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
BBH Core Select
BBH International Equity Fund
BBH Real Return Fund
BBH Broad Market Fund
(Exact name of Registrant as specified in charter)
140 Broadway,
New York, NY 10005
(Address of principal executive offices)
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: (212) 593-7237
Date of fiscal year end: OCTOBER 31
Date of reporting period: OCTOBER 31, 2008
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. Section 3507.
ITEM 1. REPORTS TO STOCKHOLDERS.
BROWN [LOGO]
BROTHERS
HARRIMAN
Annual Report
OCTOBER 31, 2008
----------
BBH CORE SELECT
<PAGE>
BBH CORE SELECT
--------------------------------------------------------------------------------
MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE
BBH Core Select (the "Fund" or "Core Select") declined by 21.76%(1) during its
fiscal year ending October 31, 2008. During the same twelve month period, the
S&P 500 Index(2) ("S&P 500") declined by 36.10%.
Fiscal 2008 was a difficult year for equities generally, as deteriorating credit
market conditions, declining housing prices, and rising energy costs created an
increasingly difficult macroeconomic environment both domestically and around
the world. Higher levels of fund redemptions and the unwinding of leveraged
investment strategies placed further structural pressures on the markets. In
light of these challenges, we are pleased that the Fund significantly
outperformed the broader market for the year, but we are disappointed to report
a meaningful absolute decline in portfolio value.
The Fund's stated investment objective is to provide investors with long-term
growth of capital on an after-tax basis. We also place a large emphasis on
capital preservation. The strategy that the Fund employs to achieve these
objectives is to invest in established, cash generative companies that are
leading providers of essential products and services when they are trading in
the public market at a discount to our estimate of intrinsic value. During
fiscal 2008, this strategy worked well to protect the Fund against the worst of
the bear market. Several of the Fund's largest holdings including Wal-Mart,
Western Union, Praxair, Chubb, and W.W. Grainger were positive contributors for
the year. We also avoided any "big mistakes" by having no direct exposure to
industries such as commercial and investment banking, homebuilding and consumer
finance.
The Fund did own, however, a number of businesses whose share prices fell
significantly, including three companies - Liberty Global, Liberty Interactive,
and Dell - - that were down over 50%. Liberty Global and Liberty Interactive were
both hurt by having fairly high debt levels. Fortunately, most of the Core
Select companies have strong balance sheets. In the case of Dell, it has no net
debt, but the company has struggled with a confluence of issues, including a
sharp deceleration in the PC market alongside a weakening economy and a
difficult internal restructuring. For all three companies, we continue to have
confidence in management and have elected so far to retain our shares rather
than exit at depressed price levels.
The Fund maintains a "buy and own" approach. We invest with a multi-year
investment perspective rather than trying to capture small profits through rapid
short-term trading. Turnover for the portfolio in fiscal 2008 was 30.66%, which
is higher than it was in fiscal 2007, but still low compared to most actively
managed equity portfolios. During fiscal 2008, we were pleased to make several
purchases of businesses that we have long admired at attractive valuations. The
nine businesses that the Fund added were: Liberty Media Interactive, W.W.
Grainger, Automatic Data Processing, Progressive, Vulcan Materials, Walgreen,
eBay, Diageo and Dentsply. We also exited three investments that had appreciated
close to our
2
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BBH CORE SELECT
--------------------------------------------------------------------------------
MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE (continued)
intrinsic value estimates (Praxair, Amgen, and Western Union), one investment
that was no longer a good fit with our investment criteria (Time Warner), and
two companies that experienced negative developments or changes in circumstances
(Freddie Mac and Viacom).
Our investment team engages in substantial original research and separately
analyzes each company's business, management and valuation. The qualities we
look for in a business are (i) essential or "have-to-have" products and
services, (ii) loyal customers, (iii) leadership in an attractive market niche
or industry, (iv) sustainable competitive advantages, (v) high returns on
invested capital, and (vi) strong free cash flow. We also explicitly identify
key risks outside of company management's control so that we can properly
consider the range of potential outcomes for each business. With respect to
management, we try to identify managers who exhibit high levels of integrity,
are excellent operators and allocate capital effectively. We seek managers who
think like owners rather than agents and many of our managers hold substantial
ownership interests. Lastly, we calculate an intrinsic value estimate for
companies that meet our business and management criteria and invest when the
public market values such companies at a meaningful discount to our estimate.
Companies are sold when they appreciate above intrinsic value. We believe a
discount to intrinsic value reduces the likelihood of permanent capital loss,
while simultaneously increasing the potential for significant gains. As of
October 31, 2008, the Fund was trading on a weighted average basis at 63% of our
intrinsic value estimate.
We are committed to rigorous fundamental analysis and a disciplined investment
process. We appreciate your continued investment in Core Select.
----------
(1) Performance data quoted represents 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. Mutual Fund performance changes over time and current
performance may be lower or higher than what is stated. For current to the
most recent month end performance and after tax returns, contact the Fund
at 1-800-625-5759.
(2) The S&P 500 Index is an unmanaged capitalization-weighted index of 500
stocks designed to measure performance of the broad domestic economy
through changes in the aggregate market value of 500 stocks representing
all major industries. Investments cannot be made in an index.
FINANCIAL STATEMENT OCTOBER 31, 2008 3
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BBH CORE SELECT
--------------------------------------------------------------------------------
MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE (continued)
Growth of $10,000 Invested in BBH Core Select
The graph below illustrates the hypothetical investment of $10,000(1) in the
Fund from November 2, 1998 to October 31, 2008 as compared to the S&P 500.
--------------------------------------------
Total Return for the Period
Ended October 31, 2008
--------------------------------------------
Since
Five Years Inception
One Year (Annualized) (Annualized)
--------------------------------------------
(21.76)% 4.03% 0.93%
- --------------------------------------------
[The following information was depicted as a line chart in the printed material]
Date Core Select* S&P 500
- ---- ------------ -------
10/31/98 10,000.00 10,000.00
11/30/98 10,420.00 10,605.83
12/31/98 11,390.00 11,216.59
01/31/99 11,650.00 11,685.46
02/28/99 11,540.00 11,322.34
03/31/99 12,120.00 11,775.21
04/30/99 12,490.00 12,231.20
05/31/99 12,240.00 11,942.78
06/30/99 12,650.00 12,605.05
07/31/99 12,300.00 12,211.84
08/31/99 12,430.00 12,151.02
09/30/99 12,070.00 11,817.96
10/31/99 12,800.00 12,565.80
11/30/99 13,200.00 12,821.26
12/31/99 14,250.00 13,576.43
01/31/00 13,690.00 12,894.35
02/29/00 13,480.00 12,650.26
03/31/00 14,640.00 13,887.84
04/30/00 14,120.00 13,469.95
05/31/00 13,670.00 13,193.55
06/30/00 13,970.00 13,518.77
07/31/00 13,780.00 13,307.47
08/31/00 14,480.00 14,134.00
09/30/00 13,630.00 13,387.86
10/31/00 13,520.00 13,331.63
11/30/00 12,350.00 12,280.57
12/31/00 12,396.84 12,340.74
01/31/01 13,130.80 12,778.84
02/28/01 11,693.05 11,613.66
03/31/01 10,828.39 10,877.36
04/30/01 11,833.81 11,722.64
05/31/01 11,763.43 11,801.18
06/30/01 11,321.04 11,513.94
07/31/01 10,959.09 11,400.64
08/31/01 10,144.70 10,686.96
09/30/01 9,199.60 9,823.46
10/31/01 9,511.28 10,010.79
11/30/01 10,225.13 10,778.62
12/31/01 10,194.97 10,873.04
01/31/02 9,893.34 10,714.40
02/28/02 9,611.83 10,507.83
03/31/02 10,003.94 10,903.02
04/30/02 9,280.04 10,241.97
05/31/02 9,179.50 10,166.49
06/30/02 8,596.35 9,442.23
07/31/02 7,862.39 8,705.74
08/31/02 7,922.72 8,762.93
09/30/02 7,007.79 7,810.58
10/31/02 7,872.45 8,497.91
11/30/02 8,355.05 8,998.44
12/31/02 7,762.87 8,469.33
01/31/03 7,460.82 8,247.43
02/28/03 7,329.93 8,123.72
03/31/03 7,470.89 8,202.52
04/30/03 8,165.62 8,878.41
05/31/03 8,558.29 9,346.30
06/30/03 8,628.77 9,465.93
07/31/03 8,689.18 9,632.53
08/31/03 8,769.73 9,820.37
09/30/03 8,679.11 9,716.27
10/31/03 9,001.31 10,266.21
11/30/03 8,940.90 10,356.55
12/31/03 9,341.76 10,882.67
01/31/04 9,452.98 11,082.91
02/29/04 9,645.07 11,236.96
03/31/04 9,412.53 11,067.28
04/30/04 9,301.32 10,893.53
05/31/04 9,180.00 11,042.77
06/30/04 9,321.54 11,257.00
07/31/04 9,129.45 10,884.39
08/31/04 9,230.55 10,927.93
09/30/04 9,331.65 11,045.95
10/31/04 9,402.42 11,214.95
11/30/04 9,725.95 11,647.85
12/31/04 10,015.86 12,043.88
01/31/05 9,700.64 11,750.01
02/28/05 10,015.86 11,996.76
03/31/05 9,792.16 11,784.41
04/30/05 9,558.29 11,560.51
05/31/05 10,026.03 11,928.13
06/30/05 10,158.22 11,944.83
07/31/05 10,585.29 12,389.18
08/31/05 10,575.12 12,276.44
.09/30/05 10,758.16 12,375.88
10/31/05 10,371.76 12,169.20
11/30/05 10,737.82 12,629.20
12/31/05 10,817.03 12,632.99
01/31/06 11,173.19 12,967.76
02/28/06 11,112.14 13,002.77
03/31/06 11,305.48 13,165.31
04/30/06 11,336.01 13,341.72
05/31/06 11,101.96 12,957.48
06/30/06 11,061.26 12,975.62
07/31/06 11,020.55 13,056.07
08/31/06 11,274.95 13,366.81
09/30/06 11,529.35 13,711.67
10/31/06 11,885.51 14,158.67
11/30/06 12,139.91 14,427.68
12/31/06 12,198.85 14,629.67
01/31/07 12,352.10 14,850.58
02/28/07 12,014.94 14,559.51
03/31/07 12,362.31 14,722.57
04/30/07 12,934.46 15,374.78
05/31/07 13,332.91 15,911.36
06/30/07 13,312.48 15,647.24
07/31/07 13,046.84 15,162.17
08/31/07 13,149.01 15,389.60
09/30/07 13,496.38 15,965.18
10/31/07 14,007.22 16,219.02
11/30/07 13,772.23 15,541.07
12/31/07 13,712.06 15,433.83
01/31/08 13,128.79 14,507.80
02/29/08 13,016.22 14,692.05
03/31/08 13,149.25 14,628.88
04/30/08 13,538.10 15,341.30
05/31/08 13,988.35 15,540.74
06/30/08 13,272.05 14,230.66
07/31/08 13,190.18 14,111.12
08/31/08 13,476.70 14,315.73
09/30/08 12,954.83 13,040.20
10/31/08 10,969.65 10,849.44
*net of fees and expenses
Performance data quoted represents past performance which is no guarantee
of future results. Investment return and principle value will fluctuate so that an
investor's shares, when redeemed, may be worth more or less than their original
cost. Mutual 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 current to the most recent month end performance and after tax
returns, contact the Fund at 1-800-625-5759.
----------
(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 index
is unmanaged.
4
<PAGE>
BBH CORE SELECT
--------------------------------------------------------------------------------
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Trustees of the BBH Trust and Shareholders of
BBH Core Select:
We have audited the accompanying statement of assets and liabilities, including
the portfolio of investments, of BBH Core Select (a series of BBH Trust) (the
"Fund") as of October 31, 2008, and 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, and the financial highlights for each of the
five years in the period then ended. These financial statements and financial
highlights are the responsibility of the Fund's management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). 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. The Fund
is not required to have, nor were we engaged to perform, an audit of its
internal control over financial reporting. Our audit included consideration of
internal control over financial reporting as a basis for designing audit
procedures that are appropriate in the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of the Fund's internal control over
financial reporting. Accordingly, we express no such opinion. An audit also
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. Our procedures included confirmation
of securities owned as of October 31, 2008, by correspondence with the custodian
and brokers; where replies were not received from brokers, we performed other
auditing procedures. We believe that our audits provide a reasonable basis for
our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of BBH
Core Select as of October 31, 2008, 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.
Deloitte & Touche LLP
Boston, Massachusetts
December 22, 2008
FINANCIAL STATEMENT OCTOBER 31, 2008 5
<PAGE>
BBH CORE SELECT
--------------------------------------------------------------------------------
PORTFOLIO ALLOCATION
October 31, 2008 (unaudited)
SECTOR DIVERSIFICATION
Percent of
U.S. $ Value Net Assets
- ------------ ----------
Consumer discretionary ............................$ 16,709,698 10.1%
Consumer staples ....................................... 50,077,555 30.1
Energy ........................................................... 8,528,822 5.1
Financials ...................................................... 28,515,745 17.1
Health care ................................................... 10,384,834 6.3
Industrials ..................................................... 16,493,193 9.9
Information technology ............................. 26,982,868 16.2
Materials ........................................................ 4,049,288 2.4
Short-Term Investments .............................. 9,649,398 5.8
Liabilities in Excess of Other Assets ......... (4,955,671) (3.0)
------------ ------
NET ASSETS ............................................ $166,435,730 100.0%
============ ======
All data as of October 31, 2008. The Fund's sector breakdown 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
<PAGE>
BBH CORE SELECT
--------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
October 31, 2008
<TABLE>
<CAPTION>
Shares Value
----------- - ------------
<S> <C> <C>
COMMON STOCKS (97.2%)
CONSUMER DISCRETIONARY (10.1%)
142,975 Bed, Bath & Beyond, Inc.(1) .............................. $ 3,684,466
455,075 Comcast Corp. (Class A) .................................. 7,171,982
253,161 Liberty Global, Inc. (Series C)(1) ....................... 4,091,082
361,100 Liberty Media Corp. - Interactive A(1) ................... 1,762,168
------------
Total Consumer Discretionary ............................. 16,709,698
------------
CONSUMER STAPLES (30.1%)
138,780 Cadbury, Plc. ADR ........................................ 5,132,084
136,000 Coca-Cola Co. ............................................ 5,992,160
90,979 Costco Wholesale Corp. ................................... 5,186,713
73,725 Diageo, Plc. ADR ......................................... 4,584,958
76,110 Dr Pepper Snapple Group, Inc.(1) ........................ 1,742,919
233,025 Nestle SA ADR ............................................ 8, 977,451
69,650 PepsiCo, Inc. ............................................ 3 ,970,747
189,200 Walgreen Co. ............................................. 4,817,032
173,329 Wal-Mart Stores, Inc. .................................... 9,673,491
- ------------
Total Consumer Staples ................................... 50,077,555
------------
ENERGY (5.1%)
72,150 Occidental Petroleum Corp. .............................. 4,007,211
125,775 XTO Energy, Inc. ......................................... 4,521,611
- ------------
Total Energy ............................................. 8,528,822
- ------------
FINANCIALS (17.1%)
113,050 AFLAC, Inc. .............................................. �� 5,005,854
95 Berkshire Hathaway, Inc. (Class A)(1) .................... 10,971,550
147,650 Chubb Corp. .............................................. 7,651,223
342,475 Progressive Corp. ........................................ 4,887,118
- ------------
Total Financials ......................................... 28,515,745
- ------------
HEALTH CARE (6.3%)
87,175 Dentsply International, Inc. ............................. 2,648,376
151,725 Novartis AG ADR .......................................... 7,736,458
- ------------
Total Health Care ........................................ 10,384,834
------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
FINANCIAL STATEMENT OCTOBER 31, 2008 7
<PAGE>
BBH CORE SELECT
--------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS (continued)
October 31, 2008
<TABLE>
<CAPTION>
Shares Value
- ----------- ------------
<S> <C> <C>
COMMON STOCKS (continued)
INDUSTRIALS (9.9%)
80,925 W.W. Grainger, Inc. ............................................ $ 6,358,277
324,525 Waste Management, Inc. ......................................... 10,134,916
------------
Total Industrials .............................................. 16,493,193
------------
INFORMATION TECHNOLOGY (16.2%)
100,600 Automatic Data Processing, Inc. ................................ 3,515,970
367,240 Dell, Inc.(1) .................................................. 4,461,966
318,675 eBay, Inc.(1) .................................................. 4,866,167
293,525 Intuit, Inc.(1) ................................................ 7,355,737
303,763 Microsoft Corp. ................................................ 6,783,028
------------
Total Information Technology ................................... 26,982,868
- ------------
MATERIALS (2.4%)
74,600 Vulcan Materials Co. ........................................... 4,049,288
------------
Total Materials ............................................... 4,049,288
------------
TOTAL COMMON STOCKS (Identified cost $185,545,819) ........ 161,742,003
------------
<CAPTION>
Principal
Amount
------------
<S> <C> <C>
SHORT-TERM INVESTMENTS (5.8%)
$ 7,650,000 U.S. Treasury Bills 1.544% 11/20/08 ............................ 7,649,564
2,000,000 U.S. Treasury Bills 0.400% 11/28/08 ............................ 1,999,834
- ------------
TOTAL SHORT TERM INVESTMENTS (Identified cost $9,643,182).. 9,649,398
------------
TOTAL INVESTMENTS (Identified cost $195,189,001(2)) ............... 103.0% $171,391,401
LIABILITIES IN EXCESS OF OTHER ASSETS ............................... (3.0) (4,955,671)
--------- - ---------------
NET ASSETS ........................................................... 100.0% $166,435,730
===== ==========
</TABLE>
----------
(1) Non-income producing security.
(2) The aggregate cost for federal income tax purposes is $195,346,025. The
aggregate gross unrealized appreciation is $5,143,051 and the aggregate
gross unrealized depreciation is $29,097,675, resulting in net unrealized
depreciation of $23,954,624.
ADR - American Depositary Receipt.
The accompanying notes are an integral part of these financial statements.
8
<PAGE>
BBH CORE SELECT
--------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
October 31, 2008
<TABLE>
ASSETS:
<S> <C>
Investments in securities, at value (identified cost $195,189,001) ....... $171,391,401
Cash ..................................................................... 680,700
Receivables for:
Investment sold ........................................................ 1,898,017
Capital stock sold ..................................................... 1,716,560
- ------------
Total Assets ......................................................... 175,686,678
- ------------
LIABILITIES:
Payables for:
Capital stock redeemed ................................................. 6,439,601
Investments purchased .................................................. 2,594,381
Investment advisory and administrative fees ............................ 115,003
Shareholder servicing fees ............................................. 35,938
Professional fees ...................................................... 23,200
Custody and accounting fees ............................................ 16,962
Board of Trustees' fees ................................................ 7,548
Accrued expenses and other liabilities ................................. 18,315
Total Liabilities .................................................... 9,250,948
- ------------
NET ASSETS .................................................................. $166,435,730
- ------------
Net Assets Consist of:
Par value ................................................................ $ 15,533
Paid-in capital .......................................................... 189,052,566
Undistributed net investment income ...................................... 170,525
Accumulated net realized gain on investments ............................. 994,706
Net unrealized depreciation on investments ............................... (23,797,600)
- ------------
Net Assets .................................................................. $166,435,730
=========
NET ASSET VALUE AND OFFERING PRICE PER SHARE
Class N Shares
($166,435,730 / 15,533,719 shares outstanding) ........................... $10.71
======
</TABLE>
The accompanying notes are an integral part of these financial statements.
FINANCIAL STATEMENT OCTOBER 31, 2008 9
<PAGE>
BBH CORE SELECT
--------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
For the year ended October 31, 2008
NET INVESTMENT INCOME:
Income:
Dividends (net of withholding taxes of $52,474) ........... $ 1,795,108
Interest .................................................. 242,696
Other Income .............................................. 838
- ------------
Total Income ............................................ 2,038,642
------------
Expenses:
Investment advisory and administrative fees ............... 1,251,604
Shareholder servicing fees ................................ 391,126
Custody and accounting fees ............................... 62,071
Professional fees ......................................... 26,507
Board of Trustees' fees ................................... 24,790
Miscellaneous expenses .................................... 84,142
------------
Total Expenses .......................................... 1,840,240
Expense offset arrangement .............................. (18,955)
------------
Net Expenses ............................................ 1,821,285
- ------------
Net Investment Income ....................................... 217,357
========
NET REALIZED AND UNREALIZED LOSS:
Net realized gain on investments ............................ 1,450,636
Net change in unrealized depreciation of investments ........ (43,650,797)
- ------------
Net Realized and Unrealized Loss .......................... (42,200,161)
- ------------
Net Decrease in Net Assets Resulting from Operations ........ $(41,982,804)
=========
The accompanying notes are an integral part of these financial statements.
10
<PAGE>
BBH CORE SELECT
--------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
For the years ended October 31,
-------------------------------
2008 2007
------------ ------------
<S> <C> <C>
INCREASE IN NET ASSETS:
Operations:
Net investment income ...................................... $ 217,357 $ 183,148
Net realized gain on investments ........................... 1,450,636 5,592,528
Net change in unrealized appreciation (depreciation)
on investments ........................................... (43,650,797) 10,551,809
- ------------ ------------
Net increase (decrease) in net assets resulting
from operations .......................................... (41,982,804) 16,327,485
------------ - ------------
Dividends and distributions declared:
From net investment income:
Class N .................................................... (195,525) (350,622)
------------ ------------
Capital stock transactions:
Net proceeds from sales of capital stock ................... 118,049,777 46,694,371
Net assets value of capital stock issued to
shareholders for reinvestment of dividends
and distributions ........................................ 23,574 36,137
Net cost of capital stock redeemed ......................... (31,669,095) (23,479,800)
------------ ------------
Net increase in net assets resulting from capital
stock transactions ..................................... 86,404,256 23,250,708
------------ ------------
Total increase in net assets ............................. 44,225,927 39,227,571
NET ASSETS:
Beginning of year ............................................ 122,209,803 82,982,232
------------ ------------
End of period (including undistributed net investment
income of $170,525 and $148,693, respectively) ............. $166,435,730 $122,209,803
========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
FINANCIAL STATEMENT OCTOBER 31, 2008 11
<PAGE>
BBH CORE SELECT
--------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
Selected per share data and ratios for a Class N share outstanding throughout
each year
<TABLE>
<CAPTION>
For the years ended October 31,
- ---------------------------------------------------------------------
2008 2007 2006 2005 2004
- ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Net asset value beginning of year ............. $13.71 $11.74 $10.20 $ 9.30 $ 8.94
- ------ ------ ------ ------ ------
Income from investment operations:
Net investment income(1) ................... 0.01 0.02 0.04 0.05 0.02
Net realized and unrealized gain (loss) .... (2.99) 2.00 1.51 0.91 0.38
------ ------ ------ ------ ------
Total income (loss) from
investment operations .................. (2.98) 2.02 1.55 0.96 0.40
- ------ ------ ------ ------ ------
Less dividends and distributions:
From net investment income ................. (0.02) (0.05) (0.01) (0.06) (0.04)
- ------ ------ ------ ------ ------
Net asset value, end of year .................. $10.71 $13.71 $11.74 $10.20 $ 9.30
===== ===== ==== ==== ====
Total return .................................. (21.76)% 17.25% 15.18% 10.31% 4.46%
Ratios/Supplemental data:
Net assets, end of year (in millions) ...... $166 $122 $83 $62 $48
Ratio of expenses to average net assets .... 1.16%(1) 1.16%(1) 1.19%(1) 1.22%(1),(2) 1.20%(2)
Ratio of net investment income to
average net assets ....................... 0.14% 0.18% 0.45% 0.47% 0.23%
Portfolio turnover rate .................... 31% 18% 53% 59% 57%
</TABLE>
----------
(1) For years ended October 31, 2008, 2007, 2006 and 2005, the Fund's expenses
were reduced through an expense offset arrangement with the Fund's
custodian; had the arrangement not been in place, the actual expense ratio
of the Fund would have been 1.18%, 1.19%, 1.24% and 1.27%, respectively.
(2) Had the expense reimbursement agreement, which terminated on December 31,
2004, not been in place, the ratio of expenses to average net assets would
have been as follows: N/A, N/A, N/A, 1.24% and 1.32%, respectively.
The accompanying notes are an integral part of these financial statements.
12
<PAGE>
BBH CORE SELECT
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
October 31, 2008
1. Organization and Significant Accounting Policies. BBH Core Select (the
"Fund") is a separate, diversified series of BBH Trust (the "Trust"), which
is registered under the Investment Company Act of 1940, as amended, 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 November 2, 1998. On February 20, 2001, the Trustees
reclassified the Fund's outstanding shares as "Class N", and established a
new class of shares designated as "Class I". As of October 31, 2008, there
were no Class I shares outstanding. At October 31, 2008, there were seven
series of the Trust.
The Fund's financial statements are prepared in accordance with accounting
principles generally accepted in the United States of America, which require
management to make certain estimates and assumptions at the date of the
financial statements and are based, in part, on the following accounting
policies. Actual results could differ from those estimates.
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) unlisted securities 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 Trust's Board of Trustees; (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 this is determined not to represent
fair value by the Trust's Board of Trustees.
B. Accounting for Investments and Income. Security transactions are
accounted for on the trade date. Realized gains and losses on security
transactions are determined on the identified cost method. Dividend
income and other distributions 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.
Distributions received on securities that represent a return of capital
or a capital gain are recorded as a reduction of cost of investments
and/or as a realized gain. Interest income is accrued daily. Investment
income is recorded net of foreign taxes withheld where recovery of such
tax is uncertain.
C. Securities Lending. The Fund may lend its portfolio securities to
broker-dealers, qualified banks and certain institutional investors. The
loans are secured by collateral in an amount equal to at least the
market value at all times of the loaned securities plus any accrued
interest and dividends. During the time the securities are on loan, the
Fund will continue to receive the interest and
FINANCIAL STATEMENT OCTOBER 31, 2008 13
<PAGE>
BBH CORE SELECT
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (continued)
October 31, 2008
dividends or amounts equivalent thereto, on the loaned securities while
receiving a fee from the borrower or earning interest on the investment
of the cash collateral. Loans are subject to termination at the option
of the borrower or the Fund. Upon termination of the loan, the borrower
will return to the lender securities identical to the loaned securities.
The Fund may pay reasonable finders', administrative and custodial fees
in connection with a loan of its securities and may share the interest
earned on the collateral with the borrower. The Fund bears the risk of
delay in recovery of, or even loss of rights in, the securities loaned
should the borrower of the securities fail financially. There were no
securities on loan as of October 31, 2008.
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 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
accounting principles generally accepted in the United States of
America, the basis on which these financial statements are prepared.
Accordingly, the amount of net investment income and net realized gain
reported on these financial statements may differ from that reported on
the Fund's tax return due to certain book-to-tax differences such as
losses deferred due to "wash sale" transactions and utilization of
capital loss carry forwards. 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 on 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.
E. Dividends and Distributions to Shareholders. Dividends and distributions
to shareholders, if any, are paid annually and are recorded on the
ex-dividend date. The tax character of distributions paid during the
fiscal years ended October 31, 2008 and 2007, respectively, were as
follows:
Distributions paid from:
------------------------------------------------------------------------
Net Total Total
Ordinary Long term taxable Tax return distributions
income capital gain distributions of capital paid
-------- - ------------ ------------- ---------- - -------------
2008: $195,525 - $195,525 - $195,525
2007: 350,622 - 350,622 - - 350,622
14
<PAGE>
BBH CORE SELECT
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (continued)
October 31, 2008
As of October 31, 2008 and 2007, respectively, the components of
accumulated earnings/(deficit) on a tax basis were as follows:
<TABLE>
<CAPTION>
Components of accumulated earnings/(deficit):
--------------------------------------------------------------------------------------------------------------------
Other Total
Undistributed Undistributed Accumulated Book/Tax Unrealized accumulated
ordinary long-term Accumulated capital and temporary appreciation/ earnings/
income capital gain earnings other losses differences (depreciation) (deficit)
------------- ------------- ----------- - ------------ - ----------- -------------- -------------
<C> <C> <C> <C> <C> <C> <C> <C>
2008: $170,525 $1,151,730 $1,322,255 $ - $(157,024) $(23,797,600) $(22,632,369)
2007: 148,693 - 148,693 (437,645) (18,285) 19,853,197 19,545,960
</TABLE>
As of October 31, 2008 the Fund did not have a net capital loss
carryforward.
Total distributions paid may differ from the Statement 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.
To the extent future capital gains are offset by capital loss carry
forwards, such gains will not be distributed.
F. Accounting Developments. In June 2006, the Fund adopted FASB
Interpretation No. 48 "Accounting for Uncertainty in Income Taxes" ("FIN
48"). FIN 48 provides guidance for how uncertain tax positions should be
recognized, measured, presented and disclosed in the financial
statements. FIN 48 requires the evaluation of tax positions taken or
expected to be taken in the course of preparing the Fund's tax returns
to determine whether that tax positions are "more-likely-than-not" of
being sustained by the applicable tax authority. Tax positions not
deemed to meet the more-likely-than-not threshold would be recorded as a
tax benefit or expense in the current year. The adoption of FIN 48 had
no impact on the operations of the Fund for the year ended October 31,
2008.
In September 2006, Statement of Financial Accounting Standards No. 157,
"Fair Value Measurements" ("SFAS 157"), was issued and is effective for
fiscal years and interim periods beginning after November 15, 2007. SFAS
157 defines fair value, establishes a framework for measuring fair value
and expands disclosures about fair value measurements. Management is
currently evaluating the implication of SFAS 157. At this time its
impact on the Fund's financial statements has not yet been determined.
FINANCIAL STATEMENT OCTOBER 31, 2008 15
<PAGE>
BBH CORE SELECT
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (continued)
October 31, 2008
In March 2008, Statement of Financial Accounting Standards No. 161,
"Disclosures about Derivative Instruments and Hedging Activities" ("SFAS
161"), was issued and is effective for fiscal years and interim periods
beginning after November 15, 2008. SFAS 161 requires enhanced
disclosures to provide information about the reasons the Fund invests in
derivative instruments, the accounting treatment and the effect
derivatives have on performance. Management is currently evaluating the
impact the adoption of SFAS 161 will have on the Fund's financial
statement disclosures.
2. Transactions with Affiliates.
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") provides
investment advice, portfolio management and administrative services to the
Fund. BBH receives a combined fee from the Fund for investment advisory and
administrative services calculated daily and paid monthly at an annual rate
equivalent to 0.80% of the Fund's average daily net assets. BBH has a
sub-administration services agreement with Federated Services Company
("FSC") for which FSC receives compensation paid by BBH. For the year ended
October 31, 2008, the Fund incurred $1,251,604 for investment advisory and
administrative services.
Shareholder Servicing Fees. The Trust has a shareholder servicing agreement
with BBH for which BBH receives a fee from the Fund calculated daily and
paid monthly at an annual rate of 0.25% of Class N shares' average daily net
assets. For the year ended October 31, 2008, the Fund incurred $391,126 for
shareholder servicing services.
Custody and Accounting Fees. BBH acts as a custodian and shall receive a
custody and accounting fee from the Fund calculated daily and paid monthly.
BBH holds all cash and investments and calculates the daily net asset value.
The custody fee is a transaction based fee with an annual minimum of
$30,000, and the accounting fee is calculated at 0.04% per annum on the
first $100 million of net assets, 0.02% per annum on the next $400 million
of net assets and 0.01% per annum on all net assets over $500 million. For
the year ended October 31, 2008, the Fund incurred $62,071 for custody and
accounting services. These fees were reduced by $18,955 as a result of an
expense offset arrangement with the Fund's custodian. 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
overdraft. The total interest paid by the Fund for the year ended October
31, 2008 was $2,734.
16
<PAGE>
BBH CORE SELECT
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (continued)
October 31, 2008
Securities Lending Fees. The Trust has a security lending agreement with BBH
for which BBH receives a fee from the Fund for each security loaned. For the
year ended October 31, 2008, the Fund incurred no security lending fees.
Board of Trustees' Fees. Each Trustee receives an annual fee as well as
reimbursement for reasonable out-of-pocket expenses from the Fund. For the
year ended October 31, 2008, the Fund incurred $24,790 for these fees.
3. Investment Transactions. For the year ended October 31, 2008, the cost of
purchases and the proceeds of sales of investment securities other than
short-term investments were $136,756,365 and $44,093,595, respectively.
4. Securities on Loan. As of October 31, 2008, the Fund had no securities on
loan.
5. Capital Stock. Prior to June 12, 2007, BBH Fund, Inc. was permitted to issue
2,500,000,000 shares of capital stock, par value $.001 per share, of which
277,777,778 shares were classified as Class N shares of the Fund and
277,777,778 shares were classified as Class I shares of the Fund. There have
been no transactions in Class I shares of capital stock as of October 31,
2008. The Trust offers unlimited shares without par value. Transactions in
Class N shares of capital stock were as follows:
SHARES
For the years ended October 31,
-------------------------------
2008 2007
---------- - -----------
Class N
Capital stock sold ...................... 9,237,345 3,718,102
Capital stock issued in connection with
reinvestment of dividends ............. 1,653 3,021
Capital stock redeemed .................. (2,619,435) (1,876,256)
- ---------- ----------
Net increase ............................ 6,619,563 1,844,867
======= =======
FINANCIAL STATEMENT OCTOBER 31, 2008 17
<PAGE>
BBH CORE SELECT
--------------------------------------------------------------------------------
DISCLOSURE OF FUND EXPENSES
October 31, 2008 (unaudited)
EXAMPLE
As a shareholder of BBH Core Select (the "Fund"), you may incur two types
of costs: (1) transaction costs, including sales charges (loads) on purchase
payments, reinvested dividends, 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, 2008 to October 31, 2008).
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.
18
<PAGE>
BBH CORE SELECT
--------------------------------------------------------------------------------
DISCLOSURE OF FUND EXPENSES (continued)
October 31, 2008 (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 sales
charges (loads), 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.
Expenses Paid
Beginning Ending During Period
Account Value Account Value May 1, 2008 to
May 1, 2008 October 31, 2008 October 31, 2008(1)
------------- ---------------- - -------------------
Class N
Actual ............. $1,000 $ 809.50 $5.28
Hypothetical(2) .... $1,000 $1,019.30 $5.89
----------
(1) Expenses are equal to the Fund's annualized expense ratio of 1.16% for
Class N shares, multiplied by the average account value over the period,
multiplied by 184/366 (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.
FINANCIAL STATEMENT OCTOBER 31, 2008 19
<PAGE>
BBH CORE SELECT
--------------------------------------------------------------------------------
DISCLOSURE OF ADVISOR SELECTION
October 31, 2008 (unaudited)
Approval of Investment Advisory/Administrative Services Agreement
At a meeting held on December 11, 2006, the Board of Trustees (the "Board")
of the Trust unanimously approved a new Combined Investment
Advisory/Administrative Services Agreement ("Combined Agreement"). The
Board determined that the terms of the Combined Agreement will be
substantially identical to those of the current investment advisory and
administration agreements of the Funds, noting that the most significant
difference in the Combined Agreement is a single fee for both investment
advisory and administrative services. The following is a summary of the
factors the Board took into consideration in making its determination to
approve the new Combined Agreement.
Nature, Extent and Quality of Services Provided by Brown Brothers Harriman & Co.
("BBH")
The Board noted that, under the Combined Agreement in respect of each Fund,
BBH, subject to the supervision of the Board, will be responsible for providing
a continuous investment program and making purchases and sales of portfolio
securities consistent with the Funds' investment objective and policies. Under
the Combined Agreement, BBH also provides administrative services to each Fund.
The Board considered the scope and quality of services to be provided by BBH
under the Combined Agreement and noted that the scope of services provided had
expanded over time, primarily, as a result of regulatory developments. The Board
noted that, for example, BBH is responsible for maintaining and monitoring its
own and, to varying degrees, the Funds' compliance program, and these compliance
programs have recently been refined and enhanced in light of new regulatory
requirements. The Board considered the quality of the investment research and
administrative capabilities of BBH and the other resources it has dedicated to
performing services for the Funds. The Board concluded that, overall, they were
satisfied with the nature, extent and quality of services expected to be
provided to each of the Funds under the Combined Agreement.
Costs of Services Provided and Profitability to BBH
At the request of the Board, BBH provided information concerning the
profitability of BBH's current investment company advisory and other fees. The
Board also reviewed BBH's profitability data for each Fund, which also included
the effect of revenue generated by the shareholder servicing, administration,
custody and other fees paid by the Fund. The Board discussed the difficulty of
making comparisons of profitability because comparative information is not
generally publicly available and is affected by numerous factors, including the
structure of the service provider, the types of funds it manages and
administers, its business mix, numerous assumptions regarding allocations and
the entity's capital structure and cost of capital. In considering profitability
information, the Board considered the effect of fall-out benefits on BBH's
expenses, as well as the "revenue sharing" arrangements BBH has entered into
with certain entities that distribute shares of the Funds. The Board focused on
profitability of BBH's relationships with the Funds before taxes and
distribution expenses. The Board concluded that it was satisfied that BBH's
level of profitability from its relationship with each Fund was not excessive.
20
<PAGE>
BBH CORE SELECT
--------------------------------------------------------------------------------
DISCLOSURE OF ADVISOR SELECTION (continued)
October 31, 2008 (unaudited)
Fall-Out Benefits
The Board considered that BBH does not allocate the Funds' portfolio
transactions for third party research, although it did benefit from proprietary
research received from brokers that execute the Funds' purchases and sales of
securities. The Board recognized that the aggregate amount of commissions
generated by Fund transactions was unlikely to result in the Funds receiving
from full service broker dealers substantial discounts on commission rates. The
Board received and reviewed information concerning BBH's policies with respect
to allocating portfolio brokerage.
The Board also considered that BBH receives shareholder servicing fees from
certain funds, and is the Funds' administrator, custodian and securities lending
agent. The Board noted that BBH retained no portion of the 12b-1 fees paid by
any Fund that operated with a Rule 12b-1 plan. The Board recognized that BBH's
profitability would be somewhat lower if it did not receive proprietary research
for commissions or, if it did not receive the other benefits described above.
The Board recognized that most Fund shareholders were also BBH clients, and that
substantial assets are invested in the Funds as a result of an overall
investment management program for the shareholder. The Board noted that the
Funds also derive reputational and other benefits from their association with
BBH and their use of the BBH name, which is licensed to the Funds by BBH. Thus,
the Board did not believe that BBH revenues associated with its clients should
be fairly regarded as "fallout" benefit from the Funds.
Economies of Scale
The Board noted that the Funds' combined fee schedules, other than the fee
schedule for BBH Money Market Fund, do not contain breakpoints. As a result, if
assets increase, the fee rates would not be reduced for these Funds on the
incremental assets. With respect to the BBH Money Market Fund, the breakpoint
will be reviewed every three (3) years by the Board, and may be adjusted upwards
to take into account the effects of inflation or such other basis as may be
appropriate, subject to the approval of shareholders to the extent required by
the 1940 Act.
There may be other economies of scale because many expenses did not rise (and
fall) proportionally to increases (and decreases) in total net assets. The Board
noted that BBH had priced its services in recognition of the fact that it was
largely its own clients who were shareholders and, accordingly, sought to assure
that the cost of these services and total expenses for each Fund were fair and
reasonable. In addition, the Board noted that over the years BBH had supported
certain Funds through fee waivers and expense reimbursements. Based on
information they had been provided over many years, the Board observed that in
the mutual fund industry as a whole, as well as among funds similar to the
Funds, there appeared to be no uniformity or pattern in the fees and asset
levels at which breakpoints (if any) apply. In
FINANCIAL STATEMENT OCTOBER 31, 2008 21
<PAGE>
BBH CORE SELECT
--------------------------------------------------------------------------------
DISCLOSURE OF ADVISOR SELECTION
October 31, 2008 (unaudited)
light of the Funds' current size and expense structure, the Board concluded that
it was unnecessary at this time to consider breakpoints with respect to the
Funds, other than for the BBH Money Market Fund.
Investment Results
The Board considered the investment results of each of the Funds as compared to
investment companies with its peers and with one or more selected securities
indices. In addition to the information received by the Board for the meeting
held on October 2, 2006, the Board received detailed performance information for
each Fund at each regular Board meeting during the year. At the meeting held on
October 2, 2006, the Board reviewed information showing performance of each Fund
compared to its peers over the prior 1-, 3-, and 5- year periods and compared
the performance information to one or more securities indices over comparable
periods.
Combined Fee Rate
The Board considered the fee rate to be paid by each Fund to BBH. The Board
recognized that it is difficult to make comparisons of these fee rates, and the
combined investment advisory and administration fees, because there are
variations in the services that are included in the fees paid by other funds.
The Board considered the depth and range of services provided under the Combined
Agreement. For example, in addition to a continuous investment program, BBH
provides, among other things, officers (including the Funds' Chief Compliance
Officer and officers to provide required certifications) and administrative
services, such as shareholder communications, and tax compliance, with the
attendant costs and exposure to liability. BBH also coordinates the provision of
services to the Funds by nonaffiliated service providers.
The following factors specific to BBH Core Select also were noted and considered
by the Board in deciding to approve the Combined Agreement:
The Board reviewed the comparative performance of BBH Core Select versus the
Standard's and Poor's 500 Index (the "Index"). The Board viewed favorably
management's decision to implement a new portfolio construction methodology
in the second quarter of 2004, a methodology which puts greater emphasis
on fundamental valuation considerations and less emphasis on tracking error
to a broad market index such as the Index. The Board also reviewed favorably
BBH's decision to have a Partner and Managing Director of the firm be the
co-managers of BBH Core Select beginning in the fourth quarter of 2005.
The Board also appreciated that the strategy of long-term, low turnover
investing in cash generative companies at prices that have a margin of safety
to intrinsic value should provide the shareholders with long-term appreciation
at a relatively modest level of risk. The Board recognized that divergence from
the benchmark was to be expected because of the manager's clearly defined
fundamental investment style with very little concern for tracking error to
the broad market. The Board spent considerable time in reviewing
BBH Core Select's
22
<PAGE>
BBH CORE SELECT
--------------------------------------------------------------------------------
DISCLOSURE OF ADVISOR SELECTION
October 31, 2008 (unaudited)
investments and confirming that those investments were consistent with the new
investment methodology. They concurred that the new portfolio construction
methodology and its implementation will need to be judged over a three to five
year timeframe. The Board also noted BBH Core Select's expense ratio was in line
with many funds of similar size and investment mandate. Taking into account all
of the factors considered, the Board concluded that BBH Core Select's recent
investment results and its total expense ratio were acceptable and that they
retained confidence in the manager to achieve BBH Core Select's investment
objective.
Conflicts of Interest
As a general matter, certain conflicts of interest may arise in connection with
a portfolio manager's management of a Fund's investments, on the one hand, and
the investments of other accounts for which the portfolio manager is
responsible, on the other. For example, it is possible that the various accounts
managed could have different investment strategies that, at times, might
conflict with one another to the possible detriment of the Fund. Alternatively,
to the extent that the same investment opportunities might be desirable for more
than one account, possible conflicts could arise in determining how to allocate
them. Other potential conflicts might include conflicts created by specific
portfolio manager compensation arrangements, use of outside consultants that
manage other unaffiliated funds and conflicts relating to selection of brokers
or dealers to execute fund portfolio trades and/or specific uses of commissions
from Fund portfolio trades (for example, research, or "soft dollars").
BBH has adopted and implemented policies, including brokerage and trade
allocation policies and procedures, which it believes manage the conflicts
associated with handling multiple accounts for multiple clients. In addition,
BBH monitors a variety of areas, including compliance with account investment
guidelines, the inclusion only of securities approved for purchase by the a BBH
oversight committee. Finally, BBH has structured the portfolio managers'
compensation in a manner, and the Funds have adopted policies, reasonably
designed to safeguard a Fund from being negatively affected as a result of any
such potential conflicts.
FINANCIAL STATEMENT OCTOBER 31, 2008 23
<PAGE>
BBH CORE SELECT
--------------------------------------------------------------------------------
ADDITIONAL FEDERAL TAX INFORMATION
October 31, 2008
The amount of qualified interest income (QII) dividends paid by the BBH Core
Select (the "Fund") for the year ended October 31, 2008 was $43,034.
Under Section 854(b)(2) of the Internal Revenue Code (the "Code"), the Fund
designates up to a maximum of $1,854,834 as qualified dividends for purposes of
the maximum rate under Section 1(h)(11) of the Code for the fiscal year ended
October 31, 2008. In January 2009, shareholders will receive Form 1099-DIV which
will include their share of qualified dividends distributed during the calendar
year 2008. Shareholders are advised to check with their tax advisors for
information on the treatment of these amounts on their individual income tax
returns.
100% of the ordinary income dividends paid by the Fund during the year ended
October 31, 2008 qualifies for the dividends received deduction available to
corporate shareholders.
24
<PAGE>
TRUSTEES AND OFFICERS OF BBH CORE SELECT
--------------------------------------------------------------------------------
(unaudited)
Information pertaining to the Trustees of the BBH Trust (the "Trust") and
executive officers of the Trust is set forth below. Part B to the Registration
Statement of the BBH Core Select includes additional information about the
Fund's Trustees and is available upon request without charge by contacting the
Fund at 1-800-625-5759
<TABLE>
<CAPTION>
Term of Number of
Office Funds in
and 60; Fund Other
Position(s) Length Complex Directorships
Name, Birth Date Held with of Time Principal Occupation(s) Overseen by Held by
and Address Trust Served# During Past 5 Years Trustee^ Trustee
---------------------------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Joseph V. Shields Jr. Chairman of Since Managing Director, Chairman and 7 None
Birth Date: the Board 2007 Chief Executive Officer of Shields &
March 17, 1938 and Trustee Company (member of New York Stock
Shields & Company Exchange); Chairman of Capital
140 Broadway Management Associates, Inc.
New York, NY 10005 (registered investment adviser);
Director of Flower Foods, Inc. (New
York Stock Exchange listed company).
David P. Feldman Trustee Since Director of Jeffrey Co. (1992 to 7 Director of
Birth Date: 2007 present); Director of QMED (1999 Dreyfus
November 16, 1939 to May 2007). Mutual Funds
C/O BBH & Co. (59 Funds)
140 Broadway
New York, NY 10005
Alan G. Lowy Trustee Since Private Investor. 7 None
Birth Date: 2007
April 17, 1939
4111 Clear Valley
Drive
Encino, CA 91436
Arthur D. Trustee Since Retired; Trustee, R.K. Mellon Family 7 None
Miltenberger 2007 Trust (1981 to June 2003); Director
Birth Date: of Aerostructures Corporation
November 8, 1938 (aircraft manufacturer) (1996 to
503 Darlington Road July 2003).
Ligonier, PA 15658
Samuel F. Pryor, IV Trustee Since Private Investor. 7 None
Birth Date: 2007
June 12, 1955
130 East 67th Street
New York, NY 10021
</TABLE>
FINANCIAL STATEMENT OCTOBER 31, 2008 25
<PAGE>
TRUSTEES AND OFFICERS OF BBH CORE SELECT
--------------------------------------------------------------------------------
(unaudited)
<TABLE>
<CAPTION>
Term of Number of
Office Funds in
and Fund Other
Position(s) Length Complex Directorships
Name, Birth Date Held with of Time Principal Occupation(s) Overseen by Held by
and Address Trust Served# During Past 5 Years Trustee^ Trustee
-----------------------------------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
H. Whitney Wagner Trustee Since President, Clear Brook Advisors, a 7 None
Birth Date: 2007 registered investment advisor.
March 3, 1956
Clear Brook Advisors
75 Rockefeller Plaza,
14th Floor
New York, NY 10019
Officers
John A. Gehret President and Since President and Principal Executive N/A N/A
Birth Date: Principal 2008 Officer of the Trust; Joined Brown
April 11, 1959 Executive Brothers Harriman & Co. ("BBH &
140 Broadway Officer Co.") in 1981 and has been a Partner
New York, NY 10005 of the firm since 1998.
Charles H. Schreiber Treasurer and Since Treasurer and Principal Financial N/A N/A
Birth Date: Principal 2007 Officer of the Trust; Senior Vice
December 10, 1957 Financial President of BBH & Co. since
140 Broadway Officer September 2001; Joined BBH & Co.
New York, NY 10005 in 1999.
Mark B. Nixon Assistant Since Assistant Secretary and Assistant N/A N/A
Birth Date: Secretary, 2007 Treasurer of the Trust; Vice
January 14, 1963 Assistant President of BBH & Co. (since
140 Broadway Treasurer October 2006); Accounting Manager,
New York, NY 10005 Reserve Funds (August 2005 -
September 2006); Assistant
Controller, Reserve Funds
(February 2005 - August 2005);
�� Private Consultant (December 2001 -
February 2005).
Beth Haddock Chief Since Chief Compliance Officer of the N/A N/A
Birth Date: Compliance 2007 Trust (September 2007 - present);
December 10, 1965 Officer Chief Compliance Officer for the
140 Broadway FINRA/NYSE and SEC compliance
New York, NY 10005 programs and Associate Compliance
Director for the global compliance
program (April 2005-present);
Deputy General Counsel of AXA
Advisors/ AXA Financial
(November 1997 - April 2005).
</TABLE>
26
<PAGE>
TRUSTEES AND OFFICERS OF BBH CORE SELECT
--------------------------------------------------------------------------------
(unaudited)
<TABLE>
<CAPTION>
Term of Number of
Office Funds in
and Fund Other
Position(s) Length Complex Directorships
Name, Birth Date Held with of Time Principal Occupation(s) Overseen by Held by
and Address Trust Served# During Past 5 Years Trustee^ Trustee
-----------------------------------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Sue M. Rim-An Anti-Money Since Anti-Money Laundering Officer, Vice N/A N/A
Birth Date: Laundering 2008 President of BBH & Co. (September
September 10, 1970 Officer 2007 - present); AML Officer at
140 Broadway UBS Investment Bank (April 2006 -
New York, NY 10005 August 2007); AML Officer & Vice
President in Private Client Services
at Bear Stearns & Co (June 1992 -
April 2006).
Gail C. Jones Secretary Since Secretary of the Trust; Counsel, N/A N/A
Birth Date: 2007 ReedSmith, LLP (since October 2002);
October 26, 1953 Corporate Counsel (January 1997 to
1001 Liberty Avenue September 2002) and Vice President
Pittsburgh, PA (January 1999 to September 2002) of
15222-3779 Federated Services Company.
George M. Polatas Vice President Since Vice President of the Trust (since N/A N/A
Birth Date: 2008 June 2008); Assistant Vice President
March 3, 1962 of Federated Services Company; Vice
1001 Liberty Avenue, President of various funds
Pittsburgh, PA distributed by Edgewood Services,
15222-3779 Inc (January 1997 to present).
Theodore J. Boudria Assistant Since Assistant Treasurer of the Trust; N/A N/A
Birth Date: Treasurer 2008 Vice President (since 2003);
June 26, 1968 Assistant Vice President (since
70 Franklin Street September 2000); Joined BBH & Co.
Boston, MA 02110 in 1995.
</TABLE>
----------
# Each Trustee of the Trust holds office until he or she attains the age of
70 (72, in the case of Trustees who were elected as such before January 1,
2000), or until he or she sooner dies, resigns or is removed from office
in accordance with the provisions of the Trust's Declaration of Trust. 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).
^ The Fund Complex consists of the Trust, which has seven series and each is
counted as one "Fund" for purposes of this table.
FINANCIAL STATEMENT OCTOBER 31, 2008 27
<PAGE>
INVESTMENT ADVISER AND ADMINISTRATOR
BROWN BROTHERS HARRIMAN
140 BROADWAY
NEW YORK, NY 10005
DISTRIBUTOR
EDGEWOOD SERVICES, INC.
5800 CORPORATE DRIVE
PITTSBURGH, PA 15237-7000
SHAREHOLDER SERVICING AGENT
BROWN BROTHERS HARRIMAN
140 BROADWAY
NEW YORK, NY 10005
(800) 625-5759
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. Such offering is made only by the prospectus, which includes details as to
offering price and other material information.
The Fund files with the SEC a complete schedule of its portfolio holdings, as of
the close of the first and third quarters of its fiscal year, on "Form N-Q."
Information on Form N-Q is available without charge and upon request by calling
the Funds at the toll-free number listed above. A text only version can be
viewed online or downloaded from the SEC's website at http://www.sec.gov; and
may be reviewed and copied at the SEC's Public Reference Room in Washington, DC
(call 1-800-SEC-0330 for information on the operation of the Public Reference
Room). You may also access this information from the BBH website at BBH.com by
clicking on "BBH Mutual Funds" and selecting "Online Documents/Holdings
Information."
A copy 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 upon request by calling the
toll-free number listed above. This information is also available from the EDGAR
database on the SEC's website at www.sec.gov.
BROWN [LOGO]
BROTHERS
HARRIMAN
BROWN [LOGO]
BROTHERS
HARRIMAN
Annual Report
OCTOBER 31, 2008
----------
BBH INTERNATIONAL EQUITY FUND
<PAGE>
BBH INTERNATIONAL EQUITY FUND
--------------------------------------------------------------------------------
MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE
For the 12-month period ended October 31, 2008, the BBH International Equity
Fund Class N Shares returned -38.30%(1) net of fees, while the Class I Shares
returned -38.12%(1). The Fund's benchmark, MSCI Europe, Australasia Far East
Index(2) (the "EAFE"), returned -46.63% over the same period. The Fund continues
to employ two sub-advisors who are monitored by BBH. One manager, Mondrian
Investment Partners ("Mondrian"), employs a value strategy while the other,
Walter Scott & Partners ("Walter Scott"), employs a growth strategy. New assets
continue to be equally allocated between both managers.
In the trailing 1-year period characterized by volatility, uncertainty in
financial markets, and the global repricing of risk assets, both sub-advisors
have managed to protect capital relative to broader international benchmarks. An
underweight to Financials and an overweight to traditionally defensive sectors
such as Consumer Staples and Health Care have aided this relative performance.
The Fund has also benefited from an underweight position in European businesses
as both managers had seen fundamental weakness in the region and had chosen to
redeploy assets in the Pacific region. Both Mondrian's currency hedges in the
Euro and Sterling and Walter Scott's large position in Japan, both of which had
previously been a drag on relative performance, have materially protected
capital in recent quarters. While the absolute numbers are disappointing as
there have been few places to hide from the global market sell-off, we are
encouraged by each manager's ability to preserve capital relatively well through
active management in quality businesses.
Both managers continued to employ strategies focused on absolute real rates of
return rather than on particular benchmarks. They invest in quality businesses
with clear plans for the future, competitive positions among peers and strong
management teams dedicated to increasing shareholder value. This investment
process allowed the Fund to be defensively positioned as volatility in global
markets continued to increase.
----------
(1) Performance data quoted represents 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.
Mutual Fund performance changes over time and current performance may be
lower or higher than what is stated. For current to the most recent month
end performance and after tax returns, contact the Fund at 1-800-625-5759.
(2) MSCI Europe, Australasia and Far East Index (EAFE): An unmanaged market
capitalization-weight equity index comprising 20 of 48 countries in the
MSCI universe and representing the developed world outside of North
America. Each MSCI country index is created separately, then aggregated,
without change, into regional MSCI indices. EAFE performance data is
calculated in U.S. dollars and in local currency.
2
<PAGE>
BBH INTERNATIONAL EQUITY FUND
--------------------------------------------------------------------------------
MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE (continued)
Growth of $10,000 Invested in BBH International Equity Fund
The graph below illustrates the hypothetical investment of $10,000(1) in the
Class N Shares of the Fund over the ten years ended to October 31, 2008 as
compared to the EAFE.
--------------------------------------------------------------------------------
Total Return for the Period Ended October 31, 2008
--------------------------------------------------------------------------------
Ten
Five Years Years
One Year (Annualized) (Annualized)
--------------------------------------------------------------------------------
Class N (38.30)% 5.47% 3.48%(2)
--------------------------------------------------------------------------------
Class I (38.12)% 5.73% 3.78%
--------------------------------------------------------------------------------
[The following information was depicted as a line chart in the printed material]
International
Date Equity Fund* MSCI-EAFE
---- ------------- ---------
10/31/98 10,000.00 10,000.00
11/30/98 10,743.31 10,512.31
12/31/98 10,879.97 10,927.02
01/31/99 10,959.46 10,894.76
02/28/99 10,919.72 10,635.11
03/31/99 11,486.07 11,079.04
04/30/99 11,843.77 11,527.94
05/31/99 11,496.01 10,934.27
06/30/99 12,151.79 11,360.56
07/30/99 12,499.55 11,698.24
08/31/99 12,509.48 11,740.96
09/30/99 12,658.52 11,859.54
10/31/99 12,956.61 12,304.28
11/30/99 13,761.43 12,731.23
12/31/99 15,791.93 13,874.50
01/31/00 15,032.50 12,993.47
02/29/00 15,667.09 13,342.99
03/31/00 16,156.03 13,860.70
04/30/00 15,407.01 13,131.63
05/31/00 15,032.50 12,811.22
06/30/00 15,739.91 13,312.14
07/31/00 14,959.68 12,754.36
08/31/00 15,022.10 12,865.32
09/30/00 14,345.89 12,238.78
10/31/00 13,825.74 11,949.94
11/30/00 13,274.37 11,501.82
12/31/00 13,625.79 11,910.14
01/31/01 13,552.08 11,904.18
02/28/01 12,467.50 11,011.37
03/31/01 11,635.63 10,276.91
04/30/01 12,488.56 10,991.15
05/31/01 12,035.77 10,603.17
06/30/01 11,582.98 10,169.50
07/31/01 11,151.25 9,984.41
08/31/01 10,761.64 9,731.81
09/30/01 9,434.86 8,745.97
10/31/01 9,824.47 8,969.87
11/30/01 10,171.96 9,300.86
12/31/01 10,224.61 9,355.73
01/31/02 9,655.99 8,858.94
02/28/02 9,677.05 8,920.96
03/31/02 10,098.25 9,403.58
04/30/02 10,140.37 9,465.64
05/31/02 10,214.08 9,585.86
06/30/02 9,908.71 9,204.34
07/31/02 9,003.13 8,295.87
08/31/02 8,971.54 8,276.79
09/30/02 8,044.90 7,387.86
10/31/02 8,455.57 7,784.59
11/30/02 8,771.47 8,138.01
12/31/02 8,456.94 7,864.58
01/31/03 8,119.08 7,536.62
02/28/03 7,950.16 7,364.04
03/31/03 7,844.58 7,219.70
04/30/03 8,340.80 7,927.23
05/31/03 8,742.00 8,407.62
06/30/03 8,837.03 8,611.09
07/31/03 9,037.63 8,819.47
08/31/03 9,132.65 9,032.02
09/30/03 9,269.90 9,310.21
10/31/03 9,797.80 9,890.23
11/30/03 10,019.52 10,109.80
12/31/03 10,738.71 10,899.37
01/31/04 10,983.98 11,053.05
02/29/04 11,207.93 11,308.38
03/31/04 11,399.88 11,371.71
04/30/04 11,058.63 11,114.71
05/31/04 11,047.96 11,152.50
06/30/04 11,346.56 11,396.74
07/31/04 11,197.26 11,026.34
08/31/04 11,175.93 11,074.86
09/30/04 11,357.22 11,363.91
10/31/04 11,698.47 11,751.42
11/30/04 12,274.33 12,554.04
12/31/04 12,756.88 13,105.17
01/31/05 12,477.45 12,864.03
02/28/05 13,014.81 13,419.76
03/31/05 12,746.13 13,082.92
04/30/05 12,477.45 12,775.47
05/31/05 �� 12,488.20 12,781.86
06/30/05 12,638.66 12,951.86
07/31/05 12,971.82 13,349.48
08/31/05 13,423.20 13,687.22
09/30/05 14,014.30 14,296.30
10/31/05 13,530.67 13,878.85
11/30/05 13,810.10 14,218.88
12/31/05 14,504.42 14,880.06
01/31/06 15,365.96 15,793.70
02/28/06 15,278.72 15,758.95
03/31/06 15,682.23 16,279.00
04/30/06 16,467.43 17,057.13
05/31/06 15,824.00 16,395.32
06/30/06 15,845.81 16,393.68
07/31/06 16,129.36 16,555.97
08/31/06 16,467.43 17,011.26
09/30/06 16,543.77 17,038.48
10/30/06 17,078.14 17,701.28
11/30/06 17,514.36 18,230.55
12/31/06 17,958.02 18,802.99
01/31/07 17,902.08 18,930.85
02/28/07 18,002.78 19,084.19
03/31/07 18,450.33 19,570.83
04/30/07 18,931.45 20,439.78
05/31/07 19,356.62 20,799.52
06/30/07 19,401.38 20,824.48
07/31/07 18,942.64 20,518.36
08/31/07 19,054.52 20,198.27
09/30/07 19,882.49 21,278.88
10/31/07 20,732.84 22,115.14
11/30/07 20,285.29 21,387.55
12/31/07 19,779.68 20,906.33
01/31/08 18,313.20 18,974.59
02/29/08 18,253.58 19,245.92
03/31/08 18,265.51 19,043.84
04/30/08 19,028.56 20,077.92
05/31/08 19,362.39 20,272.68
06/30/08 17,848.21 18,614.37
07/31/08 17,192.47 18,016.85
08/31/08 16,787.10 17,287.17
09/30/08 15,332.53 14,787.44
10/31/08 12,793.01 11,803.34
* net of fees and expenses
Performance 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. Mutual 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 current to the most recent month end performance and after tax
returns, contact the Fund at 1-800-625-5759.
----------
(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.
(2) The BBH International Equity Fund commenced operations on June 6, 1997.
Performance prior to June 6, 1997 is that of the BBH International Equity
Portfolio. Adjusted to assume that all charges, expenses and fees of the
Class N shares and the Portfolio which are presently in effect were
deducted during such periods, as permitted by applicable SEC staff
interpretations. The Class N shares' performance from June 6, 1997
(commencement of operations) to October 31, 2008 was 2.34%.
FINANCIAL STATEMENT OCTOBER 31, 2008 3
<PAGE>
BBH INTERNATIONAL EQUITY FUND
--------------------------------------------------------------------------------
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Trustees of the BBH Trust and Shareholders of
BBH International Equity Fund:
We have audited the accompanying statement of assets and liabilities, including
the portfolio of investments, of BBH International Equity Fund (a series of BBH
Trust) (the "Fund") as of October 31, 2008, and 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, and the financial highlights for
each of the five years in the period then ended. These financial statements and
financial highlights are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). 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. The Fund
is not required to have, nor were we engaged to perform, an audit of its
internal control over financial reporting. Our audit included consideration of
internal control over financial reporting as a basis for designing audit
procedures that are appropriate in the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of the Fund's internal control over
financial reporting. Accordingly, we express no such opinion. An audit also
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. Our procedures included confirmation
of securities owned as of October 31, 2008, by correspondence with the custodian
and brokers; where replies were not received from brokers, we performed other
auditing procedures. We believe that our audits provide a reasonable basis for
our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of BBH
International Equity Fund as of October 31, 2008, 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.
Deloitte & Touche LLP
Boston, Massachusetts
December 22, 2008
4
<PAGE>
BBH INTERNATIONAL EQUITY FUND
--------------------------------------------------------------------------------
PORTFOLIO ALLOCATION
October 31, 2008 (unaudited)
COUNTRY DIVERSIFICATION
Percent of
U.S. $ Value Net Assets
------------ ----------
Australia......................................... $ 27,276,563 6.2%
Belgium........................................... 361,725 0.1
Finland........................................... 2,839,499 0.7
France............................................ 41,206,732 9.4
Germany........................................... 20,581,734 4.7
Hong Kong......................................... 26,637,542 6.1
Italy............................................. 7,146,177 1.6
Japan............................................. 152,702,670 34.9
Netherlands....................................... 10,135,061 2.3
New Zealand....................................... 1,313,849 0.3
Singapore......................................... 9,648,659 2.2
South Africa...................................... 1,826,291 0.4
Spain............................................. 19,162,299 4.4
Sweden............................................ 6,037,371 1.4
Switzerland....................................... 29,753,334 6.8
Taiwan............................................ 5,224,380 1.2
United Kingdom................................... 69,954,976 16.0
Short-Term Investment.......................... 2,500,000 0.6
Cash and Other Assets in Excess of Liabilities.... 3,251,881 0.7
------------ -----
NET ASSETS........................................ $437,560,743 100.0%
======== ====
All data as of October 31, 2008. The Fund's country 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 STATEMENT OCTOBER 31, 2008 5
<PAGE>
BBH INTERNATIONAL EQUITY FUND
--------------------------------------------------------------------------------
PORTFOLIO ALLOCATION
October 31, 2008 (unaudited)
SECTOR DIVERSIFICATION
Percent of
U.S. $ Value Net Assets
- ------------ ----------
Consumer Discretionary............................ $ 35,924,654 8.2%
Consumer Staples.................................. 70,265,384 16.1
Diversified Operations............................ 7,715,812 1.8
Electronics....................................... 2,936,868 0.7
Energy............................................ 39,825,572 9.1
Finance........................................... 65,093,774 14.9
Health Care....................................... 70,212,610 16.1
Industrials....................................... 36,738,316 8.3
Information Technology............................ 16,544,617 3.8
Materials......................................... 16,533,219 3.8
Telecommunication Services........................ 42,159,988 9.5
Utilities......................................... 27,858,048 6.4
Short-Term Investment............................. 2,500,000 0.6
Cash and Other Assets in Excess of Liabilities.... 3,251,881 0.7
- ------------ -----
NET ASSETS........................................ $437,560,743 100.0%
========== ====
All data as of October 31, 2008. 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
<PAGE>
BBH INTERNATIONAL EQUITY FUND
--------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
October 31, 2008
Shares Value
---------- ------------
COMMON STOCKS (98.7%)
AUSTRALIA (6.2%)
CONSUMER STAPLES
1,427,762 Foster's Group, Ltd................................. $ 5,399,893
105,169 Wesfarmers, Ltd..................................... 1,491,467
------------
6,891,360
- ------------
ENERGY
191,041 Woodside Petroleum, Ltd............................. 5,331,029
------------
FINANCE
480,000 Lend Lease Corp., Ltd............................... 2,220,542
277,519 National Australia Bank, Ltd........................ 4,468,076
------------
6,688,618
------------
MATERIALS
528,539 Amcor, Ltd.......................................... 2,027,714
------------
TELECOMMUNICATION SERVICES
2,326,707 Telstra Corp., Ltd.................................. 6,337,842
------------
Total Australia..................................... 27,276,563
------------
BELGIUM (0.1%)
FINANCE
305,017 Fortis.............................................. 360,300
112,376 Fortis NPV(1)....................................... 1,425
------------
Total Belgium....................................... 361,725
------------
FINLAND (0.7%)
MATERIALS
201,489 UPM-Kymmene Oyj..................................... 2,839,499
------------
Total Finland....................................... 2,839,499
------------
FRANCE (9.4%)
CONSUMER DISCRETIONARY
70,484 Renault SA.......................................... 2,152,923
------------
CONSUMER STAPLES
123,944 Carrefour SA........................................ 5,210,100
40,000 Groupe Danone....................................... 2,206,611
45,000 L'Oreal SA.......................................... 3,383,917
------------
10,800,628
�� ------------
The accompanying notes are an integral part of these financial statements.
FINANCIAL STATEMENT OCTOBER 31, 2008 7
<PAGE>
BBH INTERNATIONAL EQUITY FUND
--------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS (continued)
October 31, 2008
Shares Value
---------- ------------
COMMON STOCKS (continued)
FRANCE (continued)
DIVERSIFIED OPERATIONS
61,000 LVMH Moet Hennessy Louis Vuitton SA................. $ 4,048,527
------------
ENERGY
141,783 Total SA............................................ 7,746,464
------------
FINANCE
64,875 Societe Generale.................................... 3,543,395
------------
HEALTH CARE
110,000 Essilor International SA............................ 4,912,958
------------
INDUSTRIALS
66,764 Compagnie de Saint-Gobain........................... 2,564,422
------------
TELECOMMUNICATION SERVICES
216,613 France Telecom SA................................... 5,437,415
- ------------
Total France........................................ 41,206,732
- ------------
GERMANY (4.7%)
CONSUMER DISCRETIONARY
97,000 Adidas AG........................................... 3,376,020
------ - ------
INFORMATION TECHNOLOGY
128,000 SAP AG.............................................. 4,527,018
------------
TELECOMMUNICATION SERVICES
350,859 Deutsche Telekom AG................................. 5,194,916
------------
UTILITIES
90,491 RWE AG.............................................. 7,483,780
------------
Total Germany....................................... 20,581,734
------------
HONG KONG (6.1%)
DIVERSIFIED OPERATIONS
670,000 Hutchison Whampoa, Ltd.............................. 3,667,285
------------
ENERGY
5,460,000 CNOOC, Ltd.......................................... 4,471,618
------------
FINANCE
942,500 Wharf Holdings, Ltd................................. 1,850,986
60; ------------
The accompanying notes are an integral part of these financial statements.
8
<PAGE>
BBH INTERNATIONAL EQUITY FUND
--------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS (continued)
October 31, 2008
Shares Value
---------- ------------
COMMON STOCKS (continued)
HONG KONG (continued)
TELECOMMUNICATION SERVICES
480,000 China Mobile, Ltd................................... $ 4,211,440
------------
UTILITIES
700,000 CLP Holdings, Ltd................................... 4,753,203
2,700,000 Hong Kong & China Gas Co., Ltd...................... 4,773,008
539,000 Hongkong Electric Holdings.......................... 2,910,002
------------
12,436,213
- ------------
Total Hong Kong..................................... 26,637,542
------------
ITALY (1.6%)
FINANCE
1,427,436 Intesa Sanpaolo SpA................................. 5,197,163
801,538 UniCredito Italiano SpA............................. 1,949,014
------------
Total Italy......................................... 7,146,177
------------
JAPAN (34.9%)
CONSUMER DISCRETIONARY
194,000 Denso Corp.......................................... 3,836,913
185,000 Honda Motor Co., Ltd................................ 4,601,620
275,000 Sekisui House, Ltd.................................. �� 2,792,219
114,600 Toyota Motor Corp................................... 4,524,623
------------
15,755,375
------------
CONSUMER STAPLES
272,000 Hoya Corp........................................... 5,049,577
262,000 Kao Corp............................................ 7,585,384
202,400 Seven & I Holdings Co., Ltd......................... 5,677,334
43,000 Shimamura Co., Ltd.................................. 2,984,095
------------
21,296,390
------------
FINANCE
210,000 Aeon Mall Co., Ltd.................................. 5,143,788
135,000 Daito Trust Construction Co., Ltd................... 5,680,229
301,000 Mitsubishi Estate Co., Ltd.......................... 5,306,436
339,700 Tokio Marine Holdings, Inc.......................... 10,612,252
------------
26,742,705
------------
The accompanying notes are an integral part of these financial statements.
FINANCIAL STATEMENT OCTOBER 31, 2008 9
<PAGE>
BBH INTERNATIONAL EQUITY FUND
--------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS (continued)
October 31, 2008
Shares Value
---------- ------------
COMMON STOCKS (continued)
JAPAN (continued)
HEALTH CARE
244,500 Astellas Pharma, Inc................................ $ 10,010,834
240,000 Chugai Pharmaceutical Co., Ltd...................... 3,403,211
126,000 Eisai Co., Ltd...................................... 4,148,251
289,400 Takeda Pharmaceutical Co., Ltd...................... 14,607,315
------------
32,169,611
------------
INDUSTRIALS
173,000 Advantest Corp...................................... 2,538,370
140,000 Daikin Industries, Ltd.............................. 3,151,247
72,000 Fanuc, Ltd.......................................... 4,894,209
35,600 Hirose Electric Co., Ltd............................ 3,116,930
30,450 Keyence Corp........................................ 5,889,246
137,000 Secom Co., Ltd...................................... 5,311,179
658 West Japan Railway Co............................... 2,918,261
------------
27,819,442
------------
INFORMATION TECHNOLOGY
348,700 Canon, Inc.......................................... 12,017,599
------------
MATERIALS
239,300 Nitto Denko Corp.................................... 5,271,688
122,000 Shin-Etsu Chemical Co., Ltd......................... 6,394,318
------------
11,666,006
------------
TELECOMMUNICATION SERVICES
875 KDDI Corp........................................... 5,235,542
------------
Total Japan......................................... 152,702,670
- ------------
NETHERLANDS (2.3%)
CONSUMER DISCRETIONARY
311,571 Reed Elsevier NV.................................... 4,147,161
------------
CONSUMER STAPLES
134,000 Heineken Holding NV................................. 4,047,971
60; - ------------
FINANCE
210,926 ING Groep NV........................................ 1,939,929
�� ------------
Total Netherlands................................... 10,135,061
------------
The accompanying notes are an integral part of these financial statements.
10
<PAGE>
BBH INTERNATIONAL EQUITY FUND
--------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS (continued)
October 31, 2008
Shares Value
---------- ------------
COMMON STOCKS (continued)
NEW ZEALAND (0.3%)
TELECOMMUNICATION SERVICES
951,924 Telecom Corp. of New Zealand, Ltd................... $ 1,313,849
------------
Total New Zealand................................... 1,313,849
------------
SINGAPORE (2.2%)
FINANCE
450,000 DBS Group Holdings, Ltd............................. 3,443,382
588,200 Oversea-Chinese Banking Corp., Ltd.................. 1,971,882
------------
60; 5,415,264
60; ------------
INDUSTRIALS
90,000 Jardine Matheson Holdings, Ltd...................... 2,132,884
60; ------------
TELECOMMUNICATION SERVICES
1,249,000 Singapore Telecommunications, Ltd................... 2,100,511
------------
Total Singapore..................................... 9,648,659
------------
SOUTH AFRICA (0.4%)
ENERGY
61,481 Sasol, Ltd.......................................... 1,826,291
60; - ------------
Total South Africa................................ 1,826,291
------------
SPAIN (4.4%)
CONSUMER DISCRETIONARY
125,000 Inditex SA.......................................... 4,200,705
------------
FINANCE
419,343 Banco Santander Central Hispano SA.................. 4,511,986
60; - ------------
TELECOMMUNICATION SERVICES
377,850 Telefonica SA....................................... 6,952,422
- ------------
UTILITIES
485,905 Iberdrola SA........................................ 3,497,186
60; ------------
Total Spain......................................... 19,162,299
------------
SWEDEN (1.4%)
CONSUMER DISCRETIONARY
82,000 Hennes & Mauritz AB (B Shares)...................... 2,948,832
60; ------------
The accompanying notes are an integral part of these financial statements.
FINANCIAL STATEMENT OCTOBER 31, 2008 11
<PAGE>
BBH INTERNATIONAL EQUITY FUND
--------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS (continued)
October 31, 2008
Shares Value
---------- ------------
COMMON STOCKS (continued)
SWEDEN (continued)
TELECOMMUNICATION SERVICES
439,800 Telefonaktiebolaget LM Ericsson (B Shares).......... $ 3,088,539
60; - ------------
Total Sweden........................................ 6,037,371
- ------------
SWITZERLAND (6.8%)
CONSUMER STAPLES
145,000 Nestle SA........................................... 5,618,111
------------
HEALTH CARE
32,600 Alcon, Inc.......................................... 2,872,712
187,000 Nobel Biocare Holding AG............................ 3,198,757
275,274 Novartis AG......................................... 13,842,186
60; ------------
19,913,655
60; ------------
�� INDUSTRIALS
4,300 SGS SA.............................................. 4,221,568
60; ------------
Total Switzerland................................... 29,753,334
------------
TAIWAN (1.2%)
ELECTRONICS
355,553 Taiwan Semiconductor Manufacturing Co., Ltd. ADR.... 2,936,868
------------
TELECOMMUNICATION SERVICES
138,974 Chunghwa Telecom Co., Ltd. ADR...................... 2,287,512
------------
Total Taiwan........................................ 5,224,380
60; - ------------
UNITED KINGDOM (16.0%)
CONSUMER DISCRETIONARY
498,042 Compass Group, Plc.................................. 2,338,688
518,905 GKN, Plc............................................ 1,004,950
------------
60; 3,343,638
------------
CONSUMER STAPLES
116,000 Reckitt Benckiser, Plc.............................. 4,893,959
770,000 Tesco, Plc.......................................... 4,224,791
315,128 Unilever, Plc....................................... 7,131,390
1,250,000 WM Morrison Supermarkets, Plc....................... 5,360,784
------------
21,610,924
------------
The accompanying notes are an integral part of these financial statements.
12
<PAGE>
BBH INTERNATIONAL EQUITY FUND
--------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS (continued)
October 31, 2008
Shares Value
---------- - ------------
COMMON STOCKS (continued)
UNITED KINGDOM (continued)
ENERGY
531,429 BG Group, Plc....................................... $ 7,847,318
704,699 BP, Plc............................................. 5,845,595
246,517 Royal Dutch Shell, Plc.............................. 6,757,257
------------
20,450,170
------------
FINANCE
285,167 Aviva, Plc.......................................... 1,716,430
731,237 HBOS, Plc........................................... 1,196,296
799,687 Lloyds TSB Group, Plc............................... 2,606,489
1,240,929 Royal Bank of Scotland Group, Plc................... 1,373,774
60;------------
60; 6,892,989
------------
HEALTH CARE
683,071 GlaxoSmithKline, Plc................................ 13,216,386
------------
UTILITIES
900,000 Centrica, Plc....................................... 4,440,869
------------
Total United Kingdom................................ 69,954,976
------------
TOTAL COMMON STOCKS (Identified cost $516,767,015).. 431,808,862
------------
Principal
Amount
----------
SHORT-TERM INVESTMENT (0.6%)
$2,500,000 Royal Bank of Canada Time Deposit 0.100% 11/03/08... 2,500,000
------------
TOTAL SHORT-TERM INVESTMENT
(Identified cost $2,500,000)........................ 2,500,000
------------
TOTAL INVESTMENTS (Identified cost $519,267,015(2))...... 99.3% $434,308,862
CASH AND OTHER ASSETS IN EXCESS OF LIABILITIES........... 0.7 3,251,881
- ------ ------------
NET ASSETS............................................... 100.0% $437,560,743
====== ==========
----------
(1) Non-income producing security.
(2) The aggregate cost for federal income tax purposes is $521,100,523. The
aggregate gross unrealized appreciation is $59,976,818 and the aggregate
gross unrealized depreciation is $146,768,479, resulting in net unrealized
depreciation of $86,791,661.
The accompanying notes are an integral part of these financial statements.
FINANCIAL STATEMENT OCTOBER 31, 2008 13
<PAGE>
BBH INTERNATIONAL EQUITY FUND
--------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
October 31, 2008
ASSETS:
Investments in securities, at value
(identified cost $519,267,015) .......................... $ 434,308,862
Foreign currency, at value (identified cost $26) ......... 26
Receivables for:
Investment sold ........................................ 3,318,463
Dividends and interest ................................. 2,192,570
Capital stock sold ..................................... 180,000
Other receivables ...................................... 1,413
-------------
Total Assets ......................................... 440,001,334
- -------------
LIABILITIES:
Due to Brown Brothers Harriman ........................... 411,651
Payables for:
Capital stock redeemed ................................. 1,416,531
Investment advisory and administrative fees ............ 297,916
Custody and accounting fees ............................ 122,428
Shareholder servicing fees ............................. 88,442
Professional fees ...................................... 38,300
Board of Trustees' fees ................................ 208
Accrued expenses and other liabilities ................. 65,115
------ - -------
Total Liabilities .................................... 2,440,591
-------------
NET ASSETS .................................................. $ 437,560,743
=========
Net Assets Consist of:
Par value ................................................ $ 40,755
Paid-in capital .......................................... 499,166,541
Undistributed net investment income ...................... 13,233,363
Accumulated net realized gain on investments and
foreign exchange transactions .......................... 10,044,623
Net unrealized depreciation on investments and
foreign currency translations .......................... (84,924,539)
-------------
Net Assets .................................................. $ 437,560,743
=========
NET ASSET VALUE AND OFFERING PRICE PER SHARE
CLASS N SHARES
($411,465,028 / 38,333,135 shares outstanding) ........... $10.73
=====
CLASS I SHARES
($26,095,715 / 2,422,189 shares outstanding) ............. $10.77
=====
The accompanying notes are an integral part of these financial statements.
14
<PAGE>
BBH INTERNATIONAL EQUITY FUND
--------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
For the year ended October 31, 2008
NET INVESTMENT INCOME:
Income:
Dividends and other income
(net of foreign withholding taxes of $2,180,533) ....... $ 20,357,542
Interest Income .......................................... 229,599
Securities Lending Income ................................ 32,519
- -------------
Total Income ........................................... 20,619,660
-------------
Expenses:
Investment advisory and administrative fees .............. 5,121,907
Shareholder servicing fees ............................... 1,508,607
Custody and accounting fees .............................. 409,473
Board of Trustees' fees .................................. 43,432
Professional fees ........................................ 24,556
Miscellaneous expenses ................................... 58,412
-------------
Total Expenses ......................................... 7,166,387
Expense offset arrangement ............................. (24,858)
-------------
Net Expenses ........................................... 7,141,529
-------------
Net Investment Income ...................................... 13,478,131
-------------
NET REALIZED AND UNREALIZED LOSS:
Net realized gain on investments ........................... 10,027,588
Net realized gain on foreign exchange transactions ......... 4,157,414
-------------
Net realized gain on investments and
foreign exchange transactions .......................... 14,185,002
Net change in unrealized depreciation on investments ....... (276,782,141)
Net change in unrealized depreciation on
foreign currency translations .......................... (36,840,495)
-------------
Net change in unrealized depreciation on investments
and foreign currency translations ...................... (313,622,636)
-------------
Net Realized and Unrealized Loss ...................... (299,437,634)
-------------
Net Decrease in Net Assets Resulting from Operations ....... $(285,959,503)
========
The accompanying notes are an integral part of these financial statements.
FINANCIAL STATEMENT OCTOBER 31, 2008 15
<PAGE>
BBH INTERNATIONAL EQUITY FUND
--------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
For the years ended October 31
------------------------------
2008 2007
------------- -------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
Operations:
Net investment income .................................. 13,478,131 $ 10,709,451
Net realized gain on investments and
foreign exchange transactions ........................ 4,185,002 31,121,732
Net change in unrealized appreciation (depreciation)
on investments and foreign currency translations ..... (313,622,636) 83,442,888
------------- - ------------
Net increase (decrease) in net
assets resulting from operations ..................... 285,959,503) 125,274,071
- ------------- ------------
Dividends and distributions declared:
From net investment income:
Class N ................................................ (10,352,578) (8,234,635)
Class I ................................................ (762,747) (723,263)
From net realized gains
Class N ................................................ (29,955,831) (5,732,846)
Class I ................................................ (1,916,194) (440,337)
- ------------ - -------------
Total dividends and distributions declared ........... (42,987,350) (15,131,081)
------------- -------------
Capital stock transactions:
Net proceeds from sales of capital stock ............... 105,933,541 125,535,007
Net asset value of capital stock issued to shareholders
for reinvestment of dividends and distributions ...... 1,288,415 325,815
Net cost of capital stock redeemed ..................... (85,445,720) (54,902,468)
- ------------- ------------
Net increase in net assets resulting from
capital stock transactions ......................... 21,776,236 70,958,354
- ------------ ------------
Total increase (decrease) in net assets .............. (307,170,617) 181,101,344
NET ASSETS:
Beginning of year ........................................ 744,731,360 563,630,016
------------- -------------
End of period (including undistributed net investment
income of $13,233,363 and $7,361,552, respectively) ... $ 437,560,743 $ 744,731,360
========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
16
<PAGE>
BBH INTERNATIONAL EQUITY FUND
--------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
Selected per share data and ratios for a Class N share outstanding throughout
each year
<TABLE>
<CAPTION>
For the years ended October 31,
---------------------------------------------------------------------
2008 2007 2006 2005 2004
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year .......... $ 18.53 $ 15.71 $ 12.59 $ 10.96 $ 9.28
-------- -------- -------- -------- --------
Income from investment operations:
Net investment income(1) ................. 0.32 0.28 0.25 0.18 0.14
Net realized and unrealized gain (loss) .. (7.06) 2.95 3.07 1.54 1.64
-------- -------- -------- -------- - --------
Total income from investment operations (6.74) 3.23 3.32 1.72 1.78
-------- -------- -------- -------- --------
Less dividends and distributions:
From net investment income ............... (0.27) (0.24) (0.20) (0.09) (0.10)
From net realized gains .................. (0.79) (0.17) -- -- - --
-------- -------- -------- -------- --------
Total dividends and distributions ...... (1.06) (0.41) (0.20) (0.09) (0.10)
-------- -------- -------- -------- --------
Net asset value, end of year ................ $ 10.73 $ 18.53 $ 15.71 $ 12.59 $ 10.96
�� ======== ======== ======== ======== ========
Total return ................................ (38.30)% 21.01% 26.62% 15.77% 19.29%
Ratios/Supplemental data:
Net assets, end of year (in millions) .... $ 412 $ 700 $ 524 $ 356 $ 211
Expenses as a percentage
of average net assets .................. 1.13%(2) 1.17%(2) 1.11%(2) 1.23% 1.30%
Ratio of net investment income to
average net assets ..................... 2.09% 1.64% 1.76% 1.49% 1.34%
Portfolio turnover rate .................. 19% 16% 10% 5% 81%
</TABLE>
----------
(1) Calculated using average shares outstanding for the year.
(2) The ratio of expenses to average net assets for the years ended October 31,
2008, 2007 and 2006 reflect fees reduced as a result of an expense offset
arrangement with the Fund's custodian. Had this arrangement not been in
place, this ratio would have been 1.13%, 1.17%, and 1.17%, respectively.
The accompanying notes are an integral part of these financial statements.
FINANCIAL STATEMENT OCTOBER 31, 2008 17
<PAGE>
BBH INTERNATIONAL EQUITY FUND
--------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS (continued)
Selected per share data and ratios for a Class I share outstanding throughout
each year
<TABLE>
<CAPTION>
For the years ended October 31,
----------------------------------------------------------------------
2008 2007 2006 2005 2004
-------- - -------- - -------- - -------- --------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year ........ $ 18.59 $ 15.76 $ 12.62 $ 10.98 $ 9.30
Income from investment operations:
Net investment income(1) ............... 0.35 0.32 0.29 0.21 0.14
Net realized and unrealized gain (loss) (7.07) 2.96 3.07 1.54 1.66
-------- -------- -------- -------- -------
Total income (loss) from
investment operations .............. (6.72) 3.28 3.36 1.75 1.80
- -------- -------- -------- -------- -------
Less dividends and distributions:
From net investment income ............. (0.31) (0.28) (0.22) (0.11) (0.12)
From net realized gains ................ (0.79) (0.17) -- -- --
-------- -------- -------- -------- -------
Total dividends and distributions .... (1.10) (0.45) (0.22) (0.11) (0.12)
-------- -------- -------- -------- --------
Net asset value, end of year .............. $ 10.77 $ 18.59 $ 15.76 $ 12.62 $ 10.98
====== ===== ===== ===== =====
Total return .............................. (38.12)% 21.28% 26.98% 16.05% 19.54%
Ratios/Supplemental data:
Net assets, end of year (in millions) .. $ 26 $ 45 $ 40 $ 34 $ 27
Expenses as a percentage of
average net assets ................... 0.88%(2) 0.91%(2) 0.87%(2) 0.98% 1.05%
Ratio of net investment income
to average net assets ................ 2.32% 1.87% 2.02% 1.73% 1.33%
Portfolio turnover rate ................ 19% 16% 10% 5% 81%
</TABLE>
----------
(1) Calculated using average shares outstanding for the year.
(2) The ratio of expenses to average net assets for the years ended October 31,
2008, 2007 and 2006 reflect fees reduced as a result of an expense offset
arrangement with the Fund's custodian. Had this arrangement not been in
place, this ratio would have been 0.88%, 0.91%, 0.94%, respectively.
The accompanying notes are an integral part of these financial statements.
18
<PAGE>
BBH INTERNATIONAL EQUITY FUND
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
October 31, 2008
1. Organization and Significant Accounting Policies. BBH International Equity
Fund (the "Fund") is a separate diversified series of BBH Trust (the
"Trust"), which is registered under the Investment Company Act of 1940, as
amended 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. On February
20, 2001, the Trustees reclassified the Fund's outstanding shares as
"Class N," and established a new class of shares designated as "Class I".
Class I commenced operations on October 30, 2002. Class N and Class I
shares have different operating expenses. Neither Class N shares nor Class
I shares convert to any other class of the Fund. At October 31, 2008 there
were seven series of the Trust.
The Fund's financial statements are prepared in accordance with accounting
principles generally accepted in the United States of America, which
require management to make certain estimates and assumptions at the date
of the financial statements and are based, in part, on the following
accounting policies. Actual results could differ from those estimates.
A. Valuation of Investments. The BBH International Equity Fund employs
a pricing vendor (ITG Inc.) that uses a fair valuation model to
establish daily valuations of portfolio securities. The model looks
at each security in the portfolio and determines the correlation
between the security and a set of market factors, such as the price
of ADRs, futures, exchange-traded funds, and the U.S. market as
measured by the 1000 largest domestic stocks. The model evaluates
the security's beta compared to these factors to determine which
factor should be used in determining its fair value. The model
analyzes data for the past 90 days for each factor. The model then
determines the difference between the price of the factor at the
local market close versus the price at 4 p.m. Eastern Time to
calculate a percentage by which the closing price should be adjusted
to reflect its fair value. If ITG is unable to price a security, the
security will be priced in accordance with the Manual Pricing
Procedures.
B. Accounting for Investments and Income. Security transactions are
accounted for on the trade date. Realized gains and losses on
security transactions are determined on the identified cost method.
Dividend income and other distributions 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. Distributions received on securities that
represent a return of capital or a capital gain are recorded as a
reduction of cost of investments and/or as a realized gain. Interest
income is accrued daily. Investment income is recorded net of
foreign taxes withheld where recovery of such tax is uncertain.
FINANCIAL STATEMENT OCTOBER 31, 2008 19
<PAGE>
BBH INTERNATIONAL EQUITY FUND
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (continued)
October 31, 2008
C. 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 hedge
the U.S. dollar value of portfolio 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 currency exchange rates supplied by a quotation service.
D. 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 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 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. 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 fiscal year
end, arising from changes in the exchange rate.
E. Restricted Securities. The Fund may invest in securities that are
subject to legal or contractual restrictions on resale. These
securities generally may be resold in transactions exempt from
registration or to the public if the securities are registered.
Disposal of these securities may involve time-consuming negotiations
and expense, and prompt sale at an acceptable price may be
difficult.
F. Securities Lending. The Fund may lend its portfolio securities to
broker-dealers, qualified banks and certain institutional investors.
The loans are secured by collateral in an amount equal to at least
the market value at all times of the loaned securities plus any
accrued interest and dividends. During the time the securities are
on loan, the Fund will continue to receive the interest and
dividends or amounts equivalent thereto, on the loaned securities
while receiving a fee from the borrower or earning interest on the
investment of the cash collateral. Loans are subject to termination
at the option of the borrower or the Fund. Upon termination of the
loan, the borrower will return to the lender securities identical to
the loaned securities. The Fund may pay reasonable
20
<PAGE>
BBH INTERNATIONAL EQUITY FUND
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (continued)
October 31, 2008
finders', administrative and custodial fees in connection with a
loan of its securities and may share the interest earned on the
collateral with the borrower. The Fund bears the risk of delay in
recovery of, or even loss of rights in, the securities loaned should
the borrower of the securities fail financially.
G. Federal Income Taxes. It is the Trustees policy to comply with the
requirements of the Internal Revenue Code (the "Code") applicable to
regulated investment companies and to distribute 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 accounting principles generally accepted in the
United States of America, the basis on which these financial
statements are prepared. Accordingly, the amount of net investment
income and net realized gain reported on 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 carry
forwards and the recognition of unrealized gains or losses on open
forward foreign currency exchange contracts and passive foreign
investment companies at year end. 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 on 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.
H. Dividends and Distributions to Shareholders. Dividends and
distributions to shareholders, if any, are generally declared and
paid annually and are recorded on the ex-dividend date. The tax
character of distributions paid during the fiscal years ended
October 31, 2008 and 2007, respectively, were as follows:
Distributions paid from:
- --------------------------------------------------------------------------------
Total
Ordinary Net long term Total taxable Tax return distributions
income capital gain distributions of capital paid
-------- ------------- - ------------- ---------- - -------------
2008: $15,365,734 $27,621,616 $42,987,350 -- $42,987,350
2007: 8,957,898 6,173,183 15,131,081 -- 15,131,081
FINANCIAL STATEMENT OCTOBER 31, 2008 21
<PAGE>
BBH INTERNATIONAL EQUITY FUND
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (continued)
October 31, 2008
As of October 31, 2008 and 2007, respectively, the components of
accumulated earnings/(deficit) on a tax basis were as follows:
<TABLE>
<CAPTION>
Components of accumulated earnings/(deficit):
-------------------------------------------------------------------------------------------------
Other Total
Undistributed Undistributed Accumulated Book/Tax Unrealized accumulated
ordinary long-term Accumulated capital and temporary appreciation/ earnings/
income capital gain earnings other losses differences (depreciation) (deficit)
------------- ------------- - ----------- - ------------ ----------- -------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
2008: $13,233,363 $11,878,130 $25,111,493 -- $(1,833,508) $(84,924,539) $(61,646,554)
2007: 14,994,642 27,620,467 42,615,109 -- (4,012,906) 228,698,097 267,300,300
</TABLE>
Total distributions paid may differ from the Statement 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.
I. Accounting Developments. In June 2006, the Fund adopted FASB
Interpretation No. 48 "Accounting for Uncertainty in Income Taxes"
("FIN 48"). FIN 48 provides guidance for how uncertain tax positions
should be recognized, measured, presented and disclosed in the
financial statements. FIN 48 requires the evaluation of tax
positions taken or expected to be taken in the course of preparing
the Fund's tax returns to determine whether that tax positions are
"more-likely-than-not" of being sustained by the applicable tax
authority. Tax positions not deemed to meet the more-likely-than-not
threshold would be recorded as a tax benefit or expense in the
current year. The adoption of FIN 48 had no impact on the operations
of the Fund for the year ended October 31, 2008.
In September 2006, Statement of Financial Accounting Standards No.
157, "Fair Value Measurements" ("SFAS 157"), was issued and is
effective for fiscal years and interim periods beginning after
November 15, 2007. SFAS 157 defines fair value, establishes a
framework for measuring fair value and expands disclosures about
fair value measurements. Management is currently evaluating the
implication of SFAS 157. At this time its impact on the Fund's
financial statements has not yet been determined.
In March 2008, Statement of Financial Accounting Standards No. 161,
"Disclosures about Derivative Instruments and Hedging Activities"
("SFAS 161"), was issued and is effective for fiscal years and
interim periods beginning after November 15, 2008. SFAS 161 requires
enhanced disclosures to provide information about the reasons the
Fund invests in derivative instruments, the accounting treatment and
the effect derivatives have on performance. Management is currently
evaluating the impact the adoption of SFAS 161 will have on the
Fund's financial statement disclosures.
22
<PAGE>
BBH INTERNATIONAL EQUITY FUND
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (continued)
October 31, 2008
2. Transactions with Affiliates.
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")
provides investment advice, portfolio management and administrative
services to the Fund. BBH receives a combined fee from the Fund for
investment advisory and administrative services calculated daily and paid
monthly at an annual rate equivalent to 0.80% of the Fund's average daily
net assets. BBH has a sub-administration services agreement with Federated
Services Company ("FSC") for which FSC receives compensation paid by BBH.
For the year ended October 31, 2008, the Fund incurred $5,121,907 for
investment advisory and administrative services.
Shareholder Servicing Fees. The Trustee has a shareholder servicing
agreement with BBH for which BBH receives a fee from the Fund calculated
daily and paid monthly at an annual rate of 0.25% of Class N shares'
average daily net assets. For the year ended October 31, 2008, the Fund
incurred $1,508,607 for shareholder servicing services.
Custody and Accounting Fees. BBH acts as a custodian and shall receive a
custody and accounting fee from the Fund calculated daily and paid
monthly. BBH holds all cash and investments and calculates the daily net
asset value. The custody fee is a transaction based fee with an annual
minimum of $30,000, and the accounting fee is calculated at 0.04% per
annum on the first $100 million of net assets, 0.02% per annum on the next
$400 million of net assets and 0.01% per annum on all net assets over $500
million. For the year ended October 31, 2008, the Fund incurred $409,473
for custody and accounting services. These fees were reduced by $24,858 as
a result of an expense offset arrangement with the Fund's custodian. 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 overdraft. As of October 31, 2008 the Fund
had $411,651 outstanding under such arrangements. The total interest paid
by the Fund for the year ended October 31, 2008 was $5,875.
Securities Lending Fees. The Trust has a security lending agreement with
BBH for which BBH receives a fee from the Fund for each security loaned.
For the year ended October 31, 2008, the Fund incurred no security lending
fees.
Board of Trustees' Fees. Each Trustee receives an annual fee as well as
reimbursement for reasonable out-of-pocket expenses from the Fund. For the
year ended October 31, 2008, the Fund incurred $43,432 for these fees.
FINANCIAL STATEMENT OCTOBER 31, 2008 23
<PAGE>
BBH INTERNATIONAL EQUITY FUND
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (continued)
October 31, 2008
3. Investment Transactions. For the year ended October 31, 2008, the cost of
purchases and the proceeds of sales of investment securities other than
short-term investments were $125,575,596 and $122,445,484, respectively.
4. Securities on Loan. As of October 31, 2008, the Fund had no securities on
loan.
5. Capital Stock. Prior to June 12, 2007, BBH Fund, Inc. was permitted to
issue 2,500,000,000 shares of capital stock, par value $.001 per share, of
which 277,777,778 shares were classified as Class N shares of the Fund,
277,777,778 shares were classified as Class I shares of the Fund. The
Trust offers unlimited shares without par value. Transactions in shares of
capital stock were as follows:
<TABLE>
<CAPTION>
SHARES AMOUNT
------------------------------- ------------------------------
For the years ended October 31, For the years ended October 31,
------------------------------- -------------------------------
2008 2007 2008 2007
------------- - ------------- ------------- - -------------
<S> <C> <C> <C> <C>
Class N
Capital stock sold .......... 6,752,633 7,488,347 $ 105,933,541 $ 124,535,007
Capital stock issued
in connection with
reinvestment of dividends 79,385 20,453 1,288,415 325,815
Capital stock redeemed ..... (6,265,420) (3,073,266) (85,445,720) (51,902,267)
---------- ---------- - ------------- -------------
Net increase ................ 566,598 4,435,534 $ 21,776,236 $ 72,958,555
======= ======= ========== ==========
<CAPTION>
SHARES AMOUNT
------------------------------ - -------------------------------
For the years ended October 31, For the years ended October 31,
------------------------------- -------------------------------
2008 2007 2008 2007
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Class I
Capital stock sold .......... -- 63,172 $ -- $ 1,000,000
Capital stock issued
in connection with
reinvestment of dividends -- -- -- --
Capital stock redeemed ..... -- (171,080) -- (3,000,201)
- ---------- ---------- ------------- -------------
Net decrease ................ -- (107,908) $ -- $ (2,000,201)
====== ======= ======= ========
</TABLE>
24
<PAGE>
BBH INTERNATIONAL EQUITY FUND
--------------------------------------------------------------------------------
DISCLOSURE OF FUND EXPENSES
October 31, 2008 (unaudited)
EXAMPLE
As a shareholder of BBH International Equity Fund (the "Fund"), you may incur
two types of costs: (1) transaction costs, including sales charges (loads) on
purchase payments, reinvested dividends, 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, 2008 to October 31, 2008).
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 STATEMENT OCTOBER 31, 2008 25
<PAGE>
BBH INTERNATIONAL EQUITY FUND
--------------------------------------------------------------------------------
DISCLOSURE OF FUND EXPENSES (continued)
October 31, 2008 (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 sales
charges (loads), 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.
Expenses Paid
Beginning Ending During Period
Account Value Account Value May 1, 2008 to
Class N May 1, 2008 October 31, 2008 October 31, 2008(1)
-------------- - --------------- -------------------
Actual.................. $1,000 $ 672.30 $4.75
Hypothetical(2)......... $1,000 $1,019.46 $5.74
Expenses Paid
Beginning Ending During Period
Account Value Account Value May 1, 2008 to
Class I May 1, 2008 October 31, 2008 October 31, 2008(1)
- ------------- - --------------- -------------------
Actual.................. $1,000 $ 673.10 $3.70
Hypothetical(2)......... $1,000 $1,020.71 $4.47
----------
(1) Expenses are equal to the Fund's annualized expense ratio of 1.13% and
0.88% for Class N and I shares, respectively, multiplied by the average
account value over the period, multiplied by 184/366 (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.
26
<PAGE>
BBH INTERNATIONAL EQUITY FUND
--------------------------------------------------------------------------------
DISCLOSURE OF ADVISOR SELECTION
October 31, 2008 (unaudited)
Approval of Investment Advisory/Administrative Services Agreement
At a meeting held on December 11, 2006, the Board of Trustees (the "Board") of
the Trust unanimously approved a new Combined Investment Advisory/Administrative
Services Agreement ("Combined Agreement"). The Board determined that the terms
of the Combined Agreement will be substantially identical to those of the
current investment advisory and administration agreements of the Funds, noting
that the most significant difference in the Combined Agreement is a single fee
for both investment advisory and administrative services. The following is a
summary of the factors the Board took into consideration in making its
determination to approve the new Combined Agreement.
Nature, Extent and Quality of Services Provided by Brown Brothers Harriman
& Co. ("BBH")
The Board noted that, under the Combined Agreement in respect of each Fund, BBH,
subject to the supervision of the Board, will be responsible for providing a
continuous investment program and making purchases and sales of portfolio
securities consistent with the Funds' investment objective and policies. Under
the Combined Agreement, BBH also provides administrative services to each Fund.
The Board considered the scope and quality of services to be provided by BBH
under the Combined Agreement and noted that the scope of services provided had
expanded over time, primarily, as a result of regulatory developments. The Board
noted that, for example, BBH is responsible for maintaining and monitoring its
own and, to varying degrees, the Funds' compliance program, and these compliance
programs have recently been refined and enhanced in light of new regulatory
requirements. The Board considered the quality of the investment research and
administrative capabilities of BBH and the other resources it has dedicated to
performing services for the Funds. The Board concluded that, overall, they were
satisfied with the nature, extent and quality of services expected to be
provided to each of the Funds under the Combined Agreement.
Subject to the supervision of the Board, BBH oversees the sub-advisers and
evaluates their results. BBH reviews portfolio performance, characteristics,
departures of key personnel of the sub-advisers and any other relevant topics.
BBH also analyzes and monitors economic trends and monetary policy on continuous
basis. The holdings of the BBH International Equity Fund and the allocation of
assets to the sub-advisers are regularly reviewed with the objective of
enhancing the total rate of return over a full market cycle and dampening return
volatility.
Costs of Services Provided and Profitability to BBH
At the request of the Board, BBH provided information concerning the
profitability of BBH's current investment company advisory and other fees. The
Board also reviewed BBH's profitability data for each Fund, which also included
the effect of revenue generated by the shareholder servicing, administration,
custody and other fees paid by the Fund. The Board discussed the difficulty of
making comparisons of profitability because comparative information is not
generally publicly available and is affected by numerous factors, including the
structure of the service provider, the types of funds it manages and
administers, its business
FINANCIAL STATEMENT OCTOBER 31, 2008 27
<PAGE>
BBH INTERNATIONAL EQUITY FUND
--------------------------------------------------------------------------------
DISCLOSURE OF ADVISOR SELECTION (continued)
October 31, 2008 (unaudited)
mix, numerous assumptions regarding allocations and the entity's capital
structure and cost of capital. In considering profitability information, the
Board considered the effect of fall-out benefits on BBH's expenses, as well as
the "revenue sharing" arrangements BBH has entered into with certain entities
that distribute shares of the Funds. The Board focused on profitability of BBH's
relationships with the Funds before taxes and distribution expenses. The Board
concluded that it was satisfied that BBH's level of profitability from its
relationship with each Fund was not excessive.
Fall-Out Benefits
The Board considered that BBH does not allocate the Funds' portfolio
transactions for third party research, although it did benefit from proprietary
research received from brokers that execute the Funds' purchases and sales of
securities. The Board recognized that the aggregate amount of commissions
generated by Fund transactions was unlikely to result in the Funds receiving
from full service broker dealers substantial discounts on commission rates. The
Board received and reviewed information concerning BBH's policies with respect
to allocating portfolio brokerage.
The Board also considered that BBH receives shareholder servicing fees from
certain funds, and is the Funds' administrator, custodian and securities lending
agent. The Board noted that BBH retained no portion of the 12b-1 fees paid by
any Fund that operated with a Rule 12b-1 plan. The Board recognized that BBH's
profitability would be somewhat lower if it did not receive proprietary research
for commissions or, if it did not receive the other benefits described above.
The Board recognized that most Fund shareholders were also BBH clients, and that
substantial assets are invested in the Funds as a result of an overall
investment management program for the shareholder. The Board noted that the
Funds also derive reputational and other benefits from their association with
BBH and their use of the BBH name, which is licensed to the Funds by BBH. Thus,
the Board did not believe that BBH revenues associated with its clients should
be fairly regarded as "fallout" benefit from the Funds.
Economies of Scale
The Board noted that the Funds' combined fee schedules, other than the fee
schedule for BBH Money Market Fund, do not contain breakpoints. As a result, if
assets increase, the fee rates would not be reduced for these Funds on the
incremental assets. With respect to the BBH Money Market Fund, the breakpoint
will be reviewed every three (3) years by the Board, and may be adjusted upwards
to take into account the effects of inflation or such other basis as may be
appropriate, subject to the approval of shareholders to the extent required by
the 1940 Act.
There may be other economies of scale because many expenses did not rise (and
fall) proportionally to increases (and decreases) in total net assets. The Board
noted that BBH had priced its services in recognition of the fact that it was
largely its own clients who were shareholders and, accordingly, sought to assure
that the cost of these services and total expenses for each Fund were fair and
reasonable. In addition, the Board noted that over the years BBH had supported
certain Funds through fee waivers and
28
<PAGE>
BBH INTERNATIONAL EQUITY FUND
--------------------------------------------------------------------------------
DISCLOSURE OF ADVISOR SELECTION (continued)
October 31, 2008 (unaudited)
expense reimbursements. Based on information they had been provided over many
years, the Board observed that in the mutual fund industry as a whole, as well
as among funds similar to the Funds, there appeared to be no uniformity or
pattern in the fees and asset levels at which breakpoints (if any) apply. In
light of the Funds' current size and expense structure, the Board concluded that
it was unnecessary at this time to consider breakpoints with respect to the
Funds, other than for the BBH Money Market Fund.
Investment Results
The Board considered the investment results of each of the Funds as compared to
investment companies with its peers and with one or more selected securities
indices. In addition to the information received by the Board for the meeting
held on October 2, 2006, the Board received detailed performance information for
each Fund at each regular Board meeting during the year. At the meeting held on
October 2, 2006, the Board reviewed information showing performance of each Fund
compared to its peers over the prior 1-, 3-, and 5- year periods and compared
the performance information to one or more securities indices over comparable
periods.
Combined Fee Rate
The Board considered the fee rate to be paid by each Fund to BBH. The Board
recognized that it is difficult to make comparisons of these fee rates, and the
combined investment advisory and administration fees, because there are
variations in the services that are included in the fees paid by other funds.
The Board considered the depth and range of services provided under the Combined
Agreement. For example, in addition to a continuous investment program, BBH
provides, among other things, officers (including the Funds' Chief Compliance
Officer and officers to provide required certifications) and administrative
services, such as shareholder communications, and tax compliance, with the
attendant costs and exposure to liability. BBH also coordinates the provision of
services to the Funds by nonaffiliated service providers.
The following factors specific to the BBH International Equity Fund also were
noted and considered by the Board in deciding to approve the Combined Agreement:
The Board reviewed the performance of the BBH International Equity Fund's Class
N shares and Class I shares versus the MSCI Europe, Australasia and Far East
Index (the "Index") The Board considered the performance of the BBH
International Equity Fund and each sub-advisor since adopting a multi-manager
approach and employing two sub-advisors in January 2004. The Board recognized
that divergence from the Index, particularly during periods of significant
market movements, was to be expected because each of the sub-advisers has a
clearly defined fundamental investment style with only modest concern for
tracking error to the Index. The Board reviewed the overall investments of the
Fund and concluded that the portfolio was broadly diversified in terms of
country exposure, sector exposure and specific company risk. The Board noted
that the performance of both share classes before all expenses was better than
the Index since January 31, 2004, but observed that on an after-fee basis the
Fund had trailed the Index. The
FINANCIAL STATEMENT OCTOBER 31, 2008 29
<PAGE>
BBH INTERNATIONAL EQUITY FUND
--------------------------------------------------------------------------------
DISCLOSURE OF ADVISOR SELECTION (continued)
October 31, 2008 (unaudited)
Board also noted the expense ratio for both share classes were in line with many
funds of similar size and investment mandate. Taking into account these
comparisons and the other factors considered, the Board concluded that the BBH
International Equity Fund's recent investment results and its total expense
ratio had been satisfactory.
Conflicts of Interest
As a general matter, certain conflicts of interest may arise in connection with
a portfolio manager's management of a Fund's investments, on the one hand, and
the investments of other accounts for which the portfolio manager is
responsible, on the other. For example, it is possible that the various accounts
managed could have different investment strategies that, at times, might
conflict with one another to the possible detriment of the Fund. Alternatively,
to the extent that the same investment opportunities might be desirable for more
than one account, possible conflicts could arise in determining how to allocate
them. Other potential conflicts might include conflicts created by specific
portfolio manager compensation arrangements, and conflicts relating to selection
of brokers or dealers to execute fund portfolio trades and/or specific uses of
commissions from Fund portfolio trades (for example, research, or "soft
dollars").
BBH has adopted and implemented policies, including brokerage and trade
allocation policies and procedures, which it believes address the conflicts
associated with managing multiple accounts for multiple clients. Finally, BBH
has structured the portfolio managers' compensation in a manner, and the Funds
have adopted policies, reasonably designed to safeguard a Fund from being
negatively affected as a result of any such potential conflicts.
30
<PAGE>
BBH INTERNATIONAL EQUITY FUND
--------------------------------------------------------------------------------
ADDITIONAL FEDERAL TAX INFORMATION
October 31, 2008
The Fund hereby designates $27,621,616 as an approximate amount of capital gain
dividend for the purpose of the dividends paid deduction.
Under Section 854(b)(2) of the Internal Revenue Code (the "Code"), the Fund
designates up to a maximum of $22,538,308 as qualified dividends for purposes of
the maximum rate under Section 1(h)(11) of the Code for the fiscal year ended
October 31, 2008. In January 2009, shareholders will receive Form 1099-DIV which
will include their share of qualified dividends distributed during the calendar
year 2008. Shareholders are advised to check with their tax advisors 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 countries or possessions of the United States are as follows:
Foreign Foreign Tax
Source Income Credit Total
------------ ------------
$22,538,308 $2,144,280
FINANCIAL STATEMENT OCTOBER 31, 2008 31
<PAGE>
TRUSTEES AND OFFICERS OF BBH INTERNATIONAL EQUITY FUND
--------------------------------------------------------------------------------
(unaudited)
Information pertaining to the Trustees of the BBH Trust (the "Trust") and
executive officers of the Trust is set forth below. Part B to the Registration
Statement of the BBH International Equity Fund includes additional information
about the Fund's Trustees and is available upon request without charge by
contacting the Fund at 1-800-625-5759
<TABLE>
<CAPTION>
Term of Number of
Office Funds in
and & #160; Fund Other
Position(s) Length Complex Directorships
Name, Birth Date Held with of Time Principal Occupation(s) Overseen by Held by
and Address Trust Served# During Past 5 Years �� Trustee^ Trustee
---------------------------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Joseph V. Shields Jr. Chairman of Since Managing Director, Chairman and 7 None
Birth Date: the Board 2007 Chief Executive Officer of Shields &
March 17, 1938 and Trustee Company (member of New York Stock
Shields & Company Exchange); Chairman of Capital
140 Broadway Management Associates, Inc.
New York, NY 10005 (registered investment adviser);
Director of Flower Foods, Inc. (New
York Stock Exchange listed company).
David P. Feldman Trustee Since Director of Jeffrey Co. (1992 to 7 Director of
Birth Date: 2007 present); Director of QMED (1999 Dreyfus
November 16, 1939 to May 2007). Mutual Funds
C/O BBH & Co. (59 Funds)
140 Broadway
New York, NY 10005
Alan G. Lowy Trustee Since Private Investor. 7 None
Birth Date: 2007
April 17, 1939
4111 Clear Valley
Drive
Encino, CA 91436
Arthur D. Trustee Since Retired; Trustee, R.K. Mellon Family 7 None
Miltenberger 2007 Trust (1981 to June 2003); Director
Birth Date: of Aerostructures Corporation
November 8, 1938 (aircraft manufacturer) (1996 to
503 Darlington Road July 2003).
Ligonier, PA 15658
Samuel F. Pryor, IV Trustee Since Private Investor. 7 None
Birth Date: 2007
June 12, 1955
130 East 67th Street
New York, NY 10021
</TABLE>
32
<PAGE>
TRUSTEES AND OFFICERS OF BBH INTERNATIONAL EQUITY FUND
--------------------------------------------------------------------------------
(unaudited)
<TABLE>
<CAPTION>
Term of Number of
Office Funds in
and Fund Other
Position(s) Length Complex Directorships
Name, Birth Date Held with of Time Principal Occupation(s) Overseen by Held by
and Address Trust Served# During Past 5 Years Trustee^ Trustee
-----------------------------------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
H. Whitney Wagner Trustee Since President, Clear Brook Advisors, a 7 None
Birth Date: 2007 registered investment advisor.
March 3, 1956
Clear Brook Advisors
75 Rockefeller Plaza,
14th Floor
New York, NY 10019
Officers
John A. Gehret President and Since President and Principal Executive N/A N/A
Birth Date: Principal 2008 Officer of the Trust; Joined Brown
April 11, 1959 Executive Brothers Harriman & Co. ("BBH &
140 Broadway Officer Co.") in 1981 and has been a Partner
New York, NY 10005 of the firm since 1998.
Charles H. Schreiber Treasurer and Since Treasurer and Principal Financial N/A N/A
Birth Date: Principal 2007 Officer of the Trust; Senior Vice
December 10, 1957 Financial President of BBH & Co. since
140 Broadway Officer September 2001; Joined BBH & Co.
New York, NY 10005 in 1999.
Mark B. Nixon Assistant Since Assistant Secretary and Assistant N/A N/A
Birth Date: Secretary, 2007 Treasurer of the Trust; Vice
January 14, 1963 Assistant President of BBH & Co. (since
140 Broadway Treasurer October 2006); Accounting Manager,
New York, NY 10005 Reserve Funds (August 2005 -
September 2006); Assistant
Controller, Reserve Funds
(February 2005 - August 2005);
Private Consultant (December 2001 -
February 2005).
Beth Haddock Chief Since Chief Compliance Officer of the N/A N/A
Birth Date: Compliance 2007 Trust (September 2007 - present);
December 10, 1965 Officer Chief Compliance Officer for the
140 Broadway FINRA/NYSE and SEC compliance
New York, NY 10005 programs and Associate Compliance
Director for the global compliance
program (April 2005-present);
Deputy General Counsel of AXA
Advisors/ AXA Financial
(November 1997 - April 2005).
</TABLE>FINANCIAL STATEMENT OCTOBER 31, 2008 33
<PAGE>
TRUSTEES AND OFFICERS OF BBH INTERNATIONAL EQUITY FUND
--------------------------------------------------------------------------------
(unaudited)
<TABLE>
<CAPTION>
�� Term of Number of
Office Funds in
and Fund Other
Position(s) Length Complex Directorships
Name, Birth Date Held with of Time Principal Occupation(s) Overseen by Held by
and Address Trust Served# During Past 5 Years Trustee^ Trustee
-----------------------------------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Sue M. Rim-An Anti-Money Since Anti-Money Laundering Officer, Vice N/A N/A
Birth Date: Laundering 2008 President of BBH & Co. (September
September 10, 1970 Officer 2007 - present); AML Officer at
140 Broadway UBS Investment Bank (April 2006 -
New York, NY 10005 August 2007); AML Officer & Vice
President in Private Client Services
at Bear Stearns & Co (June 1992 -
April 2006).
Gail C. Jones Secretary Since Secretary of the Trust; Counsel, N/A N/A
Birth Date: 2007 ReedSmith, LLP (since October 2002);
October 26, 1953 Corporate Counsel (January 1997 to
1001 Liberty Avenue September 2002) and Vice President
Pittsburgh, PA (January 1999 to September 2002) of
15222-3779 Federated Services Company.
George M. Polatas Vice President Since Vice President of the Trust (since N/A N/A
Birth Date: 2008 June 2008); Assistant Vice President
March 3, 1962 of Federated Services Company; Vice
1001 Liberty Avenue, President of various funds
Pittsburgh, PA distributed by Edgewood Services,
15222-3779 Inc (January 1997 to present).
Theodore J. Boudria Assistant Since Assistant Treasurer of the Trust; N/A N/A
Birth Date: Treasurer 2008 Vice President (since 2003);
June 26, 1968 Assistant Vice President (since
70 Franklin Street September 2000); Joined BBH & Co.
Boston, MA 02110 in 1995.
</TABLE>----------
# Each Trustee of the Trust holds office until he or she attains the age of
70 (72, in the case of Trustees who were elected as such before January 1,
2000), or until he or she sooner dies, resigns or is removed from office
in accordance with the provisions of the Trust's Declaration of Trust. 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).
^ The Fund Complex consists of the Trust, which has seven series and each is
counted as one "Fund" for purposes of this table.
34
<PAGE>
INVESTMENT ADVISER AND ADMINISTRATOR
BROWN BROTHERS HARRIMAN
140 BROADWAY
NEW YORK, NY 10005
DISTRIBUTOR
EDGEWOOD SERVICES, INC.
5800 CORPORATE DRIVE
PITTSBURGH, PA 15237-7000
SHAREHOLDER SERVICING AGENT
BROWN BROTHERS HARRIMAN
140 BROADWAY
NEW YORK, NY 10005
(800) 625-5759
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. Such offering is made only by the prospectus, which includes details as to
offering price and other material information.
The Fund files with the SEC a complete schedule of its portfolio holdings, as of
the close of the first and third quarters of its fiscal year, on "Form N-Q."
Information on Form N-Q is available without charge and upon request by calling
the Funds at the toll-free number listed above. A text only version can be
viewed online or downloaded from the SEC's website at http://www.sec.gov; and
may be reviewed and copied at the SEC's Public Reference Room in Washington, DC
(call 1-800-SEC-0330 for information on the operation of the Public Reference
Room). You may also access this information from the BBH website at BBH.com by
clicking on "BBH Mutual Funds" and selecting "Online Documents/Holdings
Information."
A copy 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 upon request by calling the
toll-free number listed above. This information is also available from the EDGAR
database on the SEC's website at www.sec.gov.
BROWN [LOGO]
BROTHERS
HARRIMAN
BROWN [LOGO]
BROTHERS
HARRIMAN
Annual Report
OCTOBER 31, 2008
----------
BBH REAL RETURN FUND
<PAGE>
BBH REAL RETURN FUND
--------------------------------------------------------------------------------
MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE
For the 12-month period ended October 31, 2008, the BBH Real Return Fund Class I
Shares returned -5.79%(1), while the N Shares returned -6.35%(1). The Fund's
benchmark, the Citigroup Inflation-Linked Securities Index(2) ("CILS"), returned
-3.98% over the same period. The largest detractors from performance were the
Fund's bulleted yield curve posture throughout the period as well as positions
in nominal bonds during the spring.
BBH Real Return Fund's securities underperformed for the past 12-month period
ending October 31, 2008. The weakening economy, credit crunch, falling equity
markets, and especially the fall in commodity prices led to falling inflation
expectations. Yields on TIPS increased 100 to 500 basis points. Break-even
inflation rates fell to historically low levels and were actually negative out
to seven years. Negative break-evens mean investors expect deflation over the
period to maturity of TIPS. To combat the economic weakness, the Federal Reserve
lowered the Federal Funds rate to 1.00% and along with the U.S. Treasury
instituted several programs to ease the strain in the financial markets.
----------
(1) Performance data quoted represents 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. Mutual Fund performance changes over time and current
performance may be lower or higher than what is stated. For current to the
most recent month end performance and after tax returns, contact the Fund
at 1-800-625-5759.
(2) The CILS measures the return of debentures with fixed-rate coupon payments
that adjust for inflation as measured by the Consumer Price Index. The
index employs a minimum maturity of one year and a minimum amount
outstanding of USD 1 billion for both entry and exit. The index is
unmanaged, and investments cannot be made in an index.
2
<PAGE>
BBH REAL RETURN FUND
--------------------------------------------------------------------------------
MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE (continued)
Growth of $10,000 Invested in BBH Real Return Fund
The graph below illustrates the hypothetical investment of $10,000(1) in the
Class N shares of the Fund over the ten years ended October 31, 2008 as compared
to the CILS and the 3-year Treasury.
-------------------------------------------------
Total Return for the Period
Ended October 31, 2008
-------------------------------------------------
Five Years Ten Years
One Year (Annualized) (Annualized)
-------------------------------------------------
Class N (6.35)% 1.40% 5.04%
Class I (5.79)% 1.72% 5.35%
-------------------------------------------------
[The following information was depicted as a line chart in the printed material]
Date Real Return Fund* CILS 3yr Treas
---- ----------------- ---- ---------
10/31/98 10,000.00 10,000.00 10,000.00
11/30/98 9,970.62 9,993.45 9,966.00
12/31/98 9,921.04 9,927.42 9,976.96
01/31/99 10,054.45 10,046.72 10,033.43
02/28/99 9,966.38 9,976.66 9,901.29
03/31/99 9,991.91 9,980.92 9,976.64
04/30/99 10,060.27 10,036.94 10,006.87
05/31/99 10,124.56 10,114.38 9,953.53
06/30/99 10,146.13 10,113.26 9,988.07
07/30/99 10,157.05 10,112.42 10,005.95
08/31/99 10,165.76 10,131.87 10,028.46
09/30/99 10,209.53 10,167.54 10,098.16
10/31/99 10,242.60 10,188.28 10,110.58
11/30/99 10,320.03 10,252.06 10,129.89
12/31/99 10,264.41 10,164.61 10,119.26
01/31/00 10,309.46 10,223.36 10,086.77
02/29/00 10,388.33 10,321.61 10,165.35
03/31/00 10,738.06 10,618.46 10,258.26
04/30/00 10,885.22 10,751.29 10,264.31
05/31/00 10,851.31 10,722.26 10,301.16
06/30/00 10,989.60 10,858.01 10,438.79
07/31/00 11,059.04 10,947.26 10,510.81
08/31/00 11,140.53 11,028.27 10,609.62
09/30/00 11,210.72 11,093.34 10,701.71
10/31/00 11,351.53 11,225.35 10,772.66
11/30/00 11,516.86 11,384.75 10,919.06
12/31/00 11,633.38 11,495.18 11,097.91
01/31/01 11,860.26 11,748.99 11,241.41
02/28/01 12,075.73 11,944.03 11,343.15
03/31/01 12,160.01 12,055.35 11,461.57
04/30/01 12,256.54 12,125.27 11,431.65
05/31/01 12,402.40 12,268.34 11,489.95
06/30/01 12,402.19 12,254.85 11,534.65
07/31/01 12,586.63 12,448.48 11,737.31
08/31/01 12,623.70 12,475.86 11,840.84
09/30/01 12,710.42 12,559.45 12,103.70
10/31/01 13,035.66 12,867.16 12,289.98
11/30/01 12,736.73 12,527.46 12,178.51
12/31/01 12,612.61 12,405.95 12,120.30
01/31/02 12,648.88 12,453.09 12,179.20
02/28/02 12,838.62 12,658.57 12,277.73
03/31/02 12,752.35 12,581.35 12,091.23
04/30/02 13,055.24 12,923.56 12,297.99
05/31/02 13,253.36 13,129.05 12,396.25
06/30/02 13,431.82 13,319.42 12,534.60
07/31/02 13,664.63 13,549.84 12,788.55
08/31/02 14,194.62 14,043.06 12,948.79
09/30/02 14,586.87 14,401.16 13,171.38
10/31/02 14,179.35 14,019.53 13,170.98
11/30/02 14,163.63 14,015.32 13,053.50
12/31/02 14,662.31 14,496.05 13,283.50
01/31/03 14,783.27 14,585.20 13,257.73
02/28/03 15,322.31 15,094.80 13,408.07
03/31/03 15,079.85 14,888.16 13,420.67
04/30/03 15,008.55 14,861.51 13,461.34
05/31/03 15,716.13 15,567.87 13,642.80
06/30/03 15,574.67 15,405.50 13,639.39
07/31/03 14,834.97 14,704.09 13,434.93
08/31/03 15,072.24 14,974.64 13,424.86
09/30/03 15,581.41 15,483.78 13,678.32
10/31/03 15,604.95 15,541.07 13,560.82
11/30/03 15,563.41 15,548.84 13,529.63
12/31/03 15,724.70 15,710.55 13,644.63
01/31/04 15,897.34 15,897.50 13,692.39
02/29/04 16,257.01 16,255.20 13,803.30
03/31/04 16,514.46 16,520.16 13,894.40
04/30/04 15,751.99 15,720.58 13,616.51
05/31/04 15,996.48 16,000.41 13,582.47
06/30/04 16,010.13 16,008.41 13,600.13
07/31/04 16,203.26 16,157.29 13,677.65
08/31/04 16,614.71 16,574.15 13,834.94
09/30/04 16,635.63 16,603.98 13,822.49
10/31/04 16,803.24 16,633.87 13,884.69
11/30/04 16,744.35 16,587.29 13,759.73
12/31/04 17,033.37 16,887.52 13,815.87
01/31/05 17,058.03 16,889.21 13,788.65
02/28/05 16,966.57 16,818.28 13,716.40
03/31/05 16,981.75 16,836.78 13,692.67
04/30/05 17,306.83 17,153.31 13,816.86
05/31/05 17,430.20 17,276.81 13,884.43
06/30/05 17,500.93 17,349.37 13,918.03
07/31/05 17,173.66 16,995.45 13,819.21
08/31/05 17,552.22 17,374.44 13,932.53
09/30/05 17,541.62 17,343.17 13,847.54
10/31/05 17,306.84 17,131.58 13,813.47
11/30/05 17,335.63 17,157.28 13,870.11
12/31/05 17,538.93 17,370.03 13,936.68
01/31/06 17,555.35 17,370.03 13,945.05
02/28/06 17,522.51 17,376.98 13,930.68
03/31/06 17,128.38 16,973.83 13,925.11
04/30/06 17,084.39 16,973.83 13,961.32
05/31/06 17,072.89 17,016.27 13,959.92
06/30/06 17,146.21 17,060.51 13,979.46
07/31/06 17,405.97 17,333.48 14,115.07
08/31/06 17,693.53 17,645.48 14,243.51
09/30/06 17,693.10 17,675.48 14,328.97
10/30/06 17,553.05 17,650.73 14,383.42
11/30/06 17,807.68 17,866.07 14,471.16
12/31/06 17,400.26 17,444.43 14,436.43
01/31/07 17,434.21 17,465.37 14,449.42
02/28/07 17,790.71 17,840.87 14,608.37
03/31/07 17,819.04 17,872.98 14,671.18
04/30/07 17,860.33 18,005.24 14,725.47
05/31/07 17,620.81 17,765.77 14,653.31
06/30/07 17,480.25 17,733.80 14,703.13
07/31/07 17,596.45 18,145.22 14,895.74
08/31/07 17,568.89 18,299.45 15,096.84
09/30/07 17,779.93 18,544.67 15,210.06
10/31/07 17,867.86 18,763.49 15,289.16
11/30/07 18,383.66 19,504.65 15,649.98
12/31/07 18,324.95 19,471.49 15,687.54
01/31/08 19,027.15 20,244.51 16,056.20
02/29/08 19,178.61 20,438.86 16,263.32
03/31/08 19,140.35 20,426.60 16,338.13
04/30/08 18,671.71 19,987.43 16,075.09
05/31/08 18,730.00 20,023.40 15,932.02
06/30/08 19,019.14 20,351.79 15,971.85
07/31/08 18,892.22 20,231.71 16,043.72
08/31/08 19,068.79 20,417.84 16,196.14
09/30/08 18,380.31 19,635.84 16,393.73
10/31/08 18,758.47 17,958.94 16,644.56
*net of fees and expenses
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. Mutual 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 current to the most recent month end performance and after tax
returns, contact the Fund at 1-800-625-5759.
----------
(1) The Fund's performance assumes the reinvestment of all dividends and
distributions. The CILS has been adjusted to reflect reinvestment of
dividends on securities in the index. The CILS is not adjusted to reflect
sales, expenses or other fees that the Securities and Exchange Commission
requires to be reflected in the Fund's performance.
FINANCIAL STATEMENT OCTOBER 31, 2008 3
<PAGE>
BBH REAL RETURN FUND
--------------------------------------------------------------------------------
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Trustees of the BBH Trust and Shareholders of
BBH Real Return Fund:
We have audited the accompanying statement of assets and liabilities, including
the portfolio of investments, of BBH Real Return Fund (a series of BBH Trust)
(the "Fund") as of October 31, 2008, and 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, and the financial highlights for each of the
five years in the period then ended. These financial statements and financial
highlights are the responsibility of the Fund's management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). 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. The Fund
is not required to have, nor were we engaged to perform, an audit of its
internal control over financial reporting. Our audit included consideration of
internal control over financial reporting as a basis for designing audit
procedures that are appropriate in the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of the Fund's internal control over
financial reporting. Accordingly, we express no such opinion. An audit also
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. Our procedures included confirmation
of securities owned as of October 31, 2008, by correspondence with the custodian
and brokers; where replies were not received from brokers, we performed other
auditing procedures. We believe that our audits provide a reasonable basis for
our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of BBH
Real Return Fund as of October 31, 2008, 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.
Deloitte & Touche LLP
Boston, Massachusetts
December 22, 2008
4
<PAGE>
BBH REAL RETURN FUND
--------------------------------------------------------------------------------
PORTFOLIO ALLOCATION
October 31, 2008 (unaudited)
BREAKDOWN BY SECURITY TYPE
Percent of
U.S. $ Value Net Assets
------------ ----------
U.S. Treasury Notes and Bonds ........................ $94,416,752 99.1%
Cash and Other Assets in Excess
of Liabilities ..................................... 858,067 0.9
----------- ------
NET ASSETS ........................................... $95,274,819 100.0%
========== ====
All data as of October 31, 2008. The Fund's breakdown is 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.
FINANCIAL STATEMENT OCTOBER 31, 2008 5
<PAGE>
BBH REAL RETURN FUND
--------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
October 31, 2008
Principal
Amount Value
--------- -----------
U.S. TREASURY NOTES AND BONDS (99.1%)
$11,329,110 3.500%, 01/15/11(1).................................. $ 11,065,357
11,783,172 3.375%, 01/15/12(1).................................. 11,552,116
13,516,980 2.000%, 01/15/14(1).................................. 12,381,770
16,229,690 1.625%, 01/15/15(1).................................. 14,206,042
6,572,252 1.875%, 07/15/15(1).................................. 5,804,120
1,048,639 2.000%, 01/15/16(1).................................. 925,342
5,125,869 2.500%, 07/15/16(1).................................. 4,719,403
2,642,700 2.625%, 07/15/17(1).................................. 2,476,498
4,444,523 1.625%, 01/15/18(1).................................. 3,853,885
13,581,242 2.375%, 01/15/25(1).................................. 11,762,632
5,370,133 2.000%, 01/15/26(1).................................. 4,408,122
7,599,298 2.375%, 01/15/27(1).................................. 6,575,764
2,091,540 1.750%, 01/15/28(1).................................. 1,634,997
2,851,957 3.875%, 04/15/29(1).................................. 3,050,704
�� -----------
Total U.S. Treasury Notes and Bonds
(Identified cost $104,368,049)....................... 94,416,752
-----------
TOTAL INVESTMENTS (Identified cost $104,368,049(2))........ 99.1% $94,416,752
CASH AND OTHER ASSETS IN EXCESS OF LIABILITIES............. 0.9 858,067
------ -----------
NET ASSETS................................................. 100.0% $95,274,819
====== =========
----------
(1) Inflation Protected Security.
(2) The aggregate cost for federal income tax purposes is $105,041,190. The
aggregate gross unrealized appreciation is $0 and the aggregate gross
unrealized depreciation is $10,624,438, resulting in net unrealized
depreciation of $10,624,438.
The accompanying notes are an integral part of these financial statements.
6
<PAGE>
BBH REAL RETURN FUND
--------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
October 31, 2008
<TABLE>
<CAPTION>
<S> <C>
ASSETS:
Investments in securities, at value (identified cost $104,368,049)... $ 94,416,752
Cash ................................................................. 398,583
Receivables for:
Interest and other receivables ..................................... 710,951
Capital stock sold ................................................. 22,885
------------
Total Assets ..................................................... 95,549,171
------------
LIABILITIES:
Payables for:
Capital stock redeemed ............................................. 108,441
Investment advisory and administrative fees ........................ 32,073
Professional fees .................................................. 31,856
Custody and accounting fees ........................................ 23,332
Shareholder servicing fees ......................................... 21,205
Board of Trustees' fees ............................................ 7,950
Accrued expenses and other liabilities ............................. 49,495
------------
Total Liabilities ................................................ 274,352
------------
NET ASSETS .............................................................. $ 95,274,819
==========
Net Assets Consist of:
Par value ............................................................ $ 10,651
Paid-in capital ...................................................... 136,193,559
Undistributed net investment income .................................. 367,212
Accumulated net realized loss on investments and
foreign exchange transactions ...................................... (31,345,245)
Net unrealized depreciation on investments and foreign
currency translations .............................................. (9,951,358)
------------
Net Assets .............................................................. $ 95,274,819
=========
CLASS N SHARES NET ASSET VALUE
($87,747,968 / 9,815,819 shares outstanding) ......................... $8.94
=====
CLASS I SHARES NET ASSET VALUE
($7,526,851 / 835,423 shares outstanding) ............................ $9.01
=====
</TABLE>
The accompanying notes are an integral part of these financial statements.
FINANCIAL STATEMENT OCTOBER 31, 2008 7
<PAGE>
BBH REAL RETURN FUND
--------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
For the year ended October 31, 2008
<TABLE>
<CAPTION>
NET INVESTMENT INCOME:
Income:
<S> <C>
Interest and other income (net of withholding taxes of $5,417).. $ 11,119,604
------------
Total Income .................................................. 11,119,604
- ------------
Expenses:
Investment advisory and administrative fees ..................... 583,669
Shareholder servicing fees ...................................... 351,059
Custody and accounting fees ..................................... 78,512
Professional fees ............................................... 26,969
Board of Trustees' fees ......................................... 20,782
Miscellaneous expenses .......................................... 153,290
- ------------
Total Expenses ................................................ 1,214,281
Expense offset arrangement .................................... (6,626)
------------
Net Expenses .................................................. 1,207,655
- ------------
Net Investment Income ............................................. 9,911,949
- ------------
NET REALIZED AND UNREALIZED LOSS:
Net realized gain on investments .................................. 6,101,910
Net realized loss on foreign exchange transactions ................ (398,550)
�� - ------------
Net realized gain ............................................... 5,703,360
- ------------
Net change in unrealized depreciation on investments .............. (14,688,299)
Net change in unrealized depreciation on foreign currency
translations .................................................... (51,751)
- ------------
Net change in unrealized depreciation ........................... (14,740,050)
- ------------
Net Realized and Unrealized Loss .............................. (9,036,690)
------------
Net Increase in Net Assets Resulting from Operations .............. $ 875,259
=========
</TABLE>
The accompanying notes are an integral part of these financial statements.
8
<PAGE>
BBH REAL RETURN FUND
--------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
For the years ended October 31,
-------------------------------
2008 2007
------------- -------------
<S> <C> <C>
DECREASE IN NET ASSETS:
Operations:
Net investment income ................................. $ 9,911,949 $ 12,182,394
Net realized gain (loss) on investments, foreign
exchange transactions, futures contracts and
swap agreements ..................................... 5,703,360 (10,856,433)
Net change in unrealized appreciation (depreciation)
on investments, foreign currency translations and
futures contracts ................................... (14,740,050) 2,811,829
------------- - -------------
Net increase in net assets resulting from operations.. 875,259 4,137,790
------------- -------------
Dividends and distributions declared:
From net investment income:
Class N ............................................. (8,064,671) (8,170,933)
Class I ............................................. (1,136,087) (3,702,005)
Class A ............................................. -- (2,183)
------------- -------------
Total dividends and distributions declared ........ (9,200,758) (11,875,121)
- ------------- -------------
Capital stock transactions:
Net proceeds from sales of capital stock .............. 15,712,765 37,895,788
Net asset value of capital stock issued to
shareholders for reinvestment of dividends
and distributions ................................... 8,357,191 9,269,309
Net cost of capital stock redeemed .................... (198,254,483) (245,269,850)
------------- - -------------
Net decrease in net assets resulting from
capital stock transactions ........................ (174,184,527) (198,104,753)
- ------------- -------------
Total decrease in net assets ........................ (182,510,026) (205,842,084)
NET ASSETS:
Beginning of year ....................................... 277,784,845 483,626,929
- ------------- -------------
End of period (including undis tributed net investment
income of $367,212 and $548,620, respectively) ........ $ 95,274,819 $ 277,784,845
========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
FINANCIAL STATEMENT OCTOBER 31, 2008 9
<PAGE>
BBH REAL RETURN FUND
--------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
Selected per share data and ratios for a Class N share outstanding throughout
each year
<TABLE>
<CAPTION>
For the years ended October 31,
---------------------------------------------------------
2008 2007 2006 2005 2004
------ - ------ - ------ - ------ ------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year ......... $10.16 $10.39 $11.00 $11.32 $11.32
- ------ ------ ------ ------ ------
Income from investment operations:
Net investment income(1) ................. 0.62 0.32 0.52 0.46 0.38
Net realized and unrealized gain (loss).. (1.19) (0.19) (0.31) (0.14) 0.45
------ ------ ------ ------ ------
Total income (loss) from
investment operations ................ (0.57) 0.13 0.21 0.32 0.83
------ ------ - ------ ------ ------
Less dividends and distributions:
From net investment income ............... (0.65) (0.36) (0.52) (0.45) (0.40)
From net realized gains .................. -- -- (0.30) (0.19) (0.43)
------ ------ ------ ------ ------
Total dividends and distributions ..... (0.65) (0.36) (0.82) (0.64) (0.83)
------ - ------ - ------ ------ ------
Net asset value, end of year ................ $ 8.94 $10.16 $10.39 $11.00 $11.32
====== ====== ====== ===== =====
Total return ................................ (6.35)% 1.30% 1.91% 2.91% 7.77%
Ratios/Supplemental data:
Net assets, end of year (in millions) .... $ 88 $ 200 $ 357 $ 489 $ 373
Expenses as a percentage of average
net assets ............................. 0.76%(2) 0.83%(2) 0.71%(2) 0.71%(2) 0.72%(2)
Ratio of net investment income to
average net assets ..................... 6.02% 3.16% 4.97% 4.10% 3.43%
Portfolio turnover rate .................. 80% 268% 496%(3) 572% 553%
</TABLE>
----------
(1) Calculated using average shares outstanding for the year.
(2) The ratio of expenses to average net assets for the years ended October
31, 2008, 2007, 2006, 2005 and 2004 reflect fees reduced as a result of an
expense offset arrangement with the Fund's custodian. Had this arrangement
not been in place, this ratio would have been 0.77%, 0.84%, 0.71%, 0.71%
and 0.72% respectively.
(3) 2006 year amount has been restated to align disclosure with current period
presentation.
The accompanying notes are an integral part of these financial statements.
10
<PAGE>
BBH REAL RETURN FUND
--------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS (continued)
Selected per share data and ratios for a Class I share outstanding throughout
each year
<TABLE>
<CAPTION>
For the years ended October 31,
---------------------------------------------------------
2008 2007 2006 2005 2004
- ------ - ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year .......... $10.20 $10.42 $11.03 $11.33 $11.34
- ------ - ------ - ------ ------ ------
Income from investment operations:
Net investment income(1) ................. 0.56 0.39 0.56 0.49 0.43
Net realized and unrealized gain (loss) (1.08) (0.24) (0.34) (0.12) 0.41
- ------ - ------ ------ ------ ------
Total income (loss) from
investment operations ................ (0.52) 0.15 0.22 0.37 0.84
------ - ------ ------ ------ ------
Less dividends and distributions:
From net investment income ............... (0.67) (0.37) (0.53) (0.48) (0.42)
From net realized gains .................. - -- - -- (0.30) (0.19) (0.43)
- ------ - ------ - ------ ------ - ------
Total dividends and distributions ...... (0.67) (0.37) (0.83) (0.67) (0.85)
------ - ------ ------ ------ ------
Net asset value, end of year ................ $ 9.01 $10.20 $10.42 $11.03 $11.33
===== ===== ===== ===== =====
Total return ................................ (5.79)% 1.53% 2.11% 3.30% 7.99%
Ratios/Supplemental data:
Net assets, end of year (in millions) .... $ 7 $ 78 $ 120 $ 96 $ 83
Expenses as a percentage of average
net assets ............................. 0.52%(2) 0.58%(2) 0.46%(2) 0.46%(2) 0.47%(2)
Ratio of net investment income to
average net assets ..................... 5.54% 3.76% 5.36% 4.33% 3.78%
Portfolio turnover rate .................. 80% 268% 496%(3) 572% 553%
</TABLE>
----------
(1) Calculated using average shares outstanding for the year.
(2) The ratio of expenses to average net assets for the years ended October
31, 2008, 2007, 2006, 2005 and 2004 reflect fees reduced as a result of an
expense offset arrangement with the Fund's custodian. Had this arrangement
not been in place, this ratio would have been 0.52%, 0.59%, 0.45%, 0.46%
and 0.46%, respectively.
(3) 2006 year amount has been restated to align disclosure with current period
presentation.
The accompanying notes are an integral part of these financial statements.
FINANCIAL STATEMENT OCTOBER 31, 2008 11
<PAGE>
BBH REAL RETURN FUND
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
October 31, 2008
1. Organization and Significant Accounting Policies. BBH Real Return Fund
(the "Fund") is a separate, diversified series of BBH Trust (the "Trust"),
which is registered under the Investment Company Act of 1940, as amended,
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 reorganized as a Delaware statutory trust on June 12, 2007.
The Fund commenced operations on July 23, 1992. On February 20, 2001, the
Trustees reclassified the Fund's outstanding shares as "Class N", and
established a new class of shares designated as "Class I". Class I
commenced operations on August 16, 2001. Class N and Class I have
different operating expenses. Class N and Class I do not convert to any
other class of the Fund. All shares of Class A were redeemed on April 2,
2007 and the Class was closed. At October 31, 2008 there were seven series
of the Trust.
The Fund's financial statements are prepared in accordance with accounting
principles generally accepted in the United States of America, which
require management to make certain estimates and assumptions at the date
of the financial statements and are based, in part, on the following
accounting policies. Actual results could differ from those estimates.
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 Trustees. 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 Trust's Board of Trustees. 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 this is determined not to represent fair value by the
Trustees.
B. Accounting for Investment and Income. Investment transactions are
accounted for on the trade date. Realized gains and losses, if any,
from investment transactions are determined on the basis of
identified cost. Interest income is accrued daily and consists of
interest accrued, discount earned (including both original issue and
market discount) and premium amortization on the investments of the
Fund. Investment income is recorded net of foreign taxes withheld
where recovery of such tax
12
<PAGE>
BBH REAL RETURN FUND
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (continued)
October 31, 2008
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 interest has become doubtful based on constantly
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. Repurchase Agreements. The Fund may enter into repurchase agreements
with primary dealers of U.S. Government Obligations as designated by
the Federal Reserve Bank of New York. 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 exceeds the sale price, reflecting
the Fund's return on the transaction or effectively the interest
rate paid by the dealer to the Fund. This return is unrelated to the
interest 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 or sub-custodian will monitor the value of the
underlying security each day to ensure that the value of the
security always equals or exceeds the repurchase price. Repurchase
agreements are subject to credit risks. At October 31, 2008, the
Fund had no open repurchase agreements.
D. Reverse Repurchase Agreements. The Fund may enter into reverse
repurchase agreements with primary dealers of U.S. Government
Obligations as designated by the Federal Reserve Bank of New York.
Interest on the value of reverse repurchase agreements issued and
outstanding is based upon competitive market rates at the time of
issuance. At the time the Fund enters into a reverse repurchase
agreement, it establishes and maintains a segregated account with
the lender containing liquid high grade securities having a value
not less than the repurchase price, including accrued interest, of
the reverse repurchase agreement. Reverse repurchase agreements
constitute debt. At October 31, 2008, the Fund had no open reverse
repurchase agreements.
E. 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 or to hedge
the U.S. dollar value of portfolio securities denominated in a
particular currency. The Fund has to hedge the U.S. dollar value of
portfolio securities denominated in a particular currency. 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
FINANCIAL STATEMENT OCTOBER 31, 2008 13
<PAGE>
BBH REAL RETURN FUND
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (continued)
October 31, 2008
commitments held by the Fund are determined using forward currency
exchange rates supplied by a quotation service. At October 31, 2008,
the Fund had no open forward foreign currency exchange contracts.
F. Swap Agreements. The Fund may enter into swap agreements. A swap is
an exchange of cash payments based on a notional principal amount
between the Fund and another party which is based on a specific
financial index. These transactions are entered into in an attempt
to obtain a particular return when it is considered desirable to do
so, possibly at a lower cost to the Fund than if the Fund had
invested directly in an instrument that yielded that desired return.
Cash payments are exchanged at specified intervals and recorded in
the Statement of Operations as realized gains and losses. The
expected income or expense is recorded on an accrual basis. The
value of the swap is adjusted daily and the change in value is
recorded as unrealized appreciation or depreciation. Risks may arise
upon entering into these agreements from the potential inability of
counter parties to meet the terms of their contract and from
unanticipated changes in the value of the financial index on which
the swap agreement is based. Risks may exceed amounts recognized on
the Statement of Assets and Liabilities. The Fund may use swaps for
both hedging and non-hedging purposes. For hedging purposes, the
Fund may use swaps to reduce its exposure to interest and foreign
exchange rate fluctuations. For non-hedging purposes, the Fund may
use swaps to take a position on anticipated changes in the
underlying financial index. At October 31, 2008, the Fund had no
open swap agreements.
G. Financial Futures Contracts. The Fund may enter into open futures
contracts in order to 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 which 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.
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. Futures contracts held by the Fund are valued daily at
the official settlement price of the exchange on which it is traded.
At October 31, 2008, the Fund had no open financial futures
contracts.
H. Rule 144A Securities. The Fund may purchase securities that are not
registered under the 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 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.
14
<PAGE>
BBH REAL RETURN FUND
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (continued)
October 31, 2008
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.
I. Inflation-Adjusted Debt Securities. The Fund generally invests in
inflation-adjusted debt securities issued by the U.S. Treasury. The
Fund may also invest in inflation-adjusted debt securities issued by
U.S. Government agencies and instrumentalities other than the U.S.
Treasury and by other entities such as U.S. and foreign corporations
and foreign governments. The principal value of these debt
securities is adjusted by references to changes in the Consumer
Price Index or another general price wage index. These debt
securities typically pay a fixed rate of interest, but this fixed
rate is applied to the inflation-adjusted principal amount. The
principal paid at maturity of the debt security is typically equal
to the inflation-adjusted principal amount, or the security's
original par value, whichever is greater. Other types
inflation-adjusted securities may use other methods to adjust for
other measures of inflation.
J. Securities Lending. The Fund may lend its portfolio securities to
broker-dealers, qualified banks and certain institutional investors.
The loans are secured by collateral in an amount equal to at least
the market value at all times of the loaned securities plus any
accrued interest and dividends. During the time the securities are
on loan, the Fund will continue to receive the interest and
dividends or amounts equivalent thereto, on the loaned securities
while receiving a fee from the borrower or earning interest on the
investment of the cash collateral. Loans are subject to termination
at the option of the borrower or the Fund. Upon termination of the
loan, the borrower will return to the lender securities identical to
the loaned securities. The Fund may pay reasonable finders',
administrative and custodial fees in connection with a loan of its
securities and may share the interest earned on the collateral with
the borrower. The Fund bears the risk of delay in recovery of, or
even loss of rights in, the securities loaned should the borrower of
the securities fail financially. There were no securities on loan as
of October 31, 2008.
K. 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 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 accounting principles generally accepted in the
United States of America, the basis on which these financial
statements are prepared
Accordingly, the amount of net investment income and net realized
gain reported on these financial statements may differ from that
reported on the Fund's tax return due to certain book-to-tax
differences such as losses deferred due to "wash sale" transactions
and utilization of capital loss
FINANCIAL STATEMENT OCTOBER 31, 2008 15
<PAGE>
BBH REAL RETURN FUND
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (continued)
October 31, 2008
carry forwards. These differences may result in temporary
over-distributions for financial statement purposes and are
classified as distributions in excess of accumulated net investment
income or net realized gains. These distributions do not constitute
a return of capital. Permanent differences are reclassified on 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.
L. Dividends and Distributions to Shareholders. Dividends to
shareholders from net investment income are declared and paid
monthly and are recorded on the ex-dividend date. Distributions from
net capital gains, if any, are generally paid and declared annually
and are recorded on the ex-dividend date. The tax character of
distributions paid during the fiscal years ended October 31, 2008
and 2007, respectively, were as follows:
Distributions paid from:
- -------------------------------------------------------------------------------
Net Total Total
Ordinary Long term taxable Tax return distributions
income capital gain distributions of capital paid
----------- ------------ ------------- ---------- - -------------
2008: $ 9,200,758 -- $ 9,200,758 -- $ 9,200,758
2007: 11,875,121 -- 11,875,121 -- 11,875,121
As of October 31, 2008 and 2007, respectively, the components of
accumulated earnings/(deficit) on a tax basis were as follows:
<TABLE>
<CAPTION>
Components of accumulated earnings/(deficit):
--------------------------------------------------------------------------------------------------------------------
Other Total
Undistributed Undistributed Accumulated Book/Tax Unrealized accumulated
ordinary long-term Accumulated capital and temporary appreciation/ earnings/
income capital gain earnings other losses differences (depreciation) (deficit)
------------- ------------- ----------- ------------ - ----------- -------------- -------------
<C> <C> <C> <C> <C> <C> <C> <C>
2008: $367,212 -- $367,212 $(30,672,104) $ (673,141) $(9,951,358) $(40,929,391)
2007: 16,823 -- 16,823 (37,249,081) (1,440,310) 5,578,399 (33,094,169)
</TABLE>
The Fund had a net capital loss carryforward of approximately
$30,672,104 which expires as follows:
Expiration date Amount
--------------- -----------
10/31/2014 $20,320,733
10/31/2015 10,351,371
-----------
$30,672,104
=========
Total distributions paid may differ from the Statement of Changes in
Net Assets because, for tax purposes, dividends are recognized when
actually paid.
16
<PAGE>
BBH REAL RETURN FUND
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (continued)
October 31, 2008
The differences between book-basis and tax-basis unrealized
appreciation/(depreciation) is attributable primarily to the tax
deferral of losses on wash sales.
To the extent future capital gains are offset by capital loss
carryforwards, such gains will not be distributed.
M. Accounting Developments. In June 2006, the Fund adopted FASB
Interpretation No. 48 "Accounting for Uncertainty in Income Taxes"
("FIN 48"). FIN 48 provides guidance for how uncertain tax positions
should be recognized, measured, presented and disclosed in the
financial statements. FIN 48 requires the evaluation of tax
positions taken or expected to be taken in the course of preparing
the Fund's tax returns to determine whether that tax positions are
"more-likely-than-not" of being sustained by the applicable tax
authority. Tax positions not deemed to meet the more-likely-than-not
threshold would be recorded as a tax benefit or expense in the
current year. The adoption of FIN 48 had no impact on the operations
of the Fund for the year ended October 31, 2008.
In September 2006, Statement of Financial Accounting Standards No.
157, "Fair Value Measurements" ("SFAS 157"), was issued and is
effective for fiscal years and interim periods beginning after
November 15, 2007. SFAS 157 defines fair value, establishes a
framework for measuring fair value and expands disclosures about
fair value measurements. Management is currently evaluating the
implication of SFAS 157. At this time its impact on the Fund's
financial statements has not yet been determined.
In March 2008, Statement of Financial Accounting Standards No. 161,
"Disclosures about Derivative Instruments and Hedging Activities"
("SFAS 161"), was issued and is effective for fiscal years and
interim periods beginning after November 15, 2008. SFAS 161 requires
enhanced disclosures to provide information about the reasons the
Fund invests in derivative instruments, the accounting treatment and
the effect derivatives have on financial performance. In September
2008, "FASB Staff Position No. 133-1 and FASB Interpretation No.
45-4" (the "FSP"), "Disclosures about Credit Derivatives and Certain
Guarantees: An Amendment of FASB Statement No. 133 and FASB
Interpretation No. 45; and Clarification of the Effective Date of
FASB Statement No. 161," was issued and is effective for fiscal
years and interim periods ending after November 15, 2008. The FSP
amends FASB Statement No. 133, "Accounting for Derivative
Instruments and Hedging Activities," to require disclosures by
sellers of credit derivatives, including credit derivatives embedded
in hybrid instruments. The FSP also clarifies the effective date of
SFAS 161, whereby disclosures required by SFAS 161 are effective for
financial statements issued for fiscal years and interim periods
beginning after November 15, 2008. Management is currently
evaluating the impact on the Fund's financial statements and
disclosures.
FINANCIAL STATEMENT OCTOBER 31, 2008 17
<PAGE>
BBH REAL RETURN FUND
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (continued)
October 31, 2008
2. Transactions with Affiliates.
Investment Advisory and Administrative Fees. Effective June 12, 2007,
under a combined Investment Advisory and Administrative Services Agreement
("Agreement") with the Trust, a separately identifiable department within
Brown Brothers Harriman & Co. ("BBH") provides investment advice,
portfolio management and administrative services to the Fund. BBH receives
a combined fee from the Fund for investment advisory and administrative
services calculated daily and paid monthly at an annual rate equivalent to
0.35% of the fund's average daily net assets. BBH has a sub-administration
services agreement with Federated Services Company ("FSC") for which FSC
receives compensation paid by BBH. For the year ended October 31, 2008,
the Fund incurred $583,669 for investment advisory and administrative
services.
Shareholder Servicing Fees. The Trust has a shareholder servicing
agreement with BBH for which BBH receives a fee from the Fund calculated
daily and paid monthly at an annual rate of 0.25% of Class N shares'
average daily net assets. For the year ended October 31, 2008, the Fund
incurred $351,059 for shareholder servicing services.
Custody and Accounting Fees. BBH acts as a custodian and shall receive a
custody and accounting fee from the Fund calculated daily and paid
monthly. BBH holds all cash and investments and calculates the daily net
asset value. The custody fee is a transaction based fee with an annual
minimum of $30,000, and the accounting fee is calculated at 0.04% per
annum on the first $100 million of net assets, 0.02% per annum on the next
$400 million of net assets and 0.01% per annum on all net assets over $500
million. For the year ended October 31, 2008, the Fund incurred $78,512
for custody and accounting services. These fees were reduced by $6,626 as
a result of an expense offset arrangement with the Fund's custodian. 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 overdraft. The total interest paid by the
Fund for the year ended October 31, 2008 was $10,655.
Securities Lending Fees. The Trust has a security lending agreement with
BBH for which BBH receives a fee from the Fund for each security loaned.
For the year ended October 31, 2008, the Fund incurred no security lending
fees.
Board of Trustees' Fees. Each Trustee receives an annual fee as well as
reimbursement for reasonable out-of-pocket expenses from the Fund. For the
year ended October 31, 2008, the Fund incurred $20,782 for these fees.
18
<PAGE>
BBH REAL RETURN FUND
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (continued)
October 31, 2008
3. Investment Transactions. For the year ended October 31, 2008, the cost of
purchases and the proceeds of sales of investment securities other than
short-term investments were $135,748,826 and $377,045,735, respectively.
4. Securities on Loan. As of October 31, 2008, the Fund had no securities on
loan.
5. Capital Stock. Prior to June 12, 2007, BBH Fund, Inc. was permitted to
issue 2,500,000,000 shares of capital stock, par value $.001 per share, of
which 277,777,778 shares were classified as Class N shares of the Fund,
277,777,778 shares were classified as Class I shares of the Fund. The
Trust offers unlimited shares without par value. Transactions in shares of
capital stock were as follows:
<TABLE>
<CAPTION>
SHARES AMOUNT
For the years ended For the years ended
October 31, October 31,
---------------------------- ------------------------------
2008 2007 2008 2007
----------- ----------- ------------ ------------
<S> <C> <C> <C> <C>
Class N
Capital stock sold ....... 1,167,203 2,888,008 $ 12,145,746 $ 29,493,130
Capital stock issued in
connection with
reinvestment of
dividends .............. 735,171 660,807 7,734,434 6,701,988
Capital stock redeemed (11,714,636) (18,326,328) (121,682,809) (188,584,152)
----------- - ----------- ------------ ------------
Net decrease ............. (9,812,262) (14,777,513) $(101,802,629) $(152,389,034)
========= ========= =========== ===========
Class I
Capital stock sold ....... 337,863 805,791 $ 3,567,019 $ 8,303,256
Capital stock issued in
connection with
reinvestment of
dividends .............. 71,376 252,185 622,757 2,565,493
Capital stock redeemed (7,254,680) (4,835,255) (76,571,674) (49,614,918)
----------- ----------- ------------ ------------
Net decrease ............. (6,845,441) (3,777,279) $ (72,381,898) $ (38,746,169)
========= ========= ========= ==========
</TABLE>
6. Subsequent Event. On December 10, 2008 at a quarterly meeting of the Board
of Trustees (the "Board") of BBH Trust, the Board determined that it was
in the best interests of the Fund's shareholders to liquidate the Fund.
Shareholders were given notice of this determination, along with a request
that shares of the Fund be redeemed before February 25, 2009.
FINANCIAL STATEMENT OCTOBER 31, 2008 19
<PAGE>
BBH REAL RETURN FUND
--------------------------------------------------------------------------------
DISCLOSURE OF FUND EXPENSES
October 31, 2008 (unaudited)
EXAMPLE
As a shareholder of BBH Real Return Fund (the "Fund"), you may incur two types
of costs: (1) transaction costs, including sales charges (loads) on purchase
payments, reinvested dividends, 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, 2008 to October 31, 2008).
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.
20
<PAGE>
BBH REAL RETURN FUND
--------------------------------------------------------------------------------
DISCLOSURE OF FUND EXPENSES (continued)
October 31, 2008 (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 sales
charges (loads), 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.
Expenses Paid
Beginning Ending During Period
Account Value Account Value May 1, 2008 to
Class N May 1, 2008 October 31, 2008 October 31, 2008(1)
- ------------- - ---------------- - -------------------
Actual.................. $1,000 $ 896.20 $3.62
Hypothetical(2)......... $1,000 $1,021.32 $3.86
Expenses Paid
Beginning Ending During Period
Account Value Account Value May 1, 2008 to
Class I May 1, 2008 October 31, 2008 October 31, 2008(1)
- ------------- - ---------------- - -------------------
Actual.................. $1,000 $ 900.50 $2.48
Hypothetical(2)......... $1,000 $1,022.52 $2.64
----------
(1) Expenses are equal to the Fund's annualized expense ratio of 0.76% and
0.52% for the Class N and I shares, respectively, multiplied by the
average account value over the period, multiplied by 184/366 (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.
FINANCIAL STATEMENT OCTOBER 31, 2008 21
<PAGE>
BBH REAL RETURN FUND
--------------------------------------------------------------------------------
DISCLOSURE OF ADVISOR SELECTION
October 31, 2008 (unaudited)
Approval of Investment Advisory/Administrative Services Agreement
At a meeting held on December 11, 2006, the Board of Trustees (the "Board") of
the Trust unanimously approved a new Combined Investment Advisory/Administrative
Services Agreement ("Combined Agreement"). The Board determined that the terms
of the Combined Agreement will be substantially identical to those of the
current investment advisory and administration agreements of the Funds, noting
that the most significant difference in the Combined Agreement is a single fee
for both investment advisory and administrative services. The following is a
summary of the factors the Board took into consideration in making its
determination to approve the new Combined Agreement.
Nature, Extent and Quality of Services Provided by Brown Brothers Harriman & Co.
("BBH")
The Board noted that, under the Combined Agreement in respect of each Fund, BBH,
subject to the supervision of the Board, will be responsible for providing a
continuous investment program and making purchases and sales of portfolio
securities consistent with the Funds' investment objective and policies. Under
the Combined Agreement, BBH also provides administrative services to each Fund.
The Board considered the scope and quality of services to be provided by BBH
under the Combined Agreement and noted that the scope of services provided had
expanded over time, primarily, as a result of regulatory developments. The Board
noted that, for example, BBH is responsible for maintaining and monitoring its
own and, to varying degrees, the Funds' compliance program, and these compliance
programs have recently been refined and enhanced in light of new regulatory
requirements. The Board considered the quality of the investment research and
administrative capabilities of BBH and the other resources it has dedicated to
performing services for the Funds. The Board concluded that, overall, they were
satisfied with the nature, extent and quality of services expected to be
provided to each of the Funds under the Combined Agreement.
Costs of Services Provided and Profitability to BBH
At the request of the Board, BBH provided information concerning the
profitability of BBH's current investment company advisory and other fees. The
Board also reviewed BBH's profitability data for each Fund, which also included
the effect of revenue generated by the shareholder servicing, administration,
custody and other fees paid by the Fund. The Board discussed the difficulty of
making comparisons of profitability because comparative information is not
generally publicly available and is affected by numerous factors, including the
structure of the service provider, the types of funds it manages and
administers, its business mix, numerous assumptions regarding allocations and
the entity's capital structure and cost of capital. In considering profitability
information, the Board considered the effect of fall-out benefits on BBH's
expenses, as well as the "revenue sharing" arrangements BBH has entered into
with certain entities that distribute shares of the Funds. The Board focused on
profitability of BBH's relationships with the Funds before taxes and
distribution expenses. The Board concluded that it was satisfied that BBH's
level of profitability from its relationship with each Fund was not excessive.
22
<PAGE>
BBH REAL RETURN FUND
--------------------------------------------------------------------------------
DISCLOSURE OF ADVISOR SELECTION (continued)
October 31, 2008 (unaudited)
Fall-Out Benefits
The Board considered that BBH does not allocate the Funds' portfolio
transactions for third party research, although it did benefit from proprietary
research received from brokers that execute the Funds' purchases and sales of
securities. The Board recognized that the aggregate amount of commissions
generated by Fund transactions was unlikely to result in the Funds receiving
from full service broker dealers substantial discounts on commission rates. The
Board received and reviewed information concerning BBH's policies with respect
to allocating portfolio brokerage.
The Board also considered that BBH receives shareholder servicing fees from
certain funds, and is the Funds' administrator, custodian and securities lending
agent. The Board noted that BBH retained no portion of the 12b-1 fees paid by
any Fund that operated with a Rule 12b-1 plan. The Board recognized that BBH's
profitability would be somewhat lower if it did not receive proprietary research
for commissions or, if it did not receive the other benefits described above.
The Board recognized that most Fund shareholders were also BBH clients, and that
substantial assets are invested in the Funds as a result of an overall
investment management program for the shareholder. The Board noted that the
Funds also derive reputational and other benefits from their association with
BBH and their use of the BBH name, which is licensed to the Funds by BBH. Thus,
the Board did not believe that BBH revenues associated with its clients should
be fairly regarded as "fallout" benefit from the Funds.
Economies of Scale
The Board noted that the Funds' combined fee schedules, other than the fee
schedule for BBH Money Market Fund, do not contain breakpoints. As a result, if
assets increase, the fee rates would not be reduced for these Funds on the
incremental assets. With respect to the BBH Money Market Fund, the breakpoint
will be reviewed every three (3) years by the Board, and may be adjusted upwards
to take into account the effects of inflation or such other basis as may be
appropriate, subject to the approval of shareholders to the extent required by
the 1940 Act.
There may be other economies of scale because many expenses did not rise (and
fall) proportionally to increases (and decreases) in total net assets. The Board
noted that BBH had priced its services in recognition of the fact that it was
largely its own clients who were shareholders and, accordingly, sought to assure
that the cost of these services and total expenses for each Fund were fair and
reasonable. In addition, the Board noted that over the years BBH had supported
certain Funds through fee waivers and expense reimbursements. Based on
information they had been provided over many years, the Board observed that in
the mutual fund industry as a whole, as well as among funds similar to the
Funds, there
FINANCIAL STATEMENT OCTOBER 31, 2008 23
<PAGE>
BBH REAL RETURN FUND
--------------------------------------------------------------------------------
DISCLOSURE OF ADVISOR SELECTION (continued)
October 31, 2008 (unaudited)
appeared to be no uniformity or pattern in the fees and asset levels at which
breakpoints (if any) apply. In light of the Funds' current size and expense
structure, the Board concluded that it was unnecessary at this time to consider
breakpoints with respect to the Funds, other than for the BBH Money Market Fund.
Investment Results
The Board considered the investment results of each of the Funds as compared to
investment companies with its peers and with one or more selected securities
indices. In addition to the information received by the Board for the meeting
held on October 2, 2006, the Board received detailed performance information for
each Fund at each regular Board meeting during the year. At the meeting held on
October 2, 2006, the Board reviewed information showing performance of each Fund
compared to its peers over the prior 1-, 3-, and 5- year periods and compared
the performance information to one or more securities indices over comparable
periods.
Combined Fee Rate
The Board considered the fee rate to be paid by each Fund to BBH. The Board
recognized that it is difficult to make comparisons of these fee rates, and the
combined investment advisory and administration fees, because there are
variations in the services that are included in the fees paid by other funds.
The Board considered the depth and range of services provided under the Combined
Agreement. For example, in addition to a continuous investment program, BBH
provides, among other things, officers (including the Funds' Chief Compliance
Officer and officers to provide required certifications) and administrative
services, such as shareholder communications, and tax compliance, with the
attendant costs and exposure to liability. BBH also coordinates the provision of
services to the Funds by nonaffiliated service providers.
The following factors specific to the BBH Real Return Fund also were noted and
considered by the Board in deciding to approve the Combined Agreement:
The Board reviewed the information showing performance of the BBH Real Return
Fund's Class N shares and Class I shares compared to the Citibank
Inflation-Linked Securities Index. Over all the relevant periods, the classes of
the BBH Real Return Fund on a pre-fee basis outperformed the benchmark by a
meaningful amount but on an after-fee basis generally underperformed the
benchmark by a modest amount. The Board viewed this performance with favor and
noted the benchmark has no fees. The Board also noted the expense ratio for all
share classes were in line with or lower than many funds of similar size and
investment mandate. Taking into account these comparisons and the other factors
considered, the Board concluded that the BBH Real Return Fund's investment
results over time and its total expense ratio had been satisfactory.
24
<PAGE>
BBH REAL RETURN FUND
--------------------------------------------------------------------------------
DISCLOSURE OF ADVISOR SELECTION (continued)
October 31, 2008 (unaudited)
Conflicts of Interest
As a general matter, certain conflicts of interest may arise in connection with
a portfolio manager's management of a Fund's investments, on the one hand, and
the investments of other accounts for which the portfolio manager is
responsible, on the other. For example, it is possible that the various accounts
managed could have different investment strategies that, at times, might
conflict with one another to the possible detriment of the Fund. Alternatively,
to the extent that the same investment opportunities might be desirable for more
than one account, possible conflicts could arise in determining how to allocate
them. Other potential conflicts might include conflicts created by specific
portfolio manager compensation arrangements, and conflicts relating to selection
of brokers or dealers to execute fund portfolio trades and/or specific uses of
commissions from Fund portfolio trades (for example, research, or "soft
dollars").
BBH has adopted and implemented policies, including brokerage and trade
allocation policies, which it believes manage the conflicts associated with
handling multiple accounts for multiple clients. In addition, BBH monitors a
variety of areas, including compliance with account investment guidelines, the
inclusion only of securities approved for purchase by a BBH oversight committee.
Finally, BBH has structured the portfolio managers' compensation in a manner,
and the Funds have adopted policies and procedures, reasonably designed to
safeguard a Fund from being negatively affected as a result of any such
potential conflicts.
FINANCIAL STATEMENT OCTOBER 31, 2008 25
<PAGE>
BBH REAL RETURN FUND
--------------------------------------------------------------------------------
ADDITIONAL FEDERAL TAX INFORMATION
October 31, 2008
The qualified interest income (QII) percentage for the year ended October 31,
2008 was 93.83%
In January 2009, the Fund will report on Form 1099 the tax status of all
distributions made during the calendar year 2008. Shareholders should use the
information on Form 1099 for their income tax returns.
26
<PAGE>
TRUSTEES AND OFFICERS OF BBH REAL RETURN FUND
--------------------------------------------------------------------------------
(unaudited)
Information pertaining to the Trustees of the BBH Trust (the "Trust") and
executive officers of the Trust is set forth below. Part B to the Registration
Statement of the BBH Real Return Fund includes additional information about the
Fund's Trustees and is available upon request without charge by contacting the
Fund at 1-800-625-5759
<TABLE>
<CAPTION>
Term of Number of
Office Funds in
and & #160; Fund Other
Position(s) Length Complex Directorships
Name, Birth Date Held with of Time Principal Occupation(s) Overseen by Held by
and Address Trust Served# During Past 5 Years Trustee^ Trustee
---------------------------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Joseph V. Shields Jr. Chairman of Since Managing Director, Chairman and 7 None
Birth Date: the Board 2007 Chief Executive Officer of Shields &
March 17, 1938 and Trustee Company (member of New York Stock
Shields & Company Exchange); Chairman of Capital
140 Broadway Management Associates, Inc.
New York, NY 10005 (registered investment adviser);
Director of Flower Foods, Inc. (New
York Stock Exchange listed company).
David P. Feldman Trustee Since Director of Jeffrey Co. (1992 to 7 Director of
Birth Date: 2007 present); Director of QMED (1999 Dreyfus
November 16, 1939 to May 2007). Mutual Funds
C/O BBH & Co. (59 Funds)
140 Broadway
New York, NY 10005
Alan G. Lowy Trustee Since Private Investor. 7 None
Birth Date: �� 2007
April 17, 1939
4111 Clear Valley
Drive
Encino, CA 91436
Arthur D. Trustee Since Retired; Trustee, R.K. Mellon Family 7 None
Miltenberger 2007 Trust (1981 to June 2003); Director
Birth Date: of Aerostructures Corporation
November 8, 1938 (aircraft manufacturer) (1996 to
503 Darlington Road July 2003).
Ligonier, PA 15658
Samuel F. Pryor, IV Trustee Since Private Investor. 7 None
Birth Date: 2007
June 12, 1955
130 East 67th Street
New York, NY 10021
</TABLE>FINANCIAL STATEMENT OCTOBER 31, 2008 27
<PAGE>
TRUSTEES AND OFFICERS OF BBH REAL RETURN FUND
--------------------------------------------------------------------------------
(unaudited)
<TABLE>
<CAPTION>
Term of Number of
Office Funds in
and Fund Other
Position(s) Length Complex Directorships
Name, Birth Date Held with of Time Principal Occupation(s) Overseen by Held by
and Address Trust Served# During Past 5 Years Trustee^ Trustee
-----------------------------------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
H. Whitney Wagner Trustee Since President, Clear Brook Advisors, a 7 None
Birth Date: 2007 registered investment advisor.
March 3, 1956
Clear Brook Advisors
75 Rockefeller Plaza,
14th Floor
New York, NY 10019
Officers
John A. Gehret President and Since President and Principal Executive N/A N/A
Birth Date: Principal 2008 Officer of the Trust; Joined Brown
April 11, 1959 Executive Brothers Harriman & Co. ("BBH &
140 Broadway Officer Co.") in 1981 and has been a Partner
New York, NY 10005 of the firm since 1998.
Charles H. Schreiber Treasurer and Since Treasurer and Principal Financial N/A N/A
Birth Date: Principal 2007 Officer of the Trust; Senior Vice
December 10, 1957 Financial President of BBH & Co. since
140 Broadway Officer September 2001; Joined BBH & Co.
New York, NY 10005 in 1999.
Mark B. Nixon Assistant Since Assistant Secretary and Assistant N/A N/A
Birth Date: Secretary, 2007 Treasurer of the Trust; Vice
January 14, 1963 Assistant President of BBH & Co. (since
140 Broadway Treasurer October 2006); Accounting Manager,
New York, NY 10005 Reserve Funds (August 2005 -
September 2006); Assistant
Controller, Reserve Funds
(February 2005 - August 2005);
Private Consultant (December 2001 -
February 2005).
Beth Haddock Chief Since Chief Compliance Officer of the N/A N/A
Birth Date: Compliance 2007 Trust (September 2007 - present);
December 10, 1965 Officer Chief Compliance Officer for the
140 Broadway FINRA/NYSE and SEC compliance
New York, NY 10005 programs and Associate Compliance
Director for the global compliance
program (April 2005-present);
Deputy General Counsel of AXA
Advisors/ AXA Financial
(November 1997 - April 2005).
</TABLE>28
<PAGE>
TRUSTEES AND OFFICERS OF BBH REAL RETURN FUND
--------------------------------------------------------------------------------
(unaudited)
<TABLE>
<CAPTION>
Term of Number of
Office Funds in
and Fund Other
Position(s) Length Complex Directorships
Name, Birth Date Held with of Time Principal Occupation(s) Overseen by Held by
and Address Trust Served# During Past 5 Years Trustee^ Trustee
-----------------------------------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Sue M. Rim-An Anti-Money Since Anti-Money Laundering Officer, Vice N/A N/A
Birth Date: Laundering 2008 President of BBH & Co. (September
September 10, 1970 Officer 2007 - present); AML Officer at
140 Broadway UBS Investment Bank (April 2006 -
New York, NY 10005 August 2007); AML Officer & Vice
President in Private Client Services
at Bear Stearns & Co (June 1992 -
April 2006).
Gail C. Jones Secretary Since Secretary of the Trust; Counsel, N/A N/A
Birth Date: 2007 ReedSmith, LLP (since October 2002);
October 26, 1953 Corporate Counsel (January 1997 to
1001 Liberty Avenue September 2002) and Vice President
Pittsburgh, PA (January 1999 to September 2002) of
15222-3779 Federated Services Company.
George M. Polatas Vice President Since Vice President of the Trust (since N/A N/A
Birth Date: 2008 June 2008); Assistant Vice President
March 3, 1962 of Federated Services Company; Vice
1001 Liberty Avenue, President of various funds
Pittsburgh, PA distributed by Edgewood Services,
15222-3779 Inc (January 1997 to present).
Theodore J. Boudria Assistant Since Assistant Treasurer of the Trust; N/A N/A
Birth Date: Treasurer 2008 Vice President (since 2003);
June 26, 1968 Assistant Vice President (since
70 Franklin Street September 2000); Joined BBH & Co.
Boston, MA 02110 in 1995.
</TABLE>----------
# Each Trustee of the Trust holds office until he or she attains the age of
70 (72, in the case of Trustees who were elected as such before January 1,
2000), or until he or she sooner dies, resigns or is removed from office
in accordance with the provisions of the Trust's Declaration of Trust. 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).
^ The Fund Complex consists of the Trust, which has seven series and each is
counted as one "Fund" for purposes of this table.
FINANCIAL STATEMENT OCTOBER 31, 2008 29
<PAGE>
INVESTMENT ADVISER AND ADMINISTRATOR
BROWN BROTHERS HARRIMAN
140 BROADWAY
NEW YORK, NY 10005
DISTRIBUTOR
EDGEWOOD SERVICES, INC.
5800 CORPORATE DRIVE
PITTSBURGH, PA 15237-7000
SHAREHOLDER SERVICING AGENT
BROWN BROTHERS HARRIMAN
140 BROADWAY
NEW YORK, NY 10005
(800) 625-5759
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. Such offering is made only by the prospectus, which includes details as to
offering price and other material information.
The Fund files with the SEC a complete schedule of its portfolio holdings, as of
the close of the first and third quarters of its fiscal year, on "Form N-Q."
Information on Form N-Q is available without charge and upon request by calling
the Funds at the toll-free number listed above. A text only version can be
viewed online or downloaded from the SEC's website at http://www.sec.gov; and
may be reviewed and copied at the SEC's Public Reference Room in Washington, DC
(call 1-800-SEC-0330 for information on the operation of the Public Reference
Room). You may also access this information from the BBH website at BBH.com by
clicking on "BBH Mutual Funds" and selecting "Online Documents/Holdings
Information."
A copy 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 upon request by calling the
toll-free number listed above. This information is also available from the EDGAR
database on the SEC's website at www.sec.gov.
BROWN [LOGO]
BROTHERS
HARRIMAN
BROWN [LOGO]
BROTHERS
HARRIMAN
Annual Report
OCTOBER 31, 2008
----------
BBH BROAD MARKET FUND
<PAGE>
BBH BROAD MARKET FUND
--------------------------------------------------------------------------------
MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE
2007's flight-to-quality rally in U.S. Treasuries continued in full force
throughout 2008, leaving nearly all risk sectors with spreads at record wide
levels. The deterioration of both economic and financial conditions led to the
failure, conservatorship, or forced consolidation of several former
industry-leading corporations including Lehman Brothers, Bear Stearns, Merrill
Lynch, Fannie Mae, Freddie Mac, AIG, and Washington Mutual. The authorities
responded swiftly with the Federal Reserve reducing its target rate 350bps, from
4.5% to 1%, in addition to introducing an assortment of liquidity enhancing
measures. The Treasury Department responded strongly as well, albeit in a
relatively incremental fashion.
Performance for the BBH Broad Market Fund lagged that of the Lehman Brothers
Aggregate Bond Index ("LBAG Index"). For the 12-month period ended October 31,
2008, the BBH Broad Market Fund "I" Shares returned -1.92%(1), while the "N"
Shares returned -2.08%(1) net of fees. The Fund's benchmark, the LBAG Index(2),
returned 0.30% over the same period. The underperformance was largely
attributable to the Fund's overweights to asset-backed securities ("ABS") and
corporate bonds, and its underweight of U.S. Treasuries. A majority of the ABS
losses took place in the first half of the fiscal year as we reduced positions
that had become illiquid and, in a few cases, impaired. Corporate bonds, on the
other hand, suffered their heaviest losses in the last 6 months. While the Fund
avoided many issuer-specific losses during the year, such as Lehman Brothers,
performance did suffer as a result of the Washington Mutual bankruptcy. As we
look forward, the risk profile of the Fund is substantially lower than a year
ago, and should produce less volatile results.
----------
(1) Performance data quoted represents 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. Mutual Fund performance changes over time and current
performance may be lower or higher than what is stated. For current to the
most recent month end performance and after tax returns, contact the Fund
at 1-800-625-5759.
(2) The LBAG Index is comprised of the Lehman Brothers Government/Corporate
Bond Index, Mortgage-Backed Securities Index and Asset-Backed Securities
Index, including securities that are investment-grade quality or better,
have at least one year to maturity, and have an outstanding par value of
at least $100 million. The index is unmanaged, and investments cannot be
made in an index.
2
<PAGE>
BBH BROAD MARKET FUND
--------------------------------------------------------------------------------
MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE (continued)
Growth of $10,000 Invested in BBH Broad Market Fund
The graph below illustrates the hypothetical investment of $10,000(1) in the
Class N shares of the Fund from July 20, 2000 to October 31, 2008 as compared to
the LBAG Index.
--------------------------------------------
Total Return for the Period Ended
October 31, 2008
--------------------------------------------
Since
Five Years Inception
One Year (Annualized) (Annualized)
--------------------------------------------
Class N (2.08)% 2.41% 4.72%(2)
Class I (1.92)% 2.56% 4.89%
[The following information was depicted as a line chart in the printed material]
Date Broad Market Fund* LBAG Index
-------- - ------------------ ----------
07/20/00 10,000.00 10,000.00
07/31/00 10,006.55 10,011.70
08/31/00 10,124.27 10,155.87
09/30/00 10,193.42 10,218.83
10/31/00 10,263.69 10,286.28
11/30/00 10,427.35 10,454.56
12/31/00 10,631.59 10,647.97
01/31/01 10,791.77 10,821.53
02/28/01 10,910.02 10,915.68
03/31/01 10,964.13 10,970.26
04/30/01 10,920.76 10,924.18
05/31/01 10,986.12 10,989.73
06/30/01 11,029.63 11,031.49
07/31/01 11,259.54 11,278.60
08/31/01 11,380.31 11,408.30
09/30/01 11,413.46 11,540.64
10/31/01 11,624.21 11,781.84
11/30/01 11,524.06 11,619.25
12/31/01 11,457.15 11,544.88
01/31/02 11,535.87 11,638.40
02/28/02 11,615.04 11,751.29
03/31/02 11,467.38 11,556.22
04/30/02 11,695.64 11,780.41
05/31/02 11,775.91 11,880.54
06/30/02 11,775.91 11,983.90
07/31/02 11,810.51 12,128.91
08/31/02 12,029.74 12,333.89
09/30/02 12,145.56 12,533.70
10/31/02 11,902.03 12,476.04
11/30/02 12,053.48 12,472.30
12/31/02 12,305.63 12,730.47
01/31/03 12,393.27 12,741.93
02/28/03 12,579.92 12,917.77
03/31/03 12,604.73 12,907.44
04/30/03 12,823.99 13,014.57
05/31/03 13,042.09 13,256.64
06/30/03 13,080.07 13,230.13
07/31/03 12,697.45 12,785.59
08/31/03 12,745.54 12,869.98
09/30/03 13,112.00 13,211.03
10/31/03 13,012.21 13,114.59
11/30/03 13,057.75 13,146.07
12/31/03 13,203.53 13,280.16
01/31/04 13,296.14 13,387.73
02/29/04 13,435.07 13,532.31
03/31/04 13,543.49 13,633.81
04/30/04 13,211.30 13,279.33
05/31/04 13,143.06 13,226.21
06/30/04 13,201.46 13,301.60
07/31/04 13,324.66 13,433.28
08/31/04 13,598.79 13,689.86
09/30/04 13,652.83 13,726.82
10/31/04 13,763.10 13,842.13
11/30/04 13,663.88 13,731.39
12/31/04 13,786.20 13,857.72
01/31/05 13,864.75 13,945.02
02/28/05 13,826.57 13,862.75
03/31/05 13,729.29 13,792.05
04/30/05 13,910.74 13,978.24
05/31/05 14,051.19 14,129.21
06/30/05 14,140.82 14,206.92
07/31/05 14,034.74 14,077.63
08/31/05 14,201.14 14,257.83
09/30/05 14,086.41 14,072.48
10/31/05 13,967.81 13,961.30
11/30/05 14,016.24 14,022.73
12/31/05 14,152.72 14,155.95
01/31/06 14,165.55 14,155.95
02/28/06 14,221.02 14,202.66
03/31/06 14,071.63 14,063.48
04/30/06 14,019.36 14,038.16
05/31/06 13,999.22 14,022.72
06/30/06 14,028.97 14,052.17
07/31/06 14,199.80 14,241.87
08/31/06 14,398.20 14,459.77
09/30/06 14,525.99 14,587.02
10/31/06 14,557.92 14,683.29
11/30/06 14,761.27 14,853.62
12/31/06 14,705.16 14,767.47
01/31/07 14,737.73 14,761.56
02/28/07 14,919.15 14,988.89
03/31/07 14,949.57 14,988.89
04/30/07 15,016.23 15,069.83
05/31/07 14,905.54 14,955.30
06/30/07 14 ,788.30 14,910.43
07/31/07 14,743.20 15,034.19
08/31/07 14,769.61 15,219.11
09/30/07 14,895.51 15,334.78
10/31/07 14,969.81 15,472.79
11/30/07 15,122.82 15,751.30
12/31/07 15,120.22 15,795.40
01/31/08 15,373.74 16,060.77
02/29/08 15,368.29 16,083.25
03/31/08 15,332.35 16,137.93
04/30/08 15,262.59 16,104.04
05/31/08 15,135.62 15,986.48
06/30/08 15,176.14 15,973.70
07/31/08 15,158.29 15,960.92
08/31/08 15,310.65 16,112.55
09/30/08 15,070.09 15,896.64
10/31/08 14,658.07 15,521.48
*net of fees and expenses
Performance data quoted represents past performance which is no guarantee of
future results. Investment return and principle value will fluctuate so that an
investor's shares, when redeemed, may be worth more or less than their original
cost. Mutual 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 current to the most recent month end performance and after tax
returns, contact the Fund at 1-800-625-5759.
----------
(1) The Fund's performance assumes the reinvestment of all dividends and
distributions. The LBAG Index has been adjusted to reflect reinvestment of
dividends on securities in the index. The LBAG 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.
(2) The BBH Broad Market Fund commenced operations on December 22, 2000.
Performance prior to December 22, 2000 is that of the BBH Broad Market
Fixed Income Portfolio adjusted to assume that all charges, expenses and
fees of the Class N shares and the Portfolio which are presently in effect
were deducted during such periods, as permitted by applicable SEC staff
interpretations. The Class N shares' performance from December 22, 2000
(commencement of operations) to October 31, 2008 was 4.15%.
FINANCIAL STATEMENT OCTOBER 31, 2008 3
<PAGE>
BBH BROAD MARKET FUND
--------------------------------------------------------------------------------
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Trustees of the BBH Trust and Shareholders of
BBH Broad Market Fund:
We have audited the accompanying statement of assets and liabilities, including
the portfolio of investments, of BBH Broad Market Fund (a series of BBH Trust)
(the "Fund") as of October 31, 2008, and 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, and the financial highlights for each of the
five years in the period then ended. These financial statements and financial
highlights are the responsibility of the Fund's management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). 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. The Fund
is not required to have, nor were we engaged to perform, an audit of its
internal control over financial reporting. Our audit included consideration of
internal control over financial reporting as a basis for designing audit
procedures that are appropriate in the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of the Fund's internal control over
financial reporting. Accordingly, we express no such opinion. An audit also
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. Our procedures included confirmation
of securities owned as of October 31, 2008, by correspondence with the custodian
and brokers; where replies were not received from brokers, we performed other
auditing procedures. We believe that our audits provide a reasonable basis for
our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of BBH
Broad Market Fund as of October 31, 2008, 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.
Deloitte & Touche LLP
Boston, Massachusetts
December 22, 2008
4
<PAGE>
BBH BROAD MARKET FUND
--------------------------------------------------------------------------------
PORTFOLIO ALLOCATION
October 31, 2008 (unaudited)
BREAKDOWN BY SECURITY TYPE
Percent of
U.S. $ Value Net Assets
------------ ----------
Asset Backed Securities............................. $ 19,222,042 7.5%
Collateralized Mortgage Backed Securities........... 1,978,660 0.8
Corporate Bonds..................................... 82,383,302 32.3
Municipal Bond...................................... 1,441,222 0.6
U.S. Government Agency Obligations.................. 131,735,284 51.7
U.S. Treasury Notes and Bonds....................... 30,621,561 12.0
Commercial Paper.................................... 4,799,965 1.9
Liabilities in Excess of Cash and Other Assets...... (17,289,642) (6.8)
------------ -----
NET ASSETS.......................................... $254,892,394 100.0%
========== =====
All data as of October 31, 2008. 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.
FINANCIAL STATEMENT OCTOBER 31, 2008 5
<PAGE>
BBH BROAD MARKET FUND
--------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
October 31, 2008
<TABLE>
<CAPTION>
Principal Maturity Interest
Amount Date Rate Value
--------- -------- ----- - ----------
<S> <C> <C> <C> <C>
ASSET BACKED SECURITIES (7.5%)
$ 750,000 Advanta Business Card Master
Trust 2007-D1A(1),(2)............. 01/22/13 5.678% $ 223,385
400,000 American Express Credit Account
Master Trust 2006-2............... 01/15/14 5.350 374,590
2,875,000 Banc of America Securities Auto
Trust 2006-G1..................... 12/20/10 5.170 2,806,652
752,068 Capital One Auto Finance
Trust 2005-BSS.................... 12/15/10 4.480 742,310
189,029 Capital One Auto Finance Trust 2006-A 11/15/10 5.330 188,332
1,030,000 Capital One Multi-Asset Execution
Trust 2003-B5..................... 08/15/13 4.790 850,116
465,000 Chase Issuance Trust 2007-A3........ 04/15/19 5.230 342,189
3,245,000 Chase Issuance Trust 2008-A11....... 07/15/15 5.400 2,791,291
392,995 CIT Equipment Collateral 2005-EF1(2) 09/20/10 4.318 391,557
1,390,000 Citibank Credit Card Issuance
Trust 2006-A4..................... 05/10/13 5.450 1,302,458
85,901 Countrywide Asset-Backed
Certificates 2004-S1(2)........... 03/25/20 3.872 83,236
12,730 Countrywide Asset-Backed
Certificates 2004-13(2)........... 02/25/31 3.989 12,679
131,902 Countrywide Home Equity Loan
Trust 2004-O(2)................... 02/15/34 4.840 88,630
315,079 Credit-Based Asset Servicing and
Securitization LLC 2003-CB3(2).... 12/25/32 2.879 264,882
71,100 GS Auto Loan Trust 2005-1........... 05/17/10 4.450 71,087
90,000 Honda Auto Receivables Owner
Trust 2006-1...................... 07/18/11 5.080 89,683
563,891 Household Automotive Trust 2006-1... 06/17/11 5.430 553,403
694,724 Hyundai Auto Receivables Trust 2004-A 08/15/11 3.460 692,308
1,560,000 Nissan Auto Receivables Owner
Trust 2006-B...................... 11/15/11 5.220 1,530,967
885,636 SLM Student Loan Trust 2005-9(2).... 01/25/19 3.585 883,367
1,548,630 UPFC Auto Receivables Trust 2006-A.. 05/15/12 5.490 1,485,536
</TABLE>
The accompanying notes are an integral part of these financial statements.
6
<PAGE>
BBH BROAD MARKET FUND
--------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS (continued)
October 31, 2008
<TABLE>
<CAPTION>
Principal Maturity Interest
Amount Date Rate Value
--------- -------- ----- ---------
<S> <C> <C> <C> <C>
ASSET BACKED SECURITIES (continued)
$3,132,805 USAA Auto Owner Trust 2005-1........ 11/15/11 4.130% $ 3,119,630
350,000 Wachovia Auto Owner Trust 2005-B.... 11/20/12 4.930 333,754
------------
Total Asset Backed Securities
(Identified cost $20,905,939)....... 19,222,042
------------
COLLATERALIZED MORTGAGE
BACKED SECURITIES (0.8%)
1,500,000 Bear Stearns Commercial Mortgage
Securities 2006-PW11(2)........... 03/11/39 5.408 1,390,347
605,358 Morgan Stanley Capital I 2006-HQ8... 03/12/44 5.124 588,313
60; ------------
Total Collateralized
Mortgage Backed Securities
(Identified cost $2,113,563)........ 1,978,660
------------
CORPORATE BONDS (32.3%)
AGRICULTURE (0.3%)
330,000 Philip Morris International, Inc.... 05/16/38 6.375 261,578
600,000 Reynolds American, Inc.............. 07/15/15 7.300 512,449
------------
774,027
------------
AUTO MANUFACTURES (0.4%)
1,000,000 DaimlerChrysler NA Holding Corp..... 06/15/10 4.875 859,438
100,000 DaimlerChrysler NA Holding Corp..... 11/15/13 6.500 74,958
60; ------------
934,396
60; ------------
BANKING (1.0%)
1,400,000 Bank of New York Mellon Corp........ 11/01/12 4.950 1,350,912
75,000 PNC Funding Corp.................... 02/01/17 5.625 63,505
280,000 Wachovia Corp....................... 10/15/16 5.625 218,935
1,155,000 Wells Fargo Bank NA................. 05/16/16 5.750 1,034,871
------------
2,668,223
60; ------------
BEVERAGES (1.7%)
825,000 Coca-Cola Co........................ 11/15/17 5.350 748,880
1,695,000 Diageo Finance BV................... 04/01/13 5.500 1,598,019
1,470,000 Molson Coors Capital Finance ULC.... 09/22/10 4.850 1,472,461
</TABLE>
The accompanying notes are an integral part of these financial statements.
FINANCIAL STATEMENT OCTOBER 31, 2008 7
<PAGE>
BBH BROAD MARKET FUND
--------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS (continued)
October 31, 2008
<TABLE>
<CAPTION>
Principal Maturity Interest
Amount Date Rate Value
--------- -------- ----- ---------
<S> <C> <C> <C> <C>
CORPORATE BONDS (continued)
BEVERAGES (continued)
$ 185,000 PepsiAmericas, Inc.................. 05/31/11 5.625% $ 190,168
500,000 PepsiCo, Inc........................ 06/01/18 5.000 431,947
------------
4,441,475
------------
COMMERCIAL SERVICES (0.4%)
1,085,000 Western Union Co.................... 11/17/11 5.400 1,055,179
------------
COSMETICS / PERSONAL CARE (0.6%)
495,000 Estee Lauder Cos., Inc.............. 05/15/17 5.550 404,269
1,275,000 Procter & Gamble Co................. 03/05/37 5.550 1,102,798
------------
1,507,067
------------
DIVERSIFIED FINANCIAL SERVICES (9.6%)
330,000 American Express Co................. 09/12/16 5.500 262,040
965,000 Associates Corp. of North America... 11/01/08 6.250 965,000
1,245,000 AXA Financial, Inc.................. 08/01/10 7.750 1,284,439
1,700,000 Citigroup, Inc...................... 01/18/11 6.500 1,654,802
185,000 ConocoPhillips Canada Funding Co. I. 10/15/16 5.625 162,365
1,425,000 Credit Suisse USA, Inc.............. 08/16/16 5.850 1,125,636
1,525,000 FIA Card Services NA................ 06/15/12 6.625 1,473,742
1,400,000 General Electric Capital Corp....... 09/15/17 5.625 1,144,559
2,540,000 Goldman Sachs Group, Inc............ 01/15/12 6.600 2,400,778
2,850,000 HSBC Finance Corp................... 11/27/12 6.375 2,634,888
2,725,000 International Lease Finance Corp.... 09/01/10 4.875 1,908,211
1,370,000 JP Morgan Chase & Co................ 05/01/15 5.250 1,221,488
2,775,000 Merrill Lynch & Co., Inc............ 07/25/11 5.770 2,619,844
2,220,000 Morgan Stanley...................... 04/01/14 4.750 1,578,944
2,640,000 Textron Financial Corp.............. 02/03/11 5.125 2,357,671
365,000 Travelers Cos., Inc................. 06/15/12 5.375 328,971
1,290,000 Unilever Capital Corp............... 11/01/10 7.125 1,333,313
60; ------------
24,456,691
------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
8
<PAGE>
BBH BROAD MARKET FUND
--------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS (continued)
October 31, 2008
<TABLE>
<CAPTION>
Principal Maturity Interest
Amount Date Rate Value
--------- -------- ----- - ---------
<S> <C> <C> <C> <C>
CORPORATE BONDS (continued)
FOOD (1.7%)
$ 780,000 ConAgra Foods, Inc.................. 09/15/11 6.750% $ 761,957
310,000 Hershey Co.......................... 09/01/11 5.300 305,699
700,000 Kellogg Co.......................... 04/01/31 7.450 699,171
695,000 Kraft Foods, Inc.................... 08/11/17 6.500 610,959
1,470,000 Safeway, Inc........................ 11/01/08 4.125 1,470,000
800,000 Tesco, Plc.(1)...................... 11/15/37 6.150 530,988
------------
4,378,774
60; ------------
FOREST PRODUCTS & PAPER (0.1%)
148,000 International Paper Co.............. 10/30/12 5.850 127,136
- ------------
HEALTHCARE PRODUCTS (0.4%)
1,075,000 Amgen, Inc.......................... 06/01/17 5.850 954,268
-----------
HEALTHCARE SERVICES (0.5%)
405,000 UnitedHealth Group, Inc............. 06/15/17 6.000 328,388
1,100,000 WellPoint, Inc...................... 06/15/17 5.875 899,190
60; ------------
1,227,578
------------
HOUSEHOLD PRODUCTS / WARES (0.6%)
60,000 Clorox Co........................... 10/15/12 5.450 55,470
675,000 Fortune Brands, Inc................. 01/15/11 5.125 624,219
905,000 Kimberly-Clark Corp................. 08/01/17 6.125 843,690
60; ------------
0; 1,523,379
60; ------------
INDUSTRIALS (1.3%)
675,000 Boeing Co........................... 02/15/13 5.125 640,268
290,000 Emerson Electric Co................. 12/01/16 5.125 257,209
900,000 Lockheed Martin Corp................ 05/01/36 7.200 852,785
330,000 Parker-Hannifin Corp................ 05/15/38 6.250 274,523
1,500,000 United Technologies Corp............ 07/15/38 6.125 1,293,789
------------
3,318,574
------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
FINANCIAL STATEMENT OCTOBER 31, 2008 9
<PAGE>
BBH BROAD MARKET FUND
--------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS (continued)
October 31, 2008
<TABLE>
<CAPTION>
Principal Maturity Interest
Amount Date Rate Value
--------- - -------- ----- ---------
<S> <C> <C> <C> <C>
CORPORATE BONDS (continued)
INFORMATION TECHNOLOGY (0.2%)
$ 630,000 International Business Machines Corp. 09/14/17 5.700% $ 572,283
60; ------------
INSURANCE (1.1%)
75,000 American International Group, Inc... 10/18/16 5.600 27,094
565,000 Commerce Group, Inc................. 12/09/13 5.950 527,786
810,000 Everest Reinsurance Holdings, Inc... 10/15/14 5.400 624,478
555,000 Hartford Financial Services Group, Inc. 10/15/16 5.500 376,727
1,385,000 MetLife, Inc........................ 12/01/11 6.125 1,341,471
------------
0; 2,897,556
60; ------------
MATERIALS (0.6%)
985,000 Dow Chemical Co..................... 10/01/12 6.000 934,198
755,000 E.I. Du Pont de Nemours & Co........ 07/15/13 5.000 720,893
- ------------
1,655,091
----------
MEDIA (1.0%)
1,410,000 Comcast Corp........................ 03/15/11 5.500 1,346,417
985,000 COX Communications, Inc............. 10/01/12 7.125 940,764
390,000 Time Warner Cable, Inc.............. 05/01/17 5.850 319,495
60; ------------
2,606,676
60; ------------
OIL & GAS (1.9%)
35,000 Apache Corp......................... 04/15/13 5.250 33,114
500,000 Canadian Natural Resources, Ltd..... 01/15/32 7.200 402,418
825,000 EnCana Corp......................... 02/01/38 6.500 572,250
700,000 Halliburton Co...................... 09/15/18 5.900 641,999
1,005,000 Marathon Oil Corp................... 10/01/17 6.000 800,547
1,013,000 Pemex Project Funding Master Trust.. 02/01/09 7.875 1,005,952
725,000 Petronas Capital, Ltd.(1)........... 05/22/12 7.000 707,980
635,000 Transocean, Inc..................... 04/15/18 7.375 590,469
------------
4,754,729
------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
10
<PAGE>
BBH BROAD MARKET FUND
--------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS (continued)
October 31, 2008
<TABLE>
<CAPTION>
Principal Maturity Interest
Amount Date Rate Value
--------- -------- ----- ---------
<S> <C> �� <C> <C> <C>
CORPORATE BONDS (continued)
PHARMACEUTICALS (2.2%)
$ 325,000 Bristol-Myers Squibb Co............. 05/01/38 6.125% $ 270,222
2,735,000 Eli Lilly & Co...................... 03/15/17 5.200 2,481,712
825,000 GlaxoSmithKline Capital, Inc........ 05/15/18 5.650 731,123
850,000 Schering-Plough Corp................ 09/15/17 6.000 746,735
1,285,000 WYETH............................... 03/15/11 6.950 1,315,102
------------
60; 5,544,894
& #160; - ------------
REAL ESTATE (0.2%)
610,000 Brookfield Asset Management, Inc.... 06/15/12 7.125 612,947
& #160; - ------------
RETAIL (1.2%)
1,020,000 CVS Caremark Corp................... 08/15/16 6.125 853,481
360,000 Lowe's Cos., Inc.................... 10/15/16 5.400 303,427
800,000 Target Corp......................... 01/15/38 7.000 612,099
700,000 Walgreen Co......................... 08/01/13 4.875 683,884
820,000 Wal-Mart Stores Inc................. 04/15/38 6.200 707,847
------------
3,160,738
- ------------
SEMICONDUCTORS (0.2%)
600,000 National Semiconductor Corp......... 06/15/12 6.150 576,674
60; ------------
TELECOMMUNICATIONS (2.9%)
635,000 AT&T, Inc........................... 09/15/09 4.125 627,704
1,660,000 AT&T, Inc........................... 03/15/11 6.250 1,634,286
480,000 AT&T, Inc........................... 09/15/14 5.100 419,228
1,485,000 Deutsche Telekom International
Finance BV........................ 06/15/10 8.500 1,462,621
435,000 France Telecom S.A.................. 03/01/11 7.750 430,250
675,000 KT Corp.(1)......................... 07/15/15 4.875 496,009
580,000 Telecom Italia Capital S.A.......... 01/15/10 4.000 522,655
1,180,000 Verizon California, Inc............. 01/15/09 5.500 1,176,676
585,000 Verizon Communications, Inc......... 04/01/17 5.500 498,835
- ------------
7,268,264
60; - ------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
FINANCIAL STATEMENT OCTOBER 31, 2008 11
<PAGE>
BBH BROAD MARKET FUND
--------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS (continued)
October 31, 2008
<TABLE>
<CAPTION>
Principal Maturity Interest
Amount Date Rate Value
--------- -------- ----- ---------
<S> <C> <C> <C> <C>
CORPORATE BONDS (continued)
TRANSPORTATION (0.7%)
$ 635,000 MISC Capital, Ltd.(1)............... 07/01/09 5.000% $ 626,928
800,000 Norfolk Southern Corp............... 05/15/17 7.700 786,560
270,000 Union Pacific Corp.................. 01/15/12 6.125 258,124
60; ------------
1,671,612
------------
UTILITIES (1.5%)
520,000 Dominion Resources, Inc............. 12/15/10 4.750 502,746
525,000 Duke Energy Carolinas LLC........... 04/15/38 6.050 442,817
650,000 EDP Finance BV(1)................... 11/02/12 5.375 593,319
165,000 Florida Power & Light Co............ 11/01/17 5.550 152,518
665,000 MidAmerican Energy Co............... 07/15/12 5.650 643,078
850,000 Pacific Gas & Electric Co........... 02/15/38 6.350 668,096
735,000 Sempra Energy....................... 02/01/13 6.000 692,497
60; ------------
�� 0; 3,695,071
------------
Total Corporate Bonds
(Identified cost $92,228,214)....... 82,383,302
60; ------------
MUNICIPAL BOND (0.6%)
1,485,000 Mississippi Development Bank
Special Obligation................ 07/01/12 5.240 1,441,222
------------
Total Municipal Bond
(Identified cost $1,489,253)........ 1,441,222
60; ------------
U.S. GOVERNMENT AGENCY
OBLIGATIONS (51.7%)
3,000,000 Federal Home Loan Bank.............. 05/20/11 2.625 2,945,079
3,000,000 Federal Home Loan Bank.............. 08/14/13 5.125 3,096,096
4,900,000 Federal Home Loan Mortgage Corp..... 05/21/09 5.250 4,965,773
4,600,000 Federal Home Loan Mortgage Corp..... 03/15/11 5.625 4,863,069
11,809 Federal Home Loan Mortgage Corp..... 08/15/13 4.000 11,817
41,326 Federal Home Loan Mortgage Corp..... 08/15/13 4.500 41,402
175,000 Federal Home Loan Mortgage Corp..... 05/15/28 5.500 177,394
180,000 Federal Home Loan Mortgage Corp..... 01/15/29 5.500 181,862
</TABLE>
The accompanying notes are an integral part of these financial statements.
12
<PAGE>
BBH BROAD MARKET FUND
--------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS (continued)
October 31, 2008
<TABLE>
<CAPTION>
Principal Maturity Interest
Amount Date Rate Value
--------- -------- ----- ---------
<S> <C> <C> <C> <C>
U.S.GOVERNMENT AGENCY
OBLIGATIONS (continued)
$ 1,550,000 Federal Home Loan Mortgage Corp..... 07/15/32 6.250% $ 1,682,909
105,000 Federal Home Loan Mortgage Corp..... 10/15/34 5.500 101,747
6,750,000 Federal National Mortgage Assoc..... 09/15/12 4.375 6,846,444
42,455 Federal National Mortgage Assoc..... 04/01/17 6.500 43,521
2,450,000 Federal National Mortgage Assoc..... 06/12/17 5.375 2,476,575
2,855,373 Federal National Mortgage Assoc..... 02/01/20 5.000 2,797,558
3,243,072 Federal National Mortgage Assoc..... 02/01/20 5.000 3,177,406
132,076 Federal National Mortgage Assoc..... 03/01/20 4.500 126,059
6,407,071 Federal National Mortgage Assoc..... 06/01/20 5.000 6,277,342
109,097 Federal National Mortgage Assoc..... 10/25/21 6.000 112,101
3,700,000 Federal National Mortgage Assoc.
(TBA 15YR)........................ 11/03/23 5.000 3,616,750
5,640 Federal National Mortgage Assoc..... 12/01/28 7.500 5,949
3,581 Federal National Mortgage Assoc..... 04/01/29 7.500 3,778
4,160 Federal National Mortgage Assoc..... 04/01/29 7.500 4,388
1,500,000 Federal National Mortgage Assoc..... 11/15/30 6.625 1,695,261
13,243 Federal National Mortgage Assoc..... 12/01/30 7.500 13,942
119,236 Federal National Mortgage Assoc..... 01/25/31 6.000 119,267
270,000 Federal National Mortgage Assoc..... 03/25/31 5.500 269,916
184,429 Federal National Mortgage Assoc..... 07/01/32 7.000 190,338
239,662 Federal National Mortgage Assoc..... 11/01/32 6.500 244,545
101,238 Federal National Mortgage Assoc..... 10/01/33 6.000 101,486
23,387 Federal National Mortgage Assoc..... 11/25/33 5.500 23,412
119,041 Federal National Mortgage Assoc..... 03/01/34 4.500 108,355
225,061 Federal National Mortgage Assoc..... 07/01/34 6.500 228,943
244,848 Federal National Mortgage Assoc..... 09/01/34 6.500 249,072
779,434 Federal National Mortgage Assoc..... 06/01/35 5.500 762,343
11,858 Federal National Mortgage Assoc..... 11/01/35 6.500 12,033
219,851 Federal National Mortgage Assoc..... 11/01/35 6.500 223,094
236,687 Federal National Mortgage Assoc..... 11/01/35 6.500 240,178
195,380 Federal National Mortgage Assoc..... 12/01/35 6.500 198,262
246,515 Federal National Mortgage Assoc..... 01/01/36 6.500 250,035
16,786 Federal National Mortgage Assoc..... 02/01/36 6.500 17,025
</TABLE>
The accompanying notes are an integral part of these financial statements.
FINANCIAL STATEMENT OCTOBER 31, 2008 13
<PAGE>
BBH BROAD MARKET FUND
--------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS (continued)
October 31, 2008
<TABLE>
<CAPTION>
Principal Maturity Interest
Amount Date Rate ��Value
--------- -------- ----- ---------
<S> <C> <C> <C> <C>
U.S.GOVERNMENT AGENCY
OBLIGATIONS (continued)
$ 190,497 Federal National Mortgage Assoc..... 02/01/36 6.500% $ 193,307
228,930 Federal National Mortgage Assoc..... 02/01/36 6.500 232,200
254,301 Federal National Mortgage Assoc..... 02/01/36 6.500 258,052
197,683 Federal National Mortgage Assoc..... 03/01/36 6.500 200,506
277,250 Federal National Mortgage Assoc..... 03/01/36 6.500 281,210
194,982 Federal National Mortgage Assoc..... 04/01/36 6.500 197,767
300,712 Federal National Mortgage Assoc..... 04/01/36 6.500 305,006
248,973 Federal National Mortgage Assoc..... 05/01/36 6.500 252,528
817,492 Federal National Mortgage Assoc..... 05/01/36 6.500 829,167
198,691 Federal National Mortgage Assoc..... 06/01/36 6.500 201,528
216,005 Federal National Mortgage Assoc..... 06/01/36 6.500 219,090
233,171 Federal National Mortgage Assoc..... 06/01/36 6.500 236,501
241,980 Federal National Mortgage Assoc..... 06/01/36 6.500 245,436
248,881 Federal National Mortgage Assoc..... 06/01/36 6.500 252,435
310,370 Federal National Mortgage Assoc..... 06/01/36 6.500 314,803
538,676 Federal National Mortgage Assoc.(2). 07/01/36 5.748 544,665
206,638 Federal National Mortgage Assoc..... 08/01/36 6.500 209,589
383,261 Federal National Mortgage Assoc..... 08/01/36 6.500 388,734
412,643 Federal National Mortgage Assoc..... 08/01/36 6.500 418,537
960,441 Federal National Mortgage Assoc.(2). 09/01/36 5.812 972,086
137,830 Federal National Mortgage Assoc..... 09/01/36 6.500 139,799
230,316 Federal National Mortgage Assoc..... 09/01/36 6.500 233,605
360,247 Federal National Mortgage Assoc..... 09/01/36 6.500 3 65,392
199,033 Federal National Mortgage Assoc..... 10/01/36 6.500 201,875
352,823 Federal National Mortgage Assoc..... 10/01/36 6.500 357,861
373,978 Federal National Mortgage Assoc..... 10/01/36 6.500 379,319
386,098 Federal National Mortgage Assoc..... 11/01/36 6.500 391,612
400,637 Federal National Mortgage Assoc..... 11/01/36 6.500 406,358
432,000 Federal National Mortgage Assoc..... 11/01/36 6.500 438,169
444,247 Federal National Mortgage Assoc..... 11/01/36 6.500 450,592
3,965,731 Federal National Mortgage Assoc..... 12/01/36 6.000 3,966,144
217,137 Federal National Mortgage Assoc..... 12/01/36 6.500 220,238
398,723 Federal National Mortgage Assoc..... 12/01/36 6.500 404,417
</TABLE>
The accompanying notes are an integral part of these financial statements.
14
<PAGE>
BBH BROAD MARKET FUND
--------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS (continued)
October 31, 2008
<TABLE>
<CAPTION>
Principal Maturity Interest
Amount Date Rate Value
--------- -------- ----- ---------
<S> <C> <C> <C> <C>
U.S.GOVERNMENT AGENCY
OBLIGATIONS (continued)
$ 432,498 Federal National Mortgage Assoc..... 12/01/36 6.500% $ 438,675
1,287,265 Federal National Mortgage Assoc.(2). 01/01/37 5.489 1,305,603
388,351 Federal National Mortgage Assoc..... 01/01/37 6.500 393,897
353,982 Federal National Mortgage Assoc..... 03/01/37 6.500 359,017
13,979,311 Federal National Mortgage Assoc..... 06/01/37 5.500 13,665,447
9,421,081 Federal National Mortgage Assoc..... 07/01/37 6.000 9,421,532
8,215,312 Federal National Mortgage Assoc..... 07/01/37 6.500 8,332,175
8,659,499 Federal National Mortgage Assoc..... 08/01/37 6.000 8,659,914
5,085,000 Federal National Mortgage Assoc.
(TBA 30YR)........................ 11/03/38 5.000 4,816,451
2,400,000 Federal National Mortgage Assoc.
(TBA 30YR)........................ 11/03/38 6.500 2,432,251
74,446 Federal National Mortgage Assoc..... 02/25/44 5.950 75,310
477,570 FHLMC Gold Pool..................... 05/01/19 4.000 442,529
1,558,801 FHLMC Gold Pool..................... 05/01/19 4.000 1,444,428
886,167 FHLMC Gold Pool..................... 12/01/19 4.000 821,146
2,593,713 FHLMC Gold Pool..................... 02/01/20 4.000 2,403,405
470,347 FHLMC Gold Pool..................... 04/01/20 4.000 434,660
68,147 FHLMC Gold Pool..................... 01/01/22 4.000 62,912
1,349,048 FHLMC Gold Pool..................... 10/01/34 5.500 1,319,949
158,295 FHLMC Gold Pool..................... 11/01/35 5.000 149,958
91,884 FHLMC Gold Pool..................... 12/01/35 5.000 87,044
124,883 FHLMC Gold Pool..................... 12/01/35 5.000 118,306
7,999,062 FHLMC Gold Pool..................... 06/01/36 5.000 7,577,778
1,507,813 FHLMC Non Gold Guaranteed(2)........ 04/01/36 5.411 1,515,251
335,585 FHLMC Non Gold Guaranteed(2)........ 12/01/36 5.420 339,968
694,326 FHLMC Non Gold Guaranteed(2)........ 01/01/37 5.494 704,041
1,130,732 FHLMC Non Gold Guaranteed(2)........ 02/01/37 5.445 1,146,304
56,006 General National Mortgage Assoc.(2). 08/20/29 5.625 56,279
------------
Total U.S. Government Agency Obligations
(Identified cost $132,973,892)...... 131,735,284
------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
FINANCIAL STATEMENT OCTOBER 31, 2008 15
<PAGE>
BBH BROAD MARKET FUND
--------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS (continued)
October 31, 2008
<TABLE>
<CAPTION>
Principal Maturity Interest
Amount Date Rate Value
--------- -------- ----- ---------
<S> <C> <C> <C> <C>
U.S. TREASURY NOTES AND BONDS (12.0%)
$ 2,200,000 U.S. Treasury Bonds................. 02/15/23 7.125% $2,708,235
210,000 U.S. Treasury Bonds................. 02/15/26 6.000 239,384
1,305,000 U.S. Treasury Bonds................. 02/15/36 4.500 1,329,164
760,000 U.S. Treasury Bonds................. 02/15/37 4.750 805,778
560,000 U.S. Treasury Notes................. 08/15/13 4.250 599,506
300,000 U.S. Treasury Notes................. 08/15/16 4.875 319,711
22,810,000 U.S. Treasury Notes................. 08/15/17 4.750 24,142,971
730,000 United States Treasury Inflation
Indexed Bonds..................... 11/15/17 8.493 476,812
------------
Total U.S. Treasury Notes and Bonds
(Identified cost $30,959,903)....... 30,621,561
------------
COMMERCIAL PAPER (1.9%)
4,800,000 Deutsche Bank Financial LLC......... 11/03/08 0.130 4,799,965
------------
Total Commercial Paper
(Identified cost $4,799,965)........ 4,799,965
------------
TOTAL INVESTMENTS (Identified cost $285,470,729(3))........ 106.8% $272,182,036
LIABILITIES IN EXCESS OF CASH AND OTHER ASSETS............. (6.8) (17,289,642)
----- & #160; ------------
NET ASSETS................................................. 100.0% $254,892,394
===== =========
</TABLE>
----------
(1) Security exempt from registration under Rule 144A of the Securities Act of
1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers. Total market
value of 144A securities owned at October 31, 2008, was $3,178,609 or 1.3%
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, 2008 coupon or interest rate.
(3) The aggregate cost for federal income tax purposes is $285,734,672, the
aggregate gross unrealized appreciation is $481,668 and the aggregate
gross unrealized depreciation is $14,034,304, resulting in net unrealized
depreciation of $13,552,636.
The accompanying notes are an integral part of these financial statements.
16
<PAGE>
BBH BROAD MARKET FUND
--------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
October 31, 2008
ASSETS:
Investments in securities, at value
(identified cost $285,470,729) ............................. $272,182,036
Cash.......................................................... 74,957
Receivables for:
Interest.................................................... 2,719,906
Capital stock sold.......................................... 209,383
Investment sold............................................. 51,612
------------
Total Assets.............................................. 275,237,894
------------
LIABILITIES:
Payables for:
Investment purchased........................................ 20,081,583
Investment advisory and administrative fees................. 64,566
Capital stock redeemed...................................... 63,342
Custody and accounting fees................................. 55,719
Professional fees........................................... 30,800
Shareholder servicing fees.................................. 20,203
Board of Trustees' fees..................................... 5,443
Accrued expenses and other liabilities...................... 23,844
------------
Total Liabilities......................................... 20,345,500
------------
NET ASSETS....................................................... $254,892,394
==========
Net Assets Consist of:
Par value..................................................... $ 27,376
Paid-in capital............................................... 280,892,104
Undistributed net investment income........................... 833,711
Accumulated net realized loss on investments and
foreign exchange transactions............................... (13,572,064)
Net unrealized depreciation on investments and
foreign currency translations............................... (13,288,733)
------------
Net Assets....................................................... $254,892,394
=========
NET ASSET VALUE AND OFFERING PRICE PER SHARE
CLASS N SHARES NET ASSET VALUE
($159,549,387 / 17,131,813 shares outstanding)................ $9.31
=====
CLASS I SHARES NET ASSET VALUE
($95,343,007 / 10,243,730 shares outstanding)................. $9.31
=====
The accompanying notes are an integral part of these financial statements.
FINANCIAL STATEMENT OCTOBER 31, 2008 17
<PAGE>
BBH BROAD MARKET FUND
--------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
For the year ended October 31, 2008
NET INVESTMENT INCOME:
Income:
Interest and other income (net of withholding
taxes of $999).... $ 15,133,922
- ------------
Total Income.............................................. 15,133,922
- ------------
Expenses:
Investment advisory and administrative fees................. 909,792
Shareholder servicing fees.................................. 251,929
Custody and accounting fees................................. 192,407
Professional fees........................................... 40,605
Board of Trustees' fees..................................... 30,017
Miscellaneous expenses...................................... 115,990
- ------------
Total Expenses............................................ 1,540,740
Expense offset arrangement................................ (8,144)
------------
Net Expenses.............................................. 1,532,596
- ------------
Net Investment Income....................................... 13,601,326
- ------------
NET REALIZED AND UNREALIZED LOSS:
Net realized loss on investments, futures contracts and
swap agreements............................................. (3,607,006)
Net realized loss on foreign exchange transactions............ (126,049)
------------
Net realized loss on investments and foreign
exchange transactions (3,733,055)
Net change in unrealized depreciation on investments and
futures contracts........................................... (14,264,265)
Net change in unrealized depreciation on foreign
currency translations (323,607)
------------
Net change in unrealized depreciation....................... (14,587,872)
------------
Net Realized and Unrealized Loss.............................. (18,320,927)
------------
Net Decrease in Net Assets Resulting from Operations....... $ (4,719,601)
=========
The accompanying notes are an integral part of these financial statements.
18
<PAGE>
BBH BROAD MARKET FUND
--------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
For the years ended October 31,
------------------------------------
2008 2007
------------- ------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
Operations:
Net investment income ........................................................ $ 13,601,326 $ 12,185,548
Net realized loss on investments, foreign exchange
transactions, futures contracts and swap agreements ........................ (3,733,055) (5,053,855)
Net change in unrealized depreciation on investments,
foreign currency translations and futures contracts ........................ (14,587,872) (361,679)
------------- ------------
Net increase (decrease) in net assets resulting
from operations ............................................................ (4,719,601) 6,770,014
- ------------- ------------
Dividends and distributions declared:
From net investment income:
Class N ...................................................................... (7,097,397) (6,668,697)
Class I ...................................................................... (5,872,365) (4,657,983)
------------- ------------
Total dividends and distributions declared ................................. (12,969,762) (11,326,680)
- - ------------ ------------
Capital stock transactions:
Net proceeds from sales of capital stock ..................................... 91,732,483 85,260,256
Net asset value of capital stock issued to shareholders
for reinvestment of dividends and distributions ............................ 211,322 395,914
Net cost of capital stock redeemed ........................................... (108,067,830) (33,205,938)
�� ------------- ------------
Net increase (decrease) in net assets
resulting from capital stock transactions ................................ (16,124,025) 52,450,232
------------- ------------
Total increase (decrease) in net assets .................................... (33,813,388) 47,893,566
NET ASSETS:
Beginning of year .............................................................. 288,705,782 240,812,216
------------- ------------
End of period (including undistributed net investment
income of $833,711 and $938,997, respectively) ............................... $ 254,892,394 $288,705,782
========== =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
FINANCIAL STATEMENT OCTOBER 31, 2008 19
<PAGE>
BBH BROAD MARKET FUND
--------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
Selected per share data and ratios for a Class N share outstanding throughout
each year
<TABLE>
<CAPTION>
For the years ended October 31,
--------------------------------------------------------------------------
2008 2007 2006 2005 2004
- ---- - ---- - ---- - ---- ----
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year ................. $ 9.92 $10.10 $10.19 $10.57 $10.57
- ------ ------ ------ ------ - ------
Income from investment operations:
Net investment income(1) ......................... 0.44 0.46 0.48 0.42 0.43
Net realized and unrealized gain (loss) .......... (0.63) (0.21) (0.03) (0.27) 0.17
- ------ ------ - ------ - ------ - ------
Total income from investment operations ... (0.19) 0.25 0.45 0.15 0.60
- ------ - ------ ------ ------ - ------
Less dividends and distributions:
From net investment income ...................... (0.42) (0.43) (0.46) (0.41) (0.44)
From net realized gains .......................... - -- - -- (0.08) (0.12) (0.16)
------ - ------ - ------ - ------ - ------
Total dividends and distributions .............. (0.42) (0.43) (0.54) (0.53) (0.60)
- ------ - ------ - ------ - ------ - ------
Net asset value, end of year ........................ $ 9.31 $ 9.92 $10.10 $10.19 $10.57
==== ==== ==== ==== ====
Total return ........................................ (2.08)% 2.42% 4.64% 1.49% 5.77%
Ratios/Supplemental data:
Net assets, end of year (in millions) ........... $ 160 $ 168 $ 147 $ 149 $ 110
Expenses as a percentage of
average net assets ............................. 0.58%(2) 0.61%(2) 0.55%(2) 0.57%(2) 0.55%(3)
Ratio of net investment income to
average net assets ............................. 4.42% 4.62% 4.75% 4.06% 4.14%
Portfolio turnover rate .......................... 185% 275% 325% 211% 210%
</TABLE>
----------
(1) Calculated using average shares outstanding for the year.
(2) The ratio of expenses to average net assets for the years ended October
31, 2008, 2007, 2006 and 2005 reflect fees reduced as a result of an
expense offset arrangement with the Fund's custodian. Had this arrangement
not been in place, this ratio would have been 0.58%, 0.62%, 0.56% and
0.58% respectively.
(3) Had the expense payment agreement, which terminated on December 31, 2004,
not been in place, the ratio of expenses to average net assets would have
been as follows: N/A, N/A, N/A, N/A and 0.61%, respectively.
The accompanying notes are an integral part of these financial statements.
20
<PAGE>
BBH BROAD MARKET FUND
--------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS (continued)
Selected per share data and ratios for a Class I share outstanding throughout
each year
<TABLE>
<CAPTION>
For the years ended October 31,
--------------------------------------------------------------------------
2008 2007 2006 2005 2004
---- ---- ---- ---- - ----
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year ................. $ 9.92 $10.10 $10.19 $10.57 $10.57
------ ------ ------ - ------ - ------
Income from investment operations:
Net investment income(1) ......................... 0.46 0.48 0.50 0.44 0.46
Net realized and unrealized gain (loss) .......... (0.64) (0.20) (0.04) (0.27) 0.15
------ ------ ------ - ------ - ------
Total income (loss) from
investment operations ....................... (0.18) 0.28 0.46 0.17 0.61
------ ------ ------ - ------ - ------
Less dividends and distributions:
From net investment income ....................... (0.43) (0.46) (0.47) (0.43) (0.45)
From net realized gains .......................... -- -- (0.08) (0.12) (0.16)
------ - ------ ------ ------ - ------
Total dividends and distributions .............. (0.43) (0.46) (0.55) (0.55) (0.61)
------ - ------ ��------ - ------ - ------
Net asset value, end of year ........................ $ 9.31 $ 9.92 $10.10 $10.19 $10.57
==== ==== ==== ==== ====
Total return ........................................ (1.92)% 2.58% 4.79% 1.64% 5.91%
Ratios/Supplemental data:
Net assets, end of year (in millions) ............ $95 $121 $ 94 $ 94 $ 91
Expenses as a percentage of
average net assets ............................. 0.42%(2) 0.46%(2) 0.40%(2) 0.42%(2) 0.40%(3)
Ratio of net investment income to
average net assets ............................. 4.56% 4.78% 4.92% 4.21% 4.36%
Portfolio turnover rate .......................... 185% 275% 325% 211% 210%
</TABLE>
----------
(1) Calculated using average shares outstanding for the year.
(2) The ratio of expenses to average net assets for the years ended October
31, 2008, 2007, 2006 and 2005 reflect fees reduced as a result of an
expense offset arrangement with the Fund's custodian. Had this arrangement
not been in place, this ratio would have been 0.42%, 0.47%, 0.41% and
0.44% respectively.
(3) Had the expense payment agreement, which terminated on December 31, 2004,
not been in place, the ratio of expenses to average net assets would have
been as follows: N/A, N/A, N/A, N/A and 0.45%, respectively.
The accompanying notes are an integral part of these financial statements.
FINANCIAL STATEMENT OCTOBER 31, 2008 21
<PAGE>
BBH BROAD MARKET FUND
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
October 31, 2008
1. Organization and Significant Accounting Policies. BBH Broad Market Fund
(the "Fund") is a separate diversified series of BBH Trust (the "Trust"),
which is registered under the Investment Company Act of 1940, as amended,
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 December 22, 2000. On August 6,
2002, the Trustees reclassified the Fund's outstanding shares as "Class
N", and established a new class of shares designated as "Class I". Class I
commenced on December 3, 2002. Class N and Class I shares have different
operating expenses. Neither Class N shares nor Class I shares convert to
any other class of the Fund. At October 31, 2008, there were seven series
of the Trust.
The Fund's financial statements are prepared in accordance with accounting
principles generally accepted in the United States of America, which
require management to make certain estimates and assumptions at the date
of the financial statements and are based, in part, on the following
accounting policies. Actual results could differ from those estimates.
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 Trustees. 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 Trustees. 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 this is determined not to
represent fair value by the Trustees.
B. Accounting for Investments and Income. Investment transactions are
accounted for on the trade date. Realized gains and losses, if any,
from investment transactions are determined on the basis of
identified cost. Interest income is accrued daily and consists of
interest accrued, discount earned (including both original issue and
market discount) and premium amortization on the investments of the
Fund. Investment income is recorded net of foreign taxes withheld
where
22
<PAGE>
BBH BROAD MARKET FUND
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (continued)
October 31, 2008
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 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. Repurchase Agreements. The Fund may enter into repurchase agreements
with primary dealers of U.S. Government Obligations as designated by
the Federal Reserve Bank of New York. 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 exceeds the sale price, reflecting
the Fund's return on the transaction or effectively the interest
rate paid by the dealer to the Fund. This return is unrelated to the
interest 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 or sub-custodian will monitor the value of the
underlying security each day to ensure that the value of the
security always equals or exceeds the repurchase price. Repurchase
agreements are subject to credit risks. At October 31, 2008, the
Fund had no open repurchase agreements.
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 hedge
the U.S. dollar value of Fund 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 currency
exchange rates supplied by a quotation service. At October 31, 2008,
the Fund had no open forward foreign currency exchange contracts.
E. Swap Agreements. The Fund may enter into swap agreements. A swap is
an exchange of cash payments based on a notional principal amount
between the Fund and another party which is based on a specific
financial index. These transactions are entered into in an attempt
to obtain a particular return when it is considered desirable to do
so, possibly at a lower cost to the Fund than if the Fund had
invested directly in an instrument that yielded that desired return.
Cash payments are exchanged at specified intervals and recorded in
the Statement of Operations as realized gains and losses. The
expected income or expense is recorded on an accrual basis. The
value of the swap is adjusted daily and the change in value is
recorded as unrealized appreciation or depreciation. Risks
FINANCIAL STATEMENT OCTOBER 31, 2008 23
<PAGE>
BBH BROAD MARKET FUND
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (continued)
October 31, 2008
may arise upon entering into these agreements from the potential
inability of counter parties to meet the terms of their contract and
from unanticipated changes in the value of the financial index on
which the swap agreement is based. Risks may exceed amounts
recognized on the Statement of Assets and Liabilities. The Fund may
use swaps for both hedging and non-hedging purposes. For hedging
purposes, the Fund may use swaps to reduce its exposure to interest
and foreign exchange rate fluctuations. For non-hedging purposes,
the Fund may use swaps to take a position on anticipated changes in
the underlying financial index. At October 31, 2008, the Fund had no
open swap agreements.
F. Financial Futures Contracts. The Fund may enter into open futures
contracts in order to 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 which 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.
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. Futures contracts held by the Fund are valued daily at
the official settlement price of the exchange on which it is traded.
At October 31, 2008, the Fund had no open financial futures
contracts.
G. Rule 144A Securities. The Fund may purchase securities that are not
registered under the 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 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. 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.
H. Securities Lending. The Fund may lend its portfolio securities to
broker-dealers, qualified banks and certain institutional investors.
The loans are secured by collateral in an amount equal to at least
the market value at all times of the loaned securities plus any
accrued interest and dividends. During the time the securities are
on loan, the Fund will continue to receive the interest and
dividends or amounts equivalent thereto, on the loaned securities
while receiving a fee from the borrower or earning interest on the
investment of the cash collateral. Loans are subject to
24
<PAGE>
BBH BROAD MARKET FUND
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (continued)
October 31, 2008
termination at the option of the borrower or the Fund. Upon
termination of the loan, the borrower will return to the lender
securities identical to the loaned securities. The Fund may pay
reasonable finders', administrative and custodial fees in connection
with a loan of its securities and may share the interest earned on
the collateral with the borrower. The Fund bears the risk of delay
in recovery of, or even loss of rights in, the securities loaned
should the borrower of the securities fail financially. There were
no securities on loan as of At October 31, 2008.
I. 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 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 accounting principles generally accepted in the
United States of America, the basis on which these financial
statements are prepared. Accordingly, the amount of net investment
income and net realized gain reported on 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 on 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.
J. Dividends and Distributions to Shareholders. Dividends to
shareholders are generally declared and paid monthly 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 tax character of distributions
paid during the fiscal years ended October 31, 2008 and 2007,
respectively, were as follows:
Distributions paid from:
- --------------------------------------------------------------------
Net
long term Total Total
Ordinary capital taxable Tax return distributions
income gain distributions of capital paid
----------- ---------- - ------------- - ---------- -------------
2008: $12,969,762 - $12,969,762 - $12,969,762
2007: 11,326,680 - 11,326,680 - 11,326,680
FINANCIAL STATEMENT OCTOBER 31, 2008 25
<PAGE>
BBH BROAD MARKET FUND
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (continued)
October 31, 2008
As of October 31, 2008 and 2007, respectively, the components of
accumulated earnings/(deficit) on a tax basis were as follows:
<TABLE>
<CAPTION>
Components of accumulated earnings/(deficit):
----------------------------------------------------------------------------------------------------------------
Other Total
Undistributed Undistributed Accumulated Book/Tax Unrealized accumulated
ordinary long-term Accumulated capital and temporary appreciation/ earnings/
income capital gain earnings other losses differences (depreciation) (deficit)
------ - ------------ -------- ------------ ----------- -------------- ---------
<C> <C> <C> <C> <C> <C> <C>
2008: $833,711 - - $833,711 $(13,308,121) $(263,943) $(13,288,693) $(26,027,046)
2007: 436,155 - - 436,155 (10,771,480) (137,660) (69,955) (10,542,940)
</TABLE>
The Fund had a net capital loss carryforward of approximately
$13,308,121 which expires as follows:
Expiration date Amount
--------------- -----------
10/31/2014 $ 5,375,549
10/31/2015 5,395,931
10/31/2016 2,536,641
- -----------
$13,308,121
========
Total distributions paid may differ from the Statement 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.
To the extent future capital gains are offset by capital loss
carryforwards, such gains will not be distributed.
K. Accounting Developments. In June 2006, the Fund adopted FASB
Interpretation No. 48 "Accounting for Uncertainty in Income Taxes"
("FIN 48"). FIN 48 provides guidance for how uncertain tax positions
should be recognized, measured, presented and disclosed in the
financial statements. FIN 48 requires the evaluation of tax
positions taken or expected to be taken in the course of preparing
the Fund's tax returns to determine whether that tax positions are
"more-likely-than-not" of being sustained by the applicable tax
authority. Tax positions not deemed to meet the more-likely-than-not
threshold would be recorded as a tax benefit or expense in the
current year. The adoption of FIN 48 had no impact on the operations
of the Fund for the year ended October 31, 2008.
In September 2006, Statement of Financial Accounting Standards No.
157, "Fair Value Measurements" ("SFAS 157"), was issued and is
effective for fiscal years and interim periods beginning after
November 15, 2007. SFAS 157 defines fair value, establishes a
framework for measuring fair value and expands disclosures about
fair value measurements. Management is currently evaluating the
implication of SFAS 157. At this time its impact on the Fund's
financial statements has not yet been determined.
26
<PAGE>
BBH BROAD MARKET FUND
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (continued)
October 31, 2008
In March 2008, Statement of Financial Accounting Standards No. 161,
"Disclosures about Derivative Instruments and Hedging Activities"
("SFAS 161"), was issued and is effective for fiscal years and
interim periods beginning after November 15, 2008. SFAS 161 requires
enhanced disclosures to provide information about the reasons the
Fund invests in derivative instruments, the accounting treatment and
the effect derivatives have on performance. In September 2008, "FASB
Staff Position No. 133-1 and FASB Interpretation No. 45-4" (the
"FSP"), "Disclosures about Credit Derivatives and Certain
Guarantees: An Amendment of FASB Statement No. 133 and FASB
Interpretation No. 45; and Clarification of the Effective Date of
FASB Statement No. 161," was issued and is effective for fiscal
years and interim periods ending after November 15, 2008. The FSP
amends FASB Statement No. 133, "Accounting for Derivative
Instruments and Hedging Activities," to require disclosures by
sellers of credit derivatives, including credit derivatives embedded
in hybrid instruments. The FSP also clarifies the effective date of
SFAS 161, whereby disclosures required by SFAS 161 are effective for
financial statements issued for fiscal years and interim periods
beginning after November 15, 2008. Management is currently
evaluating the impact on the Fund's financial statements and
disclosures.
2. Transactions with Affiliates.
Investment Advisory and Administrative Fees. Effective June 12, 2007,
under a combined Investment Advisory and Administrative Services Agreement
("Agreement") with the Trust, a separately identifiable department within
Brown Brothers Harriman & Co. ("BBH") provides investment advice, and
portfolio management and administrative services to the Fund. BBH receives
a combined fee from the Fund for investment advisory and administrative
services calculated daily and paid monthly at an annual rate equivalent to
0.30% of the fund's average daily net assets. BBH has a sub-administration
services agreement with Federated Services Company ("FSC") for which FSC
receives compensation paid by BBH. For the year ended October 31, 2008,
the Fund incurred $909,792 for investment advisory and administrative
services.
Shareholder Servicing Fees. The Trust has a shareholder servicing
agreement with BBH. BBH receives a fee from the Fund for such services
calculated daily and paid monthly at an annual rate of 0.15% of Class N
shares' average daily net assets. For the year ended October 31, 2008, the
Fund incurred $251,929 for shareholder servicing services.
Custody and Accounting Fees. BBH acts as a custodian and receive a custody
and accounting fee from the Fund calculated daily and paid monthly. BBH
holds all cash and investments and calculates the daily net asset value.
The custody fee is a transaction based fee with an annual minimum of
$30,000, and the accounting fee is calculated at 0.04% per annum on the
first $100 million of net assets, 0.02% per annum on the next $400 million
of net assets and 0.01% per annum on all net assets over $500 million. For
the year ended October 31, 2008, the Fund incurred $192,407 for custody
and
FINANCIAL STATEMENT OCTOBER 31, 2008 27
<PAGE>
BBH BROAD MARKET FUND
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (continued)
October 31, 2008
accounting services. These fees for the Fund were reduced by $8,144 as a
result of an expense offset arrangement with the Fund's custodian. 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 overdraft. The total interest paid by the Fund for the
year ended October 31, 2008, was $4,377.
Securities Lending Fees. The Trust has a security lending agreement with
BBH for which BBH receives a fee from the Fund for each security loaned.
For the year ended October 31, 2008, the Fund incurred no security lending
fees.
Board of Trustees' Fees. Each Trustee receives an annual fee as well as
reimbursement for reasonable out-of-pocket expenses from the Fund. For the
year ended October 31, 2008, the Fund incurred $30,017 for these fees.
3. Investment Transactions. For the year ended October 31, 2008, the cost of
purchases and the proceeds of sales of investment securities other than
short-term investments were 575,687,598 and $603,528,436 respectively.
4. Securities on Loan. As of October 31, 2008, the Fund had no securities on
loan.
5. Capital Stock. Prior to June 12, 2007, BBH Fund, Inc. was permitted to
issue 2,500,000,000 shares of capital stock, par value $.001 per share, of
which 277,777,778 shares were classified as Class N shares of the Fund and
277,777,778 were classified as Class I shares of the Fund. The Trust
offers unlimited shares without par value. Transactions in shares of
capital stock were as follows:
<TABLE>
<CAPTION>
SHARES AMOUNT
For the years ended October 31, For the years ended October 31,
----------------------------------- ----------------------------------
2008 2007 2008 2007
---------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
Class N
Capital stock sold ..................... 4,485,055 4,662,728 $ 44,457,271 $ 46,611,159
Capital stock issued in
connection with
reinvestment of
dividends ............................ 22,998 37,982 226,737 380,499
Capital stock redeemed ................. (4,256,876) (2,351,936) (42,061,645) (23,516,924)
- ---------- ---------- - ------------ ------------
Net increase ........................... 251,177 2,348,774 $ 2,622,363 $ 23,474,734
======= ======= ======= =======
</TABLE>
28
<PAGE>
BBH BROAD MARKET FUND
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (continued)
October 31, 2008
<TABLE>
<CAPTION>
SHARES AMOUNT
For the years ended October 31, For the years ended October 31,
----------------------------------- ----------------------------------
2008 2007 2008 2007
---------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
Class I
Capital stock sold ..................... 4,739,971 3,880,649 $ 47,275,212 $38,649,097
Capital stock issued in
connection with
reinvestment of
dividends ............................ (1,548) 1,548 (15,415) 15,415
Capital stock redeemed ................. (6,711,398) (977,038) (66,006,185) (9,689,014)
---------- --------- ------------ -----------
Net decrease ........................... (1,972,975) 2,905,159 $(18,746,388) $28,975,498
======== ======= ========= ========
</TABLE>
FINANCIAL STATEMENT OCTOBER 31, 2008 29
<PAGE>
BBH BROAD MARKET FUND
--------------------------------------------------------------------------------
DISCLOSURE OF FUND EXPENSES
October 31, 2008 (unaudited)
EXAMPLE
As a shareholder of BBH Broad Market Fund (the "Fund"), you may incur two types
of costs: (1) transaction costs on purchase payments, reinvested dividends, 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, 2008 to October 31, 2008).
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.
30
<PAGE>
BBH BROAD MARKET FUND
--------------------------------------------------------------------------------
DISCLOSURE OF FUND EXPENSES (continued)
October 31, 2008 (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.
Expenses Paid
Beginning Ending During Period
Account Value Account Value May 1, 2008 to
May 1, 2008 October 31, 2008 October 31, 2008(1)
----------- - ---------------- -------------------
Class N
Actual.................. $1,000 $ 960.40 $2.86
Hypothetical(2)......... $1,000 $1,022.22 $2.95
Expenses Paid
Beginning Ending During Period
Account Value Account Value May 1, 2008 to
May 1, 2008 October 31, 2008 October 31, 2008(1)
----------- - ---------------- - -------------------
Class I
Actual.................. $1,000 $ 962.10 $2.07
Hypothetical(2)......... $1,000 $1,023.03 $2.14
----------
(1) Expenses are equal to the Fund's annualized expense ratio of 0.58% and
0.42% for Class N and I shares, respectively, multiplied by the average
account value over the period, multiplied by 184/366 (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.
FINANCIAL STATEMENT OCTOBER 31, 2008 31
<PAGE>
BBH BROAD MARKET FUND
--------------------------------------------------------------------------------
DISCLOSURE OF ADVISOR SELECTION
October 31, 2008 (unaudited)
Approval of Investment Advisory/Administrative Services Agreement
At a meeting held on December 11, 2006, the Board of Trustees (the "Board") of
the Trust unanimously approved a new Combined Investment Advisory/Administrative
Services Agreement ("Combined Agreement"). The Board determined that the terms
of the Combined Agreement will be substantially identical to those of the
current investment advisory and administration agreements of the Funds, noting
that the most significant difference in the Combined Agreement is a single fee
for both investment advisory and administrative services. The following is a
summary of the factors the Board took into consideration in making its
determination to approve the new Combined Agreement.
Nature, Extent and Quality of Services Provided by Brown Brothers Harriman & Co.
("BBH")
The Board noted that, under the Combined Agreement in respect of each Fund, BBH,
subject to the supervision of the Board, will be responsible for providing a
continuous investment program and making purchases and sales of portfolio
securities consistent with the Funds' investment objective and policies. Under
the Combined Agreement, BBH also provides administrative services to each Fund.
The Board considered the scope and quality of services to be provided by BBH
under the Combined Agreement and noted that the scope of services provided had
expanded over time, primarily, as a result of regulatory developments. The Board
noted that, for example, BBH is responsible for maintaining and monitoring its
own and, to varying degrees, the Funds' compliance program, and these compliance
programs have recently been refined and enhanced in light of new regulatory
requirements. The Board considered the quality of the investment research and
administrative capabilities of BBH and the other resources it has dedicated to
performing services for the Funds. The Board concluded that, overall, they were
satisfied with the nature, extent and quality of services expected to be
provided to each of the Funds under the Combined Agreement.
Costs of Services Provided and Profitability to BBH
At the request of the Board, BBH provided information concerning the
profitability of BBH's current investment company advisory and other fees. The
Board also reviewed BBH's profitability data for each Fund, which also included
the effect of revenue generated by the shareholder servicing, administration,
custody and other fees paid by the Fund. The Board discussed the difficulty of
making comparisons of profitability because comparative information is not
generally publicly available and is affected by numerous factors, including the
structure of the service provider, the types of funds it manages and
administers, its business mix, numerous assumptions regarding allocations and
the entity's capital structure and cost of capital. In considering profitability
information, the Board considered the effect of fall-out benefits on BBH's
expenses, as well as the "revenue sharing" arrangements BBH has entered into
with certain entities that distribute shares of the Funds. The Board focused on
profitability of BBH's relationships with the Funds before taxes and
distribution expenses. The Board concluded that it was satisfied that BBH's
level of profitability from its relationship with each Fund was not excessive.
32
<PAGE>
BBH BROAD MARKET FUND
--------------------------------------------------------------------------------
DISCLOSURE OF ADVISOR SELECTION (continued)
October 31, 2008 (unaudited)
Fall-Out Benefits
The Board considered that BBH does not allocate the Funds' portfolio
transactions for third party research, although it did benefit from proprietary
research received from brokers that execute the Funds' purchases and sales of
securities. The Board recognized that the aggregate amount of commissions
generated by Fund transactions was unlikely to result in the Funds receiving
from full service broker dealers substantial discounts on commission rates. The
Board received and reviewed information concerning BBH's policies with respect
to allocating portfolio brokerage.
The Board also considered that BBH receives shareholder servicing fees from
certain funds, and is the Funds' administrator, custodian and securities lending
agent. The Board noted that BBH retained no portion of the 12b-1 fees paid by
any Fund that operated with a Rule 12b-1 plan. The Board recognized that BBH's
profitability would be somewhat lower if it did not receive proprietary research
for commissions or, if it did not receive the other benefits described above.
The Board recognized that most Fund shareholders were also BBH clients, and that
substantial assets are invested in the Funds as a result of an overall
investment management program for the shareholder. The Board noted that the
Funds also derive reputational and other benefits from their association with
BBH and their use of the BBH name, which is licensed to the Funds by BBH. Thus,
the Board did not believe that BBH revenues associated with its clients should
be fairly regarded as "fallout" benefit from the Funds.
Economies of Scale
The Board noted that the Funds' combined fee schedules, other than the fee
schedule for BBH Money Market Fund, do not contain breakpoints. As a result, if
assets increase, the fee rates would not be reduced for these Funds on the
incremental assets. With respect to the BBH Money Market Fund, the breakpoint
will be reviewed every three (3) years by the Board, and may be adjusted upwards
to take into account the effects of inflation or such other basis as may be
appropriate, subject to the approval of shareholders to the extent required by
the 1940 Act.
There may be other economies of scale because many expenses did not rise (and
fall) proportionally to increases (and decreases) in total net assets. The Board
noted that BBH had priced its services in recognition of the fact that it was
largely its own clients who were shareholders and, accordingly, sought to assure
that the cost of these services and total expenses for each Fund were fair and
reasonable. In addition, the Board noted that over the years BBH had supported
certain Funds through fee waivers and expense reimbursements. Based on
information they had been provided over many years, the Board observed that in
the mutual fund industry as a whole, as well as among funds similar to the
Funds, there
FINANCIAL STATEMENT OCTOBER 31, 2008 33
<PAGE>
BBH BROAD MARKET FUND
--------------------------------------------------------------------------------
DISCLOSURE OF ADVISOR SELECTION (continued)
October 31, 2008 (unaudited)
appeared to be no uniformity or pattern in the fees and asset levels at which
breakpoints (if any) apply. In light of the Funds' current size and expense
structure, the Board concluded that it was unnecessary at this time to consider
breakpoints with respect to the Funds, other than for the BBH Money Market Fund.
Investment Results
The Board considered the investment results of each of the Funds as compared
to investment companies with its peers and with one or more selected securities
indices. In addition to the information received by the Board for the meeting
held on October 2, 2006, the Board received detailed performance information for
each Fund at each regular Board meeting during the year. At the meeting held on
October 2, 2006, the Board reviewed information showing performance of each Fund
compared to its peers over the prior 1-, 3-, and 5- year periods and compared
the performance information to one or more securities indices over comparable
periods.
Combined Fee Rate
The Board considered the fee rate to be paid by each Fund to BBH. The Board
recognized that it is difficult to make comparisons of these fee rates, and the
combined investment advisory and administration fees, because there are
variations in the services that are included in the fees paid by other funds.
The Board considered the depth and range of services provided under the Combined
Agreement. For example, in addition to a continuous investment program, BBH
provides, among other things, officers (including the Funds' Chief Compliance
Officer and officers to provide required certifications) and administrative
services, such as shareholder communications, and tax compliance, with the
attendant costs and exposure to liability. BBH also coordinates the provision of
services to the Funds by nonaffiliated service providers.
The following factors specific to the BBH Broad Market Fund also were noted and
considered by the Board in deciding to approve the Combined Agreement:
The Board reviewed the information showing performance of the BBH Broad Market
Fund's Class N shares and Class I shares compared to the Lehman Brothers
Aggregate Bond Index. Both classes of the BBH Broad Market Fund on a pre-fee
basis outperformed the benchmark over all relevant periods and on an after-fee
basis performed roughly in line with or modestly exceeded the benchmark over all
relevant periods. The Board viewed with favor this performance and noted the
benchmark has no fees. The Board also noted the expense ratio for both share
classes were in line with or lower than many funds of similar size and
investment mandate. Taking into account these comparisons and the other factors
considered, the Board concluded that the BBH Broad Market Fund's investment
results over time and its total expense ratio had been satisfactory.
34
<PAGE>
BBH BROAD MARKET FUND
--------------------------------------------------------------------------------
DISCLOSURE OF ADVISOR SELECTION (continued)
October 31, 2008 (unaudited)
Conflicts of Interest
As a general matter, certain conflicts of interest may arise in connection with
a portfolio manager's management of a Fund's investments, on the one hand,
and the investments of other accounts for which the portfolio manager is
responsible, on the other. For example, it is possible that the various accounts
managed could have different investment strategies that, at times, might
conflict with one another to the possible detriment of the Fund. Alternatively,
to the extent that the same investment opportunities might be desirable for more
than one account, possible conflicts could arise in determining how to allocate
them. Other potential conflicts might include conflicts created by specific
portfolio manager compensation arrangements, and conflicts relating to selection
of brokers or dealers to execute fund portfolio trades and/or specific uses of
commissions from Fund portfolio trades (for example, research, or "soft
dollars").
BBH has adopted and implemented policies and procedures, including brokerage
and trade allocation policies, which it believes manage the conflicts associated
with handling multiple accounts for multiple clients. In addition, BBH monitors
a variety of areas, including compliance with account investment guidelines, the
inclusion only of securities approved for purchase by the a BBH oversight
committee. Finally, BBH has structured the portfolio managers' compensation in a
manner, and the Funds have adopted policies, reasonably designed to safeguard
a Fund from being negatively affected as a result of any such potential conflicts.
FINANCIAL STATEMENT OCTOBER 31, 2008 35
<PAGE>
BBH BROAD MARKET FUND
--------------------------------------------------------------------------------
ADDITIONAL FEDERAL TAX INFORMATION
October 31, 2008
The qualified investment income (QII) percentage for the year ended October 31,
2008 was 90.09%.
In January 2009, shareholders will receive on form 1099-DIV which will include
their share of qualified dividends during the calendar year 2008. Shareholders
are advised to check with their tax advisors for information on the treatment of
these amounts on their individual income tax returns.
36
<PAGE>
TRUSTEES AND OFFICERS OF BBH BROAD MARKET FUND
--------------------------------------------------------------------------------
(unaudited)
Information pertaining to the Trustees of the BBH Trust (the "Trust") and
executive officers of the Trust is set forth below. Part B to the Registration
Statement of the BBH Broad Market Fund includes additional information about the
Fund's Trustees and is available upon request without charge by contacting the
Fund at 1-800-625-5759
<TABLE>
<CAPTION>
Term of Number of
Office Funds in
and & #160; Fund Other
Position(s) Length Complex Directorships
Name, Birth Date Held with of Time Principal Occupation(s) Overseen by Held by
and Address Trust Served# During Past 5 Years Trustee^ Trustee
---------------------------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Joseph V. Shields Jr. Chairman of Since Managing Director, Chairman and 7 None
Birth Date: the Board 2007 Chief Executive Officer of Shields &
March 17, 1938 and Trustee Company (member of New York Stock
Shields & Company Exchange); Chairman of Capital
140 Broadway Management Associates, Inc.
New York, NY 10005 (registered investment adviser);
Director of Flower Foods, Inc. (New
York Stock Exchange listed company).
David P. Feldman Trustee Since Director of Jeffrey Co. (1992 to 7 Director of
Birth Date: 2007 present); Director of QMED (1999 Dreyfus
November 16, 1939 to May 2007). Mutual Funds
C/O BBH & Co. (59 Funds)
140 Broadway
New York, NY 10005
Alan G. Lowy Trustee Since Private Investor. 7 None
Birth Date: 2007
April 17, 1939
4111 Clear Valley
Drive
Encino, CA 91436
Arthur D. Trustee Since Retired; Trustee, R.K. Mellon Family 7 None
Miltenberger 2007 Trust (1981 to June 2003); Director
Birth Date: of Aerostructures Corporation
November 8, 1938 (aircraft manufacturer) (1996 to
503 Darlington Road July 2003).
Ligonier, PA 15658
Samuel F. Pryor, IV Trustee Since Private Investor. 7 None
Birth Date: 2007
June 12, 1955
130 East 67th Street
New York, NY 10021
</TABLE>FINANCIAL STATEMENT OCTOBER 31, 2008 37
<PAGE>
TRUSTEES AND OFFICERS OF BBH BROAD MARKET FUND
--------------------------------------------------------------------------------
(unaudited)
<TABLE>
<CAPTION>
Term of Number of
Office Funds in
and Fund Other
Position(s) Length Complex Directorships
Name, Birth Date Held with of Time Principal Occupation(s) Overseen by Held by
and Address Trust Served# During Past 5 Years Trustee^ Trustee
-----------------------------------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
H. Whitney Wagner Trustee Since President, Clear Brook Advisors, a 7 None
Birth Date: 2007 registered investment advisor.
March 3, 1956
Clear Brook Advisors
75 Rockefeller Plaza,
14th Floor
New York, NY 10019
Officers
John A. Gehret President and Since President and Principal Executive N/A N/A
Birth Date: Principal 2008 Officer of the Trust; Joined Brown
April 11, 1959 Executive Brothers Harriman & Co. ("BBH &
140 Broadway Officer Co.") in 1981 and has been a Partner
New York, NY 10005 of the firm since 1998.
Charles H. Schreiber Treasurer and Since Treasurer and Principal Financial N/A N/A
Birth Date: Principal 2007 Officer of the Trust; Senior Vice
December 10, 1957 Financial President of BBH & Co. since
140 Broadway Officer September 2001; Joined BBH & Co.
New York, NY 10005 in 1999.
Mark B. Nixon Assistant Since Assistant Secretary and Assistant N/A N/A
Birth Date: Secretary, 2007 Treasurer of the Trust; Vice
January 14, 1963 Assistant President of BBH & Co. (since
140 Broadway Treasurer October 2006); Accounting Manager,
New York, NY 10005 Reserve Funds (August 2005 -
September 2006); Assistant
Controller, Reserve Funds
(February 2005 - August 2005);
Private Consultant (December 2001 -
February 2005).
Beth Haddock Chief Since Chief Compliance Officer of the N/A N/A
Birth Date: Compliance 2007 Trust (September 2007 - present);
December 10, 1965 Officer Chief Compliance Officer for the
140 Broadway FINRA/NYSE and SEC compliance
New York, NY 10005 programs and Associate Compliance
Director for the global compliance
program (April 2005-present);
Deputy General Counsel of AXA
Advisors/ AXA Financial
(November 1997 - April 2005).
</TABLE>38
<PAGE>
TRUSTEES AND OFFICERS OF BBH BROAD MARKET FUND
--------------------------------------------------------------------------------
(unaudited)
<TABLE>
<CAPTION>
Term of Number of
Office Funds in
and Fund Other
Position(s) Length Complex Directorships
Name, Birth Date Held with of Time Principal Occupation(s) Overseen by Held by
and Address Trust Served# During Past 5 Years Trustee^ Trustee
-----------------------------------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Sue M. Rim-An Anti-Money Since Anti-Money Laundering Officer, Vice N/A N/A
Birth Date: Laundering 2008 President of BBH & Co. (September
September 10, 1970 Officer 2007 - present); AML Officer at
140 Broadway UBS Investment Bank (April 2006 -
New York, NY 10005 August 2007); AML Officer & Vice
President in Private Client Services
at Bear Stearns & Co (June 1992 -
April 2006).
Gail C. Jones Secretary Since Secretary of the Trust; Counsel, N/A N/A
Birth Date: 2007 ReedSmith, LLP (since October 2002);
October 26, 1953 Corporate Counsel (January 1997 to
1001 Liberty Avenue September 2002) and Vice President
Pittsburgh, PA (January 1999 to September 2002) of
15222-3779 Federated Services Company.
George M. Polatas Vice President Since Vice President of the Trust (since N/A N/A
Birth Date: 2008 June 2008); Assistant Vice President
March 3, 1962 of Federated Services Company; Vice
1001 Liberty Avenue, President of various funds
Pittsburgh, PA distributed by Edgewood Services,
15222-3779 Inc (January 1997 to present).
Theodore J. Boudria Assistant Since Assistant Treasurer of the Trust; N/A N/A
Birth Date: Treasurer 2008 Vice President (since 2003);
June 26, 1968 Assistant Vice President (since
70 Franklin Street September 2000); Joined BBH & Co.
Boston, MA 02110 in 1995.
</TABLE>----------
# Each Trustee of the Trust holds office until he or she attains the age of
70 (72, in the case of Trustees who were elected as such before January 1,
2000), or until he or she sooner dies, resigns or is removed from office
in accordance with the provisions of the Trust's Declaration of Trust. 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).
^ The Fund Complex consists of the Trust, which has seven series and each is
counted as one "Fund" for purposes of this table.
FINANCIAL STATEMENT OCTOBER 31, 2008 39
<PAGE>
INVESTMENT ADVISER AND ADMINISTRATOR
BROWN BROTHERS HARRIMAN
140 BROADWAY
NEW YORK, NY 10005
DISTRIBUTOR
EDGEWOOD SERVICES, INC.
5800 CORPORATE DRIVE
PITTSBURGH, PA 15237-7000
SHAREHOLDER SERVICING AGENT
BROWN BROTHERS HARRIMAN
140 BROADWAY
NEW YORK, NY 10005
(800) 625-5759
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. Such offering is made only by the prospectus, which includes details as to
offering price and other material information.
The Fund files with the SEC a complete schedule of its portfolio holdings, as of
the close of the first and third quarters of its fiscal year, on "Form N-Q."
Information on Form N-Q is available without charge and upon request by calling
the Funds at the toll-free number listed above. A text only version can be
viewed online or downloaded from the SEC's website at http://www.sec.gov; and
may be reviewed and copied at the SEC's Public Reference Room in Washington, DC
(call 1-800-SEC-0330 for information on the operation of the Public Reference
Room). You may also access this information from the BBH website at BBH.com by
clicking on "BBH Mutual Funds" and selecting "Online Documents/Holdings
Information."
A copy 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 upon request by calling the
toll-free number listed above. This information is also available from the EDGAR
database on the SEC's website at www.sec.gov.
BROWN [LOGO]
BROTHERS
HARRIMAN
ITEM 2. CODE OF ETHICS.
(a) The Registrant has adopted a code of ethics that applies to the Registrant's principal
executive officer, principal financial officer, principal accounting officer or controller
or persons performing similar functions.
(b) No answer required.
(c) Not applicable.
(d) Not applicable.
(e) Not applicable.
(f)
(1) Not applicable.
(2) Not applicable.
(3) A copy of the code of ethics referenced in Item 2(a) of this Form N-CSR is
available and can be mailed, free of charge, to anyone by calling (800) 575-1265.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
(a)(1) The Registrant's Board of Trustees has designated two members of the audit
committee as financial experts.
(2) The following Trustees have been designated as audit committee financial
experts by the Board of Trustees who are “independent” for purposes of
this Item 3 of Form N-CSR: audit committee members Arthur D. Miltenberger
��and David P. Feldman are the designated audit committee financial experts.
(3) Not applicable.
(b) No answer required.
(c) No answer required.
(d) No answer required.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
TO BE PROVIDED BY D&T
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
(a) Not applicable.
(b) Not applicable.
ITEM 6. SCHEDULE OF INVESTMENTS
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) Based upon their evaluation of the Registrant's disclosure controls and
procedures as conducted within 90 days of the filing date of this Form
N-CSR, the Registrant's principal financial officer and principal executive
officer have concluded that those disclosure controls and procedures
provide reasonable assurance that the material information required to
be disclosed by the Registrant on this report is recorded, processed,
summarized and reported within the time periods specified in the Securities
and Exchange Commission's rules and forms.
(b) There were no significant changes in the Registrant's internal controls or
in other factors that occurred during the second fiscal quarter of the period
covered by this report that has materially affected, or is reasonably likely to
materially affect, the Registrant’s internal control over financial reporting.
ITEM 12. EXHIBITS.
(a)(1) Not applicable.
(a)(2) A separate certification for each principal executive officer and principal
financial officer of the Registrant as required by Rule 30a-2(a) under the
Act (17 CFR 270.30a-2) is filed as Exhibit 12(a) (2).
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/. John A. Gehret
------------------------------
John A. Gehret, President
(Principal Executive Officer)
Date: 1/5/09
------------------
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/. Charles H. Schreiber
--------------------------------
Charles H. Schreiber, Treasurer
(Principal Financial Officer)
Date: 1/5/09
- ------------------
- Print name and title of each signing officer under his or her signature.
EXHIBIT 12(a) (1)
A copy of the code of ethics is available and can be mailed, free of charge, to anyone
by calling (800) 575-1265.
EXHIBIT 12(a) (2)
SECTION 302 CERTIFICATION OF PRINCIPLE EXECUTIVE OFFICER.
I, John A. Gehret, certify that:
1. I have reviewed this report on Form N-CSR of BBH Trust on behalf of: BBH Core Select,
BBH International Equity Fund, BBH Real Return Fund, and BBH Broad Market Fund,
("Registrant");
2. Based on my knowledge, this report does not contain any untrue statement of a material
fact or omit to state a material fact necessary to make the statements made, in light of the
circumstances under which such statements were made, not misleading with respect to the
period covered by this report;
3. Based on my knowledge, the financial statements and other financial information included
in this report, fairly present in all material respects the financial condition, results of
operations, changes in net assets, and cash flows (if the financial statements are required
to include a statement of cash flows) of the Registrant as of, and for, the periods presented
in this report;
4. The Registrant's other certifying officer and I are responsible for establishing and maintaining
disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company
Act of 1940) and internal control over financial reporting (as defined in Rule 30a-3(d) under the
Investment Company Act of 1940) for the Registrant and have:
a.) designed such disclosure controls and procedures, or caused such disclosure controls and
procedures to be designed under our supervision, to ensure that material information relating
to the Registrant, including its consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this report is being prepared;
b.) designed such internal control over financial reporting, or caused such internal control over
financial reporting to be designed under our supervision, to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of financial statements for
external purposes in accordance with generally accepted accounting principles;
c.) evaluated the effectiveness of the Registrant's disclosure controls and procedures and
presented in this report our conclusions about the effectiveness of the disclosure controls and
procedures, as of a date within 90 days prior to the filing date of this report based on such
evaluation; and
d.) disclosed in this report any change in the Registrant's internal control over financial reporting
that occurred during the second fiscal quarter of the period covered by this report that has
materially affected, or is reasonably likely to materially affect, the Registrant's internal control
over financial reporting; and
5. The Registrant's other certifying officer and I have disclosed to the Registrant's auditors and the
audit committee of the Registrant's board of directors (or persons performing the equivalent
functions):
a.) all significant deficiencies and material weaknesses in the design or operation of internal
control over financial reporting which are reasonably likely to adversely affect the Registrant's
ability to record, process, summarize, and report financial information; and
b.) any fraud, whether or not material, that involves management or other employees who have a
significant role in the Registrant's internal control over financial reporting.
Date: 1/5/09
/s/. John A. Gehret
=======================
John A. Gehret
President - - Principal Executive Officer
EXHIBIT 12(a) (2)
SECTION 302 CERTIFICATION OF PRINCIPLE FINANCIAL OFFICER.
I, Charles H. Schreiber, certify that:
1. I have reviewed this report on Form N-CSR of BBH Trust on behalf of: BBH Core Select,
BBH International Equity Fund, BBH Real Return Fund, and BBH Broad Market Fund,
("Registrant");
2. Based on my knowledge, this report does not contain any untrue statement of a material
fact or omit to state a material fact necessary to make the statements made, in light of the
circumstances under which such statements were made, not misleading with respect to the
period covered by this report;
3. Based on my knowledge, the financial statements and other financial information included
in this report, fairly present in all material respects the financial condition, results of operations,
changes in net assets, and cash flows (if the financial statements are required to include a
statement of cash flows) of the Registrant as of, and for, the periods presented in this report;
4. The Registrant's other certifying officer and I are responsible for establishing and maintaining
disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company
Act of 1940) and internal control over financial reporting (as defined in Rule 30a-3(d) under the
Investment Company Act of 1940) for the Registrant and have:
a.) designed such disclosure controls and procedures, or caused such disclosure controls and
procedures to be designed under our supervision, to ensure that material information relating
to the Registrant, including its consolidated subsidiaries, is made known to us by others
within those entities, particularly during the period in which this report is being prepared;
b.) designed such internal control over financial reporting, or caused such internal control over
financial reporting to be designed under our supervision, to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of financial statements for
external purposes in accordance with generally accepted accounting principles;
c.) evaluated the effectiveness of the Registrant's disclosure controls and procedures and
presented in this report our conclusions about the effectiveness of the disclosure controls and
procedures, as of a date within 90 days prior to the filing date of this report based on such
evaluation; and
d.) disclosed in this report any change in the Registrant's internal control over financial reporting
that occurred during the second fiscal quarter of the period covered by this report that has
materially affected, or is reasonably likely to materially affect, the Registrant's internal control
over financial reporting; and
5. The Registrant's other certifying officer and I have disclosed to the Registrant's auditors and
the audit committee of the Registrant's board of directors (or persons performing the equivalent
functions):
a.) all significant deficiencies and material weaknesses in the design or operation of internal
control over financial reporting which are reasonably likely to adversely affect the Registrant's
ability to record, process, summarize, and report financial information; and
b.) any fraud, whether or not material, that involves management or other employees who have
a significant role in the Registrant's internal control over financial reporting.
Date: 1/5/09
/s/. Charles H. Schreiber
==========================
Charles H. Schreiber
Treasurer - - Principal Financial Officer
SECTION 906 CERTIFICATIONS
This certification is provided pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C.
(section) 1350, and accompanies the report on Form N-CSR for the fiscal year ended October 31, 2008
of the BBH Trust (the “Registrant”).
Pursuant to 18 U.S.C.ss. 1350, the undersigned officers of the Registrant, hereby certify, to the best
of our knowledge, that the Registrant's Report on Form N-CSR for the period ended October 31, 2008
(the "Report") fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the
Securities Exchange Act of 1934 and that the information contained in the Report fairly presents, in all
material respects, the financial condition and results of operations of the Registrant.
Date: 1/5/09
------------------
/s/. John A. Gehret
=======================
John A. Gehret
President - - Principal Executive Officer
Date: 1/5/09
------------------
/s/. Charles H. Schreiber
=======================
Charles H. Schreiber
Treasurer - - Principal Financial Officer
This certification is being furnished solely pursuant to 18 U.S.C.ss. 1350 and is not being filed
as part of the Report or as a separate disclosure document.