 2021
Principal Amount | Maturity Date | Interest Rate | Value | |||||||||||
U.S. GOVERNMENT AGENCY OBLIGATIONS (continued) | ||||||||||||||
$ | 13,568 | Federal Home Loan Mortgage Corp. (FHLMC) Non Gold Guaranteed (6-Month USD-LIBOR + 1.740%)2 | 12/01/36 | 1.990 | % | $ | 13,651 | |||||||
17,065 | Federal Home Loan Mortgage Corp. (FHLMC) Non Gold Guaranteed (1-Year USD-LIBOR + 1.745%)2 | 01/01/37 | 2.120 | 17,234 | ||||||||||
3,646,697 | Federal National Mortgage Association (FNMA) | 07/01/35 | 5.000 | 4,157,761 | ||||||||||
229,452 | Federal National Mortgage Association (FNMA) | 11/01/35 | 5.500 | 267,995 | ||||||||||
29,946 | Federal National Mortgage Association (FNMA) (1-Year USD-LIBOR + 1.992%)2 | 07/01/36 | 2.242 | 31,919 | ||||||||||
61,863 | Federal National Mortgage Association (FNMA) (1-Year USD-LIBOR + 1.722%)2 | 09/01/36 | 1.972 | 65,330 | ||||||||||
27,298 | Federal National Mortgage Association (FNMA) (1-Year USD-LIBOR + 1.754%)2 | 01/01/37 | 2.129 | 27,696 | ||||||||||
213,479 | Federal National Mortgage Association (FNMA) | 08/01/37 | 5.500 | 248,610 | ||||||||||
2,548,593 | Federal National Mortgage Association (FNMA) | 08/01/37 | 5.500 | 2,947,755 | ||||||||||
1,046,482 | Federal National Mortgage Association (FNMA) | 06/01/40 | 6.500 | 1,207,873 | ||||||||||
6,306 | Government National Mortgage Association (GNMA) (1-Year CMT Index + 1.500%)2 | 08/20/29 | 1.625 | 6,508 | ||||||||||
Total U.S. Government Agency Obligations (Cost $241,082,885) | 238,770,338 | |||||||||||||
| U.S. TREASURY BILLS (21.2%) | |||||||||||||
500,000 | U.S. Treasury Bill6 | 11/04/21 | 0.000 | 499,998 | ||||||||||
198,000,000 | U.S. Treasury Bill6 | 11/12/21 | 0.000 | 197,998,274 | ||||||||||
210,500,000 | U.S. Treasury Bill6 | 11/18/21 | 0.000 | 210,498,020 | ||||||||||
268,000,000 | U.S. Treasury Bill6 | 11/26/21 | 0.000 | 267,993,417 | ||||||||||
210,000,000 | U.S. Treasury Bill6 | 12/16/21 | 0.000 | 209,991,516 | ||||||||||
138,000,000 | U.S. Treasury Bill6 | 12/30/21 | 0.000 | 137,980,775 | ||||||||||
185,500,000 | U.S. Treasury Bill6 | 01/06/22 | 0.000 | 185,476,987 | ||||||||||
182,250,000 | U.S. Treasury Bill6 | 01/13/22 | 0.000 | 182,227,026 | ||||||||||
173,050,000 | U.S. Treasury Bill6 | 02/03/22 | 0.000 | 173,024,582 | ||||||||||
138,750,000 | U.S. Treasury Bill6 | 02/10/22 | 0.000 | 138,728,589 | ||||||||||
120,600,000 | U.S. Treasury Bill6 | 02/17/22 | 0.000 | 120,580,553 | ||||||||||
198,750,000 | U.S. Treasury Bill6 | 03/10/22 | 0.000 | 198,707,269 | ||||||||||
153,000,000 | U.S. Treasury Bill6 | 03/24/22 | 0.000 | 152,963,939 | ||||||||||
138,250,000 | U.S. Treasury Bill6 | 04/07/22 | 0.000 | 138,215,332 | ||||||||||
203,000,000 | U.S. Treasury Bill6 | 04/14/22 | 0.000 | 202,943,357 | ||||||||||
55,000,000 | U.S. Treasury Bill6,7 | 04/21/22 | 0.000 | 54,983,672 | ||||||||||
Total U.S. Treasury Bills (Cost $2,572,887,684) | 2,572,813,306 |
The accompanying notes are an integral part of these financial statements.
22
BBH LIMITED DURATION FUND
PORTFOLIO OF INVESTMENTS (continued)
October 31, 2021
Interest Rate | Value | ||||||||
TOTAL INVESTMENTS (Cost $12,140,541,463)8 | 100.9 | % | $ | 12,211,377,642 | |||||
LIABILITIES IN EXCESS OF OTHER ASSETS | (0.9) | % | (113,648,101 | ) | |||||
NET ASSETS | 100.0 | % | $ | 12,097,729,541 |
____________
1 | Security exempt from registration under Rule 144A of the Securities Act of 1933, as amended. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. Total market value of Rule 144A securities owned at October 31, 2021 was $3,478,486,746 or 28.8% of net assets. |
2 | Variable rate instrument. Interest rates change on specific dates (such as coupon or interest payment date). The yield shown represents the October 31, 2021 coupon or interest rate. |
3 | This variable rate security is based on a predetermined schedule and the rate at period end also represents the reference rate at period end. |
4 | Security that used significant unobservable inputs to determine fair value. |
5 | Security is perpetual in nature and has no stated maturity date. |
6 | Security issued with zero coupon. Income is recognized through accretion of discount. |
7 | All or a portion of this security is held at the broker as collateral for open futures contracts. |
8 | The aggregate cost of investments (including derivatives, if any) for federal income tax purposes is $12,150,124,522, the aggregate gross unrealized appreciation is $113,038,375 and the aggregate gross unrealized depreciation is $42,202,511, resulting in net unrealized appreciation of $70,835,864. |
| |
Abbreviations: | |
CMT – Constant Maturity Treasury. | |
FHLMC – Federal Home Loan Mortgage Corporation. | |
FNMA – Federal National Mortgage Association. | |
GNMA – Government National Mortgage Association. | |
LIBOR – London Interbank Offered Rate. | |
SOFR – Secured Overnight Financing Rate. |
The accompanying notes are an integral part of these financial statements.
financial statements october 31, 2021 | 23 |
BBH LIMITED DURATION FUND
PORTFOLIO OF INVESTMENTS (continued)
October 31, 2021
FINANCIAL FUTURES CONTRACTS
The following futures contracts were open at October 31, 2021:
Number | Unrealized | |||||||||||||||
of | Expiration | Notional | Market | Gain / | ||||||||||||
Description | Contracts | Date | Amount | Value | (Loss) | |||||||||||
Contracts to Sell: | ||||||||||||||||
U.S. Treasury 2-Year Notes | 900 | December 2021 | $198,171,137 | $197,325,000 | $ | 846,137 | ||||||||||
U.S. Treasury 5-Year Notes | 4,400 | December 2021 | 543,989,107 | 535,700,000 | 8,289,107 | |||||||||||
U.S. Treasury 10-Year Notes | 160 | December 2021 | 21,360,000 | 20,912,500 | 447,500 | |||||||||||
$ | 9,582,744 |
FAIR VALUE MEASUREMENTS
The Fund is required to disclose information regarding the fair value measurements of the Fund’s assets and liabilities. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The disclosure requirement established a three-tier hierarchy to maximize the use of observable market data and minimize the use of unobservable inputs and to establish classification of fair value measurements for disclosure purposes. Inputs refer broadly to the assumptions that market participants would use in pricing the asset or liability, including, for example, the risk inherent in a particular valuation technique used to measure fair value, including the model and/or the risk inherent in the inputs to the valuation technique. Inputs may be observable or unobservable. Observable inputs are inputs that reflect the assumptions market participants would use in pricing the asset or liability developed based on market data obtained from sources independent of the reporting entity. Unobservable inputs are inputs that reflect the Fund’s own considerations about the assumptions market participants would use in pricing the asset or liability developed based on the best information available in the circumstances.
Authoritative guidance establishes three levels of the fair value hierarchy as follows:
— | Level 1 – unadjusted quoted prices in active markets for identical assets and liabilities. |
— | Level 2 – significant other observable inputs (including quoted prices for similar assets and liabilities, interest rates, prepayment speeds, credit risk, etc.). |
— | Level 3 – significant unobservable inputs (including the Fund’s own assumptions in determining the fair value of assets and liabilities). |
The accompanying notes are an integral part of these financial statements.
24
BBH LIMITED DURATION FUND
PORTFOLIO OF INVESTMENTS (continued)
October 31, 2021
Inputs are used in applying the various valuation techniques and broadly refer to the assumptions that market participants use to make valuation decisions, including assumptions about risk. Inputs may include price information, specific and broad credit data, liquidity statistics, and other factors. A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. However, the determination of what constitutes “observable” requires judgment by the investment adviser. The investment adviser considers observable data to be that market data which is readily available, regularly distributed or updated, reliable and verifiable, not proprietary, and provided by independent sources that are actively involved in the relevant market. The categorization of a financial instrument within the hierarchy is based upon the pricing transparency of the instrument and does not necessarily correspond to the investment adviser’s perceived risk of that instrument.
Financial assets within Level 1 are based on quoted market prices in active markets. The Fund does not adjust the quoted price for these instruments.
Financial instruments that trade in markets that are not considered to be active but are valued based on quoted market prices, dealer quotations or alternative pricing sources supported by observable inputs are classified within Level 2. These include investment-grade corporate bonds, U.S. Treasury notes and bonds, and certain non-U.S. sovereign obligations and over-the-counter derivatives. As Level 2 financial assets include positions that are not traded in active markets and/or are subject to transfer restrictions, valuations may be adjusted to reflect illiquidity and/or non-transferability, which are generally based on available market information.
Financial assets classified within Level 3 have significant unobservable inputs, as they trade infrequently. Level 3 financial assets include asset backed securities and certain corporate debt securities.
Because of the inherent uncertainties of valuation, the values reflected in the financial statements may materially differ from the value received upon the actual sale of those investments.
The accompanying notes are an integral part of these financial statements.
financial statements october 31, 2021 | 25 |
BBH LIMITED DURATION FUND
PORTFOLIO OF INVESTMENTS (continued)
October 31, 2021
The following table summarizes the valuation of the Fund’s investments by the above fair value hierarchy levels as of October 31, 2021.
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 October 31, 2021 | |||||||||||||||
Asset Backed Securities | $ | — | $ | 1,801,819,391 | $ | 62,676,293 | $ | 1,864,495,684 | |||||||||||
Commercial Mortgage Backed Securities | — | 374,017,088 | — | 374,017,088 | |||||||||||||||
Corporate Bonds | — | 5,107,494,928 | — | 5,107,494,928 | |||||||||||||||
Exchange-Traded Funds | 421,224,000 | — | — | 421,224,000 | |||||||||||||||
Loan Participations and Assignments | — | 1,389,970,476 | — | 1,389,970,476 | |||||||||||||||
Municipal Bonds | — | 154,117,171 | — | 154,117,171 | |||||||||||||||
Residential Mortgage Backed Securities | — | 88,474,651 | — | 88,474,651 | |||||||||||||||
U.S. Government Agency Obligations | — | 238,770,338 | — | 238,770,338 | |||||||||||||||
U.S. Treasury Bills | — | 2,572,813,306 | — | 2,572,813,306 | |||||||||||||||
Total Investment, at value . | $ | 421,224,000 | $ | 11,727,477,349 | $ | 62,676,293 | $ | 12,211,377,642 | |||||||||||
Other Financial Instruments, at value | |||||||||||||||||||
Financial Futures Contracts | $ | 9,582,744 | $ | — | $ | — | $ | 9,582,744 | |||||||||||
Other Financial Instruments, at value. | $ | 9,582,744 | $ | — | $ | — | $ | 9,582,744 |
The accompanying notes are an integral part of these financial statements.
26
BBH LIMITED DURATION FUND
PORTFOLIO OF INVESTMENTS (continued)
October 31, 2021
The following is a reconciliation of assets for which significant unobservable inputs (Level 3) were used in determining fair value during the year ended October 31, 2021:
Asset Backed Securities | Loan Participations and Assignments | Total | |||||||||||||
Balance as of October 31, 2020 | $ | 71,714,438 | $ | 29,455,128 | $ | 101,169,566 | |||||||||
Purchases | — | — | — | ||||||||||||
Sales / Paydowns | (22,363,356 | ) | (27,512,570 | ) | (49,875,926 | ) | |||||||||
Realized gains (losses) | 1,377 | 35,321 | 36,698 | ||||||||||||
Change in unrealized appreciation (depreciation) | 36,624 | 555,207 | 591,831 | ||||||||||||
Amortization | 48,140 | 22,725 | 70,865 | ||||||||||||
Transfers from Level 3 | — | (2,555,811 | ) | (2,555,811 | ) | ||||||||||
Transfers to Level 3 | 13,239,070 | — | 13,239,070 | ||||||||||||
Balance as of October 31, 2021 | $ | 62,676,293 | $ | — | $ | 62,676,293 |
The Fund’s investments classified as Level 3 were either single broker quoted or valued using a model approach, including the Fund’s assumptions in determining their fair value.
The accompanying notes are an integral part of these financial statements.
financial statements october 31, 2021 | 27 |
BBH LIMITED DURATION FUND
STATEMENT OF ASSETS AND LIABILITIES
October 31, 2021
ASSETS: | ||||
Investments in securities, at value (Cost $12,140,541,463) | $ | 12,211,377,642 | ||
Cash | 2,776,777 | |||
Cash collateral for futures contracts | 100,000 | |||
Receivables for: | ||||
Interest | 45,439,882 | |||
Shares sold | 8,352,117 | |||
Investment advisory and administrative fee waiver reimbursement | 85,485 | |||
Investments sold | 18,132 | |||
Other | 1,022,173 | |||
Prepaid assets | 79,380 | |||
Total Assets | 12,269,251,588 | |||
LIABILITIES: | ||||
Payables for: | ||||
Investments purchased | 158,841,429 | |||
Shares redeemed | 8,360,653 | |||
Investment advisory and administrative fees | 2,579,436 | |||
Dividends declared | 1,146,157 | |||
Custody and fund accounting fees | 261,362 | |||
Shareholder servicing fees | 111,427 | |||
Futures variation margin on open contracts | 102,672 | |||
Professional fees | 86,275 | |||
Transfer agent fees | 13,226 | |||
Board of Trustees' fees | 1,111 | |||
Accrued expenses and other liabilities | 18,299 | |||
Total Liabilities | 171,522,047 | |||
NET ASSETS | $ | 12,097,729,541 | ||
Net Assets Consist of: | ||||
Paid-in capital | $ | 12,082,507,669 | ||
Retained earnings | 15,221,872 | |||
Net Assets | $ | 12,097,729,541 |
NET ASSET VALUE AND OFFERING PRICE PER SHARE | ||||
CLASS N SHARES | ||||
($655,707,480 ÷ 63,514,076 shares outstanding) | $10.32 | |||
CLASS I SHARES | ||||
($11,442,022,061 ÷ 1,108,888,145 shares outstanding) | $10.32 |
The accompanying notes are an integral part of these financial statements.
28
BBH LIMITED DURATION FUND
STATEMENT OF OPERATIONS
For the year ended October 31, 2021
NET INVESTMENT INCOME: | ||||
Income: | ||||
Dividends | $ | 4,205,311 | ||
Interest income | 177,480,149 | |||
Other income | 1,631,545 | |||
Total Income | 183,317,005 | |||
Expenses: | ||||
Investment advisory and administrative fees | 25,619,922 | |||
Shareholder servicing fees | 1,101,833 | |||
Custody and fund accounting fees | 976,379 | |||
Board of Trustees' fees | 119,301 | |||
Professional fees | 93,915 | |||
Transfer agent fees | 74,199 | |||
Miscellaneous expenses | 480,172 | |||
Total Expenses | 28,465,721 | |||
Investment advisory and administrative fee waiver | (746,522 | ) | ||
Net Expenses | 27,719,199 | |||
Net Investment Income | 155,597,806 | |||
NET REALIZED AND UNREALIZED GAIN: | ||||
Net realized loss on investments in securities | (13,302,188 | ) | ||
Net realized gain on futures contracts | 7,539,469 | |||
Net realized loss on investments in securities and futures contracts | (5,762,719 | ) | ||
Net change in unrealized appreciation/(depreciation) on investments in securities | 63,310,214 | |||
Net change in unrealized appreciation/(depreciation) on futures contracts | 7,561,819 | |||
Net change in unrealized appreciation/(depreciation) on investments in securities and futures contracts | 70,872,033 | |||
Net Realized and Unrealized Gain | 65,109,314 | |||
Net Increase in Net Assets Resulting from Operations | $ | 220,707,120 |
The accompanying notes are an integral part of these financial statements.
financial statements october 31, 2021 | 29 |
BBH LIMITED DURATION FUND
STATEMENTS OF CHANGES IN NET ASSETS
For the years ended October 31, | ||||||||
2021 | 2020 | |||||||
INCREASE IN NET ASSETS: | ||||||||
Operations: | ||||||||
Net investment income | $ | 155,597,806 | $ | 176,679,793 | ||||
Net realized gain (loss) on investments in securities and futures contracts | (5,762,719 | ) | 4,229,221 | |||||
Net change in unrealized appreciation/(depreciation) on investments in securities and futures contracts | 70,872,033 | (54,311,352 | ) | |||||
Net increase in net assets resulting from operations | 220,707,120 | 126,597,662 | ||||||
Dividends and distributions declared: | ||||||||
Class N | (8,039,596 | ) | (9,638,723 | ) | ||||
Class I | (145,689,084 | ) | (166,935,856 | ) | ||||
Total dividends and distributions declared | (153,728,680 | ) | (176,574,579 | ) | ||||
Share transactions: | ||||||||
Proceeds from sales of shares1 | 7,111,674,362 | 4,159,732,686 | ||||||
Net asset value of shares issued to shareholders for reinvestment of dividends and distributions | 32,811,791 | 37,126,855 | ||||||
Cost of shares redeemed1 | (3,185,266,679 | ) | (3,215,918,972 | ) | ||||
Net increase in net assets resulting from share transactions | 3,959,219,474 | 980,940,569 | ||||||
Total increase in net assets | 4,026,197,914 | 930,963,652 | ||||||
NET ASSETS: | ||||||||
Beginning of year | 8,071,531,627 | 7,140,567,975 | ||||||
End of year | $ | 12,097,729,541 | $ | 8,071,531,627 |
________________
1 | Includes share exchanges. See Note 5 in Notes to Financial Statements. |
The accompanying notes are an integral part of these financial statements.
30
BBH LIMITED DURATION FUND
FINANCIAL HIGHLIGHTS
Selected per share data and ratios for a Class N share outstanding throughout each year.
For the years ended October 31, | ||||||||||||||||||||
2021 | 2020 | 2019 | 2018 | 2017 | ||||||||||||||||
Net asset value, beginning of year | $ | 10.23 | $ | 10.26 | $ | 10.15 | $ | 10.19 | $ | 10.13 | ||||||||||
Income from investment operations: | ||||||||||||||||||||
Net investment income1 | 0.15 | 0.24 | 0.30 | 0.26 | 0.21 | |||||||||||||||
Net realized and unrealized gain (loss) | 0.09 | (0.03 | ) | 0.11 | (0.06 | ) | 0.05 | |||||||||||||
Total income from investment operations | 0.24 | 0.21 | 0.41 | 0.20 | 0.26 | |||||||||||||||
Less dividends and distributions: | ||||||||||||||||||||
From net investment income | (0.15 | ) | (0.24 | ) | (0.30 | ) | (0.24 | ) | (0.20 | ) | ||||||||||
Total dividends and distributions | (0.15 | ) | (0.24 | ) | (0.30 | ) | (0.24 | ) | (0.20 | ) | ||||||||||
Net asset value, end of year | $ | 10.32 | $ | 10.23 | $ | 10.26 | $ | 10.15 | $ | 10.19 | ||||||||||
Total return2 | 2.38 | % | 2.06 | % | 4.14 | % | 2.03 | % | 2.64 | % | ||||||||||
Ratios/Supplemental data: | ||||||||||||||||||||
Net assets, end of year (in millions) | $ | 656 | $ | 461 | $ | 371 | $ | 275 | $ | 72 | ||||||||||
Ratio of expenses to average net assets before reductions | 0.49 | % | 0.49 | % | 0.51 | % | 0.50 | % | 0.67 | % | ||||||||||
Fee waiver | (0.14 | )%3 | (0.14 | )%3 | (0.16 | )%3 | (0.15 | )%3 | (0.27 | )%3 | ||||||||||
Expense offset arrangement | 0.00 | % | 0.00 | % | (0.00 | )%4 | (0.00 | )%4 | (0.00 | )%4 | ||||||||||
Ratio of expenses to average net assets after reductions | 0.35 | % | 0.35 | % | 0.35 | % | 0.35 | % | 0.40 | % | ||||||||||
Ratio of net investment income to average net assets | 1.48 | % | 2.32 | % | 2.98 | % | 2.52 | % | 2.05 | % | ||||||||||
Portfolio turnover rate | 34 | % | 51 | % | 53 | % | 48 | % | 52 | % |
____________
1 | Calculated using average shares outstanding for the year. |
2 | Assumes the reinvestment of distributions. |
3 | The ratio of expenses to average net assets for the years ended October 31, 2021, 2020, 2019, 2018 and 2017, reflect fees reduced as result of contractual operating expense limitation of the share class. Prior to March 24, 2017, the expense limitation of the share class was 0.48%. Following March 24, 2017, the expense limitation was changed to 0.35%. The agreement is effective for the periods beginning on December 29, 2015 and can be changed at any time at the sole discretion of the Investment Advisor. For the years ended October 31, 2021, 2020, 2019, 2018 and 2017, the waived fees were $746,522, $595,975, $538,703, $242,627 and $132,560, respectively. |
4 | Less than 0.01%. |
The accompanying notes are an integral part of these financial statements.
financial statements october 31, 2021 | 31 |
BBH LIMITED DURATION FUND
FINANCIAL HIGHLIGHTS (continued)
Selected per share data and ratios for a Class I share outstanding throughout each year.
For the years ended October 31, | ||||||||||||||||||||
2021 | 2020 | 2019 | 2018 | 2017 | ||||||||||||||||
Net asset value, beginning of year | $ | 10.23 | $ | 10.25 | $ | 10.15 | $ | 10.19 | $ | 10.13 | ||||||||||
Income from investment operations: | ||||||||||||||||||||
Net investment income1 | 0.16 | 0.24 | 0.31 | 0.25 | 0.22 | |||||||||||||||
Net realized and unrealized gain (loss) | 0.09 | (0.02 | ) | 0.10 | (0.04 | ) | 0.06 | |||||||||||||
Total income from investment operations | 0.25 | 0.22 | 0.41 | 0.21 | 0.28 | |||||||||||||||
Less dividends and distributions: | ||||||||||||||||||||
From net investment income | (0.16 | ) | (0.24 | ) | (0.31 | ) | (0.25 | ) | (0.22 | ) | ||||||||||
Total dividends and distributions | (0.16 | ) | (0.24 | ) | (0.31 | ) | (0.25 | ) | (0.22 | ) | ||||||||||
Net asset value, end of year | $ | 10.32 | $ | 10.23 | $ | 10.25 | $ | 10.15 | $ | 10.19 | ||||||||||
Total return2 | 2.46 | % | 2.24 | % | 4.12 | % | 2.11 | % | 2.77 | % | ||||||||||
Ratios/Supplemental data: | ||||||||||||||||||||
Net assets, end of year (in millions) | $ | 11,442 | $ | 7,610 | $ | 6,769 | $ | 6,000 | $ | 6,346 | ||||||||||
Ratio of expenses to average net assets before reductions | 0.27 | % | 0.27 | % | 0.28 | % | 0.27 | % | 0.28 | % | ||||||||||
Expense offset arrangement | 0.00 | % | 0.00 | % | (0.00 | )%3 | (0.00 | )%3 | (0.00 | )%3 | ||||||||||
Ratio of expenses to average net assets after reductions | 0.27 | % | 0.27 | % | 0.28 | % | 0.27 | % | 0.28 | % | ||||||||||
Ratio of net investment income to average net assets | 1.55 | % | 2.40 | % | 3.04 | % | 2.47 | % | 2.17 | % | ||||||||||
Portfolio turnover rate | 34 | % | 51 | % | 53 | % | 48 | % | 52 | % |
____________
1 | Calculated using average shares outstanding for the year. |
2 | Assumes the reinvestment of distributions. |
3 | Less than 0.01%. |
The accompanying notes are an integral part of these financial statements.
32
BBH LIMITED DURATION FUND
NOTES TO FINANCIAL STATEMENTS
October 31, 2021
1.Organization. The Fund is a separate, diversified series of BBH Trust (the “Trust”), which is registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as an open-end management investment company. The Trust was originally organized under the laws of the State of Maryland on July 16, 1990 as BBH Fund, Inc. and re-organized as a Delaware statutory trust on June 12, 2007. The Fund commenced operation on December 22, 2000 and offers two share classes, Class N and Class I. Neither Class N shares nor Class I shares automatically convert to any other share class of the Fund. The investment objective of the Fund is to provide maximum total return, consistent with preservation of capital and prudent investment management. As of October 31, 2021, there were nine series of the Trust.
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. Bonds and other fixed income securities, including restricted securities (other than short-term obligations but including listed issues) are valued at their most recent bid prices (sales price if the principal market is an exchange) in the principal market in which such securities are normally traded, on the basis of valuations furnished by a pricing service, use of which has been approved by the Board of Trustees (the “Board”). In making such valuations, the pricing service utilizes both dealer supplied valuations and electronic data processing techniques, which take into account appropriate factors such as institutional-size trading in similar groups of securities, yield, quality, coupon rate, maturity, type of issue, trading characteristics and other market data, without exclusive reliance upon quoted prices, or exchange or over-the-counter prices, since such valuations are believed to reflect more accurately the fair value of such securities. Futures contracts held by the Fund are valued daily at the official settlement price of the exchange on which it is traded.
Securities or other assets for which market quotations are not readily available are valued at fair value in accordance with procedures established by and under the general supervision and responsibility of the Board. Short-term investments, which mature in 60 days or less are valued at amortized cost if their original maturity was 60 days or less, or by amortizing their value on the 61st day prior to maturity, if their original maturity when acquired by the Fund was more than 60 days, unless the use of amortized cost is determined not to represent “fair value” by the Board.
financial statements october 31, 2021 | 33 |
BBH LIMITED DURATION FUND
NOTES TO FINANCIAL STATEMENTS (continued)
October 31, 2021
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 daily and consists of interest accrued, discount earned (including, if any, both original issue and market discount) and premium amortization on the investments of the Fund. Investment income is recorded net of any foreign taxes withheld where recovery of such tax is uncertain. Debt obligations may be placed on non-accrual status and related interest income may be reduced by ceasing current accruals and writing off interest receivable when the collection of all or a portion of the interest has become doubtful based on consistently applied procedures. A debt obligation is removed from non-accrual status when the issuer resumes interest payments or when collectability of interest is reasonably assured.
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 generally apportioned among each fund in the Trust on a net assets basis or other suitable method. Expense estimates are accrued in the period to which they relate and adjustments are made when actual amounts are known.
D.Financial Futures Contracts. The Fund may enter into open futures contracts in order to economically hedge against anticipated future changes in interest rates which otherwise might either adversely affect the value of securities held for the Fund or adversely affect the prices of securities that are intended to be purchased at a later date for the Fund. The contractual amount of the futures contracts represents the investment the Fund has in a particular contract and does not necessarily represent the amounts potentially subject to risk of loss. Trading in futures contracts involves, to varying degrees, risk of loss in excess of any futures variation margin reflected in the Statement of Assets and Liabilities. The measurement of risk associated with futures contracts is meaningful only when all related and offsetting transactions are considered. Gains and losses are realized upon the expiration or closing of the futures contracts.
Risks related to the use of futures contracts include possible illiquidity of the futures markets, contract prices that can be highly volatile and imperfectly correlated to movements in economically hedged security values and/or interest rates, and potential losses in excess of the Fund’s initial investment.
Open future contracts held at October 31, 2021, are listed in the Portfolio of Investments.
For the year ended October 31, 2021, the average monthly notional amount of open futures contracts was $1,124,481,281. The range of monthly notional amounts was $763,520,244 to $1,332,100,072.
34
BBH LIMITED DURATION FUND
NOTES TO FINANCIAL STATEMENTS (continued)
October 31, 2021
Fair Values of Derivative Instruments as of October 31, 2021
Derivatives not accounted for as economically hedging instruments under authoritative guidance for derivatives instruments and hedging activities:
Asset Derivatives | Liability Derivatives | |||||||||||||
Risk | Statement of Assets and Liabilities Location | Fair Value | Statement of Assets and Liabilities Location | Fair Value | ||||||||||
Interest Rate Risk | Net unrealized appreciation/(depreciation) on futures contracts | $ | 9,582,744 | * | Net unrealized appreciation/(depreciation) on futures contracts | $ | — | |||||||
Total | $ | 9,582,744 | $ | — |
____________________
* | Includes cumulative appreciation/(depreciation) of futures contracts as reported in the Statement of Assets and Liabilities and Notes to Financial Statements. Only the current day’s variation margin is reported within the Statement of Assets and Liabilities. |
Effect of Derivative Instruments on the Statement of Operations
Interest Rate Risk | ||||||
Net Realized Gain/(Loss) on Derivatives | ||||||
Futures Contracts | $ | 7,539,469 | ||||
Net Change in Unrealized Appreciation/(Depreciation) on Derivatives | ||||||
Futures Contracts | $ | 7,561,819 |
E.Private Placement Securities. The Fund may purchase securities that are not registered under the Securities Act of 1933, as amended (“1933 Act”) but that can be sold to “qualified institutional buyers” in accordance with the requirements stated in Rule 144A or the requirements stated in Regulation S of the 1933 Act ("Private Placement Securities"). A Private Placement Security may be considered illiquid and therefore, under SEC Regulations for open-end investment companies, subject to the 15% limitation on the purchase of illiquid securities, unless it is determined on an ongoing basis that an adequate trading market exists for the security, which is the case for the Fund. Guidelines have been adopted and the daily function of determining and monitoring liquidity of Private Placement Securities has been delegated to the investment adviser. All relevant factors will be considered in determining the liquidity of Private Placement Securities and all investments in Private Placement Securities will be carefully monitored. Information regarding Private Placement Securities is included at the end of the Portfolio of Investments.
financial statements october 31, 2021 | 35 |
BBH LIMITED DURATION FUND
NOTES TO FINANCIAL STATEMENTS (continued)
October 31, 2021
F.Loan Participations and Assignments. The Fund may invest in loan participations and assignments, which include institutionally traded floating and fixed-rate debt securities generally acquired as an assignment from another holder of, or participation interest in, loans originated by a bank or financial institution (the “Lender”) that acts as agent for all holders. Some loan participations and assignments may be purchased on a “when-issued” basis. The agent administers the terms of the loan, as specified in the loan agreement. When investing in a loan assignment, the Fund acquires the loan in whole or in part and becomes a lender under the loan agreement. The Fund generally has the right to enforce compliance with the terms of the loan agreement with the borrower.
Assignments and participations involve credit, interest rate, and liquidity risk. Interest rates on floating rate securities adjust with interest rate changes and/or issuer credit quality, and unexpected changes in such rates could result in losses to the Fund. The interest rates paid on a floating rate security in which the Fund invests generally are readjusted periodically to an increment over a designated benchmark rate, such as the one-month, three-month, six-month, or one-year London Interbank Offered Rate (“LIBOR”). LIBOR is a short-term interest rate that banks charge one another and is generally representative of the most competitive and current cash rates.
The Fund may have difficulty trading assignments and participations to third parties. There may be restrictions on transfer and only limited opportunities may exist to sell such securities in secondary markets. As a result, the Fund may be unable to sell assignments or participations at the desired time or may be able to sell only at a price less than fair market value. The Fund utilizes an independent third party to value individual loan participations and assignments on a daily basis.
G.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 may result in temporary 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 between paid-in capital and retained earnings/(accumulated deficit) within the Statement of Assets and 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.
36
BBH LIMITED DURATION FUND
NOTES TO FINANCIAL STATEMENTS (continued)
October 31, 2021
The Fund is subject to the provisions of Accounting Standards Codification 740 Income Taxes (“ASC 740”). ASC 740 sets forth a minimum threshold for financial statement recognition of the benefit of a tax position taken or expected to be taken in a tax return. The Fund did not have any unrecognized tax benefits as of October 31, 2021, nor were there any increases or decreases in unrecognized tax benefits for the year then ended. The Fund recognizes interest and penalties, if any, related to unrecognized tax benefits as an income tax expense in the Statement of Operations. During the year ended October 31, 2021, the Fund did not incur any such interest or penalties. The Fund is subject to examination by U.S. federal and state tax authorities for returns filed for the prior three fiscal years. The Fund is not aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will significantly change in the next twelve months.
H.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 and distributions in the amount of $8,039,596 and $145,689,084 to Class N and Class I shareholders, respectively, during the year ended October 31, 2021.
The tax character of distributions paid during the years ended October 31, 2021 and 2020, respectively, were as follows:
Distributions paid from: | |||||||||||||||||||||||||
Ordinary income | Net long-term capital gain | Total taxable distributions | Tax return of capital | Total distributions paid | |||||||||||||||||||||
2021: | $ | 153,728,680 | $ | — | $ | 153,728,680 | $ | — | $ | 153,728,680 | |||||||||||||||
2020: | 176,574,579 | — | 176,574,579 | — | 176,574,579 |
As of October 31, 2021 and 2020, respectively, the components of retained earnings/(accumulated deficit) were as follows:
Components of retained earnings/(accumulated deficit): | |||||||||||||||||||||||||||||
Undistributed ordinary income | Undistributed long-term capital gain | Accumulated capital and other losses | Other book/tax temporary differences | Book unrealized appreciation/ (depreciation) | Total retained earnings/ (accumulated deficit) | ||||||||||||||||||||||||
2021: | $ | — | $ | — | $ | (55,613,992 | ) | $ | (9,583,059 | ) | $ | 80,418,923 | $ | 15,221,872 | |||||||||||||||
2020: | — | — | (59,316,057 | ) | (2,021,635 | ) | 9,546,890 | (51,790,802 | ) |
financial statements october 31, 2021 | 37 |
BBH LIMITED DURATION FUND
NOTES TO FINANCIAL STATEMENTS (continued)
October 31, 2021
The Fund had $55,613,992 of post-December 22, 2010 net capital loss carryforwards as of October 31, 2021, of which $– and $55,613,992, is attributable to short-term and long-term capital losses, respectively.
The Fund is permitted to carryforward capital losses for an unlimited period and they will retain their character as either short-term or long-term capital losses rather than being considered all short-term capital losses.
Total distributions paid may differ from amounts reported in the Statements of Changes in Net Assets because, for tax purposes, dividends are recognized when actually paid.
The differences between book-basis and tax-basis unrealized appreciation/(depreciation) is attributable primarily to the tax deferral of losses on wash sales and paydowns on fixed income securities.
To the extent future capital gains are offset by capital loss carryforwards, if any, such gains will not be distributed.
I.Use of Estimates. The preparation of the financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities in the financial statements, disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of increase and decrease in net assets from operations during the reporting period. Actual results could differ from these estimates.
3.Fees and Other Transactions with Affiliates.
A.Investment Advisory and Administrative Fees. 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, portfolio management and administrative services to the Fund. The Fund pays a combined fee for investment advisory and administrative services calculated daily and paid monthly at an annual rate equivalent to 0.30% per annum on the first $1 billion of the Fund’s average daily net assets and 0.25% per annum on the Fund’s average daily net assets over $1 billion. For the year ended October 31, 2021, the Fund incurred $25,619,922 for services under the Agreement.
B.Investment Advisory and Administrative Fee Waivers. Effective June 14, 2018 the Investment Adviser has contractually agreed to waive fees and/or reimburse expenses for the Fund’s Class N shares in order to limit total annual fund operating expenses (excluding interest, taxes, brokerage commissions, other expenditures that are capitalized in accordance with GAAP, other extraordinary expenses not incurred in the ordinary course of the Fund’s business) of Class N to 0.35%. For the year ended October 31, 2021, the Investment Adviser waived fees in the amount of $746,522 for Class N.
38
BBH LIMITED DURATION FUND
NOTES TO FINANCIAL STATEMENTS (continued)
October 31, 2021
C.Shareholder Servicing Fees. The Trust has a shareholder servicing agreement with BBH. BBH receives a fee from the Fund calculated daily and paid monthly at an annual rate of 0.20% of Class N shares’ average daily net assets. For the year ended October 31, 2021, Class N shares of the Fund incurred $1,101,833 in shareholder servicing fees.
D.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% of the Fund’s net asset value. For the year ended October 31, 2021, the Fund incurred $976,379 in custody and fund accounting fees. As per agreement with the Fund’s custodian, the Fund receives interest income on cash balances held by the custodian at the BBH Base Rate. The BBH Base Rate is defined as BBH’s effective trading rate in local money markets on each day. The total interest earned by the Fund for the year ended October 31, 2021 was $5,699. This amount is included in “Interest income” in the Statement of Operations. 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 year ended October 31, 2021, was $847. This amount is included under line item “Custody and fund accounting fees” in the Statement of Operations.
E.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 year ended October 31, 2021, the Fund incurred $119,301 in independent Trustee compensation and expense reimbursements.
F.Officers of the Trust. Officers of the Trust are also employees of BBH. Officers are paid no fees by the Trust for their services to the Trust.
financial statements october 31, 2021 | 39 |
BBH LIMITED DURATION FUND
NOTES TO FINANCIAL STATEMENTS (continued)
October 31, 2021
4.Investment Transactions. For the year ended October 31, 2021, the cost of purchases and the proceeds of sales of investment securities, other than short-term investments, were $4,187,842,904 and $2,406,860,522, respectively.
5. Shares of Beneficial Interest. The Trust is permitted to issue an unlimited number of Class N shares and Class I shares of beneficial interest, at no par value. Transactions in Class N and Class I shares were as follows:
For the year ended October 31, 2021 | For the year ended October 31, 2020 | |||||||||||||||
Shares | Dollars | Shares | Dollars | |||||||||||||
Class N | ||||||||||||||||
Shares sold | 37,397,145 | $ | 386,600,187 | 38,050,699 | $ | 388,416,903 | ||||||||||
Shares issued in connection with reinvestments of dividends | 754,073 | 7,791,895 | 911,844 | 9,267,354 | ||||||||||||
Shares redeemed | (19,724,527 | ) | (203,824,235 | ) | (30,058,670 | ) | (304,777,755 | ) | ||||||||
Net increase | 18,426,691 | $ | 190,567,847 | 8,903,873 | $ | 92,906,502 | ||||||||||
Class I | ||||||||||||||||
Shares sold | 650,852,091 | $ | 6,725,074,175 | 369,593,937 | $ | 3,771,315,783 | ||||||||||
Shares issued in connection with reinvestments of dividends | 2,421,793 | 25,019,896 | 2,741,019 | 27,859,501 | ||||||||||||
Shares redeemed | (288,574,356 | ) | (2,981,442,444 | ) | (288,332,500 | ) | (2,911,141,217 | ) | ||||||||
Net increase | 364,699,528 | $ | 3,768,651,627 | 84,002,456 | $ | 888,034,067 |
Included in Shares Sold and Shares Redeemed are shareholder exchanges during the years ended October 31, 2021 and October 31, 2020. Specifically:
During the year ended October 31, 2021, 245,206 shares of Class N were exchanged for 245,372 shares of Class I valued at $2,536,380 and 1,144 shares of Class I were exchanged for 1,144 shares of Class N valued at $11,815.
During the year ended October 31, 2020, 815,626 shares of Class N were exchanged for 816,288 shares of Class I valued at $8,142,838 and 22,929 shares of Class I were exchanged for 22,929 shares of Class N valued at $235,706.
40
BBH LIMITED DURATION FUND
NOTES TO FINANCIAL STATEMENTS (continued)
October 31, 2021
6.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:
A shareholder may lose money by investing in the Fund (investment risk). The Fund is actively managed and the decisions by the Investment Adviser may cause the Fund to incur losses or miss profit opportunities (management risk). In the normal course of business, the Fund invests in securities and enters into transactions where risks exist due to failure of a counterparty to a transaction to perform (credit risk), changes in interest rates (interest rate risk), higher volatility for securities with longer maturities (maturity risk), financial performance or leverage of the issuer (issuer risk), difficulty in being able to purchase or sell a security (illiquid securities risk), or certain risks associated with investing in foreign securities not present in domestic investments, including, but not limited to, recovery of tax withheld by foreign jurisdictions (foreign investment risk). The Fund’s use of derivatives creates risks that are different from, or possibly greater than, the risks associated with investing directly in securities as the Fund could lose more than the principal amount invested (derivatives risk). The Fund invests in asset-backed and mortgage-backed securities (mortgage-backed securities risk) which are subject to the risk that borrowers may default on the obligations that underlie these securities. In addition, these securities may be paid off sooner (prepayment risk) or later than expected which may increase the volatility of securities during periods of fluctuating interest rates. The Fund may invest in bonds issued by foreign governments which may be unable or unwilling to make interest payments and/or repay the principal owed (sovereign debt risk). The Fund���s use of borrowing, in reverse repurchase agreements and investment in some derivatives, involves leverage. Leverage tends to exaggerate the effect of any increase or decrease in the value of the Fund’s securities and may cause the Fund to be more volatile (leverage risk). The value of securities held by the Fund may decline in response to certain events, including: those directly involving the companies or issuers whose securities are held by the Fund; conditions affecting the general economy; overall market changes; local, regional or political, social or economic instability; and currency and interest rate and price fluctuations. Natural disasters, the spread of infectious illness and other public health emergencies, recession, terrorism and other unforeseeable events may lead to increased market volatility and may have adverse effects on world economies and markets generally (market risk). The Fund’s shareholders may be adversely impacted by asset allocation decisions made by an investment adviser whose discretionary clients make up a large percentage of the Fund’s shareholders (shareholder concentration risk). While the U.S. Government has historically provided financial support to U.S. government-sponsored agencies or instrumentalities during times of financial stress, such as the various actions taken to stabilize the Federal National Mortgage Association and Federal Home Loan Mortgage Corporation during the credit crisis of 2008, no assurance can be given that it will do so in the future. Such securities are neither issued nor guaranteed by the U.S. Treasury (U.S. Government Agency Securities Risk). The Fund may invest in private placement securities that are issued pursuant to Rule 144A or Regulation S which have not been registered with the U.S. Securities and Exchange Commission ("SEC"). These securities may be subject to contractual restrictions which prohibit or limit
financial statements october 31, 2021 | 41 |
BBH LIMITED DURATION FUND
NOTES TO FINANCIAL STATEMENTS (continued)
October 31, 2021
their resale (Private Placement risk). LIBOR is scheduled to be phased out by the end of 2021. The unavailability and/or discontinuation of LIBOR may affect the value, liquidity or return on certain fund investments that mature later than 2021 and may result in costs incurred in connection with closing out positions and entering into new positions. Any pricing adjustments to the fund’s investments resulting from a substitute reference rate may also adversely affect the fund’s performance and/or net asset value (LIBOR Transition risk). The extent of the Fund’s exposure to these risks in respect to these financial assets is included in their value as recorded in the Fund’s Statement of Assets and Liabilities.
In 2020, the COVID-19 outbreak was declared a pandemic by the World Health Organization. The situation is dynamic with various cities and countries around the world responding in different ways to address the outbreak. The rapid development and fluidity of this situation precludes any prediction as its ultimate impact, which may have a continued adverse impact on economic and market conditions and trigger a period of global economic slowdown. Management is monitoring developments relating to COVID-19 and is coordinating its operational response based on existing business continuity plans and on guidance from global health organizations, relevant governments, and general pandemic response best practices.
Please refer to the Fund’s prospectus for a complete description of the principal risks of investing in the Fund.
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.
7.Subsequent Events. BBH, the custodian and fund accountant for the Fund, has entered into an agreement with State Street Corporation (“State Street”) under which State Street will acquire BBH’s Investor Services business; which includes those services provided to the Fund. The transaction is expected to be completed in the first quarter of 2022, subject to customary closing conditions and regulatory approvals. Investment advisory, portfolio management and administrative services provided to BBH Trust by BBH through its SID are not impacted by the agreement with State Street.
Management has evaluated events and transactions that have occurred since October 31, 2021 through the date the financial statements were issued and determined that there were no other subsequent events that would require recognition or additional disclosure in the financial statements.
42
BBH LIMITED DURATION FUND
DISCLOSURE OF FUND EXPENSES
October 31, 2021 (unaudited)
EXAMPLE
As a shareholder of the Fund, you may incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments, reinvested distributions, or other distributions; redemption fees; and exchange fees; and (2) ongoing costs, including management fees; and other Fund expenses. This Example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The Example is based on an investment of $1,000 invested at the beginning of the six-month period and held for the entire period (May 1, 2021 to October 31, 2021).
ACTUAL EXPENSES
The first line of the table provides information about actual account values and actual expenses. You may use information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled “Expenses Paid During the Period” to estimate the expenses you paid on your account during the period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The second line of the table provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid during the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% Hypothetical Example with the 5% hypothetical examples that appear in the shareholder reports of other funds.
financial statements october 31, 2021 | 43 |
BBH LIMITED DURATION FUND
DISCLOSURE OF FUND EXPENSES (continued)
October 31, 2021 (unaudited)
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as redemption fees or exchange fees. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
Beginning Account Value May 1, 2021 | Ending Account Value October 31, 2021 | Expenses Paid During Period May 1, 2021 to October 31, 20211 | |||||||||||||
Class N | |||||||||||||||
Actual | $1,000 | $1,005 | $1.77 | ||||||||||||
Hypothetical2 | $1,000 | $1,023 | $1.79 |
Beginning Account Value May 1, 2021 | Ending Account Value October 31, 2021 | Expenses Paid During Period May 1, 2021 to October 31, 20211 | |||||||||||||
Class I | |||||||||||||||
Actual | $1,000 | $1,005 | $1.37 | ||||||||||||
Hypothetical2 | $1,000 | $1,024 | $1.38 |
________________
1 | Expenses are equal to the Fund’s annualized expense ratio of 0.35% and 0.27% for Class N and I shares, respectively, multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period). |
2 | Assumes a return of 5% before expenses. For the purposes of the calculation, the applicable annualized expenses ratio for each class of shares is subtracted from the assumed return before expenses. |
44
BBH LIMITED DURATION FUND
CONFLICTS OF INTEREST
October 31, 2021 (unaudited)
Conflicts of Interest
BBH, including the Investment Adviser, provides discretionary and non-discretionary investment management services and products to corporations, institutions and individual investors throughout the world. As a result, in the ordinary course of its businesses, BBH, including the Investment Adviser, may engage in activities in which its interests or the interests of its clients may conflict with or be adverse to the interests of the Funds. In addition, certain of such clients (including the Funds) utilize the services of BBH for which they will pay to BBH customary fees and expenses that will not be shared with the Funds.
The Investment Adviser and the Sub-Adviser have adopted and implemented policies and procedures that seek to manage conflicts of interest. Pursuant to such policies and procedures, the Investment Adviser and the Sub-Adviser monitor a variety of areas, including compliance with fund investment guidelines, the investment in only those securities that have been approved for purchase, and compliance with their respective Code of Ethics.
The Trust also manages these conflicts of interest. For example, the Trust has designated a Chief Compliance Officer (“CCO”) and has adopted and implemented policies and procedures designed to manage the conflicts identified below and other conflicts that may arise in the course of the Funds’ operations in such a way as to safeguard the Funds from being negatively affected as a result of any such potential conflicts. From time to time, the Trustees receive reports from the Investment Adviser, the Sub-Adviser and the Trust’s CCO on areas of potential conflict.
Investors should carefully review the following, which describes potential and actual conflicts of interest that BBH, the Investment Adviser and Sub-Adviser can face in the operation of their respective investment management services. This section is not, and is not intended to be, a complete enumeration or explanation of all of the potential conflicts of interest that may arise. The Investment Adviser, the Sub-Adviser and the Funds have adopted policies and procedures reasonably designed to appropriately prevent, limit or mitigate the conflicts of interest described below. Additional information about potential conflicts of interest regarding the Investment Adviser is set forth in the Investment Adviser’s Form ADV. A copy of Part 1 and Part 2A of the Investment Adviser’s Form ADV is available on the SEC’s website (www.adviserinfo.sec.gov). In addition, many of the activities that create these conflicts of interest are limited and/or prohibited by law, unless an exception is available.
Other Clients and Allocation of Investment Opportunities. BBH, the Investment Adviser, and the Sub-Adviser manage funds and accounts of clients other than the Funds (“Other Clients”). In general, BBH, the Investment Adviser, and the Sub-Adviser face conflicts of interest when they render investment advisory services to different clients and, from time to time, provide dissimilar investment advice to different clients. Investment decisions will not necessarily be made in parallel among the Funds and Other Clients. Investments made by the Funds do not, and are not intended to, replicate the investments, or the investment methods and strategies, of Other Clients. Accordingly, such Other Clients’ accounts may produce results that are materially different from those experienced by the Funds. Certain other conflicts of interest may arise in connection with a portfolio manager’s management of the Funds’ investments, on the one hand, and the investments of other funds or accounts for which the portfolio manager is responsible, on the other. For example, it is possible that the various funds or accounts managed by the Investment Adviser or Sub-Adviser
financial statements october 31, 2021 | 45 |
BBH LIMITED DURATION FUND
CONFLICTS OF INTEREST (continued)
October 31, 2021 (unaudited)
could have different investment strategies that, at times, might conflict with one another to the possible detriment of the Funds. From time to time, the Investment Adviser and Sub-Adviser, sponsor and with other investment pools and accounts which engage in the same or similar businesses as the Funds using the same or similar investment strategies. To the extent that the same investment opportunities might be desirable for more than one account or fund, possible conflicts could arise in determining how to allocate them because the Investment Adviser or Sub-Adviser may have an incentive to allocate investment opportunities to certain accounts or funds. However, BBH and the Investment Adviser have implemented policies and procedures designed to ensure that information relevant to investment decisions is disseminated promptly within its portfolio management teams and investment opportunities are allocated equitably among different clients. The policies and procedures require, among other things, objective allocation for limited investment opportunities, and documentation and review of justifications for any decisions to make investments only for select accounts or in a manner disproportionate to the size of the account. Nevertheless, access to investment opportunities may be allocated differently among accounts due to the particular characteristics of an account, such as size of the account, cash position, tax status, risk tolerance and investment restrictions or for other reasons.
Actual or potential conflicts of interest may also arise when a portfolio manager has management responsibilities to multiple accounts or funds, resulting in unequal commitment of time and attention to the portfolio management of the funds or accounts.
Affiliated Service Providers. Other potential conflicts might include conflicts between the Funds and its affiliated and unaffiliated service providers (e.g. conflicting duties of loyalty). In addition to providing investment management services through the SID, BBH provides administrative, custody, shareholder servicing and fund accounting services to the Funds. BBH may have conflicting duties of loyalty while servicing the Funds and/or opportunities to further its own interest to the detriment of the Funds. For example, in negotiating fee arrangements with affiliated service providers, BBH may have an incentive to agree to higher fees than it would in the case of unaffiliated providers. BBH acting in its capacity as the Funds’ administrator is the primary valuation agent of the Funds. BBH values securities and assets in the Funds according to the Funds’ valuation policies. Because the Investment Adviser’s advisory and administrative fees are calculated by reference to the Funds’ net assets, BBH and its affiliates may have an incentive to seek to overvalue certain assets.
Aggregation. Potential conflicts of interest also arise with the aggregation of trade orders. Purchases and sales of securities for the Funds may be aggregated with orders for other client accounts managed by the Sub-Adviser. The Sub-Adviser, however, is not required to aggregate orders if portfolio management decisions for different accounts are made separately, or if it is determined that aggregating is not practicable, or in cases involving client direction. Prevailing trading activity frequently may make impossible the receipt of the same price or execution on the entire volume of securities purchased or sold. When this occurs, the various prices may be averaged, and the Funds will be charged or credited with the average price. Thus, the effect of the aggregation may operate on some occasions to the disadvantage of the Funds. In addition, under certain circumstances, the Funds will not be charged the same commission or commission equivalent rates in connection with an aggregated order.
46
BBH LIMITED DURATION FUND
CONFLICTS OF INTEREST (continued)
October 31, 2021 (unaudited)
Cross Trades. Under certain circumstances, the Investment Adviser, on behalf of the Funds, may seek to buy from or sell securities to another fund or account advised by BBH, the Investment Adviser. Subject to applicable law and regulation, BBH, the Investment Adviser may (but is not required to) effect purchases and sales between BBH, the Investment Adviser clients (“cross trades”), including the Funds, if BBH, the Investment Adviser or the Sub-Adviser believe such transactions are appropriate based on each party’s investment objectives and guidelines. There may be potential conflicts of interest or regulatory issues relating to these transactions which could limit the Investment Adviser’s decision to engage in these transactions for the Funds. BBH, the Investment Adviser and/or the Sub-Adviser may have a potentially conflicting division of loyalties and responsibilities to the parties in such transactions.
Soft Dollars. The Investment Adviser may direct brokerage transactions and/or payment of a portion of client commissions (“soft dollars”) to specific brokers or dealers or other providers to pay for research or other appropriate services which provide, in the Investment Adviser’s view, appropriate assistance in the investment decision-making process (including with respect to futures, fixed price offerings and over-the-counter transactions). The use of a broker that provides research and securities transaction services may result in a higher commission than that offered by a broker who does not provide such services. The Investment Adviser will determine in good faith whether the amount of commission is reasonable in relation to the value of research and services provided and whether the services provide lawful and appropriate assistance in its investment decision-making responsibilities.
Research or other services obtained in this manner may be used in servicing any or all of the Funds and other accounts managed by the Investment Adviser, including in connection with accounts that do not pay commissions to the broker related to the research or other service arrangements. Such products and services may disproportionately benefit other client accounts relative to the Funds based on the amount of brokerage commissions paid by the Funds and such other accounts. To the extent that the Sub-Adviser uses soft dollars, it will not have to pay for those products and services itself.
BBH may receive research that is bundled with the trade execution, clearing, and/or settlement services provided by a particular broker-dealer. To the extent that the Sub-Adviser receives research on this basis, many of the same conflicts related to traditional soft dollars may exist. For example, the research effectively will be paid by client commissions that also will be used to pay for the execution, clearing, and settlement services provided by the broker-dealer and will not be paid by the Sub-Adviser.
Arrangements regarding compensation and delegation of responsibility may create conflicts relating to selection of brokers or dealers to execute Fund portfolio trades and/or specific uses of commissions from Fund portfolio trades, administration of investment advice and valuation of securities.
Investments in BBH Funds. From time to time BBH may invest a portion of the assets of its discretionary investment advisory clients in the Funds. That investment by BBH on behalf of its discretionary investment advisory clients in the Funds may be significant at times.
Increasing a Fund’s assets may enhance investment flexibility and diversification and may contribute to economies of scale that tend to reduce the Funds’ expense ratio. In selecting the Funds for its discretionary
financial statements october 31, 2021 | 47 |
BBH LIMITED DURATION FUND
CONFLICTS OF INTEREST (continued)
October 31, 2021 (unaudited)
investment advisory clients, BBH may limit its selection to funds managed by BBH or the Investment Adviser. BBH may not consider or canvass the universe of unaffiliated investment companies available, even though there may be unaffiliated investment companies that may be more appropriate or that have superior performance. BBH, the Investment Adviser and their affiliates providing services to the Funds benefit from additional fees when the Funds is included as an investment by a discretionary investment advisory client.
BBH reserves the right to redeem at any time some or all of the shares of the Funds acquired for its discretionary investment advisory clients’ accounts. A large redemption of shares of the Funds by BBH on behalf of its discretionary investment advisory clients could significantly reduce the asset size of the Funds, which might have an adverse effect on the Funds’ investment flexibility, portfolio diversification and expense ratio.
Valuation. When market quotations are not readily available, or are believed by BBH to be unreliable, the Funds’ investments will be valued at fair value by BBH pursuant to procedures adopted by the Funds’ Board of Trustees. When determining an asset’s “fair value”, BBH seeks to determine the price that a Fund might reasonably expect to receive from the current sale of that asset in an arm’s-length transaction. The price generally may not be determined based on what the Funds might reasonably expect to receive for selling an asset at a later time or if it holds the asset to maturity. While fair value determinations will be based upon all available factors that BBH deems relevant at the time of the determination and may be based on analytical values determined by BBH using proprietary or third-party valuation models, fair value represents only a good faith approximation of the value of a security. The fair value of one or more securities may not, in retrospect, be the price at which those assets could have been sold during the period in which the particular fair values were used in determining the Funds’ net asset value. As a result, the Funds’ sale or redemption of its shares at net asset value, at a time when a holding or holdings are valued by BBH (pursuant to Board-adopted procedures) at fair value, may have the effect of diluting or increasing the economic interest of existing shareholders.
Referral Arrangements. BBH may enter into advisory and/or referral arrangements with third parties. Such arrangements may include compensation paid by BBH to the third party. BBH may pay a solicitation fee for referrals and/or advisory or incentive fees. BBH may benefit from increased amounts of assets under management.
Personal Trading. BBH, including the Investment Adviser, and any of their respective partners, principals, directors, officers, employees, affiliates or agents, face conflicts of interest when transacting in securities for their own accounts because they could benefit by trading in the same securities as the Funds, which could have an adverse effect on the Funds. However, the Investment Adviser has implemented policies and procedures concerning personal trading by BBH Partners and employees. The policy and procedures are intended to prevent BBH Partners and employees from trading in the same securities as the Funds. However, BBH, including the Investment Adviser, has implemented policies and procedures concerning personal trading by BBH Partners and employees. The policies and procedures are intended to prevent BBH Partners and employees with access to Fund material non-public information from trading in the same securities as the Funds.
48
BBH LIMITED DURATION FUND
CONFLICTS OF INTEREST (continued)
October 31, 2021 (unaudited)
Gifts and Entertainment. From time to time, employees of BBH, including the Investment Adviser, and any of their respective partners, principals, directors, officers, employees, affiliates or agents, may receive gifts and/or entertainment from clients, intermediaries, or service providers to the Funds or BBH, including the Investment Adviser, which could have the appearance of affecting or may potentially affect the judgment of the employees, or the manner in which they conduct business. The Investment Adviser has implemented policies and procedures concerning gifts and entertainment to mitigate any impact on the judgment of BBH Partners and employees. BBH, including the Investment Adviser, has implemented policies and procedures concerning gifts and entertainment to mitigate any impact on the judgment of BBH Partners and employees.
financial statements october 31, 2021 | 49 |
BBH LIMITED DURATION FUND
ADDITIONAL FEDERAL TAX INFORMATION
October 31, 2021 (unaudited)
The qualified investment income (“QII”) percentage for the year ended October 31, 2021 was 79.25%. In January 2022, shareholders will receive Form 1099-DIV, which will include their share of qualified dividends distributed during the calendar year 2021. Shareholders are advised to check with their tax advisers for information on the treatment of these amounts on their individual income tax returns.
50
TRUSTEES AND OFFICERS OF BBH LIMITED DURATION FUND
(unaudited)
Information pertaining to the Trustees and executive officers of the Trust as of October 31, 2021 is set forth below. The mailing address for each Trustee is c/o BBH Trust, 140 Broadway, New York, NY 10005.
Name and Birth Year | Position(s) Held with the Trust | Term of Office and Length of Time Served# | Principal Occupation(s) During Past 5 Years | Number of Portfolios in Fund Complex Overseen by Trustee^ | Other Public Company or Investment Company Directorships held by Trustee During Past 5 Years | |||||
Independent Trustees | ||||||||||
H. Whitney Wagner Birth Year: 1956 | Chairman of the Board and Trustee | Chairman Since 2014; Trustee Since 2007 and 2006-2007 with the Predecessor Trust | President, Clear Brook Advisors, a registered investment adviser. | 9 | None. | |||||
Andrew S. Frazier Birth Year: 1948 | Trustee | Since 2010 | Retired. | 9 | None. | |||||
Mark M. Collins Birth Year: 1956 | Trustee | Since 2011 | Partner of Brown Investment Advisory Incorporated, a registered investment adviser. | 9 | Chairman of Dillon Trust Company. | |||||
John M. Tesoro Birth Year: 1952 | Trustee | Since 2014 | Retired. | 9 | Trustee, Bridge Builder Trust (8 Funds); Director, Teton Advisors, Inc. (a registered investment adviser). | |||||
Joan A. Binstock Birth Year: 1954 | Trustee | Since 2019 | Partner, Chief Financial and Operations Officer, Lord Abbett & Co. LLC (1999-2018); Lovell Minnick Partners, Advisers Counsel (2018- present). | 9 | Independent Director, Morgan Stanley Direct Lending Fund; KKR Real Estate Interval Fund. |
FINANCIAL STATEMENTS OCTOBER 31, 2021 | 51 |
TRUSTEES AND OFFICERS OF BBH LIMITED DURATION FUND
(unaudited)
Name, Address and Birth Year | Position(s) Held with the Trust | Term of Office and Length of Time Served# | Principal Occupation(s) During Past 5 Years | Number of Portfolios in Fund Complex Overseen by Trustee^ | Other Public Company or Investment Company Directorships held by Trustee During Past 5 Years | |||||
Interested Trustees | ||||||||||
Susan C. Livingston+ 50 Post Office Square Boston, MA 02110 Birth Year: 1957 | Trustee | Since 2011 | Partner (since 1998) and Senior Client Advocate (since 2010) for BBH&Co. | 9 | None. | |||||
John A. Gehret+ 140 Broadway New York, NY 10005 Birth Year: 1959 | Trustee | Since 2011 | Limited Partner of BBH&Co. (2012-present). | 9 | None. |
52
TRUSTEES AND OFFICERS OF BBH LIMITED DURATION FUND
(unaudited)
Name, Address and Birth Year | Position(s) Held with the Trust | Term of Office and Length of Time Served# | Principal Occupation(s) During Past 5 Years | |||
Officers | ||||||
Jean-Pierre Paquin 140 Broadway New York, NY 10005 Birth Year: 1973 | President and Principal Executive Officer | Since 2016 | Partner of BBH&Co. since 2015; joined BBH&Co. in 1996. | |||
Daniel Greifenkamp 140 Broadway New York, NY 10005 Birth Year: 1969 | Vice President | Since 2016 | Managing Director of BBH&Co. since 2014; joined BBH&Co. in 2011. | |||
Charles H. Schreiber 140 Broadway New York, NY 10005 Birth Year: 1957 | Treasurer and Principal Financial Officer | Since 2007 2006-2007 with the Predecessor Trust | Senior Vice President of BBH&Co. since 2001; joined BBH&Co. in 1999. | |||
Paul F. Gallagher 140 Broadway New York, NY 10005 Birth Year: 1959 | Chief Compliance Officer (“CCO”) | Since 2015 | Senior Vice President of BBH&Co. since 2015. | |||
Kristin Marvin 140 Broadway New York, NY 10005 Birth Year: 1981 | Anti-Money Laundering Officer (“AMLO”) | Since 2021 | Assistant Vice President of BBH&Co. since March 2020; Program Manager, Ares Management Corporation, April 2015 - March 2020. |
FINANCIAL STATEMENTS OCTOBER 31, 2021 | 53 |
TRUSTEES AND OFFICERS OF BBH LIMITED DURATION FUND
(unaudited)
Name, Address and Birth Year | Position(s) Held with the Trust | Term of Office and Length of Time Served# | Principal Occupation(s) During Past 5 Years | |||
Suzan M. Barron 50 Post Office Square Boston, MA 02110 Birth Year: 1964 | Secretary | Since 2009 | Senior Vice President and Senior Investor Services Counsel of BBH&Co. since 2005. | |||
Crystal Cheung 140 Broadway New York, NY 10005 Birth Year: 1974 | Assistant Treasurer | Since 2018 | Assistant Vice President of BBH&Co. since 2016; joined BBH&Co. in 2014. | |||
Dania C. Piscetta 50 Post Office Square Boston, MA 02110 Birth Year: 1989 | Assistant Secretary | Since 2021 | Assistant Vice President of BBH&Co. since 2021; joined BBH&Co. in 2021; Assistant Vice President and Legal Associate of Wellington Management Company LLP, April 2018 - March 2021; Senior Compliance Analyst, Fidelity Investments, May 2016 – April 2018. |
________________
# | All officers of the Trust hold office for one year and until their respective successors are chosen and qualified (subject to the ability of the Trustees to remove any officer in accordance with the Trust’s By-laws). Mr. Wagner previously served on the Board of Trustees of the Predecessor Trust. |
+ | Ms. Livingston and Mr. Gehret are “interested persons” of the Trust as defined in the 1940 Act because of their positions as Partner and Limited Partner of BBH&Co., respectively. |
^ | The Fund Complex consists of the Trust, which has nine series, and each is counted as one “Portfolio” for purposes of this table. |
54
BBH LIMITED DURATION FUND
OPERATION AND EFFECTIVENESS OF THE FUND’S LIQUIDITY RISK MANAGEMENT PROGRAM
October 31, 2021 (unaudited)
The Securities and Exchange Commission adopted Rule 22e-4 under the Investment Company Act of 1940, as amended (the “Liquidity Rule”) to promote effective liquidity risk management throughout the open-end investment company industry in order to reduce the risk that funds will be unable to meet their redemption obligations and mitigate dilution of the interests of fund shareholders.
The Board of Trustees (the “Board”) of BBH Trust met on March 11, 2020 to review the liquidity risk management program (the “Program”) applicable to the funds of BBH Trust (the “Funds”) pursuant to the Liquidity Rule. The Board has appointed three members of the Brown Brothers Harriman & Co. Mutual Fund Advisory Department, the Investment Adviser to the Funds, as the Program Administrator for each Fund’s Program. The Program Administrator provided the Board with an annual report (the “Report”) that addressed the operations of the Program and assessed its adequacy and effectiveness of the Program. The Report covered the period from June 1, 2019 through January 31, 2020.
The Report noted that the Program complied with the key factors for consideration under the Liquidity Rule for assessing, managing and periodically reviewing a Fund’s liquidity risk, including the following points.
Liquidity classification. The Report described the Program’s liquidity classification methodology for categorizing the Funds’ investments into one of four liquidity buckets.
Highly Liquid Investment Minimum. The Report noted that one aspect of the Liquidity Rule is a requirement that funds that are expected to have less than 50% of assets classified as other than “highly liquid” should establish a minimum percentage of highly liquid assets that the fund is expected to hold on an on-going basis. The Program Administrator monitors the percentages of assets in each category on an ongoing basis and, given that no Fund has approached the 50% threshold, has made the determination that it is not necessary to assign a Highly Liquid Investment Minimum as provided for in the Liquidity Rule to any of the Funds.
The Fund’s investment strategy and liquidity of portfolio investments during normal and reasonably foreseeable stressed market conditions. During the Program reporting period, the Program Administrator reviewed whether each Fund’s investment strategy is appropriate for an open-end fund structure with a focus on Funds with more significant and consistent holdings of less liquid and illiquid assets and factored a Fund’s concentration in an issuer into the liquidity classification methodology by taking issuer position sizes into account.
Short-term and long-term cash flow projections during normal and reasonably foreseeable stressed market conditions. During the Program reporting period, the Program Administrator reviewed historical redemption activity and used this information as a component to establish each Fund’s reasonably anticipated trading size. The Program Administrator also took into consideration other factors such as shareholder ownership concentration, applicable distribution channels and the degree of certainty associated with a Fund’s short-term and long-term cash flow projections.
Holdings of cash and cash equivalents. The Program Administrator considered the degree to which each Fund held cash and cash equivalents as a component of each Fund’s ability to meet redemption requests.
FINANCIAL STATEMENTS OCTOBER 31, 2021 | 55 |
BBH LIMITED DURATION FUND
OPERATION AND EFFECTIVENESS OF THE FUND’S LIQUIDITY RISK MANAGEMENT PROGRAM (continued)
October 31, 2021 (unaudited)
There were no material changes to the Program during the reporting period. The Program Administrator has informed the Board that it believes that the Fund’s Program is adequately designed, has been implemented as intended, and has operated effectively since its implementation. No material exceptions have been noted since the implementation of the Program, and there were no liquidity events that impacted the Fund or its ability to meet redemption requests on a timely basis during the reporting period.
56
Administrator Brown Brothers Harriman & Co. 140 Broadway New York, NY 10005
Distributor ALPS Distributors, Inc. 1290 Broadway, Suite 1000 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 |
To obtain information or make shareholder inquiries:
By telephone: | Call 1-800-575-1265 |
By E-mail send your request to: | bbhfunds@bbh.com |
On the internet: | www.bbhfunds.com |
This report is submitted for the general information of shareholders and is not authorized for distribution to prospective investors unless preceded or accompanied by an effective prospectus. Nothing herein contained is to be considered an offer of sale or a solicitation of an offer to buy shares of the Fund.
For more complete information, visit www.bbhfunds.com for a prospectus. You should consider the Fund’s investment objectives, risks, charges and expenses carefully before you invest. Information about these and other important subjects is in the Fund’s prospectus, which you should read carefully before investing.
Holdings and allocations are subject to change. Fund holdings should not be relied on in making investment decisions and should not be construed as research or investment advice regarding particular securities. Current and future holdings are subject to risk.
The Fund files a complete schedule of portfolio holdings with the Securities and Exchange Commission (SEC) for the first and third quarters of each fiscal year as an exhibit to its reports on Form N-PORT. The Fund’s Forms N-PORT are available electronically on the SEC’s website (sec.gov). For a complete list of a fund’s portfolio holdings, view the most recent holdings listing, semi-annual report, or annual report on the Fund’s web site at http://www.bbhfunds.com.
A summary of the Fund’s Proxy Voting Policy that the Fund uses to determine how to vote proxies, if any, relating to securities held in the Fund’s portfolio, as well as a record of how the Fund voted any such proxies during the most recent 12-month period ended June 30, is available, without charge, upon request by calling the toll-free number listed above. This information is also available on the SEC’s website at www.sec.gov.
NOT FDIC INSURED NO BANK GUARANTEE MAY LOSE VALUE
Annual Report
OCTOBER 31, 2021
BBH Income Fund
BBH INCOME FUND
MANAGEMENT’S DISCUSSION OF FUND PERFORMANCE
October 31, 2021
Intermediate-term corporate indexes eked out paltry gains, as risk spreads compressed and credit-related performance just offset the impact of rising rates. This created an accommodative environment for active fixed income strategies to outperform market indexes. We are proud to report that the BBH Income Fund gained 4.64% during its fiscal year, exceeding the -0.48% return of the Bloomberg U.S. Aggregate Index and ranking in the 6th percentile out of 611 funds of its competitive Morningstar Intermediate Core-Plus Bond fund peer group.*
Longer-term interest rates spiked and credit risk spreads narrowed substantially during the first few months of the fiscal year when markets were still recovering from the depths of the COVID-19 pandemic. Increased optimism over the advent of vaccinations returned investors to risk-taking instruments. Following those initial large moves in the fall and winter, the optimism dampened, but Investment-grade and high-yield credit spreads eventually narrowed to levels not seen since the 1990s.
Our highly selective and valuation-focused approach made it increasingly challenging to source new opportunities in mainstream bond sectors in this market. The Fund's spread duration, a measure of how sensitive the portfolio value is to changes in “credit spreads” (the additional yield on credit instruments over a comparable-maturity Treasury), declined in tandem with the reduction of attractive opportunities. The Fund's spread duration was 4.2 years at the start of the fiscal year and reached a low of 3.4 years on September 30, 2021.
Despite the challenging environment, we were able to identify and invest in many credits that were durable, were fundamentally sound, and offered appealing compensation for the Fund. Those credits tended to reside in less traditional segments of the fixed income market, such as nontraditional asset-backed securities (ABS)**, business development company debt, and corporate loans. These sectors tend to be less trafficked by overseas investors, and thus offer higher yields to investors willing to search out and research them. One shared characteristic among many of these better opportunities is a relatively short duration profile (including lower “spread duration”, as discussed above), which protects the Fund somewhat from a sharp upward movement in spreads. The Fund’s allocation to, and selection within, these segments were notable contributors to performance results over the past year.
Heavy issuance was a distinguishing feature of the past 12 months, as the lower rate environment combined with increased investor appetite for yield to fuel record levels of issuance in several market sectors, including corporate bonds, loans, mortgage- and asset-backed securities, and commercial mortgage-backed securities. Issuance in all sectors was met with remarkable demand, with many deals being oversubscribed at their prevailing yields. We maintained our valuation and fundamental research disciplines and participated in issuances only when the yields offered were adequate and our research revealed the issue to be durable – able to perform through a variety of macroeconomic and industry environments. This credit and valuation discipline may seem less necessary in a period of strong growth and tight spread levels, but our experience suggests such discipline is rewarded when market risks re-emerge. It is unfortunately difficult to predict when and how risks events will manifest.
________________
* | Morningstar rankings are based on risk-adjusted returns. |
** | Traditional ABS include prime auto backed loans, credit cards and student loans (FFELP). Non-traditional ABS include ABS backed by other collateral types. |
financial statements october 31, 2021 | 3 |
BBH INCOME FUND
MANAGEMENT’S DISCUSSION OF FUND PERFORMANCE (continued)
October 31, 2021
We find few value opportunities in longer duration credits, and the Fund’s allocation to such securities has dwindled as credit spreads compressed. We would enjoy having a segment of the portfolio invested in long-dated credit instruments that offered compelling yields. However, we find most longer credits overpriced, and we wait patiently for conditions to change so that longer-dated credit securities offer adequate compensation for the risks assumed. Not coincidentally, our credit exposure resides in shorter duration instruments, and this positioning may provide the benefit of providing a defensive approach to enhancing yield as the markets face prospects of rising rates in the face of mounting inflationary pressures. These positions may provide price stability and generate cash flows that allow for more rapid reinvestment in a changing investment environment.
These credit positions are considered as we construct the portfolio’s total duration profile. We position the Fund to have an interest rate risk profile that differs little from the Fund’s performance benchmark. We achieve this objective through purchasing or selling Treasury futures to gain or reduce exposures to various points of the yield curve. This positioning explains why changes to interest rates had a negligible impact on the Fund’s performance versus its performance benchmark, the Bloomberg Aggregate Index. Instead, the Fund’s outperformance was driven by capturing the above-market yields offered by the credits we purchased.
As we look forward, we balance an opportunistic mindset with the proper caution required in a low yield and risk spread environment. The macroeconomic environment may challenge fixed income returns in the near-term. The Federal Reserve plans to curb new purchases of Treasuries and agency mortgage-backed securities. The fed funds futures market predicts the Federal Reserve will raise policy rates three times in 2022 (by 0.25% in each occurrence). Inflationary pressures seem to be mounting, and while the high levels of recent inflation data may be transitory, near-term inflation may settle at levels higher than what prevailed pre-pandemic. Treasury Inflation-Protected Securities (TIPS) are valued with breakeven inflation rates – the inflation rates that would need to prevail so their yields would equal those of traditional, nominal Treasury securities – of 2.5% – 3.0% at various maturities over the next ten years. Forward-looking forecasts of various inflation indexes estimate annual inflation rates of 2.0% - 2.5% over the next three to four years. With the 2-year Treasury offered at 0.50%, the 10-year Treasury offered at 1.55%, and the average yield of investment-grade corporate bonds at 2.22%, either: current yields rise to offer compensation for inflation or estimates of forward-looking inflation are too high.
We believe the Income Fund is positioned well to perform amidst such risks. The portfolio’s credit composition emphasizes instruments with relatively short duration profiles that are less trafficked by bond market participants and offer higher yields. We believe these positions allow the Fund to enhance income versus traditional alternatives and preserve capital versus predicted inflation levels in a rising-rate environment. The Fund’s duration was 6.81 years, a level consistent with its performance benchmark and peer funds. We believe that this duration profile offers benefits if the forward-looking inflation estimates are too high and affords investors the diversification benefits high-grade bonds tend to offer versus riskier assets in the event of a market disruption. The Fund’s spread duration stood at 3.6 years. This level is lower than where it stood during the depths of pandemic when valuations rewarded increased risk taking, reflecting prudent credit positioning in a thinner value environment.
4
BBH INCOME FUND
MANAGEMENT’S DISCUSSION OF FUND PERFORMANCE (continued)
October 31, 2021
Contribution figures are presented gross of fees. An investor’s returns will be reduced by fees incurred by the management of the Fund.
The markets appear to be at a delicate balance where yields have stabilized and spreads are at decades-long lows. Macroeconomic risks linger, and the most profound risks may be unidentified by the markets right now. We are confident that our approach and process will allow us to adapt to changes, capitalize on opportunities, and perform through a variety of environments. Thank you for the trust placed in BBH, and we look forward to engaging with you in 2022 and beyond.
________________
The BBH Income Fund was ranked against the following numbers of Intermediate Core-Plus Bond category funds over the following time periods ending 10/31/2021: 611 funds in the last year and 570 funds in the last three years. Class I ranked in the 6th percentile and 2nd percentile for the one and three year periods respectively. Past performance does not guarantee future results. |
Neither Morningstar nor its content providers are responsible for any damages or losses arising from any use of this information. |
financial statements october 31, 2021 | 5 |
BBH INCOME FUND
MANAGEMENT’S DISCUSSION OF FUND PERFORMANCE (continued)
October 31, 2021
Growth of $10,000 Invested in BBH Income
The graph below illustrates the hypothetical investment of $10,0001 in the Class I shares of the Fund since inception (June 27, 2018) to October 31, 2021 as compared to the Bloomberg Barclays U.S. Aggregate Bond Index.
The annualized gross expense ratio as shown in the March 1, 2021 prospectus for Class I shares was 0.48%. Performance data quoted represents past performance which is no guarantee of future results. Investment return and principal value will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Fund performance changes over time and current performance may be lower or higher than what is stated. Returns do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. For performance current to the most recent month-end please call 1-800-575-1265.
Hypothetical performance results are calculated on a total return basis and include all portfolio income, unrealized and realized capital gains, losses and reinvestment of dividends and other earnings. No one shareholder has actually achieved these results and no representation is being made that any actual shareholder achieved, or is likely to achieve, similar results to those shown. Hypothetical performance does not represent actual trading and may not reflect the impact of material economic and market factors. Undue reliance should not be placed on hypothetical performance results in making an investment decision.
________________
1 | The Fund’s performance assumes the reinvestment of all dividends and distributions. The Bloomberg Barclays U.S. Aggregate Bond Index has been adjusted to reflect reinvestment of dividends on securities in the index. The Bloomberg Barclays U.S. Aggregate Bond Index is not adjusted to reflect sales charges, expenses or other fees that the Securities and Exchange Commission requires to be reflected in the Fund’s performance. The index is unmanaged. Investments cannot be made in the index. |
6
BBH INCOME FUND
MANAGEMENT’S DISCUSSION OF FUND PERFORMANCE (continued)
October 31, 2021
Investing in the bond market is subject to certain risks including market, interest-rate, issuer, credit, maturity, call and inflation risk; investments may be worth more or less than the original cost when redeemed. The value of some asset- backed securities and mortgage-backed securities may be particularly sensitive to changes in prevailing interest rates and are subject to prepayment and extension risks, as well as risk that the underlying borrower will be unable to meet its obligations. Below investment grade bonds, commonly known as junk bonds, are subject to a high level of credit and market risks.
The Fund also invests in derivative instruments, investments whose values depend on the performance of the underlying security, assets, interest rate, index or currency and entail potentially higher volatility and risk of loss compared to traditional bond investments.
Foreign investing involves special risks including currency risk, increased volatility, political risks, and differences in auditing and other financial standards. Prices of emerging market securities can be significantly more volatile than the prices of securities in developed countries, and currency risk and political risks are accentuated in emerging markets.
The Fund may engage in certain investment activities that involve the use of leverage, which may magnify losses.
A significant investment of Fund assets within one or more sectors, industries, securities and/or durations may increase its vulnerability to any single economic, political, or regulatory developments, which will have a greater impact on the Fund’s return.
Illiquid investments subject the Fund to the risk that it may not be able to sell the investments when desired or at favorable prices.
To the extent that the Fund experiences a large purchase or redemption on any business day, the Fund’s performance may be adversely affected.
financial statements october 31, 2021 | 7 |
BBH INCOME FUND
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Trustees of the BBH Trust and Shareholders of BBH Income Fund:
Opinion on the Financial Statements and Financial Highlights
We have audited the accompanying statement of assets and liabilities, including the portfolio of investments, of BBH Income Fund (the "Fund"), one of the funds within BBH Trust, as of October 31, 2021, the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, the financial highlights for each of the three years in the period then ended and for the period from June 27, 2018 (commencement of operations) to October 31, 2018, and the related notes. In our opinion, the financial statements and financial highlights present fairly, in all material respects, the financial position of the Fund as of October 31, 2021, and the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the three years in the period then ended and for the period from June 27, 2018 (commencement of operations) to October 31, 2018, in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements and financial highlights are the responsibility of the BBH Trust's management. Our responsibility is to express an opinion on the Fund's financial statements and financial highlights based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the BBH Trust in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement, whether due to error or fraud. The BBH Trust is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the BBH Trust’s internal control over financial reporting. Accordingly, we express no such opinion.
8
BBH INCOME FUND
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM (continued)
Our audits included performing procedures to assess the risks of material misstatement of the financial statements and financial highlights, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements and financial highlights. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements and financial highlights. Our procedures included confirmation of securities owned as of October 31, 2021, by correspondence with the custodian and brokers; when replies were not received from brokers, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinion.
/s/ DELOITTE & TOUCHE LLP
Boston, Massachusetts
December 21, 2021
We have served as the auditor of one or more Brown Brothers Harriman investment companies since 1991.
financial statements october 31, 2021 | 9 |
BBH INCOME FUND
PORTFOLIO ALLOCATION
October 31, 2021
BREAKDOWN BY SECURITY TYPE
U.S. $ Value | Percent of Net Assets | ||||||||
Asset Backed Securities | $ | 99,845,443 | 16.3 | % | |||||
Commercial Mortgage Backed Securities | 20,176,636 | 3.3 | |||||||
Corporate Bonds | 266,413,309 | 43.5 | |||||||
Loan Participations and Assignments | 105,802,033 | 17.3 | |||||||
Municipal Bonds | 7,172,624 | 1.2 | |||||||
Preferred Stocks | 8,903,874 | 1.5 | |||||||
Residential Mortgage Backed Securities | 2,583,796 | 0.4 | |||||||
U.S. Inflation Linked Debt | 6,713,281 | 1.1 | |||||||
U.S. Treasury Bonds and Notes | 99,239,416 | 16.2 | |||||||
U.S. Treasury Bills | 4,999,370 | 0.8 |
| ||||||
Liabilities in Excess of Other Assets | (9,603,873 | ) | (1.6 | ) |
| ||||
NET ASSETS | $ | 612,245,909 | 100.0 | % |
|
All data as of October 31, 2021. The Fund’s sector diversification is expressed as a percentage of net assets and may vary over time.
The accompanying notes are an integral part of these financial statements.
10
BBH INCOME FUND
PORTFOLIO OF INVESTMENTS
October 31, 2021
Principal Amount | Maturity Date | Interest Rate | Value | |||||||||||||
| ASSET BACKED SECURITIES (16.3%) | |||||||||||||||
$ | 2,640,000 | ABPCI Direct Lending Fund ABS I, Ltd. 2020-1A1 | 12/20/30 | 3.199 | % | $ | 2,634,545 | |||||||||
96,578 | ACC Trust 2019-21 | 02/21/23 | 2.820 | 96,772 | ||||||||||||
1,133,960 | ACC Trust 2020-A1 | 03/20/23 | 6.000 | 1,152,337 | ||||||||||||
1,278,652 | Adams Outdoor Advertising LP 2018-11 | 11/15/48 | 4.810 | 1,336,313 | ||||||||||||
206,405 | Amur Equipment Finance Receivables VI LLC 2018-2A1 | 07/20/22 | 3.890 | 208,009 | ||||||||||||
2,860,000 | Antares CLO, Ltd. 2020-1A (3-Month USD-LIBOR + 1.900%)1,2 | 10/23/31 | 2.024 | 2,860,061 | ||||||||||||
1,480,000 | Ares PBN Finance Co. LLC 2021-1A1,3 | 10/15/36 | 6.000 | 1,484,429 | ||||||||||||
154,977 | ARI Fleet Lease Trust 2018-B1 | 08/16/27 | 3.220 | 155,387 | ||||||||||||
529,735 | BCC Funding Corp. XVI LLC 2019-1A1 | 08/20/24 | 2.460 | 534,985 | ||||||||||||
1,114,432 | Business Jet Securities LLC 2020-1A1 | 11/15/35 | 2.981 | 1,120,376 | ||||||||||||
1,430,000 | CARS-DB4 LP 2020-1A1 | 02/15/50 | 4.170 | 1,460,611 | ||||||||||||
1,062,381 | CF Hippolyta LLC 2020-11 | 07/15/60 | 2.280 | 1,068,469 | ||||||||||||
1,750,000 | CFG Investments, Ltd. 2021-11 | 05/20/32 | 5.820 | 1,780,658 | ||||||||||||
2,000,000 | Credit Acceptance Auto Loan Trust 2020-2A1 | 09/17/29 | 1.930 | 2,023,934 | ||||||||||||
2,850,000 | DigitalBridge Issuer LLC 2021-1A1 | 09/25/51 | 3.933 | 2,841,766 | ||||||||||||
1,070,000 | Elm Trust 2020-3A1 | 08/20/29 | 2.954 | 1,062,453 | ||||||||||||
2,490,000 | Elm Trust 2020-4A1 | 10/20/29 | 2.286 | 2,459,319 | ||||||||||||
59,814 | Enterprise Fleet Financing LLC 2018-31 | 05/20/24 | 3.380 | 60,000 | ||||||||||||
164,763 | FCI Funding LLC 2019-1A1 | 02/18/31 | 3.630 | 166,191 | ||||||||||||
1,174,256 | FNA LLC 2019-13 | 12/10/31 | 3.000 | 1,178,719 | ||||||||||||
1,597,984 | Global SC Finance VII Srl 2020-1A1 | 10/17/40 | 2.170 | 1,603,167 | ||||||||||||
1,517,998 | Global SC Finance VII Srl 2020-2A1 | 11/19/40 | 2.260 | 1,527,078 | ||||||||||||
4,270,000 | Golub Capital Partners ABS Funding, Ltd. 2021-1A1 | 04/20/29 | 2.773 | 4,224,172 | ||||||||||||
1,430,000 | Lendmark Funding Trust 2019-1A1 | 12/20/27 | 3.000 | 1,451,162 | ||||||||||||
1,120,000 | Lendmark Funding Trust 2019-2A1 | 04/20/28 | 2.780 | 1,139,866 | ||||||||||||
523,432 | LIAS Administration Fee Issuer LLC 2018-1A | 07/25/48 | 5.956 | 587,311 | ||||||||||||
690,000 | Mariner Finance Issuance Trust 2019-AA1 | 07/20/32 | 2.960 | 701,141 | ||||||||||||
1,070,000 | Mariner Finance Issuance Trust 2020-AA1 | 08/21/34 | 2.190 | 1,086,125 | ||||||||||||
1,260,000 | Monroe Capital ABS Funding, Ltd. 2021-1A1 | 04/22/31 | 2.815 | 1,242,580 | ||||||||||||
1,089,917 | NADG NNN Operating LP 2019-11 | 12/28/49 | 3.368 | 1,112,895 |
The accompanying notes are an integral part of these financial statements.
financial statements october 31, 2021 | 11 |
BBH INCOME FUND
PORTFOLIO OF INVESTMENTS (continued)
October 31, 2021
Principal Amount | Maturity Date | Interest Rate | Value | |||||||||||||
ASSET BACKED SECURITIES (continued) | ||||||||||||||||
$ | 2,520,000 | New Residential Advance Receivables Trust Advance Receivables Backed 2020-T11 | 08/15/53 | 1.426 | % | $ | 2,510,056 | |||||||||
420,622 | Newtek Small Business Loan Trust 2018-1 (U.S. Prime Rate - 0.550%)1,2 | 02/25/44 | 2.700 | 414,555 | ||||||||||||
199,526 | Newtek Small Business Loan Trust 2018-1 (U.S. Prime Rate + 0.750%)1,2 | 02/25/44 | 4.000 | 193,309 | ||||||||||||
3,960,000 | Niagara Park CLO, Ltd. 2019-1A (3-Month USD-LIBOR + 1.000%)1,2 | 07/17/32 | 1.122 | 3,963,960 | ||||||||||||
93,904 | NMEF Funding LLC 2019-A1 | 08/17/26 | 2.730 | 94,105 | ||||||||||||
2,180,000 | OnDeck Asset Securitization Trust III LLC 2021-1A1 | 05/17/27 | 1.590 | 2,170,888 | ||||||||||||
365,372 | OneMain Financial Issuance Trust 2019-1A1 | 02/14/31 | 3.480 | 365,746 | ||||||||||||
1,540,000 | OneMain Financial Issuance Trust 2020-1A1 | 05/14/32 | 3.840 | 1,585,122 | ||||||||||||
5,630,000 | Oportun Issuance Trust 2021-C1 | 10/08/31 | 2.180 | 5,629,348 | ||||||||||||
1,122,811 | Oscar US Funding XI LLC 2019-2A1 | 09/11/23 | 2.590 | 1,131,847 | ||||||||||||
1,051,445 | Oxford Finance Funding LLC 2019-1A1 | 02/15/27 | 4.459 | 1,078,028 | ||||||||||||
3,450,000 | Oxford Finance Funding LLC 2020-1A1 | 02/15/28 | 3.101 | 3,508,399 | ||||||||||||
1,520,000 | Palmer Square Loan Funding, Ltd. 2019-2A (3-Month USD-LIBOR + 2.250%)1,2 | 04/20/27 | 2.382 | 1,520,824 | ||||||||||||
1,940,000 | Palmer Square Loan Funding, Ltd. 2019-3A (3-Month USD-LIBOR + 2.100%)1,2 | 08/20/27 | 2.231 | 1,940,047 | ||||||||||||
924,954 | ReadyCap Lending Small Business Loan Trust 2019-2 (U.S. Prime Rate + -0.500%)1,2 | 12/27/44 | 2.750 | 886,220 | ||||||||||||
1,390,000 | Republic Finance Issuance Trust 2019-A1 | 11/22/27 | 3.430 | 1,394,334 | ||||||||||||
2,060,000 | Republic Finance Issuance Trust 2020-A1 | 11/20/30 | 2.470 | 2,097,435 | ||||||||||||
2,130,000 | Sabey Data Center Issuer LLC 2020-11 | 04/20/45 | 3.812 | 2,232,063 | ||||||||||||
1,500,000 | Santander Drive Auto Receivables Trust 2020-1 | 12/15/25 | 4.110 | 1,555,540 | ||||||||||||
1,940,000 | Santander Revolving Auto Loan Trust 2019-A1 | 01/26/32 | 2.510 | 2,018,513 | ||||||||||||
2,170,533 | Stack Infrastructure Issuer LLC 2019-1A1 | 02/25/44 | 4.540 | 2,264,506 | ||||||||||||
545,294 | SWC Funding LLC 2018-1A1,3 | 08/15/33 | 4.750 | 540,614 | ||||||||||||
1,688,525 | Textainer Marine Containers VII, Ltd. 2020-1A1 | 08/21/45 | 2.730 | 1,704,735 | ||||||||||||
4,942,445 | Thrust Engine Leasing DAC 2021-1A1 | 07/15/40 | 4.163 | 4,844,565 | ||||||||||||
5,990,000 | VC 3 LS LP 2021-B3 | 10/15/41 | 4.750 | 5,990,000 | ||||||||||||
2,590,000 | VCP RRL ABS I Ltd. 2021-1A1 | 10/20/31 | 2.152 | 2,589,957 | ||||||||||||
2,500,000 | World Financial Network Credit Card Master Trust 2019-A | 12/15/25 | 3.140 | 2,521,256 | ||||||||||||
2,741,010 | WRG Debt Funding IV LLC 2020-11,3 | 07/15/28 | 6.535 | 2,738,640 | ||||||||||||
| Total Asset Backed Securities (Cost $99,203,932) | 99,845,443 |
The accompanying notes are an integral part of these financial statements.
12
BBH INCOME FUND
PORTFOLIO OF INVESTMENTS (continued)
October 31, 2021
Principal Amount | Maturity Date | Interest Rate | Value | |||||||||||||
COMMERCIAL MORTGAGE BACKED SECURITIES (3.3%) | ||||||||||||||||
$ | 2,190,000 | BXMT, Ltd. 2020-FL2 (30-Day SOFR + 1.014%)1,2 | 02/15/38 | 1.064 | % | $ | 2,185,839 | |||||||||
1,250,000 | BXMT, Ltd. 2020-FL3 (30-Day SOFR + 2.664%)1,2 | 03/15/37 | 2.714 | 1,255,653 | ||||||||||||
146,085 | CG-CCRE Commercial Mortgage Trust 2014-FL2 (1-Month USD-LIBOR + 4.000%)1,2,3 | 11/15/31 | 4.090 | 145,763 | ||||||||||||
786,000 | CG-CCRE Commercial Mortgage Trust 2014-FL2 (1-Month USD-LIBOR + 4.000%)1,2 | 11/15/31 | 4.090 | 590,695 | ||||||||||||
1,375,473 | CG-CCRE Commercial Mortgage Trust 2014-FL2 (1-Month USD-LIBOR + 4.750%)1,2,3 | 11/15/31 | 4.840 | 1,163,925 | ||||||||||||
600,000 | CGMS Commercial Mortgage Trust 2017-MDRB (1-Month USD-LIBOR + 1.750%)1,2 | 07/15/30 | 1.840 | 592,850 | ||||||||||||
890,000 | Citigroup Commercial Mortgage Trust 2019-SMRT1 | 01/10/36 | 4.149 | 943,925 | ||||||||||||
3,540,000 | CSMC 2018-SITE1,2,4 | 04/15/36 | 4,941 | 3,584,192 | ||||||||||||
1,000,000 | Hudsons Bay Simon JV Trust 2015-HB101,2,4 | 08/05/34 | 5.629 | 859,014 | ||||||||||||
240,000 | JPMBB Commercial Mortgage Securities Trust 2014-C241,2,4 | 11/15/47 | 3.903 | 159,966 | ||||||||||||
3,070,000 | Morgan Stanley Capital I Trust 2019-BPR (1-Month USD-LIBOR + 1.400%)1,2 | 05/15/36 | 1.490 | 3,042,547 | ||||||||||||
890,000 | STWD, Ltd. 2019-FL1 (30-Day SOFR + 1.714%)1,2 | 07/15/38 | 1.764 | 889,923 | ||||||||||||
1,561,269 | TPG Real Estate Finance Issuer, Ltd. 2018-FL2 (1-Month USD-LIBOR + 1.130%)1,2 | 11/15/37 | 1.216 | 1,560,801 | ||||||||||||
300,000 | UBS-BAMLL Trust 2012-WRM1 | 06/10/30 | 3.663 | 301,162 |
The accompanying notes are an integral part of these financial statements.
financial statements october 31, 2021 | 13 |
BBH INCOME FUND
PORTFOLIO OF INVESTMENTS (continued)
October 31, 2021
Principal Amount | Maturity Date | Interest Rate | Value | |||||||||||||
COMMERCIAL MORTGAGE BACKED SECURITIES (continued) | ||||||||||||||||
$ | 2,915,000 | Wells Fargo Commercial Mortgage Trust 2020-SDAL (1-Month USD-LIBOR + 1.340%)1,2 | 02/15/37 | 1.430 | % | $ | 2,900,381 | |||||||||
Total Commercial Mortgage Backed Securities (Cost $20,656,657) | 220,176,636 | |||||||||||||||
CORPORATE BONDS (43.5%) | ||||||||||||||||
AEROSPACE/DEFENSE (1.4%) | ||||||||||||||||
2,220,000 | BAE Systems , Plc.1 | 04/15/30 | 3.400 | 2,373,820 | ||||||||||||
3,250,000 | Boeing Co. | 05/01/23 | 4.508 | 3,407,340 | ||||||||||||
2,700,000 | Boeing Co. | 02/01/28 | 3.250 | 2,827,147 | ||||||||||||
8,608,307 | ||||||||||||||||
AIRLINES (0.5%) | ||||||||||||||||
1,990,000 | American Airlines, Inc./AAdvantage Loyalty IP Ltd.1 | 04/20/26 | 5.500 | 2,087,510 | ||||||||||||
880,000 | Delta Air Lines, Inc./ SkyMiles IP, Ltd.1 | 10/20/28 | 4.750 | 977,179 | ||||||||||||
3,064,689 | ||||||||||||||||
AUTO MANUFACTURERS (0.5%) | ||||||||||||||||
3,080,000 | Ford Motor Credit Co. LLC | 11/13/25 | 3.375 | 3,164,700 | ||||||||||||
BANKS (4.0%) | ||||||||||||||||
1,155,000 | ANZ New Zealand Int'l, Ltd., London Branch1 | 03/19/24 | 3.400 | 1,222,575 | ||||||||||||
1,365,000 | Bank of New Zealand1 | 02/20/24 | 3.500 | 1,442,346 | ||||||||||||
1,735,000 | HSBC Holdings, Plc | 03/31/30 | 4.950 | 2,042,619 | ||||||||||||
1,140,000 | HSBC Holdings, Plc (SOFR + 2.387%)2 | 06/04/31 | 2.848 | 1,158,139 | ||||||||||||
2,020,000 | JPMorgan Chase & Co. (SOFR + 1.585%)2 | 03/13/26 | 2.005 | 2,058,530 | ||||||||||||
2,340,000 | Lloyds Banking Group, Plc | 05/08/25 | 4.450 | 2,574,777 | ||||||||||||
2,440,000 | Mitsubishi UFJ Financial Group, Inc. | 07/17/25 | 1.412 | 2,434,818 | ||||||||||||
1,410,000 | Morgan Stanley (SOFR + 1.990%)2 | 04/28/26 | 2.188 | 1,443,148 | ||||||||||||
505,000 | Santander Holdings USA, Inc. | 12/03/21 | 4.450 | 506,446 | ||||||||||||
810,000 | Santander Holdings USA, Inc. | 03/28/22 | 3.700 | 817,792 | ||||||||||||
6,100,000 | US Bancorp (5-Year CMT Index + 2.541%)2,5 | 3.700 | 6,075,905 | |||||||||||||
1,245,000 | Wells Fargo & Co. (SOFR + 2.000%)2 | 04/30/26 | 2.188 | 1,272,367 | ||||||||||||
1,165,000 | Wells Fargo & Co. (SOFR + 2.100%)2 | 06/02/28 | 2.393 | 1,184,068 | ||||||||||||
24,233,530 | ||||||||||||||||
BEVERAGES (0.3%) | ||||||||||||||||
1,310,000 | Anheuser-Busch InBev Worldwide, Inc. | 01/23/39 | 5.450 | 1,721,065 | ||||||||||||
| BIOTECHNOLOGY (0.2%) | |||||||||||||||
1,395,000 | Amgen, Inc. | 02/21/27 | 2.200 | 1,422,841 |
The accompanying notes are an integral part of these financial statements.
14
BBH INCOME FUND
PORTFOLIO OF INVESTMENTS (continued)
October 31, 2021
Principal Amount | Maturity Date | Interest Rate | Value | |||||||||||||
CORPORATE BONDS (continued) | ||||||||||||||||
BUILDING MATERIALS (0.9%) | ||||||||||||||||
$ | 2,804,000 | Builders FirstSource, Inc.1 | 06/01/27 | 6.750 | % | $ | 2,954,715 | |||||||||
2,530,000 | James Hardie International Finance DAC1 | 01/15/28 | 5.000 | 2,631,200 | ||||||||||||
5,585,915 | ||||||||||||||||
DIVERSIFIED FINANCIAL SERVICES (4.9%) | ||||||||||||||||
2,160,000 | AerCap Ireland Capital DAC / AerCap Global Aviation Trust | 10/29/24 | 1.750 | 2,161,811 | ||||||||||||
485,000 | AerCap Ireland Capital DAC / AerCap Global Aviation Trust | 10/15/27 | 4.625 | 539,623 | ||||||||||||
2,530,000 | Air Lease Corp. | 01/15/22 | 3.500 | 2,545,028 | ||||||||||||
3,055,000 | Alliance Data Systems Corp.1 | 12/15/24 | 4.750 | 3,125,243 | ||||||||||||
2,330,000 | Aviation Capital Group LLC1 | 12/15/24 | 5.500 | 2,586,445 | ||||||||||||
2,685,000 | Avolon Holdings Funding, Ltd.1 | 07/01/24 | 3.950 | 2,831,445 | ||||||||||||
925,000 | Avolon Holdings Funding, Ltd.1 | 01/15/26 | 5.500 | 1,036,265 | ||||||||||||
2,475,000 | Brightsphere Investment Group, Inc. | 07/27/26 | 4.800 | 2,534,931 | ||||||||||||
2,345,000 | Capital One Financial Corp. | 05/11/27 | 3.650 | 2,548,524 | ||||||||||||
840,000 | Credit Acceptance Corp.1 | 12/31/24 | 5.125 | 858,900 | ||||||||||||
1,400,000 | Credit Acceptance Corp. | 03/15/26 | 6.625 | 1,457,750 | ||||||||||||
2,485,000 | Drawbridge Special Opportunities Fund LP / Drawbridge Special Opportunities Finance1 | 02/15/26 | 3.875 | 2,551,949 | ||||||||||||
2,665,000 | Oxford Finance LLC / Oxford Finance Co-Issuer II, Inc.1 | 12/15/22 | 6.375 | 2,677,845 | ||||||||||||
2,655,000 | Strategic Credit Opportunities Partners LLC | 04/01/26 | 4.250 | 2,698,874 | ||||||||||||
30,154,633 | ||||||||||||||||
| ELECTRIC (2.4%) | |||||||||||||||
5,065,000 | Edison International (5-Year CMT Index + 4.698%)2,5 | 5.375 | 5,229,612 | |||||||||||||
2,800,000 | Electricite de France S.A.1 | 09/21/28 | 4.500 | 3,214,108 | ||||||||||||
2,095,000 | Narragansett Electric Co.1 | 04/09/30 | 3.395 | 2,255,726 | ||||||||||||
1,060,000 | PacifiCorp | 04/01/24 | 3.600 | 1,121,521 | ||||||||||||
2,500,000 | Vistra Operations Co. LLC1 | 07/31/27 | 5.000 | 2,562,500 | ||||||||||||
14,383,467 | ||||||||||||||||
| HEALTHCARE-SERVICES (3.4%) | |||||||||||||||
1,280,000 | Advocate Health & Hospitals Corp. | 06/15/50 | 3.008 | 1,333,786 | ||||||||||||
1,930,000 | Ascension Health | 11/15/29 | 2.532 | 2,007,728 | ||||||||||||
825,000 | Centene Corp. | 12/15/27 | 4.250 | 864,188 |
The accompanying notes are an integral part of these financial statements.
financial statements october 31, 2021 | 15 |
BBH INCOME FUND
PORTFOLIO OF INVESTMENTS (continued)
October 31, 2021
Principal Amount | Maturity Date | Interest Rate | Value | |||||||||||||
CORPORATE BONDS (continued) | ||||||||||||||||
HEALTHCARE-SERVICES (continued) | ||||||||||||||||
$ | 1,750,000 | Franciscan Missionaries of Our Lady Health System, Inc. | 07/01/49 | 3.914 | % | $ | 2,053,877 | |||||||||
6,675,000 | MEDNAX, Inc.1 | 01/15/27 | 6.250 | 6,999,205 | ||||||||||||
2,085,000 | Orlando Health Obligated Group | 10/01/50 | 3.327 | 2,245,607 | ||||||||||||
2,545,000 | PeaceHealth Obligated Group | 11/15/50 | 3.218 | 2,705,633 | ||||||||||||
2,490,000 | Sutter Health | 08/15/30 | 2.294 | 2,500,942 | ||||||||||||
20,710,966 | ||||||||||||||||
| INSURANCE (7.6%) | |||||||||||||||
4,175,000 | Aegon NV (6-Month USD-LIBOR + 3.540%)2 | 04/11/48 | 5.500 | 4,848,217 | ||||||||||||
2,880,000 | Ascot Group, Ltd.1 | 12/15/30 | 4.250 | 3,008,182 | ||||||||||||
2,035,000 | Athene Global Funding1 | 06/29/25 | 2.550 | 2,104,731 | ||||||||||||
4,295,000 | AXIS Specialty Finance LLC (5-Year CMT Index + 3.186%)2 | 01/15/40 | 4.900 | 4,536,782 | ||||||||||||
1,600,000 | Enstar Finance LLC (5-Year CMT Index + 5.468%)2 | 09/01/40 | 5.750 | 1,688,000 | ||||||||||||
3,145,000 | Enstar Group, Ltd. | 06/01/29 | 4.950 | 3,546,358 | ||||||||||||
2,195,000 | Fairfax Financial Holdings, Ltd. | 04/29/30 | 4.625 | 2,461,434 | ||||||||||||
4,765,000 | Fidelis Insurance Holdings, Ltd. (5-Year CMT Index + 6.323%)1,2 | 04/01/41 | 6.625 | 5,217,675 | ||||||||||||
1,180,000 | New York Life Insurance Co.1 | 05/15/50 | 3.750 | 1,353,539 | ||||||||||||
3,708,000 | PartnerRe Finance B LLC (5-Year CMT Index + 3.815%)2 | 10/01/50 | 4.500 | 3,958,437 | ||||||||||||
2,995,000 | Sirius International Group, Ltd.1 | 11/01/26 | 4.600 | 3,101,697 | ||||||||||||
4,830,000 | Swiss Re Finance Luxembourg S.A. (5-Year CMT Index + 3.582%)1,2 | 04/02/49 | 5.000 | 5,466,352 | ||||||||||||
2,520,000 | Teachers Insurance & Annuity Association of America1 | 05/15/50 | 3.300 | 2,670,034 | ||||||||||||
2,660,000 | United Insurance Holdings Corp | 12/15/27 | 6.250 | 2,792,773 | ||||||||||||
46,754,211 |
The accompanying notes are an integral part of these financial statements.
16
BBH INCOME FUND
PORTFOLIO OF INVESTMENTS (continued)
October 31, 2021
Principal Amount | Maturity Date | Interest Rate | Value | |||||||||||||
CORPORATE BONDS (continued) | ||||||||||||||||
INVESTMENT COMPANIES (8.6%) | ||||||||||||||||
$ | 2,960,000 | Apollo Investment Corp. | 07/16/26 | 4.500 | % | $ | 2,950,565 | |||||||||
1,680,000 | BlackRock TCP Capital Corp. | 08/23/24 | 3.900 | 1,769,714 | ||||||||||||
200,000 | Business Development Corp. of America1 | 12/30/22 | 4.750 | 205,778 | ||||||||||||
2,930,000 | Business Development Corp. of America1 | 12/15/24 | 4.850 | 3,129,531 | ||||||||||||
2,490,000 | Capital Southwest Corp. | 01/31/26 | 4.500 | 2,632,627 | ||||||||||||
1,635,000 | CION Investment Corp.3 | 02/11/26 | 4.500 | 1,637,961 | ||||||||||||
5,725,000 | Fairfax India Holdings Corp.1 | 02/26/28 | 5.000 | 5,667,750 | ||||||||||||
1,145,000 | FS KKR Capital Corp. | 07/15/24 | 4.625 | 1,223,953 | ||||||||||||
1,370,000 | FS KKR Capital Corp. | 02/01/25 | 4.125 | 1,446,846 | ||||||||||||
3,450,000 | FS KKR Capital Corp.1 | 02/14/25 | 4.250 | 3,631,030 | ||||||||||||
2,330,000 | Gladstone Capital Corp. | 01/31/26 | 5.125 | 2,463,975 | ||||||||||||
3,580,000 | Golub Capital BDC, Inc. | 04/15/24 | 3.375 | 3,708,991 | ||||||||||||
3,465,000 | Main Street Capital Corp. | 05/01/24 | 5.200 | 3,741,922 | ||||||||||||
2,095,000 | OFS Capital Corp. | 02/10/26 | 4.750 | 2,122,866 | ||||||||||||
1,445,000 | Owl Rock Capital Corp. II1 | 11/26/24 | 4.625 | 1,534,078 | ||||||||||||
3,495,000 | Owl Rock Technology Finance Corp.1 | 06/30/25 | 6.750 | 3,977,507 | ||||||||||||
470,000 | Owl Rock Technology Finance Corp.1 | 12/15/25 | 4.750 | 507,947 | ||||||||||||
2,535,000 | PennantPark Floating Rate Capital, Ltd | 04/01/26 | 4.250 | 2,544,001 | ||||||||||||
3,025,000 | Saratoga Investment Corp. | 02/28/26 | 4.375 | 3,107,044 | ||||||||||||
3,050,000 | Silver Point Specialty Credit Fund, L.P.3 | 11/04/26 | 4.000 | 3,050,000 | ||||||||||||
1,775,000 | Stellus Capital Investment Corp. | 03/30/26 | 4.875 | 1,845,533 | ||||||||||||
52,899,619 | ||||||||||||||||
| OIL & GAS (2.6%) | |||||||||||||||
2,010,000 | Apache Corp. | 11/15/25 | 4.625 | 2,166,760 | ||||||||||||
2,280,000 | Equinor ASA | 04/06/25 | 2.875 | 2,403,141 | ||||||||||||
860,000 | Equinor ASA | 05/22/30 | 2.375 | 880,983 | ||||||||||||
2,610,000 | Exxon Mobil Corp. | 03/19/30 | 3.482 | 2,889,819 | ||||||||||||
5,000,000 | Occidental Petroleum Corp. | 08/15/24 | 2.900 | 5,093,500 | ||||||||||||
2,315,000 | Ovintiv Exploration, Inc. | 07/01/24 | 5.625 | 2,548,930 | ||||||||||||
15,983,133 | ||||||||||||||||
PHARMACEUTICALS (0.6%) | ||||||||||||||||
1,695,000 | AbbVie, Inc. | 05/14/25 | 3.600 | 1,817,327 | ||||||||||||
455,000 | AbbVie, Inc. | 05/14/35 | 4.500 | 538,125 | ||||||||||||
450,000 | AbbVie, Inc. | 05/14/36 | 4.300 | 521,976 | ||||||||||||
730,000 | Bausch Health Cos., Inc.1 | 06/01/28 | 4.875 | 751,754 | ||||||||||||
3,629,182 |
The accompanying notes are an integral part of these financial statements.
financial statements october 31, 2021 | 17 |
BBH INCOME FUND
PORTFOLIO OF INVESTMENTS (continued)
October 31, 2021
Principal Amount | Maturity Date | Interest Rate | Value | |||||||||||||
CORPORATE BONDS (continued) | ||||||||||||||||
PIPELINES (2.6%) | ||||||||||||||||
$ | 1,730,000 | Enable Midstream Partners LP | 09/15/29 | 4.150 | % | $ | 1,863,133 | |||||||||
4,045,000 | Energy Transfer LP (3-Month USD-LIBOR + 4.028%)2,5 | 6.250 | 3,684,752 | |||||||||||||
1,995,000 | Energy Transfer LP | 02/01/22 | 5.200 | 1,995,000 | ||||||||||||
2,230,000 | EnLink Midstream LLC1 | 01/15/28 | 5.625 | 2,364,542 | ||||||||||||
2,230,000 | EnLink Midstream Partners, LP | 06/01/25 | 4.150 | 2,327,852 | ||||||||||||
2,430,000 | Harvest Midstream I LP1 | 09/01/28 | 7.500 | 2,551,500 | ||||||||||||
1,150,000 | Northriver Midstream Finance LP1 | 02/15/26 | 5.625 | 1,187,375 | ||||||||||||
15,974,154 | ||||||||||||||||
PRIVATE EQUITY (0.4%) | ||||||||||||||||
2,095,000 | Apollo Management Holdings LP (5-Year CMT Index + 3.266%)1,2 | 01/14/50 | 4.950 | 2,169,811 | ||||||||||||
| REAL ESTATE INVESTMENT TRUSTS (1.5%) | |||||||||||||||
2,065,000 | HAT Holdings I LLC / HAT Holdings II LLC1 | 06/15/26 | 3.375 | 2,046,931 | ||||||||||||
2,300,000 | HAT Holdings I LLC / HAT Holdings II LLC1 | 09/15/30 | 3.750 | 2,285,625 | ||||||||||||
1,380,000 | Scentre Group Trust 1 / Scentre Group Trust 21 | 02/12/25 | 3.500 | 1,462,621 | ||||||||||||
1,945,000 | Scentre Group Trust 1 / Scentre Group Trust 21 | 01/28/26 | 3.625 | 2,087,423 | ||||||||||||
1,345,000 | Scentre Group Trust 2 (5-Year CMT Index + 4.685%)1,2 | 09/24/80 | 5.125 | 1,429,062 | ||||||||||||
9,311,662 | ||||||||||||||||
| RETAIL (0.6%) | |||||||||||||||
3,450,000 | Nordstrom, Inc. | 04/01/30 | 4.375 | 3,510,237 | ||||||||||||
| SEMICONDUCTORS (0.4%) | |||||||||||||||
2,100,000 | ams AG1 | 07/31/25 | 7.000 | 2,223,375 | ||||||||||||
| TELECOMMUNICATIONS (0.1%) | |||||||||||||||
875,000 | Connect Finco S.a r.l. / Connect US Finco LLC1 | 10/01/26 | 6.750 | 907,812 | ||||||||||||
| Total Corporate Bonds (Cost $252,547,657) | 266,413,309 | ||||||||||||||
LOAN PARTICIPATIONS AND ASSIGNMENTS (17.3%) | ||||||||||||||||
5,110,000 | AAdvantage Loyality IP, Ltd. (3-Month USD-LIBOR + 4.750%)2 | 04/20/28 | 5.500 | 5,319,203 | ||||||||||||
3,358,608 | AHP Health Partners, Inc. (1-Month USD-LIBOR + 3.500%)2 | 08/24/28 | 4.000 | 3,368,045 |
The accompanying notes are an integral part of these financial statements.
18
BBH INCOME FUND
PORTFOLIO OF INVESTMENTS (continued)
October 31, 2021
Principal Amount | Maturity Date | Interest Rate | Value | |||||||||||||
LOAN PARTICIPATIONS AND ASSIGNMENTS (continued) | ||||||||||||||||
$ | 4,560,000 | Air Canada (3-Month USD-LIBOR + 3.500%)2 | 08/11/28 | 4.250 | % | $ | 4,604,642 | |||||||||
2,560,000 | AL NGPL Holdings LLC (3-Month USD-LIBOR + 3.750%)2 | 04/14/28 | 4.750 | 2,566,400 | ||||||||||||
3,057,935 | Allen Media LLC (3-Month USD-LIBOR + 5.500%)2 | 02/10/27 | 5.632 | 3,055,397 | ||||||||||||
1,180,745 | Avolon TLB Borrower 1 (US) LLC Term B3 (1-Month USD-LIBOR + 1.750%)2 | 01/15/25 | 2.500 | 1,178,998 | ||||||||||||
1,959,257 | Axalta Coating Systems Dutch Holding B BV Term B3 (3-Month USD-LIBOR + 1.750%)2 | 06/01/24 | 1.882 | 1,954,359 | ||||||||||||
2,947,702 | BCP Renaissance Parent LLC (3-Month USD-LIBOR + 3.500%)2 | 10/31/24 | 4.500 | 2,936,648 | ||||||||||||
1,393,855 | Buckeye Partners LP Term B1 (1-Month USD-LIBOR + 2.250%)2 | 11/01/26 | 2.334 | 1,386,718 | ||||||||||||
1,916,239 | Clarios Global LP (1-Month USD-LIBOR + 3.250%)2 | 04/30/26 | 3.337 | 1,903,458 | ||||||||||||
3,890,253 | Connect Finco S.a r.l. (1-Month USD-LIBOR + 3.500%)2 | 12/11/26 | 4.500 | 3,890,253 | ||||||||||||
1,887,462 | Dell International LLC Term B2 (1-Month USD-LIBOR + 1.750%)2 | 09/19/25 | 2.000 | 1,886,009 | ||||||||||||
2,500,000 | Delos Finance S.a r.l. (3-Month USD-LIBOR + 1.750%)2 | 10/06/23 | 1.882 | 2,496,475 | ||||||||||||
4,080,724 | Eastern Power LLC (3-Month USD-LIBOR + 3.750%)2 | 10/02/25 | 4.750 | 3,610,175 | ||||||||||||
2,474,119 | Elanco Animal Health, Inc. (1-Month USD-LIBOR + 1.750%)2 | 08/01/27 | 1.832 | 2,452,025 | ||||||||||||
1,935,000 | Geon Performance Solutions, LLC (Fka. Echo US Holdings, LLC) (3-Month USD-LIBOR + 4.750%)2 | 08/18/28 | 5.500 | 1,951,931 | ||||||||||||
2,255,000 | GIP II Blue Holding, LP (3-Month USD-LIBOR + 4.500%)2 | 09/29/28 | 5.500 | 2,259,239 | ||||||||||||
1,580,000 | Global Medical Response, Inc. (3-Month USD-LIBOR + 4.250%)2 | 03/14/25 | 5.250 | 1,571,658 | ||||||||||||
913,214 | Icon Plc. (3-Month USD-LIBOR + 2.500%)2 | 07/03/28 | 3.000 | 913,114 |
The accompanying notes are an integral part of these financial statements.
financial statements october 31, 2021 | 19 |
BBH INCOME FUND
PORTFOLIO OF INVESTMENTS (continued)
October 31, 2021
Principal Amount | Maturity Date | Interest Rate | Value | |||||||||||||
LOAN PARTICIPATIONS AND ASSIGNMENTS (continued) | ||||||||||||||||
$ | 3,665,311 | Icon Plc. (3-Month USD-LIBOR + 2.500%)2 | 07/03/28 | 3.000 | % | $ | 3,664,907 | |||||||||
5,048,028 | ILPEA Parent, Inc. (1-Month USD-LIBOR + 4.500%)2 | 06/22/28 | 5.250 | 5,035,408 | ||||||||||||
2,862,825 | Jazz Pharmaceuticals Plc. (1-Month USD-LIBOR + 3.500%)2 | 05/05/28 | 4.000 | 2,866,404 | ||||||||||||
2,280,000 | LendingTree, Inc. Term B (3-Month USD-LIBOR + 4.000%)2 | 09/15/28 | 4.000 | 2,275,736 | ||||||||||||
3,038,625 | Lumen Technologies, Inc. Term A (1-Month USD-LIBOR + 2.000%)2 | 01/31/25 | 2.087 | 3,019,634 | ||||||||||||
2,350,000 | Medline Borrower, LP (3-Month USD-LIBOR + 3.250%)2 | 10/23/28 | 3.750 | 2,352,327 | ||||||||||||
3,070,000 | MIP V Waste Holdings, LLC (3-Month USD-LIBOR + 3.250%)2 | 10/27/28 | 3.750 | 3,073,838 | ||||||||||||
3,075,000 | MPH Acquisition Holdings LLC (3-Month USD-LIBOR + 4.250%)2 | 09/01/28 | 4.750 | 2,995,573 | ||||||||||||
2,701,768 | NorthRiver Midstream Finance LP Term B (3-Month USD-LIBOR + 3.250%)2 | 10/01/25 | 3.382 | 2,695,364 | ||||||||||||
5,632,211 | OCM System One Buyer CTB LLC (3-Month USD-LIBOR + 4.000%)2 | 03/02/28 | 4.750 | 5,632,211 | ||||||||||||
2,778,038 | Organon & Co. (3-Month USD-LIBOR + 3.000%)2 | 06/02/28 | 3.500 | 2,783,260 | ||||||||||||
1,085,712 | RPI Intermediate Finance Trust Term B1 (1-Month USD-LIBOR + 1.750%)2 | 02/11/27 | 1.837 | 1,081,912 | ||||||||||||
2,110,000 | SkyMiles IP, Ltd. (3-Month USD-LIBOR + 3.750%)2 | 10/20/27 | 4.750 | 2,245,968 | ||||||||||||
440,581 | SS&C Technologies Holdings, Inc. Term B3 (1-Month USD-LIBOR + 1.750%)2 | 04/16/25 | 1.837 | 435,717 | ||||||||||||
334,780 | SS&C Technologies Holdings, Inc. Term B4 (1-Month USD-LIBOR + 1.750%)2 | 04/16/25 | 1.837 | 331,084 | ||||||||||||
706,870 | SS&C Technologies Holdings, Inc. Term B5 (1-Month USD-LIBOR + 1.750%)2 | 04/16/25 | 1.837 | 700,155 | ||||||||||||
1,694,200 | Tivity Health, Inc. Term B (1-Month USD-LIBOR + 4.250%)2 | 06/30/28 | 4.337 | 1,688,694 | ||||||||||||
2,774,739 | UGI Energy Services LLC (1-Month USD-LIBOR + 3.750%)2 | 08/13/26 | 3.837 | 2,783,424 | ||||||||||||
3,771,050 | United AirLines, Inc. Term B (3-Month USD-LIBOR + 3.750%)2 | 04/21/28 | 4.500 | 3,821,544 | ||||||||||||
1,819,433 | Vistra Operations Company LLC (fka Tex Operations Company LLC) (1-Month USD-LIBOR + 1.750%)2 | 12/31/25 | 1.840 | 1,801,239 |
The accompanying notes are an integral part of these financial statements.
20
BBH INCOME FUND
PORTFOLIO OF INVESTMENTS (continued)
October 31, 2021
Principal Amount | Maturity Date | Interest Rate | Value | |||||||||||||
LOAN PARTICIPATIONS AND ASSIGNMENTS (continued) | ||||||||||||||||
$ | 2,910,000 | Wyndham Hotels & Resorts, Inc. Term B (1-Month USD-LIBOR + 1.750%)2 | 05/30/25 | 1.837 | % | $ | 2,888,582 | |||||||||
2,319,758 | Zebra Buyer LLC (3-Month USD-LIBOR + 3.250%)2 | 04/21/28 | 3.750 | 2,324,305 | ||||||||||||
| Total Loan Participations and Assignments (Cost $105,895,079) | 105,802,033 | ||||||||||||||
MUNICIPAL BONDS (1.2%) | ||||||||||||||||
1,645,000 | Indiana Finance Authority, Revenue Bonds | 03/01/51 | 3.313 | 1,667,805 | ||||||||||||
5,605,000 | Port Authority of New York & New Jersey, Revenue Bonds | 10/01/33 | 2.000 | 5,504,819 | ||||||||||||
Total Municipal Bonds (Cost $7,339,432) | 7,172,624 | |||||||||||||||
PREFERRED STOCKS (1.5%) | ||||||||||||||||
132,600 | Gladstone Investment Corp. | 11/01/28 | 4.875 | 3,480,750 | ||||||||||||
93,600 | Horizon Technology Finance Corp. | 03/30/26 | 4.875 | 2,442,024 | ||||||||||||
114,000 | Trinity Capital, Inc. | 01/16/25 | 7.000 | 2,981,100 | ||||||||||||
Total Preferred Stocks (Cost $8,505,000) | 8,903,874 | |||||||||||||||
| RESIDENTIAL MORTGAGE BACKED SECURITIES (0.4%) | |||||||||||||||
686,981 | Cascade Funding Mortgage Trust 2018-RM21,2,4 | 10/25/68 | 4.000 | 708,901 | ||||||||||||
1,289,738 | Cascade Funding Mortgage Trust 2019-RM31,2,4 | 06/25/69 | 2.800 | 1,299,732 | ||||||||||||
582,360 | RMF Proprietary Issuance Trust 2019-11,2,4 | 10/25/63 | 2.750 | 575,163 | ||||||||||||
| Total Residential Mortgage Backed Securities (Cost $2,552,444) | 2,583,796 | ||||||||||||||
U.S. INFLATION LINKED DEBT (1.1%) | ||||||||||||||||
6,126,916 | U.S. Treasury Inflation Indexed Note | 10/15/26 | 0.125 | 6,713,281 | ||||||||||||
| Total U.S. Inflation Linked Debt (Cost $6,702,200) | 6,713,281 | ||||||||||||||
| U.S. TREASURY BONDS AND NOTES (16.2%) | |||||||||||||||
27,750,000 | U.S. Treasury Bond | 08/15/40 | 3.875 | 36,416,455 | ||||||||||||
9,400,000 | U.S. Treasury Bond | 08/15/46 | 2.250 | 9,908,922 | ||||||||||||
11,450,000 | U.S. Treasury Bond | 08/15/50 | 1.375 | 9,984,310 | ||||||||||||
700,000 | U.S. Treasury Note6 | 02/15/23 | 2.000 | 715,559 | ||||||||||||
1,200,000 | U.S. Treasury Note6 | 10/31/23 | 1.625 | 1,226,578 | ||||||||||||
22,340,000 | U.S. Treasury Note | 06/30/26 | 0.875 | 22,046,787 |
The accompanying notes are an integral part of these financial statements.
financial statements october 31, 2021 | 21 |
BBH INCOME FUND
PORTFOLIO OF INVESTMENTS (continued)
October 31, 2021
Principal Amount | Maturity Date | Interest Rate | Value | |||||||||||||
U.S. TREASURY BONDS AND NOTES (continued) | ||||||||||||||||
$ | 300,000 | U.S. Treasury Note6 | 08/15/26 | 1.500 | % | $ | 304,547 | |||||||||
19,050,000 | U.S. Treasury Note | 08/31/28 | 1.125 | 18,636,258 | ||||||||||||
Total U.S. Treasury Bonds and Notes (Cost $99,327,382) | 99,239,416 | |||||||||||||||
U.S. TREASURY BILLS (0.8%) | ||||||||||||||||
5,000,000 | U.S. Treasury Bill7 | 01/13/22 | 0.000 | 4,999,370 | ||||||||||||
Total U.S. Treasury Bills (Cost $4,999,548) | 4,999,370 |
TOTAL INVESTMENTS (Cost $607,729,331)8 | 101.6 | % | $ | 621,849,782 | |||
LIABILITIES IN EXCESS OF OTHER ASSETS | (1.6 | )% | (9,603,873 | ) | |||
NET ASSETS | 100.0 | % | $ | 612,245,909 |
____________
1 | Security exempt from registration under Rule 144A of the Securities Act of 1933, as amended. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. Total market value of Rule 144A securities owned at October 31, 2021 was $218,205,687or 35.6% of net assets. |
2 | Variable rate instrument. Interest rates change on specific dates (such as coupon or interest payment date). The yield shown represents the October 31, 2021 coupon or interest rate. |
3 | Security that used significant unobservable inputs to determine fair value. |
4 | This variable rate security is based on a predetermined schedule and the rate at period end also represents the reference rate at period end. |
5 | Security is perpetual in nature and has no stated maturity date. |
6 | All or a portion of this security is held at the broker as collateral for open futures contracts. |
7 | Security issued with zero coupon. Income is recognized through accretion of discount. |
8 | The aggregate cost of investments (including derivatives, if any) for federal income tax purposes is $606,073,445, the aggregate gross unrealized appreciation is $18,849,082 and the aggregate gross unrealized depreciation is $5,040,323, resulting in net unrealized appreciation of $13,808,759. |
Abbreviations:
CMT – Constant Maturity Treasury.
LIBOR – London Interbank Offered Rate.
SOFR – Secured Overnight Financing Rate.
The accompanying notes are an integral part of these financial statements.
22
BBH INCOME FUND
PORTFOLIO OF INVESTMENTS (continued)
October 31, 2021
FINANCIAL FUTURES CONTRACTS
The following futures contracts were open at October 31, 2021:
Number of | Expiration | Notional | Market | Unrealized Gain / | ||||||||||||
Description | Contracts | Date | Amount | Value | (Loss) | |||||||||||
Contracts to Buy: | ||||||||||||||||
U.S. Long Bond | 154 | December 2021 | $ | 25,188,312 | $ | 24,769,937 | $ | (418,375 | ) | |||||||
U.S. Treasury 5-Year Notes | 500 | December 2021 | 61,653,594 | 60,875,000 | (778,594 | ) | ||||||||||
U.S. Treasury 10-Year Notes | 100 | December 2021 | 13,287,813 | 13,070,313 | (217,500 | ) | ||||||||||
U.S. Ultra 10-Year Notes | 133 | December 2021 | 19,711,672 | 19,289,156 | (422,516 | ) | ||||||||||
U.S. Ultra Bond | 119 | December 2021 | 23,583,406 | 23,372,344 | (211,062 | ) | ||||||||||
$ | (2,048,047 | ) | ||||||||||||||
Contracts to Sell: | ||||||||||||||||
U.S. Treasury 2-Year Notes | 100 | December 2021 | $ | 22,005,469 | $ | 21,925,000 | $ | 80,469 | ||||||||
Net Unrealized (Loss) on Open Futures Contracts | $ | (1,967,578 | ) |
FAIR VALUE MEASUREMENTS
The Fund is required to disclose information regarding the fair value measurements of the Fund’s assets and liabilities. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The disclosure requirement established a three-tier hierarchy to maximize the use of observable market data and minimize the use of unobservable inputs and to establish classification of fair value measurements for disclosure purposes. Inputs refer broadly to the assumptions that market participants would use in pricing the asset or liability, including, for example, the risk inherent in a particular valuation technique used to measure fair value, including the model and/or the risk inherent in the inputs to the valuation technique. Inputs may be observable or unobservable. Observable inputs are inputs that reflect the assumptions market participants would use in pricing the asset or liability developed based on market data obtained from sources independent of the reporting entity. Unobservable inputs are inputs that reflect the Fund’s own considerations about the assumptions market participants would use in pricing the asset or liability developed based on the best information available in the circumstances.
Authoritative guidance establishes three levels of the fair value hierarchy as follows:
— | Level 1 – unadjusted quoted prices in active markets for identical assets and liabilities. |
— | Level 2 – significant other observable inputs (including quoted prices for similar assets and liabilities, interest rates, prepayment speeds, credit risk, etc.). |
— | Level 3 – significant unobservable inputs (including the Fund’s own assumptions in determining the fair value of assets and liabilities). |
The accompanying notes are an integral part of these financial statements.
financial statements october 31, 2021 | 23 |
BBH INCOME FUND
PORTFOLIO OF INVESTMENTS (continued)
October 31, 2021
Inputs are used in applying the various valuation techniques and broadly refer to the assumptions that market participants use to make valuation decisions, including assumptions about risk. Inputs may include price information, specific and broad credit data, liquidity statistics, and other factors. A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. However, the determination of what constitutes “observable” requires judgment by the investment adviser. The investment adviser considers observable data to be that market data which is readily available, regularly distributed or updated, reliable and verifiable, not proprietary, and provided by independent sources that are actively involved in the relevant market. The categorization of a financial instrument within the hierarchy is based upon the pricing transparency of the instrument and does not necessarily correspond to the investment adviser’s perceived risk of that instrument.
Financial assets within Level 1 are based on quoted market prices in active markets. The Fund does not adjust the quoted price for these instruments.
Financial instruments that trade in markets that are not considered to be active but are valued based on quoted market prices, dealer quotations or alternative pricing sources supported by observable inputs are classified within Level 2. These include investment-grade corporate bonds, U.S. Treasury notes and bonds, and certain non-U.S. sovereign obligations and over-the-counter derivatives. As Level 2 financial assets include positions that are not traded in active markets and/or are subject to transfer restrictions, valuations may be adjusted to reflect illiquidity and/or non-transferability, which are generally based on available market information.
Financial assets classified within Level 3 have significant unobservable inputs, as they trade infrequently. Level 3 financial assets include private equity and certain corporate debt securities.
Because of the inherent uncertainties of valuation, the values reflected in the financial statements may materially differ from the value received upon the actual sale of those investments.
The accompanying notes are an integral part of these financial statements.
24
BBH INCOME FUND
PORTFOLIO OF INVESTMENTS (continued)
October 31, 2021
The following table summarizes the valuation of the Fund’s investments by the above fair value hierarchy levels as of October 31, 2021.
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 October 31, 2021 | ||||||||||||
Asset Backed Securities | $ | — |
| $ | 87,913,041 |
| $ | 11,932,402 |
| $ | 99,845,443 |
| ||||
Commercial Mortgage Backed Securities | — |
| 18,866,948 |
| 1,309,688 |
| 20,176,636 |
| ||||||||
Corporate Bonds | — |
| 261,725,348 |
| 4,687,961 |
| 266,413,309 |
| ||||||||
Loan Participations and Assignments. | — |
| 105,802,033 |
| — |
| 105,802,033 |
| ||||||||
Municipal Bonds | — |
| 7,172,624 |
| — |
| 7,172,624 |
| ||||||||
Preferred Stock | — |
| 8,903,874 |
| — |
| 8,903,874 |
| ||||||||
Residential Mortgage Backed Securities | — |
| 2,583,796 |
| — |
| 2,583,796 |
| ||||||||
U.S. Inflation Linked Debt | — |
| 6,713,281 |
| — |
| 6,713,281 |
| ||||||||
U.S. Treasury Bonds and Notes | — |
| 99,239,416 |
| — |
| 99,239,416 |
| ||||||||
U.S. Treasury Bills | — | 4,999,370 | — | 4,999,370 | ||||||||||||
Total Investment, at value | $ | — | $ | 603,919,731 | $ | 17,930,051 | $ | 621,849,782 | ||||||||
Other Financial Instruments, at value | ||||||||||||||||
Financial Futures Contracts | $ | (1,967,578 | ) | $ | — | $ | — | $ | (1,967,578 | ) | ||||||
Other Financial Instruments, at value | $ | (1,967,578 | ) | $ | — | $ | — | $ | (1,967,578 | ) |
The accompanying notes are an integral part of these financial statements.
financial statements october 31, 2021 | 25 |
BBH INCOME FUND
PORTFOLIO OF INVESTMENTS (continued)
October 31, 2021
The following is a reconciliation of assets for which significant unobservable inputs (Level 3) were used in determining fair value during the year ended October 31, 2021:
Asset Backed Securities | Commercial Mortgage Backed Securities | Corporate Bonds | Total | ||||||||||||||
Balance as of October 31, 2020 | $ | 5,694,790 |
| $ | 1,081,308 |
| $ | — | $ | 6,776,098 |
| ||||||
Purchases | 7,470,000 |
| — |
| 4,685,000 | 12,155,000 |
| ||||||||||
Sales / Paydowns | (1,234,108 | ) | — |
| — | (1,234,108 | ) | ||||||||||
Realized gains (losses) | 26 |
| — |
| — | 26 |
| ||||||||||
Change in unrealized appreciation (depreciation) | 756 | 227,053 |
| 2,961 | 230,770 | ||||||||||||
Amortization | 938 |
| 1,327 |
| — | 2,265 |
| ||||||||||
Transfers from Level 3 | — |
| — |
| — | — |
| ||||||||||
Transfers to Level 3 | — |
| — |
| — | — |
| ||||||||||
Balance as of October 31, 2021 | $ | 11,932,402 | $ | 1,309,688 | $ | 4,687,961 | $ | 17,930,051 |
The Fund’s investments classified as Level 3 were either single broker quoted or valued using a model approach, including the Fund’s assumptions in determining their fair value.
The accompanying notes are an integral part of these financial statements.
26
BBH INCOME FUND
STATEMENT OF ASSETS AND LIABILITIES
October 31, 2021
ASSETS: | |||||
Investments in securities, at value (Cost $607,729,331) | $ | 621,849,782 | |||
Cash | 378,916 | ||||
Receivables for: | |||||
Interest | 1,427,049 | ||||
Shares sold | 242,046 | ||||
Investments sold | 197,810 | ||||
Futures variation margin on open contracts | 169,220 | ||||
Dividends | 32,770 | ||||
Prepaid assets | 1,043 | ||||
Total Assets | 624,298,636 | ||||
LIABILITIES: | |||||
Payables for: | |||||
Investments purchased | $ | 10,772,881 | |||
Shares redeemed | 769,242 | ||||
Investment advisory and administrative fees | 208,222 | ||||
Dividends declared | 177,852 | ||||
Professional fees | 75,474 | ||||
Custody and fund accounting fees | 29,329 | ||||
Transfer agent fees | 5,569 | ||||
Board of Trustees' fees | 1,111 | ||||
Accrued expenses and other liabilities | 13,047 | ||||
Total Liabilities | 12,052,727 | ||||
NET ASSETS | $ | 612,245,909 | |||
Net Assets Consist of: | |||||
Paid-in capital | $ | 598,757,652 | |||
Retained earnings | 13,488,257 | ||||
Net Assets | $ | 612,245,909 | |||
NET ASSET VALUE AND OFFERING PRICE PER SHARE | |||||
CLASS I SHARES | |||||
($612,245,909 ÷ 58,351,289 shares outstanding) | $10.49 |
The accompanying notes are an integral part of these financial statements.
financial statements october 31, 2021 | 27 |
BBH INCOME FUND
STATEMENT OF OPERATIONS
For the year ended October 31, 2021
NET INVESTMENT INCOME: | ||||
Income: | ||||
Dividends | $ | 289,308 | ||
Interest income (net of foreign withholding taxes of $42) | 19,481,254 | |||
Other income | 212,366 | |||
Total Income | 19,982,928 | |||
Expenses: | ||||
Investment advisory and administrative fees | 2,183,036 | |||
Custody and fund accounting fees | 111,836 | |||
Professional fees | 83,709 | |||
Board of Trustees' fees | 60,547 | |||
Transfer agent fees | 33,074 | |||
Miscellaneous expenses | 80,615 | |||
Total Expenses | 2,552,817 | |||
Net Investment Income | 17,430,111 | |||
NET REALIZED AND UNREALIZED GAIN: | ||||
Net realized gain on investments in securities | 2,009,665 | |||
Net realized loss on futures contracts | (2,141,796 | ) | ||
Net realized loss on investments in securities and futures contracts | (132,131 | ) | ||
Net change in unrealized appreciation/(depreciation) on investments in securities | 7,071,872 | |||
Net change in unrealized appreciation/(depreciation) on futures contracts | (606,830 | ) | ||
Net change in unrealized appreciation/(depreciation) on investments in securities and futures contracts | 6,465,042 | |||
Net Realized and Unrealized Gain | 6,332,911 | |||
Net Increase in Net Assets Resulting from Operations | $ | 23,763,022 |
The accompanying notes are an integral part of these financial statements.
28
BBH INCOME FUND
STATEMENTS OF CHANGES IN NET ASSETS
For the years ended October 31, | ||||||||
2021 | 2020 | |||||||
INCREASE IN NET ASSETS: | ||||||||
Operations: | ||||||||
Net investment income | $ | 17,430,111 | $ | 14,298,266 | ||||
Net realized gain (loss) on investments in securities and futures contracts | (132,131 | ) | 20,454,049 | |||||
Net change in unrealized appreciation/(depreciation) on investments in securities and futures contracts | 6,465,042 | (1,313,986 | ) | |||||
Net increase in net assets resulting from operations | 23,763,022 | 33,438,329 | ||||||
Dividends and distributions declared: | ||||||||
Class I | (36,718,571 | ) | (26,351,493 | ) | ||||
Share transactions: | ||||||||
Proceeds from sales of shares | 216,267,575 | 119,485,340 | ||||||
Net asset value of shares issued to shareholders for reinvestment of dividends and distributions | 3,100,657 | 1,898,492 | ||||||
Proceeds from short-term redemption fees | 2,369 | 4,617 | ||||||
Cost of shares redeemed | (62,053,028 | ) | (66,597,003 | ) | ||||
Net increase in net assets resulting from share transactions | 157,317,573 | 54,791,446 | ||||||
Total increase in net assets | 144,362,024 | 61,878,282 | ||||||
NET ASSETS: | ||||||||
Beginning of year | 467,883,885 | 406,005,603 | ||||||
End of year | $ | 612,245,909 | $ | 467,883,885 |
The accompanying notes are an integral part of these financial statements.
financial statements october 31, 2021 | 29 |
BBH INCOME FUND
FINANCIAL HIGHLIGHTS
Selected per share data and ratios for a Class I share outstanding throughout each period.
For the years ended October 31, | For the period from June 27, 2018 (commencement of operations) to October 31, 2018 | |||||||||||||||||||||
2021 | 2020 | 2019 | ||||||||||||||||||||
Net asset value, beginning of period | $ | 10.77 | $ | 10.61 | $ | 9.83 | $ | 10.00 | ||||||||||||||
Income from investment operations: | ||||||||||||||||||||||
Net investment income1 | 0.34 | 0.34 | 0.36 | 0.10 | ||||||||||||||||||
Net realized and unrealized gain (loss) | 0.15 | 0.46 | 0.78 | (0.17 | ) | |||||||||||||||||
Total income (loss) from investment operations | 0.49 | 0.80 | 1.14 | (0.07 | ) | |||||||||||||||||
Less dividends and distributions: | ||||||||||||||||||||||
From net investment income | (0.33 | ) | (0.34 | ) | (0.36 | ) | (0.10 | ) | ||||||||||||||
From net realized gains | (0.44 | ) | (0.30 | ) | – | – | ||||||||||||||||
Total dividends and distributions | (0.77 | ) | (0.64 | ) | (0.36 | ) | (0.10 | ) | ||||||||||||||
Short-term redemptions fees1 | 0.00 | 2 | 0.00 | 2 | 0.00 | 2 | – | |||||||||||||||
Net asset value, end of period | $ | 10.49 | $ | 10.77 | $ | 10.61 | $ | 9.83 | ||||||||||||||
Total return3 | 4.64 | % | 7.87 | % | 11.76 | % | (0.75 | )%4 | ||||||||||||||
Ratios/Supplemental data: | ||||||||||||||||||||||
Net assets, end of period (in millions) | $ | 612 | $ | 468 | $ | 406 | $ | 147 | ||||||||||||||
Ratio of expenses to average net assets before reductions | 0.47 | % | 0.48 | % | 0.52 | % | 0.67 | %5 | ||||||||||||||
Fee waiver6 | – | % | – | % | (0.02 | )% | (0.17 | )%5 | ||||||||||||||
Ratio of expenses to average net assets after reductions | 0.47 | % | 0.48 | % | 0.50 | % | 0.50 | %5 | ||||||||||||||
Ratio of net investment income to average net assets | 3.19 | % | 3.24 | % | 3.49 | % | 3.12 | %5 | ||||||||||||||
Portfolio turnover rate | 69 | % | 116 | % | 77 | % | 94 | %4 |
____________ | |
1 | Calculated using average shares outstanding for the period. |
2 | Less than $0.01. |
3 | Assumes the reinvestment of distributions. |
4 | Not annualized. |
5 | Annualized with the exception of audit fees, legal fees and registration fees. |
6 | The ratio of expenses to average net assets for the years ended October 31, 2021, 2020, 2019 and the period ended October 31, 2018 reflect fees reduced as result of a contractual operating expense limitation of the Fund to 0.50%. The agreement is effective through March 1, 2022 and may only be terminated during its term with approval of the Fund’s Board of Trustees. For the years ended October 31, 2021, 2020, 2019 and the period from June 27, 2018 to October 31, 2018, the waived fees were $–, $–, $55,757 and $94,185, respectively. |
The accompanying notes are an integral part of these financial statements.
30
BBH INCOME FUND
NOTES TO FINANCIAL STATEMENTS
October 31, 2021
1.Organization. The Fund is a separate, diversified series of BBH Trust (the “Trust”), which is registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as an open-end management investment company. The Trust was originally organized under the laws of the State of Maryland on July 16, 1990 as BBH Fund, Inc. and re-organized as a Delaware statutory trust on June 12, 2007. The Fund commenced operations on June 27, 2018 and offers two share classes, Class N and Class I. As of October 31, 2021, Class N shares are not available for purchase by investors but may be offered in the future. The investment objective of the Fund is to provide maximum total return, with an emphasis on current income, consistent with preservation of capital and prudent investment management. Neither Class N shares nor Class I shares automatically convert to any other share class of the Fund. As of October 31, 2021, there were nine series of the Trust.
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. Bonds and other fixed income securities, including restricted securities (other than short-term obligations but including listed issues) are valued at their most recent bid prices (sales price if the principal market is an exchange) in the principal market in which such securities are normally traded, on the basis of valuations furnished by a pricing service, use of which has been approved by the Board of Trustees (the “Board”). In making such valuations, the pricing service utilizes both dealer supplied valuations and electronic data processing techniques, which take into account appropriate factors such as institutional-size trading in similar groups of securities, yield, quality, coupon rate, maturity, type of issue, trading characteristics and other market data, without exclusive reliance upon quoted prices, or exchange or over-the-counter prices, since such valuations are believed to reflect more accurately the fair value of such securities. Futures contracts held by the Fund are valued daily at the official settlement price of the exchange on which it is traded.
Securities or other assets for which market quotations are not readily available are valued at fair value in accordance with procedures established by and under the general supervision and responsibility of the Board. Short-term investments, which mature in 60 days or less are valued at amortized cost if their original maturity was 60 days or less, or by amortizing their value on the 61st day prior to maturity, if their original maturity when acquired by the Fund was more than 60 days, unless the use of amortized cost is determined not to represent “fair value” by the Board.
financial statements october 31, 2021 | 31 |
BBH INCOME FUND
NOTES TO FINANCIAL STATEMENTS (continued)
October 31, 2021
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 daily and consists of interest accrued, discount earned (including, if any, both original issue and market discount) and premium amortization on the investments of the Fund. Investment income is recorded net of any foreign taxes withheld where recovery of such tax is uncertain. Debt obligations may be placed on non-accrual status and related interest income may be reduced by ceasing current accruals and writing off interest receivable when the collection of all or a portion of the interest has become doubtful based on consistently applied procedures. A debt obligation is removed from non-accrual status when the issuer resumes interest payments or when collectability of interest is reasonably assured.
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 generally apportioned among each fund in the Trust on a net assets basis or other suitable method. Expense estimates are accrued in the period to which they relate and adjustments are made when actual amounts are known.
D.Financial Futures Contracts. The Fund may enter into open futures contracts in order to economically hedge against anticipated future changes in interest rates which otherwise might either adversely affect the value of securities held for the Fund or adversely affect the prices of securities that are intended to be purchased at a later date for the Fund. The contractual amount of the futures contracts represents the investment the Fund has in a particular contract and does not necessarily represent the amounts potentially subject to risk of loss. Trading in futures contracts involves, to varying degrees, risk of loss in excess of any futures variation margin reflected in the Statement of Assets and Liabilities. The measurement of risk associated with futures contracts is meaningful only when all related and offsetting transactions are considered. Gains and losses are realized upon the expiration or closing of the futures contracts.
Risks related to the use of futures contracts include possible illiquidity of the futures markets, contract prices that can be highly volatile and imperfectly correlated to movements in economically hedged security values and/or interest rates, and potential losses in excess of the Fund’s initial investment.
Open future contracts held at October 31, 2021, are listed in the Portfolio of Investments.
For the year ended October 31, 2021, the average monthly notional amount of open futures contracts was $108,887,860. The range of monthly notional amounts was $84,977,448 to $165,430,266.
32
BBH INCOME FUND
NOTES TO FINANCIAL STATEMENTS (continued)
October 31, 2021
Fair Values of Derivative Instruments as of October 31, 2021
Derivatives not accounted for as economically hedging instruments under authoritative guidance for derivatives instruments and hedging activities:
Asset Derivatives | Liability Derivatives | |||||||||||||
Risk | Statement of Assets and Liabilities Location | Fair Value | Statement of Assets and Liabilities Location | Fair Value | ||||||||||
Interest Rate Risk | Net unrealized appreciation/ (depreciation) on futures contracts | $ | 80,469 | * | Net unrealized appreciation/ (depreciation) on futures contracts | $ | (2,048,047 | )* | ||||||
Total | $ | 80,469 | $ | (2,048,047 | ) |
____________
* | Includes cumulative appreciation/(depreciation) of futures contracts as reported in the Statement of Assets and Liabilities and Notes to Financial Statements. Only the current day’s variation margin is reported within the Statement of Assets and Liabilities. |
Effect of Derivative Instruments on the Statement of Operations
Interest Rate Risk | ||||||
Net Realized Loss on Derivatives | ||||||
Futures Contracts | $ | (2,141,796 | ) | |||
Net Change in Unrealized Appreciation/(Depreciation) on | ||||||
Derivatives Futures Contracts | $ | (606,830 | ) |
E.Private Placement Securities. The Fund may purchase securities that are not registered under the Securities Act of 1933, as amended (“1933 Act”) but that can be sold to “qualified institutional buyers” in accordance with the requirements stated in Rule 144A or the requirements stated in Regulation S of the 1933 Act (“Private Placement Securities”). A Private Placement Security may be considered illiquid, under SEC Regulations for open-end investment companies, and therefore subject to the 15% limitation on the purchase of illiquid securities, unless it is determined on an ongoing basis that an adequate trading market exists for the security, which is the case for the Fund. Guidelines have been adopted and the daily function of determining and monitoring liquidity of Private Placement Securities has been delegated to the investment adviser. All relevant factors will be considered in determining the liquidity of Private Placement Securities and all investments in Private Placement Securities will be carefully monitored. Information regarding Private Placement Securities is included at the end of the Portfolio of Investments.
financial statements october 31, 2021 | 33 |
BBH INCOME FUND
NOTES TO FINANCIAL STATEMENTS (continued)
October 31, 2021
F.Loan Participations and Assignments. The Fund may invest in loan participations and assignments, which include institutionally traded floating and fixed-rate debt securities generally acquired as an assignment from another holder of, or participation interest in, loans originated by a bank or financial institution (the “Lender”) that acts as agent for all holders. Some loan participations and assignments may be purchased on a “when-issued” basis. The agent administers the terms of the loan, as specified in the loan agreement. When investing in a loan assignment, the Fund acquires the loan in whole or in part and becomes a lender under the loan agreement. The Fund generally has the right to enforce compliance with the terms of the loan agreement with the borrower.
Assignments and participations involve credit, interest rate, and liquidity risk. Interest rates on floating rate securities adjust with interest rate changes and/or issuer credit quality, and unexpected changes in such rates could result in losses to the Fund. The interest rates paid on a floating rate security in which the Fund invests generally are readjusted periodically to an increment over a designated benchmark rate, such as the one-month, three-month, six-month, or one-year London Interbank Offered Rate (“LIBOR”). LIBOR is a short-term interest rate that banks charge one another and is generally representative of the most competitive and current cash rates.
The Fund may have difficulty trading assignments and participations to third parties. There may be restrictions on transfer and only limited opportunities may exist to sell such securities in secondary markets. As a result, the Fund may be unable to sell assignments or participations at the desired time or may be able to sell only at a price less than fair market value. The Fund utilizes an independent third party to value individual loan participations and assignments on a daily basis.
G.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 may result in temporary 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 between paid-in capital and retained earnings/(accumulated deficit) within the Statement of Assets and 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.
The Fund is subject to the provisions of Accounting Standards Codification 740 Income Taxes (“ASC 740”). ASC 740 sets forth a minimum threshold for financial statement recognition of the benefit
34
BBH INCOME FUND
NOTES TO FINANCIAL STATEMENTS (continued)
October 31, 2021
of a tax position taken or expected to be taken in a tax return. The Fund did not have any unrecognized tax benefits as of October 31, 2021, nor were there any increases or decreases in unrecognized tax benefits for the period then ended. The Fund recognizes interest and penalties, if any, related to unrecognized tax benefits as an income tax expense in the Statement of Operations. During the year ended October 31, 2021, the Fund did not incur any such interest or penalties. The Fund is subject to examination by U.S. federal and state tax authorities for returns filed for the prior three fiscal years. The Fund is not aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will significantly change in the next twelve months.
H.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 amount of $36,718,571 to Class I shareholders during the year ended October 31, 2021. In addition, the Fund designated a portion of the payment made to redeeming shareholders as a distribution for income tax purposes.
The tax character of distributions paid during the years ended October 31, 2021 and 2020, respectively, were as follows:
Distributions paid from: | ||||||||||||||||||||
Ordinary income | Net long-term capital gain | Total taxable distributions | Tax return of capital | Total distributions paid | ||||||||||||||||
2021: | $ | 30,192,596 | $ | 6,525,975 | $ | 36,718,571 | $ | — | $ | 36,718,571 | ||||||||||
2020: | 22,866,799 | 3,484,694 | 26,351,493 | — | 26,351,493 |
As of October 31, 2021 and 2020, respectively, the components of retained earnings/(accumulated deficit) were as follows:
Components of retained earnings/(accumulated deficit): | |||||||||||||||||||||||||||||
Undistributed ordinary income | Undistributed long-term capital gain | Accumulated capital and other losses | Other book/tax temporary differences | Unrealized appreciation/ (depreciation) | Total retained earnings/ (accumulated deficit) | ||||||||||||||||||||||||
2021: | $114,713 | $ | — | $ | (257,363 | ) | $ | 1,478,034 | $12,152,873 | $13,488,257 | |||||||||||||||||||
2020: | 13,177,330 | 6,525,346 | — | 1,053,299 | 5,687,831 | 26,443,806 |
financial statements october 31, 2021 | 35 |
BBH INCOME FUND
NOTES TO FINANCIAL STATEMENTS (continued)
October 31, 2021
The Fund had $257,363 of post-December 22, 2010 net capital loss carryforwards as of October 31, 2021, of which $205,257 and $52,106, is attributable to short-term and long-term capital losses, respectively.
The Fund is permitted to carryforward capital losses for an unlimited period and they will retain their character as either short-term or long-term capital losses rather than being considered all short-term capital losses.
Total distributions paid may differ from amounts reported in the Statements of Changes in Net Assets because, for tax purposes, dividends are recognized when actually paid.
The differences between book-basis and tax-basis unrealized appreciation/(depreciation) is attributable primarily to the tax deferral of losses on wash sales and paydowns on fixed income securities.
To the extent future capital gains are offset by capital loss carryforwards, if any, such gains will not be distributed.
I.Use of Estimates. The preparation of the financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities in the financial statements, disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of increase and decrease in net assets from operations 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 27, 2018 (commencement of operations), 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, portfolio management and administrative services to the Fund. The Fund pays a combined fee for investment advisory and administrative services calculated daily and paid monthly at an annual rate equivalent to 0.40% per annum. For the year ended October 31, 2021, the Fund incurred $2,183,036 for services under the Agreement.
B.Investment Advisory and Administrative Fee Waivers. Effective June 27, 2018 (commencement of operations), the Investment Adviser has contractually agreed to waive fees and/or reimburse expenses in order to limit the total annual fund operating expenses (excluding interests, taxes, brokerage commissions, other expenditures that are capitalized in accordance with generally accepted accounting principles, and other extraordinary expenses not incurred in the ordinary course of the
36
BBH INCOME FUND
NOTES TO FINANCIAL STATEMENTS (continued)
October 31, 2021
Fund’s business) for Class I shares to 0.50%. The agreement will terminate on March 1, 2022, unless it is renewed by all parties to the agreement. The agreement may only be terminated during its term with approval of the Fund’s Board of Trustees. For the year ended October 31, 2021, the Investment Adviser waived fees in the amount of $0 for Class I.
C.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% of the Fund’s net asset value. For the year ended October 31, 2021, the Fund incurred $111,836 in custody and fund accounting fees. The Fund receives interest income on cash balances held by the custodian at the BBH Base Rate. The BBH Base Rate is defined as BBH’s effective trading rate in local money markets on each day. The total interest earned by the Fund for the year ended October 31, 2021 was $6,306. This amount is included in “Interest income” in the Statement of Operations. 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 year ended October 31, 2021, was $119. This amount is included under line item “Custody and fund accounting fees” in the Statement of Operations.
D.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 year ended October 31, 2021, the Fund incurred $60,547 in independent Trustee compensation and expense reimbursements.
E.Officers of the Trust. Officers of the Trust are also employees of BBH. Officers are paid no fees by the Trust for their services to the Trust.
4.Investment Transactions. For the year ended October 31, 2021, the cost of purchases and the proceeds of sales of investment securities, other than short-term investments, were $521,663,175 and $369,000,563, respectively.
financial statements october 31, 2021 | 37 |
BBH INCOME FUND
NOTES TO FINANCIAL STATEMENTS (continued)
October 31, 2021
5. Shares of Beneficial Interest. The Trust is permitted to issue an unlimited number of Class I shares of beneficial interest, at no par value. Transactions in Class I shares were as follows:
For the year ended | For the year ended | |||||||||||||||
October 31, 2021 | October 31, 2020 | |||||||||||||||
Shares | Dollars | Shares | Dollars | |||||||||||||
Class I | ||||||||||||||||
Shares sold | 20,537,274 | $ | 216,267,575 | 11,360,524 | $ | 119,485,340 | ||||||||||
Shares issued in connection with reinvestments of dividends | 293,453 | 3,100,657 | 182,738 | 1,898,492 | ||||||||||||
Proceeds from short-term redemption fees | N/A | 2,369 | N/A | 4,617 | ||||||||||||
Shares redeemed | (5,908,472 | ) | (62,053,028 | ) | (6,380,176 | ) | (66,597,003 | ) | ||||||||
Net increase | 14,922,255 | $ | 157,317,573 | 5,163,086 | $ | 54,791,446 |
6. 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:
A shareholder may lose money by investing in the Fund (investment risk). The Fund is actively managed and the decisions by the Investment Adviser may cause the Fund to incur losses or miss profit opportunities (management risk). In the normal course of business, the Fund invests in securities and enters into transactions where risks exist due to failure of a counterparty to a transaction to perform (credit risk), changes in interest rates (interest rate risk), higher volatility for securities with longer maturities (maturity risk), financial performance or leverage of the issuer (issuer risk), difficulty in being able to purchase or sell a security (illiquid investment risk), or certain risks associated with investing in foreign securities not present in domestic investments, including, but not limited to, recovery of tax withheld by foreign jurisdictions (foreign investment risk). Investments in other investment companies are subject to market and selection risk, as well as the specific risks associated with the investment companies’ portfolio securities (investment in other investment companies risk), and risks from investing in securities of issuers based in developing countries (emerging markets risk). The Fund’s use of derivatives creates risks that are different from, or possibly greater than, the risks associated with investing directly in securities as the Fund could lose more than the principal amount invested (derivatives risk). Political, legislative and economic events may affect a municipal security’s value, interest payments, repayments of principal and the Fund’s ability to sell it (municipal issuer risk). Due to uncertainty regarding the ability of the issuer to pay principal and interest, securities that are rated below investment grade (i.e., Ba1/BB+ or lower) (junk bond risk), and their unrated equivalents, may be subject to greater risks than securities which have higher credit ratings, including a high risk of default. If the issuer of the securities in which the Fund invests redeems them before maturity the Fund may have to reinvest the proceeds in securities that pay a lower
38
BBH INCOME FUND
NOTES TO FINANCIAL STATEMENTS (continued)
October 31, 2021
interest rate (call risk). The Fund invests in asset-backed (asset-backed securities risk) and mortgage-backed securities (mortgage-backed securities risk) which are subject to the risk that borrowers may default on the obligations that underlie these securities. In addition, these securities may be paid off sooner (prepayment risk) or later than expected which may increase the volatility of securities during periods of fluctuating interest rates. The Fund may invest in bonds issued by foreign governments which may be unable or unwilling to make interest payments and/or repay the principal owed (sovereign debt risk). The Fund’s use of borrowing, in reverse repurchase agreements and investment in some derivatives, involves leverage. Leverage tends to exaggerate the effect of any increase or decrease in the value of the Fund’s securities and may cause the Fund to be more volatile (leverage risk). Loan participations, delayed funding loans and revolving credit facilities may have the effect of requiring the Fund to increase its investments in a company at a time when it might not otherwise decide to do so (loan risk). The value of securities held by the Fund may decline in response to certain events, including: those directly involving the companies or issuers whose securities are held by the Fund; conditions affecting the general economy; overall market changes; local, regional or political, social or economic instability; and currency and interest rate and price fluctuations. Natural disasters, the spread of infectious illness and other public health emergencies, recession, terrorism and other unforeseeable events may lead to increased market volatility and may have adverse effects on world economies and markets generally (market risk). A significant investment of Fund assets within one or more sectors, industries, securities and/or durations may increase the Fund’s sensitivity to adverse economic, business, political, or other, risks associated with such sector, industry, security or duration (sector risk). The Fund’s shareholders may be adversely impacted by asset allocation decisions made by an investment adviser whose discretionary clients make up a large percentage of the Fund’s shareholders (shareholder concentration 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). While the U.S. Government has historically provided financial support to U.S. government-sponsored agencies or instrumentalities during times of financial stress, such as the various actions taken to stabilize the Federal National Mortgage Association and Federal Home Loan Mortgage Corporation during the credit crisis of 2008, no assurance can be given that it will do so in the future. Such securities are neither issued nor guaranteed by the U.S. Treasury (U.S. Government Agency Securities Risk). The Fund may invest in private placement securities that are issued pursuant to Regulation S and Rule 144A which have not been registered with the U.S. Securities and Exchange Commission ("SEC"). These securities may be subject to contractual restrictions which prohibit or limit their resale (private placement risk). LIBOR is scheduled to be phased out by the end of 2021. The unavailability and/or discontinuation of LIBOR may affect the value, liquidity or return on certain fund investments that mature later than 2021 and may result in costs incurred in connection with closing out positions and entering into new positions. Any pricing adjustments to the fund’s investments resulting from a substitute reference rate may also adversely affect the fund’s performance and/or net asset value (LIBOR transition risk). The extent
financial statements october 31, 2021 | 39 |
BBH INCOME FUND
NOTES TO FINANCIAL STATEMENTS (continued)
October 31, 2021
of the Fund’s exposure to these risks in respect to these financial assets is included in their value as recorded in the Fund’s Statement of Assets and Liabilities.
In 2020, the COVID-19 outbreak was declared a pandemic by the World Health Organization. The situation is dynamic with various cities and countries around the world responding in different ways to address the outbreak. The rapid development and fluidity of this situation precludes any prediction as its ultimate impact, which may have a continued adverse impact on economic and market conditions and trigger a period of global economic slowdown. Management is monitoring developments relating to COVID-19 and is coordinating its operational response based on existing business continuity plans and on guidance from global health organizations, relevant governments, and general pandemic response best practices.
Please refer to the Fund’s prospectus for a complete description of the principal risks of investing in the Fund.
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.
7.Subsequent Events. BBH, the custodian and fund accountant for the Fund, has entered into an agreement with State Street Corporation (“State Street”) under which State Street will acquire BBH's Investor Services business; which includes those services provided to the Fund. The transaction is expected to be completed in the first quarter of 2022, subject to customary closing conditions and regulatory approvals. Investment advisory, portfolio management and administrative services provided to BBH Trust by BBH through its SID are not impacted by the agreement with State Street.
Management has evaluated events and transactions that have occurred since October 31, 2021 through the date the financial statements were issued and determined that there were no other subsequent events that would require recognition or additional disclosure in the financial statements.
40
BBH INCOME FUND
DISCLOSURE OF FUND EXPENSES
October 31, 2021 (unaudited)
EXAMPLE
As a shareholder of the Fund, you may incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments, reinvested distributions, or other distributions; redemption fees; and exchange fees; and (2) ongoing costs, including management fees; and other Fund expenses. This Example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The Example is based on an investment of $1,000 invested at the beginning of the six-month period and held for the entire period (May 1, 2021, to October 31, 2021).
ACTUAL EXPENSES
The first line of the table provides information about actual account values and actual expenses. You may use information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled “Expenses Paid During the Period” to estimate the expenses you paid on your account during the period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The second line of the table provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid during the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% Hypothetical Example with the 5% hypothetical examples that appear in the shareholder reports of other funds.
financial statements october 31, 2021 | 41 |
BBH INCOME FUND
DISCLOSURE OF FUND EXPENSES (continued)
October 31, 2021 (unaudited)
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as redemption fees or exchange fees. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
Beginning Account Value May 1, 2021 | Ending Account Value October 31, 2021 | Expenses Paid During Period May 1, 2021 to October 31, 20211 | |||||||||||||
Class I | |||||||||||||||
Actual | $ | 1,000 | $ | 1,023 | $ | 2.40 | |||||||||
Hypothetical2 | $ | 1,000 | $ | 1,023 | $ | 2.40 |
________________
1 | Expenses are equal to the Fund’s annualized expense ratio of 0.47% for Class I shares, multiplied by the average account value over the period and multiplied by 184/365 (to reflect the one-half year period). |
2 | Assumes a return of 5% before expenses. For the purposes of the calculation, the applicable annualized expenses ratio for each class of shares is subtracted from the assumed return before expenses. |
42
BBH INCOME FUND
CONFLICTS OF INTEREST
October 31, 2021 (unaudited)
Conflicts of Interest
BBH, including the Investment Adviser, provides discretionary and non-discretionary investment management services and products to corporations, institutions and individual investors throughout the world. As a result, in the ordinary course of its businesses, BBH, including the Investment Adviser, may engage in activities in which its interests or the interests of its clients may conflict with or be adverse to the interests of the Funds. In addition, certain of such clients (including the Funds) utilize the services of BBH for which they will pay to BBH customary fees and expenses that will not be shared with the Funds.
The Investment Adviser and the Sub-Adviser have adopted and implemented policies and procedures that seek to manage conflicts of interest. Pursuant to such policies and procedures, the Investment Adviser and the Sub-Adviser monitor a variety of areas, including compliance with fund investment guidelines, the investment in only those securities that have been approved for purchase, and compliance with their respective Code of Ethics.
The Trust also manages these conflicts of interest. For example, the Trust has designated a Chief Compliance Officer (“CCO”) and has adopted and implemented policies and procedures designed to manage the conflicts identified below and other conflicts that may arise in the course of the Funds’ operations in such a way as to safeguard the Funds from being negatively affected as a result of any such potential conflicts. From time to time, the Trustees receive reports from the Investment Adviser, the Sub-Adviser and the Trust’s CCO on areas of potential conflict.
Investors should carefully review the following, which describes potential and actual conflicts of interest that BBH, the Investment Adviser and Sub-Adviser can face in the operation of their respective investment management services. This section is not, and is not intended to be, a complete enumeration or explanation of all of the potential conflicts of interest that may arise. The Investment Adviser, the Sub-Adviser and the Funds have adopted policies and procedures reasonably designed to appropriately prevent, limit or mitigate the conflicts of interest described below. Additional information about potential conflicts of interest regarding the Investment Adviser is set forth in the Investment Adviser’s Form ADV. A copy of Part 1 and Part 2A of the Investment Adviser’s Form ADV is available on the SEC’s website (www.adviserinfo.sec.gov). In addition, many of the activities that create these conflicts of interest are limited and/or prohibited by law, unless an exception is available.
financial statements october 31, 2021 | 43 |
BBH INCOME FUND
CONFLICTS OF INTEREST (continued)
October 31, 2021 (unaudited)
Other Clients and Allocation of Investment Opportunities. BBH, the Investment Adviser, and the Sub-Adviser manage funds and accounts of clients other than the Funds (“Other Clients”). In general, BBH, the Investment Adviser, and the Sub-Adviser face conflicts of interest when they render investment advisory services to different clients and, from time to time, provide dissimilar investment advice to different clients. Investment decisions will not necessarily be made in parallel among the Funds and Other Clients. Investments made by the Funds do not, and are not intended to, replicate the investments, or the investment methods and strategies, of Other Clients. Accordingly, such Other Clients’ accounts may produce results that are materially different from those experienced by the Funds. Certain other conflicts of interest may arise in connection with a portfolio manager’s management of the Funds’ investments, on the one hand, and the investments of other funds or accounts for which the portfolio manager is responsible, on the other. For example, it is possible that the various funds or accounts managed by the Investment Adviser or Sub-Adviser could have different investment strategies that, at times, might conflict with one another to the possible detriment of the Funds. From time to time, the Investment Adviser and Sub-Adviser, sponsor and with other investment pools and accounts which engage in the same or similar businesses as the Funds using the same or similar investment strategies. To the extent that the same investment opportunities might be desirable for more than one account or fund, possible conflicts could arise in determining how to allocate them because the Investment Adviser or Sub-Adviser may have an incentive to allocate investment opportunities to certain accounts or funds. However, BBH and the Investment Adviser have implemented policies and procedures designed to ensure that information relevant to investment decisions is disseminated promptly within its portfolio management teams and investment opportunities are allocated equitably among different clients. The policies and procedures require, among other things, objective allocation for limited investment opportunities, and documentation and review of justifications for any decisions to make investments only for select accounts or in a manner disproportionate to the size of the account. Nevertheless, access to investment opportunities may be allocated differently among accounts due to the particular characteristics of an account, such as size of the account, cash position, tax status, risk tolerance and investment restrictions or for other reasons.
Actual or potential conflicts of interest may also arise when a portfolio manager has management responsibilities to multiple accounts or funds, resulting in unequal commitment of time and attention to the portfolio management of the funds or accounts.
44
BBH INCOME FUND
CONFLICTS OF INTEREST (continued)
October 31, 2021 (unaudited)
Affiliated Service Providers. Other potential conflicts might include conflicts between the Funds and its affiliated and unaffiliated service providers (e.g. conflicting duties of loyalty). In addition to providing investment management services through the SID, BBH provides administrative, custody, shareholder servicing and fund accounting services to the Funds. BBH may have conflicting duties of loyalty while servicing the Funds and/or opportunities to further its own interest to the detriment of the Funds. For example, in negotiating fee arrangements with affiliated service providers, BBH may have an incentive to agree to higher fees than it would in the case of unaffiliated providers. BBH acting in its capacity as the Funds’ administrator is the primary valuation agent of the Funds. BBH values securities and assets in the Funds according to the Funds’ valuation policies. Because the Investment Adviser’s advisory and administrative fees are calculated by reference to the Funds’ net assets, BBH and its affiliates may have an incentive to seek to overvalue certain assets.
Aggregation. Potential conflicts of interest also arise with the aggregation of trade orders. Purchases and sales of securities for the Funds may be aggregated with orders for other client accounts managed by the Sub-Adviser. The Sub-Adviser, however, is not required to aggregate orders if portfolio management decisions for different accounts are made separately, or if it is determined that aggregating is not practicable, or in cases involving client direction. Prevailing trading activity frequently may make impossible the receipt of the same price or execution on the entire volume of securities purchased or sold. When this occurs, the various prices may be averaged, and the Funds will be charged or credited with the average price. Thus, the effect of the aggregation may operate on some occasions to the disadvantage of the Funds. In addition, under certain circumstances, the Funds will not be charged the same commission or commission equivalent rates in connection with an aggregated order.
Cross Trades. Under certain circumstances, the Investment Adviser, on behalf of the Funds, may seek to buy from or sell securities to another fund or account advised by BBH, the Investment Adviser. Subject to applicable law and regulation, BBH, the Investment Adviser may (but is not required to) effect purchases and sales between BBH, the Investment Adviser clients (“cross trades”), including the Funds, if BBH, the Investment Adviser or the Sub-Adviser believe such transactions are appropriate based on each party’s investment objectives and guidelines. There may be potential conflicts of interest or regulatory issues relating to these transactions which could limit the Investment Adviser's decision to engage in these transactions for the Funds. BBH, the Investment Adviser and/or the Sub-Adviser may have a potentially conflicting division of loyalties and responsibilities to the parties in such transactions.
financial statements october 31, 2021 | 45 |
BBH INCOME FUND
CONFLICTS OF INTEREST (continued)
October 31, 2021 (unaudited)
Soft Dollars. The Investment Adviser may direct brokerage transactions and/or payment of a portion of client commissions (“soft dollars”) to specific brokers or dealers or other providers to pay for research or other appropriate services which provide, in the Investment Adviser’s view, appropriate assistance in the investment decision-making process (including with respect to futures, fixed price offerings and over-the-counter transactions). The use of a broker that provides research and securities transaction services may result in a higher commission than that offered by a broker who does not provide such services. The Investment Adviser will determine in good faith whether the amount of commission is reasonable in relation to the value of research and services provided and whether the services provide lawful and appropriate assistance in its investment decision-making responsibilities.
Research or other services obtained in this manner may be used in servicing any or all of the Funds and other accounts managed by the Investment Adviser, including in connection with accounts that do not pay commissions to the broker related to the research or other service arrangements. Such products and services may disproportionately benefit other client accounts relative to the Funds based on the amount of brokerage commissions paid by the Funds and such other accounts. To the extent that the Sub-Adviser uses soft dollars, it will not have to pay for those products and services itself.
BBH may receive research that is bundled with the trade execution, clearing, and/or settlement services provided by a particular broker-dealer. To the extent that the Sub-Adviser receives research on this basis, many of the same conflicts related to traditional soft dollars may exist. For example, the research effectively will be paid by client commissions that also will be used to pay for the execution, clearing, and settlement services provided by the broker-dealer and will not be paid by the Sub-Adviser.
Arrangements regarding compensation and delegation of responsibility may create conflicts relating to selection of brokers or dealers to execute Fund portfolio trades and/or specific uses of commissions from Fund portfolio trades, administration of investment advice and valuation of securities.
Investments in BBH Funds. From time to time BBH may invest a portion of the assets of its discretionary investment advisory clients in the Funds. That investment by BBH on behalf of its discretionary investment advisory clients in the Funds may be significant at times.
Increasing a Fund’s assets may enhance investment flexibility and diversification and may contribute to economies of scale that tend to reduce the Funds’ expense ratio. In selecting the Funds for its discretionary investment advisory clients, BBH may limit its selection to funds managed by BBH or the Investment Adviser. BBH may not consider or canvass the universe of unaffiliated investment companies available, even though there may be unaffiliated investment companies that may be more appropriate or that have superior performance. BBH, the Investment Adviser and their affiliates providing services to the Funds benefit from additional fees when the Funds is included as an investment by a discretionary investment advisory client.
BBH reserves the right to redeem at any time some or all of the shares of the Funds acquired for its discretionary investment advisory clients’ accounts. A large redemption of shares of the Funds by BBH on
46
BBH INCOME FUND
CONFLICTS OF INTEREST (continued)
October 31, 2021 (unaudited)
behalf of its discretionary investment advisory clients could significantly reduce the asset size of the Funds, which might have an adverse effect on the Funds’ investment flexibility, portfolio diversification and expense ratio.
Valuation. When market quotations are not readily available, or are believed by BBH to be unreliable, the Funds’ investments will be valued at fair value by BBH pursuant to procedures adopted by the Funds’ Board of Trustees. When determining an asset’s “fair value”, BBH seeks to determine the price that a Fund might reasonably expect to receive from the current sale of that asset in an arm’s-length transaction. The price generally may not be determined based on what the Funds might reasonably expect to receive for selling an asset at a later time or if it holds the asset to maturity. While fair value determinations will be based upon all available factors that BBH deems relevant at the time of the determination and may be based on analytical values determined by BBH using proprietary or third-party valuation models, fair value represents only a good faith approximation of the value of a security. The fair value of one or more securities may not, in retrospect, be the price at which those assets could have been sold during the period in which the particular fair values were used in determining the Funds’ net asset value. As a result, the Funds’ sale or redemption of its shares at net asset value, at a time when a holding or holdings are valued by BBH (pursuant to Board-adopted procedures) at fair value, may have the effect of diluting or increasing the economic interest of existing shareholders.
Referral Arrangements. BBH may enter into advisory and/or referral arrangements with third parties. Such arrangements may include compensation paid by BBH to the third party. BBH may pay a solicitation fee for referrals and/or advisory or incentive fees. BBH may benefit from increased amounts of assets under management.
Personal Trading. BBH, including the Investment Adviser, and any of their respective partners, principals, directors, officers, employees, affiliates or agents, face conflicts of interest when transacting in securities for their own accounts because they could benefit by trading in the same securities as the Funds, which could have an adverse effect on the Funds. However, the Investment Adviser has implemented policies and procedures concerning personal trading by BBH Partners and employees. The policy and procedures are intended to prevent BBH Partners and employees from trading in the same securities as the Funds. However, BBH, including the Investment Adviser, has implemented policies and procedures concerning personal trading by BBH Partners and employees. The policies and procedures are intended to prevent BBH Partners and employees with access to Fund material non-public information from trading in the same securities as the Funds.
Gifts and Entertainment. From time to time, employees of BBH, including the Investment Adviser, and any of their respective partners, principals, directors, officers, employees, affiliates or agents, may receive gifts and/or entertainment from clients, intermediaries, or service providers to the Funds or BBH, including the Investment Adviser, which could have the appearance of affecting or may potentially affect the judgment of the employees, or the manner in which they conduct business. The Investment Adviser has implemented policies and procedures concerning gifts and entertainment to mitigate any impact on the judgment of BBH Partners and employees. BBH, including the Investment Adviser, has implemented policies and procedures concerning gifts and entertainment to mitigate any impact on the judgment of BBH Partners and employees.
financial statements october 31, 2021 | 47 |
BBH INCOME FUND
ADDITIONAL FEDERAL TAX INFORMATION
October 31, 2021 (unaudited)
The Fund hereby designates $6,525,975 as an approximate amount of capital gain dividend for the purpose of dividends paid deduction.
The qualified investment income (“QII”) percentage for the period ended October 31, 2021 was 81.64%. In January 2022, shareholders will receive Form 1099-DIV, which will include their share of qualified dividends distributed during the calendar year 2021. Shareholders are advised to check with their tax advisers for information on the treatment of these amounts on their individual income tax returns.
48
TRUSTEES AND OFFICERS OF BBH INCOME FUND
(unaudited)
Information pertaining to the Trustees and executive officers of the Trust as of October 31, 2021 is set forth below. The mailing address for each Trustee is c/o BBH Trust, 140 Broadway, New York, NY 10005.
Name and Birth Year | Position(s) Held with the Trust | Term of Office and Length of Time Served# | Principal Occupation(s) During Past 5 Years | Number of Portfolios in Fund Complex Overseen by Trustee^ | Other Public Company or Investment Company Directorships held by Trustee During Past 5 Years | |||||
Independent Trustees | ||||||||||
H. Whitney Wagner Birth Year: 1956 | Chairman of the Board and Trustee | Chairman Since 2014; Trustee Since 2007 and 2006-2007 with the Predecessor Trust | President, Clear Brook Advisors, a registered investment adviser. | 9 | None. | |||||
Andrew S. Frazier Birth Year: 1948 | Trustee | Since 2010 | Retired. | 9 | None. | |||||
Mark M. Collins Birth Year: 1956 | Trustee | Since 2011 | Partner of Brown Investment Advisory Incorporated, a registered investment adviser. | 9 | Chairman of Dillon Trust Company. | |||||
John M. Tesoro Birth Year: 1952 | Trustee | Since 2014 | Retired. | 9 | Trustee, Bridge Builder Trust (8 Funds); Director of Teton Advisors, Inc. (a registered investment adviser). | |||||
Joan A. Binstock Birth Year: 1954 | Trustee | Since 2019 | Partner, Chief Financial and Operations Officer, Lord Abbett & Co. LLC (1999-2018); Lovell Minnick Partners, Advisers Counsel (2018-present). | 9 | Independent Director, Morgan Stanley Direct Lending Fund; KKR Real Estate Interval Fund. |
financial statements october 31, 2021 | 49 |
TRUSTEES AND OFFICERS OF BBH INCOME FUND
(unaudited)
Name, Address and Birth Year | Position(s) Held with the Trust | Term of Office and Length of Time Served# | Principal Occupation(s) During Past 5 Years | Number of Portfolios in Fund Complex Overseen by Trustee^ | Other Public Company or Investment Company Directorships held by Trustee During Past 5 Years | |||||
Interested Trustees | ||||||||||
Susan C. Livingston+ 50 Post Office Square Boston, MA 02110 Birth Year: 1957 | Trustee | Since 2011 | Partner (since 1998) and Senior Client Advocate (since 2010) for BBH&Co. | 9 | None. | |||||
John A. Gehret+ 140 Broadway New York, NY 10005 Birth Year: 1959 | Trustee | Since 2011 | Limited Partner of BBH&Co. (2012-present). | 9 | None. |
50
TRUSTEES AND OFFICERS OF BBH INCOME FUND
(unaudited)
Name, Address and Birth Year | Position(s) Held with the Trust | Term of Office and Length of Time Served# | Principal Occupation(s) During Past 5 Years | |||
Officers | ||||||
Jean-Pierre Paquin 140 Broadway New York, NY 10005 Birth Year: 1973 | President and Principal Executive Officer | Since 2016 | Partner of BBH&Co. since 2015; joined BBH&Co. in 1996. | |||
Daniel Greifenkamp 140 Broadway New York, NY 10005 Birth Year: 1969 | Vice President | Since 2016 | Managing Director of BBH&Co. since 2014; joined BBH&Co. in 2011. | |||
Charles H. Schreiber 140 Broadway New York, NY 10005 Birth Year: 1957 | Treasurer and Principal Financial Officer | Since 2007 2006-2007 with the Predecessor Trust | Senior Vice President of BBH&Co. since 2001; joined BBH&Co. in 1999. | |||
Paul F. Gallagher 140 Broadway New York, NY 10005 Birth Year: 1959 | Chief Compliance Officer (“CCO”) | Since 2015 | Senior Vice President of BBH&Co. since 2015. | |||
Kristin Marvin 140 Broadway New York, NY 10005 Birth Year: 1981 | Anti-Money Laundering Officer (“AMLO”) | Since 2021 | Assistant Vice President of BBH&Co. since March 2020; Program Manager, Ares Management Corporation, April 2015-March 2020. | |||
Suzan M. Barron 50 Post Office Square Boston, MA 02110 Birth Year: 1964 | Secretary | Since 2009 | Senior Vice President and Senior Investor Services Counsel, BBH&Co. since 2005. |
financial statements october 31, 2021 | 51 |
TRUSTEES AND OFFICERS OF BBH INCOME FUND
(unaudited)
Name, Address and Birth Year | Position(s) Held with the Trust | Term of Office and Length of Time Served# | Principal Occupation(s) During Past 5 Years | |||
Crystal Cheung 140 Broadway New York, NY 10005 Birth Year: 1974 | Assistant Treasurer | Since 2018 | Assistant Vice President of BBH&Co. since 2016; joined BBH&Co. 2014. | |||
Dania C. Piscetta 50 Post Office Square Boston, MA 02110 Birth Year: 1989 | Assistant Secretary | Since 2021 | Assistant Vice President of BBH&Co. since 2021; joined BBH&Co. in 2021; Assistant Vice President and Legal Associate of Wellington Management Company LLP, April 2018 - March 2021; Senior Compliance Analyst, Fidelity Investments, May 2016 – April 2018. |
________________
# | All officers of the Trust hold office for one year and until their respective successors are chosen and qualified (subject to the ability of the Trustees to remove any officer in accordance with the Trust’s By-laws). Mr. Wagner previously served on the Board of Trustees of the Predecessor Trust. |
+ | Ms. Livingston and Mr. Gehret are “interested persons” of the Trust as defined in the 1940 Act because of their positions as Partner and Limited Partner of BBH&Co., respectively. |
^ | The Fund Complex consists of the Trust, which has nine series, and each is counted as one “Portfolio” for purposes of this table. |
52
BBH INCOME FUND
OPERATION AND EFFECTIVENESS OF THE FUND’S LIQUIDITY RISK MANAGEMENT PROGRAM
October 31, 2021 (unaudited)
The Securities and Exchange Commission adopted Rule 22e-4 under the Investment Company Act of 1940, as amended (the “Liquidity Rule”) to promote effective liquidity risk management throughout the open-end investment company industry in order to reduce the risk that funds will be unable to meet their redemption obligations and mitigate dilution of the interests of fund shareholders.
The Board of Trustees (the “Board”) of BBH Trust met on March 9, 2021 to review the liquidity risk management program (the “Program”) for the funds of BBH Trust (the “Funds”) pursuant to the Liquidity Rule. The Board has appointed three members of the Brown Brothers Harriman & Co. Mutual Fund Advisory Department, the Investment Adviser to the Funds, as the Program Administrator for each Fund’s Program. The Program Administrator provided the Board with a report (the “Report”) that addressed the operations of the Program and assessed its adequacy and effectiveness of the Program. The Report covered the period from February 1, 2020 through January 31, 2021 (the “Reporting Period”).
The Report noted that the Program complied with the key factors for consideration under the Liquidity Rule for assessing, managing and periodically reviewing a Fund’s liquidity risk, including the following points.
Liquidity classification. The Report described the Program’s liquidity classification methodology for categorizing the Funds’ investments into one of four liquidity buckets.
Highly Liquid Investment Minimum. The Report noted that one aspect of the Liquidity Rule is a requirement that funds that are expected to have less than 50% of assets classified as other than “highly liquid” should establish a minimum percentage of highly liquid assets that the fund is expected to hold on an on-going basis. The Program Administrator monitors the percentages of assets in each category on an ongoing basis and, given that no Fund has approached the 50% threshold, has made the determination that it is not necessary to assign a Highly Liquid Investment Minimum as provided for in the Liquidity Rule to any of the Funds.
The Fund’s investment strategy and liquidity of portfolio investments during normal and reasonably foreseeable stressed market conditions. During the Reporting Period, the Program Administrator reviewed whether each Fund’s investment strategy is appropriate for an open-end fund structure with a focus on Funds with more significant and consistent holdings of less liquid and illiquid assets and factored a Fund’s concentration in an issuer into the liquidity classification methodology by taking issuer position sizes into account.
Short-term and long-term cash flow projections during normal and reasonably foreseeable stressed market conditions. During the Reporting Period, the Program Administrator reviewed historical redemption activity and used this information as a component to establish each Fund’s reasonably anticipated trading size. The Program Administrator also took into consideration other factors such as shareholder ownership concentration, applicable distribution channels and the degree of certainty associated with a Fund’s short-term and long-term cash flow projections.
Holdings of cash and cash equivalents. The Program Administrator considered the degree to which each Fund held cash and cash equivalents as a component of each Fund’s ability to meet redemption requests.
financial statements october 31, 2021 | 53 |
BBH INCOME FUND
OPERATION AND EFFECTIVENESS OF THE FUND’S LIQUIDITY RISK MANAGEMENT PROGRAM (continued)
October 31, 2021 (unaudited)
There were no material changes to the Program during the Reporting Period. The Program Administrator has informed the Board that it believes that the Fund’s Program is adequately designed, has been implemented as intended, and has operated effectively since its implementation. No material exceptions have been noted since the implementation of the Program, and there were no liquidity events that impacted the Fund or its ability to meet redemption requests on a timely basis during the Reporting Period.
54
Administrator Brown Brothers Harriman & Co. 140 Broadway New York, NY 10005
Distributor ALPS Distributors, Inc. 1290 Broadway, Suite 1000 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 |
To obtain information or make shareholder inquiries:
By telephone: | Call 1-800-575-1265 |
By E-mail send your request to: | bbhfunds@bbh.com |
On the internet: | www.bbhfunds.com |
This report is submitted for the general information of shareholders and is not authorized for distribution to prospective investors unless preceded or accompanied by an effective prospectus. Nothing herein contained is to be considered an offer of sale or a solicitation of an offer to buy shares of the Fund.
For more complete information, visit www.bbhfunds.com for a prospectus. You should consider the Fund’s investment objectives, risks, charges and expenses carefully before you invest. Information about these and other important subjects is in the Fund’s prospectus, which you should read carefully before investing.
Holdings and allocations are subject to change. Fund holdings should not be relied on in making investment decisions and should not be construed as research or investment advice regarding particular securities. Current and future holdings are subject to risk.
The Fund files a complete schedule of portfolio holdings with the Securities and Exchange Commission (SEC) for the first and third quarters of each fiscal year as an exhibit to its reports on Form N-PORT. The Fund’s Forms N-PORT are available electronically on the SEC’s website (sec.gov). For a complete list of a fund’s portfolio holdings, view the most recent holdings listing, semi-annual report, or annual report on the Fund’s web site at http://www.bbhfunds.com.
A summary of the Fund’s Proxy Voting Policy that the Fund uses to determine how to vote proxies, if any, relating to securities held in the Fund’s portfolio, as well as a record of how the Fund voted any such proxies during the most recent 12-month period ended June 30, is available, without charge, upon request by calling the toll-free number listed above. This information is also available on the SEC’s website at www.sec.gov.
NOT FDIC INSURED NO BANK GUARANTEE MAY LOSE VALUE
Annual Report
OCTOBER 31, 2021
BBH Select Series — Large Cap Fund
BBH SELECT SERIES – LARGE CAP FUND
MANAGEMENT’S DISCUSSION OF FUND PERFORMANCE
October 31, 2021
Our primary goal in managing the BBH Select Series – Large Cap Fund (“the Fund”) is to provide attractive compounded returns over full market cycles in a risk-conscious way. We employ a bottom-up, fundamentals-based process that seeks to invest in competitively advantaged, well-managed, cash generative businesses that provide essential products and services. With reducing the likelihood of a permanent capital loss for each investment being one of our key goals, we work to explicitly identify key risks outside of company management’s control so that we can contemplate the range of potential outcomes for each business. Our portfolio construction decisions are driven by an approach that considers the quality of the businesses, their long-term growth prospects and their valuation levels relative to our appraisals of intrinsic value*. We invest with a long-term ownership perspective and an expectation that our returns will be driven not by short-term trading activity, but instead by the underlying earnings power of the businesses, their effectiveness at deploying capital and their operational and financial resilience during periods of economic stress. We do not prioritize benchmark sensitivity in managing the Fund – neither in terms of sector exposures nor individual position weights. As a result, we expect that our active share** will remain relatively high, and therefore the performance of the Fund may differ meaningfully – both positively and negatively – from major indexes at various points within a market cycle as we maintain our independent perspective and focus on long-term compounding.
The Institutional Share class of the Fund rose by 37.6% net of fees during its fiscal year ended October 31, 2021. During the same period, the S&P 500 Index (“S&P 500”) returned 42.9%. Since its inception on September 9, 2019, the Fund returned 17.7% on an annualized basis, compared to 24.6% for the S&P 500. Notably, the strong absolute returns for both the Fund and the Index in fiscal 2021 were influenced by the widespread economic recovery and improving investor confidence following the pandemic-induced disruption that affected fiscal 2020.
During fiscal 2021 and since inception, the Fund’s annualized return differential vis-à-vis the performance of the S&P 500 has resulted primarily from our under-exposure to the small group of mega-cap technology and Internet companies that drove a substantial share of the Index’s returns. Nevertheless, we believe our portfolio companies have executed well and have produced solid growth and fundamental performance while maintaining appropriately conservative capital structures. These achievements are evident at the aggregate portfolio level, where we have observed attractive growth in revenue and earnings, strong profit margins, solid returns on capital and reasonable debt levels (relative to pre-tax cash flows).
The Fund’s largest positive contributors during fiscal 2021 were Alphabet Inc., Arthur J. Gallagher & Co., Berkshire Hathaway Inc. and Oracle Corp. The share prices of each of the four companies benefited from rebounding economic activity, strong competitive positioning and beneficial capital allocation.
________________
* | Intrinsic value is an estimate of the present value of the cash that a business can generate and distribute to shareholders over its remaining life. |
** | Active Share is a measure of how much a portfolio’s holdings deviate from its benchmark index. |
financial statements october 31, 2021 | 3 |
BBH SELECT SERIES – LARGE CAP FUND
MANAGEMENT’S DISCUSSION OF FUND PERFORMANCE (continued)
October 31, 2021
The Fund’s largest detractors during fiscal 2021 were Colgate-Palmolive Co., Brown-Forman Corp., Perrigo Inc. and Henry Schein Inc. While there were specific circumstances affecting the fundamental performance of each company during the year, they also shared a common attribute of being perceived as relatively defensive, which acted as a sentiment headwind in the context of a broader market that was heavily driven by growth and momentum characteristics. We sold our positions in Perrigo and Henry Schein in January 2021 and March 2021, respectively.
During fiscal 2021, the Fund made new investments in Graco Inc., Sherwin-Williams Co., Abbott Laboratories and S&P Global Inc., all of which we view as being well-positioned leaders in attractive market segments with durable growth characteristics. In addition to the exits of Perrigo and Henry Schein, the Fund also sold its holdings of Allegion PLC, FleetCor Technologies Inc. and Comcast Corp. based on our assessments of their attractiveness relative to other investment opportunities.
As of October 31, 2021, the Fund had positions in 31 companies, with approximately 48% of the assets held in the ten largest holdings. The Fund ended the fiscal year trading at roughly 94% of our underlying intrinsic value estimates on a weighted average basis.
During fiscal 2021, Nicholas Haffenreffer joined the BBH Select Series – Large Cap investment team as a Portfolio Manager. Prior to joining BBH, he had been Principal, Chief Investment Officer and Portfolio Manager at Torray LLC, overseeing the TorrayResolute Concentrated Large Growth strategy and the TorrayResolute Small/Mid Cap Growth strategy. Previously, Nicholas had founded Resolute Capital Management in 1998 and merged the company with Torray in 2010. Earlier in his career, Nicholas held positions as Director of Research at Farr Miller & Washington, equity analyst at T. Rowe Price Associates, Inc. and equity analyst for Select Equity Group, Inc. Nicholas received a BA from Brown University in 1990.
Nicholas’ philosophy and approach are very well aligned with BBH’s equity investment culture. While our core investment philosophy and key objectives will remain broadly consistent with the past, we do expect that Nicholas’s approach and the tools and techniques he has successfully employed in his career will enhance our investment execution and be additive to our research, portfolio construction and long-term performance.
________________
Portfolio holdings are subject to change. |
4
BBH SELECT SERIES – LARGE CAP FUND
MANAGEMENT’S DISCUSSION OF FUND PERFORMANCE (continued)
October 31, 2021
Growth of $10,000 Invested in BBH Select Series - Large Cap Fund
The graph below illustrates the hypothetical investment of $10,0001 in the Class I shares of the Fund since inception (September 9, 2019) to October 31, 2021 as compared to the S&P 500.
The annualized gross expense ratios as shown in the March 1, 2021 prospectus for Class I and Retail Class shares were 0.74% and 3.48%, respectively.
Performance data quoted represents past performance which is no guarantee of future results. Investment return and principal value will fluctuate, so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Fund performance changes over time and current performance may be lower or higher than what is stated. Fund shares redeemed within 30 days of purchase are subject to a redemption fee of 2.00%. Returns do not reflect the deductions of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. For performance current to the most recent month-end please call 1-800-575-1265.
Hypothetical performance results are calculated on a total return basis and include all portfolio income, unrealized and realized capital gains, losses and reinvestment of dividends and other earnings. No one shareholder has actually achieved these results and no representation is being made that any actual shareholder achieved, or is likely to achieve, similar results to those shown. Hypothetical performance does not represent actual trading and may not reflect the impact of material economic and market factors. Undue reliance should not be placed on hypothetical performance results in making an investment decision.
________________
1 | The Fund’s performance assumes the reinvestment of all dividends and distributions. The S&P 500 has been adjusted to reflect reinvestment of dividends on securities. The S&P 500 is not adjusted to reflect sales charges, expenses or other fees that the Securities and Exchange Commission requires to be reflected in the Fund’s performance. The S&P 500 is an unmanaged weighted index of 500 stocks providing a broad indicator of stock price movements. The composition of the index is materially different than the Fund’s holdings. The index is unmanaged. Investments cannot be made in an index. |
financial statements october 31, 2021 | 5 |
BBH SELECT SERIES – LARGE CAP FUND
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
October 31, 2021
To the Trustees of the BBH Trust and Shareholders of BBH Select Series – Large Cap Fund:
Opinion on the Financial Statements and Financial Highlights
We have audited the accompanying statement of assets and liabilities, including the portfolio of investments, of BBH Select Series – Large Cap Fund (the "Fund"), one of the funds within BBH Trust, as of October 31, 2021, the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, the financial highlights for each of the two years in the period then ended and for the period from September 9, 2019 (commencement of operations) to October 31, 2019, and the related notes. In our opinion, the financial statements and financial highlights present fairly, in all material respects, the financial position of the Fund as of October 31, 2021, and the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the two years in the period then ended and for the period from September 9, 2019 (commencement of operations) to October 31, 2019, in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements and financial highlights are the responsibility of the BBH Trust's management. Our responsibility is to express an opinion on the Fund's financial statements and financial highlights based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the BBH Trust in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement, whether due to error or fraud. The BBH Trust is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the BBH Trust’s internal control over financial reporting. Accordingly, we express no such opinion.
6
BBH SELECT SERIES – LARGE CAP FUND
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM (continued)
Our audits included performing procedures to assess the risks of material misstatement of the financial statements and financial highlights, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements and financial highlights. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements and financial highlights. Our procedures included confirmation of securities owned as of October 31, 2021, by correspondence with the custodian and brokers; when replies were not received from brokers, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinion.
/s/ DELOITTE & TOUCHE LLP
Boston, Massachusetts
December 21, 2021
We have served as the auditor of one or more Brown Brothers Harriman investment companies since 1991.
financial statements october 31, 2021 | 7 |
BBH SELECT SERIES – LARGE CAP FUND
PORTFOLIO ALLOCATION
October 31, 2021
SECTOR DIVERSIFICATION
U.S. $ Value | Percent of Net Assets | |||||||
Common Stock: | ||||||||
Basic Materials | $ | 48,920,990 | 10.4 | % | ||||
Communications | 70,675,660 | 15.1 | ||||||
Consumer Cyclical | 71,429,093 | 15.3 | ||||||
Consumer Non-Cyclical | 127,055,287 | 27.1 | ||||||
Financials | 87,134,250 | 18.5 | ||||||
Industrials | 32,462,274 | 6.9 | ||||||
Technology | 21,422,262 | 4.6 | ||||||
Cash and Other Assets in Excess of Liabilities | 9,752,834 | 2.1 | ||||||
NET ASSETS | $ | 468,852,650 | 100.0 | % |
All data as of October 31, 2021. The Fund’s sector diversification is expressed as a percentage of net assets and may vary over time.
The accompanying notes are an integral part of these financial statements.
8
BBH SELECT SERIES – LARGE CAP FUND
PORTFOLIO OF INVESTMENTS
October 31, 2021
Shares | Value | |||||||
| COMMON STOCK (97.9%) | |||||||
BASIC MATERIALS (10.4%) | ||||||||
102,055 | Celanese Corp. (Series A) | $ | 16,482,903 | |||||
66,060 | Linde, Plc. (Ireland) | 21,086,352 | ||||||
35,854 | Sherwin-Williams Co. | 11,351,735 | ||||||
Total Basic Materials | 48,920,990 | |||||||
| ||||||||
COMMUNICATIONS (15.1%) | ||||||||
13,263 | Alphabet, Inc. (Class C)1 | 39,330,233 | ||||||
6,526 | Amazon.com, Inc.1 | 22,008,478 | ||||||
3,857 | Booking Holdings, Inc.1 | 9,336,949 | ||||||
Total Communications | 70,675,660 | |||||||
| ||||||||
CONSUMER CYCLICAL (15.3%) | ||||||||
134,128 | Copart, Inc.1 | 20,828,737 | ||||||
32,751 | Costco Wholesale Corp. | 16,098,427 | ||||||
39,576 | Dollar General Corp. | 8,766,876 | ||||||
96,160 | NIKE, Inc. (Class B) | 16,086,607 | ||||||
90,963 | Starbucks Corp. | 9,648,446 | ||||||
Total Consumer Cyclical | 71,429,093 | |||||||
| ||||||||
CONSUMER NON-CYCLICAL (27.1%) | ||||||||
96,192 | Abbott Laboratories | 12,398,187 | ||||||
214,140 | Alcon, Inc. (Switzerland) | 17,850,710 | ||||||
121,016 | Baxter International, Inc. | 9,555,423 | ||||||
147,908 | Brown-Forman Corp. (Class B) | 10,041,474 | ||||||
131,669 | Colgate-Palmolive Co. | 10,031,861 | ||||||
47,508 | Diageo, Plc. ADR (United Kingdom) | 9,485,922 | ||||||
59,560 | Nestle S.A. ADR (Switzerland) | 7,851,199 | ||||||
26,961 | S&P Global, Inc. | 12,783,828 | ||||||
22,288 | Thermo Fisher Scientific, Inc. | 14,109,864 | ||||||
106,137 | Zoetis, Inc. (Class A) | 22,946,819 | ||||||
Total Consumer Non-Cyclical | 127,055,287 | |||||||
| ||||||||
FINANCIALS (18.5%) | ||||||||
135,096 | Arthur J Gallagher & Co. | 22,651,546 | ||||||
62 | Berkshire Hathaway, Inc. (Class A)1 | 26,839,924 | ||||||
48,487 | Mastercard, Inc. (Class A) | 16,268,358 |
The accompanying notes are an integral part of these financial statements.
financial statements october 31, 2021 | 9 |
BBH SELECT SERIES – LARGE CAP FUND
PORTFOLIO OF INVESTMENTS (continued)
October 31, 2021
Shares | Value | |||||||
| ||||||||
| COMMON STOCKS (continued) | |||||||
FINANCIALS (continued) | ||||||||
144,655 | Progressive Corp | $ | 13,724,866 | |||||
36,122 | Visa, Inc. (Class A) | 7,649,556 | ||||||
Total Financials | 87,134,250 | |||||||
| INDUSTRIALS (6.9%) | |||||||
156,489 | AO Smith Corp. | 11,434,651 | ||||||
123,866 | Graco, Inc. | 9,312,246 | ||||||
73,116 | Waste Management, Inc. | 11,715,377 | ||||||
Total Industrials | 32,462,274 | |||||||
| ||||||||
| TECHNOLOGY (4.6%) | |||||||
21,664 | KLA Corp. | 8,075,473 | ||||||
139,116 | Oracle Corp. | 13,346,789 | ||||||
Total Technology | 21,422,262 | |||||||
Total Common Stock | ||||||||
(Cost $313,485,314) | 459,099,816 |
TOTAL INVESTMENTS (Cost $313,485,314)2 | 97.9 | % | $ | 459,099,816 | |||
CASH AND OTHER ASSETS IN EXCESS OF LIABILITIES | 2.1 | % | 9,752,834 | ||||
NET ASSETS | 100.00 | % | $ | 468,852,650 |
____________
1 | Non-income producing security. |
2 | The aggregate cost for federal income tax purposes is $313,485,772, the aggregate gross unrealized appreciation is $145,614,502 and the aggregate gross unrealized depreciation is $458, resulting in net unrealized appreciation of $145,614,044. |
Abbreviation:
ADR – American Depositary Receipt.
The accompanying notes are an integral part of these financial statements.
10
BBH SELECT SERIES – LARGE CAP FUND
PORTFOLIO OF INVESTMENTS (continued)
October 31, 2021
FAIR VALUE MEASUREMENTS
The Fund is required to disclose information regarding the fair value measurements of the Fund’s assets and liabilities. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The disclosure requirement established a three-tier hierarchy to maximize the use of observable market data and minimize the use of unobservable inputs and to establish classification of fair value measurements for disclosure purposes. Inputs refer broadly to the assumptions that market participants would use in pricing the asset or liability, including for example, the risk inherent in a particular valuation technique used to measure fair value including such a pricing model and/or the risk inherent in the inputs to the valuation technique. Inputs may be observable or unobservable. Observable inputs are inputs that reflect the assumptions market participants would use in pricing the asset or liability developed based on market data obtained from sources independent of the reporting entity. Unobservable inputs are inputs that reflect the Fund’s own considerations about the assumptions market participants would use in pricing the asset or liability developed based on the best information available in the circumstances.
Authoritative guidance establishes three levels of the fair value hierarchy as follows:
— | Level 1 – unadjusted quoted prices in active markets for identical assets and liabilities. |
— | Level 2 – significant other observable inputs (including quoted prices for similar assets and liabilities, interest rates, prepayment speeds, credit risk, etc.). |
— | Level 3 – significant unobservable inputs (including the Fund’s own assumptions in determining the fair value of assets and liabilities). |
Inputs are used in applying the various valuation techniques and broadly refer to the assumptions that market participants use to make valuation decisions, including assumptions about risk. Inputs may include price information, specific and broad credit data, liquidity statistics, and other factors. A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. However, the determination of what constitutes “observable” requires judgment by the investment adviser. The investment adviser considers observable data to be that market data which is readily available, regularly distributed or updated, reliable and verifiable, not proprietary, and provided by independent sources that are actively involved in the relevant market. The categorization of a financial instrument within the hierarchy is based upon the pricing transparency of the instrument and does not necessarily correspond to the investment adviser’s perceived risk of that instrument.
The accompanying notes are an integral part of these financial statements.
financial statements october 31, 2021 | 11 |
BBH SELECT SERIES – LARGE CAP FUND
PORTFOLIO OF INVESTMENTS (continued)
October 31, 2021
Financial assets within Level 1 are based on quoted market prices in active markets. The Fund does not adjust the quoted price for these instruments.
Financial instruments that trade in markets that are not considered to be active but are valued based on quoted market prices, dealer quotations or alternative pricing sources supported by observable inputs are classified within Level 2. These include investment-grade corporate bonds, U.S. Treasury notes and bonds, and certain non-U.S. sovereign obligations, listed equities and over-the-counter derivatives and foreign equity securities whose values could be impacted by events occurring before the Fund’s pricing time, but after the close of the securities’ primary markets and are, therefore, fair valued according to procedures adopted by the Board of Trustees. As Level 2 financial assets include positions that are not traded in active markets and/or are subject to transfer restrictions, valuations may be adjusted to reflect illiquidity and/or non-transferability, which are generally based on available market information.
Financial assets classified within Level 3 have significant unobservable inputs, as they trade infrequently. Level 3 financial assets include private equity and certain corporate debt securities.
Because of the inherent uncertainties of valuation, the values reflected in the financial statements may materially differ from the value received upon the actual sale of those investments.
The following table summarizes the valuation of the Fund’s investments by the above fair value hierarchy levels as of October 31, 2021.
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 October 31, 2021 | |||||||||||||||
Common Stock: | |||||||||||||||||||
Basic Materials | $ | 48,920,990 | $ | — | $ | — | $ | 48,920,990 | |||||||||||
Communications | 70,675,660 | — | — | 70,675,660 | |||||||||||||||
Consumer Cyclical | 71,429,093 | — | — | 71,429,093 | |||||||||||||||
Consumer Non-Cyclical | 127,055,287 | — | — | 127,055,287 | |||||||||||||||
Financials | 87,134,250 | — | — | 87,134,250 | |||||||||||||||
Industrials | 32,462,274 | — | — | 32,462,274 | |||||||||||||||
Technology | 21,422,262 | — | — | 21,422,262 | |||||||||||||||
Investments, at value | $ | 459,099,816 | $ | — | $ | — | $ | 459,099,816 |
The accompanying notes are an integral part of these financial statements.
12
BBH SELECT SERIES – LARGE CAP FUND
STATEMENT OF ASSETS AND LIABILITIES
October 31, 2021
ASSETS: | ||||
Investments in securities, at value (Cost $313,485,314) | $ | 459,099,816 | ||
Cash | 9,407,690 | |||
Receivables for: | ||||
Shares sold | 466,811 | |||
Dividends | 379,385 | |||
Investment advisory and administrative fee waiver reimbursement | 3,531 | |||
Interest | 509 | |||
Prepaid assets | 6,966 | |||
Total Assets | 469,364,708 | |||
LIABILITIES: | ||||
Payables for: | ||||
Investment advisory and administrative fees | 254,652 | |||
Shares redeemed | 180,976 | |||
Professional fees | 50,375 | |||
Custody and fund accounting fees | 9,000 | |||
Transfer agent fees | 6,574 | |||
Board of Trustees' fees | 1,111 | |||
Distribution fees | 384 | |||
Accrued expenses and other liabilities | 8,986 | |||
Total Liabilities | 512,058 | |||
NET ASSETS | $ | 468,852,650 | ||
Net Assets Consist of: | ||||
Paid-in capital | $ | 307,727,810 | ||
Retained earnings | 161,124,840 | |||
Net Assets | $ | 468,852,650 |
NET ASSET VALUE AND OFFERING PRICE PER SHARE | ||||
CLASS I SHARES | ||||
($466,977,130 ÷ 33,067,959 shares outstanding) | $14.12 | |||
RETAIL CLASS SHARES | ||||
($1,875,520 ÷ 134,098 shares outstanding) | $13.99 |
The accompanying notes are an integral part of these financial statements.
financial statements october 31, 2021 | 13 |
BBH SELECT SERIES – LARGE CAP FUND
STATEMENT OF OPERATIONS
For the year ended October 31, 2021
NET INVESTMENT INCOME: | ||||
Income: | ||||
Dividends (net of foreign withholding taxes of $36,583) | $ | 4,493,021 | ||
Interest income | 58,719 | |||
Other income | 23 | |||
Total Income | 4,551,763 | |||
Expenses: | ||||
Investment advisory and administrative fees | 2,984,373 | |||
Board of Trustees' fees | 60,050 | |||
Professional fees | 59,813 | |||
Transfer agent fees | 39,165 | |||
Custody and fund accounting fees | 34,411 | |||
Distribution fees | 4,278 | |||
Miscellaneous expenses | 68,235 | |||
Total Expenses | 3,250,325 | |||
Investment advisory and administrative fee waiver | (27,841 | ) | ||
Net Expenses | 3,222,484 | |||
Net Investment Income | 1,329,279 | |||
NET REALIZED AND UNREALIZED GAIN: | ||||
Net realized gain on investments in securities | 24,792,983 | |||
Net change in unrealized appreciation/(depreciation) on investments in securities | 117,074,293 | |||
Net Realized and Unrealized Gain | 141,867,276 | |||
Net Increase in Net Assets Resulting from Operations | $ | 143,196,555 |
The accompanying notes are an integral part of these financial statements.
14
BBH SELECT SERIES – LARGE CAP FUND
STATEMENTS OF CHANGES IN NET ASSETS
For the years ended October 31, | ||||||||||||
2021 | 2020 | |||||||||||
INCREASE (DECREASE) IN NET ASSETS: | ||||||||||||
Operations: | ||||||||||||
Net investment income | $ | 1,329,279 | $ | 1,354,299 | ||||||||
Net realized gain (loss) on investments in securities and foreign exchange transactions and translations | 24,792,983 | (9,767,949 | ) | |||||||||
Net change in unrealized appreciation/(depreciation) on investments in securities and foreign currency translations | 117,074,293 | 22,620,092 | ||||||||||
Net increase in net assets resulting from operations | 143,196,555 | 14,206,442 | ||||||||||
Dividends and distributions declared: | ||||||||||||
Class I | (1,483,494 | ) | (170,101 | ) | ||||||||
Retail Class | (5,835 | ) | — | |||||||||
Total dividends and distributions declared | (1,489,329 | ) | (170,101 | ) | ||||||||
Share transactions: | ||||||||||||
Proceeds from sales of shares* | 70,848,905 | 106,103,818 | ||||||||||
Net asset value of shares issued to shareholders for reinvestment of dividends and distributions | 296,987 | 30,580 | ||||||||||
Proceeds from short-term redemption fees | 40 | 2,937 | ||||||||||
Cost of shares redeemed* | (132,867,067 | ) | (130,069,475 | ) | ||||||||
Net decrease in net assets resulting from share transactions. | (61,721,135 | ) | (23,932,140 | ) | ||||||||
Total increase (decrease) in net assets | 79,986,091 | (9,895,799 | ) | |||||||||
NET ASSETS: | ||||||||||||
Beginning of year | 388,866,559 | 398,762,358 | ||||||||||
End of year | $ | 468,852,650 | $ | 388,866,559 |
____________________________
* Includes share exchanges. See Note 5 in Notes to Financial Statements.
The accompanying notes are an integral part of these financial statements.
financial statements october 31, 2021 | 15 |
BBH SELECT SERIES – LARGE CAP FUND
FINANCIAL HIGHLIGHTS
Selected per share data and ratios for a Class I share outstanding throughout each period.
For the years ended October 31, | For the period from September 9, 2019 (commencement of operations) to October 31, 2019 | ||||||||||||||
2021 | 2020 | ||||||||||||||
Net asset value, beginning of period | $ | 10.30 | $ | 10.12 | $ | 10.00 | |||||||||
Income from investment operations: | |||||||||||||||
Net investment income1 | 0.04 | 0.03 | 0.01 | ||||||||||||
Net realized and unrealized gain | 3.74 | 0.15 | 0.11 | ||||||||||||
Total income from investment operations | 3.78 | 0.18 | 0.12 | ||||||||||||
Short-term redemption fees1 | 0.00 | 2 | 0.00 | 2 | — | ||||||||||
Less dividends and distributions: | |||||||||||||||
From investment income | 0.04 | 0.00 | 2 | — | |||||||||||
Total dividends and distributions | 0.04 | 0.00 | 2 | — | |||||||||||
Net asset value, end of period | $ | 14.12 | $ | 10.30 | $ | 10.12 | |||||||||
Total return3 | 37.56 | % | 1.82 | % | 1.20 | %4 | |||||||||
Ratios/Supplemental data: | |||||||||||||||
Net assets, end of period (in millions) | $ | 467 | $ | 387 | $ | 397 | |||||||||
Ratio of expenses to average net assets before reductions | 0.70 | % | 0.74 | % | 0.75 | %5 | |||||||||
Fee waiver | — | %6 | — | %6 | (0.01 | )%5,6 | |||||||||
Ratio of expenses to average net assets after reductions | 0.70 | % | 0.74 | % | 0.74 | %5 | |||||||||
Ratio of net investment income to average net assets | 0.29 | % | 0.34 | % | 0.52 | %5 | |||||||||
Portfolio turnover rate | 18 | % | 38 | % | 0 | %4 |
____________ | |
1 | Calculated using average shares outstanding for the period. |
2 | Less than $0.01. |
3 | Assumes the reinvestment of distributions. |
4 | Not annualized. |
5 | Annualized with the exception of audit fees, legal fees and registration fees. |
6 | The ratio of expenses to average net assets for the years ended October 31, 2021, 2020 and the period ended October 31, 2019 reflect fees reduced as result of a contractual operating expense limitation of the share class of 0.80%. The Agreement is effective through March 1, 2022 and may only be terminated during its term with approval of the Fund’s Board of Trustees. For the years ended October 31, 2021, 2020 and the period from September 9, 2019 to October 31, 2019 the waived fees were $0, $0 and $27,976, respectively. |
The accompanying notes are an integral part of these financial statements.
16
BBH SELECT SERIES – LARGE CAP FUND
FINANCIAL HIGHLIGHTS (continued)
Selected per share data and ratios for a Retail Class share outstanding throughout each period.
For the years ended October 31, | For the period from September 9, 2019 (commencement of operations) to October 31, 2019 | ||||||||||||||
2021 | 2020 | ||||||||||||||
Net asset value, beginning of period | $ | 10.24 | $ | 10.09 | $ | 10.00 | |||||||||
Income from investment operations: | |||||||||||||||
Net investment income (loss)1 | (0.01 | ) | 0.00 | 2 | 0.01 | ||||||||||
Net realized and unrealized gain | 3.72 | 0.15 | 0.08 | ||||||||||||
Total income from investment operations | 3.71 | 0.15 | 0.09 | ||||||||||||
Short-term redemption fees1 | — | — | 0.00 | 2 | |||||||||||
Less dividends and distributions: | |||||||||||||||
From investment income | 0.04 | — | — | ||||||||||||
Total dividends and distributions | 0.04 | — | — | ||||||||||||
Net asset value, end of period | $ | 13.99 | $ | 10.24 | $ | 10.09 | |||||||||
Total return3 | 37.10 | % | 1.49 | % | 0.90 | %4 | |||||||||
Ratios/Supplemental data: | |||||||||||||||
Net assets, end of period (in millions) | $ | 2 | $ | 2 | $ | 2 | |||||||||
Ratio of expenses to average net assets before reductions | 2.68 | % | 3.48 | % | 5.79 | %5 | |||||||||
Fee waiver | (1.63 | )%6 | (2.43 | )%6 | (4.74 | )%5,6 | |||||||||
Ratio of expenses to average net assets after reductions | 1.05 | % | 1.05 | % | 1.05 | %5 | |||||||||
Ratio of net investment (loss) income to average net assets | (0.06 | )% | 0.03 | % | 0.46 | %5 | |||||||||
Portfolio turnover rate | 18 | % | 38 | % | 0 | %4 |
____________ | |
1 | Calculated using average shares outstanding for the period. |
2 | Less than $0.01. |
3 | Assumes the reinvestment of distributions. |
4 | Not annualized. |
5 | Annualized with the exception of audit fees, legal fees and registration fees. |
6 | The ratio of expenses to average net assets for the years ended October 31, 2021, 2020 and the period ended October 31, 2019 reflect fees reduced as result of a contractual operating expense limitation of the share class of 1.05%. The Agreement is effective through March 1, 2022 and may only be terminated during its term with approval of the Fund’s Board of Trustees. For the years ended October 31, 2021, 2020 and the period from September 9, 2019 to October 31, 2019 the waived fees were $27,841, $47,750 and $8,357, respectively. |
The accompanying notes are an integral part of these financial statements.
financial statements october 31, 2021 | 17 |
BBH SELECT SERIES – LARGE CAP FUND
NOTES TO FINANCIAL STATEMENTS
October 31, 2021
1.Organization. The Fund is a separate, non-diversified series of BBH Trust (the “Trust”), which is registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as an open-end management investment company. The Trust was originally organized under the laws of the State of Maryland on July 16, 1990 as BBH Fund, Inc. and re-organized as a Delaware statutory trust on June 12, 2007. The Fund commenced operations on September 9, 2019 and offers two share classes, Class I and Retail Class. Neither Class I shares nor Retail Class shares automatically convert to any other share class of the Fund. The investment objective of the Fund is to provide investors with long-term growth of capital. As of October 31, 2021, there were nine series of the Trust.
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. (1) The value of investments listed on a securities exchange is based on the last sale price on that exchange prior to the time when assets are valued, or in the absence of recorded sales, at the average of readily available closing bid and asked prices on such exchange; (2) securities not traded on an exchange are valued at the average of the quoted bid and asked prices in the over-the-counter market; (3) securities or other assets for which market quotations are not readily available are valued at fair value in accordance with procedures established by and under the general supervision and responsibility of the Board of Trustees (the “Board”); (4) short-term investments, which mature in 60 days or less are valued at amortized cost if their original maturity was 60 days or less, or by amortizing their value on the 61st day prior to maturity, if their original maturity when acquired by the Fund was more than 60 days, unless the use of amortized cost is determined not to represent “fair value” 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. Dividend income and other distributions received from portfolio securities are recorded on the ex-dividend date. Non-cash dividends included in dividend income, if any, are recorded at the fair market value of securities received at ex-date. Distributions received on securities that represent a return of capital are recorded as a reduction of cost of investments. Distributions received on securities that represent a capital gain are recorded as a realized gain. Interest income is accrued daily. Investment income is recorded net of any foreign taxes withheld where recovery of such tax is uncertain.
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 generally apportioned among each fund in the Trust
18
BBH SELECT SERIES – LARGE CAP FUND
NOTES TO FINANCIAL STATEMENTS (continued)
October 31, 2021
on a net assets basis or other suitable method. Expense estimates are accrued in the period to which they relate and adjustments are made when actual amounts are known.
D.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 may result in temporary 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 between paid-in capital and retained earnings/(accumulated deficit) within the Statement of Assets and 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.
The Fund is subject to the provisions of Accounting Standards Codification 740 Income Taxes (“ASC 740”). ASC 740 sets forth a minimum threshold for financial statement recognition of the benefit of a tax position taken or expected to be taken in a tax return. The Fund did not have any unrecognized tax benefits as of October 31, 2021, nor were there any increases or decreases in unrecognized tax benefits for the year then ended. The Fund recognizes interest and penalties, if any, related to unrecognized tax benefits as an income tax expense in the Statement of Operations. During the year ended October 31, 2021, the Fund did not incur any such interest or penalties. The Fund is subject to examination by U.S. federal and state tax authorities for returns filed for open tax period since September 9, 2019 (commencement of operations). The Fund is not aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will significantly change in the next twelve months.
E.Dividends and Distributions to Shareholders. Dividends and distributions from net investment income to shareholders, if any, are paid annually and are recorded on the ex-dividend date. 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 and distributions in the amount of $1,483,494 and $5,835 to Class I shares and Retail Class shareholders, respectively, during the year ended October 31, 2021.
financial statements october 31, 2021 | 19 |
BBH SELECT SERIES – LARGE CAP FUND
NOTES TO FINANCIAL STATEMENTS (continued)
October 31, 2021
The tax character of distributions paid during the years ended October 31, 2021 and 2020, respectively, were as follows:
Distributions paid from: | ||||||||||||||||||||
Ordinary income | Net long-term capital gain | Total taxable distributions | Tax return of capital | Total distributions paid | ||||||||||||||||
2021: | $ | 1,489,329 | $ | — | $ | 1,489,329 | $ | — | $ | 1,489,329 | ||||||||||
2020: | 170,101 | — | 170,101 | — | 170,101 |
As of October 31, 2021 and 2020, respectively, the components of retained earnings/(accumulated deficit) were as follows:
Components of retained earnings/(accumulated deficit): | |||||||||||||||||||||||||||||
Undistributed ordinary income | Undistributed long-term capital gain | Accumulated capital and other losses | Other book/tax temporary differences | Unrealized appreciation/ (depreciation) | Total retained earnings/ (accumulated deficit) | ||||||||||||||||||||||||
2021: | $ | 1,114,173 | $ | 14,316,835 | $ | — | $ | (458 | ) | $ | 145,694,290 | $ | 161,124,840 |
| |||||||||||||||
2020: | 1,354,013 | — | (9,767,949 | ) | — | 28,540,209 | 20,126,273 |
|
The Fund did not have a net capital loss carryforward at October 31, 2021.
The Fund is permitted to carryforward capital losses for an unlimited period and they will retain their character as either short-term or long-term capital losses rather than being considered all short-term capital losses.
Total distributions paid may differ from amounts reported in the Statements of Changes in Net Assets because, for tax purposes, dividends are recognized when actually paid.
The differences between book-basis and tax-basis unrealized appreciation/(depreciation) would be attributable primarily to the tax deferral of losses on wash sales, if applicable.
To the extent future capital gains are offset by capital loss carryforwards, if any, such gains will not be distributed.
F.Use of Estimates. The preparation of the financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities in the financial statements, disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of increase and decrease in net assets from operations during the reporting period. Actual results could differ from these estimates.
20
BBH SELECT SERIES – LARGE CAP FUND
NOTES TO FINANCIAL STATEMENTS (continued)
October 31, 2021
3.Fees and Other Transactions with Affiliates.
A.Investment Advisory and Administrative Fees. 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, portfolio management and administrative services to the Fund. The Fund pays a combined fee for investment advisory and administrative services calculated daily and paid monthly at an annual rate equivalent to 0.65% per annum on the first $3 billion of the Fund’s average daily net assets and 0.60% per annum on the Fund’s average daily net assets over $3 billion. For year ended October 31, 2021, the Fund incurred $2,984,373 under the Agreement.
B.Investment Advisory and Administrative Fee Waivers. Effective September 9, 2019 (commencement of operations), the Investment Adviser contractually agreed to limit the annual fund operating expenses (excluding interest, taxes, brokerage commissions, other expenditures that are capitalized in accordance with GAAP, other extraordinary expenses not incurred in the ordinary course of the Fund’s business and for Retail Class, amounts payable pursuant to any plan adopted in accordance with Rule 12b-1) of Class I and Retail Class to 0.80%. The agreement will terminate on March 1, 2022, unless it is renewed by all parties to the agreement. The agreement may only be terminated during its term with approval of the Fund’s Board of Trustees. For the year ended October 31, 2021, the Investment Adviser waived fees in the amount of $0 and $27,841 for Class I and Retail Class, respectively.
C.Distribution (12b-1) Fees. The Fund has adopted a distribution plan pursuant to Rule 12b-1 for Retail Class shares that allows the Fund to pay distribution and other fees for the sale of its shares and for distribution-related services provided to shareholders. Because these fees are paid out of the Fund’s assets continuously, over time these fees will increase the cost of investment in Retail Class shares and may cost the Retail Class shareholder more than paying other types of sales charges. The maximum annual distribution fee for Retail Class shares is 0.25% of the average daily net assets of the Retail Class shares of the Fund. With this agreement along with the investment advisory and waiver agreements above, it is anticipated that total operating expenses for Retail Class shares will be no greater than 1.05% of the average daily net assets. For the year ended October 31, 2021, Retail Class shares of the Fund incurred $4,278 for Distribution (12b-1) Fees. This amount is presented under line item “Distribution fees” in the Statement of Operations.
D.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% of the Fund’s net asset value. For the year ended October 31, 2021, the Fund incurred $34,411 in custody and fund accounting fees. As per agreement with the Fund’s custodian, the Fund receives interest income on cash balances held by the custodian at the BBH Base Rate. The BBH Base Rate is defined as BBH’s effective trading rate in local money markets on each day. The total interest earned
financial statements october 31, 2021 | 21 |
BBH SELECT SERIES – LARGE CAP FUND
NOTES TO FINANCIAL STATEMENTS (continued)
October 31, 2021
by the Fund for the year ended October 31, 2021 was $58,719. This amount is included in "interest income" in the Statement of Operations. 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 year ended October 31, 2021, was $53. This amount is included under line item “Custody and fund accounting fees” in the Statement of Operations.
E.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 year ended October 31, 2021, the Fund incurred $60,050 in independent Trustee compensation and expense reimbursements.
F.Officers of the Trust. Officers of the Trust are also employees of BBH. Officers are paid no fees by the Trust for their services to the Trust.
4.Investment Transactions. For the year ended October 31, 2021, the cost of purchases and the proceeds of sales of investment securities, other than short-term investments, were $82,483,484 and $150,423,905, respectively.
5.Shares of Beneficial Interest. The Trust is permitted to issue an unlimited number of Class I and Retail Class shares of beneficial interest at no par value. Transactions in Class I and Retail Class shares were as follows:
For the year ended October 31, 2021 | For the year ended October 31, 2020 | |||||||||||||||
Shares | Dollars | Shares | Dollars | |||||||||||||
Class I |
|
|
|
| ||||||||||||
Shares sold | 5,766,662 |
| $ | 70,599,590 |
| 11,524,670 |
| $ | 105,474,945 |
| ||||||
Shares issued in connection with reinvestments of dividends | 25,428 |
| 291,152 |
| 2,943 |
| 30,580 |
| ||||||||
Proceeds from short-term redemption fees | N/A |
| 40 |
| N/A |
| 2,937 |
| ||||||||
Shares redeemed | (10,274,265 | ) | (131,739,744 | ) | (13,218,054 | ) | (129,851,574 | ) | ||||||||
Net increase | (4,482,175 | ) | $ | (60,848,962 | ) | (1,690,441 | ) | $ | (24,343,112 | ) | ||||||
Retail Class |
|
|
|
| ||||||||||||
Shares sold | 20,099 |
| $ | 249,315 |
| 63,876 |
| $ | 628,873 |
| ||||||
Shares issued in connection with reinvestments of dividends | 513 |
| 5,835 |
| — |
| — |
| ||||||||
Proceeds from short-term redemption fees | N/A |
| — |
| N/A |
| — |
| ||||||||
Shares redeemed | (98,352 | ) | (1,127,323 | ) | (21,650 | ) | (217,901 | ) | ||||||||
Net increase | (77,740 | ) | $ | (872,173 | ) | 42,226 |
| $ | 410,972 |
|
22
BBH SELECT SERIES – LARGE CAP FUND
NOTES TO FINANCIAL STATEMENTS (continued)
October 31, 2021
Included in Shares Sold and Shares Redeemed are shareholder exchanges during the year ended October 31, 2021. Specifically:
During the year ended October 31, 2021, 357 shares of Retail Class were exchanged for 354 shares of Class I valued at $4,518.
6. 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:
A shareholder may lose money by investing in the Fund (investment risk). The Fund is actively managed and the decisions by the Investment Adviser may cause the Fund to incur losses or miss profit opportunities (management risk). Price movements may occur due to factors affecting individual companies, such as the issuance of an unfavorable earnings report, or other events affecting particular industries or the equity market as a whole (equity securities risk). The value of securities held by the Fund may fall due to changing economic, political, regulatory or market conditions, or due to a company’s or issuer’s individual situation. Natural disasters, the spread of infectious illness and other public health emergencies, recession, terrorism and other unforeseeable events may lead to increased market volatility and may have adverse effects on world economies and markets generally (market risk). In the normal course of business, the Fund invests in securities and enters into transactions where risks exist due to assumption of large positions in securities of a small number of issuers (non-diversification risk). There are certain risks associated with investing in foreign securities not present in domestic investments, including, but not limited to, recovery of tax withheld by foreign jurisdictions (foreign investment risk). The Fund’s shareholders may be adversely impacted by asset allocation decisions made by an investment adviser whose discretionary clients make up a large percentage of the Fund’s shareholders (shareholder concentration risk). The extent of the Fund’s exposure to these risks in respect to these financial assets is included in their value as recorded in the Fund’s Statement of Assets and Liabilities.
In 2020, the COVID-19 outbreak was declared a pandemic by the World Health Organization. The situation is dynamic with various cities and countries around the world responding in different ways to address the outbreak. The rapid development and fluidity of this situation precludes any prediction as its ultimate impact, which may have a continued adverse impact on economic and market conditions and trigger a period of global economic slowdown. Management is monitoring developments relating to COVID-19 and is coordinating its operational response based on existing business continuity plans and on guidance from global health organizations, relevant governments, and general pandemic response best practices.
Please refer to the Fund’s prospectus for a complete description of the principal risks of investing in the Fund.
financial statements october 31, 2021 | 23 |
BBH SELECT SERIES – LARGE CAP FUND
NOTES TO FINANCIAL STATEMENTS (continued)
October 31, 2021
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.
7.Subsequent Events. BBH, the custodian and fund accountant for the Fund, has entered into an agreement with State Street Corporation (“State Street”) under which State Street will acquire BBH’s Investor Services business; which includes those services provided to the Fund. The transaction is expected to be completed in the first quarter of 2022, subject to customary closing conditions and regulatory approvals. Investment advisory, portfolio management and administrative services provided to BBH Trust by BBH through its SID are not impacted by the agreement with State Street.
Management has evaluated events and transactions that have occurred since October 31, 2021 through the date the financial statements were issued and determined that there were no other subsequent events that would require recognition or additional disclosure in the financial statements.
24
BBH SELECT SERIES – LARGE CAP FUND
DISCLOSURE OF FUND EXPENSES
October 31, 2021 (unaudited)
EXAMPLE
As a shareholder of the Fund, you may incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments, reinvested distributions, or other distributions; redemption fees; and exchange fees; and (2) ongoing costs, including management fees; distribution 12b-1 fees; and other Fund expenses. This Example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The Example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period (May 1, 2021 to October 31, 2021).
ACTUAL EXPENSES
The first line of the table below provides information about actual account values and actual expenses. You may use information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled “Expenses Paid During the Period” to estimate the expenses you paid on your account during the period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The second line of the table below provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid during the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% Hypothetical Example with the 5% hypothetical examples that appear in the shareholder reports of other funds.
financial statements october 31, 2021 | 25 |
BBH SELECT SERIES – LARGE CAP FUND
DISCLOSURE OF FUND EXPENSES (continued)
October 31, 2021 (unaudited)
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as redemption fees or exchange fees. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
Beginning Account Value May 1, 2021 | Ending Account Value October 31, 2021 | Expenses Paid During Period May 1, 2021 to October 31, 20211 | |||||||||||||
Class I | |||||||||||||||
Actual | $1,000 | $1,100 | $3.70 | ||||||||||||
Hypothetical2 | $1,000 | $1,022 | $3.57 |
Beginning Account Value May 1, 2021 | Ending Account Value October 31, 2021 | Expenses Paid During Period May 1, 2021 to October 31, 20211 | |||||||||||||
Retail Class | |||||||||||||||
Actual | $1,000 | $1,098 | $5.55 | ||||||||||||
Hypothetical2 | $1,000 | $1,020 | $5.35 |
________________
1 | Expenses are equal to the Fund’s annualized expense ratio of 0.70% and 1.05% for Class I and Retail Class shares, respectively, multiplied by the average account value over the period, multiplied by 184/365. |
2 | Assumes a return of 5% before expenses. For the purposes of the calculation, the applicable annualized expense ratio for each class of shares is subtracted from the assumed return before expenses. |
26
BBH SELECT SERIES – LARGE CAP FUND
CONFLICTS OF INTEREST
October 31, 2021 (unaudited)
Description of Potential Material Conflicts of Interest - Investment Adviser
BBH, including the Investment Adviser, provides discretionary and non-discretionary investment management services and products to corporations, institutions and individual investors throughout the world. As a result, in the ordinary course of its businesses, BBH, including the Investment Adviser, may engage in activities in which its interests or the interests of its clients may conflict with or be adverse to the interests of the Funds. In addition, certain of such clients (including the Funds) utilize the services of BBH for which they will pay to BBH customary fees and expenses that will not be shared with the Funds.
The Investment Adviser and the Sub-Adviser have adopted and implemented policies and procedures that seek to manage conflicts of interest. Pursuant to such policies and procedures, the Investment Adviser and the Sub-Adviser monitor a variety of areas, including compliance with fund investment guidelines, the investment in only those securities that have been approved for purchase, and compliance with their respective Code of Ethics.
The Trust also manages these conflicts of interest. For example, the Trust has designated a chief compliance officer (“CCO”) and has adopted and implemented policies and procedures designed to manage the conflicts identified below and other conflicts that may arise in the course of the Funds’ operations in such a way as to safeguard the Funds from being negatively affected as a result of any such potential conflicts. From time to time, the Trustees receive reports from the Investment Adviser, the Sub-Adviser and the Trust’s CCO on areas of potential conflict.
Investors should carefully review the following, which describes potential and actual conflicts of interest that BBH, the Investment Adviser and Sub-Adviser can face in the operation of their respective investment management services. This section is not, and is not intended to be, a complete enumeration or explanation of all of the potential conflicts of interest that may arise. The Investment Adviser, the Sub-Adviser and the Funds have adopted policies and procedures reasonably designed to appropriately prevent, limit or mitigate the conflicts of interest described below. Additional information about potential conflicts of interest regarding the Investment Adviser is set forth in the Investment Adviser’s Form ADV. A copy of Part 1 and Part 2A of the Investment Adviser’s Form ADV is available on the SEC’s website (www.adviserinfo.sec.gov). In addition, many of the activities that create these conflicts of interest are limited and/or prohibited by law, unless an exception is available.
Other Clients and Allocation of Investment Opportunities. BBH, the Investment Adviser, and the Sub-Adviser manage funds and accounts of clients other than the Funds (“Other Clients”). In general, BBH, the Investment Adviser, and the Sub-Adviser face conflicts of interest when they render investment advisory services to different clients and, from time to time, provide dissimilar investment advice to different clients. Investment decisions will not necessarily be made in parallel among the Funds and Other Clients. Investments made by the Funds do not, and are not intended to, replicate the investments, or the investment methods and strategies, of Other Clients. Accordingly, such Other Clients’ accounts may produce results that are materially different from those experienced by the Funds. Certain other conflicts of interest may arise in connection with a portfolio manager’s management of the Funds’ investments, on the one hand, and the investments of other funds or accounts for which the portfolio manager is responsible, on the other. For example, it is possible that the various funds or accounts managed by the Investment Adviser or Sub-Adviser
financial statements october 31, 2021 | 27 |
BBH SELECT SERIES – LARGE CAP FUND
CONFLICTS OF INTEREST (continued)
October 31, 2021 (unaudited)
could have different investment strategies that, at times, might conflict with one another to the possible detriment of the Funds. From time to time, the Investment Adviser and Sub-Adviser, sponsor and with other investment pools and accounts which engage in the same or similar businesses as the Funds using the same or similar investment strategies. To the extent that the same investment opportunities might be desirable for more than one account or fund, possible conflicts could arise in determining how to allocate them because the Investment Adviser or Sub-Adviser may have an incentive to allocate investment opportunities to certain accounts or funds. However, BBH and the Investment Adviser have implemented policies and procedures designed to ensure that information relevant to investment decisions is disseminated promptly within its portfolio management teams and investment opportunities are allocated equitably among different clients. The policies and procedures require, among other things, objective allocation for limited investment opportunities, and documentation and review of justifications for any decisions to make investments only for select accounts or in a manner disproportionate to the size of the account. Nevertheless, access to investment opportunities may be allocated differently among accounts due to the particular characteristics of an account, such as size of the account, cash position, tax status, risk tolerance and investment restrictions or for other reasons.
Actual or potential conflicts of interest may also arise when a portfolio manager has management responsibilities to multiple accounts or funds, resulting in unequal commitment of time and attention to the portfolio management of the funds or accounts.
Affiliated Service Providers. Other potential conflicts might include conflicts between the Funds and its affiliated and unaffiliated service providers (e.g. conflicting duties of loyalty). In addition to providing investment management services through the SID, BBH provides administrative, custody, shareholder servicing and fund accounting services to the Funds. BBH may have conflicting duties of loyalty while servicing the Funds and/or opportunities to further its own interest to the detriment of the Funds. For example, in negotiating fee arrangements with affiliated service providers, BBH may have an incentive to agree to higher fees than it would in the case of unaffiliated providers. BBH acting in its capacity as the Funds’ administrator is the primary valuation agent of the Funds. BBH values securities and assets in the Funds according to the Funds’ valuation policies. Because the Investment Adviser’s advisory and administrative fees are calculated by reference to the Funds’ net assets, BBH and its affiliates may have an incentive to seek to overvalue certain assets.
Aggregation. Potential conflicts of interest also arise with the aggregation of trade orders. Purchases and sales of securities for the Funds may be aggregated with orders for other client accounts managed by the Sub-Adviser. The Sub-Adviser, however, is not required to aggregate orders if portfolio management decisions for different accounts are made separately, or if it is determined that aggregating is not practicable, or in cases involving client direction. Prevailing trading activity frequently may make impossible the receipt of the same price or execution on the entire volume of securities purchased or sold. When this occurs, the various prices may be averaged, and the Funds will be charged or credited with the average price. Thus, the effect of the aggregation may operate on some occasions to the disadvantage of the Funds. In addition, under certain circumstances, the Funds will not be charged the same commission or commission equivalent rates in connection with an aggregated order.
28
BBH SELECT SERIES – LARGE CAP FUND
CONFLICTS OF INTEREST (continued)
October 31, 2021 (unaudited)
Cross Trades. Under certain circumstances, the Investment Adviser, on behalf of the Funds, may seek to buy from or sell securities to another fund or account advised by BBH, the Investment Adviser or the Sub-Adviser. Subject to applicable law and regulation, BBH, the Investment Adviser may (but is not required to) effect purchases and sales between BBH, the Investment Adviser clients (“cross trades”), including the Funds, if BBH, the Investment Adviser or the Sub-Adviser believe such transactions are appropriate based on each party’s investment objectives and guidelines. There may be potential conflicts of interest or regulatory issues relating to these transactions which could limit the Investment Adviser’s decision to engage in these transactions for the Funds. BBH, the Investment Adviser and/or the Sub-Adviser may have a potentially conflicting division of loyalties and responsibilities to the parties in such transactions.
Soft Dollars. The Investment Adviser may direct brokerage transactions and/or payment of a portion of client commissions (“soft dollars”) to specific brokers or dealers or other providers to pay for research or other appropriate services which provide, in the Investment Adviser’s view, appropriate assistance in the investment decision-making process (including with respect to futures, fixed price offerings and over-the-counter transactions). The use of a broker that provides research and securities transaction services may result in a higher commission than that offered by a broker who does not provide such services. The Investment Adviser will determine in good faith whether the amount of commission is reasonable in relation to the value of research and services provided and whether the services provide lawful and appropriate assistance in its investment decision-making responsibilities.
Research or other services obtained in this manner may be used in servicing any or all of the Funds and other accounts managed by the Investment Adviser, including in connection with accounts that do not pay commissions to the broker related to the research or other service arrangements. Such products and services may disproportionately benefit other client accounts relative to the Funds based on the amount of brokerage commissions paid by the Funds and such other accounts. To the extent that the Sub-Adviser uses soft dollars, it will not have to pay for those products and services itself.
BBH may receive research that is bundled with the trade execution, clearing, and/or settlement services provided by a particular broker-dealer. To the extent that the Sub-Adviser receives research on this basis, many of the same conflicts related to traditional soft dollars may exist. For example, the research effectively will be paid by client commissions that also will be used to pay for the execution, clearing, and settlement services provided by the broker-dealer and will not be paid by the Sub-Adviser.
Arrangements regarding compensation and delegation of responsibility may create conflicts relating to selection of brokers or dealers to execute Fund portfolio trades and/or specific uses of commissions from Fund portfolio trades, administration of investment advice and valuation of securities.
Investments in BBH Funds. From time to time BBH may invest a portion of the assets of its discretionary investment advisory clients in the Funds. That investment by BBH on behalf of its discretionary investment advisory clients in the Funds may be significant at times.
financial statements october 31, 2021 | 29 |
BBH SELECT SERIES – LARGE CAP FUND
CONFLICTS OF INTEREST (continued)
October 31, 2021 (unaudited)
Increasing a Fund’s assets may enhance investment flexibility and diversification and may contribute to economies of scale that tend to reduce the Funds’ expense ratio. In selecting the Funds for its discretionary investment advisory clients, BBH may limit its selection to funds managed by BBH or the Investment Adviser. BBH may not consider or canvass the universe of unaffiliated investment companies available, even though there may be unaffiliated investment companies that may be more appropriate or that have superior performance. BBH, the Investment Adviser and their affiliates providing services to the Funds benefit from additional fees when the Funds is included as an investment by a discretionary investment advisory client.
BBH reserves the right to redeem at any time some or all of the shares of the Funds acquired for its discretionary investment advisory clients’ accounts. A large redemption of shares of the Funds by BBH on behalf of its discretionary investment advisory clients could significantly reduce the asset size of the Funds, which might have an adverse effect on the Funds’ investment flexibility, portfolio diversification and expense ratio.
Valuation. When market quotations are not readily available, or are believed by BBH to be unreliable, the Funds’ investments will be valued at fair value by BBH pursuant to procedures adopted by the Funds’ Board of Trustees. When determining an asset’s “fair value”, BBH seeks to determine the price that a Fund might reasonably expect to receive from the current sale of that asset in an arm’s-length transaction. The price generally may not be determined based on what the Funds might reasonably expect to receive for selling an asset at a later time or if it holds the asset to maturity. While fair value determinations will be based upon all available factors that BBH deems relevant at the time of the determination and may be based on analytical values determined by BBH using proprietary or third-party valuation models, fair value represents only a good faith approximation of the value of a security. The fair value of one or more securities may not, in retrospect, be the price at which those assets could have been sold during the period in which the particular fair values were used in determining the Funds’ net asset value. As a result, the Funds’ sale or redemption of its shares at net asset value, at a time when a holding or holdings are valued by BBH (pursuant to Board-adopted procedures) at fair value, may have the effect of diluting or increasing the economic interest of existing shareholders.
Referral Arrangements. BBH may enter into advisory and/or referral arrangements with third parties. Such arrangements may include compensation paid by BBH to the third party. BBH may pay a solicitation fee for referrals and/or advisory or incentive fees. BBH may benefit from increased amounts of assets under management.
Personal Trading. BBH, including the Investment Adviser, and any of their respective partners, principals, directors, officers, employees, affiliates or agents, face conflicts of interest when transacting in securities for their own accounts because they could benefit by trading in the same securities as the Funds, which could have an adverse effect on the Funds. However, the Investment Adviser has implemented policies and procedures concerning personal trading by BBH Partners and employees. The policy and procedures are intended to prevent BBH Partners and employees from trading in the same securities as the Funds. However, BBH, including the Investment Adviser, has implemented policies and procedures concerning personal trading by BBH Partners and employees. The policies and procedures are intended to prevent BBH Partners and employees with access to Fund material non-public information from trading in the same securities as the Funds.
30
BBH SELECT SERIES – LARGE CAP FUND
CONFLICTS OF INTEREST (continued)
October 31, 2021 (unaudited)
Gifts and Entertainment. From time to time, employees of BBH, including the Investment Adviser, and any of their respective partners, principals, directors, officers, employees, affiliates or agents, may receive gifts and/or entertainment from clients, intermediaries, or service providers to the Funds or BBH, including the Investment Adviser, which could have the appearance of affecting or may potentially affect the judgment of the employees, or the manner in which they conduct business. The Investment Adviser has implemented policies and procedures concerning gifts and entertainment to mitigate any impact on the judgment of BBH Partners and employees. BBH, including the Investment Adviser, has implemented policies and procedures concerning gifts and entertainment to mitigate any impact on the judgment of BBH Partners and employees.
financial statements october 31, 2021 | 31 |
BBH SELECT SERIES – LARGE CAP FUND
ADDITIONAL FEDERAL TAX INFORMATION
October 31, 2021 (unaudited)
The Fund hereby designates $708,659 as an approximate amount of capital gain dividend for the purpose of dividends paid deduction.
In January 2022, shareholders will receive Form 1099-DIV, which will include their share of qualified dividends distributed during the calendar year 2021. Shareholders are advised to check with their tax advisers for information on the treatment of these amounts on their individual income tax returns.
32
TRUSTEES AND OFFICERS OF BBH SELECT SERIES – LARGE CAP FUND
(unaudited)
Information pertaining to the Trustees and executive officers of the Trust as of October 31, 2021 is set forth below. The mailing address for each Trustee is c/o BBH Trust, 140 Broadway, New York, NY 10005.
Name and Birth Year |
| Position(s) Held with the Trust |
| Term of Office and Length of Time Served# |
| Principal Occupation(s) During Past 5 Years |
| Number of Portfolios in Fund Complex Overseen by Trustee^ |
| Other Public Company or Investment Company Directorships held by Trustee During Past 5 Years |
Independent Trustees | ||||||||||
H. Whitney Wagner Birth Year: 1956 | Chairman of the Board and Trustee | Chairman Since 2014; Trustee Since 2007 and 2006-2007 with the Predecessor Trust | President, Clear Brook Advisors, a registered investment advisor. | 9 | None. | |||||
Andrew S. Frazier Birth Year: 1948 | Trustee | Since 2010 | Retired. | 9 | None. | |||||
Mark M. Collins Birth Year: 1956 | Trustee | Since 2011 | Partner of Brown Investment Advisory Incorporated, a registered investment advisor. | 9 | Chairman of Dillon Trust Company. | |||||
John M. Tesoro Birth Year: 1952 | Trustee | Since 2014 | Retired. | 9 | Trustee, Bridge Builder Trust (8 Funds), Director, Teton Advisers, Inc. (a registered investment adviser). | |||||
Joan A. Binstock Birth Year: 1954 | Trustee | Since 2019 | Partner, Chief Financial and Operations Officer, Lord Abbett & Co. LLC (1999-2018); Lovell Minnick Partners, Advisers Counsel (2018-Present). | 9 | Independent Director, Morgan Stanley Direct Lending Fund; KKR Real Estate Interval Fund. |
financial statements october 31, 2021 | 33 |
TRUSTEES AND OFFICERS OF BBH SELECT SERIES – LARGE CAP FUND
(unaudited)
Name, Address and Birth Year | Position(s) Held with the Trust | Term of Office and Length of Time Served# | Principal Occupation(s) During Past 5 Years | Number of Portfolios in Fund Complex Overseen by Trustee^ | Other Public Company or Investment Company Directorships held by Trustee During Past 5 Years | |||||
Interested Trustees | ||||||||||
Susan C. Livingston+ 50 Post Office Square Boston, MA 02110 Birth Year: 1957 | Trustee | Since 2011 | Partner (since 1998) and Senior Client Advocate (since 2010) for BBH&Co. | 9 | None. | |||||
John A. Gehret+ 140 Broadway New York, NY 10005 Birth Year: 1959 | Trustee | Since 2011 | Limited Partner of BBH&Co. (2012-present). | 9 | None. |
34
TRUSTEES AND OFFICERS OF BBH SELECT SERIES – LARGE CAP FUND
(unaudited)
Name, Address and Birth Year | Position(s) Held with the Trust | Term of Office and Length of Time Served# | Principal Occupation(s) During Past 5 Years | |||
Officers | ||||||
Jean-Pierre Paquin 140 Broadway New York, NY 10005 Birth Year: 1973 | President and Principal Executive Officer | Since 2016 | Partner of BBH&Co. since 2015; joined BBH&Co. in 1996. | |||
Daniel Greifenkamp 140 Broadway New York, NY 10005 Birth Year: 1969 | Vice President | Since 2016 | Managing Director of BBH&Co. since 2014; joined BBH&Co. in 2011. | |||
Charles H. Schreiber 140 Broadway New York, NY 10005 Birth Year: 1957 | Treasurer and Principal Financial Officer | Since 2007 2006-2007 with the Predecessor Trust | Senior Vice President of BBH&Co. since 2001; joined BBH&Co. in 1999. | |||
Paul F. Gallagher 140 Broadway New York, NY 10005 Birth Year: 1959 | Chief Compliance Officer (“CCO”) | Since 2015 | Senior Vice President of BBH&Co. since 2015. | |||
Kristin Marvin 140 Broadway New York, NY 10005 Birth Year: 1981 | Anti-Money Laundering Officer (“AMLO”) | Since 2021 | Assistant Vice President of BBH&Co. since March 2020; Program Manager, Ares Management Corporation, April 2015 - March 2020. |
financial statements october 31, 2021 | 35 |
TRUSTEES AND OFFICERS OF BBH SELECT SERIES – LARGE CAP FUND
(unaudited)
Name, Address and Birth Year | Position(s) Held with the Trust | Term of Office and Length of Time Served# | Principal Occupation(s) During Past 5 Years | |||
Suzan M. Barron 50 Post Office Square Boston, MA 02110 Birth Year: 1964 | Secretary | Since 2009 | Senior Vice President and Senior Investor Services Counsel, BBH&Co. since 2005. | |||
Crystal Cheung 140 Broadway New York, NY 10005 Birth Year: 1974 | Assistant Treasurer | Since 2018 | Assistant Vice President of BBH&Co. since 2016; joined BBH&Co. 2014. | |||
Dania C. Piscetta 50 Post Office Square Boston, MA 02110 Birth Year:1989 | Assistant Secretary | Since 2021 | Assistant Vice President of BBH&Co. since June 2021; joined BBH&Co. in 2021; Assistant Vice President and Legal Associate of Wellington Management Company LLP, April 2018 - March 2021; Senior Compliance Analyst, Fidelity Investments, May 2016 - April 2018. |
________________
# | All officers of the Trust hold office for one year and until their respective successors are chosen and qualified (subject to the ability of the Trustees to remove any officer in accordance with the Trust’s By-laws). Mr. Wagner previously served on the Board of Trustees of the Predecessor Trust. |
+ | Ms. Livingston and Mr. Gehret are “interested persons” of the Trust as defined in the 1940 Act because of their positions as Partner and Limited Partner of BBH&Co., respectively. |
^ | The Fund Complex consists of the Trust, which has nine series, and each is counted as one “Portfolio” for purposes of this table. |
36
BBH SELECT SERIES – LARGE CAP FUND
OPERATION AND EFFECTIVENESS OF THE FUND’S LIQUIDITY RISK MANAGEMENT PROGRAM
October 31, 2021 (unaudited)
The Securities and Exchange Commission adopted Rule 22e-4 under the Investment Company Act of 1940, as amended (the “Liquidity Rule”) to promote effective liquidity risk management throughout the open-end investment company industry in order to reduce the risk that funds will be unable to meet their redemption obligations and mitigate dilution of the interests of fund shareholders.
The Board of Trustees (the “Board”) of BBH Trust met on March 9, 2021 to review the liquidity risk management program (the “Program”) for the funds of BBH Trust (the “Funds”) pursuant to the Liquidity Rule. The Board has appointed three members of the Brown Brothers Harriman & Co. Mutual Fund Advisory Department, the Investment Adviser to the Funds, as the Program Administrator for each Fund’s Program. The Program Administrator provided the Board with a report (the “Report”) that addressed the operations of the Program and assessed its adequacy and effectiveness of the Program. The Report covered the period from February 1, 2020 through January 31, 2021 (the “Reporting Period”).
The Report noted that the Program complied with the key factors for consideration under the Liquidity Rule for assessing, managing and periodically reviewing a Fund’s liquidity risk, including the following points.
Liquidity classification. The Report described the Program’s liquidity classification methodology for categorizing the Funds’ investments into one of four liquidity buckets.
Highly Liquid Investment Minimum. The Report noted that one aspect of the Liquidity Rule is a requirement that funds that are expected to have less than 50% of assets classified as other than “highly liquid” should establish a minimum percentage of highly liquid assets that the fund is expected to hold on an on-going basis. The Program Administrator monitors the percentages of assets in each category on an ongoing basis and, given that no Fund has approached the 50% threshold, has made the determination that it is not necessary to assign a Highly Liquid Investment Minimum as provided for in the Liquidity Rule to any of the Funds.
The Fund’s investment strategy and liquidity of portfolio investments during normal and reasonably foreseeable stressed market conditions. During the Reporting Period, the Program Administrator reviewed whether each Fund’s investment strategy is appropriate for an open-end fund structure with a focus on Funds with more significant and consistent holdings of less liquid and illiquid assets and factored a Fund’s concentration in an issuer into the liquidity classification methodology by taking issuer position sizes into account.
Short-term and long-term cash flow projections during normal and reasonably foreseeable stressed market conditions. During the Reporting Period, the Program Administrator reviewed historical redemption activity and used this information as a component to establish each Fund’s reasonably anticipated trading size. The Program Administrator also took into consideration other factors such as shareholder ownership concentration, applicable distribution channels and the degree of certainty associated with a Fund’s short-term and long-term cash flow projections.
Holdings of cash and cash equivalents. The Program Administrator considered the degree to which each Fund held cash and cash equivalents as a component of each Fund’s ability to meet redemption requests.
financial statements october 31, 2021 | 37 |
BBH SELECT SERIES – LARGE CAP FUND
OPERATION AND EFFECTIVENESS OF THE FUND’S LIQUIDITY RISK MANAGEMENT PROGRAM (continued)
October 31, 2021 (unaudited)
There were no material changes to the Program during the Reporting Period. The Program Administrator has informed the Board that it believes that the Fund’s Program is adequately designed, has been implemented as intended, and has operated effectively since its implementation. No material exceptions have been noted since the implementation of the Program, and there were no liquidity events that impacted the Fund or its ability to meet redemption requests on a timely basis during the Reporting Period.
38
Administrator Brown Brothers Harriman & Co. 140 Broadway New York, NY 10005
Distributor ALPS Distributors, Inc. 1290 Broadway, Suite 1000 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 |
To obtain information or make shareholder inquiries:
By telephone: | Call 1-800-575-1265 |
By E-mail send your request to: | bbhfunds@bbh.com |
On the internet: | www.bbhfunds.com |
This report is submitted for the general information of shareholders and is not authorized for distribution to prospective investors unless preceded or accompanied by an effective prospectus. Nothing herein contained is to be considered an offer of sale or a solicitation of an offer to buy shares of the Fund.
For more complete information, visit www.bbhfunds.com for a prospectus. You should consider the Fund’s investment objectives, risks, charges and expenses carefully before you invest. Information about these and other important subjects is in the Fund’s prospectus, which you should read carefully before investing.
Holdings and allocations are subject to change. Fund holdings should not be relied on in making investment decisions and should not be construed as research or investment advice regarding particular securities. Current and future holdings are subject to risk.
The Fund files a complete schedule of portfolio holdings with the Securities and Exchange Commission (SEC) for the first and third quarters of each fiscal year as an exhibit to its reports on Form N-PORT. The Fund’s Forms N-PORT are available electronically on the SEC’s website (sec.gov). For a complete list of a fund’s portfolio holdings, view the most recent holdings listing, semi-annual report, or annual report on the Fund’s web site at http://www.bbhfunds.com.
A summary of the Fund’s Proxy Voting Policy that the Fund uses to determine how to vote proxies, if any, relating to securities held in the Fund’s portfolio, as well as a record of how the Fund voted any such proxies during the most recent 12-month period ended June 30, is available, without charge, upon request by calling the toll-free number listed above. This information is also available on the SEC’s website at www.sec.gov.
NOT FDIC INSURED NO BANK GUARANTEE MAY LOSE VALUE
Annual Report
OCTOBER 31, 2021
BBH Intermediate Municipal Bond Fund
BBH INTERMEDIATE MUNICIPAL BOND FUND
MANAGEMENT’S DISCUSSION OF FUND PERFORMANCE
October 31, 2021
BBH Intermediate Municipal Bond Fund (the “Fund”) Class I produced a total return of 1.21% (net of fees and expenses) for the twelve-month period ending October 31, 2021 as compared to its benchmark, Bloomberg 1-15 Year Municipal Index1 which had a return of 1.78% over the same period. Longer-term performance remains strong and our team was excited that the Fund received a Lipper award in the spring as the top performing intermediate municipal debt fund over the five years period ending December 31, 2020. The Fund was assessed against 55 funds in this category. Ratings are based on risk-adjusted performance.*
The objective of the Intermediate Municipal Bond Fund is to protect our investors’ capital and generate attractive risk-adjusted returns. We seek to achieve this objective by investing in a limited number of durable credits that provide attractive yields or return potential. Our objective and strategy have remained the same since we launched the Fund on April 1, 2014. We are pleased that the Fund’s net assets continued to grow and ended October at just under $870 million.
In the Municipal market, valuations are often disconnected from their underlying fundamentals, particularly during periods of heightened market volatility. In the early stages of the pandemic, investors were consumed by widespread fears of credit insolvencies. Since then, effective vaccines, record fiscal stimulus, and ultra-accommodative monetary policy helped the economy recover quickly and fueled investor demand for lower-rated credits, pushing spreads to historic low levels.
For the twelve-month period, intermediate five- to ten-year maturity tax-exempt interest rates increased by 30 basis points2, while short and long maturities remained stable. During this time, the credit-sensitive portions of the Municipal market generated historically strong results. Relative to an equal-weighted blend of AAA- and AA-rated securities, BBB-rated debt outperformed by 550 basis points and Municipal High Yield outperformed by over 850 basis points during the year. The Fund’s exposure to BBB-rated bonds has been modest, at around 5%, and it has zero high-yield exposure. The Fund owns a portfolio of resilient, higher-quality credits which benefited during the early stages of the pandemic but lagged during the recovery over the last twelve months.
We invest our portfolios from the bottom-up and have continued to identify more opportunities in Revenue Bonds than in General Obligation issues (GO). As of October 31, 2021, the Fund held approximately 65% of its net assets in Revenue Bonds and the balance in GOs. Within the Revenue sector, the Fund’s largest exposure was to State Housing Finance Authority (HFA) sector, which comprised 16% of net assets at the end of the fiscal year.
Over the past year, we continued to identify better opportunities in bonds with non-standard coupons than in traditional 5% coupon, fixed-rate municipal bonds, The Fund holds meaningful exposures of floating-rate notes and zero-coupon bonds. As of October 31st, these two types of bonds comprised 12% and 16% of the fund’s net assets, respectively. This year, we also actively invested in a range of high-quality new issues with 6- to 12-month delayed settlement periods. As of fiscal year-end, the Fund holds 9% of its net assets in these bonds that have yet to settle. Although these opportunities generally offered comparable yields and return potential compared to lower-rated investment-grade bonds, they underperformed on a relative basis.
financial statements october 31, 2021 | 3 |
BBH INTERMEDIATE MUNICIPAL BOND FUND
MANAGEMENT’S DISCUSSION OF FUND PERFORMANCE (continued)
October 31, 2021
Despite the performance headwinds from low-rated credit rally, we believe the Fund is well-positioned going forward, with ample liquidity to take advantage of market volatility and a weakening in credit valuations. We view current valuations as heavily reliant on fiscal and monetary stimulus and look forward to our opportunity set broadening as these stimulus measures recede.
The Refinitiv Lipper Fund Awards, granted annually, highlight funds and fund companies that have excelled in delivering consistently strong risk-adjusted performance relative to their peers. The Refinitiv Lipper Fund Awards are based on the Lipper Leader for Consistent Return rating, which is a risk-adjusted performance measure calculated over 36, 60 and 120 months. The fund with the highest Lipper Leader for Consistent Return (Effective Return) value in each eligible classification wins the Refinitiv Lipper Fund Award. For more information, see lipperfundawards.com. Although Refinitiv Lipper makes reasonable efforts to ensure the accuracy and reliability of the data contained herein, the accuracy is not guaranteed by Refinitiv Lipper. The BBH Intermediate Municipal Bond Fund (Class I) competed with 55 portfolios in the Intermediate Municipal Debt Funds category for the five-year period ending December 31, 2020. Lipper Fund Awards are based on the Institutional Class shares. Other share classes may have different performance characteristics. Past performance does not guarantee future results.
Thank you for your continued confidence and stay well.
________________
There is no assurance the objective will be achieved. Holdings are subject to change. | |
* | Refinitiv Lipper Fund Awards, ©2021 Refinitiv. All rights reserved. Used under license. |
1 | Bloomberg Municipal Bond 1-15 Year Blend (1-17) Index is a sub-index of the Barclays Capital Municipal Bond Index, a rules-based market value-weighted index of bonds with maturities of one year to 17 years engineered for the tax-exempt bond market. One cannot invest directly in an index. Bloomberg® and the Bloomberg indexes are service marks of Bloomberg Finance L.P. and its affiliates, including Bloomberg Index Services Limited (“BISL”), the administrator of the index (collectively, “Bloomberg”) and have been licensed for use for certain purposes by Brown Brothers Harriman & Co (BBH). Bloomberg is not affiliated with BBH, and Bloomberg does not approve, endorse, review, or recommend the BBH strategies. Bloomberg does not guarantee the timeliness, accurateness, or completeness of any data or information relating to the fund. |
2 | One “basis point” or “bp” is 1/100th of a percent (0.01% or 0.0001). |
4
BBH INTERMEDIATE MUNICIPAL BOND FUND
MANAGEMENT’S DISCUSSION OF FUND PERFORMANCE (continued)
October 31, 2021
Growth of $10,000 Invested in BBH Intermediate Municipal Bond
The graph below illustrates the hypothetical investment of $10,0001 in the Class N shares of the Fund since inception (April 1, 2014) to October 31, 2021 as compared to the BMBB.
The annualized gross expense ratios as shown in the March 1, 2021 prospectus for Class N and Class I shares were 0.71% and 0.47%, respectively.
Performance data quoted represents past performance which is no guarantee of future results. Investment return and principal value will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Fund performance changes over time and current performance may be lower or higher than what is stated. Returns do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. For performance current to the most recent month-end please call 1-800-575-1265.
Hypothetical performance results are calculated on a total return basis and include all portfolio income, unrealized and realized capital gains, losses and reinvestment of dividends and other earnings. No one shareholder has actually achieved these results and no representation is being made that any actual shareholder achieved, or is likely to achieve, similar results to those shown. Hypothetical performance does not represent actual trading and may not reflect the impact of material economic and market factors. Undue reliance should not be placed on hypothetical performance results in making an investment decision.
________________
1 | The Fund’s performance assumes the reinvestment of all dividends and distributions. The Barclays Municipal Bond 1-15 Year Blend (1-17) Index (“BMBB”) has been adjusted to reflect reinvestment of dividends on securities in the index. The BMBB is not adjusted to reflect sales charges, expenses or other fees that the Securities and Exchange Commission requires to be reflected in the Fund’s performance. The index is unmanaged. Investments cannot be made in the index. |
financial statements october 31, 2021 | 5 |
BBH INTERMEDIATE MUNICIPAL BOND FUND
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Trustees of the BBH Trust and Shareholders of BBH Intermediate Municipal Bond Fund:
Opinion on the Financial Statements and Financial Highlights
We have audited the accompanying statement of assets and liabilities, including the portfolio of investments, of BBH Intermediate Municipal Bond Fund (the "Fund"), one of the funds within BBH Trust, as of October 31, 2021, the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, the financial highlights for each of the five years in the period then ended, and the related notes. In our opinion, the financial statements and financial highlights present fairly, in all material respects, the financial position of the Fund as of October 31, 2021, and the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended, in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements and financial highlights are the responsibility of the BBH Trust's management. Our responsibility is to express an opinion on the Fund's financial statements and financial highlights based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the BBH Trust in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement, whether due to error or fraud. The BBH Trust is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the BBH Trust’s internal control over financial reporting. Accordingly, we express no such opinion.
6
BBH INTERMEDIATE MUNICIPAL BOND FUND
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM (continued)
Our audits included performing procedures to assess the risks of material misstatement of the financial statements and financial highlights, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements and financial highlights. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements and financial highlights. Our procedures included confirmation of securities owned as of October 31, 2021, by correspondence with the custodian and brokers; when replies were not received from brokers, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinion.
/s/ DELOITTE & TOUCHE LLP
Boston, Massachusetts
December 21, 2021
We have served as the auditor of one or more Brown Brothers Harriman investment companies since 1991.
financial statements october 31, 2021 | 7 |
BBH INTERMEDIATE MUNICIPAL BOND FUND
PORTFOLIO ALLOCATION
October 31, 2021
BREAKDOWN BY SECURITY TYPE
U.S. $ Value | Percent of Net Assets | ||||||||
Municipal Bonds | $ | 948,341,558 | 109.0 | % |
| ||||
Liabilities in Excess of Other Assets | (78,161,319 | ) | (9.0 | ) |
| ||||
NET ASSETS | $ | 870,180,239 | 100.0 | % |
|
All data as of October 31, 2021. BBH Intermediate Municipal Bond Fund’s (the “Fund”) security type diversification is expressed as a percentage of net assets and may vary over time.
CREDIT QUALITY
U.S. $ Value | Percent of Total Investments | ||||||||
AAA | $ | 251,087,830 | 26.5 | % |
| ||||
AA | 432,237,880 | 45.6 |
|
| |||||
A | 181,725,869 | 19.2 |
|
| |||||
BBB | 71,155,213 | 7.5 |
|
| |||||
NR | 7,089,227 | 0.7 |
|
| |||||
SP-2 | 5,045,539 | 0.5 |
|
| |||||
TOTAL INVESTMENTS | $ | 948,341,558 | 100.0 | % |
|
All data as of October 31, 2021. The Fund’s credit quality is expressed as a percentage of total investments and may vary over time. Ratings are provided by Standard and Poor’s (S&P). Where S&P ratings are not available, they are substituted with Moody’s. S&P and Moody’s are independent third parties.
The accompanying notes are an integral part of these financial statements.
8
BBH INTERMEDIATE MUNICIPAL BOND FUND
PORTFOLIO OF INVESTMENTS
October 31, 2021
Principal Amount | Maturity Date | Interest Rate | Value | ||||||||||||
| MUNICIPAL BONDS (109.0%) |
|
|
| |||||||||||
Arizona (0.6%) | |||||||||||||||
$ | 2,250,000 | Coconino County Pollution Control Corp., Revenue Bonds1,2 | 09/01/32 | 1.875 | % | $ | 2,291,226 | ||||||||
3,000,000 | County of Yavapai Industrial Development Authority, Revenue Bonds | 06/01/27 | 1.300 | 2,990,349 | |||||||||||
205,000 | Salt Verde Financial Corp., Revenue Bonds | 12/01/22 | 5.250 | 215,188 | |||||||||||
Total Arizona | 5,496,763 | ||||||||||||||
| California (13.1%) | ||||||||||||||
3,640,000 | Allan Hancock Joint Community College District, General Obligation Bonds | 08/01/42 | 0.000 | 3,460,756 | |||||||||||
510,000 | Anaheim City School District, General Obligation Bonds, NPFG3 | 08/01/24 | 0.000 | 497,623 | |||||||||||
1,000,000 | Anaheim City School District, General Obligation Bonds, NPFG3 | 08/01/26 | 0.000 | 941,084 | |||||||||||
1,040,000 | Anaheim City School District, General Obligation Bonds, AGM, NPFG3 | 08/01/28 | 0.000 | 933,243 | |||||||||||
2,140,000 | Anaheim City School District, General Obligation Bonds, AGM, NPFG3 | 08/01/29 | 0.000 | 1,865,318 | |||||||||||
3,120,000 | Anaheim Public Financing Authority, Revenue Bonds, AGM3 | 09/01/30 | 0.000 | 2,674,604 | |||||||||||
3,000,000 | Bay Area Toll Authority, Revenue Bonds | 04/01/54 | 5.000 | 3,340,449 | |||||||||||
4,375,000 | Burbank Unified School District, General Obligation Bonds, NPFG3 | 08/01/23 | 0.000 | 4,323,693 | |||||||||||
6,550,000 | Burbank Unified School District, General Obligation Bonds, NPFG3 | 08/01/24 | 0.000 | 6,405,040 | |||||||||||
6,060,000 | California Infrastructure & Economic Development Bank, Revenue Bonds (1-Month USD-LIBOR + 0.330%)2 | 10/01/47 | 0.388 | 6,060,728 | |||||||||||
1,185,000 | California Pollution Control Financing Authority, Revenue Bonds1,2 | 11/01/40 | 3.125 | 1,285,021 | |||||||||||
1,100,000 | California State Public Works Board, Revenue Bonds4 | 08/01/25 | 5.000 | 1,224,078 | |||||||||||
1,470,000 | California State Public Works Board, Revenue Bonds4 | 08/01/26 | 5.000 | 1,682,918 | |||||||||||
2,400,000 | California State Public Works Board, Revenue Bonds4 | 08/01/29 | 5.000 | 2,914,239 | |||||||||||
2,785,000 | California State Public Works Board, Revenue Bonds4 | 08/01/30 | 5.000 | 3,432,887 | |||||||||||
2,560,000 | California State Public Works Board, Revenue Bonds4 | 08/01/31 | 5.000 | 3,205,748 |
The accompanying notes are an integral part of these financial statements.
financial statements october 31, 2021 | 9 |
BBH INTERMEDIATE MUNICIPAL BOND FUND
PORTFOLIO OF INVESTMENTS (continued)
October 31, 2021
Principal Amount | Maturity Date | Interest Rate | Value | ||||||||||||
MUNICIPAL BONDS (continued) | |||||||||||||||
California (continued) | |||||||||||||||
$ | 1,040,000 | Chaffey Joint Union High School District, General Obligation Bonds3 | 08/01/33 | 0.000 | % | $ | 789,911 | ||||||||
1,000,000 | Chaffey Joint Union High School District, General Obligation Bonds3 | 02/01/34 | 0.000 | 768,236 | |||||||||||
800,000 | City of Irvine, Special Assessment Bonds2,5 | 11/01/21 | 0.010 | 800,000 | |||||||||||
4,050,000 | Coast Community College District, General Obligation Bonds, AGM3 | 08/01/28 | 0.000 | 3,722,980 | |||||||||||
1,015,000 | Downey Unified School District, General Obligation Bonds3 | 08/01/33 | 0.000 | 766,544 | |||||||||||
1,000,000 | Downey Unified School District, General Obligation Bonds3 | 08/01/35 | 0.000 | 690,647 | |||||||||||
2,000,000 | Glendale Community College District, General Obligation Bonds3 | 08/01/32 | 0.000 | 1,597,775 | |||||||||||
2,500,000 | Glendale Community College District, General Obligation Bonds3 | 08/01/33 | 0.000 | 1,927,615 | |||||||||||
3,350,000 | Glendale Community College District, General Obligation Bonds3 | 08/01/35 | 0.000 | 2,410,296 | |||||||||||
5,240,000 | Glendale Community College District, General Obligation Bonds3 | 08/01/36 | 0.000 | 3,639,679 | |||||||||||
1,900,000 | Glendale Community College District, General Obligation Bonds3 | 08/01/37 | 0.000 | 1,272,812 | |||||||||||
1,040,000 | Golden State Tobacco Securitization Corp., Revenue Bonds, AGM3 | 06/01/25 | 0.000 | 1,017,742 | |||||||||||
5,500,000 | Golden State Tobacco Securitization Corp., Revenue Bonds, AMBAC3 | 06/01/27 | 0.000 | 5,207,990 | |||||||||||
1,000,000 | Grossmont Healthcare District, General Obligation Bonds, AMBAC3 | 07/15/30 | 0.000 | 875,042 | |||||||||||
1,100,000 | La Mesa-Spring Valley School District, General Obligation Bonds, NPFG3 | 08/01/26 | 0.000 | 1,043,038 | |||||||||||
1,660,000 | Lake Tahoe Unified School District, General Obligation Bonds, NPFG3 | 08/01/27 | 0.000 | 1,535,901 | |||||||||||
1,110,000 | Lake Tahoe Unified School District, General Obligation Bonds, NPFG3 | 08/01/30 | 0.000 | 944,543 | |||||||||||
725,000 | Long Beach Bond Finance Authority, Revenue Bonds | 11/15/22 | 5.250 | 762,141 | |||||||||||
680,000 | Long Beach Bond Finance Authority, Revenue Bonds (3-Month USD-LIBOR + 1.450%)2 | 11/15/27 | 1.534 | 703,652 | |||||||||||
4,000,000 | Newark Unified School District, General Obligation Bonds, AGM3 | 08/01/25 | 0.000 | 3,881,788 |
The accompanying notes are an integral part of these financial statements.
10
BBH INTERMEDIATE MUNICIPAL BOND FUND
PORTFOLIO OF INVESTMENTS (continued)
October 31, 2021
Principal Amount | Maturity Date | Interest Rate | Value | ||||||||||||
MUNICIPAL BONDS (continued) | |||||||||||||||
California (continued) | |||||||||||||||
$ | 9,150,000 | Northern California Gas Authority No 1, Revenue Bonds (3-Month USD-LIBOR + 0.720%)2 | 07/01/27 | 0.808 | % | $ | 9,203,909 | ||||||||
1,725,000 | Oak Grove School District, General Obligation Bonds3 | 08/01/31 | 0.000 | 1,382,314 | |||||||||||
1,030,000 | Oak Grove School District, General Obligation Bonds3 | 08/01/32 | 0.000 | 822,721 | |||||||||||
1,050,000 | Oak Park Unified School District, General Obligation Bonds, AGM3 | 08/01/28 | 0.000 | 947,277 | |||||||||||
975,000 | Placer Union High School District, General Obligation Bonds, AGM3 | 08/01/30 | 0.000 | 840,526 | |||||||||||
775,000 | Roseville Joint Union High School District, General Obligation Bonds, AGM3 | 08/01/30 | 0.000 | 665,220 | |||||||||||
1,035,000 | Roseville Joint Union High School District, General Obligation Bonds3 | 08/01/33 | 0.000 | 731,313 | |||||||||||
2,415,000 | San Diego Unified School District, General Obligation Bonds3 | 07/01/34 | 0.000 | 1,618,106 | |||||||||||
3,000,000 | San Diego Unified School District, General Obligation Bonds3 | 07/01/37 | 0.000 | 1,745,906 | |||||||||||
1,900,000 | San Mateo County Transportation Authority, Revenue Bonds2,5 | 11/01/21 | 0.010 | 1,900,000 | |||||||||||
1,000,000 | Santa Ana Unified School District, General Obligation Bonds, NPFG3 | 08/01/24 | 0.000 | 980,012 | |||||||||||
1,120,000 | Santa Rita Union School District, General Obligation Bonds, AGM3 | 08/01/33 | 0.000 | 850,362 | |||||||||||
9,000,000 | Southern California Public Power Authority, Revenue Bonds2,5 | 11/01/21 | 0.010 | 9,000,000 | |||||||||||
2,415,000 | State of California, General Obligation Bonds | 12/01/32 | 2.850 | 2,614,770 | |||||||||||
1,000,000 | Ukiah Unified School District, General Obligation Bonds, NPFG3 | 08/01/24 | 0.000 | 980,549 | |||||||||||
1,040,000 | Windsor Unified School District, General Obligation Bonds3 | 08/01/33 | 0.000 | 809,286 | |||||||||||
Total California | 113,698,032 | ||||||||||||||
| Colorado (1.4%) | ||||||||||||||
800,000 | Colorado Educational & Cultural Facilities Authority, Revenue Bonds2,5 | 11/01/21 | 0.030 | 800,000 | |||||||||||
1,300,000 | Colorado Health Facilities Authority, Revenue Bonds2,5 | 11/01/21 | 0.030 | 1,300,000 | |||||||||||
1,156,155 | Colorado Housing & Finance Authority, Revenue Bonds, GNMA | 11/01/48 | 4.200 | 1,209,465 | |||||||||||
1,900,000 | E-470 Public Highway Authority, Revenue Bonds, NPFG3 | 09/01/25 | 0.000 | 1,838,160 |
The accompanying notes are an integral part of these financial statements.
financial statements october 31, 2021 | 11 |
BBH INTERMEDIATE MUNICIPAL BOND FUND
PORTFOLIO OF INVESTMENTS (continued)
October 31, 2021
Principal Amount | Maturity Date | Interest Rate | Value | ||||||||||||
MUNICIPAL BONDS (continued) | |||||||||||||||
Colorado (continued) | |||||||||||||||
$ | 1,750,000 | E-470 Public Highway Authority, Revenue Bonds, NPFG3 | 09/01/27 | 0.000 | % | $ | 1,626,435 | ||||||||
5,000,000 | E-470 Public Highway Authority, Revenue Bonds (SOFR + 0.350%)2 | 09/01/39 | 0.384 | 5,010,668 | |||||||||||
Total Colorado | 11,784,728 | ||||||||||||||
| Connecticut (3.7%) | ||||||||||||||
1,135,000 | Connecticut Housing Finance Authority, Revenue Bonds, FHLMC, FNMA, GNMA | 11/15/22 | 2.100 | 1,153,335 | |||||||||||
530,000 | Connecticut Housing Finance Authority, Revenue Bonds | 05/15/23 | 2.800 | 545,401 | |||||||||||
1,605,000 | Connecticut Housing Finance Authority, Revenue Bonds | 05/15/26 | 1.150 | 1,595,475 | |||||||||||
1,070,000 | Connecticut Housing Finance Authority, Revenue Bonds | 11/15/26 | 1.200 | 1,062,025 | |||||||||||
2,120,000 | Connecticut Housing Finance Authority, Revenue Bonds | 05/15/27 | 1.350 | 2,110,652 | |||||||||||
1,000,000 | Connecticut Housing Finance Authority, Revenue Bonds | 11/15/27 | 1.400 | 993,622 | |||||||||||
165,000 | Connecticut Housing Finance Authority, Revenue Bonds | 05/15/30 | 2.000 | 165,322 | |||||||||||
350,000 | Connecticut Housing Finance Authority, Revenue Bonds | 11/15/30 | 2.050 | 350,773 | |||||||||||
400,000 | Connecticut Housing Finance Authority, Revenue Bonds | 05/15/31 | 2.100 | 401,574 | |||||||||||
1,135,000 | Connecticut Housing Finance Authority, Revenue Bonds | 11/15/41 | 4.000 | 1,216,488 | |||||||||||
2,845,000 | Connecticut State Health & Educational Facilities Authority, Revenue Bonds1,2 | 07/01/42 | 2.000 | 3,007,407 | |||||||||||
3,705,000 | Connecticut State Health & Educational Facilities Authority, Revenue Bonds1,2 | 07/01/49 | 1.800 | 3,813,338 | |||||||||||
395,000 | State of Connecticut, General Obligation Bonds (SIFMA Municipal Swap Index Yield + 0.900%)2 | 03/01/23 | 0.950 | 397,557 | |||||||||||
1,000,000 | State of Connecticut, General Obligation Bonds (SIFMA Municipal Swap Index Yield + 0.990%)2 | 03/01/25 | 1.040 | 1,019,877 | |||||||||||
1,845,000 | State of Connecticut, General Obligation Bonds | 03/01/26 | 5.000 | 2,040,882 | |||||||||||
2,050,000 | State of Connecticut Special Tax Revenue, Revenue Bonds | 08/01/25 | 5.000 | 2,390,180 | |||||||||||
2,945,000 | State of Connecticut Special Tax Revenue, Revenue Bonds | 09/01/26 | 5.000 | 3,547,856 |
The accompanying notes are an integral part of these financial statements.
12
BBH INTERMEDIATE MUNICIPAL BOND FUND
PORTFOLIO OF INVESTMENTS (continued)
October 31, 2021
Principal Amount | Maturity Date | Interest Rate | Value | ||||||||||||
MUNICIPAL BONDS (continued) | |||||||||||||||
Connecticut (continued) | |||||||||||||||
$ | 1,065,000 | State of Connecticut Special Tax Revenue, Revenue Bonds | 08/01/27 | 5.000 | % | $ | 1,235,265 | ||||||||
2,205,000 | State of Connecticut Special Tax Revenue, Revenue Bonds | 01/01/29 | 5.000 | 2,729,381 | |||||||||||
2,000,000 | State of Connecticut Special Tax Revenue, Revenue Bonds | 05/01/36 | 4.000 | 2,363,555 | |||||||||||
Total Connecticut | 32,139,965 | ||||||||||||||
| District of Columbia (0.9%) | ||||||||||||||
1,000,000 | District of Columbia, Revenue Bonds | 03/01/27 | 5.000 | 1,223,415 | |||||||||||
5,000,000 | District of Columbia, Revenue Bonds | 10/01/28 | 5.000 | 6,351,652 | |||||||||||
Total District of Columbia | 7,575,067 | ||||||||||||||
Florida (1.8%) | |||||||||||||||
1,015,000 | County of Hillsborough Solid Waste & Resource Recovery Revenue, Revenue Bonds | 09/01/24 | 5.000 | 1,134,845 | |||||||||||
970,000 | Florida Housing Finance Corp., Revenue Bonds, FHLMC, FNMA, GNMA | 07/01/49 | 4.000 | 1,042,518 | |||||||||||
4,020,000 | Florida Housing Finance Corp., Revenue Bonds, FHLMC, FNMA, GNMA | 01/01/50 | 4.250 | 4,376,245 | |||||||||||
1,750,000 | State of Florida, General Obligation Bonds | 06/01/26 | 5.000 | 2,093,797 | |||||||||||
2,125,000 | State of Florida Lottery Revenue, Revenue Bonds | 07/01/25 | 5.000 | 2,470,998 | |||||||||||
3,875,000 | State of Florida Lottery Revenue, Revenue Bonds | 07/01/27 | 5.000 | 4,655,597 | |||||||||||
Total Florida | 15,774,000 | ||||||||||||||
| Georgia (3.9%) | ||||||||||||||
4,850,000 | Development Authority of Burke County, Revenue Bonds1,2 | 10/01/32 | 2.250 | 4,984,896 | |||||||||||
5,000,000 | Development Authority of Burke County, Revenue Bonds1,2 | 01/01/40 | 1.500 | 5,123,108 | |||||||||||
1,200,000 | Development Authority of Burke County, Revenue Bonds1,2 | 11/01/45 | 3.000 | 1,237,406 | |||||||||||
2,565,000 | Development Authority of Burke County, Revenue Bonds1,2 | 11/01/45 | 3.250 | 2,772,167 | |||||||||||
345,000 | Georgia Municipal Electric Authority, Revenue Bonds | 01/01/25 | 5.000 | 392,880 | |||||||||||
1,265,000 | Georgia Municipal Electric Authority, Revenue Bonds | 01/01/26 | 5.000 | 1,484,703 | |||||||||||
800,000 | Georgia Municipal Electric Authority, Revenue Bonds | 01/01/27 | 5.000 | 961,833 | |||||||||||
990,000 | Georgia Municipal Electric Authority, Revenue Bonds | 01/01/29 | 5.000 | 1,227,330 | |||||||||||
2,700,000 | Georgia Municipal Electric Authority, Revenue Bonds | 01/01/29 | 5.000 | 3,300,525 |
The accompanying notes are an integral part of these financial statements.
financial statements october 31, 2021 | 13 |
BBH INTERMEDIATE MUNICIPAL BOND FUND
PORTFOLIO OF INVESTMENTS (continued)
October 31, 2021
Principal Amount | Maturity Date | Interest Rate | Value | ||||||||||||
MUNICIPAL BONDS (continued) | |||||||||||||||
Georgia (continued) | |||||||||||||||
$ | 1,140,000 | Georgia Municipal Electric Authority, Revenue Bonds | 01/01/31 | 5.000 | % | $ | 1,396,430 | ||||||||
1,000,000 | Georgia Municipal Electric Authority, Revenue Bonds | 01/01/33 | 5.000 | 1,218,932 | |||||||||||
500,000 | Georgia Municipal Electric Authority, Revenue Bonds | 01/01/34 | 5.000 | 608,456 | |||||||||||
1,750,000 | Monroe County Development Authority, Revenue Bonds | 07/01/25 | 2.250 | 1,808,191 | |||||||||||
3,850,000 | Monroe County Development Authority, Revenue Bonds1,2 | 01/01/39 | 1.500 | 3,944,793 | |||||||||||
1,200,000 | State of Georgia, General Obligation Bonds | 02/01/25 | 5.000 | 1,378,279 | |||||||||||
1,710,000 | State of Georgia, General Obligation Bonds | 12/01/26 | 5.000 | 2,080,167 | |||||||||||
Total Georgia | 33,920,096 | ||||||||||||||
| Hawaii (1.7%) | ||||||||||||||
2,250,000 | City & County of Honolulu, General Obligation Bonds4 | 11/01/23 | 5.000 | 2,367,801 | |||||||||||
3,750,000 | City & County of Honolulu, General Obligation Bonds4 | 11/01/27 | 5.000 | 4,439,044 | |||||||||||
4,345,000 | City & County of Honolulu, General Obligation Bonds4 | 11/01/28 | 5.000 | 5,256,362 | |||||||||||
2,000,000 | City & County of Honolulu, General Obligation Bonds4 | 11/01/29 | 5.000 | 2,456,850 | |||||||||||
Total Hawaii | 14,520,057 | ||||||||||||||
| Illinois (5.9%) | ||||||||||||||
1,400,000 | Illinois Finance Authority, Revenue Bonds2,5 | 11/01/21 | 0.030 | 1,400,000 | |||||||||||
2,400,000 | Illinois Finance Authority, Revenue Bonds2,5 | 11/01/21 | 0.030 | 2,400,000 | |||||||||||
7,400,000 | Illinois Finance Authority, Revenue Bonds2,5 | 11/01/21 | 0.030 | 7,400,000 | |||||||||||
600,000 | Illinois Finance Authority, Revenue Bonds2,5 | 11/01/21 | 0.040 | 600,000 | |||||||||||
1,350,000 | Illinois Finance Authority, Revenue Bonds | 10/01/23 | 5.000 | 1,470,491 | |||||||||||
3,500,000 | Illinois Finance Authority, Revenue Bonds | 10/01/25 | 5.000 | 4,093,455 | |||||||||||
2,000,000 | Illinois Finance Authority, Revenue Bonds | 08/15/27 | 5.000 | 2,460,903 | |||||||||||
2,000,000 | Illinois Finance Authority, Revenue Bonds | 08/15/28 | 5.000 | 2,513,679 | |||||||||||
2,990,000 | Illinois Finance Authority, Revenue Bonds | 07/15/32 | 3.000 | 3,233,182 | |||||||||||
1,285,000 | Illinois Finance Authority, Revenue Bonds | 08/15/32 | 5.000 | 1,662,544 | |||||||||||
2,000,000 | Illinois Finance Authority, Revenue Bonds | 10/01/33 | 5.000 | 2,776,644 | |||||||||||
2,000,000 | Illinois Finance Authority, Revenue Bonds | 08/15/34 | 5.000 | 2,571,404 | |||||||||||
2,470,000 | Illinois Finance Authority, Revenue Bonds | 08/15/36 | 4.000 | 2,933,104 | |||||||||||
95,000 | Illinois Finance Authority, Revenue Bonds1,2 | 07/15/57 | 5.000 | 99,996 |
The accompanying notes are an integral part of these financial statements.
14
BBH INTERMEDIATE MUNICIPAL BOND FUND
PORTFOLIO OF INVESTMENTS (continued)
October 31, 2021
Principal Amount | Maturity Date | Interest Rate | Value | ||||||||||||
MUNICIPAL BONDS (continued) | |||||||||||||||
Illinois (continued) | |||||||||||||||
$ | 2,585,000 | Metropolitan Pier & Exposition Authority, Revenue Bonds | 07/01/26 | 7.000 | % | $ | 3,040,367 | ||||||||
4,675,000 | Railsplitter Tobacco Settlement Authority, Revenue Bonds | 06/01/24 | 5.000 | 5,204,706 | |||||||||||
905,000 | Railsplitter Tobacco Settlement Authority, Revenue Bonds | 06/01/26 | 5.000 | 1,070,648 | |||||||||||
4,300,000 | Railsplitter Tobacco Settlement Authority, Revenue Bonds | 06/01/27 | 5.000 | 5,051,303 | |||||||||||
870,000 | Railsplitter Tobacco Settlement Authority, Revenue Bonds | 06/01/28 | 5.000 | 1,015,948 | |||||||||||
Total Illinois | 50,998,374 | ||||||||||||||
Indiana (2.2%) | |||||||||||||||
1,665,000 | Indiana Bond Bank, Revenue Bonds (3-Month USD-LIBOR + 0.970%)2 | 10/15/22 | 1.053 | 1,665,423 | |||||||||||
900,000 | Indiana Finance Authority, Revenue Bonds2,5 | 11/01/21 | 0.040 | 900,000 | |||||||||||
950,000 | Indiana Finance Authority, Revenue Bonds2,5 | 11/01/21 | 0.040 | 950,000 | |||||||||||
2,000,000 | Indiana Finance Authority, Revenue Bonds1,2 | 12/01/58 | 2.250 | 2,100,567 | |||||||||||
4,335,000 | Indiana Housing & Community Development Authority, Revenue Bonds2,5 | 11/01/21 | 0.030 | 4,335,000 | |||||||||||
1,580,000 | Indiana Housing & Community Development Authority, Revenue Bonds, GNMA | 07/01/22 | 5.000 | 1,626,754 | |||||||||||
1,565,000 | Indiana Housing & Community Development Authority, Revenue Bonds, GNMA | 01/01/23 | 5.000 | 1,643,915 | |||||||||||
3,605,000 | Indiana Housing & Community Development Authority, Revenue Bonds | 01/01/49 | 3.750 | 3,928,592 | |||||||||||
2,265,000 | Indiana Housing & Community Development Authority, Revenue Bonds, GNMA | 07/01/49 | 3.250 | 2,419,323 | |||||||||||
Total Indiana | 19,569,574 | ||||||||||||||
| Iowa (0.7%) | ||||||||||||||
7,000,000 | Iowa Finance Authority, Revenue Bonds2,5 | 11/01/21 | 0.030 | 7,000,000 | |||||||||||
415,000 | Iowa Finance Authority, Revenue Bonds, FHLMC, FNMA, GNMA | 07/01/46 | 4.000 | 435,845 | |||||||||||
3,840,000 | Iowa Finance Authority, Revenue Bonds, FHLMC, FNMA, GNMA | 01/01/50 | 3.750 | 4,187,469 | |||||||||||
Total Iowa | 11,623,314 | ||||||||||||||
| Kentucky (1.2%) | ||||||||||||||
5,000,000 | County of Trimble KY, Revenue Bonds | 11/01/27 | 1.350 | 5,015,481 | |||||||||||
4,965,000 | Kentucky Public Energy Authority, Revenue Bonds1,2 | 12/01/49 | 4.000 | 5,494,944 | |||||||||||
Total Kentucky | 10,510,425 |
The accompanying notes are an integral part of these financial statements.
financial statements october 31, 2021 | 15 |
BBH INTERMEDIATE MUNICIPAL BOND FUND
PORTFOLIO OF INVESTMENTS (continued)
October 31, 2021
Principal Amount | Maturity Date | Interest Rate | Value | ||||||||||||
MUNICIPAL BONDS (continued) | |||||||||||||||
Maryland (6.6%) | |||||||||||||||
$ | 1,125,000 | County of Baltimore, General Obligation Bonds | 02/01/26 | 5.000 | % | $ | 1,334,028 | ||||||||
2,200,000 | County of Prince George's, General Obligation Bonds | 07/15/26 | 5.000 | 2,645,071 | |||||||||||
3,500,000 | County of Prince George's, General Obligation Bonds | 09/15/27 | 5.000 | 4,335,186 | |||||||||||
135,000 | State of Maryland, General Obligation Bonds | 08/01/24 | 5.000 | 152,242 | |||||||||||
10,000,000 | State of Maryland, General Obligation Bonds | 03/15/25 | 5.000 | 11,526,646 | |||||||||||
5,200,000 | State of Maryland, General Obligation Bonds4 | 03/01/26 | 5.000 | 6,063,160 | |||||||||||
10,000,000 | State of Maryland, General Obligation Bonds4 | 08/01/27 | 3.000 | 10,940,664 | |||||||||||
5,000,000 | State of Maryland, General Obligation Bonds4 | 03/01/28 | 4.000 | 5,828,874 | |||||||||||
2,500,000 | State of Maryland, General Obligation Bonds4 | 03/01/29 | 4.000 | 2,962,989 | |||||||||||
1,000,000 | State of Maryland Department of Transportation, Revenue Bonds4 | 12/01/23 | 5.000 | 1,044,946 | |||||||||||
2,000,000 | State of Maryland Department of Transportation, Revenue Bonds4 | 12/01/26 | 5.000 | 2,303,255 | |||||||||||
2,250,000 | State of Maryland Department of Transportation, Revenue Bonds4 | 12/01/27 | 5.000 | 2,646,183 | |||||||||||
2,250,000 | State of Maryland Department of Transportation, Revenue Bonds4 | 12/01/28 | 5.000 | 2,699,956 | |||||||||||
2,125,000 | State of Maryland Department of Transportation, Revenue Bonds4 | 12/01/29 | 5.000 | 2,594,021 | |||||||||||
Total Maryland | 57,077,221 | ||||||||||||||
| Massachusetts (4.4%) | ||||||||||||||
1,805,000 | Commonwealth of Massachusetts, Revenue Bonds, AGM1,2 | 06/01/22 | 8.873 | 1,847,651 | |||||||||||
12,935,000 | Commonwealth of Massachusetts, General Obligation Bonds (3-Month USD-LIBOR + 0.550%)2 | 11/01/25 | 0.634 | 12,952,641 | |||||||||||
4,625,000 | Commonwealth of Massachusetts, General Obligation Bonds | 07/01/26 | 5.000 | 5,544,881 | |||||||||||
1,200,000 | Commonwealth of Massachusetts, General Obligation Bonds | 09/01/26 | 5.000 | 1,445,646 | |||||||||||
5,000,000 | Massachusetts Clean Water Trust, Revenue Bonds (U.S. Consumer Price Index + 0.990%)2 | 08/01/23 | 6.401 | 5,321,607 | |||||||||||
10,000,000 | Massachusetts Health & Educational Facilities Authority, Revenue Bonds5 | 11/01/21 | 0.010 | 10,000,000 | |||||||||||
370,000 | Massachusetts Housing Finance Agency, Revenue Bonds | 06/01/34 | 3.300 | 392,146 | |||||||||||
485,000 | Massachusetts Housing Finance Agency, Revenue Bonds | 12/01/36 | 3.450 | 516,538 | |||||||||||
Total Massachusetts | 38,021,110 |
The accompanying notes are an integral part of these financial statements.
16
BBH INTERMEDIATE MUNICIPAL BOND FUND
PORTFOLIO OF INVESTMENTS (continued)
October 31, 2021
Principal Amount | Maturity Date | Interest Rate | Value | ||||||||||||
MUNICIPAL BONDS (continued) | |||||||||||||||
Michigan (4.3%) | |||||||||||||||
$ | 1,930,000 | Brighton Area School District, General Obligation Bonds | 05/01/33 | 3.000 | % | $ | 2,119,705 | ||||||||
2,385,000 | Brighton Area School District, General Obligation Bonds | 05/01/34 | 3.000 | 2,607,002 | |||||||||||
90,000 | Detroit City School District, General Obligation Bonds, BHAC, FGIC | 05/01/25 | 5.250 | 98,401 | |||||||||||
325,000 | Detroit City School District, General Obligation Bonds, AGM | 05/01/27 | 5.250 | 401,512 | |||||||||||
5,025,000 | Detroit City School District, General Obligation Bonds, AGM | 05/01/29 | 5.250 | 6,500,499 | |||||||||||
5,350,000 | Detroit City School District, General Obligation Bonds, AGM | 05/01/29 | 6.000 | 6,539,595 | |||||||||||
1,550,000 | Detroit City School District, General Obligation Bonds, AGM | 05/01/30 | 5.250 | 2,039,622 | |||||||||||
3,940,000 | Detroit City School District, General Obligation Bonds, AGM | 05/01/32 | 5.250 | 5,207,762 | |||||||||||
1,195,000 | Michigan Finance Authority, Revenue Bonds | 05/01/28 | 5.000 | 1,423,873 | |||||||||||
3,850,000 | Michigan Finance Authority, Revenue Bonds1,2 | 10/15/38 | 1.200 | 3,831,509 | |||||||||||
1,235,000 | Pontiac School District, General Obligation Bonds | 05/01/26 | 5.000 | 1,472,139 | |||||||||||
1,355,000 | Pontiac School District, General Obligation Bonds | 05/01/27 | 5.000 | 1,659,924 | |||||||||||
1,480,000 | Pontiac School District, General Obligation Bonds | 05/01/28 | 5.000 | 1,857,522 | |||||||||||
1,240,000 | Pontiac School District, General Obligation Bonds | 05/01/31 | 5.000 | 1,610,919 | |||||||||||
Total Michigan | 37,369,984 | ||||||||||||||
| Minnesota (4.1%) | ||||||||||||||
7,500,000 | City of Minneapolis MN/St Paul Housing & Redevelopment Authority, Revenue Bonds2,5 | 11/01/21 | 0.040 | 7,500,000 | |||||||||||
1,300,000 | Duluth Independent School District No 709, General Obligation Bonds3 | 02/01/31 | 0.000 | 1,063,709 | |||||||||||
1,050,000 | Duluth Independent School District No 709, General Obligation Bonds3 | 02/01/32 | 0.000 | 829,808 | |||||||||||
1,025,000 | Duluth Independent School District No 709, General Obligation Bonds3 | 02/01/33 | 0.000 | 782,601 | |||||||||||
835,000 | Minnesota Housing Finance Agency, Revenue Bonds, FHLMC, FNMA, GNMA | 01/01/28 | 1.750 | 853,430 | |||||||||||
1,525,000 | Minnesota Housing Finance Agency, Revenue Bonds, FHLMC, FNMA, GNMA | 07/01/28 | 1.300 | 1,517,038 | |||||||||||
927,019 | Minnesota Housing Finance Agency, Revenue Bonds, FHLMC, FNMA, GNMA | 03/01/47 | 2.930 | 949,867 | |||||||||||
817,809 | Minnesota Housing Finance Agency, Revenue Bonds, FHA, FHLMC, FNMA, GNMA | 01/01/49 | 3.600 | 846,969 |
The accompanying notes are an integral part of these financial statements.
financial statements october 31, 2021 | 17 |
BBH INTERMEDIATE MUNICIPAL BOND FUND
PORTFOLIO OF INVESTMENTS (continued)
October 31, 2021
Principal Amount | Maturity Date | Interest Rate | Value | ||||||||||||
MUNICIPAL BONDS (continued) | |||||||||||||||
Minnesota (continued) | |||||||||||||||
$ | 2,273,621 | Minnesota Housing Finance Agency, Revenue Bonds, FHLMC, FNMA, GNMA | 03/01/49 | 3.450 | % | $ | 2,349,085 | ||||||||
834,333 | Minnesota Housing Finance Agency, Revenue Bonds, FHLMC, FNMA, GNMA | 06/01/49 | 3.150 | 857,216 | |||||||||||
4,655,201 | Minnesota Housing Finance Agency, Revenue Bonds, FHLMC, FNMA, GNMA | 01/01/50 | 2.470 | 4,734,744 | |||||||||||
1,000,000 | Sartell-St Stephen Independent School District No 748, General Obligation Bonds3 | 02/01/33 | 0.000 | 741,967 | |||||||||||
6,655,000 | Shakopee Independent School District No 720, General Obligation Bonds3 | 02/01/28 | 0.000 | 6,075,108 | |||||||||||
5,155,000 | Shakopee Independent School District No 720, General Obligation Bonds3 | 02/01/29 | 0.000 | 4,595,985 | |||||||||||
2,250,000 | St Paul Independent School District No 625, Certificates of Participation | 02/01/32 | 2.000 | 2,296,546 | |||||||||||
Total Minnesota | 35,994,073 | ||||||||||||||
Mississippi (0.1%) | |||||||||||||||
1,000,000 | Mississippi Business Finance Corp., Revenue Bonds1,2 | 03/01/27 | 2.200 | 1,037,327 | |||||||||||
Total Mississippi | 1,037,327 | ||||||||||||||
Missouri (0.0%) | |||||||||||||||
40,000 | Missouri Housing Development Commission, Revenue Bonds, FHLMC, FNMA, GNMA | 05/01/51 | 3.250 | 43,355 | |||||||||||
Total Missouri | 43,355 | ||||||||||||||
Montana (0.1%) | |||||||||||||||
1,190,000 | Montana Board of Housing, Revenue Bonds | 12/01/43 | 4.000 | 1,276,654 | |||||||||||
Total Montana | 1,276,654 | ||||||||||||||
Nebraska (1.6%) | |||||||||||||||
2,515,000 | Central Plains Energy Project, Revenue Bonds | 09/01/27 | 5.000 | 2,611,786 | |||||||||||
3,675,000 | Central Plains Energy Project, Revenue Bonds1,2 | 03/01/50 | 5.000 | 3,997,863 | |||||||||||
1,710,000 | Nebraska Investment Finance Authority, Revenue Bonds, FHLMC, FNMA, GNMA | 03/01/29 | 1.950 | 1,753,543 | |||||||||||
1,710,000 | Nebraska Investment Finance Authority, Revenue Bonds, FHLMC, FNMA, GNMA | 03/01/33 | 1.950 | 1,688,383 | |||||||||||
2,750,000 | Nebraska Investment Finance Authority, Revenue Bonds, FHLMC, FNMA, GNMA | 09/01/49 | 4.000 | 2,994,704 | |||||||||||
500,000 | Saline County Hospital Authority No 1, Revenue Bonds2,5 | 11/01/21 | 0.030 | 500,000 | |||||||||||
Total Nebraska | 13,546,279 | ||||||||||||||
Nevada (0.1%) | |||||||||||||||
1,250,000 | County of Clark, Revenue Bonds1,2 | 01/01/36 | 1.650 | 1,271,260 | |||||||||||
Total Nevada | 1,271,260 |
The accompanying notes are an integral part of these financial statements.
18
BBH INTERMEDIATE MUNICIPAL BOND FUND
PORTFOLIO OF INVESTMENTS (continued)
October 31, 2021
Principal Amount | Maturity Date | Interest Rate | Value | ||||||||||||
MUNICIPAL BONDS (continued) | |||||||||||||||
New Hampshire (0.1%) | |||||||||||||||
$ | 1,000,000 | New Hampshire Business Finance Authority, Revenue Bonds | 08/01/24 | 3.125 | % | $ | 1,064,734 | ||||||||
Total New Hampshire | 1,064,734 | ||||||||||||||
| New Jersey (6.1%) | ||||||||||||||
1,420,000 | Holmdel Township School District, General Obligation Bonds | 02/01/27 | 3.250 | 1,595,548 | |||||||||||
2,075,000 | Mount Laurel Township Board of Education, General Obligation Bonds | 09/01/23 | 2.500 | 2,159,341 | |||||||||||
1,630,000 | Mount Laurel Township Board of Education, General Obligation Bonds | 09/01/24 | 2.500 | 1,721,779 | |||||||||||
3,830,000 | New Jersey Economic Development Authority, Revenue Bonds (SIFMA Municipal Swap Index Yield + 1.550%)2 | 09/01/27 | 1.600 | 3,877,508 | |||||||||||
5,100,000 | New Jersey Economic Development Authority, Revenue Bonds (SIFMA Municipal Swap Index Yield + 1.600%)2 | 03/01/28 | 1.650 | 5,165,194 | |||||||||||
2,200,000 | New Jersey Economic Development Authority, Revenue Bonds1,2 | 11/01/34 | 1.200 | 2,218,157 | |||||||||||
3,000,000 | New Jersey Health Care Facilities Financing Authority, Revenue Bonds2,5 | 11/01/21 | 0.010 | 3,000,000 | |||||||||||
3,350,000 | New Jersey Health Care Facilities Financing Authority, Revenue Bonds1,2 | 07/01/45 | 5.000 | 3,990,770 | |||||||||||
3,365,000 | New Jersey Transportation Trust Fund Authority, Revenue Bonds3 | 12/15/26 | 0.000 | 3,128,804 | |||||||||||
1,380,000 | New Jersey Transportation Trust Fund Authority, Revenue Bonds3 | 12/15/28 | 0.000 | 1,216,836 | |||||||||||
7,000,000 | New Jersey Transportation Trust Fund Authority, Revenue Bonds4 | 06/15/30 | 5.000 | 8,705,011 | |||||||||||
4,405,000 | New Jersey Transportation Trust Fund Authority, Revenue Bonds3 | 12/15/30 | 0.000 | 3,659,213 | |||||||||||
6,000,000 | New Jersey Transportation Trust Fund Authority, Revenue Bonds3 | 12/15/31 | 0.000 | 4,834,663 | |||||||||||
2,760,000 | New Jersey Turnpike Authority, Revenue Bonds (1-Month USD-LIBOR + 0.750%)2 | 01/01/30 | 0.808 | 2,767,692 | |||||||||||
1,375,000 | Rumson Boro School District, General Obligation Bonds | 07/15/33 | 2.000 | 1,400,106 | |||||||||||
1,750,000 | Township of Ewing, General Obligation Bonds | 08/01/27 | 3.000 | 1,904,506 | |||||||||||
1,750,000 | Township of Ewing, General Obligation Bonds | 08/01/29 | 2.000 | 1,788,227 | |||||||||||
Total New Jersey | 53,133,355 |
The accompanying notes are an integral part of these financial statements.
financial statements october 31, 2021 | 19 |
BBH INTERMEDIATE MUNICIPAL BOND FUND
PORTFOLIO OF INVESTMENTS (continued)
October 31, 2021
Principal Amount | Maturity Date | Interest Rate | Value | ||||||||||||
MUNICIPAL BONDS (continued) | |||||||||||||||
New Mexico (0.5%) | |||||||||||||||
$ | 1,420,000 | New Mexico Mortgage Finance Authority, Revenue Bonds, FHLMC, FNMA, GNMA | 01/01/49 | 4.000 | % | $ | 1,544,386 | ||||||||
2,895,000 | New Mexico Mortgage Finance Authority, Revenue Bonds, FHLMC, FNMA, GNMA | 01/01/51 | 3.500 | 3,143,498 | |||||||||||
Total New Mexico | 4,687,884 | ||||||||||||||
| New York (6.7%) | ||||||||||||||
5,000,000 | Metropolitan Transportation Authority, Revenue Bonds | 02/01/22 | 4.000 | 5,045,539 | |||||||||||
4,165,000 | Metropolitan Transportation Authority, Revenue Bonds (1-Month USD-LIBOR + 0.820%)2 | 11/01/26 | 0.875 | 4,169,490 | |||||||||||
5,750,000 | Metropolitan Transportation Authority, Revenue Bonds (SOFR + 0.330%)2 | 11/01/35 | 0.363 | 5,734,456 | |||||||||||
2,100,000 | New York City Transitional Finance Authority Future Tax Secured Revenue, Revenue Bonds2,5 | 11/01/21 | 0.030 | 2,100,000 | |||||||||||
10,200,000 | New York City Transitional Finance Authority Future Tax Secured Revenue, Revenue Bonds2,5 | 11/01/21 | 0.030 | 10,200,000 | |||||||||||
4,000,000 | New York City Transitional Finance Authority Future Tax Secured Revenue, Revenue Bonds | 08/01/28 | 5.000 | 5,046,810 | |||||||||||
3,000,000 | New York City Transitional Finance Authority Future Tax Secured Revenue, Revenue Bonds | 11/01/28 | 5.000 | 3,806,631 | |||||||||||
2,500,000 | New York City Water & Sewer System, Revenue Bonds2,5 | 11/01/21 | 0.030 | 2,500,000 | |||||||||||
925,000 | New York State Dormitory Authority, Revenue Bonds | 02/15/24 | 5.000 | 1,024,451 | |||||||||||
5,000,000 | New York State Urban Development Corp., Revenue Bonds | 03/15/28 | 5.000 | 6,250,671 | |||||||||||
5,655,000 | Port Authority of New York & New Jersey, Revenue Bonds | 10/01/31 | 2.000 | 5,636,452 | |||||||||||
3,500,000 | Port Authority of New York & New Jersey, Revenue Bonds | 10/01/33 | 2.000 | 3,437,443 | |||||||||||
3,350,000 | Triborough Bridge & Tunnel Authority, Revenue Bonds (SOFR + 0.380%)2 | 01/01/32 | 0.414 | 3,353,784 | |||||||||||
Total New York | 58,305,727 | ||||||||||||||
| North Carolina (3.0%) | ||||||||||||||
4,400,000 | Charlotte-Mecklenburg Hospital Authority, Revenue Bonds2,5 | 11/01/21 | 0.030 | 4,400,000 | |||||||||||
2,315,000 | County of New Hanover, Revenue Bonds | 10/01/26 | 5.000 | 2,781,883 | |||||||||||
1,725,000 | County of Wake, General Obligation Bonds | 03/01/24 | 5.000 | 1,914,145 |
The accompanying notes are an integral part of these financial statements.
20
BBH INTERMEDIATE MUNICIPAL BOND FUND
PORTFOLIO OF INVESTMENTS (continued)
October 31, 2021
Principal Amount | Maturity Date | Interest Rate | Value | ||||||||||||
MUNICIPAL BONDS (continued) | |||||||||||||||
North Carolina (continued) | |||||||||||||||
$ | 735,000 | North Carolina Housing Finance Agency, Revenue Bonds, FHLMC, FNMA, GNMA | 01/01/23 | 2.750 | % | $ | 750,845 | ||||||||
745,000 | North Carolina Housing Finance Agency, Revenue Bonds, FHLMC, FNMA, GNMA | 07/01/23 | 2.800 | 767,441 | |||||||||||
1,625,000 | North Carolina Housing Finance Agency, Revenue Bonds, FHLMC, FNMA, GNMA | 01/01/28 | 1.100 | 1,598,653 | |||||||||||
4,320,000 | North Carolina Housing Finance Agency, Revenue Bonds, FNMA, GNMA | 01/01/50 | 4.000 | 4,725,368 | |||||||||||
2,520,000 | North Carolina Housing Finance Agency, Revenue Bonds | 07/01/50 | 4.000 | 2,780,678 | |||||||||||
1,570,000 | State of North Carolina, General Obligation Bonds | 06/01/24 | 5.000 | 1,759,089 | |||||||||||
2,000,000 | State of North Carolina, General Obligation Bonds | 06/01/27 | 5.000 | 2,462,468 | |||||||||||
2,225,000 | State of North Carolina, General Obligation Bonds | 06/01/32 | 2.000 | 2,299,251 | |||||||||||
Total North Carolina | 26,239,821 | ||||||||||||||
| North Dakota (0.9%) | ||||||||||||||
1,000,000 | North Dakota Housing Finance Agency, Revenue Bonds | 01/01/29 | 1.650 | 995,933 | |||||||||||
2,200,000 | North Dakota Housing Finance Agency, Revenue Bonds | 07/01/32 | 2.800 | 2,332,569 | |||||||||||
4,230,000 | North Dakota Housing Finance Agency, Revenue Bonds | 07/01/49 | 4.250 | 4,623,931 | |||||||||||
Total North Dakota | 7,952,433 | ||||||||||||||
| Ohio (3.1%) | ||||||||||||||
2,800,000 | Ohio Higher Educational Facility Commission, Revenue Bonds1,2 | 01/01/39 | 0.030 | 2,800,000 | |||||||||||
14,500,000 | Ohio Higher Educational Facility Commission, Revenue Bonds2,5 | 11/01/21 | 0.030 | 14,500,000 | |||||||||||
2,000,000 | Ohio Higher Educational Facility Commission, Revenue Bonds (1-Month USD-LIBOR + 0.420%)2 | 10/01/44 | 0.478 | 2,000,311 | |||||||||||
4,750,000 | State of Ohio, Revenue Bonds2,5 | 11/01/21 | 0.030 | 4,750,000 | |||||||||||
2,195,000 | State of Ohio, General Obligation Bonds | 08/01/25 | 5.000 | 2,559,241 | |||||||||||
Total Ohio | 26,609,552 |
The accompanying notes are an integral part of these financial statements.
financial statements october 31, 2021 | 21 |
BBH INTERMEDIATE MUNICIPAL BOND FUND
PORTFOLIO OF INVESTMENTS (continued)
October 31, 2021
Principal Amount | Maturity Date | Interest Rate | Value | ||||||||||||
MUNICIPAL BONDS (continued) | |||||||||||||||
Oklahoma (0.8%) | |||||||||||||||
$ | 4,115,000 | Oklahoma Housing Finance Agency, Revenue Bonds, FHLMC, FNMA, GNMA | 09/01/49 | 4.000 | % | $ | 4,514,987 | ||||||||
1,930,000 | Oklahoma Housing Finance Agency, Revenue Bonds, FHLMC, FNMA, GNMA | 09/01/50 | 3.250 | 2,092,239 | |||||||||||
Total Oklahoma | 6,607,226 | ||||||||||||||
| Oregon (5.4%) | ||||||||||||||
6,400,000 | Clackamas & Washington Counties School District No 3, General Obligation Bonds3 | 06/15/35 | 0.000 | 4,701,367 | |||||||||||
1,020,000 | Clackamas County School District No 115, General Obligation Bonds3 | 06/15/27 | 0.000 | 956,527 | |||||||||||
1,670,000 | Lane County School District No 1 Pleasant Hill, General Obligation Bonds3 | 06/15/27 | 0.000 | 1,566,953 | |||||||||||
1,445,000 | Multnomah & Clackamas Counties School District No 10JT Gresham-Barlow, General Obligation Bonds3 | 06/15/32 | 0.000 | 1,153,169 | |||||||||||
3,905,000 | Salem-Keizer School District No 24J, General Obligation Bonds3 | 06/15/25 | 0.000 | 3,812,712 | |||||||||||
4,335,000 | Salem-Keizer School District No 24J, General Obligation Bonds3 | 06/15/26 | 0.000 | 4,167,195 | |||||||||||
5,000,000 | Salem-Keizer School District No 24J, General Obligation Bonds3 | 06/15/26 | 0.000 | 4,738,455 | |||||||||||
5,000,000 | Salem-Keizer School District No 24J, General Obligation Bonds3 | 06/15/27 | 0.000 | 4,631,604 | |||||||||||
1,500,000 | Salem-Keizer School District No 24J, General Obligation Bonds3 | 06/15/28 | 0.000 | 1,382,378 | |||||||||||
2,745,000 | Salem-Keizer School District No 24J, General Obligation Bonds3 | 06/15/28 | 0.000 | 2,478,720 | |||||||||||
2,185,000 | Salem-Keizer School District No 24J, General Obligation Bonds | 06/15/29 | 5.000 | 2,810,592 | |||||||||||
1,045,000 | Salem-Keizer School District No 24J, General Obligation Bonds3 | 06/15/31 | 0.000 | 862,651 | |||||||||||
1,000,000 | Salem-Keizer School District No 24J, General Obligation Bonds3 | 06/15/33 | 0.000 | 772,881 | |||||||||||
1,045,000 | Salem-Keizer School District No 24J, General Obligation Bonds3 | 06/15/35 | 0.000 | 753,074 | |||||||||||
4,500,000 | State of Oregon, General Obligation Bonds5 | 11/01/21 | 0.030 | 4,500,000 | |||||||||||
5,000,000 | Umatilla County School District No 8R Hermiston, General Obligation Bonds3 | 06/15/32 | 0.000 | 4,080,847 |
The accompanying notes are an integral part of these financial statements.
22
BBH INTERMEDIATE MUNICIPAL BOND FUND
PORTFOLIO OF INVESTMENTS (continued)
October 31, 2021
Principal Amount | Maturity Date | Interest Rate | Value | ||||||||||||
MUNICIPAL BONDS (continued) | |||||||||||||||
Oregon (continued) | |||||||||||||||
$ | 2,225,000 | Washington & Multnomah Counties School District No 48J Beaverton, General Obligation Bonds3 | 06/15/33 | 0.000 | % | $ | 1,596,094 | ||||||||
1,500,000 | Washington Clackamas & Yamhill Counties School District No 88J, General Obligation Bonds3 | 06/15/31 | 0.000 | 1,217,633 | |||||||||||
1,055,000 | Washington Clackamas & Yamhill Counties School District No 88J, General Obligation Bonds3 | 06/15/33 | 0.000 | 783,401 | |||||||||||
Total Oregon | 46,966,253 | ||||||||||||||
| Other Territory (0.6%) | ||||||||||||||
4,920,000 | FHLMC Multifamily VRD Certificates, Revenue Bonds | 05/15/27 | 2.304 | 5,044,500 | |||||||||||
Total Other Territory | 5,044,500 | ||||||||||||||
Pennsylvania (3.5%) | |||||||||||||||
150,000 | Allegheny County Airport Authority, Revenue Bonds, FGIC | 01/01/22 | 5.000 | 151,134 | |||||||||||
85,000 | Allegheny County Airport Authority, Revenue Bonds, FGIC | 01/01/23 | 5.000 | 89,488 | |||||||||||
6,000,000 | Bethlehem Area School District Authority, Revenue Bonds (SOFR + 0.350%)2,4 | 07/01/31 | 0.000 | 6,000,021 | |||||||||||
1,000,000 | New Kensington-Arnold School District, General Obligation Bonds, BAM | 05/15/28 | 2.500 | 1,057,422 | |||||||||||
1,225,000 | North Penn Water Authority, Revenue Bonds (SIFMA Municipal Swap Index Yield + 0.560%)2 | 11/01/24 | 0.610 | 1,231,144 | |||||||||||
5,000,000 | Pennsylvania Economic Development Financing Authority, Revenue Bonds1,2 | 08/01/37 | 0.580 | 4,978,277 | |||||||||||
2,000,000 | School District of Philadelphia, General Obligation Bonds | 09/01/23 | 5.000 | 2,170,602 | |||||||||||
635,000 | School District of Philadelphia, General Obligation Bonds, AGM, FGIC | 06/01/24 | 5.000 | 704,192 | |||||||||||
1,710,000 | School District of Philadelphia, General Obligation Bonds | 09/01/26 | 5.000 | 2,048,333 | |||||||||||
1,610,000 | School District of Philadelphia, General Obligation Bonds | 09/01/28 | 5.000 | 2,002,736 | |||||||||||
2,210,000 | State Public School Building Authority, Revenue Bonds, AGM | 06/01/32 | 5.000 | 2,644,371 | |||||||||||
6,255,000 | State Public School Building Authority, Revenue Bonds, AGM | 06/01/33 | 5.000 | 7,467,288 | |||||||||||
Total Pennsylvania | 30,545,008 |
The accompanying notes are an integral part of these financial statements.
financial statements october 31, 2021 | 23 |
BBH INTERMEDIATE MUNICIPAL BOND FUND
PORTFOLIO OF INVESTMENTS (continued)
October 31, 2021
Principal Amount | Maturity Date | Interest Rate | Value | |||||||||||||
MUNICIPAL BONDS (continued) | ||||||||||||||||
| South Carolina (0.1%) | |||||||||||||||
$ | 930,000 | South Carolina State Housing Finance & Development Authority, Revenue Bonds | 07/01/34 | 2.650 | % | $ | 971,435 | |||||||||
Total South Carolina | 971,435 | |||||||||||||||
| South Dakota (2.0%) | |||||||||||||||
3,785,000 | Educational Enhancement Funding Corp., Revenue Bonds | 06/01/26 | 5.000 | 4,066,722 | ||||||||||||
1,500,000 | South Dakota Housing Development Authority, Revenue Bonds, FHLMC, FNMA, GNMA | 11/01/32 | 3.400 | 1,601,097 | ||||||||||||
405,000 | South Dakota Housing Development Authority, Revenue Bonds | 11/01/44 | 4.000 | 421,976 | ||||||||||||
2,395,000 | South Dakota Housing Development Authority, Revenue Bonds | 11/01/48 | 4.500 | 2,649,649 | ||||||||||||
2,750,000 | South Dakota Housing Development Authority, Revenue Bonds | 11/01/49 | 4.000 | 3,025,673 | ||||||||||||
5,025,000 | South Dakota Housing Development Authority, Revenue Bonds | 11/01/50 | 3.750 | 5,489,951 | ||||||||||||
Total South Dakota | 17,255,068 | |||||||||||||||
| Tennessee (1.4%) | |||||||||||||||
2,485,000 | Clarksville Natural Gas Acquisition Corp., Revenue Bonds | 12/15/21 | 5.000 | 2,499,287 | ||||||||||||
1,750,000 | New Memphis Arena Public Building Authority, Revenue Bonds | 04/01/29 | 0.000 | 1,784,791 | ||||||||||||
1,750,000 | New Memphis Arena Public Building Authority, Revenue Bonds3 | 04/01/33 | 0.000 | 1,371,313 | ||||||||||||
3,000,000 | New Memphis Arena Public Building Authority, Revenue Bonds3 | 04/01/35 | 0.000 | 2,207,406 | ||||||||||||
1,000,000 | Tennessee Energy Acquisition Corp., Revenue Bonds | 11/01/28 | 5.000 | 1,239,891 | ||||||||||||
2,435,000 | Tennessee Housing Development Agency, Revenue Bonds | 01/01/47 | 3.500 | 2,565,310 | ||||||||||||
100,000 | Tennessee Housing Development Agency, Revenue Bonds | 07/01/50 | 3.500 | 108,959 | ||||||||||||
Total Tennessee | 11,776,957 | |||||||||||||||
| Texas (10.6%) | |||||||||||||||
1,385,000 | City of Denton, General Obligation Bonds | 02/15/28 | 5.000 | 1,719,825 | ||||||||||||
910,000 | City of Houston Airport System Revenue, Revenue Bonds | 07/01/24 | 5.000 | 1,016,463 |
The accompanying notes are an integral part of these financial statements.
24
BBH INTERMEDIATE MUNICIPAL BOND FUND
PORTFOLIO OF INVESTMENTS (continued)
October 31, 2021
Principal Amount | Maturity Date | Interest Rate | Value | |||||||||||||
MUNICIPAL BONDS (continued) | ||||||||||||||||
| Texas (continued) | |||||||||||||||
$ | 1,170,000 | City of Houston Airport System Revenue, Revenue Bonds | 07/01/25 | 5.000 | % | $ | 1,349,425 | |||||||||
500,000 | City of San Antonio Electric & Gas Systems Revenue, Revenue Bonds1,2 | 02/01/48 | 2.750 | 512,999 | ||||||||||||
765,000 | Crandall Independent School District, General Obligation Bonds3 | 08/15/24 | 0.000 | 752,543 | ||||||||||||
420,000 | Crandall Independent School District, General Obligation Bonds3 | 08/15/25 | 0.000 | 407,207 | ||||||||||||
450,000 | Crandall Independent School District, General Obligation Bonds3 | 08/15/26 | 0.000 | 428,844 | ||||||||||||
140,000 | Crandall Independent School District, General Obligation Bonds3 | 08/15/27 | 0.000 | 130,539 | ||||||||||||
2,000,000 | Fort Bend Independent School District, General Obligation Bonds | 08/15/28 | 5.000 | 2,524,136 | ||||||||||||
1,000,000 | Hays Consolidated Independent School District, General Obligation Bonds | 02/15/27 | 5.000 | 1,216,146 | ||||||||||||
3,455,000 | Leander Independent School District, General Obligation Bonds3 | 08/15/29 | 0.000 | 2,613,702 | ||||||||||||
4,000,000 | Little Elm Independent School District, General Obligation Bonds1,2 | 08/15/48 | 0.680 | 4,002,058 | ||||||||||||
1,025,000 | Love Field Airport Modernization Corp., Revenue Bonds | 11/01/25 | 5.000 | 1,193,913 | ||||||||||||
1,380,000 | Lower Colorado River Authority, Revenue Bonds, AGM4 | 05/15/27 | 5.000 | 1,652,494 | ||||||||||||
2,280,000 | Lower Colorado River Authority, Revenue Bonds, AGM4 | 05/15/28 | 5.000 | 2,784,686 | ||||||||||||
7,500,000 | Medina Valley Independent School District, General Obligation Bonds1,2 | 02/15/51 | 0.820 | 7,430,333 | ||||||||||||
2,000,000 | Round Rock Independent School District, General Obligation Bonds | 08/01/34 | 2.750 | 2,164,965 | ||||||||||||
1,000,000 | State of Texas, General Obligation Bonds | 08/01/26 | 5.000 | 1,193,537 | ||||||||||||
1,970,000 | Texas Department of Housing & Community Affairs, Revenue Bonds, GNMA | 09/01/34 | 2.700 | 2,049,218 | ||||||||||||
3,632,025 | Texas Department of Housing & Community Affairs, Revenue Bonds, FNMA | 03/01/35 | 3.400 | 3,963,919 |
The accompanying notes are an integral part of these financial statements.
financial statements october 31, 2021 | 25 |
BBH INTERMEDIATE MUNICIPAL BOND FUND
PORTFOLIO OF INVESTMENTS (continued)
October 31, 2021
Principal Amount | Maturity Date | Interest Rate | Value | |||||||||||||
MUNICIPAL BONDS (continued) | ||||||||||||||||
| Texas (continued) | |||||||||||||||
$ | 1,295,000 | Texas Department of Housing & Community Affairs, Revenue Bonds, GNMA | 09/01/35 | 2.150 | % | $ | 1,311,904 | |||||||||
11,712,199 | Texas Department of Housing & Community Affairs, Revenue Bonds, FHLMC, FNMA, GNMA | 09/01/47 | 2.835 | 12,275,732 | ||||||||||||
990,000 | Texas Department of Housing & Community Affairs, Revenue Bonds, GNMA | 03/01/50 | 4.000 | 1,102,890 | ||||||||||||
510,000 | Texas Municipal Gas Acquisition & Supply Corp. I, Revenue Bonds | 12/15/21 | 5.250 | 513,153 | ||||||||||||
12,035,000 | Texas Municipal Gas Acquisition & Supply Corp. I, Revenue Bonds (3-Month USD-LIBOR + 0.700%)2 | 12/15/26 | 0.778 | 12,088,035 | ||||||||||||
4,080,000 | Texas Municipal Gas Acquisition & Supply Corp. I, Revenue Bonds | 12/15/26 | 6.250 | 4,718,663 | ||||||||||||
3,765,000 | Texas Municipal Gas Acquisition & Supply Corp. II, Revenue Bonds (SIFMA Municipal Swap Index Yield + 0.550%)2 | 09/15/27 | 0.600 | 3,798,478 | ||||||||||||
3,755,000 | Texas Municipal Gas Acquisition & Supply Corp. II, Revenue Bonds (3-Month USD-LIBOR + 0.690%)2 | 09/15/27 | 0.767 | 3,774,021 | ||||||||||||
11,880,000 | Texas Municipal Gas Acquisition & Supply Corp. II, Revenue Bonds (3-Month USD-LIBOR + 0.870%)2 | 09/15/27 | 0.948 | 12,020,697 | ||||||||||||
1,000,000 | Wylie Independent School District, General Obligation Bonds3 | 08/15/24 | 0.000 | 987,551 | ||||||||||||
1,000,000 | Wylie Independent School District, General Obligation Bonds3 | 08/15/25 | 0.000 | 975,778 | ||||||||||||
Total Texas | 92,673,854 | |||||||||||||||
| Virginia (3.2%) | |||||||||||||||
2,750,000 | Amelia County Industrial Development Authority, Revenue Bonds | 04/01/27 | 1.450 | 2,762,866 | ||||||||||||
1,755,000 | City of Virginia Beach, General Obligation Bonds | 04/01/25 | 5.000 | 2,026,633 | ||||||||||||
2,005,000 | County of Arlington, General Obligation Bonds | 08/15/25 | 5.000 | 2,347,184 | ||||||||||||
1,215,000 | County of Arlington, General Obligation Bonds | 08/15/30 | 2.500 | 1,281,401 | ||||||||||||
6,040,000 | Virginia College Building Authority, Revenue Bonds | 09/01/27 | 5.000 | 7,455,161 | ||||||||||||
1,835,000 | Virginia College Building Authority, Revenue Bonds | 02/01/28 | 5.000 | 2,291,690 | ||||||||||||
5,000,000 | Virginia Commonwealth Transportation Board, Revenue Bonds | 05/15/24 | 5.000 | 5,584,319 |
The accompanying notes are an integral part of these financial statements.
26
BBH INTERMEDIATE MUNICIPAL BOND FUND
PORTFOLIO OF INVESTMENTS (continued)
October 31, 2021
Principal Amount | Maturity Date | Interest Rate | Value | |||||||||||||
MUNICIPAL BONDS (continued) | ||||||||||||||||
| Virginia (continued) | |||||||||||||||
$ | 2,300,000 | Virginia Housing Development Authority, Revenue Bonds | 01/01/23 | 2.740 | % | $ | 2,348,114 | |||||||||
1,205,000 | Virginia Public School Authority, Revenue Bonds | 08/01/26 | 5.000 | 1,448,181 | ||||||||||||
Total Virginia | 27,545,549 | |||||||||||||||
| Washington (1.0%) | |||||||||||||||
850,000 | County of King, General Obligation Bonds2,5 | 11/01/21 | 0.030 | 850,000 | ||||||||||||
425,000 | Port of Seattle, Revenue Bonds | 06/01/27 | 3.750 | 443,690 | ||||||||||||
1,050,000 | State of Washington, General Obligation Bonds | 08/01/26 | 5.000 | 1,261,900 | ||||||||||||
1,330,000 | State of Washington, General Obligation Bonds, NPFG3 | 06/01/30 | 0.000 | 1,159,257 | ||||||||||||
105,000 | Washington State Housing Finance Commission, Revenue Bonds | 06/01/44 | 3.500 | 107,348 | ||||||||||||
1,270,000 | Washington State Housing Finance Commission, Revenue Bonds, FHLMC, FNMA, GNMA | 12/01/47 | 4.000 | 1,315,767 | ||||||||||||
4,000,000 | Washington State Housing Finance Commission, Revenue Bonds (SIFMA Municipal Swap Index Yield + 0.550%)2 | 12/01/48 | 0.600 | 4,021,752 | ||||||||||||
Total Washington | 9,159,714 | |||||||||||||||
| Wisconsin (0.7%) | |||||||||||||||
300,000 | County of Milwaukee Airport Revenue, Revenue Bonds | 12/01/28 | 5.250 | 329,044 | ||||||||||||
5,400,000 | Wisconsin Health & Educational Facilities Authority, Revenue Bonds2,5 | 11/01/21 | 0.030 | 5,400,000 | ||||||||||||
Total Wisconsin | 5,729,044 | |||||||||||||||
| Wyoming (0.3%) | |||||||||||||||
2,605,000 | Wyoming Community Development Authority, Revenue Bonds | 12/01/48 | 4.000 | 2,825,786 | ||||||||||||
Total Wyoming | 2,825,786 | |||||||||||||||
Total Municipal Bonds | ||||||||||||||||
(Identified cost $921,399,960) | 948,341,558 |
TOTAL INVESTMENTS (cost $921,399,960)6 | 109.0 | % | $ | 948,341,558 | |||
LIABILITIES IN EXCESS OF OTHER ASSETS | (9.0 | )% | (78,161,319 | ) | |||
NET ASSETS | 100.00 | % | $ | 870,180,239 |
The accompanying notes are an integral part of these financial statements.
financial statements october 31, 2021 | 27 |
BBH INTERMEDIATE MUNICIPAL BOND FUND
PORTFOLIO OF INVESTMENTS (continued)
October 31, 2021
1 | This variable rate security is based on a predetermined schedule and the rate at period end also represents the reference rate at period end. |
2 | Variable rate instrument. Interest rates change on specific dates (such as coupon or interest payment date). The yield shown represents the October 31, 2021 coupon or interest rate. |
3 | Security issued with zero coupon. Income is recognized through accretion of discount. |
4 | Represent a security purchased on a when-issued basis. |
5 | Variable rate demand note. The maturity date reflects the demand repayment dates. Interest rates change on specific dates (such as coupon or interest payment date). The yield shown represents the coupon or interest rate as of October 31, 2021. |
6 | The aggregate cost for federal income tax purposes is $921,403,600, the aggregate gross unrealized appreciation is $28,241,958 and the aggregate gross unrealized depreciation is $1,304,000, resulting in net unrealized appreciation of $26,937,958. |
Abbreviations: | |
AGM - Assured Guaranty Municipal Corporation. | |
AMBAC - AMBAC Financial Group, Inc. | |
BAM - Build America Mutual. | |
BHAC - Berkshire Hathaway Assurance Corporation. | |
FGIC - Financial Guaranty Insurance Company. | |
FHA - Federal Housing Administration. | |
FHLMC - Federal Home Loan Mortgage Corporation. | |
FNMA - Federal National Mortgage Association. | |
GNMA - Government National Mortgage Association. | |
LIBOR - London Interbank Offered Rate. | |
NPFG - National Public Finance Guarantee Corporation. | |
SIFMA - Securities Industry and Financial Markets Association. | |
SOFR - Secured Overnight Financing Rate. |
The accompanying notes are an integral part of these financial statements.
28
BBH INTERMEDIATE MUNICIPAL BOND FUND
PORTFOLIO OF INVESTMENTS (continued)
October 31, 2021
FAIR VALUE MEASUREMENTS
The Fund is required to disclose information regarding the fair value measurements of the Fund’s assets and liabilities. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The disclosure requirement established a three-tier hierarchy to maximize the use of observable market data and minimize the use of unobservable inputs and to establish classification of fair value measurements for disclosure purposes. Inputs refer broadly to the assumptions that market participants would use in pricing the asset or liability, including, for example, the risk inherent in a particular valuation technique used to measure fair value, including the model and/or the risk inherent in the inputs to the valuation technique. Inputs may be observable or unobservable. Observable inputs are inputs that reflect the assumptions market participants would use in pricing the asset or liability developed based on market data obtained from sources independent of the reporting entity. Unobservable inputs are inputs that reflect the Fund’s own considerations about the assumptions market participants would use in pricing the asset or liability developed based on the best information available in the circumstances.
Authoritative guidance establishes three levels of the fair value hierarchy as follows:
— | Level 1 – unadjusted quoted prices in active markets for identical assets and liabilities. |
— | Level 2 – significant other observable inputs (including quoted prices for similar assets and liabilities, interest rates, prepayment speeds, credit risk, etc.). |
— | Level 3 – significant unobservable inputs (including the Fund’s own assumptions in determining the fair value of assets and liabilities). |
Inputs are used in applying the various valuation techniques and broadly refer to the assumptions that market participants use to make valuation decisions, including assumptions about risk. Inputs may include price information, specific and broad credit data, liquidity statistics, and other factors. A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. However, the determination of what constitutes “observable” requires judgment by the investment adviser. The investment adviser considers observable data to be that market data which is readily available, regularly distributed or updated, reliable and verifiable, not proprietary, and provided by independent sources that are actively involved in the relevant market. The categorization of a financial instrument within the hierarchy is based upon the pricing transparency of the instrument and does not necessarily correspond to the investment adviser’s perceived risk of that instrument.
The accompanying notes are an integral part of these financial statements.
financial statements october 31, 2021 | 29 |
BBH INTERMEDIATE MUNICIPAL BOND FUND
PORTFOLIO OF INVESTMENTS (continued)
October 31, 2021
Financial assets within Level 1 are based on quoted market prices in active markets. The Fund does not adjust the quoted price for these instruments.
Financial instruments that trade in markets that are not considered to be active but are valued based on quoted market prices, dealer quotations or alternative pricing sources supported by observable inputs are classified within Level 2. These include municipal bonds, investment-grade corporate bonds, U.S. Treasury notes and bonds, and certain non-U.S. sovereign obligations and over-the-counter derivatives. As Level 2 financial assets include positions that are not traded in active markets and/or are subject to transfer restrictions, valuations may be adjusted to reflect illiquidity and/or non-transferability, which are generally based on available market information.
Financial assets classified within Level 3 have significant unobservable inputs, as they trade infrequently. Level 3 financial assets include private equity and certain corporate debt securities.
Because of the inherent uncertainties of valuation, the values reflected in the financial statements may materially differ from the value received upon the actual sale of those investments.
The following table summarizes the valuation of the Fund’s investments by the above fair value hierarchy levels as of October 31, 2021.
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 October 31, 2021 | ||||||||||||||||
Municipal Bonds* | $ | — | $ | 948,341,558 | $ | — | $ | 948,341,558 | ||||||||||||
Total Investment, at value | $ | — | $ | 948,341,558 | $ | — | $ | 948,341,558 |
_______________________ | |
* | For geographical breakdown of municipal bond investments, refer to the Portfolio Investments. |
The accompanying notes are an integral part of these financial statements.
30
BBH INTERMEDIATE MUNICIPAL BOND FUND
STATEMENT OF ASSETS AND LIABILITIES
October 31, 2021
ASSETS: | ||||
Investments in securities, at value (Cost $921,399,960) | $ | 948,341,558 | ||
Cash | 119,580 | |||
Receivables for: | ||||
Interest | 5,320,686 | |||
Shares sold | 1,143,477 | |||
Investment advisory and administrative fee waiver reimbursement | 2,704 | |||
Prepaid assets | 1,329 | |||
Total Assets | 954,929,334 | |||
LIABILITIES: | ||||
Payables for: | ||||
Investments purchased | 83,618,578 | |||
Shares redeemed | 603,496 | |||
Investment advisory and administrative fees | 294,524 | |||
Dividends declared | 87,263 | |||
Professional fees | 68,274 | |||
Custody and fund accounting fees | 38,304 | |||
Shareholder servicing fees | 14,281 | |||
Transfer agent fees | 6,586 | |||
Board of Trustees' fees | 1,111 | |||
Accrued expenses and other liabilities | 16,678 | |||
Total Liabilities | 84,749,095 | |||
NET ASSETS | $ | 870,180,239 | ||
Net Assets Consist of: | ||||
Paid-in capital | $ | 842,605,095 | ||
Retained earnings | 27,575,144 | |||
Net Assets | $ | 870,180,239 |
| ||||
NET ASSET VALUE AND OFFERING PRICE PER SHARE | ||||
CLASS N SHARES | ||||
($81,744,782 ÷ 7,482,142 shares outstanding) | $10.93 | |||
CLASS I SHARES | ||||
($788,435,457 ÷ 72,224,792 shares outstanding) | $10.92 |
The accompanying notes are an integral part of these financial statements.
financial statements october 31, 2021 | 31 |
BBH INTERMEDIATE MUNICIPAL BOND FUND
STATEMENT OF OPERATIONS
For the year ended October 31, 2021
NET INVESTMENT INCOME: | ||||
Income: | ||||
Interest income | $ | 15,543,141 | ||
Other income | 22 | |||
Total Income | 15,543,163 | |||
Expenses: | ||||
Investment advisory and administrative fees | 3,401,911 | |||
Shareholder servicing fees | 195,924 | |||
Custody and fund accounting fees | 151,988 | |||
Professional fees | 79,926 | |||
Board of Trustees’ fees | 62,558 | |||
Transfer agent fees | 39,107 | |||
Miscellaneous expenses | 127,327 | |||
Total Expenses | 4,058,741 | |||
Investment advisory and administrative fee waiver | (35,002 | ) | ||
Net Expenses | 4,023,739 | |||
Net Investment Income | 11,519,424 | |||
| ||||
| ||||
NET REALIZED AND UNREALIZED LOSS: | ||||
Net realized gain on investments in securities | 621,594 | |||
Net change in unrealized appreciation/(depreciation) on investments in securities | (3,779,387 | ) | ||
Net Realized and Unrealized Loss | (3,157,793 | ) | ||
Net Increase in Net Assets Resulting from Operations | $ | 8,361,631 |
The accompanying notes are an integral part of these financial statements.
32
BBH INTERMEDIATE MUNICIPAL BOND FUND
STATEMENT OF CHANGES IN NET ASSETS
For the years ended October 31, | ||||||||
2021 | 2020 | |||||||
INCREASE IN NET ASSETS: | ||||||||
Operations: | ||||||||
Net investment income | $ | 11,519,424 | $ | 9,421,154 | ||||
Net realized gain on investments in securities | 621,594 | 882,684 | ||||||
Net change in unrealized appreciation/(depreciation) on investments in securities | (3,779,387 | ) | 15,478,840 | |||||
Net increase in net assets resulting from operations | 8,361,631 | 25,782,678 | ||||||
Dividends and distributions declared: | ||||||||
Class N | (1,254,792 | ) | (1,300,344 | ) | ||||
Class I | (11,067,676 | ) | (9,979,557 | ) | ||||
Total dividends and distributions declared | (12,322,468 | ) | (11,279,901 | ) | ||||
Share transactions: | ||||||||
Proceeds from sales of shares* | 278,506,756 | 429,297,126 | ||||||
Net asset value of shares issued to shareholders for reinvestment of dividends and distributions | 5,195,409 | 3,707,156 | ||||||
Proceeds from short-term redemption fees | 4,901 | 2,857 | ||||||
Cost of shares redeemed* | (157,456,767 | ) | (88,067,119 | ) | ||||
Net increase in net assets resulting from share transactions | 126,250,299 | 344,940,020 | ||||||
Total increase in net assets | 122,289,462 | 359,442,797 | ||||||
NET ASSETS: | ||||||||
Beginning of year | 747,890,777 | 388,447,980 | ||||||
End of year | $ | 870,180,239 | $ | 747,890,777 |
_______________________ | |
* | Includes share exchanges. See Note 5 in Notes to Financial Statements. |
The accompanying notes are an integral part of these financial statements.
financial statements october 31, 2021 | 33 |
BBH INTERMEDIATE MUNICIPAL BOND FUND
FINANCIAL HIGHLIGHTS
Selected per share data and ratios for a Class N share outstanding throughout each year.
For the years ended October 31, | ||||||||||||||||||||
2021 | 2020 | 2019 | 2018 | 2017 | ||||||||||||||||
Net asset value, beginning of year | $10.96 | $10.76 | $10.15 | $10.48 | $10.56 | |||||||||||||||
Income from investment operations: | ||||||||||||||||||||
Net investment income1 | 0.13 | 0.17 | 0.21 | 0.21 | 0.22 | |||||||||||||||
Net realized and unrealized gain (loss) | (0.02 | ) | 0.25 | 0.62 | (0.23 | ) | 0.11 | |||||||||||||
Total income (loss) from investment operations | 0.11 | 0.42 | 0.83 | (0.02 | ) | 0.33 | ||||||||||||||
Less dividends and distributions: | ||||||||||||||||||||
From net investment income | (0.13 | ) | (0.17 | ) | (0.21 | ) | (0.21 | ) | (0.26 | ) | ||||||||||
From net realized gains | (0.01 | ) | (0.05 | ) | (0.01 | ) | (0.10 | ) | (0.15 | ) | ||||||||||
Total dividends and distributions | (0.14 | ) | (0.22 | ) | (0.22 | ) | (0.31 | ) | (0.41 | ) | ||||||||||
Short-term redemption fees1 | 0.00 | 2 | 0.00 | 2 | 0.00 | 2 | 0.00 | 2 | 0.00 | 2 | ||||||||||
Net asset value, end of year | $10.93 | $10.96 | $10.76 | $10.15 | $10.48 | |||||||||||||||
Total return3 | 1.01 | % | 4.00 | % | 8.21 | % | (0.26 | )% | 3.20 | % | ||||||||||
Ratios/Supplemental data: | ||||||||||||||||||||
Net assets, end of year (in millions) | $82 | $92 | $54 | $34 | $16 | |||||||||||||||
Ratio of expenses to average net assets before reductions | 0.69 | % | 0.71 | % | 0.77 | % | 0.91 | % | 1.05 | % | ||||||||||
Fee waiver | (0.04 | )%4 | (0.06 | )%4 | (0.12 | )%4 | (0.26 | )%4 | (0.40 | )%4 | ||||||||||
Expense offset arrangement | – | % | (0.00 | )%5 | (0.00 | )%5 | (0.00 | )%5 | (0.00 | )%5 | ||||||||||
Ratio of expenses to average net assets after reductions | 0.65 | % | 0.65 | % | 0.65 | % | 0.65 | % | 0.65 | % | ||||||||||
Ratio of net investment income to average net assets | 1.18 | % | 1.58 | % | 2.01 | % | 2.07 | % | 2.16 | % | ||||||||||
Portfolio turnover rate | 45 | % | 32 | % | 104 | % | 146 | % | 125 | % | ||||||||||
Portfolio turnover rate6 | 23 | % | 19 | % | 32 | % | 52 | % | 64 | % |
____________
1 | Calculated using average shares outstanding for the year. |
2 | Less than $0.01. |
3 | Assumes the reinvestment of distributions. |
4 | The ratio of expenses to average net assets for the years ended October 31, 2021, 2020, 2019, 2018 and 2017, reflect fees reduced as result of a contractual operating expense limitation of the share class to 0.65%. The agreement is effective for period beginning on April 1, 2014 and will terminate on March 1, 2022, unless it is renewed by all parties to the agreement. For the years ended October 31, 2021, 2020, 2019, 2018 and 2017, the waived fees were $35,002, $41,531, $55,422, $63,024 and $78,871, respectively. |
5 | Less than 0.01%. |
6 | The portfolio turnover rate excludes variable rate demand notes. |
The accompanying notes are an integral part of these financial statements.
34
BBH INTERMEDIATE MUNICIPAL BOND FUND
FINANCIAL HIGHLIGHTS (continued)
Selected per share data and ratios for a Class I share outstanding throughout each year.
For the years ended October 31, | ||||||||||||||||||||
2021 | 2020 | 2019 | 2018 | 2017 | ||||||||||||||||
Net asset value, beginning of year | $10.95 | $10.75 | $10.14 | $10.47 | $10.55 | |||||||||||||||
Income from investment operations: | ||||||||||||||||||||
Net investment income1 | 0.15 | 0.19 | 0.23 | 0.23 | 0.25 | |||||||||||||||
Net realized and unrealized gain (loss) | (0.02 | ) | 0.25 | 0.61 | (0.24 | ) | 0.09 | |||||||||||||
Total income (loss) from investment operations | 0.13 | 0.44 | 0.84 | (0.01 | ) | 0.34 | ||||||||||||||
Less dividends and distributions: | ||||||||||||||||||||
From net investment income | (0.15 | ) | (0.19 | ) | (0.22 | ) | (0.22 | ) | (0.27 | ) | ||||||||||
From net realized gains | (0.01 | ) | (0.05 | ) | (0.01 | ) | (0.10 | ) | (0.15 | ) | ||||||||||
Total dividends and distributions | (0.16 | ) | (0.24 | ) | (0.23 | ) | (0.32 | ) | (0.42 | ) | ||||||||||
Short-term redemption fees1 | 0.00 | 2 | 0.00 | 2 | 0.00 | 2 | — | 0.00 | 2 | |||||||||||
Net asset value, end of year | $10.92 | $10.95 | $10.75 | $10.14 | $10.47 | |||||||||||||||
Total return3 | 1.21 | % | 4.18 | % | 8.38 | % | (0.12 | )% | 3.36 | % | ||||||||||
Ratios/Supplemental data: | ||||||||||||||||||||
Net assets, end of year (in millions) | $788 | $656 | $334 | $129 | $71 | |||||||||||||||
Ratio of expenses to average net assets before reductions | 0.45 | % | 0.47 | % | 0.50 | % | 0.62 | % | 0.69 | % | ||||||||||
Fee waiver | – | %4 | (0.00 | )%4,5 | (0.00 | )%4,5 | (0.12 | )%4 | (0.19 | )%4 | ||||||||||
Expense offset arrangement | – | % | (0.00 | )%5 | (0.00 | )%5 | (0.00 | )%5 | (0.00 | )%5 | ||||||||||
Ratio of expenses to average net assets after reductions | 0.45 | % | 0.47 | % | 0.50 | % | 0.50 | % | 0.50 | % | ||||||||||
Ratio of net investment income to average net assets | 1.38 | % | 1.75 | % | 2.17 | % | 2.23 | % | 2.46 | % | ||||||||||
Portfolio turnover rate | 45 | % | 32 | % | 104 | % | 146 | % | 125 | % | ||||||||||
Portfolio turnover rate6 | 23 | % | 19 | % | 32 | % | 52 | % | 64 | % |
____________
1 | Calculated using average shares outstanding for the year. |
2 | Less than $0.01. |
3 | Assumes the reinvestment of distributions. |
4 | The ratio of expenses to average net assets for the years ended October 31, 2021, 2020, 2019, 2018 and 2017, reflect fees reduced as result of a contractual operating expense limitation of the share class to 0.50%. The agreement is effective for period beginning on April 1, 2014 and will terminate on March 1, 2022, unless it is renewed by all parties to the agreement. For the years ended October 31, 2021, 2020, 2019, 2018 and 2017, the waived fees were $-, $-, $6,608, $111,441 and $123,485, respectively. |
5 | Less than 0.01%. |
6 | The portfolio turnover rate excludes variable rate demand notes. |
The accompanying notes are an integral part of these financial statements.
financial statements october 31, 2021 | 35 |
BBH INTERMEDIATE MUNICIPAL BOND FUND
NOTES TO FINANCIAL STATEMENTS
October 31, 2021
1. Organization. The Fund is a separate, diversified series of BBH Trust (the “Trust”), which is registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as an open-end management investment company. The Trust was originally organized under the laws of the State of Maryland on July 16, 1990 as BBH Fund, Inc. and re-organized as a Delaware statutory trust on June 12, 2007. The Fund commenced operations on April 1, 2014 and offers two share classes, Class N and Class I. Neither Class N shares nor Class I shares automatically convert to any other share class of the Fund. The investment objective of the Fund is to protect investor’s capital and generate attractive risk-adjusted returns. As of October 31, 2021, there were nine series of the Trust.
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. Prices of municipal bonds are provided by an external pricing service approved by the Fund’s Board of Trustees (the “Board”). These securities are generally classified as Level 2. The evaluated vendor pricing is based on methods that may include consideration of the following: yields or prices of municipal securities of comparable quality, type of issue, coupon, maturity and rating, market quotes or indications of value from security dealers, evaluations of anticipated cash flows or collateral, general market conditions and other information and analysis, including the obligor’s credit characteristics considered relevant.
Securities or other assets for which market quotations are not readily available are valued at fair value in accordance with procedures established by and under the general supervision and responsibility of the Board. Short-term investments, which mature in 60 days or less are valued at amortized cost if their original maturity was 60 days or less, or by amortizing their value on the 61st day prior to maturity, if their original maturity when acquired by the Fund was more than 60 days, unless the use of amortized cost is determined not to represent “fair value” 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 daily and consists of interest accrued, discount earned (including, if any, both original issue and market discount) and premium amortization on the investments of the Fund. Debt obligations may be placed on non-accrual status and related interest income may be reduced by ceasing current accruals and writing off interest receivable when the collection of all or a portion of the interest has become doubtful based on consistently applied procedures. A debt obligation is removed from non-accrual status when the issuer resumes interest payments or when collectability of interest is reasonably assured.
36
BBH INTERMEDIATE MUNICIPAL BOND FUND
NOTES TO FINANCIAL STATEMENTS (continued)
October 31, 2021
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 generally apportioned among each fund in the Trust on a net assets basis or other suitable method. Expense estimates are accrued in the period to which they relate and adjustments are made when actual amounts are known.
D. 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 may result in temporary 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 between paid-in capital and retained earnings/(accumulated deficit) within the Statement of Assets and 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.
The Fund is subject to the provisions of Accounting Standards Codification 740 Income Taxes (“ASC 740”). ASC 740 sets forth a minimum threshold for financial statement recognition of the benefit of a tax position taken or expected to be taken in a tax return. The Fund did not have any unrecognized tax benefits as of October 31, 2021, nor were there any increases or decreases in unrecognized tax benefits for the year then ended. The Fund recognizes interest and penalties, if any, related to unrecognized tax benefits as an income tax expense in the Statement of Operations. During the year ended October 31, 2021, the Fund did not incur any such interest or penalties. The Fund is subject to examination by U.S. federal and state tax authorities for returns filed for the prior three years. The Fund is not aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will significantly change in the next twelve months.
E. 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 and distributions in the amount of $1,254,792 and $11,067,676 to Class N and Class I shareholders, respectively, during the year ended October 31, 2021. In addition, the Fund designated a portion of the payment made to redeeming shareholders as a distribution for income tax purpose.
financial statements october 31, 2021 | 37 |
BBH INTERMEDIATE MUNICIPAL BOND FUND
NOTES TO FINANCIAL STATEMENTS (continued)
October 31, 2021
The tax character of distributions paid during the years ended October 31, 2021 and 2020, respectively, were as follows:
Distributions paid from: | ||||||||||||||||||||||||||||||
Ordinary income | Net long-term capital gain | Total taxable distributions | Tax exempt income | Tax return of capital | Total distributions paid | |||||||||||||||||||||||||
2021: | $ | 276,002 | $602,567 | $ | 878,569 | $11,443,899 | $ | — | $12,322,468 | |||||||||||||||||||||
2020: | 1,789,349 | 118,951 | 1,908,300 | 9,371,601 | — | 11,279,901 |
As of October 31, 2021 and 2020, respectively, the components of retained earnings/(accumulated deficit) were as follows:
Components of retained earnings/(accumulated deficit): | |||||||||||||||||||||||||||||||||
Undistributed ordinary income | Undistributed long-term capital gain | Undistributed tax-exempt income | Accumulated capital and other losses | Other book/tax temporary differences | Unrealized appreciation/ (depreciation) | Total retained earnings/ (accumulated deficit) | |||||||||||||||||||||||||||
2021: | $614,979 | $ | — | $22,207 | $ | — | $(3,640 | ) | $26,941,598 | $27,575,144 | |||||||||||||||||||||||
2020: | 191,668 | 602,567 | 22,294 | — | (1,533 | ) | 30,720,985 | 31,535,981 |
The Fund did not have a net capital loss carryforward at October 31, 2021.
The Fund is permitted to carryforward capital losses for an unlimited period and they will retain their character as either short-term or long-term capital losses rather than being considered all short-term capital losses.
Total distributions paid may differ from amounts reported in the Statements of Changes in Net Assets because, for tax purposes, dividends are recognized when actually paid.
To the extent future capital gains are offset by capital loss carryforwards, if any, such gains will not be distributed.
F.Use of Estimates. The preparation of financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities in the financial statements, disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of increases and decreases in net assets from operations during the reporting period. Actual results could differ from these estimates.
38
BBH INTERMEDIATE MUNICIPAL BOND FUND
NOTES TO FINANCIAL STATEMENTS (continued)
October 31, 2021
3. Fees and Other Transactions with Affiliates.
A. Investment Advisory and Administrative Fees. Effective April 1, 2014 (commencement of operations), 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, portfolio management and administrative services to the Fund. The Fund’s investment advisory and administrative services fee is calculated daily and paid monthly at an annual rate equivalent to 0.40% of the Fund’s average daily net assets. For the year ended October 31, 2021, the Fund incurred $3,401,911 under the Agreement.
B. Investment Advisory and Administrative Fee Waiver. Effective April 1, 2014 (commencement of operations), the Investment Adviser contractually agreed to limit the annual fund operating expenses (excluding interest, taxes, brokerage commissions, other expenditures that are capitalized in accordance with GAAP and other extraordinary expenses not incurred in the ordinary course of the Fund’s business) of Class N and Class I to 0.65% and 0.50%, respectively. The agreement will terminate on March 1, 2022, unless it is renewed by all parties to the agreement. The agreement may only be terminated during its term with approval of the Fund’s Board of Trustees. For the year ended October 31, 2021, the Investment Adviser waived fees in the amount of $35,002 and $0 for Class N and Class I, respectively.
C. Shareholder Servicing Fees. The Trust has a shareholder servicing agreement with BBH. BBH receives a fee from the Fund calculated daily and paid monthly at an annual rate of 0.20% of Class N shares’ average daily net assets. For the year ended October 31, 2021, Class N shares of the Fund incurred $195,924 in shareholder servicing fees.
D. 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% of the Fund’s net asset value. For the year ended October 31, 2021, the Fund incurred $151,988 in custody and fund accounting fees. As per agreement with the Fund’s custodian, the Fund receives interest income on cash balances held by the custodian at the BBH Base Rate. The BBH Base Rate is defined as BBH’s effective trading rate in local money markets on each day. The total interest earned by the Fund under the revised agreement for the year ended October 31, 2021 was $1,565. This amount is included in “Interest income” in the Statement of Operations. 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 year ended October 31, 2021 was $119. This amount is included under line item “Custody and fund accounting fees” in the Statement of Operations.
financial statements october 31, 2021 | 39 |
BBH INTERMEDIATE MUNICIPAL BOND FUND
NOTES TO FINANCIAL STATEMENTS (continued)
October 31, 2021
E. 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 year ended October 31, 2021, the Fund incurred $62,558 in independent Trustee compensation and expense reimbursements.
F. Officers of the Trust. Officers of the Trust are also employees of BBH. Officers are paid no fees by the Trust for their services to the Trust.
4.Investment Transactions. For the year ended October 31, 2021, the cost of purchases and the proceeds of sales of investment securities, other than short-term investments, was $590,748,583 and $393,155,336, respectively.
5.Shares of Beneficial Interest. The Trust is permitted to issue an unlimited number of Class N shares and Class I shares of beneficial interest, at no par value. Transactions in Class N and Class I shares were as follows:
For the year ended October 31, 2021 | For the year ended October 31, 2020 | |||||||||||||||
Shares | Dollars | Shares | Dollars | |||||||||||||
Class N | ||||||||||||||||
Shares sold | 3,040,169 | $ | 33,549,002 | 5,598,508 | $ | 60,922,314 | ||||||||||
Shares issued in connection with reinvestments of dividends | 113,559 | 1,252,118 | 119,749 | 1,297,371 | ||||||||||||
Proceeds from short-term redemption fees | N/A | 511 | N/A | 2,422 | ||||||||||||
Shares redeemed | (4,036,559 | ) | (44,522,443 | ) | (2,416,961 | ) | (26,142,859 | ) | ||||||||
Net increase (decrease) | (882,831 | ) | $ | (9,720,812 | ) | 3,301,296 | $ | 36,079,248 | ||||||||
Class I | ||||||||||||||||
Shares sold | 22,224,702 | $ | 244,957,754 | 34,364,204 | $ | 368,374,812 | ||||||||||
Shares issued in connection with reinvestments of dividends | 358,044 | 3,943,291 | 222,188 | 2,409,785 | ||||||||||||
Proceeds from short-term redemption fees | N/A | 4,390 | N/A | 435 | ||||||||||||
Shares redeemed | (10,256,469 | ) | (112,934,324 | ) | (5,743,724 | ) | (61,924,260 | ) | ||||||||
Net increase | 12,326,277 | $ | 135,971,111 | 28,842,668 | $ | 308,860,772 |
40
BBH INTERMEDIATE MUNICIPAL BOND FUND
NOTES TO FINANCIAL STATEMENTS (continued)
October 31, 2021
Included in Shares Sold and Shares Redeemed are shareholder exchanges during the years ended October 31, 2021 and 2020. Specifically:
During the year ended 2021, 243 shares of Class N were exchanged for 244 shares of Class I valued at $2,688, and 106,612 shares of Class I were exchanged for 106,515 shares of Class N valued at $1,172,702.
During the year ended 2020, 994,055 shares of Class N were exchanged for 994,975 shares of Class I valued at $10,757,858.
6. 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:
A shareholder may lose money by investing in the Fund (investment risk). The Fund is actively managed and the decisions by the Investment Adviser may cause the Fund to incur losses or miss profit opportunities (management risk). Additionally, in the normal course of business, the Fund invests in securities and enters into transactions where risks exist due to redemption of securities by the issuer before maturity (call risk), failure of a counterparty to a transaction to perform (credit risk), changes in interest rates, higher volatility for securities with longer maturities (interest rate risk), difficulty in being able to purchase or sell a security (liquidity risk) and a significant position in municipal securities in a particular state (geographic risk). Political, legislative and economic events may affect a municipal security’s value, interest payments, repayments of principal and the Fund’s ability to sell it (municipal issuer risk). Additionally, as the Fund’s exposure to similar municipal revenue sectors increases, the Fund will become more sensitive to adverse economic, business or political developments relevant to these sectors (municipal revenue sector risk). The Fund’s use of derivatives creates risks that are different from, or possibly greater than, the risks associated with investing directly in securities as the Fund could lose more than the principal amount invested (derivatives risk). The value of securities held by the Fund may decline in response to certain events, including: those directly involving the companies or issuers whose securities are held by the Fund; conditions affecting the general economy; overall market changes; and political and regulatory events. Natural disasters, the spread of infectious illness and other public health emergencies, recession, terrorism and other unforeseeable events may lead to increased market volatility and may have adverse effects on world economies and markets generally (market risk). While the Fund endeavors to purchase only bona fide tax exempt bonds, there is a risk that a bond may be reclassified by the IRS as a taxable bond creating taxable income for the Fund and its shareholders (taxation risk). The Fund’s shareholders may be adversely impacted by asset allocation decisions made by an investment adviser whose discretionary clients may make up a large percentage of the Fund’s shareholders (shareholder concentration risk). LIBOR is scheduled to be phased out by 2022. The unavailability and/or discontinuation of LIBOR may affect the value, liquidity or return on certain fund investments that mature later than 2022 and may result in costs incurred in connection with closing out positions and entering into new positions. Any pricing adjustments to the fund’s
financial statements october 31, 2021 | 41 |
BBH INTERMEDIATE MUNICIPAL BOND FUND
NOTES TO FINANCIAL STATEMENTS (continued)
October 31, 2021
investments resulting from a substitute reference rate may also adversely affect the fund’s performance and/or net asset value (LIBOR Transition Risk). The extent of the Fund’s exposure to these risks in respect to these financial assets is included in their value as recorded in the Fund’s Statement of Assets and Liabilities.
In 2020, the COVID-19 outbreak was declared a pandemic by the World Health Organization. The situation is dynamic with various cities and countries around the world responding in different ways to address the outbreak. The rapid development and fluidity of this situation precludes any prediction as its ultimate impact, which may have a continued adverse impact on economic and market conditions and trigger a period of global economic slowdown. Management is monitoring developments relating to COVID-19 and is coordinating its operational response based on existing business continuity plans and on guidance from global health organizations, relevant governments, and general pandemic response best practices.
Please refer to the Fund’s prospectus for a complete description of the principal risks of investing in the Fund.
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.
7. Subsequent Events. BBH&Co. ("BBH"), the custodian and fund accountant for the Fund, has entered into an agreement with State Street Corporation (“State Street”) under which State Street will acquire BBH’s Investor Services business; which includes those services provided to the Fund. The transaction is expected to be completed in the first quarter of 2022, subject to customary closing conditions and regulatory approvals. Investment advisory, portfolio management and administrative services provided to BBH Trust by BBH through its SID are not impacted by the agreement with State Street.
Management has evaluated events and transactions that have occurred since October 31, 2021 through the date the financial statements were issued and determined that there were no other subsequent events that would require recognition or additional disclosure in the financial statements.
42
BBH INTERMEDIATE MUNICIPAL BOND FUND
DISCLOSURE OF FUND EXPENSES
October 31, 2021 (unaudited)
EXAMPLE
As a shareholder of the Fund, you may incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments, reinvested distributions, or other distributions; redemption fees; and exchange fees; and (2) ongoing costs, including management fees; and other Fund expenses. This Example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The Example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period (May 1, 2021 to October 31, 2021).
ACTUAL EXPENSES
The first line of the table provides information about actual account values and actual expenses. You may use information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled “Expenses Paid During the Period” to estimate the expenses you paid on your account during the period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The second line of the table provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid during the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% Hypothetical Example with the 5% hypothetical examples that appear in the shareholder reports of other funds.
financial statements october 31, 2021 | 43 |
BBH INTERMEDIATE MUNICIPAL BOND FUND
DISCLOSURE OF FUND EXPENSES (continued)
October 31, 2021 (unaudited)
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as redemption fees or exchange fees. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
Beginning Account Value May 1, 2021 | Ending Account Value October 31, 2021 | Expenses Paid During Period May 1, 2021 to October 31, 20211 | ||||||||||
Class N | ||||||||||||
Actual | $1,000 | $ 997 | $3.27 | |||||||||
Hypothetical2 | $1,000 | $1,022 | $3.31 |
Beginning Account Value May 1, 2021 | Ending Account Value October 31, 2021 | Expenses Paid During Period May 1, 2021 to October 31, 20211 | ||||||||||
Class I | ||||||||||||
Actual | $1,000 | $ 998 | $2.23 | |||||||||
Hypothetical2 | $1,000 | $1,023 | $2.26 |
________________
1 | Expenses are equal to the Fund’s annualized expense ratio of 0.65% and 0.44% for Class N and I shares, respectively, multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period). |
2 | Assumes a return of 5% before expenses. For the purposes of the calculation, the applicable annualized expenses ratio for each class of shares is subtracted from the assumed return before expenses. |
44
BBH INTERMEDIATE MUNICIPAL BOND FUND
CONFLICTS OF INTEREST
October 31, 2021 (unaudited)
Description of Potential Material Conflicts of Interest - Investment Adviser
BBH, including the Investment Adviser, provides discretionary and non-discretionary investment management services and products to corporations, institutions and individual investors throughout the world. As a result, in the ordinary course of its businesses, BBH, including the Investment Adviser, may engage in activities in which its interests or the interests of its clients may conflict with or be adverse to the interests of the Funds. In addition, certain of such clients (including the Funds) utilize the services of BBH for which they will pay to BBH customary fees and expenses that will not be shared with the Funds.
The Investment Adviser and the Sub-Adviser have adopted and implemented policies and procedures that seek to manage conflicts of interest. Pursuant to such policies and procedures, the Investment Adviser and the Sub-Adviser monitor a variety of areas, including compliance with fund investment guidelines, the investment in only those securities that have been approved for purchase, and compliance with their respective Code of Ethics.
The Trust also manages these conflicts of interest. For example, the Trust has designated a chief compliance officer (“CCO”) and has adopted and implemented policies and procedures designed to manage the conflicts identified below and other conflicts that may arise in the course of the Funds’ operations in such a way as to safeguard the Funds from being negatively affected as a result of any such potential conflicts. From time to time, the Trustees receive reports from the Investment Adviser, the Sub-Adviser and the Trust’s CCO on areas of potential conflict.
Investors should carefully review the following, which describes potential and actual conflicts of interest that BBH, the Investment Adviser and Sub-Adviser can face in the operation of their respective investment management services. This section is not, and is not intended to be, a complete enumeration or explanation of all of the potential conflicts of interest that may arise. The Investment Adviser, the Sub-Adviser and the Funds have adopted policies and procedures reasonably designed to appropriately prevent, limit or mitigate the conflicts of interest described below. Additional information about potential conflicts of interest regarding the Investment Adviser is set forth in the Investment Adviser’s Form ADV. A copy of Part 1 and Part 2A of the Investment Adviser’s Form ADV is available on the SEC’s website (www.adviserinfo.sec.gov). In addition, many of the activities that create these conflicts of interest are limited and/or prohibited by law, unless an exception is available.
Other Clients and Allocation of Investment Opportunities. BBH, the Investment Adviser, and the Sub-Adviser manage funds and accounts of clients other than the Funds (“Other Clients”). In general, BBH, the Investment Adviser, and the Sub-Adviser face conflicts of interest when they render investment advisory services to different clients and, from time to time, provide dissimilar investment advice to different clients. Investment decisions will not necessarily be made in parallel among the Funds and Other Clients. Investments made by the Funds do not, and are not intended to, replicate the investments, or the investment methods and strategies, of Other Clients. Accordingly, such Other Clients’ accounts may produce results that are materially different from those experienced by the Funds. Certain other conflicts of interest may arise in connection with a portfolio manager’s management of the Funds’ investments, on the one hand, and the investments of other funds or accounts for which the portfolio manager is responsible, on the other. For example, it is possible that the various funds or accounts managed by the Investment Adviser or Sub-Adviser
financial statements october 31, 2021 | 45 |
BBH INTERMEDIATE MUNICIPAL BOND FUND
CONFLICTS OF INTEREST (continued)
October 31, 2021 (unaudited)
could have different investment strategies that, at times, might conflict with one another to the possible detriment of the Funds. From time to time, the Investment Adviser and Sub-Adviser, sponsor and with other investment pools and accounts which engage in the same or similar businesses as the Funds using the same or similar investment strategies. To the extent that the same investment opportunities might be desirable for more than one account or fund, possible conflicts could arise in determining how to allocate them because the Investment Adviser or Sub-Adviser may have an incentive to allocate investment opportunities to certain accounts or funds. However, BBH and the Investment Adviser have implemented policies and procedures designed to ensure that information relevant to investment decisions is disseminated promptly within its portfolio management teams and investment opportunities are allocated equitably among different clients. The policies and procedures require, among other things, objective allocation for limited investment opportunities, and documentation and review of justifications for any decisions to make investments only for select accounts or in a manner disproportionate to the size of the account. Nevertheless, access to investment opportunities may be allocated differently among accounts due to the particular characteristics of an account, such as size of the account, cash position, tax status, risk tolerance and investment restrictions or for other reasons.
Actual or potential conflicts of interest may also arise when a portfolio manager has management responsibilities to multiple accounts or funds, resulting in unequal commitment of time and attention to the portfolio management of the funds or accounts.
Affiliated Service Providers. Other potential conflicts might include conflicts between the Funds and its affiliated and unaffiliated service providers (e.g. conflicting duties of loyalty). In addition to providing investment management services through the SID, BBH provides administrative, custody, shareholder servicing and fund accounting services to the Funds. BBH may have conflicting duties of loyalty while servicing the Funds and/or opportunities to further its own interest to the detriment of the Funds. For example, in negotiating fee arrangements with affiliated service providers, BBH may have an incentive to agree to higher fees than it would in the case of unaffiliated providers. BBH acting in its capacity as the Funds’ administrator is the primary valuation agent of the Funds. BBH values securities and assets in the Funds according to the Funds’ valuation policies. Because the Investment Adviser’s advisory and administrative fees are calculated by reference to the Funds’ net assets, BBH and its affiliates may have an incentive to seek to overvalue certain assets.
Aggregation. Potential conflicts of interest also arise with the aggregation of trade orders. Purchases and sales of securities for the Funds may be aggregated with orders for other client accounts managed by the Sub-Adviser. The Sub-Adviser, however, is not required to aggregate orders if portfolio management decisions for different accounts are made separately, or if it is determined that aggregating is not practicable, or in cases involving client direction. Prevailing trading activity frequently may make impossible the receipt of the same price or execution on the entire volume of securities purchased or sold. When this occurs, the various prices may be averaged, and the Funds will be charged or credited with the average price. Thus, the effect of the aggregation may operate on some occasions to the disadvantage of the Funds. In addition, under certain circumstances, the Funds will not be charged the same commission or commission equivalent rates in connection with an aggregated order.
46
BBH INTERMEDIATE MUNICIPAL BOND FUND
CONFLICTS OF INTEREST (continued)
October 31, 2021 (unaudited)
Cross Trades. Under certain circumstances, the Investment Adviser, on behalf of the Funds, may seek to buy from or sell securities to another fund or account advised by BBH, the Investment Adviser or the Sub-Adviser. Subject to applicable law and regulation, BBH, the Investment Adviser may (but is not required to) effect purchases and sales between BBH, the Investment Adviser clients (“cross trades”), including the Funds, if BBH, the Investment Adviser or the Sub-Adviser believe such transactions are appropriate based on each party’s investment objectives and guidelines. There may be potential conflicts of interest or regulatory issues relating to these transactions which could limit the Investment Adviser’s decision to engage in these transactions for the Funds. BBH, the Investment Adviser and/or the Sub-Adviser may have a potentially conflicting division of loyalties and responsibilities to the parties in such transactions.
Soft Dollars. The Investment Adviser may direct brokerage transactions and/or payment of a portion of client commissions (“soft dollars”) to specific brokers or dealers or other providers to pay for research or other appropriate services which provide, in the Investment Adviser’s view, appropriate assistance in the investment decision-making process (including with respect to futures, fixed price offerings and over-the-counter transactions). The use of a broker that provides research and securities transaction services may result in a higher commission than that offered by a broker who does not provide such services. The Investment Adviser will determine in good faith whether the amount of commission is reasonable in relation to the value of research and services provided and whether the services provide lawful and appropriate assistance in its investment decision-making responsibilities.
Research or other services obtained in this manner may be used in servicing any or all of the Funds and other accounts managed by the Investment Adviser, including in connection with accounts that do not pay commissions to the broker related to the research or other service arrangements. Such products and services may disproportionately benefit other client accounts relative to the Funds based on the amount of brokerage commissions paid by the Funds and such other accounts. To the extent that the Sub-Adviser uses soft dollars, it will not have to pay for those products and services itself.
BBH may receive research that is bundled with the trade execution, clearing, and/or settlement services provided by a particular broker-dealer. To the extent that the Sub-Adviser receives research on this basis, many of the same conflicts related to traditional soft dollars may exist. For example, the research effectively will be paid by client commissions that also will be used to pay for the execution, clearing, and settlement services provided by the broker-dealer and will not be paid by the Sub-Adviser.
Arrangements regarding compensation and delegation of responsibility may create conflicts relating to selection of brokers or dealers to execute Fund portfolio trades and/or specific uses of commissions from Fund portfolio trades, administration of investment advice and valuation of securities.
Investments in BBH Funds. From time to time BBH may invest a portion of the assets of its discretionary investment advisory clients in the Funds. That investment by BBH on behalf of its discretionary investment advisory clients in the Funds may be significant at times.
Increasing a Fund’s assets may enhance investment flexibility and diversification and may contribute to economies of scale that tend to reduce the Funds’ expense ratio. In selecting the Funds for its discretionary
financial statements october 31, 2021 | 47 |
BBH INTERMEDIATE MUNICIPAL BOND FUND
CONFLICTS OF INTEREST (continued)
October 31, 2021 (unaudited)
investment advisory clients, BBH may limit its selection to funds managed by BBH or the Investment Adviser. BBH may not consider or canvass the universe of unaffiliated investment companies available, even though there may be unaffiliated investment companies that may be more appropriate or that have superior performance. BBH, the Investment Adviser and their affiliates providing services to the Funds benefit from additional fees when the Funds is included as an investment by a discretionary investment advisory client.
BBH reserves the right to redeem at any time some or all of the shares of the Funds acquired for its discretionary investment advisory clients’ accounts. A large redemption of shares of the Funds by BBH on behalf of its discretionary investment advisory clients could significantly reduce the asset size of the Funds, which might have an adverse effect on the Funds’ investment flexibility, portfolio diversification and expense ratio.
Valuation. When market quotations are not readily available, or are believed by BBH to be unreliable, the Funds’ investments will be valued at fair value by BBH pursuant to procedures adopted by the Funds’ Board of Trustees. When determining an asset’s “fair value”, BBH seeks to determine the price that a Fund might reasonably expect to receive from the current sale of that asset in an arm’s-length transaction. The price generally may not be determined based on what the Funds might reasonably expect to receive for selling an asset at a later time or if it holds the asset to maturity. While fair value determinations will be based upon all available factors that BBH deems relevant at the time of the determination and may be based on analytical values determined by BBH using proprietary or third-party valuation models, fair value represents only a good faith approximation of the value of a security. The fair value of one or more securities may not, in retrospect, be the price at which those assets could have been sold during the period in which the particular fair values were used in determining the Funds’ net asset value. As a result, the Funds’ sale or redemption of its shares at net asset value, at a time when a holding or holdings are valued by BBH (pursuant to Board-adopted procedures) at fair value, may have the effect of diluting or increasing the economic interest of existing shareholders.
Referral Arrangements. BBH may enter into advisory and/or referral arrangements with third parties. Such arrangements may include compensation paid by BBH to the third party. BBH may pay a solicitation fee for referrals and/or advisory or incentive fees. BBH may benefit from increased amounts of assets under management.
48
BBH INTERMEDIATE MUNICIPAL BOND FUND
CONFLICTS OF INTEREST (continued)
October 31, 2021 (unaudited)
Personal Trading. BBH, including the Investment Adviser, and any of their respective partners, principals, directors, officers, employees, affiliates or agents, face conflicts of interest when transacting in securities for their own accounts because they could benefit by trading in the same securities as the Funds, which could have an adverse effect on the Funds. However, the Investment Adviser has implemented policies and procedures concerning personal trading by BBH Partners and employees. The policy and procedures are intended to prevent BBH Partners and employees from trading in the same securities as the Funds. However, BBH, including the Investment Adviser, has implemented policies and procedures concerning personal trading by BBH Partners and employees. The policies and procedures are intended to prevent BBH Partners and employees with access to Fund material non-public information from trading in the same securities as the Funds.
Gifts and Entertainment. From time to time, employees of BBH, including the Investment Adviser, and any of their respective partners, principals, directors, officers, employees, affiliates or agents, may receive gifts and/or entertainment from clients, intermediaries, or service providers to the Funds or BBH, including the Investment Adviser, which could have the appearance of affecting or may potentially affect the judgment of the employees, or the manner in which they conduct business. The Investment Adviser has implemented policies and procedures concerning gifts and entertainment to mitigate any impact on the judgment of BBH Partners and employees. BBH, including the Investment Adviser, has implemented policies and procedures concerning gifts and entertainment to mitigate any impact on the judgment of BBH Partners and employees.
financial statements october 31, 2021 | 49 |
BBH INTERMEDIATE MUNICIPAL BOND FUND
ADDITIONAL FEDERAL TAX INFORMATION
October 31, 2021 (unaudited)
The Fund hereby designates $602,567 as an approximate amount of capital gain dividend for the purpose of dividends paid deduction.
The qualified investment income (“QII”) percentage for the year ended October 31, 2021 was 100%. In January 2022, shareholders will receive Form 1099-DIV, which will include their share of qualified dividends distributed during the calendar year 2021. Shareholders are advised to check with their tax advisers for information on the treatment of these amounts on their individual income tax returns.
50
TRUSTEES AND OFFICERS OF BBH INTERMEDIATE MUNICIPAL BOND FUND
(unaudited)
Information pertaining to the Trustees and executive officers of the Trust as of October 31, 2021 is set forth below. The mailing address for each Trustee is c/o BBH Trust, 140 Broadway, New York, NY 10005.
Name and Birth Year | Position(s) Held with the Trust | Term of Office and Length of Time Served# | Principal Occupation(s) During Past 5 Years | Number of Portfolios in Fund Complex Overseen by Trustee^ | Other Public Company or Investment Company Directorships held by Trustee During Past 5 Years | |||||
Independent Trustees | ||||||||||
H. Whitney Wagner Birth Year: 1956 | Chairman of the Board and Trustee | Chairman Since 2014; Trustee Since 2007 and 2006-2007 with the Predecessor Trust | President, Clear Brook Advisors, a registered investment advisor. | 9 | None. | |||||
Andrew S. Frazier Birth Year: 1948 | Trustee | Since 2010 | Retired. | 9 | None. | |||||
Mark M. Collins Birth Year: 1956 | Trustee | Since 2011 | Partner of Brown Investment Advisory Incorporated, a registered investment advisor. | 9 | Chairman of Dillon Trust Company. | |||||
John M. Tesoro Birth Year: 1952 | Trustee | Since 2014 | Retired. | 9 | Trustee, Bridge Builder Trust (8 Funds); Director of Teton Advisors, Inc. (a registered investment adviser). | |||||
Joan A. Binstock Birth Year: 1954 | Trustee | Since 2019 | Partner, Chief Financial and Operations Officer, Lord Abbett & Co. LLC (1999-2018); Lovell Minnick Partners, Advisers Counsel (2018-present). | 9 | Independent Director, Morgan Stanley Direct Lending Fund; KKR Real Estate Interval Fund. |
financial statements october 31, 2021 | 51 |
TRUSTEES AND OFFICERS OF BBH INTERMEDIATE MUNICIPAL BOND FUND
(unaudited)
Name, Address and Birth Year | Position(s) Held with the Trust | Term of Office and Length of Time Served# | Principal Occupation(s) During Past 5 Years | Number of Portfolios in Fund Complex Overseen by Trustee^ | Other Public Company or Investment Company Directorships held by Trustee During Past 5 Years | |||||
Interested Trustees | ||||||||||
Susan C. Livingston+ 50 Post Office Square Boston, MA 02110 Birth Year: 1957 | Trustee | Since 2011 | Partner (since 1998) and Senior Client Advocate (since 2010) for BBH&Co. | 9 | None. | |||||
John A. Gehret+ 140 Broadway New York, NY 10005 Birth Year: 1959 | Trustee | Since 2011 | Limited Partner of BBH&Co. (2012-present). | 9 | None. |
52
TRUSTEES AND OFFICERS OF BBH INTERMEDIATE MUNICIPAL BOND FUND
(unaudited)
Name, Address and Birth Year | Position(s) Held with the Trust | Term of Office and Length of Time Served# | Principal Occupation(s) During Past 5 Years | |||
Officers | ||||||
Jean-Pierre Paquin 140 Broadway New York, NY 10005 Birth Year: 1973 | President and Principal Executive Officer | Since 2016 | Partner of BBH&Co. since 2015; joined BBH&Co. in 1996. | |||
Daniel Greifenkamp 140 Broadway New York, NY 10005 Birth Year: 1969 | Vice President | Since 2016 | Managing Director of BBH&Co. since 2014; joined BBH&Co. in 2011. | |||
Charles H. Schreiber 140 Broadway New York, NY 10005 Birth Year: 1957 | Treasurer and Principal Financial Officer | Since 2007 2006-2007 with the Predecessor Trust | Senior Vice President of BBH&Co. since 2001; joined BBH&Co. in 1999. | |||
Paul F. Gallagher 140 Broadway New York, NY 10005 Birth Year: 1959 | Chief Compliance Officer (“CCO”) | Since 2015 | Senior Vice President of BBH&Co. since 2015. | |||
Kristin Marvin 140 Broadway New York, NY 10005 Birth Year: 1981 | Anti-Money Laundering Officer (“AMLO”) | Since 2021 | Assistant Vice President of BBH&Co. since March 2020; Program Manager, Ares Management Corporation, April 2015 - March 2020. |
financial statements october 31, 2021 | 53 |
TRUSTEES AND OFFICERS OF BBH INTERMEDIATE MUNICIPAL BOND FUND
(unaudited)
Name, Address and Birth Year | Position(s) Held with the Trust | Term of Office and Length of Time Served# | Principal Occupation(s) During Past 5 Years | |||
Suzan M. Barron 50 Post Office Square Boston, MA 02110 Birth Year: 1964 | Secretary | Since 2009 | Senior Vice President and Senior Investor Services Counsel, BBH&Co. since 2005. | |||
Crystal Cheung 140 Broadway New York, NY 10005 Birth Year: 1974 | Assistant Treasurer | Since 2018 | Assistant Vice President of BBH&Co. since 2016; joined BBH&Co. in 2014. | |||
Dania C. Piscetta 50 Post Office Square Boston, MA 02110 Birth Year: 1989 | Assistant Secretary | Since 2021 | Assistant Vice President of BBH&Co. since June 2021; joined BBH&Co. in 2021; Assistant Vice President and Legal Associate of Wellington Management Company LLP, April 2018 - March 2021; Senior Compliance Analyst, Fidelity Investments, May 2016 – April 2018. |
________________
# | All officers of the Trust hold office for one year and until their respective successors are chosen and qualified (subject to the ability of the Trustees to remove any officer in accordance with the Trust’s By-laws). Mr. Wagner previously served on the Board of Trustees of the Predecessor Trust. |
+ | Ms. Livingston and Mr. Gehret are “interested persons” of the Trust as defined in the 1940 Act because of their positions as Partner and Limited Partner of BBH&Co., respectively. |
^ | The Fund Complex consists of the Trust, which has nine series, and each is counted as one “Portfolio” for purposes of this table. |
54
BBH INTERMEDIATE MUNICIPAL BOND FUND
OPERATION AND EFFECTIVENESS OF THE FUND’S LIQUIDITY RISK MANAGEMENT PROGRAM
October 31, 2021 (unaudited)
The Securities and Exchange Commission adopted Rule 22e-4 under the Investment Company Act of 1940, as amended (the “Liquidity Rule”) to promote effective liquidity risk management throughout the open-end investment company industry in order to reduce the risk that funds will be unable to meet their redemption obligations and mitigate dilution of the interests of fund shareholders.
The Board of Trustees (the “Board”) of BBH Trust met on March 9, 2021 to review the liquidity risk management program (the “Program”) for the funds of BBH Trust (the “Funds”) pursuant to the Liquidity Rule. The Board has appointed three members of the Brown Brothers Harriman & Co. Mutual Fund Advisory Department, the Investment Adviser to the Funds, as the Program Administrator for each Fund’s Program. The Program Administrator provided the Board with a report (the “Report”) that addressed the operations of the Program and assessed its adequacy and effectiveness of the Program. The Report covered the period from February 1, 2020 through January 31, 2021 (the “Reporting Period”).
The Report noted that the Program complied with the key factors for consideration under the Liquidity Rule for assessing, managing and periodically reviewing a Fund’s liquidity risk, including the following points.
Liquidity classification. The Report described the Program’s liquidity classification methodology for categorizing the Funds’ investments into one of four liquidity buckets.
Highly Liquid Investment Minimum. The Report noted that one aspect of the Liquidity Rule is a requirement that funds that are expected to have less than 50% of assets classified as other than “highly liquid” should establish a minimum percentage of highly liquid assets that the fund is expected to hold on an on-going basis. The Program Administrator monitors the percentages of assets in each category on an ongoing basis and, given that no Fund has approached the 50% threshold, has made the determination that it is not necessary to assign a Highly Liquid Investment Minimum as provided for in the Liquidity Rule to any of the Funds.
The Fund’s investment strategy and liquidity of portfolio investments during normal and reasonably foreseeable stressed market conditions. During the Reporting Period, the Program Administrator reviewed whether each Fund’s investment strategy is appropriate for an open-end fund structure with a focus on Funds with more significant and consistent holdings of less liquid and illiquid assets and factored a Fund’s concentration in an issuer into the liquidity classification methodology by taking issuer position sizes into account.
Short-term and long-term cash flow projections during normal and reasonably foreseeable stressed market conditions. During the Reporting Period, the Program Administrator reviewed historical redemption activity and used this information as a component to establish each Fund’s reasonably anticipated trading size. The Program Administrator also took into consideration other factors such as shareholder ownership concentration, applicable distribution channels and the degree of certainty associated with a Fund’s short-term and long-term cash flow projections.
Holdings of cash and cash equivalents. The Program Administrator considered the degree to which each Fund held cash and cash equivalents as a component of each Fund’s ability to meet redemption requests.
financial statements october 31, 2021 | 55 |
BBH INTERMEDIATE MUNICIPAL BOND FUND
OPERATION AND EFFECTIVENESS OF THE FUND’S LIQUIDITY RISK MANAGEMENT PROGRAM (continued)
October 31, 2021 (unaudited)
There were no material changes to the Program during the Reporting Period. The Program Administrator has informed the Board that it believes that the Fund’s Program is adequately designed, has been implemented as intended, and has operated effectively since its implementation. No material exceptions have been noted since the implementation of the Program, and there were no liquidity events that impacted the Fund or its ability to meet redemption requests on a timely basis during the Reporting Period.
56
Administrator Brown Brothers Harriman & Co. 140 Broadway New York, NY 10005
Distributor ALPS Distributors, Inc. 1290 Broadway, Suite 1000 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 |
To obtain information or make shareholder inquiries:
By telephone: | Call 1-800-575-1265 |
By E-mail send your request to: | bbhfunds@bbh.com |
On the internet: | www.bbhfunds.com |
This report is submitted for the general information of shareholders and is not authorized for distribution to prospective investors unless preceded or accompanied by an effective prospectus. Nothing herein contained is to be considered an offer of sale or a solicitation of an offer to buy shares of the Fund.
For more complete information, visit www.bbhfunds.com for a prospectus. You should consider the Fund’s investment objectives, risks, charges and expenses carefully before you invest. Information about these and other important subjects is in the Fund’s prospectus, which you should read carefully before investing.
Holdings and allocations are subject to change. Fund holdings should not be relied on in making investment decisions and should not be construed as research or investment advice regarding particular securities. Current and future holdings are subject to risk.
The Fund files a complete schedule of portfolio holdings with the Securities and Exchange Commission (SEC) for the first and third quarters of each fiscal year as an exhibit to its reports on Form N-PORT. The Fund’s Forms N-PORT are available electronically on the SEC’s website (sec.gov). For a complete list of a fund’s portfolio holdings, view the most recent holdings listing, semi-annual report, or annual report on the Fund’s web site at http://www.bbhfunds.com.
A summary of the Fund’s Proxy Voting Policy that the Fund uses to determine how to vote proxies, if any, relating to securities held in the Fund’s portfolio, as well as a record of how the Fund voted any such proxies during the most recent 12-month period ended June 30, is available, without charge, upon request by calling the toll-free number listed above. This information is also available on the SEC’s website at www.sec.gov.
NOT FDIC INSURED NO BANK GUARANTEE MAY LOSE VALUE
Annual Report
OCTOBER 31, 2021
BBH U.S. Government Money Market Fund
BBH U.S. GOVERNMENT MONEY MARKET FUND
MANAGEMENT’S DISCUSSION OF FUND PERFORMANCE
October 31, 2021
For the 12-month period ended October 31, 2021, the BBH U.S. Government Money Market Fund (the “Fund”) returned 0.01%. We believe the performance of the Fund remains competitive with industry peers, while maintaining a high degree of quality and liquidity throughout the period.
The Fund seeks to maximize income while attempting to preserve capital and maintain liquidity by investing in securities issued or guaranteed as to principal and interest by the U.S. Government or its Agencies and repurchase agreements fully backed by such instruments.
The Federal Reserve (“Fed”) maintained an accommodative monetary policy throughout the reporting period leaving the Federal Funds Rate target unchanged at a range of 0% to 0.25%. Throughout the first half of the period the Fed noted that the path of the economy would depend significantly on the course of the virus. And while the economy and labor market improved, they remained far from substantial further progress that would prompt a change in the accommodative stance of policy. In March, the American Rescue Plan Act of 2021 was signed into law by the President addressing the need for more fiscal stimulus. The Fed increased the rate of Interest on Excess Reserves and the Reverse Repo Facility by 5 basis points* to 15 and 5 basis points, respectively, giving a much-needed boost to the money markets.
During the second half of the period, higher inflation readings and uneven labor market gains have challenged the Fed’s stance on accommodative policy as the economy continues to emerge from the depths of the pandemic. The Fed announced its plan to taper the $120 billion monthly pace of its asset purchases beginning in mid-November, stating that the move came “in light of the substantial further progress the economy has made toward the Committee’s goals since last December.” The markets expectations of an increase in the Federal Funds Rate target shifted to mid-2022. However, the outlook for the economy remains uncertain and Fed policy remains supportive to mitigate the downside risks.
The investment team for the BBH Money Market Fund maintained what it believed to be a prudent investment strategy throughout the period, with a weighted average maturity typically between 35 and 45 days.
________________
*One "basis point" or "bp" is 1/100th of a percent (0.01% or 0.0001) |
financial statements october 31, 2021 | 59 |
BBH U.S. GOVERNMENT MONEY MARKET FUND
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Trustees of the BBH Trust and Shareholders of BBH U.S. Government Money Market Fund:
Opinion on the Financial Statements and Financial Highlights
We have audited the accompanying statement of assets and liabilities, including the portfolio of investments, of BBH U.S. Government Money Market Fund (the "Fund"), one of the funds within BBH Trust, as of October 31, 2021, the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, the financial highlights for each of the two years in the period then ended, the period from July 1, 2019 to October 31, 2019 and for each of the three years in the period ended June 30, 2019, and the related notes. In our opinion, the financial statements and financial highlights present fairly, in all material respects, the financial position of the Fund as of October 31, 2021, and the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the two years in the period then ended, the period from July 1, 2019 to October 31, 2019 and for each of the three years in the period ended June 30, 2019, in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements and financial highlights are the responsibility of the BBH Trust's management. Our responsibility is to express an opinion on the Fund's financial statements and financial highlights based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the BBH Trust in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement, whether due to error or fraud. The BBH Trust is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the BBH Trust’s internal control over financial reporting. Accordingly, we express no such opinion.
60
BBH U.S. GOVERNMENT MONEY MARKET FUND
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM (continued)
Our audits included performing procedures to assess the risks of material misstatement of the financial statements and financial highlights, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements and financial highlights. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements and financial highlights. Our procedures included confirmation of securities owned as of October 31, 2021, by correspondence with the custodian and brokers. We believe that our audits provide a reasonable basis for our opinion.
/s/ DELOITTE & TOUCHE LLP
Boston, Massachusetts
December 21, 2021
We have served as the auditor of one or more Brown Brothers Harriman investment companies since 1991.
financial statements october 31, 2021 | 61 |
BBH U.S. GOVERNMENT MONEY MARKET FUND
PORTFOLIO ALLOCATION
October 31, 2021
BREAKDOWN BY SECURITY TYPE
U.S. $ Value | Percent of Net Assets | |||||||
U.S. Government Agency Obligation | $ | 84,999,056 | 2.0 | % | ||||
U.S. Treasury Bills | 3,894,878,765 | 92.2 | ||||||
Repurchase Agreements | 175,000,000 | 4.1 | ||||||
Cash and Other Assets in Excess of Liabilities | 72,538,981 | 1.7 | ||||||
NET ASSETS | $ | 4,227,416,802 | 100.0 | % |
All data as of October 31, 2021. The Fund's breakdown by security type is expressed as a percentage of net assets and may vary over time.
The accompanying notes are an integral part of these financial statements.
62
BBH U.S. GOVERNMENT MONEY MARKET FUND
PORTFOLIO OF INVESTMENTS
October 31, 2021
Principal Amount | Maturity Date | Interest Rate | Value | ||||||||||||
U.S. GOVERNMENT AGENCY OBLIGATION (2.0%) | |||||||||||||||
$ | 85,000,000 | Federal Home Loan Bank Discount Notes1 | 11/17/21 | 0.025 | % | $ | 84,999,056 | ||||||||
Total U.S. Government Agency Obligation (Cost $84,999,056) | 84,999,056 | ||||||||||||||
| U.S. TREASURY BILLS (92.2%) | ||||||||||||||
45,000,000 | U.S. Treasury Bill1 | 11/02/21 | 0.040 | 44,999,950 | |||||||||||
200,000,000 | U.S. Treasury Bill1,2 | 11/04/21 | 0.048 | 199,999,208 | |||||||||||
225,000,000 | U.S. Treasury Bill1,2 | 11/09/21 | 0.045 | 224,997,750 | |||||||||||
290,000,000 | U.S. Treasury Bill1,2 | 11/12/21 | 0.029 | 289,997,418 | |||||||||||
320,000,000 | U.S. Treasury Bill1,2 | 11/16/21 | 0.034 | 319,995,506 | |||||||||||
345,000,000 | U.S. Treasury Bill1,2 | 11/18/21 | 0.039 | 344,993,626 | |||||||||||
425,000,000 | U.S. Treasury Bill1,2 | 11/23/21 | 0.041 | 424,989,330 | |||||||||||
275,000,000 | U.S. Treasury Bill1,2 | 11/26/21 | 0.047 | 274,991,094 | |||||||||||
270,000,000 | U.S. Treasury Bill1,2 | 11/30/21 | 0.048 | 269,989,487 | |||||||||||
280,000,000 | U.S. Treasury Bill1,2 | 12/02/21 | 0.041 | 279,990,132 | |||||||||||
400,000,000 | U.S. Treasury Bill1,2 | 12/07/21 | 0.041 | 399,983,550 | |||||||||||
360,000,000 | U.S. Treasury Bill1,2 | 12/09/21 | 0.041 | 359,984,325 | |||||||||||
100,000,000 | U.S. Treasury Bill1 | 12/14/21 | 0.067 | 99,991,997 | |||||||||||
310,000,000 | U.S. Treasury Bill1,2 | 12/16/21 | 0.056 | 309,978,413 | |||||||||||
50,000,000 | U.S. Treasury Bill1 | 01/27/22 | 0.025 | 49,996,979 | |||||||||||
Total U.S. Treasury Bills (Cost $3,894,878,765) | 3,894,878,765 | ||||||||||||||
| REPURCHASE AGREEMENTS (4.1%) | ||||||||||||||
55,000,000 | BNP Paribas (Agreement dated 10/29/21 collateralized by FHLMC 3.000%-8.000%, due 01/01/27-09/01/51, original par $19,987,036, value $4,803,805, FNMA 1.807%-6.000%, due 01/01/27-07/01/51, original par $25,429,488, value $9,034,788, GNMA 2.126%-4.500%, due 11/20/34- 01/20/69, original par $30,537,941, value $11,775,613, U.S. Treasury Securities 0.000%-6.875%, due 12/07/21-08/31/26, original par $28,020,000, value $30,485,798) | 11/01/21 | 0.050 | 55,000,000 | |||||||||||
65,000,000 | National Australia Bank Ltd. (Agreement dated 10/29/21 collateralized by U.S. Treasury Notes 1.250%, due 05/31/28, original par $66,980,000, value $66,300,000) | 11/01/21 | 0.020 | 65,000,000 |
The accompanying notes are an integral part of these financial statements.
financial statements october 31, 2021 | 63 |
BBH U.S. GOVERNMENT MONEY MARKET FUND
PORTFOLIO OF INVESTMENTS (continued)
October 31, 2021
Principal Amount | Maturity Date | Interest Rate | Value | ||||||||||||
REPURCHASE AGREEMENTS (continued) | |||||||||||||||
$ | 55,000,000 | Societe Generale (Agreement dated 10/29/21 collateralized by FHLMC 4.000%-4.500%, due 11/01/40-09/01/48, original par $4,644, value $1,232, FNMA 1.532%-4.500%, due 11/01/26-02/01/57, original par $16,093,268, value $9,286,326, GNMA 1.875%-3.500%, due 01/20/26-07/20/51, original par $9,706,049, value $5,039,027, REFC 0.000%, due 01/15/30-04/15/30, original par $42,340,000, value $36,487,195, U.S. Treasury Securities 0.000%-7.625%, due 10/31/21-10/31/26, original par $5,159,800, value $5,286,220) | 11/01/21 | 0.040 | % | $ | 55,000,000 | ||||||||
Total Repurchase Agreements (Cost $175,000,000) | 175,000,000 | ||||||||||||||
TOTAL INVESTMENTS (Cost $4,154,877,821)3 | 98.3 | % |
| $ | 4,154,877,821 | ||||||||||
ASSETS IN EXCESS OF OTHER LIABILITIES | 1.7 | % | 72,538,981 | ||||||||||||
NET ASSETS | 100.0 | % | $ | 4,227,416,802 |
_______________________
1 | Coupon represents a yield to maturity. |
2 | Coupon represents a weighted average yield. |
3 | The cost of securities for federal income tax purposes is substantially the same as for financial reporting purposes. |
Abbreviations:
FHLMC – Federal Home Loan Mortgage Corporation.
FNMA – Federal National Mortgage Association.
GNMA – Government National Mortgage Association.
REFC – Resolution Funding Corporation.
The accompanying notes are an integral part of these financial statements.
64
BBH U.S. GOVERNMENT MONEY MARKET FUND
PORTFOLIO OF INVESTMENTS (continued)
October 31, 2021
FAIR VALUE MEASUREMENTS
The Fund is required to disclose information regarding the fair value measurements of the Fund’s assets and liabilities. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The disclosure requirement established a three-tier hierarchy to maximize the use of observable market data and minimize the use of unobservable inputs and to establish classification of fair value measurements for disclosure purposes. Inputs refer broadly to the assumptions that market participants would use in pricing the asset or liability, including, for example, the risk inherent in a particular valuation technique used to measure fair value, including the model and/or the risk inherent in the inputs to the valuation technique. Inputs may be observable or unobservable. Observable inputs are inputs that reflect the assumptions market participants would use in pricing the asset or liability developed based on market data obtained from sources independent of the reporting entity. Unobservable inputs are inputs that reflect the Fund’s own considerations about the assumptions market participants would use in pricing the asset or liability developed based on the best information available in the circumstances.
Authoritative guidance establishes three levels of the fair value hierarchy as follows:
— | Level 1 – unadjusted quoted prices in active markets for identical assets and liabilities. |
— | Level 2 – significant other observable inputs (including quoted prices for similar assets and liabilities, interest rates, prepayment speeds, credit risk, etc.). |
— | Level 3 – significant unobservable inputs (including the Fund’s own assumptions in determining the fair value of assets and liabilities). |
Inputs are used in applying the various valuation techniques and broadly refer to the assumptions that market participants use to make valuation decisions, including assumptions about risk. Inputs may include price information, specific and broad credit data, liquidity statistics, and other factors. A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. However, the determination of what constitutes “observable” requires judgment by the investment adviser. The investment adviser considers observable data to be that market data which is readily available, regularly distributed or updated, reliable and verifiable, not proprietary, and provided by independent sources that are actively involved in the relevant market. The categorization of a financial instrument within the hierarchy is based upon the pricing transparency of the instrument and does not necessarily correspond to the investment adviser’s perceived risk of that instrument.
The accompanying notes are an integral part of these financial statements.
financial statements october 31, 2021 | 65 |
BBH U.S. GOVERNMENT MONEY MARKET FUND
PORTFOLIO OF INVESTMENTS (continued)
October 31, 2021
Financial assets within Level 1 are based on quoted market prices in active markets. The Fund does not adjust the quoted price for these instruments.
Financial instruments that trade in markets that are not considered to be active but are valued based on quoted market prices, dealer quotations or alternative pricing sources supported by observable inputs are classified within Level 2. These include investment-grade corporate bonds, U.S. Treasury notes and bonds, and certain non-U.S. sovereign obligations and over-the-counter derivatives. As Level 2 financial assets include positions that are not traded in active markets and/or are subject to transfer restrictions, valuations may be adjusted to reflect illiquidity and/or non-transferability, which are generally based on available market information.
Financial assets classified within Level 3 have significant unobservable inputs, as they trade infrequently. Level 3 financial assets include private equity and certain corporate debt securities. As observable prices are not available for these securities, valuation techniques are used to derive fair value.
At October 31, 2021, 100% of the Fund’s investments were valued using amortized cost, in accordance with rules under the Investment Company Act of 1940, as amended (the “1940 Act”). Amortized cost approximates the fair value of a security, but since the value is not obtained from a quoted price in an active market, securities valued at amortized cost are considered to be valued using Level 2 inputs.
Because of the inherent uncertainties of valuation, the values reflected in the financial statements may materially differ from the value received upon the actual sale of those investments.
The following table summarizes the valuation of the Fund’s investments by the above fair value hierarchy levels as of October 31, 2021.
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 October 31, 2021 | ||||||||||||||||
U.S. Government Agency Obligation | $ | — | $ | 84,999,056 | $ | — | $ | 84,999,056 | ||||||||||||
U.S. Treasury Bills | — | 3,894,878,765 | — | 3,894,878,765 | ||||||||||||||||
Repurchase Agreements | — | 175,000,000 | — | 175,000,000 | ||||||||||||||||
Total Investment, at value | $ | — | $ | 4,154,877,821 | $ | — | $ | 4,154,877,821 |
The accompanying notes are an integral part of these financial statements.
66
BBH U.S. GOVERNMENT MONEY MARKET FUND
STATEMENT OF ASSETS AND LIABILITIES
October 31, 2021
ASSETS: | ||||
Investments, at cost which approximates fair value | $3,979,877,821 | |||
Repurchase agreements (Cost $175,000,000) | 175,000,000 | |||
Cash | 72,741,428 | |||
Receivables for: | ||||
Investment advisory and administrative fees waiver reimbursement | 615,601 | |||
Interest | 1,443 | |||
Shares sold | 359 | |||
Prepaid assets | 19,700 | |||
Total Assets | 4,228,256,352 | |||
LIABILITIES: | ||||
Payables for: | ||||
Investment advisory and administrative fees | 703,493 | |||
Custody and fund accounting fees | 63,637 | |||
Professional fees | 47,083 | |||
Transfer agent fees | 4,407 | |||
Dividends declared | 3,474 | |||
Board of Trustees' fees | 1,111 | |||
Accrued expenses and other liabilities | 16,345 | |||
Total Liabilities | 839,550 | |||
NET ASSETS | $4,227,416,802 | |||
Net Assets Consist of: | ||||
Paid-in capital | $4,227,416,203 | |||
Undistributed net investment income | 599 | |||
Net Assets | $4,227,416,802 |
NET ASSET VALUE AND OFFERING PRICE PER SHARE INSTITUTIONAL SHARES | ||||
($4,227,416,802 ÷ 4,227,422,221 shares outstanding) | $1.00 |
The accompanying notes are an integral part of these financial statements.
financial statements october 31, 2021 | 67 |
BBH U.S. GOVERNMENT MONEY MARKET FUND
STATEMENT OF OPERATIONS
For the year ended October 31, 2021
NET INVESTMENT INCOME: | ||||
Income: | ||||
Interest income | $ | 1,853,388 | ||
Other income | 35,788 | |||
Total Income | 1,889,176 | |||
Expenses: | ||||
Investment advisory and administrative fees | 7,972,965 | |||
Custody and fund accounting fees | 285,999 | |||
Board of Trustees' fees | 81,638 | |||
Professional fees | 56,457 | |||
Shareholder servicing fees | 51,544 | |||
Transfer agent fees | 29,091 | |||
Miscellaneous expenses | 177,375 | |||
Total Expenses | 8,655,069 | |||
Investment advisory, administrative and shareholder service fee waiver | (7,158,565 | ) | ||
Net Expenses | 1,496,504 | |||
Net Investment Income | 392,672 | |||
NET REALIZED GAIN: | ||||
Net realized gain on investments | 16,860 | |||
Net Increase in Net Assets Resulting from Operations | $ | 409,532 |
The accompanying notes are an integral part of these financial statements.
68
BBH U.S. GOVERNMENT MONEY MARKET FUND
STATEMENTS OF CHANGES IN NET ASSETS
For the years ended October 31, | ||||||||
2021 | 2020 | |||||||
INCREASE IN NET ASSETS: | ||||||||
Operations: | ||||||||
Net investment income | $ | 392,672 | $ | 13,697,472 | ||||
Net realized gain on investments | 16,860 | 40,269 | ||||||
Net increase in net assets resulting from operations | 409,532 | 13,737,741 | ||||||
Distributions declared: | ||||||||
Regular Shares* | (2,579 | ) | (345,171 | ) | ||||
Institutional Shares | (371,165 | ) | (13,392,570 | ) | ||||
Total distributions declared | (373,744 | ) | (13,737,741 | ) | ||||
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 | 8,901,851,221 | 8,663,555,206 | ||||||
Fund shares repurchased | (8,210,017,012 | ) | (7,238,357,034 | ) | ||||
Net increase in net assets resulting from fund share transactions | 691,834,209 | 1,425,198,172 | ||||||
Total increase in net assets | 691,869,997 | 1,425,198,172 | ||||||
NET ASSETS: | ||||||||
Beginning of year | 3,535,546,805 | 2,110,348,633 | ||||||
End of year | $ | 4,227,416,802 | $ | 3,535,546,805 |
_______________________________
* | Effective February 26, 2021, the Fund’s Regular Share Class was converted to the Fund’s Institutional Share Class. |
The accompanying notes are an integral part of these financial statements.
financial statements october 31, 2021 | 69 |
BBH U.S. GOVERNMENT MONEY MARKET FUND
FINANCIAL HIGHLIGHTS
Selected per share data and ratios for an Institutional Share outstanding throughout each period.
For the years ended October 31, | For the period from July 1, 2019 to October 31, | For the years ended June 30, | ||||||||||||||||||||||
2021 | 2020 | 2019 | 2019 | 2018 | 2017 | |||||||||||||||||||
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 | 0.00 | 2 | 0.01 | 0.01 | 0.02 | 0.01 | 0.00 | 2 | ||||||||||||||||
Distributions to shareholders: | ||||||||||||||||||||||||
From net investment income | 0.00 | 2 | (0.01 | ) | (0.01 | ) | (0.02 | ) | (0.01 | ) | 0.00 | 2 | ||||||||||||
Total distributions | 0.00 | 2 | (0.01 | ) | (0.01 | ) | (0.02 | ) | (0.01 | ) | 0.00 | 2 | ||||||||||||
Net asset value, end of period | $ | 1.00 | $ | 1.00 | $ | 1.00 | $ | 1.00 | $ | 1.00 | $ | 1.00 | ||||||||||||
Total return3 | 0.01 | % | 0.59 | % | 0.63 | %4 | 2.02 | % | 1.06 | % | 0.22 | % | ||||||||||||
Ratios/Supplemental data: | ||||||||||||||||||||||||
Net assets, end of period (in millions) | $ | 4,227 | $ | 3,475 | $ | 2,040 | $ | 2,126 | $ | 1,710 | $ | 1,455 | ||||||||||||
Ratio of expenses to average net assets before reductions | 0.23 | % | 0.24 | % | 0.24 | %5 | 0.24 | % | 0.26 | % | 0.24 | % | ||||||||||||
Expense reimbursement6 | (0.19 | )% | (0.05 | )% | – | % | – | % | – | % | – | % | ||||||||||||
Expense offset arrangement | – | % | – | % | – | % | (0.01 | )% | (0.02 | )% | (0.00 | )%7 | ||||||||||||
Ratio of expenses to average net assets after reductions | 0.04 | % | 0.19 | % | 0.24 | %5 | 0.23 | % | 0.24 | % | 0.24 | % | ||||||||||||
Ratio of net investment income to average net assets | 0.01 | % | 0.48 | % | 1.86 | % | 2.02 | % | 1.07 | % | 0.21 | % |
____________ | |
1 | Calculated using average shares outstanding for the period. |
2 | Less than $0.01 per share. |
3 | Assumes the reinvestment of distributions. |
4 | Not Annualized. |
5 | Annualized with the exception of audit fees. |
6 | During the years ended October 31, 2021, 2020, the period ended October 31, 2019, and the years ended June 30, 2019, 2018 and 2017, the investment advisory and administrative fee/shareholder servicing fee waivers, as a result of a minimum yield agreement, were $7,060,486, $1,299,428, $-, $-, $- and $-, respectively. |
7 | Less than 0.01%. |
The accompanying notes are an integral part of these financial statements.
70
BBH U.S. GOVERNMENT MONEY MARKET FUND
NOTES TO FINANCIAL STATEMENTS
October 31, 2021
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. As of the close of business on February 26, 2021, shares of the Fund’s Regular Shares class were converted to the Fund’s Institutional Shares class. The Regular Shares class ceased operation at this time. The Fund currently offers one class of shares designated as Institutional Shares. The investment objective of the Fund is to provide investors with as high a level of income as is consistent with the preservation of capital and the maintenance of liquidity. At October 31, 2021, there were nine series of the Trust. Effective July 1, 2019, the Fund changed its fiscal year end from June 30, 2019 to October 31, 2019.
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 generally apportioned among each fund in the Trust on a net assets basis or other suitable method. Expense estimates are accrued in the period to which they relate and adjustments are made when actual amounts are known.
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
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BBH U.S. GOVERNMENT MONEY MARKET FUND
NOTES TO FINANCIAL STATEMENTS (continued)
October 31, 2021
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.
Repurchase agreements are entered into by the Fund under Master Repurchase Agreements (MRA) which permit the Fund, under certain circumstances including an event of default (such as bankruptcy or insolvency), to offset payables and/or receivables under the MRA with collateral held and/or posted to the counterparty and create one single net payment due to or from the Fund. However, bankruptcy or insolvency laws of a particular jurisdiction may impose restrictions on or prohibitions against such a right of offset in the event of the MRA counterparty’s bankruptcy or insolvency. Lastly, the MRA does not preclude the Fund from selling, transferring, pledging or hypothecating the underlying collateral but no such transaction shall relieve the Fund of its obligation to transfer the collateral to the counterparty upon the latter’s repurchase of the securities.
The Fund’s repurchase agreements are disclosed on a gross basis and information related to collateral, which could be offset in event of default, are shown in the Portfolio of Investments.
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 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 between paid-in capital and retained earnings/(accumulated deficit) within 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.
The Fund is subject to the provisions of Accounting Standards Codification 740 Income Taxes (“ASC 740”). ASC 740 sets forth a minimum threshold for financial statement recognition of the benefit of a tax position taken or expected to be taken in a tax return. The Fund did not have any unrecognized
72
BBH U.S. GOVERNMENT MONEY MARKET FUND
NOTES TO FINANCIAL STATEMENTS (continued)
October 31, 2021
tax benefits as of October 31, 2021, nor were there any increases or decreases in unrecognized tax benefits for the period then ended. The Fund recognizes interest and penalties, if any, related to unrecognized tax benefits as an income tax expense in the Statement of Operations. During the year ended October 31, 2021, the Fund did not incur any such interest or penalties. The Fund is subject to examination by U.S. federal and state tax authorities for returns filed for the prior three years. The Fund is not aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will significantly change in the next twelve months.
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 $2,579 and $371,165 to Regular and Institutional shareholders, respectively, during the year ended October 31, 2021.
The tax character of distributions paid during the years ended October 31, 2021 and 2020, respectively, were as follows:
Distributions paid from: | ||||||||||||||||||||
Ordinary income | Net long-term capital gain | Total taxable distributions | Total Distributions paid | |||||||||||||||||
2021: | $ | 373,744 | $ | — | $ | 373,744 | $ | 373,744 |
| |||||||||||
2020: | 13,737,741 | — | 13,737,741 | 13,737,741 |
|
As of October 31, 2021 and 2020, respectively, the components of retained earnings/(accumulated deficit) were as follows:
Components of retained earnings/(accumulated deficit): | |||||||||||||||||||||||||||||
Undistributed ordinary income | Undistributed long-term capital gain | Accumulated capital and other losses | Other book/tax temporary differences | Unrealized appreciation/ (depreciation) | Total retained earnings/ (accumulated deficit) | ||||||||||||||||||||||||
2021: | $ | 4,073 | $ | — | $ | — | $ | (3,474 | ) | $ | — | $ | 599 | ||||||||||||||||
2020: | 24,690 | — | — | (59,879 | ) | — | (35,189 | ) |
The Fund did not have a net capital loss carryforward at October 31, 2021.
The Fund is permitted to carryforward capital losses incurred in taxable years beginning after December 22, 2010, for an unlimited period and they will retain their character as either short-term or long-term capital losses rather than being considered all short-term capital losses.
financial statements october 31, 2021 | 73 |
BBH U.S. GOVERNMENT MONEY MARKET FUND
NOTES TO FINANCIAL STATEMENTS (continued)
October 31, 2021
Total distributions paid may differ from the amounts shown in the Statements of Changes in Net Assets because, for tax purposes, dividends are recognized when actually paid.
There are no significant differences between book-basis and tax-basis unrealized appreciation/(depreciation) for investments for the current period.
To the extent future capital gains are offset by future capital loss carryforwards, if any, such gains will not be distributed.
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 in the financial statements, disclosure of contingent 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 paid 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 year ended October 31, 2021, the Fund incurred $7,972,965 for services under the Agreement.
B.Investment Advisory and Administrative Fee Waiver. BBH has voluntarily agreed to waive its Investment Advisory and Administrative Fee and credit daily to the Fund an amount necessary to maintain the minimum annualized yield of the Fund at 0.01%. The amount credited each day will offset 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 year ended October 31, 2021, BBH waived fees in the amount of $54,794 and $7,060,486 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 paid monthly at an annual rate of 0.20% of the Regular Shares’ average daily net assets. For the year ended October 31, 2021, the Regular Shares of the Fund incurred $51,544 in shareholder servicing fees.
D.Shareholder Servicing Fee Waiver. BBH has voluntarily agreed to waive its Shareholder Servicing Fee for the Regular Shares only when the Investment Advisory and Administrative Fee waiver
74
BBH U.S. GOVERNMENT MONEY MARKET FUND
NOTES TO FINANCIAL STATEMENTS (continued)
October 31, 2021
described above is not enough to maintain the minimum daily yield of the Fund at 1 basis point (0.01%). The amount credited each day will 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 year ended October 31, 2021, the Regular Shares of the Fund incurred $43,285 in shareholder servicing fees.
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 paid 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 October 31, 2021, the Fund incurred $285,999 in custody and fund accounting fees. As per agreement with the Fund’s custodian, the Fund receives interest income on cash balances held by the custodian at the BBH Base Rate. The BBH Base Rate is defined as BBH’s effective trading rate in local money markets on each day. The total interest earned by the Fund under the agreement for the year ended October 31, 2021 was $19,606. This amount is included in “Interest income” in the Statement of Operations. 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 year ended October 31, 2021 was $22,874. This amount is included in the “Custody and fund accounting fees” in the Statement of Operations.
F.Board of Trustees’ Fees. Each Trustee who is not an “interested person” as defined under the 1940 Act (referred to here as an “Independent Trustee”) receives an annual fee as well as reimbursement for reasonable out-of-pocket expenses from the Fund. For the year ended October 31, 2021, the Fund incurred $81,638 in Independent Trustee compensation and expense reimbursements.
G.Officers of the Trust. Officers of the Trust are also employees of BBH. Officers are paid no fees by the Trust for their services to the Trust.
financial statements october 31, 2021 | 75 |
BBH U.S. GOVERNMENT MONEY MARKET FUND
NOTES TO FINANCIAL STATEMENTS (continued)
October 31, 2021
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. Effective February 26, 2021, the Fund’s Regular Share Class was converted to the Fund’s Institutional Share Class. Transactions in Regular Shares and Institutional Shares were as follows:
| For the year ended October 31, 2021 | For the year ended October 31, 2020 | ||||||||||||||
Shares | Dollars | Shares | Dollars | |||||||||||||
Regular Shares | ||||||||||||||||
Shares sold | 107,428,914 | $ | 107,428,914 | 315,424,689 | $ | 315,424,689 | ||||||||||
Shares issued in connection with reinvestments of dividends | 7 | 7 | 126,888 | 126,888 | ||||||||||||
Shares redeemed | (168,383,442 | ) | (168,383,442 | ) | (325,258,417 | ) | (325,258,417 | ) | ||||||||
Net decrease | (60,954,521 | ) | $ | (60,954,521 | ) | (9,706,840 | ) | $ | (9,706,840 | ) | ||||||
Institutional Shares | ||||||||||||||||
Shares sold | 8,794,422,278 | $ | 8,794,422,278 | 8,347,970,492 | $ | 8,347,970,492 | ||||||||||
Shares issued in connection with reinvestments of dividends | 22 | 22 | 33,137 | 33,137 | ||||||||||||
Shares redeemed | (8,041,633,570 | ) | (8,041,633,570 | ) | (6,913,098,617 | ) | (6,913,098,617 | ) | ||||||||
Net increase | 752,788,730 | $ | 752,788,730 | 1,434,905,012 | $ | 1,434,905,012 |
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:
Investments in the Fund are neither insured nor guaranteed by the U.S. Government. Shares of the Fund are not deposits or obligations of, or guaranteed by, BBH or any other bank, and the shares are neither insured nor guaranteed by the Federal Deposit Insurance Corporation, the Federal Reserve Board or any other federal, state or other governmental agency. BBH has no legal obligation to provide financial support to the Fund and you should not expect that BBH as the Fund’s sponsor will provide financial support to the Fund at any time. Although the Fund seeks to preserve the value of your investment at $1.00 per share, it is possible to lose money by investing in the Fund. Please refer to the Fund’s prospectus for a complete description of the principal risks of investing in the Fund.
The divergence of the Fund’s amortized cost price per share from its market based net asset value per share may result in the Fund’s inability to maintain a stable $1.00 NAV, resulting in material dilution or other unfair results to shareholders (stable NAV risk). In the normal course of business the Fund invests in securities and enters into transactions where risks exist due to fluctuations in the market (market risk), failure of an issuer, guarantor or counterparty to a transaction to perform (credit risk) or
76
BBH U.S. GOVERNMENT MONEY MARKET FUND
NOTES TO FINANCIAL STATEMENTS (continued)
October 31, 2021
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 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 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. The U.S. Securities and Exchange Commission (“SEC”) and other regulators may adopt additional money market fund regulations in the future, which may impact the operation and performance of the Fund (Regulatory Risk). The absence of an active market for the Fund’s variable and floating rate securities could make it difficult for the Fund to dispose of them if the issuer defaults (variable and floating rate instrument risk).
In 2020, the COVID-19 outbreak was declared a pandemic by the World Health Organization. The situation is dynamic with various cities and countries around the world responding in different ways to address the outbreak. The rapid development and fluidity of this situation precludes any prediction as its ultimate impact, which may have a continued adverse impact on economic and market conditions and trigger a period of global economic slowdown. Management is monitoring developments relating to COVID-19 and is coordinating its operational response based on existing business continuity plans and on guidance from global health organizations, relevant governments, and general pandemic response best practices.
Please refer to the Fund’s prospectus for a complete description of the principal risks of investing in the Fund.
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 Regulation. Money market funds are required to comply with SEC regulations and governing rules for money market funds. Government money market funds, such as BBH U.S. Government Money Market Fund, are permitted to continue to transact fund shares at a NAV calculated using the amortized cost valuation method. The Fund’s Board of Trustees has determined not to impose any liquidity-based redemption fees or redemption gates on the Fund as permitted by the SEC amendments. As a government
financial statements october 31, 2021 | 77 |
BBH U.S. GOVERNMENT MONEY MARKET FUND
NOTES TO FINANCIAL STATEMENTS (continued)
October 31, 2021
money market fund, the Fund must invest 99.5% or more of its total assets in cash, government securities, and/or repurchase agreements that are collateralized fully by cash or government securities.
7. Significant Events. Effective February 26, 2021, the Fund’s Regular Share Class was converted to the Fund’s Institutional Share Class.
There are no other significant events to report as they relate to the Fund.
8.Subsequent Events. BBH, the custodian and fund accountant for the Fund, has entered into an agreement with State Street Corporation (“State Street”) under which State Street will acquire BBH’s Investor Services business; which includes those services provided to the Fund. The transaction is expected to be completed in the first quarter of 2022, subject to customary closing conditions and regulatory approvals. Investment advisory, portfolio management and administrative services provided to BBH Trust by BBH through its SID are not impacted by the agreement with State Street.
Management has evaluated events and transactions that have occurred since October 31, 2021 through the date the financial statements were issued and determined that there were no other subsequent events that would require recognition or additional disclosure in the financial statements.
78
BBH U.S. GOVERNMENT MONEY MARKET FUND
DISCLOSURE OF FUND EXPENSES
October 31, 2021 (unaudited)
EXAMPLE
As a shareholder of the Fund, you may incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments, reinvested distributions, or other distributions; redemption fees; and exchange fees; and (2) ongoing costs, including management fees, and other Fund expenses. This Example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The Example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period (May 1, 2021 to October 31, 2021).
ACTUAL EXPENSES
The first line of the table below provides information about actual account values and actual expenses. You may use information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled “Expenses Paid During the Period” to estimate the expenses you paid on your account during the period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The second line of the table below provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid during the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% Hypothetical Example with the 5% hypothetical examples that appear in the shareholder reports of other funds.
financial statements october 31, 2021 | 79 |
BBH U.S. GOVERNMENT MONEY MARKET FUND
DISCLOSURE OF FUND EXPENSES (continued)
October 31, 2021 (unaudited)
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as redemption fees or exchange fees. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
Beginning Account Value May 1, 2021 | Ending Account Value October 31, 2021 | Expenses Paid During Period May 1, 2021 to October 31, 20211 | ||||||||||
Institutional Shares | ||||||||||||
Actual | $1,000 | $1,000 | $0.10 | |||||||||
Hypothetical2 | $1,000 | $1,025 | $0.10 |
________________
1 | Expenses are equal to the Fund’s annualized net expense ratio of 0.02% for Institutional Shares, 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. |
80
BBH U.S. GOVERNMENT MONEY MARKET FUND
CONFLICTS OF INTEREST
October 31, 2021 (unaudited)
Conflict of Interest
BBH, including the Investment Adviser, provides discretionary and non-discretionary investment management services and products to corporations, institutions and individual investors throughout the world. As a result, in the ordinary course of its businesses, BBH, including the Investment Adviser, may engage in activities in which its interests or the interests of its clients may conflict with or be adverse to the interests of the Funds. In addition, certain of such clients (including the Funds) utilize the services of BBH for which they will pay to BBH customary fees and expenses that will not be shared with the Funds.
The Investment Adviser and the Sub-Adviser have adopted and implemented policies and procedures that seek to manage conflicts of interest. Pursuant to such policies and procedures, the Investment Adviser and the Sub-Adviser monitor a variety of areas, including compliance with fund investment guidelines, the investment in only those securities that have been approved for purchase, and compliance with their respective Code of Ethics.
The Trust also manages these conflicts of interest. For example, the Trust has designated a Chief Compliance Officer (“CCO”) and has adopted and implemented policies and procedures designed to manage the conflicts identified below and other conflicts that may arise in the course of the Funds’ operations in such a way as to safeguard the Funds from being negatively affected as a result of any such potential conflicts. From time to time, the Trustees receive reports from the Investment Adviser, the Sub-Adviser and the Trust’s CCO on areas of potential conflict.
Investors should carefully review the following, which describes potential and actual conflicts of interest that BBH, the Investment Adviser and Sub-Adviser can face in the operation of their respective investment management services. This section is not, and is not intended to be, a complete enumeration or explanation of all of the potential conflicts of interest that may arise. The Investment Adviser, the Sub-Adviser and the Funds have adopted policies and procedures reasonably designed to appropriately prevent, limit or mitigate the conflicts of interest described below. Additional information about potential conflicts of interest regarding the Investment Adviser is set forth in the Investment Adviser’s Form ADV. A copy of Part 1 and Part 2A of the Investment Adviser’s Form ADV is available on the SEC’s website (www.adviserinfo.sec.gov). In addition, many of the activities that create these conflicts of interest are limited and/or prohibited by law, unless an exception is available.
Other Clients and Allocation of Investment Opportunities. BBH, the Investment Adviser, and the Sub-Adviser manage funds and accounts of clients other than the Funds (“Other Clients”). In general, BBH, the Investment Adviser, and the Sub-Adviser face conflicts of interest when they render investment advisory services to different clients and, from time to time, provide dissimilar investment advice to different clients. Investment decisions will not necessarily be made in parallel among the Funds and Other Clients. Investments made by the Funds do not, and are not intended to, replicate the investments, or the investment methods and strategies, of Other Clients. Accordingly, such Other Clients’ accounts may produce results that are materially different from those experienced by the Funds. Certain other conflicts of interest may arise in connection with a portfolio manager’s management of the Funds’ investments, on the one hand, and the investments of other funds or accounts for which the portfolio manager is responsible, on the other. For example, it is possible that the various funds or accounts managed by the Investment Adviser or Sub-Adviser
financial statements october 31, 2021 | 81 |
BBH U.S. GOVERNMENT MONEY MARKET FUND
CONFLICTS OF INTEREST (continued)
October 31, 2021 (unaudited)
could have different investment strategies that, at times, might conflict with one another to the possible detriment of the Funds. From time to time, the Investment Adviser and Sub-Adviser, sponsor and with other investment pools and accounts which engage in the same or similar businesses as the Funds using the same or similar investment strategies. To the extent that the same investment opportunities might be desirable for more than one account or fund, possible conflicts could arise in determining how to allocate them because the Investment Adviser or Sub-Adviser may have an incentive to allocate investment opportunities to certain accounts or funds. However, BBH and the Investment Adviser have implemented policies and procedures designed to ensure that information relevant to investment decisions is disseminated promptly within its portfolio management teams and investment opportunities are allocated equitably among different clients. The policies and procedures require, among other things, objective allocation for limited investment opportunities, and documentation and review of justifications for any decisions to make investments only for select accounts or in a manner disproportionate to the size of the account. Nevertheless, access to investment opportunities may be allocated differently among accounts due to the particular characteristics of an account, such as size of the account, cash position, tax status, risk tolerance and investment restrictions or for other reasons.
Actual or potential conflicts of interest may also arise when a portfolio manager has management responsibilities to multiple accounts or funds, resulting in unequal commitment of time and attention to the portfolio management of the funds or accounts.
Affiliated Service Providers. Other potential conflicts might include conflicts between the Funds and its affiliated and unaffiliated service providers (e.g. conflicting duties of loyalty). In addition to providing investment management services through the SID, BBH provides administrative, custody, shareholder servicing and fund accounting services to the Funds. BBH may have conflicting duties of loyalty while servicing the Funds and/or opportunities to further its own interest to the detriment of the Funds. For example, in negotiating fee arrangements with affiliated service providers, BBH may have an incentive to agree to higher fees than it would in the case of unaffiliated providers. BBH acting in its capacity as the Funds’ administrator is the primary valuation agent of the Funds. BBH values securities and assets in the Funds according to the Funds’ valuation policies. Because the Investment Adviser’s advisory and administrative fees are calculated by reference to the Funds’ net assets, BBH and its affiliates may have an incentive to seek to overvalue certain assets.
Aggregation. Potential conflicts of interest also arise with the aggregation of trade orders. Purchases and sales of securities for the Funds may be aggregated with orders for other client accounts managed by the Sub-Adviser. The Sub-Adviser, however, is not required to aggregate orders if portfolio management decisions for different accounts are made separately, or if it is determined that aggregating is not practicable, or in cases involving client direction. Prevailing trading activity frequently may make impossible the receipt of the same price or execution on the entire volume of securities purchased or sold. When this occurs, the various prices may be averaged, and the Funds will be charged or credited with the average price. Thus, the effect of the aggregation may operate on some occasions to the disadvantage of the Funds. In addition, under certain circumstances, the Funds will not be charged the same commission or commission equivalent rates in connection with an aggregated order.
82
BBH U.S. GOVERNMENT MONEY MARKET FUND
CONFLICTS OF INTEREST (continued)
October 31, 2021 (unaudited)
Cross Trades. Under certain circumstances, the Investment Adviser, on behalf of the Funds, may seek to buy from or sell securities to another fund or account advised by BBH, the Investment Adviser. Subject to applicable law and regulation, BBH, the Investment Adviser may (but is not required to) effect purchases and sales between BBH, the Investment Adviser clients (“cross trades”), including the Funds, if BBH, the Investment Adviser or the Sub-Adviser believe such transactions are appropriate based on each party’s investment objectives and guidelines. There may be potential conflicts of interest or regulatory issues relating to these transactions which could limit the Investment Adviser’s decision to engage in these transactions for the Funds. BBH, the Investment Adviser and/or the Sub-Adviser may have a potentially conflicting division of loyalties and responsibilities to the parties in such transactions.
Soft Dollars. The Investment Adviser may direct brokerage transactions and/or payment of a portion of client commissions (“soft dollars”) to specific brokers or dealers or other providers to pay for research or other appropriate services which provide, in the Investment Adviser’s view, appropriate assistance in the investment decision-making process (including with respect to futures, fixed price offerings and over-the-counter transactions). The use of a broker that provides research and securities transaction services may result in a higher commission than that offered by a broker who does not provide such services. The Investment Adviser will determine in good faith whether the amount of commission is reasonable in relation to the value of research and services provided and whether the services provide lawful and appropriate assistance in its investment decision-making responsibilities.
Research or other services obtained in this manner may be used in servicing any or all of the Funds and other accounts managed by the Investment Adviser, including in connection with accounts that do not pay commissions to the broker related to the research or other service arrangements. Such products and services may disproportionately benefit other client accounts relative to the Funds based on the amount of brokerage commissions paid by the Funds and such other accounts. To the extent that the Sub-Adviser uses soft dollars, it will not have to pay for those products and services itself.
BBH may receive research that is bundled with the trade execution, clearing, and/or settlement services provided by a particular broker-dealer. To the extent that the Sub-Adviser receives research on this basis, many of the same conflicts related to traditional soft dollars may exist. For example, the research effectively will be paid by client commissions that also will be used to pay for the execution, clearing, and settlement services provided by the broker-dealer and will not be paid by the Sub-Adviser.
Arrangements regarding compensation and delegation of responsibility may create conflicts relating to selection of brokers or dealers to execute Fund portfolio trades and/or specific uses of commissions from Fund portfolio trades, administration of investment advice and valuation of securities.
Investments in BBH Funds. From time to time BBH may invest a portion of the assets of its discretionary investment advisory clients in the Funds. That investment by BBH on behalf of its discretionary investment advisory clients in the Funds may be significant at times.
Increasing a Fund’s assets may enhance investment flexibility and diversification and may contribute to economies of scale that tend to reduce the Funds’ expense ratio. In selecting the Funds for its discretionary
financial statements october 31, 2021 | 83 |
BBH U.S. GOVERNMENT MONEY MARKET FUND
CONFLICTS OF INTEREST (continued)
October 31, 2021 (unaudited)
investment advisory clients, BBH may limit its selection to funds managed by BBH or the Investment Adviser. BBH may not consider or canvass the universe of unaffiliated investment companies available, even though there may be unaffiliated investment companies that may be more appropriate or that have superior performance. BBH, the Investment Adviser and their affiliates providing services to the Funds benefit from additional fees when the Funds is included as an investment by a discretionary investment advisory client.
BBH reserves the right to redeem at any time some or all of the shares of the Funds acquired for its discretionary investment advisory clients’ accounts. A large redemption of shares of the Funds by BBH on behalf of its discretionary investment advisory clients could significantly reduce the asset size of the Funds, which might have an adverse effect on the Funds’ investment flexibility, portfolio diversification and expense ratio.
Valuation. When market quotations are not readily available, or are believed by BBH to be unreliable, the Funds’ investments will be valued at fair value by BBH pursuant to procedures adopted by the Funds’ Board of Trustees. When determining an asset’s “fair value”, BBH seeks to determine the price that a Fund might reasonably expect to receive from the current sale of that asset in an arm’s-length transaction. The price generally may not be determined based on what the Funds might reasonably expect to receive for selling an asset at a later time or if it holds the asset to maturity. While fair value determinations will be based upon all available factors that BBH deems relevant at the time of the determination and may be based on analytical values determined by BBH using proprietary or third-party valuation models, fair value represents only a good faith approximation of the value of a security. The fair value of one or more securities may not, in retrospect, be the price at which those assets could have been sold during the period in which the particular fair values were used in determining the Funds’ net asset value. As a result, the Funds’ sale or redemption of its shares at net asset value, at a time when a holding or holdings are valued by BBH (pursuant to Board-adopted procedures) at fair value, may have the effect of diluting or increasing the economic interest of existing shareholders.
Referral Arrangements. BBH may enter into advisory and/or referral arrangements with third parties. Such arrangements may include compensation paid by BBH to the third party. BBH may pay a solicitation fee for referrals and/or advisory or incentive fees. BBH may benefit from increased amounts of assets under management.
Personal Trading. BBH, including the Investment Adviser, and any of their respective partners, principals, directors, officers, employees, affiliates or agents, face conflicts of interest when transacting in securities for their own accounts because they could benefit by trading in the same securities as the Funds, which could have an adverse effect on the Funds. However, the Investment Adviser has implemented policies and procedures concerning personal trading by BBH Partners and employees. The policy and procedures are intended to prevent BBH Partners and employees from trading in the same securities as the Funds. However, BBH, including the Investment Adviser, has implemented policies and procedures concerning personal trading by BBH Partners and employees. The policies and procedures are intended to prevent BBH Partners and employees with access to Fund material non-public information from trading in the same securities as the Funds.
84
BBH U.S. GOVERNMENT MONEY MARKET FUND
CONFLICTS OF INTEREST (continued)
October 31, 2021 (unaudited)
Gifts and Entertainment. From time to time, employees of BBH, including the Investment Adviser, and any of their respective partners, principals, directors, officers, employees, affiliates or agents, may receive gifts and/or entertainment from clients, intermediaries, or service providers to the Funds or BBH, including the Investment Adviser, which could have the appearance of affecting or may potentially affect the judgment of the employees, or the manner in which they conduct business. The Investment Adviser has implemented policies and procedures concerning gifts and entertainment to mitigate any impact on the judgment of BBH Partners and employees. BBH, including the Investment Adviser, has implemented policies and procedures concerning gifts and entertainment to mitigate any impact on the judgment of BBH Partners and employees.
financial statements october 31, 2021 | 85 |
BBH U.S. GOVERNMENT MONEY MARKET FUND
ADDITIONAL FEDERAL TAX INFORMATION
October 31, 2021 (unaudited)
In January 2022, the Fund will report on Form 1099 the tax status of all distributions made during the calendar year 2021. Shareholders should use the information on Form 1099 for their income tax returns.
86
TRUSTEES AND OFFICERS OF BBH U.S. GOVERNMENT MONEY MARKET FUND
(unaudited)
Information pertaining to the Trustees and executive officers of BBH Trust as of October 31, 2021 is set forth below. The mailing address for each Trustee is c/o BBH Trust, 140 Broadway, New York, NY 10005.
Name and Birth Year | Position(s) Held with the Trust | Term of Office and Length of Time Served# | Principal Occupation(s) During Past 5 Years | Number of Portfolios in Fund Complex Overseen by Trustee^ | Other Public Company or Investment Company Directorships held by Trustee During Past 5 Years | |||||
Independent Trustees | ||||||||||
H. Whitney Wagner Birth Year: 1956 | Chairman of the Board and Trustee | Chairman Since 2014; Trustee Since 2007 and 2006-2007 with the Predecessor Trust | President, Clear Brook Advisors, a registered investment adviser. | 9 | None. | |||||
Andrew S. Frazier Birth Year: 1948 | Trustee | Since 2010 | Retired. | 9 | None. | |||||
Mark M. Collins Birth Year: 1956 | Trustee | Since 2011 | Partner of Brown Investment Advisory Incorporated, a registered investment adviser. | 9 | Chairman of Dillon Trust Company. | |||||
John M. Tesoro Birth Year: 1952 | Trustee | Since 2014 | Retired. | 9 | Trustee, Bridge Builder Trust (8 Funds), Director, Teton Advisers, Inc. (a registered investment adviser). | |||||
Joan A. Binstock Birth Year: 1954 | Trustee | Since 2019 | Partner, Chief Financial and Operations Officer, Lord Abbett & Co. LLC (1999-2018); Lovell Minnick Partners, Advisers Counsel (2018- present). | 9 | Independent Director, Morgan Stanley Direct Lending Fund; KKR Real Estate Interval Fund. |
financial statements october 31, 2021 | 87 |
TRUSTEES AND OFFICERS OF BBH U.S. GOVERNMENT MONEY MARKET FUND
(unaudited)
Name, Address and Birth Year | Position(s) Held with the Trust | Term of Office and Length of Time Served# | Principal Occupation(s) During Past 5 Years | Number of Portfolios in Fund Complex Overseen by Trustee^ | Other Public Company or Investment Company Directorships held by Trustee During Past 5 Years | |||||
Interested Trustees | ||||||||||
Susan C. Livingston+ 50 Post Office Square Boston, MA 02110 Birth Year: 1957 | Trustee | Since 2011 | Partner (since 1998) and Senior Client Advocate (since 2010) for BBH&Co. | 9 | None. | |||||
John A. Gehret+ 140 Broadway New York, NY 10005 Birth Year: 1959 | Trustee | Since 2011 | Limited Partner of BBH&Co. (2012-present). | 9 | None. |
88
TRUSTEES AND OFFICERS OF BBH U.S. GOVERNMENT MONEY MARKET FUND
(unaudited)
Name, Address and Birth Year | Position(s) Held with the Trust | Term of Office and Length of Time Served# | Principal Occupation(s) During Past 5 Years | |||
Officers | ||||||
Jean-Pierre Paquin 140 Broadway New York, NY 10005 Birth Year: 1973 | President and Principal Executive Officer | Since 2016 | Partner of BBH&Co. since 2015; joined BBH&Co. in 1996. | |||
Daniel Greifenkamp 140 Broadway New York, NY 10005 Birth Year: 1969 | Vice President | Since 2016 | Managing Director of BBH&Co. since 2014; joined BBH&Co. in 2011. | |||
Charles H. Schreiber 140 Broadway New York, NY 10005 Birth Year: 1957 | Treasurer and Principal Financial Officer | Since 2007 2006-2007 with the Predecessor Trust | Senior Vice President of BBH&Co. since 2001; joined BBH&Co. in 1999. | |||
Paul F. Gallagher 140 Broadway New York, NY 10005 Birth Year: 1959 | Chief Compliance Officer (“CCO”) | Since 2015 | Senior Vice President of BBH&Co. since 2015. | |||
Kristin Marvin 140 Broadway New York, NY 10005 Birth Year: 1981 | Anti-Money Laundering Officer (“AMLO”) | Since 2021 | Assistant Vice President of BBH&Co. since March 2020; Program Manager, Ares Management Corporation, April 2015 - March 2020. |
financial statements october 31, 2021 | 89 |
TRUSTEES AND OFFICERS OF BBH U.S. GOVERNMENT MONEY MARKET FUND
(unaudited)
Name, Address and Birth Year | Position(s) Held with the Trust | Term of Office and Length of Time Served# | Principal Occupation(s) During Past 5 Years | |||
Suzan M. Barron 50 Post Office Square Boston, MA 02110 Birth Year: 1964 | Secretary | Since 2009 | Senior Vice President and Senior Investor Services Counsel, BBH&Co. since 2005. | |||
Crystal Cheung 140 Broadway New York, NY 10005 Birth Year: 1974 | Assistant Treasurer | Since 2018 | Assistant Vice President of BBH&Co. since 2016; joined BBH&Co. 2014. | |||
Dania C. Piscetta 50 Post Office Square Boston, MA 02110 Birth Year: 1989 | Assistant Secretary | Since 2021 | Assistant Vice President of BBH&Co. since 2021; joined BBH&Co. in 2021; Assistant Vice President and Legal Associate of Wellington Management Company LLP, April 2018 - March 2021; Senior Compliance Analyst, Fidelity Investments, May 2016 - April 2018. |
________________
# | All officers of the Trust hold office for one year and until their respective successors are chosen and qualified (subject to the ability of the Trustees to remove any officer in accordance with the Trust’s By-laws). Mr. Wagner previously served on the Board of Trustees of the Predecessor Trust. |
+ | Ms. Livingston and Mr. Gehret are “interested persons” of the Trust as defined in the 1940 Act because of their positions as Partner and Limited Partner of BBH&Co., respectively. |
^ | The Fund Complex consists of the Trust, which has nine series, and each is counted as one “Portfolio” for purposes of this table. |
90
Administrator Brown Brothers Harriman & Co. 140 Broadway New York, NY 10005
Distributor ALPS Distributors, Inc. 1290 Broadway, Suite 1000 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 |
To obtain information or make shareholder inquiries:
By telephone: | Call 1-800-575-1265 |
By E-mail send your request to: | bbhfunds@bbh.com |
On the internet: | www.bbhfunds.com |
This report is submitted for the general information of shareholders and is not authorized for distribution to prospective investors unless preceded or accompanied by an effective prospectus. Nothing herein contained is to be considered an offer of sale or a solicitation of an offer to buy shares of the Fund.
For more complete information, visit www.bbhfunds.com for a prospectus. You should consider the Fund’s investment objectives, risks, charges and expenses carefully before you invest. Information about these and other important subjects is in the Fund’s prospectus, which you should read carefully before investing.
Holdings and allocations are subject to change. Fund holdings should not be relied on in making investment decisions and should not be construed as research or investment advice regarding particular securities. Current and future holdings are subject to risk.
The Fund files a complete schedule of portfolio holdings with the Securities and Exchange Commission (SEC) for the first and third quarters of each fiscal year as an exhibit to its reports on Form N-PORT. The Fund’s Forms N-PORT are available electronically on the SEC’s website (sec.gov). For a complete list of a fund’s portfolio holdings, view the most recent holdings listing, semi-annual report, or annual report on the Fund’s web site at http://www.bbhfunds.com.
A summary of the Fund’s Proxy Voting Policy that the Fund uses to determine how to vote proxies, if any, relating to securities held in the Fund’s portfolio, as well as a record of how the Fund voted any such proxies during the most recent 12-month period ended June 30, is available, without charge, upon request by calling the toll-free number listed above. This information is also available on the SEC’s website at www.sec.gov.
NOT FDIC INSURED NO BANK GUARANTEE MAY LOSE VALUE
Item 2. Code of Ethics. | |
As of the period ended October 31, 2021 (the “Reporting Period”), the Registrant has adopted a code of ethics that applies to the Registrant’s principal executive officer and principal financial officer, principal accounting officer or controller or persons performing similar functions. During the Reporting Period, there have been no changes to, amendments to or waivers from, any provision of the code of ethics. A copy of this code of ethics can be obtained upon request, free of charge, by calling (800) 575 - 1265. |
Item 3. Audit Committee Financial Expert. | |
The Board of Trustees of the Registrant has determined that Andrew S. Frazier, John M. Tesoro Mark M. Collins and Joan A. Binstock possess the attributes identified in Instruction (b) of Item 3 to Form N-CSR to each qualify as an “audit committee financial expert,” and has designated Messrs. Fraizer, Tesoro and Collins and Ms. Binstock as the Registrant’s audit committee financial experts. Messrs. Frazier, Tesoro and Collins and Ms. Binstock are “independent” Trustees pursuant to paragraph (a)(2) of Item 3 to Form N-CSR. |
Item 4. Principal Accountant Fees and Services. | |
(a) | Audit Fees The aggregate fees billed for each of the last two fiscal years for professional services rendered by the principal accountant for the audit of the Registrant’s annual financial statements or services that are normally provided by the accountant in connection with statutory and regulatory filings or engagements for those fiscal years were $416,000 for 2021 and $331,000 for 2020. |
(b) | Audit Related Fees The aggregate fees billed in each of the last two fiscal years for assurance and related services rendered to the Registrant by the principal accountant that are reasonably related to the performance of the audit of the Registrant’s financial statements and are not reported under paragraph (a) of this Item were $0 for 2021 and $0 for 2020. |
(c) | Tax Fees The aggregate fees billed in each of the last two fiscal years for professional services rendered to the Registrant by the principal accountant for tax compliance, tax advice and tax planning were $53,000 for 2021 and $54,442 for 2020. These services consisted of (i) review or preparation of U.S. federal, state, local and excise tax returns; (ii) U.S. federal, state and local entity tax planning, advice and assistance regarding statutory, regulatory or administrative developments, and (iii) tax advice regarding tax qualification. |
(d) | All Other Fees The aggregate fees billed in each of the last two fiscal years for products and services provided by the principal accountant, other than the services reported in paragraphs (a) through (c) of this Item were $93,000 for 2021 and $28,333 for 2020. The other services provided to the Registrant consisted of examinations pursuant to Rule 17f-2 of the Investment Company Act of 1940, as amended and filings of Form N-17f-2 “Certificate of Accounting of Securities and Similar Investments in the Custody of Management Investment Companies” with the U.S. Securities and Exchange Commission (“17f-2 Services”) in addition to audit services, tax services and 17f-2 Services provided to other series of the Registrant. |
(e)(1) | Pursuant to the Registrant’s Audit Committee Charter that has been adopted by the audit committee, the audit committee shall approve all audit and permissible non-audit services to be provided to the Registrant and all permissible non-audit services to be provided to its investment adviser or any entity controlling, controlled by or under common control with the investment adviser that provides ongoing services to the Registrant if the engagement relates directly to the operations and financial reporting of the Registrant. The audit committee has delegated to its Chairman the approval of such services subject to reports to the full audit committee at its next subsequent meeting. |
(e)(2) | The percentage of services described in each of paragraphs (b) through (d) of this Item that were approved by the audit committee pursuant to paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X, with respect to: Audit-Related Fees were 0%; Tax Fees were 0%; and Other Fees were 0%. |
(f) | Not applicable. |
(g) | The aggregate non-audit fees billed by the Registrant’s accountant for services rendered to the Registrant, and rendered to the Registrant’s investment adviser (not including any sub-adviser whose role is primarily portfolio management and is subcontracted with or overseen by another investment adviser), and any entity controlling, controlled by, or under common control with the investment adviser that provides ongoing services to the Registrant for each of the last two fiscal years of the Registrant were $1,549,000 for 2021 and $1,904,181 for 2020. |
(h) | The Registrant’s audit committee has considered whether the provision of non-audit services that were rendered to the Registrant’s investment adviser (not including any subadviser whose role is primarily portfolio management and is subcontracted with or overseen by another investment adviser), and any entity controlling, controlled by, or under common control with the investment adviser that provides ongoing services to the Registrant that were not pre-approved pursuant to paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X is compatible with maintaining the principal accountant’s independence. |
Item 5. Audit Committee of Listed Registrants. | |
Not Applicable |
Item 6. Investments. | |
(a) | A Schedule of Investments in securities of unaffiliated issuers as of the close of the Reporting Period is included as part of the report to shareholders filed under Item 1 of this Form N-CSR. |
(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”). |
(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. Disclosure of Securities Lending Activities for Closed-End Management Investment Companies. | |
Not applicable. |
Item 13. Exhibits. | |
(a)(1) | Not applicable. |
(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 13(a)(2) to this Form N-CSR. |
(a)(3) | Not applicable. |
(a)(4) | 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 13(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: January 10, 2022 |
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: January 10, 2022 |
| |
By: (Signature and Title) | |
| |
/s/ Charles H. Schreiber | |
Charles H. Schreiber | |
Title: Treasurer (Principal Financial Officer) | |
Date: January 10, 2022 |