UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM N-CSR
CERTIFIED SHAREHOLDER REPORT
OF REGISTERED MANAGEMENT
INVESTMENT COMPANIES
Investment Company Act file number: 811-21829
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BBH TRUST
On behalf of the following series:
BBH Partner Fund — Small Cap Equity
BBH Select Series — Mid Cap Fund
BBH Partner Fund — International Equity
BBH Limited Duration Fund
BBH Income Fund
BBH Select Series — Large Cap Fund
BBH Intermediate Municipal Bond Fund
BBH U.S. Government Money Market Fund
(Exact name of registrant as specified in charter)
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140 Broadway, New York, NY 10005
(Address of principal executive offices) (Zip Code)
Corporation Services Company
251 Little Falls Drive
Wilmington, DE 19808
(Name and address of agent for service)
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Registrant’s telephone number, including area code: (800) 575-1265
Date of fiscal year end: October 31
Date of reporting period: October 31, 2023
Form N-CSR is to be used by management investment companies to file reports with the Commission not later than 10 days after the transmission to stockholders of any report that is required to be transmitted to stockholders under Rule 30e-1 under the Investment Company Act of 1940 (17 CFR 270.30e-1). The Commission may use the information provided on Form N-CSR in its regulatory, disclosure review, inspection, and policymaking roles.
A registrant is required to disclose the information specified by Form N-CSR, and the Commission will make this information public. A registrant is not required to respond to the collection of information contained in Form N-CSR unless the Form displays a currently valid Office of Management and Budget (“OMB”) control number. Please direct comments concerning the accuracy of the information collection burden estimate and any suggestions for reducing the burden to Secretary, Securities and Exchange Commission, 450 Fifth Street, NW, Washington, DC 20549-0609. The OMB has reviewed this collection of information under the clearance requirements of 44 U.S.C. § 3507.
Item 1. Reports to Stockholders.
Annual Report
OCTOBER 31, 2023
BBH Partner Fund — Small Cap Equity
BBH PARTNER FUND – SMALL CAP EQUITY |
MANAGEMENT’S DISCUSSION OF FUND PERFORMANCE October 31, 2023 |
The BBH Partner Fund – Small Cap Equity (“the Fund” or “BBH Small Cap”) returned -1.07%, net of fees, for the fiscal year ended October 31, 2023. During the same twelve-month period, the Fund’s benchmark, the Russell 2000, returned -8.56%. From the inception of the Fund through October 31, 2023, the Fund has generated an annualized return of -16.80%, net of fees, while the Russell 2000 has returned -10.74% per annum.
For fiscal 2023, the Fund outperformed its benchmark, driven by security selection within Industrials and Health Care, an overweight to Technology, and individual security performance from the following holdings: Agilysys Inc, Cimpress PLC, Onto Innovation, Astronics Corp, and Heska Corp. The largest negative contributors to performance during the same time period include: XPEL Inc, SoundThinking Inc, WideOpenWest Inc, Olo Inc, Alarm.com Holdings Inc, and an underweight to Energy relative to the Russell 2000 Index.
The Fund’s Sub-adviser, Bares Capital Management, LLC (“Bares”), has invested the Fund in a concentrated portfolio of small cap companies that Bares believes can compound intrinsic value at high rates over the long-term. The key criteria that Bares uses to evaluate a company are as follows:
• Competitive Advantage: to assess a company’s competitive position, the Bares team performs a Porter’s 5 Forces analysis to determine buyer power, supplier power, the threat of substitutes and new entrants, and the competitive rivalry and industry dynamics. They will also analyze the sources of a company’s “moat,” which can be any of the following, including a significant cost advantage, efficient scale, network effects, switching costs, or the possession of intangible assets such as brand power.
• Management Talent: the Bares team focuses on assessing management’s ability to execute and operate the business, whether they are trustworthy and transparent, and that their incentives are aligned with minority shareholders. Bares must be able to trust that the management team will use capital efficiently to generate the highest returns, which could include reinvesting in the core business, acquiring another company, or repurchasing its own shares in the open market.
• Growth Potential: the Bares team aims to identify and evaluate companies with underappreciated sources of growth. In addition to determining a reasonable estimate of a business’ total addressable market, the team also qualitatively determines a company’s runway for growth and will selectively reassess the long-term potential if they believe growth can continue at an elevated rate.
Bares believes that the companies with the greatest potential to compound intrinsic value at above-average rates have durable competitive advantages, large growth opportunities, superior returns on equity (achieved without excessive leverage) and that are led by skilled managers who are good stewards of shareholder capital. To find such companies, the Bares team places heavy emphasis on assessing the quality of a business and its management team through extensive, on the ground due diligence and research.
____________
Portfolio holdings are subject to change.
Intrinsic value is an estimate of the present value of the cash that a business can generate over its remaining life.
2 |
BBH PARTNER FUND – SMALL CAP EQUITY |
MANAGEMENT’S DISCUSSION OF FUND PERFORMANCE (continued) October 31, 2023 |
Growth of $10,000 Invested in BBH Partner Fund – Small Cap Equity
The graph below illustrates the hypothetical investment of $10,0001 in the Class I shares of the Fund since inception (July 8, 2021) to October 31, 2023 as compared to the Russell 2000 TR USD.
The annualized gross expense ratio as shown in the February 28, 2023 prospectus for Class I shares was 0.92%.
Performance data quoted represents past performance which is no guarantee of future results. Investment return and principal value will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Fund performance changes over time and current performance may be lower or higher than what is stated. Fund shares redeemed within 30 days of purchase are subject to a redemption fee of 2.00%. Returns do not reflect the deductions of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. For performance current to the most recent month-end please call 1-800-575-1265.
____________
1 The Fund’s performance assumes the reinvestment of all dividends and distributions. The Russel 2000 TR USD index has been adjusted to reflect reinvestment of dividends on securities in the index. The Russel 2000 TR USD index is not adjusted to reflect sales charges, expenses or other fees that the Securities and Exchange Commission requires to be reflected in the Fund’s performance. The Russell 2000 TR USD is a stock index that tracks 2,000 publicly traded small-capitalization companies. The index is unmanaged. Investments cannot be made in an index.
The Fund seeks to generate attractive returns over time but does not attempt to mirror a benchmark or an index. The composition of the Russell 2000 Index is materially different than the Fund’s holdings.
F I N A N C I A L S T A T E M E N T S O C T O B E R 3 1, 2 0 2 3 | 3 |
BBH PARTNER FUND – SMALL CAP EQUITY |
MANAGEMENT’S DISCUSSION OF FUND PERFORMANCE (continued) October 31, 2023 |
Hypothetical performance results are calculated on a total return basis and include all portfolio income, unrealized and realized capital gains, losses and reinvestment of dividends and other earnings. No one shareholder has actually achieved these results and no representation is being made that any actual shareholder achieved, or is likely to achieve, similar results to those shown. Hypothetical performance does not represent actual trading and may not reflect the impact of material economic and market factors. Undue reliance should not be placed on hypothetical performance results in making an investment decision.
4 |
BBH PARTNER FUND – SMALL CAP EQUITY |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
|
To the shareholders of BBH Partner Fund – Small Cap Equity and the Board of Trustees of BBH Trust:
Opinion on the Financial Statements and Financial Highlights
We have audited the accompanying statement of assets and liabilities, including the portfolio of investments, of BBH Partner Fund – Small Cap Equity (the “Fund”), one of the funds constituting BBH Trust, as of October 31, 2023, the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, the financial highlights for each of the two years in the period then ended and for the period from July 8, 2021 (commencement of operations) through October 31, 2021, and the related notes. In our opinion, the financial statements and financial highlights present fairly, in all material respects, the financial position of the Fund as of October 31, 2023, and the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the two years in the period then ended and for the period from July 8, 2021 (commencement of operations) through October 31, 2021 in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements and financial highlights are the responsibility of the Fund’s management. Our responsibility is to express an opinion on the Fund’s financial statements and financial highlights based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement, whether due to error or fraud. The Fund is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Fund’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements and financial highlights, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements and financial highlights. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements and financial highlights. Our procedures included confirmation of securities owned as of October 31, 2023, by correspondence with the custodian and brokers; when replies were not received from brokers, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinion.
/s/ DELOITTE & TOUCHE LLP
Boston, Massachusetts
December 20, 2023
We have served as the auditor of one or more Brown Brothers Harriman investment companies since 1991.
F I N A N C I A L S T A T E M E N T S O C T O B E R 3 1, 2 0 2 3 | 5 |
BBH PARTNER FUND – SMALL CAP EQUITY |
PORTFOLIO ALLOCATION October 31, 2023 |
SECTOR DIVERSIFICATION
U.S. $ Value | Percent of | |||||
Common Stock: |
|
| ||||
Basic Materials | $ | 10,938,000 | 3.7 | % | ||
Communications |
| 40,925,000 | 14.0 |
| ||
Consumer Cyclical |
| 39,938,524 | 13.6 |
| ||
Consumer Non-Cyclical |
| 87,755,844 | 30.0 |
| ||
Financials |
| 27,039,800 | 9.2 |
| ||
Industrials |
| 10,731,000 | 3.7 |
| ||
Technology |
| 65,044,383 | 22.2 |
| ||
Cash and Other Assets in Excess of Liabilities |
| 10,477,611 | 3.6 |
| ||
NET ASSETS | $ | 292,850,162 | 100.0 | % |
All data as of October 31, 2023. The Fund’s sector diversification is expressed as a percentage of net assets and may vary over time.
6 |
BBH PARTNER FUND – SMALL CAP EQUITY |
PORTFOLIO OF INVESTMENTS October 31, 2023 All investments in the United States, except as noted. |
Shares | Value | ||||||
COMMON STOCK (96.4%) |
| ||||||
BASIC MATERIALS (3.7%) |
| ||||||
600,000 | Element Solutions, Inc. | $ | 10,938,000 | ||||
Total Basic Materials |
| 10,938,000 | |||||
COMMUNICATIONS (14.0%) |
| ||||||
2,000,000 | Despegar.com Corp. (British Virgin Islands)1 |
| 13,260,000 | ||||
1,300,000 | Upwork, Inc.1 |
| 13,585,000 | ||||
2,000,000 | WideOpenWest, Inc.1 |
| 14,080,000 | ||||
Total Communications |
| 40,925,000 | |||||
CONSUMER CYCLICAL (13.6%) |
| ||||||
38,427 | Papa John’s International, Inc. |
| 2,498,524 | ||||
3,000,000 | ThredUp, Inc. (Class A)1 |
| 9,660,000 | ||||
600,000 | XPEL, Inc.1 |
| 27,780,000 | ||||
Total Consumer Cyclical |
| 39,938,524 | |||||
CONSUMER NON-CYCLICAL (30.0%) |
| ||||||
588,446 | Alarm.com Holdings, Inc.1 |
| 30,087,244 | ||||
250,000 | Cimpress, Plc. (Ireland)1 |
| 14,917,500 | ||||
300,000 | EVERTEC, Inc. (Puerto Rico) |
| 9,534,000 | ||||
370,000 | Franklin Covey Co.1 |
| 14,581,700 | ||||
250,000 | iRadimed Corp. |
| 10,185,000 | ||||
560,000 | SoundThinking, Inc.1 |
| 8,450,400 | ||||
Total Consumer Non-Cyclical |
| 87,755,844 | |||||
FINANCIALS (9.2%) |
| ||||||
140,000 | StoneX Group, Inc.1 |
| 13,344,800 | ||||
220,000 | Triumph Financial, Inc.1 |
| 13,695,000 | ||||
Total Financials |
| 27,039,800 | |||||
INDUSTRIALS (3.7%) |
| ||||||
700,000 | Astronics Corp.1 |
| 10,731,000 | ||||
Total Industrials |
| 10,731,000 | |||||
| |||||||
TECHNOLOGY (22.2%) |
| ||||||
230,333 | Agilysys, Inc.1 |
| 19,760,268 | ||||
600,000 | Health Catalyst, Inc.1 |
| 4,494,000 | ||||
300,000 | Model N, Inc.1 |
| 7,230,000 | ||||
1,000,000 | Olo, Inc. (Class A)1 |
| 5,110,000 |
F I N A N C I A L S T A T E M E N T S O C T O B E R 3 1, 2 0 2 3 | 7 |
BBH PARTNER FUND – SMALL CAP EQUITY |
PORTFOLIO OF INVESTMENTS (continued) October 31, 2023 All investments in the United States, except as noted. |
Shares | Value | |||||||
COMMON STOCK (continued) |
|
| ||||||
TECHNOLOGY (continued) |
|
| ||||||
100,000 | Onto Innovation, Inc.1 |
| $ | 11,237,000 | ||||
559,500 | PagerDuty, Inc.1 |
|
| 11,285,115 | ||||
800,000 | Zuora, Inc. (Class A)1 |
|
| 5,928,000 | ||||
Total Technology |
|
| 65,044,383 | |||||
Total Common Stock |
|
| 282,372,551 | |||||
TOTAL INVESTMENTS (Cost $343,806,624)2 | 96.4 | % | $ | 282,372,551 | ||||
CASH AND OTHER ASSETS IN EXCESS OF LIABILITIES | 3.6 | % |
| 10,477,611 | ||||
NET ASSETS | 100.00 | % | $ | 292,850,162 |
____________
1 Non-income producing security.
2 The aggregate cost for federal income tax purposes is $344,406,714, the aggregate gross unrealized appreciation is $23,464,567 and the aggregate gross unrealized depreciation is $85,498,730, resulting in net unrealized depreciation of $62,034,163.
8 |
BBH PARTNER FUND – SMALL CAP EQUITY |
PORTFOLIO OF INVESTMENTS (continued) October 31, 2023 |
Fair Value Measurements
The Fund is required to disclose information regarding the fair value measurements of the Fund’s assets and liabilities. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The disclosure requirement established a three-tier hierarchy to maximize the use of observable market data and minimize the use of unobservable inputs and to establish classification of fair value measurements for disclosure purposes. Inputs refer broadly to the assumptions that market participants would use in pricing the asset or liability, including for example, the risk inherent in a particular valuation technique used to measure fair value including such a pricing model and/or the risk inherent in the inputs to the valuation technique. Inputs may be observable or unobservable. Observable inputs are inputs that reflect the assumptions market participants would use in pricing the asset or liability developed based on market data obtained from sources independent of the reporting entity. Unobservable inputs are inputs that reflect the Fund’s own considerations about the assumptions market participants would use in pricing the asset or liability developed based on the best information available in the circumstances.
Authoritative guidance establishes three levels of the fair value hierarchy as follows:
— | Level 1 – unadjusted quoted prices in active markets for identical assets and liabilities. |
— | Level 2 – significant other observable inputs (including quoted prices for similar assets and liabilities, interest rates, prepayment speeds, credit risk, etc.). |
— | Level 3 – significant unobservable inputs (including the Fund’s own assumptions in determining the fair value of assets and liabilities). |
Inputs are used in applying the various valuation techniques and broadly refer to the assumptions that market participants use to make valuation decisions, including assumptions about risk. Inputs may include price information, specific and broad credit data, liquidity statistics, and other factors. A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. However, the determination of what constitutes “observable” requires judgment by the investment adviser. The investment adviser considers observable data to be that market data which is readily available, regularly distributed or updated, reliable and verifiable, not proprietary, and provided by independent sources that are actively involved in the relevant market. The categorization of a financial instrument within the hierarchy is based upon the pricing transparency of the instrument and does not necessarily correspond to the investment adviser’s perceived risk of that instrument.
F I N A N C I A L S T A T E M E N T S O C T O B E R 3 1, 2 0 2 3 | 9 |
BBH PARTNER FUND – SMALL CAP EQUITY |
PORTFOLIO OF INVESTMENTS (continued) October 31, 2023 |
Financial assets within Level 1 are based on quoted market prices in active markets. The Fund does not adjust the quoted price for these instruments.
Financial instruments that trade in markets that are not considered to be active but are valued based on quoted market prices, dealer quotations or alternative pricing sources supported by observable inputs are classified within Level 2. These include investment-grade corporate bonds, U.S. Treasury notes and bonds, and certain non-U.S. sovereign obligations, listed equities and over-the-counter derivatives and foreign equity securities whose values could be impacted by events occurring before the Fund’s pricing time, but after the close of the securities’ primary markets and are, therefore, fair valued according to procedures adopted by the Board of Trustees. As Level 2 financial assets include positions that are not traded in active markets and/or are subject to transfer restrictions, valuations may be adjusted to reflect illiquidity and/or non-transferability, which are generally based on available market information.
Financial assets classified within Level 3 have significant unobservable inputs, as they trade infrequently. Level 3 financial assets include private equity and certain corporate debt securities.
Because of the inherent uncertainties of valuation, the values reflected in the financial statements may materially differ from the value received upon the actual sale of those investments.
The following table summarizes the valuation of the Fund’s investments by the above fair value hierarchy levels as of October 31, 2023.
Investments, at value | Unadjusted | Significant | Significant | Balance as of | ||||||||
Common Stock: |
|
|
|
| ||||||||
Basic Materials | $ | 10,938,000 | $ | — | $ | — | $ | 10,938,000 | ||||
Communications |
| 40,925,000 |
| — |
| — |
| 40,925,000 | ||||
Consumer Cyclical |
| 39,938,524 |
| — |
| — |
| 39,938,524 | ||||
Consumer Non-Cyclical |
| 87,755,844 |
| — |
| — |
| 87,755,844 | ||||
Financials |
| 27,039,800 |
| — |
| — |
| 27,039,800 | ||||
Industrials |
| 10,731,000 |
| — |
| — |
| 10,731,000 | ||||
Technology |
| 65,044,383 |
| — |
| — |
| 65,044,383 | ||||
Total Investments, at value | $ | 282,372,551 | $ | — | $ | — | $ | 282,372,551 |
10 |
BBH PARTNER FUND – SMALL CAP EQUITY |
STATEMENT OF ASSETS AND LIABILITIES October 31, 2023 |
ASSETS: |
|
| ||
Investments in securities, at value (Cost $343,806,624) | $ | 282,372,551 |
| |
Cash |
| 10,700,434 |
| |
Receivables for: |
|
| ||
Shares sold |
| 80,950 |
| |
Interest from Custodian |
| 17,344 |
| |
Dividends |
| 13,500 |
| |
Total Assets |
| 293,184,779 |
| |
LIABILITIES: |
|
| ||
Payables for: |
|
| ||
Investment advisory and administrative fees |
| 216,765 |
| |
Professional fees |
| 52,355 |
| |
Shares redeemed |
| 50,524 |
| |
Custody and fund accounting fees |
| 6,863 |
| |
Transfer agent fees |
| 3,425 |
| |
Board of Trustees’ fees |
| 1,349 |
| |
Accrued expenses and other liabilities |
| 3,336 |
| |
Total Liabilities |
| 334,617 |
| |
NET ASSETS | $ | 292,850,162 |
| |
Net Assets Consist of: |
|
| ||
Paid-in capital | $ | 438,699,470 |
| |
Accumulated deficit |
| (145,849,308 | ) | |
Net Assets | $ | 292,850,162 |
| |
NET ASSET VALUE AND OFFERING PRICE PER SHARE |
|
| ||
CLASS I SHARES | $ | 6.49 |
|
The accompanying notes are an integral part of these financial statements.
F I N A N C I A L S T A T E M E N T S O C T O B E R 3 1, 2 0 2 3 | 11 |
BBH PARTNER FUND – SMALL CAP EQUITY |
STATEMENT OF OPERATIONS For the year ended October 31, 2023 |
NET INVESTMENT LOSS: |
|
| ||
Income: |
|
| ||
Dividends (including foreign withholding tax reclaim of $500) | $ | 887,542 |
| |
Interest income from Custodian |
| 357,667 |
| |
Total Income |
| 1,245,209 |
| |
Expenses: |
|
| ||
Investment advisory and administrative fees |
| 2,876,362 |
| |
Board of Trustees’ fees |
| 73,703 |
| |
Professional fees |
| 61,501 |
| |
Transfer agent fees |
| 38,283 |
| |
Custody and fund accounting fees |
| 29,190 |
| |
Miscellaneous expenses |
| 48,037 |
| |
Total Expenses |
| 3,127,076 |
| |
Net Investment Loss |
| (1,881,867 | ) | |
NET REALIZED AND UNREALIZED GAIN: |
|
| ||
Net realized loss on investments in securities |
| (44,430,148 | ) | |
Net change in unrealized appreciation/(depreciation) on investments in securities |
| 44,905,317 |
| |
Net Realized and Unrealized Gain |
| 475,169 |
| |
Net Decrease in Net Assets Resulting from Operations | $ | (1,406,698 | ) |
The accompanying notes are an integral part of these financial statements.
12 |
BBH PARTNER FUND – SMALL CAP EQUITY |
STATEMENTS OF CHANGES IN NET ASSETS |
For the years ended | ||||||||
2023 | 2022 | |||||||
INCREASE/(DECREASE) IN NET ASSETS FROM: |
|
|
|
| ||||
Operations: |
|
|
|
| ||||
Net investment loss | $ | (1,881,867 | ) | $ | (2,470,244 | ) | ||
Net realized loss on investments in securities |
| (44,430,148 | ) |
| (38,410,400 | ) | ||
Net change in unrealized appreciation/(depreciation) on investments in securities |
| 44,905,317 |
|
| (101,184,107 | ) | ||
Net decrease in net assets resulting from operations |
| (1,406,698 | ) |
| (142,064,751 | ) | ||
Dividends and distributions declared: |
|
|
|
| ||||
Class I |
| — |
|
| (2,050,868 | ) | ||
Share transactions: |
|
|
|
| ||||
Proceeds from sales of shares |
| 38,511,518 |
|
| 214,540,021 |
| ||
Cost of shares redeemed |
| (88,309,082 | ) |
| (48,848,721 | ) | ||
Net increase/(decrease) in net assets resulting from share transactions |
| (49,797,564 | ) |
| 165,691,300 |
| ||
Total increase/(decrease) in net assets |
| (51,204,262 | ) |
| 21,575,681 |
| ||
NET ASSETS: |
|
|
|
| ||||
Beginning of year |
| 344,054,424 |
|
| 322,478,743 |
| ||
End of year | $ | 292,850,162 |
| $ | 344,054,424 |
|
The accompanying notes are an integral part of these financial statements.
F I N A N C I A L S T A T E M E N T S O C T O B E R 3 1, 2 0 2 3 | 13 |
BBH PARTNER FUND – SMALL CAP EQUITY |
FINANCIAL HIGHLIGHTS Selected per share data and ratios for a Class I share outstanding throughout each year/period. |
| For the period from | |||||||||||
2023 | 2022 | |||||||||||
Net asset value, beginning of year/period | $ | 6.56 |
| $ | 9.85 |
| $ | 10.00 |
| |||
Income from investment operations: |
|
|
|
|
|
| ||||||
Net investment loss1 |
| (0.04 | ) |
| (0.05 | ) |
| (0.03 | ) | |||
Net realized and unrealized loss |
| (0.03 | ) |
| (3.18 | ) |
| (0.12 | ) | |||
Total (loss) from investment operations |
| (0.07 | ) |
| (3.23 | ) |
| (0.15 | ) | |||
Dividends and distributions to shareholders: |
|
|
|
|
|
| ||||||
From net realized gains |
| — |
|
| (0.06 | ) |
| — |
| |||
Total dividends and distributions to shareholders |
| — |
|
| (0.06 | ) |
| — |
| |||
Net asset value, end of year/period | $ | 6.49 |
| $ | 6.56 |
| $ | 9.85 |
| |||
Total return2 |
| (1.07 | )% |
| (32.97 | )% |
| (1.50 | )%3 | |||
Ratios/Supplemental data: |
|
|
|
|
|
| ||||||
Net assets, end of year/period (in millions) | $ | 293 |
| $ | 344 |
| $ | 322 |
| |||
Ratio of expenses to average net assets before reductions |
| 0.92 | % |
| 0.92 | % |
| 0.93 | %4 | |||
Fee waiver5 |
| — | % |
| 0.00 | %6 |
| (0.01 | )%4 | |||
Ratio of expenses to average net assets after reductions |
| 0.92 | % |
| 0.92 | % |
| 0.92 | %4 | |||
Ratio of net investment loss to average net assets |
| (0.56 | )% |
| (0.70 | )% |
| (0.83 | )%4 | |||
Portfolio turnover rate |
| 27 | % |
| 16 | % |
| 3 | %3 |
____________
1 Calculated using average shares outstanding for the year/period.
2 Assumes the reinvestment of distributions.
3 Not annualized.
4 Annualized with the exception of audit fees, legal fees and registration fees.
5 The ratio of expenses to average net assets for the years ended October 31, 2023, 2022 and the period ended October 31, 2021 reflect fees reduced as result of a voluntary operating expense waiver. For the years ended October 31, 2023, 2022 and the period from July 8, 2021 to October 31, 2021 the waived fee were $-, $2,089 and $40,593, respectively.
6 Less than 0.01%.
The accompanying notes are an integral part of these financial statements.
14 |
BBH PARTNER FUND – SMALL CAP EQUITY |
NOTES TO FINANCIAL STATEMENTS October 31, 2023 |
1. Organization. The Fund is a separate, non-diversified series of BBH Trust (the “Trust”), which is registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as an open-end management investment company. The Trust was originally organized under the laws of the State of Maryland on July 16, 1990 as BBH Fund, Inc. and re-organized as a Delaware statutory trust on June 12, 2007. As of October 31, 2023, there were eight series of the Trust. The Fund commenced operations on July 8, 2021 and offers one share class, Class I. The investment objective of the Fund is to provide investors with long-term growth of capital. Under normal circumstances, at least 80% of the net assets of the Fund, plus any borrowings for investment purposes, are invested in small cap equity securities publicly traded and issued by domestic issuers directly.
2. Significant Accounting Policies. The Fund’s financial statements are prepared in accordance with Generally Accepted Accounting Principles in the United States of America (“GAAP”). The Fund is an investment company and accordingly follows the investment company accounting and reporting guidance of the Financial Accounting Standards Board (“FASB”) Accounting Standard Codification Topic 946 Financial Services — Investment Companies. The following summarizes significant accounting policies of the Fund:
A. Valuation of Investments. The Board of Trustees (the “Board”) has ultimate responsibility for determining the fair value of investments. Pursuant to Rule 2a-5 of the 1940 Act, the Board has designated the Investment Adviser as its valuation designee. The Investment Adviser monitors the continual appropriateness of valuation methods applied and determines if adjustments should be made in light of market factor changes and events affecting issuers. The Investment Adviser performs a series of activities to provide reasonable assurance of the appropriateness of the prices utilized, including but not limited to: periodic independent pricing service due diligence meetings and reviewing the results of back testing on a monthly basis. The Investment Adviser provides the Board with reporting on the results of the back testing as well as positions which were fair valued during the period.
All securities and other investments are recorded at their estimated fair value. The value of investments listed on a securities exchange is based on the last sale price prior to the time when assets are valued, or in the absence of recorded sales, at the most recent bid price on such exchange. If a readily available market quotation is not available or is determined to be unreliable, the investments may be valued utilizing evaluated prices provided by independent pricing services. In establishing such prices, the independent pricing service utilizes both dealer supplied prices and electronic data processing techniques which take into account appropriate factors such as institutional sized trading in similar groups of securities, yield, quality, coupon rate, maturity, type of issue, trading characteristics, the closure of the primary exchange on which securities trade and before the Fund’s net asset value is next determined and other market data without exclusive reliance on quoted exchange prices or over-the-counter prices since such valuations are believed to reflect more accurately the fair value of such investments. Investments may be fair valued by Brown Brothers Harriman & Co. (“BBH”) through a separately identifiable department
F I N A N C I A L S T A T E M E N T S O C T O B E R 3 1, 2 0 2 3 | 15 |
BBH PARTNER FUND – SMALL CAP EQUITY |
NOTES TO FINANCIAL STATEMENTS (continued) October 31, 2023 |
(“SID” or “Investment Adviser”) in accordance with the BBH Trust Portfolio Valuation Policy and Procedures using methods that most fairly reflect the amount that the Fund would reasonably expect to receive for the investment on a current sale in its principal market in the ordinary course of business. Short-term investments, which mature in 60 days or less are valued at amortized cost if their original maturity was 60 days or less, or by amortizing their value on the 61st day prior to maturity, if their original maturity when acquired by the Fund was more than 60 days, unless the use of amortized cost is determined not to represent fair value. Any futures contracts held by the Fund are valued daily at the official settlement price of the exchange on which they are traded.
B. Accounting for Investments and Income. Investment transactions are accounted for on the trade date. Realized gains and losses on investment transactions are determined based on the identified cost method. Dividend income and other distributions received from portfolio securities are recorded on the ex-dividend date. Non-cash dividends included in dividend income, if any, are recorded at the fair market value of securities received at ex-date. Distributions received on securities that represent a return of capital are recorded as a reduction of cost of investments. Distributions received on securities that represent a capital gain are recorded as a realized gain. Interest income is accrued daily. Investment income is recorded net of any foreign taxes withheld where recovery of such tax is uncertain.
C. Fund Expenses. Most expenses of the Trust can be directly attributed to a specific fund. Expenses which cannot be directly attributed to a fund are generally apportioned among each fund in the Trust on a net assets basis or other suitable method. Expense estimates are accrued in the period to which they relate and adjustments are made when actual amounts are known.
D. Federal Income Taxes. It is the Trust’s policy to comply with the requirements of the Internal Revenue Code (the “Code”) applicable to regulated investment companies and to distribute substantially all of its taxable income to its shareholders. Accordingly, no federal income tax provision is required. The Fund files a tax return annually using tax accounting methods required under provisions of the Code, which may differ from GAAP, which is the basis on which these financial statements are prepared. Accordingly, the amount of net investment income and net realized gain reported in these financial statements may differ from that reported on the Fund’s tax return, due to certain book-to-tax timing differences such as losses deferred due to “wash sale” transactions and utilization of capital loss carryforwards. These differences may result in temporary over-distributions for financial statement purposes and are classified as distributions in excess of accumulated net realized gains or net investment income. These distributions do not constitute a return of capital. Permanent differences are reclassified between paid-in capital and retained earnings/(accumulated deficit) within the Statement of Assets and Liabilities based upon their tax classification. As such, the character of distributions to shareholders reported in the Financial Highlights table may differ from that reported to shareholders on Form 1099-DIV.
16 |
BBH PARTNER FUND – SMALL CAP EQUITY |
NOTES TO FINANCIAL STATEMENTS (continued) October 31, 2023 |
The Fund is subject to the provisions of Accounting Standards Codification 740 Income Taxes (“ASC 740”). ASC 740 sets forth a minimum threshold for financial statement recognition of the benefit of a tax position taken or expected to be taken in a tax return. The Fund did not have any unrecognized tax benefits as of October 31, 2023, nor were there any increases or decreases in unrecognized tax benefits for the year then ended. The Fund recognizes interest and penalties, if any, related to unrecognized tax benefits as an income tax expense in the Statement of Operations. During the year ended October 31, 2023, the Fund did not incur any such interest or penalties. The Fund is subject to examination by U.S. federal and state tax authorities for returns filed for open tax period since July 8, 2021 (commencement of operations). The Fund is not aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will significantly change in the next twelve months.
E. Dividends and Distributions to Shareholders. Dividends and distributions from net investment income to shareholders, if any, are paid annually and are recorded on the ex-dividend date. Distributions from net capital gains, if any, are generally declared and paid annually and are recorded on the ex-dividend date. The Fund declared dividends and distributions in the amount of $0 and $2,050,868 to Class I shares shareholders, during the years ended October 31, 2023 and October 31, 2022, respectively.
The tax character of distribution paid during the years ended October 31, 2023 and 2022, respectively, were as follows:
Distribution paid from: | ||||||||||||
Ordinary | Net | Total | Tax return | Total | ||||||||
2023: | $ — | $ — | $ — | $ — | $ — | |||||||
2022: | 2,050,868 | — | 2,050,868 | — | 2,050,868 |
As of October 31, 2023 and 2022, respectively, the components of retained earnings/(accumulated deficit) on tax basis were as follows:
Components of retained earnings/(accumulated deficit): | ||||||||||||||||
Undistributed | Undistributed | Accumulated | Other | Late year | Unrealized | Total | ||||||||||
2023: | $ — | $ — | $(82,240,458) | $(600,090) | $(1,574,687) | $ (61,434,073) | $(145,849,308) | |||||||||
2022: | — | — | (38,410,400) | — | (2,031,614) | (106,339,390) | (146,781,404) |
The Fund had $82,240,458 net capital loss carryforwards as of October 31, 2023, of which $35,054,654 and $47,185,804, is attributable to short-term and long-term capital losses, respectively.
F I N A N C I A L S T A T E M E N T S O C T O B E R 3 1, 2 0 2 3 | 17 |
BBH PARTNER FUND – SMALL CAP EQUITY |
NOTES TO FINANCIAL STATEMENTS (continued) October 31, 2023 |
The Fund is permitted to carryforward capital losses for an unlimited period and they will retain their character as either short-term or long-term capital losses.
Total distributions paid may differ from amounts reported in the Statements of Changes in Net Assets because, for tax purposes, dividends are recognized when actually paid.
The differences between book-basis and tax-basis unrealized appreciation/(depreciation) would be attributable primarily to the tax deferral of losses on wash sales, if applicable.
To the extent future capital gains are offset by capital loss carryforwards, if any, such gains will not be distributed.
F. Use of Estimates. The preparation of the financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities in the financial statements, disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of increase and decrease in net assets from operations during the reporting period. Actual results could differ from these estimates.
3. Fees and Other Transactions with Affiliates.
A. Investment Advisory and Administrative Fees. Under a combined Investment Advisory and Administrative Services Agreement (“Agreement”) with the Trust, Brown Brothers Harriman & Co. (“BBH”) through a separately identifiable department (“Investment Adviser”) provides investment advisory, portfolio management and administrative services to the Fund. BBH employs a “manager-of-managers” investment approach, whereby it allocates the Fund’s assets to the Fund’s sub-adviser, currently Bares Capital Management, Inc. (“Bares Capital Management” or the “Sub-Adviser”). The Sub-Adviser is responsible for investing the assets of the Fund and the Investment Adviser oversees the Sub-Adviser and evaluates its performance results. The Fund pays a combined fee for investment advisory and administrative services calculated daily and paid monthly at an annual rate equivalent to 0.85% per annum on the first $3 billion of the Fund’s average daily net assets and 0.80% per annum on the Fund’s average daily net assets over $3 billion. The Investment Adviser pays its Sub-Adviser the entire amount of its investment advisory and administrative fees. For the year ended October 31, 2023, the Fund incurred $2,876,362 under the Agreement.
B. Investment Advisory and Administrative Fee Waivers. The Investment Adviser voluntarily agreed to limit the annual fund operating expenses (excluding interest, taxes, brokerage commissions, other expenditures that are capitalized in accordance with GAAP and other extraordinary expenses not incurred in the ordinary course of the Fund’s business) of Class I. This is a voluntary waiver that can be changed at any time at the sole discretion of the Investment Adviser. For the year ended October 31, 2023, the Investment Adviser waived fees in the amount of $0 for Class I.
18 |
BBH PARTNER FUND – SMALL CAP EQUITY |
NOTES TO FINANCIAL STATEMENTS (continued) October 31, 2023 |
C. Custody and Fund Accounting Fees. BBH acts as a custodian and fund accountant and receives custody and fund accounting fees from the Fund calculated daily and incurred monthly. BBH holds all of the Fund’s cash and investments and calculates the Fund’s daily net asset value. The custody fee is an asset and transaction-based fee. The fund accounting fee is an asset-based fee calculated at 0.325 basis points per annum of the Fund’s net asset value, effective September 1, 2023 based on the new agreement. The fund accounting fee was 0.40 basis points per annum until August 31, 2023. For the year ended October 31, 2023, the Fund incurred $29,190 in custody and fund accounting fees. As per agreement with the Fund’s custodian, the Fund receives interest income on cash balances held by the custodian at the BBH Base Rate. The BBH Base Rate is defined as BBH’s effective trading rate in local money markets on each day. The total interest earned by the Fund for the year ended October 31, 2023 was $357,667. This amount is included in “Interest income from Custodian” in the Statement of Operations. In the event that the Fund is overdrawn, under the custody agreement with BBH, BBH will make overnight loans to the Fund to cover overdrafts. Pursuant to their agreement, the Fund will pay the BBH Overdraft Base Rate plus 2% on the day of the overdraft. The total interest incurred by the Fund for the year ended October 31, 2023, was $1,556. This amount is included under line item “Custody and fund accounting fees” in the Statement of Operations.
D. Board of Trustees’ Fees. Each Trustee who is not an “interested person” as defined under the 1940 Act receives an annual fee as well as reimbursement for reasonable out-of-pocket expenses from the Fund. For the year ended October 31, 2023, the Fund incurred $73,703 in independent Trustee compensation and expense reimbursements.
E. Officers of the Trust. Officers of the Trust are also employees of BBH. Officers are paid no fees by the Trust for their services to the Trust.
4. Investment Transactions. For the year ended October 31, 2023, the cost of purchases and the proceeds of sales of investment securities, other than short-term investments, were $88,979,850 and $141,659,622, respectively.
5. Shares of Beneficial Interest. The Trust is permitted to issue an unlimited number of Class I shares of beneficial interest at no par value. Transactions in Class I shares were as follows:
For the year ended | For the year ended | |||||||||||||
Shares | Dollars | Shares | Dollars | |||||||||||
Class I |
|
|
|
| ||||||||||
Shares sold | 5,587,651 |
| $ 38,511,518 |
| 26,759,570 |
| $ 214,540,021 |
| ||||||
Shares redeemed | (12,908,538 | ) | (88,309,082 | ) | (7,079,879 | ) | (48,848,721 | ) | ||||||
Net increase/(decrease) | (7,320,887 | ) | $ (49,797,564 | ) | 19,679,691 |
| $ 165,691,300 |
|
F I N A N C I A L S T A T E M E N T S O C T O B E R 3 1, 2 0 2 3 | 19 |
BBH PARTNER FUND – SMALL CAP EQUITY |
NOTES TO FINANCIAL STATEMENTS (continued) October 31, 2023 |
6. Principal Risk Factors and Indemnifications.
A. Principal Risk Factors. Investing in the Fund may involve certain risks, as discussed in the Fund’s prospectus, including but not limited to, those described below:
A shareholder may lose money by investing in the Fund (investment risk). The Fund is actively managed and the decisions by the Investment Adviser may cause the Fund to incur losses or miss profit opportunities (management risk). Price movements may occur due to factors affecting individual companies, such as the issuance of an unfavorable earnings report, or other events affecting particular industries or the equity market as a whole (equity securities risk). Small cap companies, when compared to larger companies, may experience lower trading volume and could be subject to greater and less predictable price changes (small cap company risk). The fund will invest 25% or more of its net assets in the Software & Services Industry Group. When a fund focuses its investments in a particular industry, group of industries, or sector, financial, economic business and other developments affecting issuers in those industries or groups of industries will have a greater effect on the fund than if the fund did not focus on an industry or group of industries (Software & Service Industry Group Concentration risk). The value of securities held by the Fund may fall due to changing economic, political, regulatory or market conditions, or due to a company’s or issuer’s individual situation. Natural disasters, the spread of infectious illness and other public health emergencies, recession, terrorism and other unforeseeable events may lead to increased market volatility and may have adverse effects on world economies and markets generally (market risk). In the normal course of business, the Fund invests in securities and enters into transactions where risks exist due to assumption of large positions in securities of a small number of issuers (non-diversification risk). The Fund’s shareholders may be adversely impacted by asset allocation decisions made by an investment adviser whose discretionary clients make up a large percentage of the Fund’s shareholders (large shareholder risk). The extent of the Fund’s exposure to these risks in respect to these financial assets is included in their value as recorded in the Fund’s Statement of Assets and Liabilities.
Please refer to the Fund’s prospectus for a complete description of the principal risks of investing in the Fund.
B. Indemnifications. Under the Trust’s organizational documents, its officers and Trustees may be indemnified against certain liabilities and expenses arising out of the performance of their duties to the Fund, and shareholders are indemnified against personal liability for the obligations of the Trust. Additionally, in the normal course of business, the Fund enters into agreements with service providers that may contain indemnification clauses. The Fund’s maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Fund that have not yet occurred. The risk of material loss from such claims is considered remote.
7. Subsequent Events. Management has evaluated events and transactions that have occurred since October 31, 2023 through the date the financial statements were issued and determined that there were no subsequent events that would require recognition or additional disclosure in the financial statements.
20 |
BBH PARTNER FUND – SMALL CAP EQUITY |
DISCLOSURE OF FUND EXPENSES |
EXAMPLE
As a shareholder of the Fund, you may incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments, reinvested distributions, or other distributions; redemption fees; and exchange fees; and (2) ongoing costs, including management fees; distribution 12b-1 fees; and other Fund expenses. This Example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The Example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period (May 1, 2023 to October 31, 2023).
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.
F I N A N C I A L S T A T E M E N T S O C T O B E R 3 1, 2 0 2 3 | 21 |
BBH PARTNER FUND – SMALL CAP EQUITY |
DISCLOSURE OF FUND EXPENSES (continued) |
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as redemption fees or exchange fees. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
Beginning | Ending | Expenses Paid | ||||
Class I | ||||||
Actual | $1,000 | $ 915 | $4.49 | |||
Hypothetical2 | $1,000 | $1,021 | $4.74 |
____________
1 Expenses are equal to the Fund’s annualized expense ratio of 0.93% for Class I, multiplied by the average account value over the period, multiplied by 184/365.
2 Assumes a return of 5% before expenses. For the purposes of the calculation, the applicable annualized expense ratio for each class of shares is subtracted from the assumed return before expenses.
22 |
BBH PARTNER FUND – SMALL CAP EQUITY |
CONFLICTS OF INTEREST October 31, 2023 (unaudited) |
Description of Potential Material Conflicts of Interest — Investment Adviser
BBH, including the Investment Adviser, provides discretionary and non-discretionary investment management services and products to corporations, institutions and individual investors throughout the world. As a result, in the ordinary course of its businesses, BBH, including the Investment Adviser, may engage in activities in which its interests or the interests of its clients may conflict with or be adverse to the interests of the Funds. In addition, certain of such clients (including the Funds) utilize the services of BBH for which they will pay to BBH customary fees and expenses that will not be shared with the Funds.
The Investment Adviser has adopted and implemented policies and procedures that seek to manage conflicts of interest. Pursuant to such policies and procedures, the Investment Adviser monitors a variety of areas, including compliance with fund investment guidelines, the investment in only those securities that have been approved for purchase, and compliance with their respective Code of Ethics.
The Trust also manages these conflicts of interest. For example, the Trust has designated a chief compliance officer (“CCO”) and has adopted and implemented policies and procedures designed to manage the conflicts identified below and other conflicts that may arise in the course of the Funds’ operations in such a way as to safeguard the Funds from being negatively affected as a result of any such potential conflicts. From time to time, the Trustees receive reports from the Investment Adviser and the Trust’s CCO on areas of potential conflict.
Investors should carefully review the following, which describes potential and actual conflicts of interest that BBH, the Investment Adviser can face in the operation of their respective investment management services. This section is not, and is not intended to be, a complete enumeration or explanation of all of the potential conflicts of interest that may arise. The Investment Adviser and the Funds has adopted policies and procedures reasonably designed to appropriately prevent, limit or mitigate the conflicts of interest described below. Additional information about potential conflicts of interest regarding the Investment Adviser is set forth in the Investment Adviser’s Form ADV. A copy of Part 1 and Part 2A of the Investment Adviser’s Form ADV is available on the SEC’s website (www.adviserinfo.sec.gov). In addition, many of the activities that create these conflicts of interest are limited and/or prohibited by law, unless an exception is available.
Other Clients and Allocation of Investment Opportunities. BBH, the Investment Adviser manages funds and accounts of clients other than the Funds (“Other Clients”). In general, BBH, the Investment Adviser faces conflicts of interest when they render investment advisory services to different clients and, from time to time, provide dissimilar investment advice to different clients. Investment decisions will not necessarily be made in parallel among the Funds and Other Clients. Investments made by the Funds do not, and are not intended to, replicate the investments, or the investment methods and strategies, of Other Clients. Accordingly, such Other Clients may produce results that are materially different from those experienced by the Funds. Certain other conflicts of interest may arise in connection with a portfolio manager’s management of the Funds’ investments, on the one hand, and the investments of other funds or
F I N A N C I A L S T A T E M E N T S O C T O B E R 3 1, 2 0 2 3 | 23 |
BBH PARTNER FUND – SMALL CAP EQUITY |
CONFLICTS OF INTEREST (continued) October 31, 2023 (unaudited) |
accounts for which the portfolio manager is responsible, on the other. For example, it is possible that the various funds or accounts managed by the Investment Adviser could have different investment strategies that, at times, might conflict with one another to the possible detriment of the Funds. From time to time, the Investment Adviser sponsors and with other investment pools and accounts which engage in the same or similar businesses as the Funds using the same or similar investment strategies. To the extent that the same investment opportunities might be desirable for more than one account or fund, possible conflicts could arise in determining how to allocate them because the Investment Adviser may have an incentive to allocate investment opportunities to certain accounts or funds. However, BBH and the Investment Adviser have implemented policies and procedures designed to ensure that information relevant to investment decisions is disseminated promptly within its portfolio management teams and investment opportunities are allocated equitably among different clients. The policies and procedures require, among other things, objective allocation for limited investment opportunities, and documentation and review of justifications for any decisions to make investments only for select accounts or in a manner disproportionate to the size of the account. Nevertheless, access to investment opportunities may be allocated differently among accounts due to the particular characteristics of an account, such as size of the account, cash position, tax status, risk tolerance and investment restrictions or for other reasons.
Actual or potential conflicts of interest may also arise when a portfolio manager has management responsibilities to multiple accounts or funds, resulting in unequal commitment of time and attention to the portfolio management of the funds or accounts.
Affiliated Service Providers. Other potential conflicts might include conflicts between the Funds and its affiliated and unaffiliated service providers (e.g., conflicting duties of loyalty). In addition to providing investment management services through the SID, BBH provides administrative, custody, shareholder servicing and fund accounting services to the Funds. BBH may have conflicting duties of loyalty while servicing the Funds and/or opportunities to further its own interest to the detriment of the Funds. For example, in negotiating fee arrangements with affiliated service providers, BBH may have an incentive to agree to higher fees than it would in the case of unaffiliated providers. BBH acting in its capacity as the Funds’ administrator is the primary valuation agent of the Funds. BBH values securities and assets in the Funds according to the Funds’ valuation policies. Because the Investment Adviser’s advisory and administrative fees are calculated by reference to a Funds’ net assets, BBH and its affiliates may have an incentive to seek to overvalue certain assets.
Aggregation. Potential conflicts of interest also arise with the aggregation of trade orders. Purchases and sales of securities for the Funds may be aggregated with orders for other client accounts managed by the Investment Adviser. The Investment Adviser, however, are not required to aggregate orders if portfolio management decisions for different accounts are made separately, or if it is determined that aggregating is not practicable, or in cases involving client direction. Prevailing trading activity frequently may make impossible the receipt of the same price or execution on the entire volume of securities purchased or sold. When this occurs, the various prices may be averaged, and the Funds will be charged or credited with the
24 |
BBH PARTNER FUND – SMALL CAP EQUITY |
CONFLICTS OF INTEREST (continued) October 31, 2023 (unaudited) |
average price. Thus, the effect of the aggregation may operate on some occasions to the disadvantage of the Funds. In addition, under certain circumstances, the Funds will not be charged the same commission or commission equivalent rates in connection with an aggregated order.
Cross Trades. Under certain circumstances, the Investment Adviser, on behalf of the Funds, may seek to buy from or sell securities to another fund or account advised by BBH, the Investment Adviser. Subject to applicable law and regulation, BBH, the Investment Adviser may (but is not required to) effect purchases and sales between BBH, the Investment Adviser clients (“cross trades”), including the Funds, if BBH or the Investment Adviser believes such transactions are appropriate based on each party’s investment objectives and guidelines. There may be potential conflicts of interest or regulatory issues relating to these transactions which could limit the Investment Adviser’s decision to engage in these transactions for the Funds. BBH and/or the Investment Adviser may have a potentially conflicting division of loyalties and responsibilities to the parties in such transactions.
Soft Dollars. The Investment Adviser may direct brokerage transactions and/or payment of a portion of client commissions (“soft dollars”) to specific brokers or dealers or other providers to pay for research or other appropriate services which provide, in the Investment Adviser’s view, appropriate assistance in the investment decision-making process (including with respect to futures, fixed price offerings and over-the-counter transactions). The use of a broker that provides research and securities transaction services may result in a higher commission than that offered by a broker who does not provide such services. The Investment Adviser will determine in good faith whether the amount of commission is reasonable in relation to the value of research and services provided and whether the services provide lawful and appropriate assistance in its investment decision-making responsibilities.
Research or other services obtained in this manner may be used in servicing any or all of the Funds and other accounts managed by the Investment Adviser, including in connection with accounts that do not pay commissions to the broker related to the research or other service arrangements. Such products and services may disproportionately benefit other client accounts relative to the Funds based on the amount of brokerage commissions paid by the Funds and such other accounts. To the extent that a Sub-adviser uses soft dollars, it will not have to pay for those products and services itself.
BBH may receive research that is bundled with the trade execution, clearing, and/or settlement services provided by a particular broker-dealer. For example, the research effectively will be paid by client commissions that also will be used to pay for the execution, clearing, and settlement services provided by the broker-dealer and will not be paid by the Investment Adviser.
Arrangements regarding compensation and delegation of responsibility may create conflicts relating to selection of brokers or dealers to execute Fund portfolio trades and/or specific uses of commissions from Fund portfolio trades, administration of investment advice and valuation of securities.
F I N A N C I A L S T A T E M E N T S O C T O B E R 3 1, 2 0 2 3 | 25 |
BBH PARTNER FUND – SMALL CAP EQUITY |
CONFLICTS OF INTEREST (continued) October 31, 2023 (unaudited) |
Investments in BBH Funds. From time to time BBH may invest a portion of the assets of its discretionary investment advisory clients in the Funds. That investment by BBH on behalf of its discretionary investment advisory clients in the Funds may be significant at times.
Increasing a Fund’s assets may enhance investment flexibility and diversification and may contribute to economies of scale that tend to reduce the Funds’ expense ratio. In selecting the Funds for its discretionary investment advisory clients, BBH may limit its selection to funds managed by BBH or the Investment Adviser. BBH may not consider or canvass the universe of unaffiliated investment companies available, even though there may be unaffiliated investment companies that may be more appropriate or that have superior performance. BBH, the Investment Adviser and their affiliates providing services to the Funds benefit from additional fees when the Funds is included as an investment by a discretionary investment advisory client.
BBH reserves the right to redeem at any time some or all of the shares of the Funds acquired for its discretionary investment advisory clients’ accounts. A large redemption of shares of the Funds by BBH on behalf of its discretionary investment advisory clients could significantly reduce the asset size of the Funds, which might have an adverse effect on the Funds’ investment flexibility, portfolio diversification and expense ratio.
Valuation. When market quotations are not readily available or are believed by BBH to be unreliable, the Funds’ investments will be valued at fair value by BBH pursuant to procedures adopted by the Funds’ Board. When determining an asset’s “fair value,” BBH seeks to determine the price that a Fund might reasonably expect to receive from the current sale of that asset in an arm’s-length transaction. The price generally may not be determined based on what the Funds might reasonably expect to receive for selling an asset at a later time or if it holds the asset to maturity. While fair value determinations will be based upon all available factors that BBH deems relevant at the time of the determination and may be based on analytical values determined by BBH using proprietary or third-party valuation models, fair value represents only a good faith approximation of the value of a security. The fair value of one or more securities may not, in retrospect, be the price at which those assets could have been sold during the period in which the particular fair values were used in determining the Funds’ net asset value. As a result, the Funds’ sale or redemption of its shares at net asset value, at a time when a holding or holdings are valued by BBH (pursuant to Board-adopted procedures) at fair value, may have the effect of diluting or increasing the economic interest of existing shareholders.
Referral Arrangements. BBH may enter into advisory and/or referral arrangements with third parties. Such arrangements may include compensation paid by BBH to the third party. BBH may pay a solicitation fee for referrals and/or advisory or incentive fees. BBH may benefit from increased amounts of assets under management.
26 |
BBH PARTNER FUND – SMALL CAP EQUITY |
CONFLICTS OF INTEREST (continued) October 31, 2023 (unaudited) |
Personal Trading. BBH, including the Investment Adviser, and any of their respective partners, principals, directors, officers, employees, affiliates or agents, face conflicts of interest when transacting in securities for their own accounts because they could benefit by trading in the same securities as the Funds, which could have an adverse effect on the Funds. However, the Investment Adviser has implemented policies and procedures concerning personal trading by BBH Partners and employees. The policy and procedures are intended to prevent BBH Partners and employees from trading in the same securities as the Funds. However, BBH, including the Investment Adviser, has implemented policies and procedures concerning personal trading by BBH Partners and employees. The policies and procedures are intended to prevent BBH Partners and employees with access to Fund material non-public information from trading in the same securities as the Funds.
Gifts and Entertainment. From time to time, employees of BBH, including the Investment Adviser, and any of their respective partners, principals, directors, officers, employees, affiliates or agents, may receive gifts and/or entertainment from clients, intermediaries, or service providers to the Funds or BBH, including the Investment Adviser, which could have the appearance of affecting or may potentially affect the judgment of the employees, or the manner in which they conduct business. The Investment Adviser has implemented policies and procedures concerning gifts and entertainment to mitigate any impact on the judgment of BBH Partners and employees. BBH, including the Investment Adviser, has implemented policies and procedures concerning gifts and entertainment to mitigate any impact on the judgment of BBH Partners and employees.
F I N A N C I A L S T A T E M E N T S O C T O B E R 3 1, 2 0 2 3 | 27 |
BBH PARTNER FUND – SMALL CAP EQUITY |
ADDITIONAL FEDERAL TAX INFORMATION October 31, 2023 (unaudited) |
In January 2024, shareholders will receive Form 1099-DIV, which will include their share of qualified dividends distributed during the calendar year 2023. Shareholders are advised to check with their tax advisers for information on the treatment of these amounts on their individual income tax returns.
28 |
TRUSTEES AND OFFICERS OF BBH PARTNER FUND – SMALL CAP EQUITY |
(unaudited) |
Information pertaining to the Trustees and executive officers of the Trust as of October 31, 2023 is set forth below. The mailing address for each Trustee is c/o BBH Trust, 140 Broadway, New York, NY 10005.
Name and Birth Year | Position(s) | Term of | Principal | Number of | Other Public |
Independent Trustees | |||||
H. Whitney Wagner | Chairman of the Board and Trustee | Chairman Since 2014; Trustee Since 2007 and 2006 – 2007 with the Predecessor Trust | President, Clear Brook Advisors, a registered investment adviser. | 8 | None. |
Andrew S. Frazier | Trustee | Since 2010 | Retired. | 8 | None. |
Mark M. Collins | Trustee | Since 2011 | Partner of Brown Investment Advisory Incorporated, a registered investment adviser. | 8 | Chairman of Dillon Trust Company. |
John M. Tesoro | Trustee | Since 2014 | Retired. | 8 | Independent Trustee, Bridge Builder Trust (11 funds) and Edward Jones Money Market Fund; Director, Teton Advisers, Inc. (a registered investment adviser) (2014 – 2021). |
Joan A. Binstock | Trustee | Since 2019 | Partner, Chief Financial and Operations Officer, Lord Abbett & Co. LLC (1999 – 2018); Lovell Minnick Partners, Advisors Counsel | 8 | Independent Director, Morgan Stanley Direct Lending Fund; KKR Real Estate Interval Fund. |
Karen A. Kochevar | Trustee | Since 2023 | Retired. | 8 | Director, CAVA Group, Inc. |
F I N A N C I A L S T A T E M E N T S O C T O B E R 3 1, 2 0 2 3 | 29 |
TRUSTEES AND OFFICERS OF BBH PARTNER FUND – SMALL CAP EQUITY |
(unaudited) |
|
|
|
|
| Other Public |
Interested Trustees | |||||
Susan C. Livingston+ | Trustee | Since 2011 | Partner (since 1998) and Senior Client Advocate (since 2010) for BBH&Co. | 8 | None. |
John A. Gehret+ | Trustee | Since 2011 | Limited Partner of BBH&Co. (2012 – present). | 8 | None. |
30 |
TRUSTEES AND OFFICERS OF BBH PARTNER FUND – SMALL CAP EQUITY |
(unaudited) |
Name, Address | Position(s) | Term of | Principal Occupation(s) |
Officers | |||
Jean-Pierre Paquin | President and Principal Executive Officer | Since 2016 | Partner of BBH&Co. since 2015; joined BBH&Co. in 1996. |
Daniel Greifenkamp | Vice President | Since 2016 | Principal of BBH&Co. since 2014; joined BBH&Co. in 2011. |
Charles H. Schreiber | Treasurer and Principal Financial Officer | Since 2007 2006 – 2007 with the Predecessor Trust | Managing Director of BBH&Co. since 2001; joined BBH&Co. in 1999. |
Paul F. Gallagher | Chief Compliance Officer (“CCO”) | Since 2015 | Managing Director of BBH&Co. since 2015. |
Nicole English | Anti-Money Laundering Officer (“AMLO”) | Since 2022 | Vice President of BBH&Co. since 2019; joined BBH&Co. in 2016. |
Brian J. Carroll | Secretary | Since 2021 | Vice President of BBH&Co. since 2023; joined BBH&Co. in 2014. |
Crystal Cheung | Assistant Treasurer | Since 2018 | Assistant Vice President of BBH&Co. since 2016; joined BBH&Co. in 2014. |
____________
# All officers of the Trust hold office for one year and until their respective successors are chosen and qualified (subject to the ability of the Trustees to remove any officer in accordance with the Trust’s By-laws). Mr. Wagner previously served on the Board of Trustees of the Predecessor Trust.
+ Ms. Livingston and Mr. Gehret are “interested persons” of the Trust as defined in the 1940 Act because of their positions as Partner and Limited Partner of BBH&Co., respectively.
^ The Fund Complex consists of the Trust, which has eight series, and each is counted as one “Portfolio” for purposes of this table.
F I N A N C I A L S T A T E M E N T S O C T O B E R 3 1, 2 0 2 3 | 31 |
BBH PARTNER FUND – SMALL CAP EQUITY |
OPERATION AND EFFECTIVENESS OF THE FUND’S LIQUIDITY RISK MANAGEMENT PROGRAM October 31, 2023 (unaudited) |
The Securities and Exchange Commission adopted Rule 22e-4 under the Investment Company Act of 1940, as amended (the “Liquidity Rule”), to promote effective liquidity risk management throughout the open-end investment company industry in order to reduce the risk that funds will be unable to meet their redemption obligations and mitigate dilution of the interests of fund shareholders.
The Board of Trustees (the “Board”) of BBH Trust has appointed three members of the Brown Brothers Harriman & Co. Mutual Fund Advisory Department, the Investment Adviser to the funds of BBH Trust (the “Funds”), as the Program Administrator for the Fund’s liquidity risk management program (the “Program”). The Board met on March 7, 2023 to review the Program for the Funds pursuant to the Liquidity Rule. The Program Administrator provided the Board with a report (the “Report”) that addressed the operations of the Program and assessed its adequacy and effectiveness for the period from February 1, 2022 through January 31, 2023 (the “Reporting Period”).
The Report noted that the Program complied with the key factors for consideration under the Liquidity Rule for assessing, managing and periodically reviewing a Fund’s liquidity risk, including the following points.
Liquidity classification. The Report described the Program’s liquidity classification methodology for categorizing the Funds’ investments into one of four liquidity buckets. The Fund classified each of its investments into one of four liquidity categories based on the number of days reasonably needed to sell and convert a reasonably anticipated sized trade of each investment into cash without significantly impacting the price of the investments. The Program Administrator relied on a third-party data provider to facilitate the classification of the Fund’s investments based on criteria in the Fund’s Program. During the Reporting Period, the Fund did not hold more than 15% of its net assets in illiquid investments.
Highly Liquid Investment Minimum. The Report noted that one aspect of the Liquidity Rule is a requirement that funds that are expected to have less than 50% of assets classified as other than “highly liquid” should establish a minimum percentage of highly liquid assets that the fund is expected to hold on an on-going basis. The Program Administrator monitors the percentages of assets in each category on an ongoing basis and, given that the Fund did not approach the 50% threshold, has made the determination that it is not necessary to assign a Highly Liquid Investment Minimum to the Fund as provided for in the Liquidity Rule.
The Fund’s investment strategy and liquidity of portfolio investments during normal and reasonably foreseeable stressed market conditions. During the Reporting Period, the Program Administrator reviewed whether the Fund’s investment strategy is appropriate for an open-end fund structure with a focus on funds with more significant and consistent holdings of less liquid and illiquid assets and factored a Fund’s concentration in an issuer into the liquidity classification methodology by taking issuer position sizes into account.
32 |
BBH PARTNER FUND – SMALL CAP EQUITY |
OPERATION AND EFFECTIVENESS OF THE FUND’S LIQUIDITY RISK MANAGEMENT PROGRAM (continued) October 31, 2023 (unaudited) |
Short-term and long-term cash flow projections during normal and reasonably foreseeable stressed market conditions. During the Reporting Period, the Program Administrator reviewed historical redemption activity and used this information as a component to establish the Fund’s reasonably anticipated trading size. The Program Administrator also took into consideration other factors such as shareholder ownership concentration, applicable distribution channels and the degree of certainty associated with the Fund’s short-term and long-term cash flow projections.
Holdings of cash and cash equivalents. The Program Administrator considered the degree to which the Fund held cash and cash equivalents as a component of each Fund’s ability to meet redemption requests.
There were no material changes to the Program during the Reporting Period. The Program Administrator has informed the Board that it believes that the Fund’s Program is adequately designed, has been implemented as intended, and has operated effectively since its implementation. No material exceptions have been noted since the implementation of the Program, and there were no liquidity events that impacted the Fund or its ability to meet redemption requests on a timely basis during the Reporting Period.
F I N A N C I A L S T A T E M E N T S O C T O B E R 3 1, 2 0 2 3 | 33 |
Administrator Distributor Shareholder Servicing Agent | Investment Adviser | |
To obtain information or make shareholder inquiries: | ||
By telephone: | Call 1-800-575-1265 | |
This report is submitted for the general information of shareholders and is not authorized for distribution to prospective investors unless preceded or accompanied by an effective prospectus. Nothing herein contained is to be considered an offer of sale or a solicitation of an offer to buy shares of the Fund. For more complete information, visit www.bbhfunds.com for a prospectus. You should consider the Fund’s investment objectives, risks, charges and expenses carefully before you invest. Information about these and other important subjects is in the Fund’s prospectus, which you should read carefully before investing. Holdings and allocations are subject to change. Fund holdings should not be relied on in making investment decisions and should not be construed as research or investment advice regarding particular securities. Current and future holdings are subject to risk. The Fund files a complete schedule of portfolio holdings with the Securities and Exchange Commission (SEC) for the first and third quarters of each fiscal year as an exhibit to its reports on Form N-PORT. The Fund’s Forms N-PORT are available electronically on the SEC’s website (sec.gov). For a complete list of a fund’s portfolio holdings, view the most recent holdings listing, semi-annual report, or annual report on the Fund’s web site at http://www.bbhfunds.com. A summary of the Fund’s Proxy Voting Policy that the Fund uses to determine how to vote proxies, if any, relating to securities held in the Fund’s portfolio, as well as a record of how the Fund voted any such proxies during the most recent 12-month period ended June 30, is available, without charge, upon request by calling the toll-free number listed above. This information is also available on the SEC’s website at www.sec.gov. NOT FDIC INSURED NO BANK GUARANTEE MAY LOSE VALUE |
Annual Report
OCTOBER 31, 2023
BBH Select Series — Mid Cap Fund
BBH SELECT SERIES – MID CAP FUND |
MANAGEMENT’S DISCUSSION OF FUND PERFORMANCE October 31, 2023 |
The objective of the BBH Select Series – Mid Cap Fund (“the Fund”) is to provide investors with long-term growth of capital. The Fund seeks to generate attractive compounded investment returns over full market cycles, while reducing the likelihood of permanent loss of capital on any single investment. To achieve this, the Fund’s strategy is to invest in a select number of high-quality business franchises, as defined by the four pillars of our investment criteria – business quality, attractive financial returns, strong management, and growth potential. By adhering to our disciplined criteria and process, and investing at a significant discount to our estimate of intrinsic value, we believe we can establish a strong margin of safety for our investments in companies that have the potential to compound attractive investment returns over many years.
Given that there are few companies which meet our investment criteria, and the benefits of compounding accrue over time, we seek to hold a concentrated portfolio with low turnover consistent with an expected investment period of three to five years. We expect the Fund’s holdings to range from 20-30 companies over time. Due to the Fund’s concentrated nature, the performance of the Fund will likely differ meaningfully – both positively and negatively – from relevant indexes at various points within a long-term market cycle as we maintain our independent perspective and focus on the potential of long-term compounding.
The Fund increased 1.13% net of fees during its fiscal year ended October 31, 2023. During the same period, the Russell Midcap Index (“Russell Midcap”) declined by -1.01%. Since its inception on May 24, 2021, the Fund declined -4.45% on an annualized basis net of fees, compared to a decline of -5.04% for the Russell Midcap. The modest negative absolute returns for the Russell Midcap were primarily a function of increased potential for a recession alongside a backdrop of rising interest rates, a regional banking crisis, and war in the Middle East.
During fiscal 2023, the Fund’s outperformance relative to the benchmark was driven by strong fundamental performance from our Information Technology and Materials holdings partially offset by underperformance from our Healthcare and Industrials holdings. The Fund also benefitted from being overweight Information Technology and having little to no exposure to Energy, Utilities, and Real Estate. While the Fund considers investments in every sector, our bottom-up fundamentals-based process may result in being underweight or overweight certain sectors depending on where we find the best opportunities with respect to our criteria and given our focus on companies with the potential to compounding capital over many years at attractive rates of return. We do not overweight or underweight any sector based on a top-down macro view of how that sector might perform, and our investment strategy does not change based on the market backdrop. We believe that our focus on quality franchises with the ability to reinvest capital at high rates of return will serve us well across a wide variety of market conditions and through full market cycles.
2 |
BBH SELECT SERIES – MID CAP FUND |
MANAGEMENT’S DISCUSSION OF FUND PERFORMANCE (continued) October 31, 2023 |
The Fund’s largest positive contributors during fiscal 2023 were Watsco Inc., Arista Networks Inc., Guidewire Software Inc., and NVR Inc. These four companies each delivered resilient performance in the face of increased recessionary concerns and macroeconomic headwinds. Watsco Inc. benefitted from strong pricing power that allowed it to expand margins despite normalizing unit volumes for heating, ventilation, and air conditioning products. Arista Networks Inc. benefitted from continued robust investment in cloud networks. Guidewire Software Inc. saw increased sales momentum for its core systems software serving the insurance industry. NVR Inc. experienced strong demand for new housing against a backdrop of limited supply.
The Fund’s largest detractors during fiscal 2023 were SVB Financial Group, AMN Healthcare Services Inc., Mercury Systems Inc., and Aspen Technology Inc. SVB Financial Group failed following a deposit run catalyzed by an equity raise that was poorly executed. AMN Healthcare Services Inc. was impacted by weaker demand for temporary staffing to the healthcare industry following the COVID-19 pandemic. Mercury Systems Inc. experienced continued supply chain and production issues related to its defense products. Aspen Technology Inc. saw a decline in demand for its asset optimization software for capital intensive industries like refining and chemicals.
During Fiscal 2023, the Fund made new investments in Zebra Technologies Corp., Darling Ingredients Inc., Globant SA, Mister Car Wash Inc., and GFL Environmental Inc. We are excited about the potential for these companies to contribute positively to our returns over many years. The Fund also exited its holdings in Archaea Energy Inc., Graco Inc., SVB Financial Group, Mercury Systems Inc., and Charles River Laboratories based on our assessment of their attractiveness relative to other investment opportunities.
As of October 31, 2023, the Fund had positions in 26 companies with approximately 51% of the assets held in the ten largest holdings. The weighted average market cap of our holdings was $13.6 billion, and our portfolio turnover during fiscal 2023 was 6.8%. The Fund ended the fiscal year trading at roughly 75% of our underlying intrinsic value estimates on a weighted average basis.
____________
There is no assurance the objective will be achieved. Holdings are subject to change.
F I N A N C I A L S T A T E M E N T S O C T O B E R 3 1, 2 0 2 3 | 3 |
BBH SELECT SERIES – MID CAP FUND |
MANAGEMENT’S DISCUSSION OF FUND PERFORMANCE (continued) October 31, 2023 |
Growth of $10,000 Invested in BBH Select Series – Mid Cap Fund
The graph below illustrates the hypothetical investment of $10,0001 in the Class I shares of the Fund since inception (May 24, 2021) to October 31, 2023 as compared to the RMCCTR.
The annualized gross expense ratios as shown in the February 28, 2023 prospectus for Class I was 2.29%.
Performance data quoted represents past performance which is no guarantee of future results. Investment return and principal value will fluctuate, so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Fund performance changes over time and current performance may be lower or higher than what is stated. Fund shares redeemed within 30 days of purchase are subject to a redemption fee of 2.00%. Returns do not reflect the deductions of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. For performance current to the most recent month-end please call 1-800-575-1265.
Hypothetical performance results are calculated on a total return basis and include all portfolio income, unrealized and realized capital gains, losses and reinvestment of dividends and other earnings. No one shareholder has actually achieved these results and no representation is being made that any actual shareholder achieved, or is likely to achieve, similar results to those shown. Hypothetical performance does not represent actual trading and may not reflect the impact of material economic and market factors. Undue reliance should not be placed on hypothetical performance results in making an investment decision.
____________
1 The Fund’s performance assumes the reinvestment of all dividends and distributions. The Russell Mid Cap Total Return Index (“RMCCTR”) has been adjusted to reflect reinvestment of dividends on securities. The RMCCTR is not adjusted to reflect sales charges, expenses or other fees that the Securities and Exchange Commission requires to be reflected in the Fund’s performance. The RMCCTR is an unmanaged weighted index of 800 medium-capitalization stocks. The index is unmanaged. Investments cannot be made in an index.
4 |
BBH SELECT SERIES – MID CAP FUND |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
|
To the shareholders of BBH Select Series – Mid Cap Fund and the Board of Trustees of BBH Trust:
Opinion on the Financial Statements and Financial Highlights
We have audited the accompanying statement of assets and liabilities, including the portfolio of investments, of BBH Select Series – Mid Cap Fund (the “Fund”), one of the funds constituting BBH Trust, as of October 31, 2023, the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, the financial highlights for each of the two years in the period then ended and for the period from May 24, 2021 (commencement of operations) through October 31, 2021, and the related notes. In our opinion, the financial statements and financial highlights present fairly, in all material respects, the financial position of the Fund as of October 31, 2023, and the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the two years in the period then ended and for the period from May 24, 2021 (commencement of operations) through October 31, 2021 in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements and financial highlights are the responsibility of the Fund’s management. Our responsibility is to express an opinion on the Fund’s financial statements and financial highlights based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement, whether due to error or fraud. The Fund is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Fund’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements and financial highlights, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements and financial highlights. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements and financial highlights. Our procedures included confirmation of securities owned as of October 31, 2023, by correspondence with the custodian and brokers; when replies were not received from brokers, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinion.
/s/ DELOITTE & TOUCHE LLP
Boston, Massachusetts
December 20, 2023
We have served as the auditor of one or more Brown Brothers Harriman investment companies since 1991.
F I N A N C I A L S T A T E M E N T S O C T O B E R 3 1, 2 0 2 3 | 5 |
BBH SELECT SERIES – MID CAP FUND |
PORTFOLIO ALLOCATION October 31, 2023 |
SECTOR DIVERSIFICATION
U.S. $ Value | Percent of | |||||
Common Stock: |
|
| ||||
Communications | $ | 6,159,174 | 4.4 | % | ||
Consumer Cyclical |
| 20,422,788 | 14.5 |
| ||
Consumer Non-Cyclical |
| 25,997,661 | 18.5 |
| ||
Financials |
| 13,349,787 | 9.5 |
| ||
Industrials |
| 33,771,906 | 24.1 |
| ||
Technology |
| 35,296,524 | 25.2 |
| ||
Cash and Other Assets in Excess of Liabilities |
| 5,385,130 | 3.8 |
| ||
NET ASSETS | $ | 140,382,970 | 100.0 | % |
All data as of October 31, 2023. The Fund’s sector diversification is expressed as a percentage of net assets and may vary over time.
The accompanying notes are an integral part of these financial statements.
6 |
BBH SELECT SERIES – MID CAP FUND |
PORTFOLIO OF INVESTMENTS October 31, 2023 All investments in the United States, except as noted. |
Shares | Value | ||||||||
COMMON STOCK (96.2%) |
| ||||||||
COMMUNICATIONS (4.4%) |
| ||||||||
30,739 | Arista Networks, Inc.1 | $ | 6,159,174 | ||||||
Total Communications |
| 6,159,174 | |||||||
| |||||||||
CONSUMER CYCLICAL (14.5%) |
| ||||||||
1,087 | NVR, Inc.1 |
| 5,883,518 | ||||||
25,665 | Watsco, Inc. |
| 8,954,262 | ||||||
77,141 | Wyndham Hotels & Resorts, Inc. |
| 5,585,008 | ||||||
Total Consumer Cyclical |
| 20,422,788 | |||||||
| |||||||||
CONSUMER NON-CYCLICAL (18.5%) |
| ||||||||
75,470 | AMN Healthcare Services, Inc.1 |
| 5,725,154 | ||||||
44,638 | Bright Horizons Family Solutions, Inc.1 |
| 3,305,890 | ||||||
90,510 | Bruker Corp. |
| 5,159,070 | ||||||
103,082 | Darling Ingredients, Inc.1 |
| 4,565,502 | ||||||
96,708 | First Advantage Corp. |
| 1,258,171 | ||||||
422,980 | Mister Car Wash, Inc.1 |
| 2,199,496 | ||||||
85,004 | Shift4 Payments, Inc. (Class A)1 |
| 3,784,378 | ||||||
Total Consumer Non-Cyclical |
| 25,997,661 | |||||||
| |||||||||
FINANCIALS (9.5%) |
| ||||||||
116,517 | Brown & Brown, Inc. |
| 8,088,610 | ||||||
23,433 | LPL Financial Holdings, Inc. |
| 5,261,177 | ||||||
Total Financials |
| 13,349,787 | |||||||
| |||||||||
INDUSTRIALS (24.1%) |
| ||||||||
57,732 | Advanced Drainage Systems, Inc. |
| 6,167,510 | ||||||
39,375 | AptarGroup, Inc. |
| 4,814,381 | ||||||
89,400 | Crown Holdings, Inc. |
| 7,205,640 | ||||||
113,762 | GFL Environmental, Inc. (Canada). |
| 3,278,621 | ||||||
39,066 | HEICO Corp. (Class A) |
| 4,966,461 | ||||||
27,179 | Toro Co. |
| 2,197,150 | ||||||
26,170 | Vulcan Materials Co. |
| 5,142,143 | ||||||
Total Industrials |
| 33,771,906 |
The accompanying notes are an integral part of these financial statements.
F I N A N C I A L S T A T E M E N T S O C T O B E R 3 1, 2 0 2 3 | 7 |
BBH SELECT SERIES – MID CAP FUND |
PORTFOLIO OF INVESTMENTS (continued) October 31, 2023 All investments in the United States, except as noted. |
Shares | Value | |||||||||
COMMON STOCK (continued) |
|
| ||||||||
TECHNOLOGY (25.2%) |
|
| ||||||||
18,016 | Aspen Technology, Inc.1 |
| $ | 3,202,344 | ||||||
95,777 | Entegris, Inc. |
|
| 8,432,207 | ||||||
23,557 | Globant S.A. (Luxembourg)1 |
|
| 4,011,522 | ||||||
96,365 | Guidewire Software, Inc.1 |
|
| 8,685,378 | ||||||
50,767 | Take-Two Interactive Software, Inc.1 |
|
| 6,790,086 | ||||||
19,935 | Zebra Technologies Corp. (Class A)1 |
|
| 4,174,987 | ||||||
Total Technology |
|
| 35,296,524 | |||||||
Total Common Stock |
|
| ||||||||
(Cost $141,036,693) |
|
| 134,997,840 | |||||||
|
| |||||||||
TOTAL INVESTMENTS (Cost $141,036,693)2 | 96.2 | % | $ | 134,997,840 | ||||||
CASH AND OTHER ASSETS IN EXCESS OF LIABILITIES | 3.8 | % |
| 5,385,130 | ||||||
NET ASSETS | 100.00 | % | $ | 140,382,970 |
____________
1 Non-income producing security.
2 The aggregate cost for federal income tax purposes is $141,049,595, the aggregate gross unrealized appreciation is $4,621,431 and the aggregate gross unrealized depreciation is $10,673,186, resulting in net unrealized depreciation of $6,051,755.
The accompanying notes are an integral part of these financial statements.
8 |
BBH SELECT SERIES – MID CAP FUND |
PORTFOLIO OF INVESTMENTS (continued) October 31, 2023 |
FAIR VALUE MEASUREMENTS
The Fund is required to disclose information regarding the fair value measurements of the Fund’s assets and liabilities. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The disclosure requirement established a three-tier hierarchy to maximize the use of observable market data and minimize the use of unobservable inputs and to establish classification of fair value measurements for disclosure purposes. Inputs refer broadly to the assumptions that market participants would use in pricing the asset or liability, including for example, the risk inherent in a particular valuation technique used to measure fair value including such a pricing model and/or the risk inherent in the inputs to the valuation technique. Inputs may be observable or unobservable. Observable inputs are inputs that reflect the assumptions market participants would use in pricing the asset or liability developed based on market data obtained from sources independent of the reporting entity. Unobservable inputs are inputs that reflect the Fund’s own considerations about the assumptions market participants would use in pricing the asset or liability developed based on the best information available in the circumstances.
Authoritative guidance establishes three levels of the fair value hierarchy as follows:
— Level 1 – unadjusted quoted prices in active markets for identical assets and liabilities.
— Level 2 – significant other observable inputs (including quoted prices for similar assets and liabilities, interest rates, prepayment speeds, credit risk, etc.).
— Level 3 – significant unobservable inputs (including the Fund’s own assumptions in determining the fair value of assets and liabilities).
Inputs are used in applying the various valuation techniques and broadly refer to the assumptions that market participants use to make valuation decisions, including assumptions about risk. Inputs may include price information, specific and broad credit data, liquidity statistics, and other factors. A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. However, the determination of what constitutes “observable” requires judgment by the investment adviser. The investment adviser considers observable data to be that market data which is readily available, regularly distributed or updated, reliable and verifiable, not proprietary, and provided by independent sources that are actively involved in the relevant market. The categorization of a financial instrument within the hierarchy is based upon the pricing transparency of the instrument and does not necessarily correspond to the investment adviser’s perceived risk of that instrument.
Financial assets within Level 1 are based on quoted market prices in active markets. The Fund does not adjust the quoted price for these instruments.
The accompanying notes are an integral part of these financial statements.
F I N A N C I A L S T A T E M E N T S O C T O B E R 3 1, 2 0 2 3 | 9 |
BBH SELECT SERIES – MID CAP FUND |
PORTFOLIO OF INVESTMENTS (continued) October 31, 2023 |
Financial instruments that trade in markets that are not considered to be active but are valued based on quoted market prices, dealer quotations or alternative pricing sources supported by observable inputs are classified within Level 2. These include investment-grade corporate bonds, U.S. Treasury notes and bonds, and certain non-U.S. sovereign obligations, listed equities and over-the-counter derivatives and foreign equity securities whose values could be impacted by events occurring before the Fund’s pricing time, but after the close of the securities’ primary markets and are, therefore, fair valued according to procedures adopted by the Board of Trustees. As Level 2 financial assets include positions that are not traded in active markets and/or are subject to transfer restrictions, valuations may be adjusted to reflect illiquidity and/or non-transferability, which are generally based on available market information.
Financial assets classified within Level 3 have significant unobservable inputs, as they trade infrequently. Level 3 financial assets include private equity and certain corporate debt securities.
Because of the inherent uncertainties of valuation, the values reflected in the financial statements may materially differ from the value received upon the actual sale of those investments.
The following table summarizes the valuation of the Fund’s investments by the above fair value hierarchy levels as of October 31, 2023.
Investments, at value | Unadjusted | Significant | Significant | Balance as of | ||||||||
Common Stock: |
|
|
|
| ||||||||
Communications | $ | 6,159,174 | $ | — | $ | — | $ | 6,159,174 | ||||
Consumer Cyclical |
| 20,422,788 |
| — |
| — |
| 20,422,788 | ||||
Consumer Non-Cyclical |
| 25,997,661 |
| — |
| — |
| 25,997,661 | ||||
Financials |
| 13,349,787 |
| — |
| — |
| 13,349,787 | ||||
Industrials |
| 33,771,906 |
| — |
| — |
| 33,771,906 | ||||
Technology |
| 35,296,524 |
| — |
| — |
| 35,296,524 | ||||
Investments, at value | $ | 134,997,840 | $ | — | $ | — | $ | 134,997,840 |
The accompanying notes are an integral part of these financial statements.
10 |
BBH SELECT SERIES – MID CAP FUND |
STATEMENT OF ASSETS AND LIABILITIES October 31, 2023 |
ASSETS: |
|
| ||
Investments in securities, at value (Cost $141,036,693) | $ | 134,997,840 |
| |
Cash |
| 5,216,466 |
| |
Receivables for: |
|
| ||
Shares sold |
| 632,400 |
| |
Dividends |
| 40,676 |
| |
Interest from Custodian |
| 18,034 |
| |
Total Assets |
| 140,905,416 |
| |
|
| |||
LIABILITIES: |
|
| ||
Payables for: |
|
| ||
Shares redeemed |
| 373,116 |
| |
Net investment advisory and administrative fees |
| 81,503 |
| |
Professional fees |
| 52,355 |
| |
Custody and fund accounting fees |
| 6,378 |
| |
Transfer agent fees |
| 3,432 |
| |
Board of Trustees' fees |
| 1,344 |
| |
Accrued expenses and other liabilities |
| 4,318 |
| |
Total Liabilities |
| 522,446 |
| |
|
| |||
NET ASSETS | $ | 140,382,970 |
| |
Net Assets Consist of: |
|
| ||
Paid-in capital | $ | 149,140,487 |
| |
Accumulated deficit |
| (8,757,517 | ) | |
Net Assets | $ | 140,382,970 |
| |
|
| |||
NET ASSET VALUE AND OFFERING PRICE PER SHARE |
|
| ||
CLASS I SHARES |
|
| ||
($140,382,970 ÷ 15,685,767 shares outstanding) | $ | 8.95 |
|
The accompanying notes are an integral part of these financial statements.
F I N A N C I A L S T A T E M E N T S O C T O B E R 3 1, 2 0 2 3 | 11 |
BBH SELECT SERIES – MID CAP FUND |
STATEMENT OF OPERATIONS For the year ended October 31, 2023 |
NET INVESTMENT INCOME: |
|
| ||
Income: |
|
| ||
Dividends (net of foreign withholding taxes of $366) | $ | 526,166 |
| |
Interest income from Custodian |
| 148,999 |
| |
Total Income |
| 675,165 |
| |
|
| |||
Expenses: |
|
| ||
Investment advisory and administrative fees |
| 487,711 |
| |
Board of Trustees' fees |
| 70,470 |
| |
Professional fees |
| 61,497 |
| |
Transfer agent fees |
| 38,366 |
| |
Custody and fund accounting fees |
| 16,777 |
| |
Registration fees |
| 16,161 |
| |
Miscellaneous expenses |
| 18,908 |
| |
Total Expenses |
| 709,890 |
| |
Investment advisory and administrative fee waiver |
| (124,636 | ) | |
Net Expenses |
| 585,254 |
| |
Net Investment Income |
| 89,911 |
| |
|
| |||
NET REALIZED AND UNREALIZED LOSS: |
|
| ||
Net realized loss on investments in securities |
| (2,636,683 | ) | |
Net change in unrealized appreciation/(depreciation) on investments in securities |
| (4,643,880 | ) | |
Net Realized and Unrealized Loss |
| (7,280,563 | ) | |
Net Decrease in Net Assets Resulting from Operations | $ | (7,190,652 | ) |
The accompanying notes are an integral part of these financial statements.
12 |
BBH SELECT SERIES – MID CAP FUND |
STATEMENTS OF CHANGES IN NET ASSETS |
For the years ended October 31, | ||||||||
2023 | 2022 | |||||||
INCREASE/(DECREASE) IN NET ASSETS FROM: |
|
|
|
| ||||
Operations: |
|
|
|
| ||||
Net investment income/(loss) | $ | 89,911 |
| $ | (49,391 | ) | ||
Net realized loss on investments in securities |
| (2,636,683 | ) |
| (135,918 | ) | ||
Net change in unrealized appreciation/(depreciation) on |
| (4,643,880 | ) |
| (2,250,174 | ) | ||
Net decrease in net assets resulting from operations |
| (7,190,652 | ) |
| (2,435,483 | ) | ||
|
|
|
| |||||
Share transactions: |
|
|
|
| ||||
Proceeds from sales of shares |
| 142,150,080 |
|
| 698,453 |
| ||
Cost of shares redeemed |
| (6,673,281 | ) |
| — |
| ||
Net increase in net assets resulting from share transactions |
| 135,476,799 |
|
| 698,453 |
| ||
Total increase/(decrease) in net assets |
| 128,286,147 |
|
| (1,737,030 | ) | ||
|
|
|
| |||||
NET ASSETS: |
|
|
|
| ||||
Beginning of year |
| 12,096,823 |
|
| 13,833,853 |
| ||
End of year | $ | 140,382,970 |
| $ | 12,096,823 |
|
The accompanying notes are an integral part of these financial statements.
F I N A N C I A L S T A T E M E N T S O C T O B E R 3 1, 2 0 2 3 | 13 |
BBH SELECT SERIES – MID CAP FUND |
FINANCIAL HIGHLIGHTS Selected per share data and ratios for a Class I share outstanding throughout each year/period. |
| For the | |||||||||||
2023 | 2022 | |||||||||||
Net asset value, beginning of year/period | $ | 8.85 |
| $ | 10.68 |
| $ | 10.00 |
| |||
Income from investment operations: |
|
|
|
|
|
| ||||||
Net investment income/(loss)1 |
| 0.01 |
|
| (0.04 | ) |
| (0.02 | ) | |||
Net realized and unrealized gain/(loss) |
| 0.09 |
|
| (1.79 | ) |
| 0.70 |
| |||
Total income/(loss) from investment operations |
| 0.10 |
|
| (1.83 | ) |
| 0.68 |
| |||
Net asset value, end of year/period | $ | 8.95 |
| $ | 8.85 |
| $ | 10.68 |
| |||
Total return2 |
| 1.13 | % |
| (17.13 | )% |
| 6.80 | %3 | |||
Ratios/Supplemental data: |
|
|
|
|
|
| ||||||
Net assets, end of year (in millions) | $ | 140 |
| $ | 12 |
| $ | 14 |
| |||
Ratio of expenses to average net assets before reductions |
| 1.09 | % |
| 2.29 | % |
| 2.46 | %4 | |||
Fee waiver5 |
| (0.19 | )% |
| (1.39 | )% |
| (1.56 | )%4 | |||
Ratio of expenses to average net assets after reductions |
| 0.90 | % |
| 0.90 | % |
| 0.90 | %4 | |||
Ratio of net investment income/(loss) to average net assets |
| 0.14 | % |
| (0.38 | )% |
| (0.40 | )%4 | |||
Portfolio turnover rate |
| 7 | % |
| 23 | % |
| 3 | %3 |
____________
1 Calculated using average shares outstanding for the year/period.
2 Assumes the reinvestment of distributions.
3 Not annualized.
4 Annualized with the exception of audit fees, legal fees and registration fees.
5 The ratio of expenses to average net assets for the years ended October 31, 2023 and 2022 and the period ended October 31, 2021 reflect fees reduced as result of a contractual operating expense limitation of the share class of 0.90%. The Agreement is effective through March 1, 2024 and may only be terminated during its term with approval of the Fund’s Board of Trustees. For the year ended October 31, 2023 and 2022 and period from May 24, 2021 to October 31, 2021 the waived fees were $124,636, $179,874 and $135,159, respectively.
The accompanying notes are an integral part of these financial statements.
14 |
BBH SELECT SERIES – MID CAP FUND |
NOTES TO FINANCIAL STATEMENTS October 31, 2023 |
1. Organization. The Fund is a separate, non-diversified series of BBH Trust (the “Trust”), which is registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as an open-end management investment company. The Trust was originally organized under the laws of the State of Maryland on July 16, 1990 as BBH Fund, Inc. and re-organized as a Delaware statutory trust on June 12, 2007. As of October 31, 2023, there were eight series of the Trust. The Fund commenced operations on May 24, 2021 and offers two share classes, Class I and Retail Class. As of October 31, 2023, Retail Class shares are not available for purchase by investors but may be offered in the future. The investment objective of the Fund is to provide investors with long-term growth of capital. Under normal circumstances, the Fund invests at least 80% of its net assets, plus the amount of any borrowings for investment purposes, in mid cap publicly traded equity securities.
2. Significant Accounting Policies. The Fund’s financial statements are prepared in accordance with Generally Accepted Accounting Principles in the United States of America (“GAAP”). The Fund is an investment company and accordingly follows the investment company accounting and reporting guidance of the Financial Accounting Standards Board (“FASB”) Accounting Standard Codification Topic 946 Financial Services – Investment Companies. The following summarizes significant accounting policies of the Fund:
A. Valuation of Investments. The Board of Trustees (the “Board”) has ultimate responsibility for determining the fair value of investments. Pursuant to Rule 2a-5 of the 1940 Act, the Board has designated the Investment Adviser as its valuation designee. The Investment Adviser monitors the continual appropriateness of valuation methods applied and determines if adjustments should be made in light of market factor changes and events affecting issuers. The Investment Adviser performs a series of activities to provide reasonable assurance of the appropriateness of the prices utilized, including but not limited to: periodic independent pricing service due diligence meetings and reviewing the results of back testing on a monthly basis. The Investment Adviser provides the Board with reporting on the results of the back testing as well as positions which were fair valued during the period.
All securities and other investments are recorded at their estimated fair value. The value of investments listed on a securities exchange is based on the last sale price prior to the time when assets are valued, or in the absence of recorded sales, at the most recent bid price on such exchange. If a readily available market quotation is not available or is determined to be unreliable, the investments may be valued utilizing evaluated prices provided by independent pricing services. In establishing such prices, the independent pricing service utilizes both dealer supplied prices and electronic data processing techniques which take into account appropriate factors such as institutional sized trading in similar groups of securities, yield, quality, coupon rate, maturity, type of issue, trading characteristics, the closure of the primary exchange on which securities trade and before the Fund’s net asset value is next determined and other market data without exclusive reliance on quoted exchange prices or over-the-counter prices since such valuations are believed to reflect more accurately the fair value of such investments. Investments may be fair valued by
F I N A N C I A L S T A T E M E N T S O C T O B E R 3 1, 2 0 2 3 | 15 |
BBH SELECT SERIES – MID CAP FUND |
NOTES TO FINANCIAL STATEMENTS (continued) October 31, 2023 |
Brown Brothers Harriman & Co. (“BBH”) through a separately identifiable department (“SID” or “Investment Adviser”) in accordance with the BBH Trust Portfolio Valuation Policy and Procedures using methods that most fairly reflect the amount that the Fund would reasonably expect to receive for the investment on a current sale in its principal market in the ordinary course of business. Short-term investments, which mature in 60 days or less are valued at amortized cost if their original maturity was 60 days or less, or by amortizing their value on the 61st day prior to maturity, if their original maturity when acquired by the Fund was more than 60 days, unless the use of amortized cost is determined not to represent fair value. Any futures contracts held by the Fund are valued daily at the official settlement price of the exchange on which they are traded.
B. Accounting for Investments and Income. Investment transactions are accounted for on the trade date. Realized gains and losses on investment transactions are determined based on the identified cost method. Dividend income and other distributions received from portfolio securities are recorded on the ex-dividend date. Non-cash dividends included in dividend income, if any, are recorded at the fair market value of securities received at ex-date. Distributions received on securities that represent a return of capital are recorded as a reduction of cost of investments. Distributions received on securities that represent a capital gain are recorded as a realized gain. Interest income is accrued daily. Investment income is recorded net of any foreign taxes withheld where recovery of such tax is uncertain.
C. Fund Expenses. Most expenses of the Trust can be directly attributed to a specific fund. Expenses which cannot be directly attributed to a fund are generally apportioned among each fund in the Trust on a net assets basis or other suitable method. Expense estimates are accrued in the period to which they relate and adjustments are made when actual amounts are known.
D. Federal Income Taxes. It is the Trust’s policy to comply with the requirements of the Internal Revenue Code (the “Code”) applicable to regulated investment companies and to distribute substantially all of its taxable income to its shareholders. Accordingly, no federal income tax provision is required. The Fund files a tax return annually using tax accounting methods required under provisions of the Code, which may differ from GAAP, which is the basis on which these financial statements are prepared. Accordingly, the amount of net investment income and net realized gain reported in these financial statements may differ from that reported on the Fund’s tax return, due to certain book-to-tax timing differences such as losses deferred due to “wash sale” transactions and utilization of capital loss carryforwards. These differences may result in temporary over-distributions for financial statement purposes and are classified as distributions in excess of accumulated net realized gains or net investment income. These distributions do not constitute a return of capital. Permanent differences are reclassified between paid-in capital and retained earnings/(accumulated deficit) within the Statement of Assets and Liabilities based upon their tax classification. As such, the character of distributions to shareholders reported in the Financial Highlights table may differ from that reported to shareholders on Form 1099-DIV.
16 |
BBH SELECT SERIES – MID CAP FUND |
NOTES TO FINANCIAL STATEMENTS (continued) October 31, 2023 |
The Fund is subject to the provisions of Accounting Standards Codification 740 Income Taxes (“ASC 740”). ASC 740 sets forth a minimum threshold for financial statement recognition of the benefit of a tax position taken or expected to be taken in a tax return. The Fund did not have any unrecognized tax benefits as of October 31, 2023, nor were there any increases or decreases in unrecognized tax benefits for the year then ended. The Fund recognizes interest and penalties, if any, related to unrecognized tax benefits as an income tax expense in the Statement of Operations. During the year ended October 31, 2023, the Fund did not incur any such interest or penalties. The Fund is subject to examination by U.S. federal and state tax authorities for returns filed for open tax period since May 24, 2021 (commencement of operations). The Fund is not aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will significantly change in the next twelve months.
E. Dividends and Distributions to Shareholders. Dividends and distributions from net investment income to shareholders, if any, are paid annually and are recorded on the ex-dividend date. Distributions from net capital gains, if any, are generally declared and paid annually and are recorded on the ex-dividend date. The Fund did not declare any dividends and distributions to shareholders during the years ended October 31, 2023 and October 31, 2022, respectively.
As of October 31, 2023 and 2022, respectively, the components of retained earnings/(accumulated deficit) on tax basis were as follows:
Components of retained earnings/(accumulated deficit): | |||||||||||||||||||||||||
Undistributed | Undistributed | Accumulated | Other | Late Year | Unrealized | Total | |||||||||||||||||||
2023: | $ | 53,937 | $ | — | $ | (2,759,699 | ) | $ | (12,902 | ) | $ | — | $ | (6,038,853 | ) | $ | (8,757,517 | ) | |||||||
2022: |
| — |
| — |
| (135,918 | ) |
| (35,974 | ) |
| — |
| (1,394,973 | ) |
| (1,566,865 | ) |
The Fund had $2,759,699 net capital loss carryforwards as of October 31, 2023, of which $1,600,169 and $1,159,530, is attributable to short-term and long-term capital losses, respectively.
The Fund is permitted to carryforward capital losses for an unlimited period and they will retain their character as either short-term or long-term capital losses.
The differences between book-basis and tax-basis unrealized appreciation/(depreciation) would be attributable primarily to the tax deferral of losses on wash sales, if applicable.
To the extent future capital gains are offset by capital loss carryforwards, if any, such gains will not be distributed.
F I N A N C I A L S T A T E M E N T S O C T O B E R 3 1, 2 0 2 3 | 17 |
BBH SELECT SERIES – MID CAP FUND |
NOTES TO FINANCIAL STATEMENTS (continued) October 31, 2023 |
F. Use of Estimates. The preparation of the financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities in the financial statements, disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of increase and decrease in net assets from operations during the reporting period. Actual results could differ from these estimates.
3. Fees and Other Transactions with Affiliates.
A. Investment Advisory and Administrative Fees. Under a combined Investment Advisory and Administrative Services Agreement (“Agreement”) with the Trust, Brown Brothers Harriman & Co. (“BBH”) through a separately identifiable department (“Investment Adviser”) provides investment advisory, portfolio management and administrative services to the Fund. The Fund pays a combined fee for investment advisory and administrative services calculated daily and paid monthly at an annual rate equivalent to 0.75% per annum on the first $3 billion of the Fund’s average daily net assets and 0.70% per annum on the Fund’s average daily net assets over $3 billion. For the year ended October 31, 2023, the Fund incurred $487,711 under the Agreement.
B. Expense Waivers and Reimbursements. Effective May 24, 2021 (commencement of operations), the Investment Adviser contractually agreed to limit the annual fund operating expenses (excluding interest, taxes, brokerage commissions, other expenditures that are capitalized in accordance with GAAP, other extraordinary expenses not incurred in the ordinary course of the Fund’s business) to 0.90%. The agreement will terminate on March 1, 2024, unless it is renewed by all parties to the agreement. The agreement may only be terminated during its term with approval of the Fund’s Board of Trustees. For the year ended October 31, 2023, the Investment Adviser waived Investment Advisory and Administrative fees in the amount of $124,636 for Class I.
C. Custody and Fund Accounting Fees. BBH acts as a custodian and fund accountant and receives custody and fund accounting fees from the Fund calculated daily and incurred monthly. BBH holds all of the Fund’s cash and investments and calculates the Fund’s daily net asset value. The custody fee is an asset and transaction-based fee. The fund accounting fee is an asset-based fee calculated at 0.325 basis points per annum of the Fund’s net asset value, effective from September 1, 2023 based on the new agreement. The fund accounting fee was 0.40 basis points per annum until August 31, 2023. For the year ended October 31, 2023, the Fund incurred $16,777 in custody and fund accounting fees. As per agreement with the Fund’s custodian, the Fund receives interest income on cash balances held by the custodian at the BBH Base Rate. The BBH Base Rate is defined as BBH’s effective trading rate in local money markets on each day. The total interest earned by the Fund for the year ended October 31, 2023 was $148,999. This amount is included in “Interest income from Custodian” in the Statement of Operations. In the event that the Fund is overdrawn, under the custody agreement with BBH, BBH will make overnight loans to the Fund to cover overdrafts. Pursuant to their agreement, the Fund will pay the BBH Overdraft Base Rate plus 2% on the day of the overdraft. The Fund did not incur any such fees in the year ended October 31, 2023. This amount, if any, is included under line item “Custody and fund accounting fees” in the Statement of Operations.
18 |
BBH SELECT SERIES – MID CAP FUND |
NOTES TO FINANCIAL STATEMENTS (continued) October 31, 2023 |
D. Board of Trustees’ Fees. Each Trustee who is not an “interested person” as defined under the 1940 Act receives an annual fee as well as reimbursement for reasonable out-of-pocket expenses from the Fund. For the year ended October 31, 2023, the Fund incurred $70,470 in independent Trustee compensation and expense reimbursements.
E. Officers of the Trust. Officers of the Trust are also employees of BBH. Officers are paid no fees by the Trust for their services to the Trust.
4. Investment Transactions. For the year ended October 31, 2023, the cost of purchases and the proceeds of sales of investment securities, other than short-term investments, were $135,059,152 and $4,533,426, respectively.
5. Shares of Beneficial Interest. The Trust is permitted to issue an unlimited number of Class I shares of beneficial interest at no par value. Transactions in Class I shares were as follows:
For the year ended | For the year ended | |||||||||||
Shares | Dollars | Shares | Dollars | |||||||||
Class I |
|
|
|
| ||||||||
Shares sold | 15,036,110 |
| $ | 142,150,080 |
| 71,058 | $ | 698,453 | ||||
Shares redeemed | (716,784 | ) |
| (6,673,281 | ) | — |
| — | ||||
Net increase | 14,319,326 |
| $ | 135,476,799 |
| 71,058 | $ | 698,453 |
6. Principal Risk Factors and Indemnifications.
A. Principal Risk Factors. Investing in the Fund may involve certain risks, as discussed in the Fund’s prospectus, including but not limited to, those described below:
A shareholder may lose money by investing in the Fund (investment risk). The Fund is actively managed and the decisions by the Investment Adviser may cause the Fund to incur losses or miss profit opportunities (management risk). Price movements may occur due to factors affecting individual companies, such as the issuance of an unfavorable earnings report, or other events affecting particular industries or the equity market as a whole (equity securities risk). Mid cap companies, when compared to larger companies, may experience lower trade volume and could be subject to greater and less predictable price changes (mid cap company risk). The value of securities held by the Fund may fall due to changing economic, political, regulatory or market conditions, or due to a company’s or issuer’s individual situation. Natural disasters, the spread of infectious illness and other public health emergencies, recession, terrorism and other unforeseeable events may lead to increased market volatility and may have adverse effects on world economies and markets generally (market risk). In the normal course of business, the Fund invests in securities and enters into transactions where risks exist due to assumption of large positions in securities of a small number of issuers (non-diversification risk). There are certain risks associated with investing
F I N A N C I A L S T A T E M E N T S O C T O B E R 3 1, 2 0 2 3 | 19 |
BBH SELECT SERIES – MID CAP FUND |
NOTES TO FINANCIAL STATEMENTS (continued) October 31, 2023 |
in foreign securities not present in domestic investments, including, but not limited to, recovery of tax withheld by foreign jurisdictions (foreign investment risk). Investments in other investment companies are subject to market and selection risk, as well as the specific risks associated with the investment companies’ portfolio securities (investment in other investment companies risk). Initial public offerings (“IPOs”) are new issues of equity securities, as such they have no trading history and there may be limited information about the companies for a very limited period. Additionally, the prices of securities sold in IPOs may be highly volatile (IPO risk). Preferred securities are subject to issuer-specific and market risks. Generally, issuers only pay dividends after the company makes required payments to holders of bonds and other debt, as such the value of preferred securities may react more strongly to market conditions than bonds and other debts (preferred securities risk). The Fund’s shareholders may be adversely impacted by asset allocation decisions made by an investment adviser whose discretionary clients make up a large percentage of the Fund’s shareholders (large shareholder risk). The Fund may invest in large cap company securities, it may underperform other funds during periods when the Fund’s large cap securities are out of favor (Large Cap Company Risk). Small cap companies may have limited product lines or markets. They may be less financially secure than larger, more established companies and may depend on a more limited management group than larger capitalized companies (Small Cap Company Risk). The extent of the Fund’s exposure to these risks in respect to these financial assets is included in their value as recorded in the Fund’s Statement of Assets and Liabilities.
Please refer to the Fund’s prospectus for a complete description of the principal risks of investing in the Fund.
B. Indemnifications. Under the Trust’s organizational documents, its officers and Trustees may be indemnified against certain liabilities and expenses arising out of the performance of their duties to the Fund, and shareholders are indemnified against personal liability for the obligations of the Trust. Additionally, in the normal course of business, the Fund enters into agreements with service providers that may contain indemnification clauses. The Fund’s maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Fund that have not yet occurred. The risk of material loss from such claims is considered remote.
7. Subsequent Events. Management has evaluated events and transactions that have occurred since October 31, 2023 through the date the financial statements were issued and determined that there were no subsequent events that would require recognition or additional disclosure in the financial statements.
20 |
BBH SELECT SERIES – MID CAP FUND |
DISCLOSURE OF FUND EXPENSES October 31, 2023 (unaudited) |
EXAMPLE
As a shareholder of the Fund, you may incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments, reinvested distributions, or other distributions; redemption fees; and exchange fees; and (2) ongoing costs, including management fees; distribution 12b-1 fees; and other Fund expenses. This Example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The Example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period (May 1, 2023 to October 31, 2023).
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.
F I N A N C I A L S T A T E M E N T S O C T O B E R 3 1, 2 0 2 3 | 21 |
BBH SELECT SERIES – MID CAP FUND |
DISCLOSURE OF FUND EXPENSES (continued) October 31, 2023 (unaudited) |
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as redemption fees or exchange fees. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
Beginning | Ending | Expenses Paid | ||||
Actual | $1,000 | $ 982 | $4.50 | |||
Hypothetical2 | $1,000 | $1,021 | $4.58 |
_________________
1 Expenses are equal to the Fund’s annualized expense ratio of 0.90%, multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period).
2 Assumes a return of 5% before expenses. For the purposes of the calculation, the applicable annualized expense ratio for each class of shares is subtracted from the assumed return before expenses.
22 |
BBH SELECT SERIES – MID CAP FUND |
CONFLICTS OF INTEREST October 31, 2023 (unaudited) |
Description of Potential Material Conflicts of Interest – Investment Adviser
BBH, including the Investment Adviser, provides discretionary and non-discretionary investment management services and products to corporations, institutions and individual investors throughout the world. As a result, in the ordinary course of its businesses, BBH, including the Investment Adviser, may engage in activities in which its interests or the interests of its clients may conflict with or be adverse to the interests of the Funds. In addition, certain of such clients (including the Funds) utilize the services of BBH for which they will pay to BBH customary fees and expenses that will not be shared with the Funds.
The Investment Adviser has adopted and implemented policies and procedures that seek to manage conflicts of interest. Pursuant to such policies and procedures, the Investment Adviser monitors a variety of areas, including compliance with fund investment guidelines, the investment in only those securities that have been approved for purchase, and compliance with their respective Code of Ethics.
The Trust also manages these conflicts of interest. For example, the Trust has designated a chief compliance officer (“CCO”) and has adopted and implemented policies and procedures designed to manage the conflicts identified below and other conflicts that may arise in the course of the Funds’ operations in such a way as to safeguard the Funds from being negatively affected as a result of any such potential conflicts. From time to time, the Trustees receive reports from the Investment Adviser and the Trust’s CCO on areas of potential conflict.
Investors should carefully review the following, which describes potential and actual conflicts of interest that BBH, the Investment Adviser can face in the operation of their respective investment management services. This section is not, and is not intended to be, a complete enumeration or explanation of all of the potential conflicts of interest that may arise. The Investment Adviser and the Funds has adopted policies and procedures reasonably designed to appropriately prevent, limit or mitigate the conflicts of interest described below. Additional information about potential conflicts of interest regarding the Investment Adviser is set forth in the Investment Adviser’s Form ADV. A copy of Part 1 and Part 2A of the Investment Adviser’s Form ADV is available on the SEC’s website (www.adviserinfo.sec.gov). In addition, many of the activities that create these conflicts of interest are limited and/or prohibited by law, unless an exception is available.
Other Clients and Allocation of Investment Opportunities. BBH, the Investment Adviser manages funds and accounts of clients other than the Funds (“Other Clients”). In general, BBH, the Investment Adviser faces conflicts of interest when they render investment advisory services to different clients and, from time to time, provide dissimilar investment advice to different clients. Investment decisions will not necessarily be made in parallel among the Funds and Other Clients. Investments made by the Funds do not, and are not intended to, replicate the investments, or the investment methods and strategies, of Other Clients. Accordingly, such Other Clients may produce results that are materially different from those experienced by the Funds. Certain other conflicts of interest may arise in connection with a portfolio manager’s management of the Funds’ investments, on the one hand, and the investments of other funds or accounts for which the portfolio manager is responsible, on the other. For example, it is possible that the various funds or accounts managed by the Investment Adviser could have different investment strategies
F I N A N C I A L S T A T E M E N T S O C T O B E R 3 1, 2 0 2 3 | 23 |
BBH SELECT SERIES – MID CAP FUND |
CONFLICTS OF INTEREST (continued) October 31, 2023 (unaudited) |
that, at times, might conflict with one another to the possible detriment of the Funds. From time to time, the Investment Adviser sponsors and with other investment pools and accounts which engage in the same or similar businesses as the Funds using the same or similar investment strategies. To the extent that the same investment opportunities might be desirable for more than one account or fund, possible conflicts could arise in determining how to allocate them because the Investment Adviser may have an incentive to allocate investment opportunities to certain accounts or funds. However, BBH and the Investment Adviser have implemented policies and procedures designed to ensure that information relevant to investment decisions is disseminated promptly within its portfolio management teams and investment opportunities are allocated equitably among different clients. The policies and procedures require, among other things, objective allocation for limited investment opportunities, and documentation and review of justifications for any decisions to make investments only for select accounts or in a manner disproportionate to the size of the account. Nevertheless, access to investment opportunities may be allocated differently among accounts due to the particular characteristics of an account, such as size of the account, cash position, tax status, risk tolerance and investment restrictions or for other reasons.
Actual or potential conflicts of interest may also arise when a portfolio manager has management responsibilities to multiple accounts or funds, resulting in unequal commitment of time and attention to the portfolio management of the funds or accounts.
Affiliated Service Providers. Other potential conflicts might include conflicts between the Funds and its affiliated and unaffiliated service providers (e.g., conflicting duties of loyalty). In addition to providing investment management services through the SID, BBH provides administrative, custody, shareholder servicing and fund accounting services to the Funds. BBH may have conflicting duties of loyalty while servicing the Funds and/or opportunities to further its own interest to the detriment of the Funds. For example, in negotiating fee arrangements with affiliated service providers, BBH may have an incentive to agree to higher fees than it would in the case of unaffiliated providers. BBH acting in its capacity as the Funds’ administrator is the primary valuation agent of the Funds. BBH values securities and assets in the Funds according to the Funds’ valuation policies. Because the Investment Adviser’s advisory and administrative fees are calculated by reference to a Funds’ net assets, BBH and its affiliates may have an incentive to seek to overvalue certain assets.
Aggregation. Potential conflicts of interest also arise with the aggregation of trade orders. Purchases and sales of securities for the Funds may be aggregated with orders for other client accounts managed by the Investment Adviser. The Investment Adviser, however, are not required to aggregate orders if portfolio management decisions for different accounts are made separately, or if it is determined that aggregating is not practicable, or in cases involving client direction. Prevailing trading activity frequently may make impossible the receipt of the same price or execution on the entire volume of securities purchased or sold. When this occurs, the various prices may be averaged, and the Funds will be charged or credited with the average price. Thus, the effect of the aggregation may operate on some occasions to the disadvantage of the Funds. In addition, under certain circumstances, the Funds will not be charged the same commission or commission equivalent rates in connection with an aggregated order.
24 |
BBH SELECT SERIES – MID CAP FUND |
CONFLICTS OF INTEREST (continued) October 31, 2023 (unaudited) |
Cross Trades. Under certain circumstances, the Investment Adviser, on behalf of the Funds, may seek to buy from or sell securities to another fund or account advised by BBH, the Investment Adviser. Subject to applicable law and regulation, BBH, the Investment Adviser may (but is not required to) effect purchases and sales between BBH, the Investment Adviser clients (“cross trades”), including the Funds, if BBH or the Investment Adviser believes such transactions are appropriate based on each party’s investment objectives and guidelines. There may be potential conflicts of interest or regulatory issues relating to these transactions which could limit the Investment Adviser’s decision to engage in these transactions for the Funds. BBH and/or the Investment Adviser may have a potentially conflicting division of loyalties and responsibilities to the parties in such transactions.
Soft Dollars. The Investment Adviser may direct brokerage transactions and/or payment of a portion of client commissions (“soft dollars”) to specific brokers or dealers or other providers to pay for research or other appropriate services which provide, in the Investment Adviser’s view, appropriate assistance in the investment decision-making process (including with respect to futures, fixed price offerings and over-the-counter transactions). The use of a broker that provides research and securities transaction services may result in a higher commission than that offered by a broker who does not provide such services. The Investment Adviser will determine in good faith whether the amount of commission is reasonable in relation to the value of research and services provided and whether the services provide lawful and appropriate assistance in its investment decision-making responsibilities.
Research or other services obtained in this manner may be used in servicing any or all of the Funds and other accounts managed by the Investment Adviser, including in connection with accounts that do not pay commissions to the broker related to the research or other service arrangements. Such products and services may disproportionately benefit other client accounts relative to the Funds based on the amount of brokerage commissions paid by the Funds and such other accounts. To the extent that a Sub-adviser uses soft dollars, it will not have to pay for those products and services itself.
BBH may receive research that is bundled with the trade execution, clearing, and/or settlement services provided by a particular broker-dealer. For example, the research effectively will be paid by client commissions that also will be used to pay for the execution, clearing, and settlement services provided by the broker-dealer and will not be paid by the Investment Adviser.
Arrangements regarding compensation and delegation of responsibility may create conflicts relating to selection of brokers or dealers to execute Fund portfolio trades and/or specific uses of commissions from Fund portfolio trades, administration of investment advice and valuation of securities.
F I N A N C I A L S T A T E M E N T S O C T O B E R 3 1, 2 0 2 3 | 25 |
BBH SELECT SERIES – MID CAP FUND |
CONFLICTS OF INTEREST (continued) October 31, 2023 (unaudited) |
Investments in BBH Funds. From time to time BBH may invest a portion of the assets of its discretionary investment advisory clients in the Funds. That investment by BBH on behalf of its discretionary investment advisory clients in the Funds may be significant at times.
Increasing a Fund’s assets may enhance investment flexibility and diversification and may contribute to economies of scale that tend to reduce the Funds’ expense ratio. In selecting the Funds for its discretionary investment advisory clients, BBH may limit its selection to funds managed by BBH or the Investment Adviser. BBH may not consider or canvass the universe of unaffiliated investment companies available, even though there may be unaffiliated investment companies that may be more appropriate or that have superior performance. BBH, the Investment Adviser and their affiliates providing services to the Funds benefit from additional fees when the Funds is included as an investment by a discretionary investment advisory client.
BBH reserves the right to redeem at any time some or all of the shares of the Funds acquired for its discretionary investment advisory clients’ accounts. A large redemption of shares of the Funds by BBH on behalf of its discretionary investment advisory clients could significantly reduce the asset size of the Funds, which might have an adverse effect on the Funds’ investment flexibility, portfolio diversification and expense ratio.
Valuation. When market quotations are not readily available or are believed by BBH to be unreliable, the Funds’ investments will be valued at fair value by BBH pursuant to procedures adopted by the Funds’ Board. When determining an asset’s “fair value,” BBH seeks to determine the price that a Fund might reasonably expect to receive from the current sale of that asset in an arm’s-length transaction. The price generally may not be determined based on what the Funds might reasonably expect to receive for selling an asset at a later time or if it holds the asset to maturity. While fair value determinations will be based upon all available factors that BBH deems relevant at the time of the determination and may be based on analytical values determined by BBH using proprietary or third-party valuation models, fair value represents only a good faith approximation of the value of a security. The fair value of one or more securities may not, in retrospect, be the price at which those assets could have been sold during the period in which the particular fair values were used in determining the Funds’ net asset value. As a result, the Funds’ sale or redemption of its shares at net asset value, at a time when a holding or holdings are valued by BBH (pursuant to Board-adopted procedures) at fair value, may have the effect of diluting or increasing the economic interest of existing shareholders.
Referral Arrangements. BBH may enter into advisory and/or referral arrangements with third parties. Such arrangements may include compensation paid by BBH to the third party. BBH may pay a solicitation fee for referrals and/or advisory or incentive fees. BBH may benefit from increased amounts of assets under management.
Personal Trading. BBH, including the Investment Adviser, and any of their respective partners, principals, directors, officers, employees, affiliates or agents, face conflicts of interest when transacting in securities for their own accounts because they could benefit by trading in the same securities as the Funds, which could have an adverse effect on the Funds. However, the Investment Adviser has implemented policies
26 |
BBH SELECT SERIES – MID CAP FUND |
CONFLICTS OF INTEREST (continued) October 31, 2023 (unaudited) |
and procedures concerning personal trading by BBH Partners and employees. The policy and procedures are intended to prevent BBH Partners and employees from trading in the same securities as the Funds. However, BBH, including the Investment Adviser, has implemented policies and procedures concerning personal trading by BBH Partners and employees. The policies and procedures are intended to prevent BBH Partners and employees with access to Fund material non-public information from trading in the same securities as the Funds.
Gifts and Entertainment. From time to time, employees of BBH, including the Investment Adviser, and any of their respective partners, principals, directors, officers, employees, affiliates or agents, may receive gifts and/or entertainment from clients, intermediaries, or service providers to the Funds or BBH, including the Investment Adviser, which could have the appearance of affecting or may potentially affect the judgment of the employees, or the manner in which they conduct business. The Investment Adviser has implemented policies and procedures concerning gifts and entertainment to mitigate any impact on the judgment of BBH Partners and employees. BBH, including the Investment Adviser, has implemented policies and procedures concerning gifts and entertainment to mitigate any impact on the judgment of BBH Partners and employees.
F I N A N C I A L S T A T E M E N T S O C T O B E R 3 1, 2 0 2 3 | 27 |
BBH SELECT SERIES – MID CAP FUND |
ADDITIONAL FEDERAL TAX INFORMATION October 31, 2023 (unaudited) |
In January 2024, shareholders will receive Form 1099-DIV, which will include their share of qualified dividends distributed during the calendar year 2023. Shareholders are advised to check with their tax advisers for information on the treatment of these amounts on their individual income tax returns.
28 |
TRUSTEES AND OFFICERS OF BBH SELECT SERIES – MID CAP FUND |
(unaudited) |
Information pertaining to the Trustees and executive officers of the Trust as of October 31, 2023 is set forth below. The mailing address for each Trustee is c/o BBH Trust, 140 Broadway, New York, NY 10005.
|
|
|
|
| Other Public |
Independent Trustees | |||||
H. Whitney Wagner | Chairman of | Chairman Since 2014; Trustee Since 2007 and 2006 – 2007 with the Predecessor Trust | President, Clear Brook Advisors, a registered investment adviser. | 8 | None. |
Andrew S. Frazier | Trustee | Since 2010 | Retired. | 8 | None. |
Mark M. Collins | Trustee | Since 2011 | Partner of Brown Investment Advisory Incorporated, a registered investment adviser. | 8 | Chairman of Dillon Trust Company. |
John M. Tesoro | Trustee | Since 2014 | Retired. | 8 | Independent Trustee, Bridge Builder Trust (11 funds) and Edward Jones Money Market Fund; Director, Teton Advisers, Inc. (a registered investment adviser) (2014-2021). |
Joan A. Binstock | Trustee | Since 2019 | Partner, Chief Financial and Operations Officer, Lord Abbett & Co. LLC (1999-2018); Lovell Minnick Partners, Advisors Counsel (2018-Present). | 8 | Independent Director, Morgan Stanley Direct Lending Fund; KKR Real Estate Interval Fund. |
Karen A. Kochevar | Trustee | Since 2023 | Retired. | 8 | Director, CAVA Group, Inc. |
F I N A N C I A L S T A T E M E N T S O C T O B E R 3 1, 2 0 2 3 | 29 |
TRUSTEES AND OFFICERS OF BBH SELECT SERIES – MID CAP FUND |
(unaudited) |
|
|
|
|
| Other Public |
Interested Trustees | |||||
Susan C. Livingston+ | Trustee | Since 2011 | Partner (since 1998) and Senior Client Advocate (since 2010) for BBH&Co. | 8 | None. |
John A. Gehret+ | Trustee | Since 2011 | Limited Partner of BBH&Co. (2012-present). | 8 | None. |
30 |
TRUSTEES AND OFFICERS OF BBH SELECT SERIES – MID CAP FUND |
(unaudited) |
Name, Address | Position(s) | Term of | Principal Occupation(s) |
Officers | |||
Jean-Pierre Paquin | President and Principal | Since 2016 | Partner of BBH&Co. since 2015; joined BBH&Co. in 1996. |
Daniel Greifenkamp | Vice President | Since 2016 | Principal of BBH&Co. since 2014; joined BBH&Co. in 2011. |
Charles H. Schreiber | Treasurer and Principal Financial Officer | Since 2007 | Managing Director of BBH&Co. since 2001; joined BBH&Co. in 1999. |
Paul F. Gallagher | Chief Compliance Officer (“CCO”) | Since 2015 | Managing Director of BBH&Co. since 2015. |
Nicole English | Anti-Money Laundering Officer | Since 2022 | Vice President of BBH&Co. since 2019; joined BBH&Co. in 2016. |
Brian J. Carroll | Secretary | Since 2021 | Vice President of BBH&Co. since 2023; joined BBH&Co. in 2014. |
Crystal Cheung | Assistant Treasurer | Since 2018 | Assistant Vice President of BBH&Co. since 2016; joined BBH&Co. 2014. |
____________
# All officers of the Trust hold office for one year and until their respective successors are chosen and qualified (subject to the ability of the Trustees to remove any officer in accordance with the Trust’s By-laws). Mr. Wagner previously served on the Board of Trustees of the Predecessor Trust.
+ Ms. Livingston and Mr. Gehret are “interested persons” of the Trust as defined in the 1940 Act because of their positions as Partner and Limited Partner of BBH&Co., respectively.
^ The Fund Complex consists of the Trust, which has eight series, and each is counted as one “Portfolio” for purposes of this table.
F I N A N C I A L S T A T E M E N T S O C T O B E R 3 1, 2 0 2 3 | 31 |
BBH SELECT SERIES – MID CAP FUND |
OPERATION AND EFFECTIVENESS OF THE FUND’S LIQUIDITY RISK MANAGEMENT PROGRAM October 31, 2023 (unaudited) |
The Securities and Exchange Commission adopted Rule 22e-4 under the Investment Company Act of 1940, as amended (the “Liquidity Rule”), to promote effective liquidity risk management throughout the open-end investment company industry in order to reduce the risk that funds will be unable to meet their redemption obligations and mitigate dilution of the interests of fund shareholders.
The Board of Trustees (the “Board”) of BBH Trust has appointed three members of the Brown Brothers Harriman & Co. Mutual Fund Advisory Department, the Investment Adviser to the funds of BBH Trust (the “Funds”), as the Program Administrator for the Fund’s liquidity risk management program (the “Program”). The Board met on March 7, 2023 to review the Program for the Funds pursuant to the Liquidity Rule. The Program Administrator provided the Board with a report (the “Report”) that addressed the operations of the Program and assessed its adequacy and effectiveness for the period from February 1, 2022 through January 31, 2023 (the “Reporting Period”).
The Report noted that the Program complied with the key factors for consideration under the Liquidity Rule for assessing, managing and periodically reviewing a Fund’s liquidity risk, including the following points.
Liquidity classification. The Report described the Program’s liquidity classification methodology for categorizing the Funds’ investments into one of four liquidity buckets. The Fund classified each of its investments into one of four liquidity categories based on the number of days reasonably needed to sell and convert a reasonably anticipated sized trade of each investment into cash without significantly impacting the price of the investments. The Program Administrator relied on a third-party data provider to facilitate the classification of the Fund’s investments based on criteria in the Fund’s Program. During the Reporting Period, the Fund did not hold more than 15% of its net assets in illiquid investments.
Highly Liquid Investment Minimum. The Report noted that one aspect of the Liquidity Rule is a requirement that funds that are expected to have less than 50% of assets classified as other than “highly liquid” should establish a minimum percentage of highly liquid assets that the fund is expected to hold on an on-going basis. The Program Administrator monitors the percentages of assets in each category on an ongoing basis and, given that the Fund did not approach the 50% threshold, has made the determination that it is not necessary to assign a Highly Liquid Investment Minimum to the Fund as provided for in the Liquidity Rule.
The Fund’s investment strategy and liquidity of portfolio investments during normal and reasonably foreseeable stressed market conditions. During the Reporting Period, the Program Administrator reviewed whether the Fund’s investment strategy is appropriate for an open-end fund structure with a focus on funds with more significant and consistent holdings of less liquid and illiquid assets and factored a Fund’s concentration in an issuer into the liquidity classification methodology by taking issuer position sizes into account.
Short-term and long-term cash flow projections during normal and reasonably foreseeable stressed market conditions. During the Reporting Period, the Program Administrator reviewed historical redemption activity and used this information as a component to establish the Fund’s reasonably anticipated trading size. The Program Administrator also took into consideration other factors such as shareholder ownership concentration, applicable distribution channels and the degree of certainty associated with the Fund’s short-term and long-term cash flow projections.
32 |
BBH SELECT SERIES – MID CAP FUND |
OPERATION AND EFFECTIVENESS OF THE FUND’S LIQUIDITY RISK MANAGEMENT PROGRAM (continued) October 31, 2023 (unaudited) |
Holdings of cash and cash equivalents. The Program Administrator considered the degree to which the Fund held cash and cash equivalents as a component of each Fund’s ability to meet redemption requests.
There were no material changes to the Program during the Reporting Period. The Program Administrator has informed the Board that it believes that the Fund’s Program is adequately designed, has been implemented as intended, and has operated effectively since its implementation. No material exceptions have been noted since the implementation of the Program, and there were no liquidity events that impacted the Fund or its ability to meet redemption requests on a timely basis during the Reporting Period.
F I N A N C I A L S T A T E M E N T S O C T O B E R 3 1, 2 0 2 3 | 33 |
Administrator Distributor Shareholder Servicing Agent | Investment Adviser | |
To obtain information or make shareholder inquiries: | ||
By telephone: | Call 1-800-575-1265 | |
This report is submitted for the general information of shareholders and is not authorized for distribution to prospective investors unless preceded or accompanied by an effective prospectus. Nothing herein contained is to be considered an offer of sale or a solicitation of an offer to buy shares of the Fund. For more complete information, visit www.bbhfunds.com for a prospectus. You should consider the Fund’s investment objectives, risks, charges and expenses carefully before you invest. Information about these and other important subjects is in the Fund’s prospectus, which you should read carefully before investing. Holdings and allocations are subject to change. Fund holdings should not be relied on in making investment decisions and should not be construed as research or investment advice regarding particular securities. Current and future holdings are subject to risk. The Fund files a complete schedule of portfolio holdings with the Securities and Exchange Commission (SEC) for the first and third quarters of each fiscal year as an exhibit to its reports on Form N-PORT. The Fund’s Forms N-PORT are available electronically on the SEC’s website (sec.gov). For a complete list of a fund’s portfolio holdings, view the most recent holdings listing, semi-annual report, or annual report on the Fund’s web site at http://www.bbhfunds.com. A summary of the Fund’s Proxy Voting Policy that the Fund uses to determine how to vote proxies, if any, relating to securities held in the Fund’s portfolio, as well as a record of how the Fund voted any such proxies during the most recent 12-month period ended June 30, is available, without charge, upon request by calling the toll-free number listed above. This information is also available on the SEC’s website at www.sec.gov. NOT FDIC INSURED NO BANK GUARANTEE MAY LOSE VALUE |
Annual Report
OCTOBER 31, 2023
BBH Partner Fund — International Equity
BBH PARTNER FUND – INTERNATIONAL EQUITY |
MANAGEMENT’S DISCUSSION OF FUND PERFORMANCE October 31, 2023 |
The BBH Partner Fund – International Equity (“the Fund” or “BBH International”) returned 5.24%, net of fees, for the fiscal year ended October 31, 2023. During the same twelve-month period, the Fund’s benchmark, the MSCI Europe, Australasia Far East Index (the “EAFE”) returned 14.40%. From the inception of the Fund through October 31, 2023, the Fund has compounded at an annualized rate of 4.62%, net of fees, while the MSCI EAFE has returned 4.48% per year.
For fiscal 2023, the Fund underperformed its benchmark driven by security selection within Financials, an overweight to China and underweight to Japan, and individual security performance from the following holdings: Revvity Inc, JD.com Inc, Worldline SA, Sartorius Stedim Biotech SA and Prudential plc. The largest contributors to performance during the same time period include: CRH plc, Safran SA, Melrose Industries plc, SAP SE, Constellation Software, and strong stock selection in the Communication Services sector relative to the MSCI EAFE index.
On August 18, 2023, Trinity Street Asset Management (“TSAM”) was added as a subadviser to the Fund responsible for managing a portion of the Fund’s assets alongside Select Equity Group (“SEG”). The investment approaches implemented by SEG and TSAM, described in greater detail below, are both well-aligned and complementary.
SEG’s investment philosophy is grounded in the belief that rigorous, independent research and disciplined investing can generate attractive long-term returns. SEG seeks to identify great businesses with enduring franchise value – those with steady predictable growth, high returns on capital and well-established barriers to competition. The subadviser believes these companies are both well positioned for long-term growth and resilient in difficult economic environments.
The TSAM investment philosophy centers around searching globally for companies undergoing structural change that is underappreciated by the broader market. The change factor could be a change in management, product, geopolitical environment, or in industry supply/demand dynamics that is misunderstood or underappreciated by the market. The team focuses their research efforts exclusively on companies experiencing periods of change because they believe this is where disruptions to normal market pricing mechanisms (i.e., attractive risk/reward opportunities and significant discounts to intrinsic value) are most likely to be found.
Portfolio holdings are subject to change.
Intrinsic value is an estimate of the present value of the cash that a business can generate over its remaining life.
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2 |
BBH PARTNER FUND – INTERNATIONAL EQUITY |
MANAGEMENT’S DISCUSSION OF FUND PERFORMANCE (continued) October 31, 2023 |
Growth of $10,000 Invested in BBH Partner Fund – International Equity
The graph below illustrates the hypothetical investment of $10,0001 in the Class I shares of the Fund (Effective February 24, 2017, the Fund’s Class N shares were converted into Class I shares) over the ten years ended October 31, 2023 as compared to the MSCI EAFE.
The annualized gross expense ratio as in the August 19, 2023 prospectus for Class I shares was 0.63%. Performance data quoted represents past performance which is no guarantee of future results. Investment return and principal value will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Fund performance changes over time and current performance may be lower or higher than what is stated. Fund shares redeemed within 30 days of purchase are subject to a redemption fee of 2.00%. Returns do not reflect the deductions of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. For performance current to the most recent month-end please call 1-800-575-1265.
Hypothetical performance results are calculated on a total return basis and include all portfolio income, unrealized and realized capital gains, losses and reinvestment of dividends and other earnings. No one shareholder has actually achieved these results and no representation is being made that any actual shareholder achieved, or is likely to achieve, similar results to those shown. Hypothetical performance does not represent actual trading and may not reflect the impact of material economic and market factors. Undue reliance should not be placed on hypothetical performance results in making an investment decision.
____________
1 The Fund’s performance assumes the reinvestment of all dividends and distributions. The EAFE has been adjusted to reflect reinvestment of dividends on securities in the index. The EAFE is not adjusted to reflect sales charges, expenses or other fees that the Securities and Exchange Commission requires to be reflected in the Fund’s performance.
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F I N A N C I A L S T A T E M E N T S O C T O B E R 3 1, 2 0 2 3 | 3 |
BBH PARTNER FUND – INTERNATIONAL EQUITY |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
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To the shareholders of BBH Partner Fund – International Equity and the Board of Trustees of BBH Trust:
Opinion on the Financial Statements and Financial Highlights
We have audited the accompanying statement of assets and liabilities, including the portfolio of investments, of BBH Partner Fund – International Equity (the “Fund”), one of the funds constituting BBH Trust, as of October 31, 2023, the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, the financial highlights for each of the five years in the period then ended, and the related notes. In our opinion, the financial statements and financial highlights present fairly, in all material respects, the financial position of the Fund as of October 31, 2023, and the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements and financial highlights are the responsibility of the Fund’s management. Our responsibility is to express an opinion on the Fund’s financial statements and financial highlights based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement, whether due to error or fraud. The Fund is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Fund’s internal control over financial reporting. Accordingly, we express no such opinion.
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4 |
BBH PARTNER FUND – INTERNATIONAL EQUITY |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM (continued)
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Our audits included performing procedures to assess the risks of material misstatement of the financial statements and financial highlights, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements and financial highlights. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements and financial highlights. Our procedures included confirmation of securities owned as of October 31, 2023, by correspondence with the custodian and brokers; when replies were not received from brokers, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinion.
/s/ DELOITTE & TOUCHE LLP
Boston, Massachusetts
December 20, 2023
We have served as the auditor of one or more Brown Brothers Harriman investment companies since 1991.
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F I N A N C I A L S T A T E M E N T S O C T O B E R 3 1, 2 0 2 3 | 5 |
BBH PARTNER FUND – INTERNATIONAL EQUITY |
PORTFOLIO ALLOCATION October 31, 2023 |
COUNTRY DIVERSIFICATION
U.S. $ Value | Percent of | ||||||||
Common Stock: |
| ||||||||
Canada | $ 93,655,173 | 5.0 | % | ||||||
Cayman Islands | 52,846,271 | 2.8 |
| ||||||
Denmark | 19,585,518 | 1.0 |
| ||||||
Finland | 18,109,539 | 1.0 |
| ||||||
France | 276,279,897 | 14.9 |
| ||||||
Germany | 160,721,124 | 8.6 |
| ||||||
Hong Kong | 109,860,053 | 5.9 |
| ||||||
Ireland | 110,750,038 | 6.0 |
| ||||||
Japan | 159,673,832 | 8.6 |
| ||||||
Jersey | 36,432,686 | 2.0 |
| ||||||
Luxembourg | 25,260,674 | 1.4 |
| ||||||
Netherlands | 146,883,687 | 7.9 |
| ||||||
Singapore | 12,318,193 | 0.7 |
| ||||||
South Korea | 29,799,699 | 1.6 |
| ||||||
Spain | 14,179,037 | 0.8 |
| ||||||
Sweden | 35,068,348 | 1.9 |
| ||||||
Switzerland | 126,306,375 | 6.8 |
| ||||||
Taiwan | 79,093,628 | 4.3 |
| ||||||
United Kingdom | 210,475,502 | 11.3 |
| ||||||
United States | 50,570,453 | 2.7 |
| ||||||
Registered Investment Companies: |
| ||||||||
United States | 57,100,000 | 3.1 |
| ||||||
Warrants: |
| ||||||||
Canada | 0 | 0.0 |
| ||||||
Cash and Other Assets in Excess of Liabilities | 32,252,723 | 1.7 |
| ||||||
NET ASSETS | $1,857,222,450 | 100.0 | % |
All data as of October 31, 2023. The Fund’s country diversification is expressed as a percentage of net assets and may vary over time. The Fund’s country diversification is derived from respective security’s country of incorporation.
The accompanying notes are an integral part of these financial statements. | ||
6 |
BBH PARTNER FUND – INTERNATIONAL EQUITY |
PORTFOLIO ALLOCATION (continued) October 31, 2023 |
SECTOR DIVERSIFICATION
U.S. $ Value | Percent of | ||||||||
Common Stock: |
| ||||||||
Basic Materials | $ 60,002,955 | 3.2 | % | ||||||
Communications | 129,846,894 | 7.0 |
| ||||||
Consumer Cyclical | 165,613,165 | 8.9 |
| ||||||
Consumer Non-Cyclical | 326,038,546 | 17.6 |
| ||||||
Energy | 19,585,518 | 1.1 |
| ||||||
Financials | 320,065,804 | 17.2 |
| ||||||
Industrials | 391,196,330 | 21.1 |
| ||||||
Technology | 355,520,515 | 19.1 |
| ||||||
Registered Investment Companies | 57,100,000 | 3.1 |
| ||||||
Warrants: |
| ||||||||
Technology | 0 | 0.0 |
| ||||||
Cash and Other Assets in Excess of Liabilities | 32,252,723 | 1.7 |
| ||||||
NET ASSETS | $1,857,222,450 | 100.0 | % |
All data as of October 31, 2023. 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. | ||
F I N A N C I A L S T A T E M E N T S O C T O B E R 3 1, 2 0 2 3 | 7 |
BBH PARTNER FUND – INTERNATIONAL EQUITY |
PORTFOLIO OF INVESTMENTS October 31, 2023 |
Shares/ | Value | ||||
COMMON STOCK (95.2%) | |||||
CANADA (5.0%) |
| ||||
BASIC MATERIALS |
| ||||
127,300 | Franco-Nevada Corp. | $ | 15,472,269 | ||
CONSUMER CYCLICAL |
| ||||
91,026 | Alimentation Couche-Tard, Inc. |
| 4,950,686 | ||
FINANCIALS |
| ||||
1,690,046 | Brookfield Corp. |
| 49,191,541 | ||
TECHNOLOGY |
| ||||
12,003 | Constellation Software, Inc. |
| 24,040,677 | ||
Total Canada |
| 93,655,173 | |||
CAYMAN ISLANDS (2.8%) |
| ||||
COMMUNICATIONS |
| ||||
2,086,033 | JD.com, Inc. (Class A) |
| 26,452,717 | ||
776,281 | Trip.com Group, Ltd. ADR1 |
| 26,393,554 | ||
Total Cayman Islands |
| 52,846,271 | |||
DENMARK (1.0%) |
| ||||
ENERGY |
| ||||
907,054 | Vestas Wind Systems A/S1 |
| 19,585,518 | ||
Total Denmark |
| 19,585,518 | |||
FINLAND (1.0%) |
| ||||
INDUSTRIALS |
| ||||
418,288 | Kone Oyj (Class B) |
| 18,109,539 | ||
Total Finland |
| 18,109,539 | |||
FRANCE (14.9%) |
| ||||
CONSUMER CYCLICAL |
| ||||
9,349 | LVMH Moet Hennessy Louis Vuitton SE |
| 6,684,768 | ||
CONSUMER NON-CYCLICAL |
| ||||
34,953 | L’Oreal S.A. |
| 14,647,949 | ||
184,161 | Sanofi S.A. |
| 16,792,656 | ||
173,677 | Sartorius Stedim Biotech |
| 32,624,091 | ||
| 64,064,696 | ||||
INDUSTRIALS |
| ||||
518,884 | Safran S.A. |
| 80,751,493 | ||
294,048 | Schneider Electric SE |
| 45,176,554 | ||
241,753 | Thales S.A. |
| 35,595,703 | ||
| 161,523,750 | ||||
TECHNOLOGY |
| ||||
85,050 | Capgemini SE |
| 15,061,569 | ||
702,387 | Dassault Systemes SE |
| 28,945,114 | ||
| 44,006,683 | ||||
Total France |
| 276,279,897 |
The accompanying notes are an integral part of these financial statements. | ||
8 |
BBH PARTNER FUND – INTERNATIONAL EQUITY |
PORTFOLIO OF INVESTMENTS (continued) October 31, 2023 |
Shares/ | Value | ||||
COMMON STOCK (continued) | |||||
GERMANY (8.6%) |
| ||||
CONSUMER CYCLICAL |
| ||||
182,303 | Adidas AG | $ | 32,216,481 | ||
CONSUMER NON-CYCLICAL |
| ||||
140,475 | Merck KGaA |
| 21,122,638 | ||
FINANCIALS |
| ||||
108,040 | Deutsche Boerse AG |
| 17,730,466 | ||
INDUSTRIALS |
| ||||
75,463 | Rheinmetall AG |
| 21,574,221 | ||
TECHNOLOGY |
| ||||
508,497 | SAP SE |
| 68,077,318 | ||
Total Germany |
| 160,721,124 | |||
HONG KONG (5.9%) |
| ||||
CONSUMER CYCLICAL |
| ||||
1,762,000 | Galaxy Entertainment Group, Ltd. |
| 9,870,035 | ||
FINANCIALS |
| ||||
9,088,235 | AIA Group, Ltd. |
| 79,156,228 | ||
599,119 | Hong Kong Exchanges & Clearing, Ltd. |
| 20,833,790 | ||
| 99,990,018 | ||||
Total Hong Kong |
| 109,860,053 | |||
IRELAND (6.0%) |
| ||||
CONSUMER CYCLICAL |
| ||||
166,900 | Ryanair Holdings, Plc. ADR1 |
| 14,637,130 | ||
CONSUMER NON-CYCLICAL |
| ||||
83,799 | ICON, Plc. ADR1 |
| 20,443,604 | ||
INDUSTRIALS |
| ||||
1,403,607 | CRH , Plc. |
| 75,669,304 | ||
Total Ireland |
| 110,750,038 | |||
JAPAN (8.6%) |
| ||||
CONSUMER CYCLICAL |
| ||||
274,200 | Nintendo Co., Ltd. |
| 11,365,712 | ||
201,900 | Sony Group Corp. |
| 16,729,883 | ||
| 28,095,595 | ||||
CONSUMER NON-CYCLICAL |
| ||||
293,400 | Eisai Co., Ltd. |
| 15,585,679 | ||
INDUSTRIALS |
| ||||
85,500 | Daikin Industries, Ltd. |
| 12,327,707 | ||
57,226 | Keyence Corp. |
| 22,178,634 | ||
579,800 | Komatsu, Ltd. |
| 13,459,534 | ||
| 47,965,875 |
The accompanying notes are an integral part of these financial statements. | ||
F I N A N C I A L S T A T E M E N T S O C T O B E R 3 1, 2 0 2 3 | 9 |
BBH PARTNER FUND – INTERNATIONAL EQUITY |
PORTFOLIO OF INVESTMENTS (continued) October 31, 2023 |
Shares/ | Value | ||||
COMMON STOCK (continued) |
| ||||
JAPAN (continued) |
| ||||
TECHNOLOGY |
| ||||
629,500 | Nomura Research Institute, Ltd. | $ | 16,642,029 | ||
346,025 | Obic Co., Ltd. |
| 51,384,654 | ||
| 68,026,683 | ||||
Total Japan |
| 159,673,832 | |||
JERSEY (2.0%) |
| ||||
CONSUMER NON-CYCLICAL |
| ||||
1,199,293 | Experian, Plc. |
| 36,432,686 | ||
Total Jersey |
| 36,432,686 | |||
LUXEMBOURG (1.4%) |
| ||||
COMMUNICATIONS |
| ||||
153,318 | Spotify Technology S.A.1 |
| 25,260,674 | ||
Total Luxembourg |
| 25,260,674 | |||
NETHERLANDS (7.9%) |
| ||||
COMMUNICATIONS |
| ||||
1,397,461 | Prosus NV1 |
| 39,106,908 | ||
CONSUMER CYCLICAL |
| ||||
1,571,767 | Universal Music Group NV |
| 38,290,883 | ||
CONSUMER NON-CYCLICAL |
| ||||
168,193 | Heineken NV |
| 15,098,510 | ||
TECHNOLOGY |
| ||||
64,494 | ASML Holding NV |
| 38,762,134 | ||
408,135 | STMicroelectronics NV |
| 15,625,252 | ||
| 54,387,386 | ||||
Total Netherlands |
| 146,883,687 | |||
SINGAPORE (0.7%) |
| ||||
FINANCIALS |
| ||||
512,600 | DBS Group Holdings, Ltd. |
| 12,318,193 | ||
Total Singapore |
| 12,318,193 | |||
SOUTH KOREA (1.6%) |
| ||||
FINANCIALS |
| ||||
313,133 | KB Financial Group, Inc. |
| 11,911,559 | ||
TECHNOLOGY |
| ||||
205,393 | SK Hynix, Inc. |
| 17,888,140 | ||
Total South Korea |
| 29,799,699 | |||
SPAIN (0.8%) |
| ||||
CONSUMER NON-CYCLICAL |
| ||||
248,403 | Amadeus IT Group S.A. |
| 14,179,037 | ||
Total Spain |
| 14,179,037 |
The accompanying notes are an integral part of these financial statements. | ||
10 |
BBH PARTNER FUND – INTERNATIONAL EQUITY |
PORTFOLIO OF INVESTMENTS (continued) October 31, 2023 |
Shares/ | Value | ||||
COMMON STOCK (continued) |
| ||||
SWEDEN (1.9%) |
| ||||
CONSUMER NON-CYCLICAL |
| ||||
710,926 | Essity AB (Class B) | $ | 16,210,159 | ||
FINANCIALS |
| ||||
1,527,543 | Svenska Handelsbanken AB (Class A) |
| 12,994,811 | ||
INDUSTRIALS |
| ||||
718,920 | Hexagon AB (Class B) |
| 5,863,378 | ||
Total Sweden |
| 35,068,348 | |||
SWITZERLAND (6.8%) |
| ||||
BASIC MATERIALS |
| ||||
490,459 | DSM-Firmenich AG |
| 44,530,686 | ||
CONSUMER NON-CYCLICAL |
| ||||
681,921 | Alcon, Inc. |
| 48,846,111 | ||
45,172 | Sonova Holding AG |
| 10,699,987 | ||
| 59,546,098 | ||||
FINANCIALS |
| ||||
17,754 | Partners Group Holding AG |
| 18,801,111 | ||
INDUSTRIALS |
| ||||
14,367 | Sika AG |
| 3,428,480 | ||
Total Switzerland |
| 126,306,375 | |||
TAIWAN (4.3%) |
| ||||
TECHNOLOGY |
| ||||
786,904 | MediaTek, Inc. |
| 20,700,511 | ||
676,551 | Taiwan Semiconductor Manufacturing Co., Ltd. ADR |
| 58,393,117 | ||
Total Taiwan |
| 79,093,628 | |||
UNITED KINGDOM (11.3%) |
| ||||
COMMUNICATIONS |
| ||||
13,700,174 | Vodafone Group, Plc. |
| 12,633,041 | ||
CONSUMER CYCLICAL |
| ||||
657,085 | Compass Group, Plc. |
| 16,557,479 | ||
170,793 | Next, Plc. |
| 14,310,108 | ||
| 30,867,587 | ||||
CONSUMER NON-CYCLICAL |
| ||||
2,506,907 | Rentokil Initial, Plc. |
| 12,784,986 | ||
FINANCIALS |
| ||||
639,321 | London Stock Exchange Group, Plc. |
| 64,212,838 | ||
3,141,963 | Prudential, Plc. |
| 32,915,267 | ||
| 97,128,105 |
The accompanying notes are an integral part of these financial statements. | ||
F I N A N C I A L S T A T E M E N T S O C T O B E R 3 1, 2 0 2 3 | 11 |
BBH PARTNER FUND – INTERNATIONAL EQUITY |
PORTFOLIO OF INVESTMENTS (continued) October 31, 2023 |
Shares/ | Value | ||||
COMMON STOCK (continued) |
| ||||
UNITED KINGDOM (continued) |
| ||||
INDUSTRIALS |
| ||||
1,452,936 | BAE Systems, Plc. | $ | 19,479,802 | ||
6,622,198 | Melrose Industries, Plc. |
| 37,581,981 | ||
| 57,061,783 | ||||
Total United Kingdom |
| 210,475,502 | |||
UNITED STATES (2.7%) |
| ||||
CONSUMER NON-CYCLICAL |
| ||||
513,342 | Revvity, Inc. |
| 42,530,385 | ||
23,017 | S&P Global, Inc. |
| 8,040,068 | ||
Total United States |
| 50,570,453 | |||
Total Common Stock |
| 1,767,869,727 | |||
REGISTERED INVESTMENT COMPANIES (3.1%) |
| ||||
UNITED STATES (3.1%) |
| ||||
57,100,000 | Morgan Stanley Institutional Liquidity Funds – Treasury Securities Portfolio, Institutional Share Class |
| 57,100,000 | ||
Total United States |
| 57,100,000 | |||
Total Registered Investment Companies |
| 57,100,000 | |||
WARRANTS (0.0%) |
| ||||
CANADA (0.0%) |
| ||||
18,143 | Constellation Software Inc., expires 03/31/20401 |
| 0 | ||
Total Canada |
| 0 | |||
Total Warrants |
| 0 |
TOTAL INVESTMENTS (Cost $1,749,448,802)2 | 98.3 | % | $ | 1,824,969,727 | ||||
CASH AND OTHER ASSETS IN EXCESS OF LIABILITIES | 1.7 | % |
| 32,252,723 | ||||
NET ASSETS | 100.00 | % | $ | 1,857,222,450 |
____________
1 Non-income producing security.
2 The aggregate cost for federal income tax purposes is $1,771,431,193, the aggregate gross unrealized appreciation is $258,924,766 and the aggregate gross unrealized depreciation is $205,386,232, resulting in net unrealized appreciation of $53,538,534.
The Fund’s country diversification is based on the respective security’s country of incorporation.
Abbreviation:
ADR − American Depositary Receipt.
The accompanying notes are an integral part of these financial statements. | ||
12 |
BBH PARTNER FUND – INTERNATIONAL EQUITY |
PORTFOLIO OF INVESTMENTS (continued) October 31, 2023 |
Fair Value Measurements
The Fund is required to disclose information regarding the fair value measurements of the Fund’s assets and liabilities. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The disclosure requirement established a three-tier hierarchy to maximize the use of observable market data and minimize the use of unobservable inputs and to establish classification of fair value measurements for disclosure purposes. Inputs refer broadly to the assumptions that market participants would use in pricing the asset or liability, including, for example, the risk inherent in a particular valuation technique used to measure fair value, including the model and/or the risk inherent in the inputs to the valuation technique. Inputs may be observable or unobservable. Observable inputs are inputs that reflect the assumptions market participants would use in pricing the asset or liability developed based on market data obtained from sources independent of the reporting entity. Unobservable inputs are inputs that reflect the Fund’s own considerations about the assumptions market participants would use in pricing the asset or liability developed based on the best information available in the circumstances.
Authoritative guidance establishes three levels of the fair value hierarchy as follows:
— | Level 1 – unadjusted quoted prices in active markets for identical assets and liabilities. | |
— | Level 2 – significant other observable inputs (including quoted prices for similar assets and liabilities, interest rates, prepayment speeds, credit risk, etc.). | |
— | Level 3 – significant unobservable inputs (including the Fund’s own assumptions in determining the fair value of assets and liabilities). |
Inputs are used in applying the various valuation techniques and broadly refer to the assumptions that market participants use to make valuation decisions, including assumptions about risk. Inputs may include price information, specific and broad credit data, liquidity statistics, and other factors. A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. However, the determination of what constitutes “observable” requires judgment by the investment adviser. The investment adviser considers observable data to be that market data which is readily available, regularly distributed or updated, reliable and verifiable, not proprietary, and provided by independent sources that are actively involved in the relevant market. The categorization of a financial instrument within the hierarchy is based upon the pricing transparency of the instrument and does not necessarily correspond to the investment adviser’s perceived risk of that instrument.
Financial assets within Level 1 are based on quoted market prices in active markets. The Fund does not adjust the quoted price for these instruments.
Financial instruments that trade in markets that are not considered to be active but are valued based on quoted market prices, dealer quotations or alternative pricing sources supported by observable inputs are classified within Level 2. These include investment-grade corporate bonds, U.S. Treasury notes and bonds, and certain non-U.S. sovereign obligations and over-the-counter derivatives and foreign equity securities whose values could be impacted by events occurring before the Fund’s pricing time, but after the
The accompanying notes are an integral part of these financial statements. | ||
F I N A N C I A L S T A T E M E N T S O C T O B E R 3 1, 2 0 2 3 | 13 |
BBH PARTNER FUND – INTERNATIONAL EQUITY |
PORTFOLIO OF INVESTMENTS (continued) October 31, 2023 |
close of the securities’ primary markets and are, therefore, fair valued according to procedures adopted by the Board of Trustees. As Level 2 financial assets include positions that are not traded in active markets and/or are subject to transfer restrictions, valuations may be adjusted to reflect illiquidity and/or non-transferability, which are generally based on available market information.
Financial assets classified within Level 3 have significant unobservable inputs, as they trade infrequently. Level 3 financial assets include private equity and certain corporate debt securities.
Because of the inherent uncertainties of valuation, the values reflected in the financial statements may materially differ from the value received upon the actual sale of those investments.
The following table summarizes the valuation of the Fund’s investments by the above fair value hierarchy levels as of October 31, 2023.
Investments, at value | Unadjusted | Significant | Significant | Balance as of | ||||||||
Common Stock: |
|
|
|
| ||||||||
Canada | $ | 93,655,173 | $ | — | $ | — | $ | 93,655,173 | ||||
Cayman Islands |
| 26,393,554 |
| 26,452,717 |
| — |
| 52,846,271 | ||||
Denmark |
| — |
| 19,585,518 |
| — |
| 19,585,518 | ||||
Finland |
| — |
| 18,109,539 |
| — |
| 18,109,539 | ||||
France |
| — |
| 276,279,897 |
| — |
| 276,279,897 | ||||
Germany |
| — |
| 160,721,124 |
| — |
| 160,721,124 | ||||
Hong Kong |
| — |
| 109,860,053 |
| — |
| 109,860,053 | ||||
Ireland |
| 35,080,734 |
| 75,669,304 |
| — |
| 110,750,038 | ||||
Japan |
| — |
| 159,673,832 |
| — |
| 159,673,832 | ||||
Jersey |
| — |
| 36,432,686 |
| — |
| 36,432,686 | ||||
Luxembourg |
| 25,260,674 |
| — |
| — |
| 25,260,674 | ||||
Netherlands |
| — |
| 146,883,687 |
| — |
| 146,883,687 | ||||
Singapore |
| — |
| 12,318,193 |
| — |
| 12,318,193 | ||||
South Korea |
| — |
| 29,799,699 |
| — |
| 29,799,699 | ||||
Spain |
| — |
| 14,179,037 |
| — |
| 14,179,037 | ||||
Sweden |
| — |
| 35,068,348 |
| — |
| 35,068,348 | ||||
Switzerland |
| — |
| 126,306,375 |
| — |
| 126,306,375 | ||||
Taiwan |
| 58,393,117 |
| 20,700,511 |
| — |
| 79,093,628 | ||||
United Kingdom |
| — |
| 210,475,502 |
| — |
| 210,475,502 | ||||
United States |
| 50,570,453 |
| — |
| — |
| 50,570,453 | ||||
Registered Investment Companies: |
|
|
|
| ||||||||
United States |
| 57,100,000 |
| — |
| — |
| 57,100,000 | ||||
Warrants: |
|
|
|
| ||||||||
Canada |
| — |
| 0 |
| — |
| 0 | ||||
Total Investments, at value | $ | 346,453,705 | $ | 1,478,516,022 | $ | — | $ | 1,824,969,727 |
The accompanying notes are an integral part of these financial statements. | ||
14 |
BBH PARTNER FUND – INTERNATIONAL EQUITY |
STATEMENT OF ASSETS AND LIABILITIES October 31, 2023 |
ASSETS: |
|
| ||
Investments in securities, at value (Cost $1,749,448,802) | $ | 1,824,969,727 |
| |
Cash |
| 31,462,425 |
| |
Foreign currency at value (Cost $786,233) |
| 785,857 |
| |
Receivables for: |
|
| ||
Dividends |
| 4,360,333 |
| |
Investments sold |
| 2,803,352 |
| |
Shares sold |
| 300,550 |
| |
Interest from Custodian |
| 75,499 |
| |
Total Assets |
| 1,864,757,743 |
| |
LIABILITIES: |
|
| ||
Payables for: |
|
| ||
Investments purchased |
| 5,864,925 |
| |
Investment advisory and administrative fees |
| 941,604 |
| |
Shares redeemed |
| 541,169 |
| |
Custody and fund accounting fees |
| 99,341 |
| |
Professional fees |
| 74,480 |
| |
Transfer agent fees |
| 3,537 |
| |
Board of Trustees’ fees |
| 1,376 |
| |
Accrued expenses and other liabilities |
| 8,861 |
| |
Total Liabilities |
| 7,535,293 |
| |
NET ASSETS | $ | 1,857,222,450 |
| |
Net Assets Consist of: |
|
| ||
Paid-in capital | $ | 2,176,576,988 |
| |
Accumulated deficit |
| (319,354,538 | ) | |
Net Assets | $ | 1,857,222,450 |
| |
|
| |||
NET ASSET VALUE AND OFFERING PRICE PER SHARE |
|
| ||
CLASS I SHARES |
|
| ||
($1,857,222,450 ÷ 139,860,527 shares outstanding) |
| $13.28 |
|
The accompanying notes are an integral part of these financial statements. | ||
F I N A N C I A L S T A T E M E N T S O C T O B E R 3 1, 2 0 2 3 | 15 |
BBH PARTNER FUND – INTERNATIONAL EQUITY |
STATEMENT OF OPERATIONS For the year ended October 31, 2023 |
NET INVESTMENT INCOME: |
|
| ||
Income: |
|
| ||
Dividends (net of foreign withholding taxes of $2,991,132) | $ | 30,355,143 |
| |
Interest income |
| 1,534 |
| |
Interest income from Custodian |
| 1,423,686 |
| |
Other income |
| 2,713 |
| |
Total Income |
| 31,783,076 |
| |
|
| |||
Expenses: |
|
| ||
Investment advisory and administrative fees |
| 12,779,438 |
| |
Custody and fund accounting fees |
| 461,812 |
| |
Professional fees |
| 96,501 |
| |
Board of Trustees’ fees |
| 93,284 |
| |
Transfer agent fees |
| 39,574 |
| |
Miscellaneous expenses |
| 177,220 |
| |
Total Expenses |
| 13,647,829 |
| |
Net Investment Income |
| 18,135,247 |
| |
|
| |||
NET REALIZED AND UNREALIZED GAIN: |
|
| ||
Net realized loss on investments in securities |
| (199,832,985 | ) | |
Net realized loss on foreign exchange transactions and translations |
| (120,336 | ) | |
Net realized loss on investments in securities and foreign exchange transactions and translations |
| (199,953,321 | ) | |
Net change in unrealized appreciation/(depreciation) on investments in securities |
| 306,002,512 |
| |
Net change in unrealized appreciation/(depreciation) on foreign currency translations |
| 289,424 |
| |
Net change in unrealized appreciation/(depreciation) on investments in securities and foreign currency translations |
| 306,291,936 |
| |
Net Realized and Unrealized Gain |
| 106,338,615 |
| |
Net Increase in Net Assets Resulting from Operations | $ | 124,473,862 |
|
The accompanying notes are an integral part of these financial statements. | ||
16 |
BBH PARTNER FUND – INTERNATIONAL EQUITY |
STATEMENTS OF CHANGES IN NET ASSETS
|
For the years ended | ||||||||
2023 | 2022 | |||||||
INCREASE/(DECREASE) IN NET ASSETS FROM: |
|
|
|
| ||||
Operations: |
|
|
|
| ||||
Net investment income | $ | 18,135,247 |
| $ | 10,567,432 |
| ||
Net realized loss on investments in securities and foreign exchange transactions and translations |
| (199,953,321 | ) |
| (200,401,245 | ) | ||
Net change in unrealized appreciation/(depreciation) on investments in securities and foreign currency translations |
| 306,291,936 |
|
| (712,758,587 | ) | ||
Net increase/(decrease) in net assets resulting from operations |
| 124,473,862 |
|
| (902,592,400 | ) | ||
|
|
|
| |||||
Dividends and distributions declared: |
|
|
|
| ||||
Class I |
| (10,360,602 | ) |
| (306,843,011 | ) | ||
|
|
|
| |||||
Share transactions: |
|
|
|
| ||||
Proceeds from sales of shares |
| 135,165,601 |
|
| 800,932,741 |
| ||
Net asset value of shares issued to shareholders for reinvestment of dividends and distributions |
| 276,268 |
|
| 11,341,834 |
| ||
Cost of shares redeemed |
| (442,745,407 | ) |
| (270,792,352 | ) | ||
Net increase/(decrease) in net assets resulting from share transactions |
| (307,303,538 | ) |
| 541,482,223 |
| ||
Total decrease in net assets |
| (193,190,278 | ) |
| (667,953,188 | ) | ||
NET ASSETS: |
|
|
|
| ||||
Beginning of year |
| 2,050,412,728 |
|
| 2,718,365,916 |
| ||
End of year | $ | 1,857,222,450 |
| $ | 2,050,412,728 |
|
The accompanying notes are an integral part of these financial statements. | ||
F I N A N C I A L S T A T E M E N T S O C T O B E R 3 1, 2 0 2 3 | 17 |
BBH PARTNER FUND – INTERNATIONAL EQUITY |
FINANCIAL HIGHLIGHTS Selected per share data and ratios for a Class I share outstanding throughout each year. |
For the years ended October 31, | |||||||||||||||
2023 | 2022 | 2021 | 2020 | 2019 | |||||||||||
Net asset value, beginning of year | $ 12.68 |
| $ 21.10 |
| $ 17.73 |
| $ 16.15 |
| $ 14.90 |
| |||||
Income from investment operations: |
|
|
|
|
| ||||||||||
Net investment income1 | 0.12 |
| 0.07 |
| 0.14 |
| 0.04 |
| 0.10 |
| |||||
Net realized and unrealized gain/(loss) | 0.55 |
| (6.14 | ) | 3.79 |
| 1.81 |
| 2.19 |
| |||||
Total income/(loss) from investment operations | 0.67 |
| (6.07 | ) | 3.93 |
| 1.85 |
| 2.29 |
| |||||
Dividends and distributions to shareholders: |
|
|
|
|
| ||||||||||
From net investment income | (0.07 | ) | (0.13 | ) | (0.04 | ) | (0.09 | ) | (0.16 | ) | |||||
From net realized gains | — |
| (2.22 | ) | (0.52 | ) | (0.18 | ) | (0.88 | ) | |||||
Total dividends and distributions to shareholders | (0.07 | ) | (2.35 | ) | (0.56 | ) | (0.27 | ) | (1.04 | ) | |||||
Net asset value, end of year | $ 13.28 |
| $ 12.68 |
| $ 21.10 |
| $ 17.73 |
| $ 16.15 |
| |||||
Total return2 | 5.24 | % | (31.91 | )% | 22.38 | % | 11.59 | % | 16.92 | % | |||||
|
|
|
|
| |||||||||||
Ratios/Supplemental data: |
|
|
|
|
| ||||||||||
Net assets, end of year (in millions) | $ 1,857 |
| $ 2,050 |
| $ 2,718 |
| $ 2,029 |
| $ 1,790 |
| |||||
Ratio of expenses to average net assets before reductions | 0.64 | % | 0.68 | % | 0.68 | % | 0.69 | % | 0.71 | % | |||||
Expense offset arrangement | — | % | — | % | — | % | — | % | (0.01 | )% | |||||
Ratio of expenses to average net assets after | 0.64 | % | 0.68 | % | 0.68 | % | 0.69 | % | 0.70 | % | |||||
Ratio of net investment income to average net assets | 0.85 | % | 0.45 | % | 0.65 | % | 0.22 | % | 0.66 | % | |||||
Portfolio turnover rate | 65 | % | 52 | % | 86 | % | 77 | % | 135 | % | |||||
|
|
|
|
|
____________
1 Calculated using average shares outstanding for the year.
2 Assumes the reinvestment of distributions.
The accompanying notes are an integral part of these financial statements. | ||
18 |
BBH PARTNER FUND – INTERNATIONAL EQUITY |
NOTES TO FINANCIAL STATEMENTS October 31, 2023 |
1. Organization. The Fund is a separate, diversified series of BBH Trust (the “Trust”), which is registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as an open-end management investment company. The Trust was originally organized under the laws of the State of Maryland on July 16, 1990 as BBH Fund, Inc. and re-organized as a Delaware statutory trust on June 12, 2007. As of October 31, 2023, there were eight series of the Trust. The Fund commenced operations on June 6, 1997 and currently offers one class, Class I. The investment objective of the Fund is to provide investors with long-term maximization of total return, primarily through capital appreciation. Under normal circumstances, at least 80% of the net assets of the Fund, plus any borrowings for investment purposes, are invested in equity securities of companies in the developed and emerging markets of the world, excluding the United States.
2. Significant Accounting Policies. The Fund’s financial statements are prepared in accordance with Generally Accepted Accounting Principles in the United States of America (“GAAP”). The Fund is an investment company and accordingly follows the investment company accounting and reporting guidance of the Financial Accounting Standards Board (“FASB”) Accounting Standard Codification Topic 946 Financial Services – Investment Companies. The following summarizes significant accounting policies of the Fund:
A. Valuation of Investments. The Board of Trustees (the “Board”) has ultimate responsibility for determining the fair value of investments. Pursuant to Rule 2a-5 of the 1940 Act, the Board has designated the Investment Adviser as its valuation designee. The Investment Adviser monitors the continual appropriateness of valuation methods applied and determines if adjustments should be made in light of market factor changes and events affecting issuers. The Investment Adviser performs a series of activities to provide reasonable assurance of the appropriateness of the prices utilized, including but not limited to: periodic independent pricing service due diligence meetings and reviewing the results of back testing on a monthly basis. The Investment Adviser provides the Board with reporting on the results of the back testing as well as positions which were fair valued during the period.
All securities and other investments are recorded at their estimated fair value. The value of investments listed on a securities exchange is based on the last sale price prior to the time when assets are valued, or in the absence of recorded sales, at the most recent bid price on such exchange. If a readily available market quotation is not available or is determined to be unreliable, the investments may be valued utilizing evaluated prices provided by independent pricing services. In establishing such prices, the independent pricing service utilizes both dealer supplied prices and electronic data processing techniques which take into account appropriate factors such as institutional sized trading in similar groups of securities, yield, quality, coupon rate, maturity, type of issue, trading characteristics, the closure of the primary exchange on which securities trade and before the Fund’s net asset value is next determined and other market data without exclusive reliance on quoted exchange prices or over-the-counter prices since such valuations are believed to reflect more accurately the fair value of such investments. Investments may be fair valued by Brown Brothers Harriman & Co. (“BBH”) through a separately identifiable department (“SID” or “Investment Adviser”) in accordance with the BBH Trust Portfolio Valuation Policy and Procedures using methods
| ||
F I N A N C I A L S T A T E M E N T S O C T O B E R 3 1, 2 0 2 3 | 19 |
BBH PARTNER FUND – INTERNATIONAL EQUITY |
NOTES TO FINANCIAL STATEMENTS (continued) October 31, 2023 |
that most fairly reflect the amount that the Fund would reasonably expect to receive for the investment on a current sale in its principal market in the ordinary course of business. Short-term investments, which mature in 60 days or less are valued at amortized cost if their original maturity was 60 days or less, or by amortizing their value on the 61st day prior to maturity, if their original maturity when acquired by the Fund was more than 60 days, unless the use of amortized cost is determined not to represent fair value. Any futures contracts held by the Fund are valued daily at the official settlement price of the exchange on which they are traded.
B. Accounting for Investments and Income. Investment transactions are accounted for on the trade date. Realized gains and losses on investment transactions are determined based on the identified cost method. Dividend income and other distributions received from portfolio securities are recorded on the ex-dividend date. Non-cash dividends included in dividend income, if any, are recorded at the fair market value of securities received at ex-date. Distributions received on securities that represent a return of capital are recorded as a reduction of cost of investments. Distributions received on securities that represent a capital gain are recorded as a realized gain. Interest income is accrued daily. Investment income is recorded net of any foreign taxes withheld where recovery of such tax is uncertain.
C. Fund Expenses. Most expenses of the Trust can be directly attributed to a specific fund. Expenses which cannot be directly attributed to a fund are generally apportioned among each fund in the Trust on a net assets basis. Expense estimates are accrued in the period to which they relate and adjustments are made when actual amounts are known.
D. Forward Foreign Currency Exchange Contracts. The Fund may enter into forward foreign currency exchange contracts (“Contracts”) in connection with planned purchases or sales of securities to economically hedge the U.S. dollar value of securities denominated in a particular currency, or to increase or shift its exposure to a currency other than U.S. dollars. The Fund has no specific limitation on the percentage of assets which may be committed to these types of Contracts. The Fund could be exposed to risks if the counterparties to the Contracts are unable to meet the terms of their Contracts or if the value of the foreign currency changes unfavorably. The U.S. dollar values of foreign currency underlying all contractual commitments held by the Fund are determined using forward foreign currency exchange rates supplied by a quotation service. During the year ended October 31, 2023, the Fund had no open contracts.
E. Foreign Currency Translations. The accounting records of the Fund are maintained in U.S. dollars. Foreign currency amounts are translated into U.S. dollars at the current rate of exchange of such currency against the U.S. dollar to determine the value of investments, assets and liabilities. Purchases and sales of securities, and income and expenses are translated at the prevailing rate of exchange on the respective dates of such transactions. Upon the purchase or sale of a security denominated in foreign currency, the Fund may enter into forward foreign currency exchange contracts for the purchase or sale, for a fixed amount of U.S. dollars, of the amount of foreign currency involved in the underlying security transaction. Reported net realized gains and losses arise from the sales of portfolio securities, sales of foreign currencies, currency gains or losses realized
| ||
20 |
BBH PARTNER FUND – INTERNATIONAL EQUITY |
NOTES TO FINANCIAL STATEMENTS (continued) October 31, 2023 |
between the trade and settlement dates on securities transactions, and the difference between the amounts of dividends, interest and foreign withholding taxes recorded on the Fund’s books and the U.S. dollar equivalent of the amounts actually received or paid. The effect of changes in foreign exchange rates on foreign denominated securities is reflected in the net realized and unrealized gain or loss on investments in securities and foreign exchange transactions and translations and net change in unrealized appreciation or depreciation on investments in securities and foreign currency translations within the Statement of Operations. Net unrealized appreciation or depreciation on foreign currency translations arise from changes in the value of the assets and liabilities, excluding investments in securities, at period end, resulting from changes in the exchange rate.
F. Rule 144A Securities. The Fund may purchase securities that are not registered under the Securities Act of 1933, as amended (“1933 Act”) but that can be sold to “qualified institutional buyers” in accordance with the requirements stated in Rule 144A under the 1933 Act (“Rule 144A Securities”). A Rule 144A Security may be considered illiquid, under SEC Regulations for open-end investment companies, and therefore subject to the 15% limitation on the purchase of illiquid securities, unless it is determined on an ongoing basis that an adequate trading market exists for the security, which is the case for the Fund. Guidelines have been adopted and the daily function of determining and monitoring liquidity of Rule 144A Securities has been delegated to the investment adviser. All relevant factors will be considered in determining the liquidity of Rule 144A Securities and all investments in Rule 144A Securities will be carefully monitored. Information regarding Rule 144A Securities is included at the end of the Portfolio of Investments.
G. Federal Income Taxes. The Fund may be subject to foreign taxes on income, gains on investments or currency repatriation, a portion of which may be recoverable. The Fund will accrue such taxes and recoveries, as applicable, based upon its current interpretation of tax rules and regulations that exist in the markets in which it invests.
Realized gains in certain countries may be subject to foreign taxes at the Fund level, based on statutory rates. The Fund accrues for such foreign taxes on net realized and unrealized gains at the appropriate rate for each jurisdiction, as applicable. The amount, if any, is disclosed as a liability in the Statement of Assets and Liabilities and as an expense in the Statement of Operations.
It is the Trust’s policy to comply with the requirements of the Internal Revenue Code (the “Code”) applicable to regulated investment companies and to distribute substantially all of its taxable income to its shareholders. Accordingly, no federal income tax provision is required. The Fund files a tax return annually using tax accounting methods required under provisions of the Code, which may differ from GAAP, which is the basis on which these financial statements are prepared. Accordingly, the amount of net investment income and net realized gain reported in these financial statements may differ from that reported on the Fund’s tax return, due to certain book-to-tax timing differences such as losses deferred due to “wash sale” transactions and utilization of capital loss carryforwards. These differences may result in temporary over-distributions for financial statement purposes and are classified as distributions in excess of accumulated net realized gains or net investment income. These distributions
| ||
F I N A N C I A L S T A T E M E N T S O C T O B E R 3 1, 2 0 2 3 | 21 |
BBH PARTNER FUND – INTERNATIONAL EQUITY |
NOTES TO FINANCIAL STATEMENTS (continued) October 31, 2023 |
do not constitute a return of capital. Permanent differences are reclassified between paid-in capital and retained earnings/(accumulated deficit) within the Statement of Assets and Liabilities based upon their tax classification. As such, the character of distributions to shareholders reported in the Financial Highlights table may differ from that reported to shareholders on Form 1099-DIV.
The Fund is subject to the provisions of Accounting Standards Codification 740 Income Taxes (“ASC 740”). ASC 740 sets forth a minimum threshold for financial statement recognition of the benefit of a tax position taken or expected to be taken in a tax return. The Fund did not have any unrecognized tax benefits as of October 31, 2023, nor were there any increases or decreases in unrecognized tax benefits for the year then ended. The Fund recognizes interest and penalties, if any, related to unrecognized tax benefits as an income tax expense in the Statement of Operations. During the year ended October 31, 2023, the Fund did not incur any such interest or penalties. The Fund is subject to examination by U.S. federal and state tax authorities for returns filed for the prior three years. The Fund is not aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will significantly change in the next twelve months.
H. Dividends and Distributions to Shareholders. Dividends and distributions from net investment income to shareholders, if any, are paid annually and are recorded on the ex-dividend date. Distributions from net capital gains, if any, are generally declared and paid annually and are recorded on the ex-dividend date. The Fund declared dividends and distributions in the amount of $10,360,602 and $306,843,011 to Class I shares during the years ended October 31, 2023 and October 31, 2022, respectively. In addition, the Fund designated a portion of the payment made to redeeming shareholders as a distribution for income tax purposes.
The tax character of distributions paid during the years ended October 31, 2023 and 2022, respectively, were as follows:
Distributions paid from: | ||||||||||
Ordinary | Net | Total | Tax return | Total | ||||||
2023: | $ 10,360,602 | $ — | $ 10,360,602 | $ — | $ 10,360,602 | |||||
2022: | 114,819,518 | 192,023,493 | 306,843,011 | — | 306,843,011 |
As of October 31, 2023 and 2022, respectively, the components of retained earnings/(accumulated deficit) on tax basis were as follows:
Components of retained earnings/(accumulated deficit): | ||||||||||||||||
Undistributed | Undistributed | Accumulated | Other | Unrealized | Total | |||||||||||
2023: | $18,010,377 | $ — | $(390,810,946 | ) | $(21,982,391) |
| $ 75,428,422 |
| $(319,354,538) |
| ||||||
2022: | 10,356,068 | — | (193,247,052 | ) | (19,713,300 | ) | (230,863,514 | ) | (433,467,798 | ) |
| ||
22 |
BBH PARTNER FUND – INTERNATIONAL EQUITY |
NOTES TO FINANCIAL STATEMENTS (continued) October 31, 2023 |
The Fund had $390,810,946 of net capital loss carryforwards as of October 31, 2023, of which $233,039,581 and $157,771,365, is attributable to short-term and long-term capital losses, respectively.
The Fund is permitted to carryforward capital losses for an unlimited period and they will retain their character as either short-term or long-term capital losses.
Total distributions paid may differ from amounts reported in the Statements of Changes in Net Assets because, for tax purposes, dividends are recognized when actually paid.
The differences between book-basis and tax-basis unrealized appreciation/(depreciation) is attributable primarily to the tax deferral of losses on wash sales.
To the extent future capital gains are offset by capital loss carryforwards, if any, such gains will not be distributed.
I. Use of Estimates. The preparation of the financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities in the financial statements, disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of increase and decrease in net assets from operations during the reporting period. Actual results could differ from these estimates.
3. Fees and Other Transactions with Affiliates
A. Investment Advisory and Administrative Fees. Under a combined Investment Advisory and Administrative Services Agreement (“Agreement”) with the Trust, the Investment Adviser provides investment advisory, portfolio management and administrative services to the Fund. BBH employs a “manager-of-managers” investment approach, whereby it allocates the Fund’s assets to the Fund’s Sub-Advisers, currently Select Equity Group, L.P. (“Select Equity Group”) and effective August 18, 2023, Trinity Street Asset Management (together the “Sub-Advisers”). The Sub-Advisers are responsible for investing the assets of the Fund and the Investment Adviser oversees the Sub-Advisers and evaluates their performance results. The Fund’s investment advisory and administrative services fee is calculated daily and paid monthly at an annual rate equivalent to 0.60% per annum on the first $3 billion of average daily net assets and 0.55% per annum on all average daily net assets over $3 billion. Prior to November 18, 2022, the Fund paid the Investment Adviser a fee equal to 0.65% per annum for the first $3 billion and 0.60% per annum for amounts over $3 billion of the average daily net assets of the Fund. The Investment Adviser pays each Sub-Adviser from its investment advisory and administrative fee an amount that in the aggregate equals the Fund’s investment advisory and administration fee based upon the percentage of net assets that each Sub-Adviser manages. For the year ended October 31, 2023, the Fund incurred $12,779,438 for services under the Agreement.
| ||
F I N A N C I A L S T A T E M E N T S O C T O B E R 3 1, 2 0 2 3 | 23 |
BBH PARTNER FUND – INTERNATIONAL EQUITY |
NOTES TO FINANCIAL STATEMENTS (continued) October 31, 2023 |
B. Custody and Fund Accounting Fees. BBH acts as a custodian and fund accountant and receives custody and fund accounting fees from the Fund calculated daily and incurred monthly. BBH holds all of the Fund’s cash and investments and calculates the Fund’s daily net asset value. The custody fee is an asset and transaction-based fee. The fund accounting fee is an asset-based fee calculated at 0.325 basis points per annum of the Fund’s net asset value, effective September 1, 2023 based on the new agreement. The fund accounting fee was 0.40 basis points per annum until August 31, 2023. For the year ended October 31, 2023, the Fund incurred $461,812 in custody and fund accounting fees. As per agreement with the Fund’s custodian, the Fund receives interest income on cash balances held by the custodian at the BBH Base Rate. The BBH Base Rate is defined as BBH’s effective trading rate in local money markets on each day. The total interest earned by the Fund for the year ended October 31, 2023 was $1,423,686. This amount is included in “Interest income from Custodian” in the Statement of Operations. In the event that the Fund is overdrawn, under the custody agreement with BBH, BBH will make overnight loans to the Fund to cover overdrafts. Pursuant to their agreement, the Fund will pay the BBH Overdraft Base Rate plus 2% on the day of the overdraft. The total interest incurred by the Fund for the year ended October 31, 2023, was $55,558. This amount is included under line item “Custody and fund accounting fees” in the Statement of Operations.
C. Board of Trustees’ Fees. Each Trustee who is not an “interested person” as defined under the 1940 Act receives an annual fee as well as reimbursement for reasonable out-of-pocket expenses from the Fund. For the year ended October 31, 2023, the Fund incurred $93,284 in independent Trustee compensation and expense reimbursements.
D. Officers of the Trust. Officers of the Trust are also employees of BBH. Officers are paid no fees by the Trust for their services to the Trust.
4. Investment Transactions. For the year ended October 31, 2023, the cost of purchases and the proceeds of sales of investment securities, other than short-term investments, were $1,323,502,341 and $1,643,333,999, respectively.
5. Shares of Beneficial Interest. The Trust is permitted to issue an unlimited number of Class I shares of beneficial interest, at no par value. Transactions in Class I shares were as follows:
For the year ended | For the year ended | |||||||||||||||
Shares | Dollars | Shares | Dollars | |||||||||||||
Class I |
|
|
|
|
|
| ||||||||||
Shares sold | 9,345,985 |
| $ | 135,165,601 |
| 50,632,813 |
| $ | 800,932,741 |
| ||||||
Shares issued in connection | 19,947 |
|
| 276,268 |
| 642,233 |
|
| 11,341,834 |
| ||||||
Shares redeemed | (31,157,761 | ) |
| (442,745,407 | ) | (18,483,521 | ) |
| (270,792,352 | ) | ||||||
Net increase/(decrease) | (21,791,829 | ) | $ | (307,303,538 | ) | 32,791,525 |
| $ | 541,482,223 |
|
| ||
24 |
BBH PARTNER FUND – INTERNATIONAL EQUITY |
NOTES TO FINANCIAL STATEMENTS (continued) October 31, 2023 |
6. Principal Risk Factors and Indemnifications.
A. Principal Risk Factors. Investing in the Fund may involve certain risks, as discussed in the Fund’s prospectus, including, but not limited to, those described below:
A shareholder may lose money by investing in the Fund (investment risk). The Fund is actively managed and the decisions by the Sub- Adviser may cause the Fund to incur losses or miss profit opportunities (management risk). Price movements may occur due to factors affecting individual companies, such as the issuance of an unfavorable earnings report, or other events affecting particular industries or the equity market as a whole (equity securities risk). The value of securities held by the Fund may fall due to changing economic, political, regulatory or market conditions, or due to a company’s or issuer’s individual situation. Natural disasters, the spread of infectious illness and other public health emergencies, recession, terrorism and other unforeseeable events may lead to increased market volatility and may have adverse effects on world economies and markets generally (market risk). The Fund may, from time to time, invest in a limited number of issuers. As a result, the appreciation or depreciation of any one security held by the Fund will have a greater impact on the Fund’s net asset value than it would if the Fund invested in a larger number of securities. Although that strategy has the potential to generate attractive returns over time, it also increases the Fund’s volatility and may lead to greater losses (concentrated portfolio holdings risk). There are certain risks associated with investing in securities of companies based outside of the United States, including, but not limited to, recovery of tax withheld by foreign jurisdictions (Non-U.S. investment risk), capital controls imposed by foreign governments in response to economic or political events that may impact the ability of the Fund to buy, sell or otherwise transfer securities or currency (capital controls risk), and risks from investing in securities of issuers based in developing countries (emerging markets risk). Non-U.S. currencies invested in by the Fund may depreciate against the U.S. dollar (currency exchange rate risk). The Fund’s shareholders may be adversely impacted by asset allocation decisions made by an investment adviser whose discretionary clients make up a large percentage of the Fund’s shareholders (shareholder concentration risk). The derivatives held by the Fund which include, forwards, futures, options, rights and warrants, may be riskier than other types of investments and may increase the volatility of the Fund (derivatives risk). Derivatives may be sensitive to changes in economic and market conditions and may create leverage, which could result in losses that significantly exceed the Fund’s original investment. Derivatives expose the Fund to counter-party risk, which is the risk that the derivative counterparty will not fulfill its contractual obligations (and includes credit risk associated with the counterparty). Because the Fund invests in large cap company securities, it may underperform other funds during periods when the Fund’s large cap securities are out of favor (large cap company risk). The extent of the Fund’s exposure to these risks in respect to these financial assets is included in their value as recorded in the Fund’s Statement of Assets and Liabilities.
Please refer to the Fund’s prospectus for a complete description of the principal risks of investing in the Fund.
| ||
F I N A N C I A L S T A T E M E N T S O C T O B E R 3 1, 2 0 2 3 | 25 |
BBH PARTNER FUND – INTERNATIONAL EQUITY |
NOTES TO FINANCIAL STATEMENTS (continued) October 31, 2023 |
B. Indemnifications. Under the Trust’s organizational documents, its officers and Trustees may be indemnified against certain liabilities and expenses arising out of the performance of their duties to the Fund, and shareholders are indemnified against personal liability for the obligations of the Trust. Additionally, in the normal course of business, the Fund enters into agreements with service providers that may contain indemnification clauses. The Fund’s maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Fund that have not yet occurred. The risk of material loss from such claims is considered remote.
7. Subsequent Events. Management has evaluated events and transactions that have occurred since October 31, 2023 through the date the financial statements were issued and determined that there were no subsequent events that would require recognition or additional disclosure in the financial statements.
| ||
26 |
BBH PARTNER FUND – INTERNATIONAL EQUITY |
DISCLOSURE OF FUND EXPENSES October 31, 2023 (unaudited) |
EXAMPLE
As a shareholder of the Fund, you may incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments, reinvested distributions, or other distributions; redemption fees; and exchange fees; and (2) ongoing costs, including management fees; and other Fund expenses. This Example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The Example is based on an investment of $1,000 invested at the beginning of the six-month period and held for the entire period (May 1, 2023 to October 31, 2023).
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.
| ||
F I N A N C I A L S T A T E M E N T S O C T O B E R 3 1, 2 0 2 3 | 27 |
BBH PARTNER FUND – INTERNATIONAL EQUITY |
DISCLOSURE OF FUND EXPENSES (continued) October 31, 2023 (unaudited) |
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as redemption fees or exchange fees. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
Beginning | Ending | Expenses Paid | ||||
Class I | ||||||
Actual | $1,000 | $ 888 | $3.09 | |||
Hypothetical2 | $1,000 | $1,022 | $3.31 |
____________
1 Expenses are equal to the Fund’s annualized expense ratio of 0.65% for I shares, multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period).
2 Assumes a return of 5% before expenses. For the purposes of the calculation, the applicable annualized expenses ratio for each class of shares is subtracted from the assumed return before expenses.
| ||
28 |
BBH PARTNER FUND – INTERNATIONAL EQUITY |
DISCLOSURE OF ADVISOR SELECTION October 31, 2023 (unaudited) |
Sub-Advisory Agreement Approval
The 1940 Act requires that a fund’s investment advisory agreements must be approved both by a fund’s board of trustees and by a majority of the trustees who are not parties to the investment advisory agreements or “interested persons” of any party (“Independent Trustees”), cast in person at a meeting called for the purpose of voting on such approval. However the U.S. Securities and Exchange Commission provided exemptive relief from the in-person provisions of Section 15 of the 1940 Act related to the approval of certain agreements on March 25, 2020 (“Exemptive Relief”).
The Board, a majority of which is comprised of Independent Trustees, held a meeting via videoconference in reliance on the Exemptive Order on July 17, 2023, to consider the approval of a new sub-advisory agreement between the Investment Adviser and Trinity Street Asset Management, LLP (“Trinity Street”) (the “Sub-Advisory Agreement”). the Investment Adviser recommended the approval of the Sub-Advisory Agreement based on several factors, including the Investment Adviser’s evaluation of Trinity Street’s performance as an adviser during various time periods and market cycles, Trinity Street’s reputation, experience, investment philosophy and policies, and the Investment Adviser’s determination that Trinity Street’s investment strategy is complementary to the investment strategy of the Fund’s other sub-adviser Select Equity Group, L.P. At the July 17, 2023 meeting, the Board voted to approve the Sub-Advisory Agreement for an initial two-year term beginning on August 18, 2023 (the “Effective Date”). On the Effective Date, Trinity Street became a sub-adviser to the Fund and began day-to-day portfolio management of a portion of the Fund’s assets. Select Equity Group remains a sub-adviser to the Fund and continues the day-to-day portfolio management of a separate portion of the Fund’s assets. The Investment Adviser employs a “manager of managers” investment approach, whereby it allocates the Fund’s assets to Trinity Street and Select Equity Group.
After reviewing written and oral information from the Investment Adviser and Trinity Street, the Board determined that the proposed Sub-Advisory Agreement was in the best interests of the Fund and its shareholders. The Board considered information relating to portfolio managers, investment philosophies, strategies, and processes, as well as other factors. In approving Trinity Street as a sub-adviser to the Fund, the Board carefully evaluated: (i) the nature and quality of the services expected to be rendered to the Fund; (ii) the distinct investment objective and policies of the Fund; (iii) the history, reputation, qualification and background of Trinity Street’s personnel and Trinity Street’s financial condition; (iv) the performance record of Trinity Street; and (v) other factors deemed relevant.
The Board received from, and discussed with, counsel to the Trust (“Fund Counsel”) a memorandum regarding the responsibilities of trustees for the approval of investment advisory agreements under the 1940 Act, as well as the guidance provided in Gartenberg v. Merrill Lynch Asset Management, Inc., which was affirmed in Jones v. Harris Associates, L.P. In addition, the Board met in executive session outside the presence of Fund management. The following is a summary of the factors the Board considered in making its determination to approve the sub-advisory agreement. No single factor was identified as the principal factor in determining whether to approve the agreement, and individual Trustees may have given different weight to various factors. The Board reviewed these factors with counsel to the Trust. The Board concluded that terms of the sub-advisory agreement were fair and reasonable and that the fee to be paid to Trinity Street was reasonable in light of the services to be provided.
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F I N A N C I A L S T A T E M E N T S O C T O B E R 3 1, 2 0 2 3 | 29 |
BBH PARTNER FUND – INTERNATIONAL EQUITY |
DISCLOSURE OF ADVISOR SELECTION (continued) October 31, 2023 (unaudited) |
Nature, Extent and Quality of the Services
In evaluating the nature, extent and quality of the services to be provided by Trinity Street under the Sub-Advisory Agreement, the Board considered, among other things, information provided by the Investment Adviser and Trinity Street regarding the operations, facilities, organization and personnel of Trinity Street, the anticipated ability of Trinity Street up to perform its duties under the Sub-Advisory Agreement, and the anticipated changes to the current investment program and other practices of the Fund, including proposed changes to the Fund’s principal investment strategies. The Board considered that the appointment of Trinity Street is not expected to result in any diminution in the nature, extent and quality of services provided to the Fund and its shareholders, including compliance services. The Board considered that, although Trinity Street did not have prior experience managing registered investment companies, Trinity Street is an experienced and respected asset management firm and that the Investment Adviser believed that Trinity Street has the capabilities, experience, resources and personnel necessary to provide sub-advisory services to the Fund based on the assessment of their organization, investment talent, and strong back office. The Board considered whether Trinity Street would be able to provide sub-advisory services that are appropriate in scope and extent in light of the investment program for the Fund and whether Trinity Street’s portfolio management team has demonstrated its ability to adhere to compliance procedures. The Board also considered the quality of the investment research capabilities of Trinity Street and the other resources it has dedicated to performing services for the Fund. On the basis of these considerations, together with other information considered, the Board determined that it was satisfied with the nature, extent and quality of the services to be provided by Trinity Street.
Performance
The Board considered Trinity Street’s performance relating to its other accounts, including pooled investment vehicles, investment management experience, capabilities and resources. The Board further considered information regarding Trinity Street’s investment philosophy, the proposed portfolio construction for the potion of the Fund that Trinity Street would manage, and investment techniques to be employed. On the basis of this information and the Board’s assessment of the nature, extent and quality of the services to be provided by Trinity Street, the Board concluded that Select Equity Group is capable of generating a level of investment performance that is appropriate in light of the proposed changes to the Fund’s principal investment strategy.
Cost of Services to be Provided and Profitability
The Board considered the proposed sub-advisory fee schedule under the Sub-Advisory Agreement and the estimated profitability analysis provided by Trinity Street, noting that the Investment Adviser would be responsible for paying the sub-advisory fee out of the fee it receives from the Fund. The Board considered that the sub-advisory fee schedule payable by the Investment Adviser to Trinity Street is the same as that which is paid to the Fund’s other sub-adviser. The Board considered whether there will be any incidental benefits expected to be derived by Trinity Street from its relationship with the Fund. On the basis of these considerations, together with other information considered, the Board determined that the sub-advisory fee to be received by Trinity Street under the Sub-Advisory Agreement is reasonable in light of the sub-advisory services to be provided.
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30 |
BBH PARTNER FUND – INTERNATIONAL EQUITY |
DISCLOSURE OF ADVISOR SELECTION (continued) October 31, 2023 (unaudited) |
Economies of Scale
In evaluating the extent to which the sub-advisory fees payable under the Sub-Advisory Agreement reflect economies of scale or would permit economies of scale to be realized in the future, the Board considered the sub-advisory fee schedule and the existence of breakpoints in both the advisory and sub-advisory fee schedules. The Board considered that the Investment Adviser believes that the appointment of Trinity Street, as sub-adviser, has the potential to attract additional assets because of Trinity Street’s asset management capabilities. The Board also considered that it would have the opportunity to periodically reexamine the appropriateness of the advisory fees payable by the Fund to the Investment Adviser, and sub-advisory fees payable by the Investment Adviser to Trinity Street, in light of any asset growth experienced in the future.
Fall-Out Benefits
The Board considered whether there will be any incidental benefits expected to be derived by Trinity Street from its relationship with the Fund.
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F I N A N C I A L S T A T E M E N T S O C T O B E R 3 1, 2 0 2 3 | 31 |
BBH PARTNER FUND – INTERNATIONAL EQUITY |
CONFLICTS OF INTEREST October 31, 2023 (unaudited) |
Description of Potential Material Conflicts of Interest – Investment Adviser
BBH, including the Investment Adviser, provides discretionary and non-discretionary investment management services and products to corporations, institutions and individual investors throughout the world. As a result, in the ordinary course of its businesses, BBH, including the Investment Adviser, may engage in activities in which its interests or the interests of its clients may conflict with or be adverse to the interests of the Funds. In addition, certain of such clients (including the Funds) utilize the services of BBH for which they will pay to BBH customary fees and expenses that will not be shared with the Funds.
The Investment Adviser has adopted and implemented policies and procedures that seek to manage conflicts of interest. Pursuant to such policies and procedures, the Investment Adviser monitors a variety of areas, including compliance with fund investment guidelines, the investment in only those securities that have been approved for purchase, and compliance with their respective Code of Ethics.
The Trust also manages these conflicts of interest. For example, the Trust has designated a chief compliance officer (“CCO”) and has adopted and implemented policies and procedures designed to manage the conflicts identified below and other conflicts that may arise in the course of the Funds’ operations in such a way as to safeguard the Funds from being negatively affected as a result of any such potential conflicts. From time to time, the Trustees receive reports from the Investment Adviser, and the Trust’s CCO on areas of potential conflict.
Investors should carefully review the following, which describes potential and actual conflicts of interest that BBH, the Investment Adviser can face in the operation of their respective investment management services. This section is not, and is not intended to be, a complete enumeration or explanation of all of the potential conflicts of interest that may arise. The Investment Adviser and the Funds has adopted policies and procedures reasonably designed to appropriately prevent, limit or mitigate the conflicts of interest described below. Additional information about potential conflicts of interest regarding the Investment Adviser is set forth in the Investment Adviser’s Form ADV. A copy of Part 1 and Part 2A of the Investment Adviser’s Form ADV is available on the SEC’s website (www.adviserinfo.sec.gov). In addition, many of the activities that create these conflicts of interest are limited and/or prohibited by law, unless an exception is available.
Other Clients and Allocation of Investment Opportunities. BBH, the Investment Adviser manages funds and accounts of clients other than the Funds (“Other Clients”). In general, BBH, the Investment Adviser faces conflicts of interest when they render investment advisory services to different clients and, from time to time, provide dissimilar investment advice to different clients. Investment decisions will not necessarily be made in parallel among the Funds and Other Clients. Investments made by the Funds do not, and are not intended to, replicate the investments, or the investment methods and strategies, of Other Clients. Accordingly, such Other Clients may produce results that are materially different from those experienced by the Funds. Certain other conflicts of interest may arise in connection with a portfolio manager’s management of the Funds’ investments, on the one hand, and the investments of other funds or
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32 |
BBH PARTNER FUND – INTERNATIONAL EQUITY |
CONFLICTS OF INTEREST (continued) October 31, 2023 (unaudited) |
accounts for which the portfolio manager is responsible, on the other. For example, it is possible that the various funds or accounts managed by the Investment Adviser could have different investment strategies that, at times, might conflict with one another to the possible detriment of the Funds. From time to time, the Investment Adviser sponsors and with other investment pools and accounts which engage in the same or similar businesses as the Funds using the same or similar investment strategies. To the extent that the same investment opportunities might be desirable for more than one account or fund, possible conflicts could arise in determining how to allocate them because the Investment Adviser may have an incentive to allocate investment opportunities to certain accounts or funds. However, BBH and the Investment Adviser have implemented policies and procedures designed to ensure that information relevant to investment decisions is disseminated promptly within its portfolio management teams and investment opportunities are allocated equitably among different clients. The policies and procedures require, among other things, objective allocation for limited investment opportunities, and documentation and review of justifications for any decisions to make investments only for select accounts or in a manner disproportionate to the size of the account. Nevertheless, access to investment opportunities may be allocated differently among accounts due to the particular characteristics of an account, such as size of the account, cash position, tax status, risk tolerance and investment restrictions or for other reasons.
Actual or potential conflicts of interest may also arise when a portfolio manager has management responsibilities to multiple accounts or funds, resulting in unequal commitment of time and attention to the portfolio management of the funds or accounts.
Affiliated Service Providers. Other potential conflicts might include conflicts between the Funds and its affiliated and unaffiliated service providers (e.g., conflicting duties of loyalty). In addition to providing investment management services through the SID, BBH provides administrative, custody, shareholder servicing and fund accounting services to the Funds. BBH may have conflicting duties of loyalty while servicing the Funds and/or opportunities to further its own interest to the detriment of the Funds. For example, in negotiating fee arrangements with affiliated service providers, BBH may have an incentive to agree to higher fees than it would in the case of unaffiliated providers. BBH acting in its capacity as the Funds’ administrator is the primary valuation agent of the Funds. BBH values securities and assets in the Funds according to the Funds’ valuation policies. Because the Investment Adviser’s advisory and administrative fees are calculated by reference to a Funds’ net assets, BBH and its affiliates may have an incentive to seek to overvalue certain assets.
Aggregation. Potential conflicts of interest also arise with the aggregation of trade orders. Purchases and sales of securities for the Funds may be aggregated with orders for other client accounts managed by the Investment Adviser. The Investment Adviser, however, are not required to aggregate orders if portfolio management decisions for different accounts are made separately, or if it is determined that aggregating is not practicable, or in cases involving client direction. Prevailing trading activity frequently may make impossible the receipt of the same price or execution on the entire volume of securities purchased or sold.
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F I N A N C I A L S T A T E M E N T S O C T O B E R 3 1, 2 0 2 3 | 33 |
BBH PARTNER FUND – INTERNATIONAL EQUITY |
CONFLICTS OF INTEREST (continued) October 31, 2023 (unaudited) |
When this occurs, the various prices may be averaged, and the Funds will be charged or credited with the average price. Thus, the effect of the aggregation may operate on some occasions to the disadvantage of the Funds. In addition, under certain circumstances, the Funds will not be charged the same commission or commission equivalent rates in connection with an aggregated order.
Cross Trades. Under certain circumstances, the Investment Adviser, on behalf of the Funds, may seek to buy from or sell securities to another fund or account advised by BBH, the Investment Adviser. Subject to applicable law and regulation, BBH, the Investment Adviser may (but is not required to) effect purchases and sales between BBH, the Investment Adviser clients (“cross trades”), including the Funds, if BBH or the Investment Adviser believes such transactions are appropriate based on each party’s investment objectives and guidelines. There may be potential conflicts of interest or regulatory issues relating to these transactions which could limit the Investment Adviser’s decision to engage in these transactions for the Funds. BBH and/or the Investment Adviser may have a potentially conflicting division of loyalties and responsibilities to the parties in such transactions.
Soft Dollars. The Investment Adviser may direct brokerage transactions and/or payment of a portion of client commissions (“soft dollars”) to specific brokers or dealers or other providers to pay for research or other appropriate services which provide, in the Investment Adviser’s view, appropriate assistance in the investment decision-making process (including with respect to futures, fixed price offerings and over-the-counter transactions). The use of a broker that provides research and securities transaction services may result in a higher commission than that offered by a broker who does not provide such services. The Investment Adviser will determine in good faith whether the amount of commission is reasonable in relation to the value of research and services provided and whether the services provide lawful and appropriate assistance in its investment decision-making responsibilities.
Research or other services obtained in this manner may be used in servicing any or all of the Funds and other accounts managed by the Investment Adviser, including in connection with accounts that do not pay commissions to the broker related to the research or other service arrangements. Such products and services may disproportionately benefit other client accounts relative to the Funds based on the amount of brokerage commissions paid by the Funds and such other accounts. To the extent that a Sub-adviser uses soft dollars, it will not have to pay for those products and services itself.
BBH may receive research that is bundled with the trade execution, clearing, and/or settlement services provided by a particular broker-dealer. For example, the research effectively will be paid by client commissions that also will be used to pay for the execution, clearing, and settlement services provided by the broker-dealer and will not be paid by the Investment Adviser.
Arrangements regarding compensation and delegation of responsibility may create conflicts relating to selection of brokers or dealers to execute Fund portfolio trades and/or specific uses of commissions from Fund portfolio trades, administration of investment advice and valuation of securities.
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34 |
BBH PARTNER FUND – INTERNATIONAL EQUITY |
CONFLICTS OF INTEREST (continued) October 31, 2023 (unaudited) |
Investments in BBH Funds. From time to time BBH may invest a portion of the assets of its discretionary investment advisory clients in the Funds. That investment by BBH on behalf of its discretionary investment advisory clients in the Funds may be significant at times.
Increasing a Fund’s assets may enhance investment flexibility and diversification and may contribute to economies of scale that tend to reduce the Funds’ expense ratio. In selecting the Funds for its discretionary investment advisory clients, BBH may limit its selection to funds managed by BBH or the Investment Adviser. BBH may not consider or canvass the universe of unaffiliated investment companies available, even though there may be unaffiliated investment companies that may be more appropriate or that have superior performance. BBH, the Investment Adviser and their affiliates providing services to the Funds benefit from additional fees when the Funds is included as an investment by a discretionary investment advisory client.
BBH reserves the right to redeem at any time some or all of the shares of the Funds acquired for its discretionary investment advisory clients’ accounts. A large redemption of shares of the Funds by BBH on behalf of its discretionary investment advisory clients could significantly reduce the asset size of the Funds, which might have an adverse effect on the Funds’ investment flexibility, portfolio diversification and expense ratio.
Valuation. When market quotations are not readily available or are believed by BBH to be unreliable, the Funds’ investments will be valued at fair value by BBH pursuant to procedures adopted by the Funds’ Board. When determining an asset’s “fair value,” BBH seeks to determine the price that a Fund might reasonably expect to receive from the current sale of that asset in an arm’s-length transaction. The price generally may not be determined based on what the Funds might reasonably expect to receive for selling an asset at a later time or if it holds the asset to maturity. While fair value determinations will be based upon all available factors that BBH deems relevant at the time of the determination and may be based on analytical values determined by BBH using proprietary or third-party valuation models, fair value represents only a good faith approximation of the value of a security. The fair value of one or more securities may not, in retrospect, be the price at which those assets could have been sold during the period in which the particular fair values were used in determining the Funds’ net asset value. As a result, the Funds’ sale or redemption of its shares at net asset value, at a time when a holding or holdings are valued by BBH (pursuant to Board-adopted procedures) at fair value, may have the effect of diluting or increasing the economic interest of existing shareholders.
Referral Arrangements. BBH may enter into advisory and/or referral arrangements with third parties. Such arrangements may include compensation paid by BBH to the third party. BBH may pay a solicitation fee for referrals and/or advisory or incentive fees. BBH may benefit from increased amounts of assets under management.
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F I N A N C I A L S T A T E M E N T S O C T O B E R 3 1, 2 0 2 3 | 35 |
BBH PARTNER FUND – INTERNATIONAL EQUITY |
CONFLICTS OF INTEREST (continued) October 31, 2023 (unaudited) |
Personal Trading. BBH, including the Investment Adviser, and any of their respective partners, principals, directors, officers, employees, affiliates or agents, face conflicts of interest when transacting in securities for their own accounts because they could benefit by trading in the same securities as the Funds, which could have an adverse effect on the Funds. However, the Investment Adviser has implemented policies and procedures concerning personal trading by BBH Partners and employees. The policy and procedures are intended to prevent BBH Partners and employees from trading in the same securities as the Funds. However, BBH, including the Investment Adviser, has implemented policies and procedures concerning personal trading by BBH Partners and employees. The policies and procedures are intended to prevent BBH Partners and employees with access to Fund material non-public information from trading in the same securities as the Funds.
Gifts and Entertainment. From time to time, employees of BBH, including the Investment Adviser, and any of their respective partners, principals, directors, officers, employees, affiliates or agents, may receive gifts and/or entertainment from clients, intermediaries, or service providers to the Funds or BBH, including the Investment Adviser, which could have the appearance of affecting or may potentially affect the judgment of the employees, or the manner in which they conduct business. The Investment Adviser has implemented policies and procedures concerning gifts and entertainment to mitigate any impact on the judgment of BBH Partners and employees. BBH, including the Investment Adviser, has implemented policies and procedures concerning gifts and entertainment to mitigate any impact on the judgment of BBH Partners and employees.
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36 |
BBH PARTNER FUND – INTERNATIONAL EQUITY |
ADDITIONAL FEDERAL TAX INFORMATION October 31, 2023 (unaudited) |
Under Section 854(b)(2) of the Internal Revenue Code (the “Code”), the Fund designates up to a maximum of $10,360,602 as qualified dividends for purposes of the maximum rate under Section 1(h)(11) of the Code for the year ended October 31, 2023. In January 2024, shareholders will receive Form 1099-DIV, which will include their share of qualified dividends distributed during the calendar year 2023. Shareholders are advised to check with their tax advisers for information on the treatment of these amounts on their individual income tax returns. The amounts which represent income derived from sources within, and taxes paid to foreign counties or possessions of the United States are as follows:
Foreign | Foreign | |||||
$29,664,765 | $2,991,132 |
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F I N A N C I A L S T A T E M E N T S O C T O B E R 3 1, 2 0 2 3 | 37 |
TRUSTEES AND OFFICERS OF BBH PARTNER FUND – INTERNATIONAL EQUITY |
(unaudited) |
Information pertaining to the Trustees and executive officers of the Trust as of October 31, 2023 is set forth below. The mailing address for each Trustee is c/o BBH Trust, 140 Broadway, New York, NY 10005.
|
|
|
|
| Other Public |
Independent Trustees | |||||
H. Whitney Wagner | Chairman of the Board and Trustee | Chairman Since 2014; Trustee Since 2007 and 2006 – 2007 with the Predecessor Trust | President, Clear Brook Advisors, a registered investment adviser. | 8 | None. |
Andrew S. Frazier | Trustee | Since 2010 | Retired. | 8 | None. |
Mark M. Collins | Trustee | Since 2011 | Partner of Brown Investment Advisory Incorporated, a registered investment adviser. | 8 | Chairman of Dillon Trust Company. |
John M. Tesoro | Trustee | Since 2014 | Retired. | 8 | Independent Trustee, Bridge Builder Trust (11 funds) and Edward Jones Money Market Fund; Director, Teton Advisers, Inc. (a registered investment adviser) (2014 – 2021). |
Joan A. Binstock | Trustee | Since 2019 | Partner, Chief Financial and Operations Officer, Lord Abbett & Co. LLC (1999 – 2018); Lovell Minnick Partners, Advisers Counsel | 8 | Independent Director, Morgan Stanley Direct Lending Fund; KKR Real Estate Interval Fund. |
Karen A. Kochevar | Trustee | Since 2023 | Retired. | 8 | Director, CAVA Group, Inc. |
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38 |
TRUSTEES AND OFFICERS OF BBH PARTNER FUND – INTERNATIONAL EQUITY |
(unaudited) |
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|
|
|
| Other Public |
Interested Trustees | |||||
Susan C. Livingston+ | Trustee | Since 2011 | Partner (since 1998) and Senior Client Advocate (since 2010) for BBH&Co. | 8 | None. |
John A. Gehret+ | Trustee | Since 2011 | Limited Partner of BBH&Co. (2012 – present). | 8 | None. |
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F I N A N C I A L S T A T E M E N T S O C T O B E R 3 1, 2 0 2 3 | 39 |
TRUSTEES AND OFFICERS OF BBH PARTNER FUND – INTERNATIONAL EQUITY |
(unaudited) |
Name, Address | Position(s) | Term of | Principal Occupation(s) |
Officers | |||
Jean-Pierre Paquin | President and Principal Executive Officer | Since 2016 | Partner of BBH&Co. since 2015; joined BBH&Co. in 1996. |
Daniel Greifenkamp | Vice President | Since 2016 | Principal of BBH&Co. |
Charles H. Schreiber | Treasurer and Principal Financial Officer | Since 2007 2006 – 2007 with the Predecessor Trust | Managing Director of BBH&Co. since 2001; joined BBH&Co. in 1999. |
Paul F. Gallagher | Chief Compliance Officer (“CCO”) | Since 2015 | Managing Director of BBH&Co. since 2015. |
Nicole English | Anti-Money Laundering Officer (“AMLO”) | Since 2022 | Vice President of BBH&Co. |
Brian J. Carroll | Secretary | Since 2021 | Vice President of BBH&Co. |
Crystal Cheung | Assistant Treasurer | Since 2018 | Assistant Vice President of BBH&Co. since 2016; joined BBH&Co. in 2014. |
____________
# All officers of the Trust hold office for one year and until their respective successors are chosen and qualified (subject to the ability of the Trustees to remove any officer in accordance with the Trust’s By-laws). Mr. Wagner previously served on the Board of Trustees of the Predecessor Trust.
+ Ms. Livingston and Mr. Gehret are “interested persons” of the Trust as defined in the 1940 Act because of their positions as Partner and Limited Partner of BBH&Co., respectively.
^ The Fund Complex consists of the Trust, which has eight series, and each is counted as one “Portfolio” for purposes of this table.
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40 |
BBH PARTNER FUND – INTERNATIONAL EQUITY |
OPERATION AND EFFECTIVENESS OF THE FUND’S LIQUIDITY RISK MANAGEMENT PROGRAM October 31, 2023 (unaudited) |
The Securities and Exchange Commission adopted Rule 22e-4 under the Investment Company Act of 1940, as amended (the “Liquidity Rule”), to promote effective liquidity risk management throughout the open-end investment company industry in order to reduce the risk that funds will be unable to meet their redemption obligations and mitigate dilution of the interests of fund shareholders.
The Board of Trustees (the “Board”) of BBH Trust has appointed three members of the Brown Brothers Harriman & Co. Mutual Fund Advisory Department, the Investment Adviser to the funds of BBH Trust (the “Funds”), as the Program Administrator for the Fund’s liquidity risk management program (the “Program”). The Board met on March 7, 2023 to review the Program for the Funds pursuant to the Liquidity Rule. The Program Administrator provided the Board with a report (the “Report”) that addressed the operations of the Program and assessed its adequacy and effectiveness for the period from February 1, 2022 through January 31, 2023 (the “Reporting Period”).
The Report noted that the Program complied with the key factors for consideration under the Liquidity Rule for assessing, managing and periodically reviewing a Fund’s liquidity risk, including the following points.
Liquidity classification. The Report described the Program’s liquidity classification methodology for categorizing the Funds’ investments into one of four liquidity buckets. The Fund classified each of its investments into one of four liquidity categories based on the number of days reasonably needed to sell and convert a reasonably anticipated sized trade of each investment into cash without significantly impacting the price of the investments. The Program Administrator relied on a third-party data provider to facilitate the classification of the Fund’s investments based on criteria in the Fund’s Program. During the Reporting Period, the Fund did not hold more than 15% of its net assets in illiquid investments.
Highly Liquid Investment Minimum. The Report noted that one aspect of the Liquidity Rule is a requirement that funds that are expected to have less than 50% of assets classified as other than “highly liquid” should establish a minimum percentage of highly liquid assets that the fund is expected to hold on an on-going basis. The Program Administrator monitors the percentages of assets in each category on an ongoing basis and, given that the Fund did not approach the 50% threshold, has made the determination that it is not necessary to assign a Highly Liquid Investment Minimum to the Fund as provided for in the Liquidity Rule.
The Fund’s investment strategy and liquidity of portfolio investments during normal and reasonably foreseeable stressed market conditions. During the Reporting Period, the Program Administrator reviewed whether the Fund’s investment strategy is appropriate for an open-end fund structure with a focus on funds with more significant and consistent holdings of less liquid and illiquid assets and factored a Fund’s concentration in an issuer into the liquidity classification methodology by taking issuer position sizes into account.
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F I N A N C I A L S T A T E M E N T S O C T O B E R 3 1, 2 0 2 3 | 41 |
BBH PARTNER FUND – INTERNATIONAL EQUITY |
OPERATION AND EFFECTIVENESS OF THE FUND’S LIQUIDITY RISK MANAGEMENT PROGRAM (continued) October 31, 2023 (unaudited) |
Short-term and long-term cash flow projections during normal and reasonably foreseeable stressed market conditions. During the Reporting Period, the Program Administrator reviewed historical redemption activity and used this information as a component to establish the Fund’s reasonably anticipated trading size. The Program Administrator also took into consideration other factors such as shareholder ownership concentration, applicable distribution channels and the degree of certainty associated with the Fund’s short-term and long-term cash flow projections.
Holdings of cash and cash equivalents. The Program Administrator considered the degree to which the Fund held cash and cash equivalents as a component of each Fund’s ability to meet redemption requests.
There were no material changes to the Program during the Reporting Period. The Program Administrator has informed the Board that it believes that the Fund’s Program is adequately designed, has been implemented as intended, and has operated effectively since its implementation. No material exceptions have been noted since the implementation of the Program, and there were no liquidity events that impacted the Fund or its ability to meet redemption requests on a timely basis during the Reporting Period.
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42 |
Administrator Distributor Shareholder Servicing Agent | Investment Adviser | |
To obtain information or make shareholder inquiries: | ||
By telephone: | Call 1-800-575-1265 | |
This report is submitted for the general information of shareholders and is not authorized for distribution to prospective investors unless preceded or accompanied by an effective prospectus. Nothing herein contained is to be considered an offer of sale or a solicitation of an offer to buy shares of the Fund. For more complete information, visit www.bbhfunds.com for a prospectus. You should consider the Fund’s investment objectives, risks, charges and expenses carefully before you invest. Information about these and other important subjects is in the Fund’s prospectus, which you should read carefully before investing. Holdings and allocations are subject to change. Fund holdings should not be relied on in making investment decisions and should not be construed as research or investment advice regarding particular securities. Current and future holdings are subject to risk. The Fund files a complete schedule of portfolio holdings with the Securities and Exchange Commission (SEC) for the first and third quarters of each fiscal year as an exhibit to its reports on Form N-PORT. The Fund’s Forms N-PORT are available electronically on the SEC’s website (sec.gov). For a complete list of a fund’s portfolio holdings, view the most recent holdings listing, semi-annual report, or annual report on the Fund’s web site at http://www.bbhfunds.com. A summary of the Fund’s Proxy Voting Policy that the Fund uses to determine how to vote proxies, if any, relating to securities held in the Fund’s portfolio, as well as a record of how the Fund voted any such proxies during the most recent 12-month period ended June 30, is available, without charge, upon request by calling the toll-free number listed above. This information is also available on the SEC’s website at www.sec.gov. NOT FDIC INSURED NO BANK GUARANTEE MAY LOSE VALUE |
Annual Report
OCTOBER 31, 2023
BBH Limited Duration Fund
BBH Limited Duration Fund |
MANAGEMENT’S DISCUSSION OF FUND PERFORMANCE October 31, 2023 |
The bond market continued to experience challenging conditions over the past year, as interest rates continued to rise and volatility emerged in pockets of the credit markets. Unlike last year, though, fixed income markets were able to perform through those headwinds as interest rates began the year at higher levels. U.S. Treasury rates rose across tenors over the past year as the Fed continued to hike interest rates to combat inflationary pressures. The Fed hiked the federal rates by 2.25% to a range of 5.00% – 5.25% from a range of 3.00% – 3.25% over the past year. Longer-term interest rates rose in tandem and proved a headwind for certain longer-duration assets. The unrelenting pace of monetary policy tightening brought volatility to pockets of the credit markets. Earlier in 2023, the sudden run on Silicon Valley Bank (SVB) spurred a chain reaction that resulted in runs on Silvergate Bank and Signature Bank, stress at Credit Suisse and First Republic Bank that culminated in their sales to UBS and J.P. Morgan, respectively, volatility among U.S. regional banks, and interventions by central banks around the globe to ease depositor concerns.
Performance of mainstream, investment-grade fixed income benchmarks were mixed over the trailing twelve months. The Bloomberg U.S. Aggregate Index returned 0.4% as Treasuries and agency mortgage-backed securities (MBS) in the Index had negative total returns and corporate bonds, asset-backed securities (ABS), and commercial mortgage-backed securities (CMBS) in the Index had positive total returns. Credit indexes generally had positive total returns and outperformed higher quality alternatives. Indices of senior bank loans, high yield corporate bonds, collateralized loan obligation (CLO) debt, investment-grade corporate bonds, and nontraditional ABS* all posted positive returns and outperformed similar duration Treasuries by substantial levels. MBS underperformed Treasuries over the trailing year as the Fed’s Quantitative Tightening campaign combined with duration extensions amid the rising rate environment to challenge MBS. The Non-Agency CMBS Index posted a positive total return but underperformed Treasuries as the sector was challenged by broad concerns over conditions in the commercial real estate market and the ability to refinance debt obligations.
In last year’s letter, we wrote about the reasons we were optimistic for the prospects of actively managed fixed income funds. Credit spreads were elevated, and our valuation framework revealed that large parts of the markets for investment grade and high yield corporate bonds, nontraditional asset-backed securities (ABS), senior bank loans, and commercial mortgage-backed securities (CMBS) screened favorably. Importantly, the opportunities that emerged met our stringent credit criteria, including our analysts’ assessments of whether each credit evaluated for the Fund withstood severe stress scenarios — the worst environments experienced by their industries — without impairment of principal or interest. This was particularly important as we shared the then-pervasive concerns that the Fed’s aggressive pace of policy tightening could push the U.S. to recession and cause defaults to rise among highly levered borrowers.
On October 31, 2023, the Fund was positioned to benefit from the higher income opportunities afforded by durable credits offered at attractive yields. Credit holdings represented approximately 93% of the Fund, while holdings of high quality “reserves” (Treasury securities and cash equivalents) were relatively low at 7% of the Fund. The Fund’s spread duration, a risk measure we use of how sensitive the portfolio is to changes in “credit spreads” (the additional yield on credit instruments over a comparable-maturity Treasury), was 2.0 years as of October 31, 2023. The Fund’s forward-looking yield to maturity was 6.1%.
2 |
BBH Limited Duration Fund |
MANAGEMENT’S DISCUSSION OF FUND PERFORMANCE (continued) October 31, 2023 |
This positioning helped the BBH Limited Duration Fund return 6.43% while the Fund’s benchmark, the Bloomberg 1 – 3 Year Treasury Index, returned 2.89%. The Fund’s Class N Share’s one-year performance ending October 31, 2023 ranked in the 13th percentile out of 236 funds in its competitive Morningstar fund peer group, the Morningstar U.S. Ultrashort Bond Fund universe.** At this time last year, many investors expressed concern that ultrashort bond funds would continue to underperform cash alternatives after observing the rapid pace of Fed tightening. The BBH Limited Duration Fund’s return exceeded the returns offered by short-term alternatives, such as money market instruments and Treasury bills.
The Fund’s outperformance was driven by a combination of its sector and ratings exposures, credit selection results, and duration posture. Overweight exposures to investment-grade corporate bonds, senior bank loans, nontraditional ABS, and high yield corporate bonds contributed to results. The Fund experienced favorable selection results from its positions in corporate credit, nontraditional ABS, and CMBS. The Fund’s duration posture contributed as ultrashort bonds outperformed 1 – 3 year Treasuries over the past year. The Fund’s sector exposure to CMBS hindered relative results, although selection contributions within the sector more than offset the negative sector effect.
We purchased opportunities that met our durability and valuation criteria for the Fund throughout the year. The purchases were made across a wide range of sectors and industries. We purchased corporate bonds spanned 28 different industries, with most purchases coming from bonds issued by banks, automobile manufacturers, and healthcare companies. We purchased bonds from 14 different types of nontraditional ABS issuances, including deals secured by data center leases and revenues, subprime auto loans, and personal consumer loans. We purchased bonds from two different single-asset, single-borrower (SASB) CMBS deals secured by non-office properties. We also purchased loan syndications for companies in six different industries, including healthcare and pharmaceuticals.
The banking sector experienced increased volatility and wider credit spreads in reaction to several idiosyncratic bank failures in the first half of 2023. Relying on our fundamental bottom-up approach we leaned into the volatility and purchased notes from a regional bank that possessed strong asset quality, solid liquidity, satisfactory capital adequacy and net earnings.
Our outlook for the market is that opportunities remain in the credit markets, although measures of aggregate valuation weakened. According to our valuation framework, the percentage of investment-grade corporate bonds that screened as a “buy” decreased to 38% as of October 31, 2023 versus 64% at the start of the year, while the percentage of high yield corporate bonds that screened as a “buy” remained near it’s beginning-of-year level at 41%. Senior bank loans continue to screen attractively, with over 90% of the universe screening as a “buy” candidate. There remain an abundance of opportunities in select subsectors of the market, particularly in interest rate-sensitive sectors. We continue to find opportunities in intermediate maturity bonds rated “single-A” and “BBB” in the investment-grade bond universe, particularly among
____________
* Traditional ABS include prime auto backed loans, credit cards and student loans (FFELP). Non-traditional ABS include ABS backed by other collateral types.
** Morningstar rankings are based on total returns.
F I N A N C I A L S T A T E M E N T S O C T O B E R 3 1, 2 0 2 3 | 3 |
BBH Limited Duration Fund |
MANAGEMENT’S DISCUSSION OF FUND PERFORMANCE (continued) October 31, 2023 |
bonds issued by banks, life insurers, electric utilities, and REITs. Several “BB” and “B” rated bonds from smaller issuers screen attractively in the high yield bond universe. Away from the corporate credit markets, we observe a continuing disconnect between wider credit spread levels and solid credit performance. We are finding an abundance of attractively valued opportunities in non-traditional ABS issuances and collateralized loan obligation (CLO) debt. We believe that opportunities in the CMBS market will arise as stronger properties come to market with single asset single borrower (SASB) securitizations that facilitate strong transparency. Opportunities are emerging in parts of the agency MBS market as valuations improve, and we are prepared to add positions opportunistically. We continue generally to avoid non-agency RMBS due to less favorable technical factors, inadequate equity cushions, weak fundamentals underpinned by weak housing affordability, low inventory of homes for sale, and stable-to-declining home prices.
The Fund remains positioned to benefit from the higher income potential of carefully-selected credits. Credit positions still represent 95% of the Fund, a slight increase from one year ago. Holdings of “reserves” decreased marginally to 5% from 7% last year. “High yield” investments (those rated at or below Ba1/BB+) decreased to 10% of the Fund from 11%. These Fund’s spread duration decreased to 1.8 years from 2.0 years amid these changes.
The Fund’s duration is managed at a level that fosters capital preservation. The Fund’s duration is managed to be less than 1.5 years and has ranged between 0.8 year and 0.9 year over the past twelve months. This is done through assessing the Fund’s holdings, then purchasing or selling Treasury futures to gain or reduce exposures to various points of the yield curve. The Fund’s duration was 0.9 years as of October 31, 2023.
We believe the Limited Duration Fund is positioned well heading into the new fiscal year. Yields remain near their highest levels since before the Global Financial Crisis of 2008. The yield curve implies that the Fed’s tightening campaign may have ended already and could give way to rate cuts in the middle of 2024. Credit valuations are mixed but an abundance of opportunities remain. We are confident that our approach and process will allow us to adapt to changes, capitalize on opportunities, and perform through a variety of environments. Thank you for the trust placed in BBH, and we look forward to engaging with you in 2024 and beyond.
____________
Past performance does not guarantee future results.
Portfolio holdings and characteristics are subject to change.
The BBH Limited Duration Fund was ranked against the following numbers of U.S.-domiciled Ultrashort Bond category funds over the following time periods ending 10/31/2023: 232 funds in the last year, 205 funds in the last three years, 180 funds in the last five years and 97 funds in the last ten years. Class I ranked in the 13th percentile, 14th percentile, 5th percentile and 1st percentile, for the one, three-, five- and ten-year periods respectively. Class N ranked in the 15th percentile, 17th percentile, 8th percentile and 5th percentile, for the one, three-, five- and ten-year periods respectively. Past performance does not guarantee future results. Neither Morningstar nor its content providers are responsible for any damages or losses arising from any use of this information.
Quality ratings reflect the credit quality of the underlying issues in the fund portfolio and not of the fund itself. Issuers with credit ratings of AA or better are considered to be of high credit quality, with little risk of issuer failure. Issuers with credit ratings of BBB or better are considered to be of good credit quality, with adequate capacity to meet financial commitments. Issuers with credit ratings below BBB are considered speculative in nature and are vulnerable to the possibility of issuer failure or business interruption.
4 |
BBH Limited Duration Fund |
MANAGEMENT’S DISCUSSION OF FUND PERFORMANCE (continued) October 31, 2023 |
Growth of $10,000 Invested in BBH Limited Duration
The graph below illustrates the hypothetical investment of $10,0001 in the Class N shares of the Fund over the ten years ended October 31, 2023 as compared to the BCTSY and the Referenced Benchmark.
The annualized gross expense ratios as in the February 28, 2023 prospectus for Class N and Class I shares were 0.49% and 0.27%, respectively.
Performance data quoted represents past performance which is no guarantee of future results. Investment return and principal value will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Fund performance changes over time and current performance may be lower or higher than what is stated. Returns do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. For performance current to the most recent month-end please call 1-800-575-1265.
The Reference Benchmark is an unmanaged weighted index comprised as follows: 40% Bloomberg Barclays Short-Term Corporate Index; 40% Bloomberg Barclays US Aggregate ABS Index; and 20% Bloomberg Barclays US Treasury Bills Index. The indexes are not available for direct investment. The Fund does not measure its performance success nor alter its construction in relation to any particular benchmark or index.
Bloomberg® and the Bloomberg indexes are service marks of Bloomberg Finance L.P. and its affiliates, including Bloomberg Index Services Limited (“BISL”), the administrator of the index (collectively, “Bloomberg”) and have been licensed for use for certain purposes by Brown Brothers Harriman & Co (BBH).
____________
1 The Fund’s performance assumes the reinvestment of all dividends and distributions. The Barclays Capital U.S. 1-3 Year Treasury Bond Index (“BCTSY”) has been adjusted to reflect reinvestment of dividends on securities in the index. The BCTSY is not adjusted to reflect sales charges, expenses or other fees that the Securities and Exchange Commission requires to be reflected in the Fund’s performance.
F I N A N C I A L S T A T E M E N T S O C T O B E R 3 1, 2 0 2 3 | 5 |
BBH Limited Duration Fund |
MANAGEMENT’S DISCUSSION OF FUND PERFORMANCE (continued) October 31, 2023 |
Bloomberg is not affiliated with BBH, and Bloomberg does not approve, endorse, review, or recommend the BBH strategies. Bloomberg does not guarantee the timeliness, accurateness, or completeness of any data or information relating to the fund.
Hypothetical performance results are calculated on a total return basis and include all portfolio income, unrealized and realized capital gains, losses and reinvestment of dividends and other earnings. No one shareholder has actually achieved these results and no representation is being made that any actual shareholder achieved, or is likely to achieve, similar results to those shown. Hypothetical performance does not represent actual trading and may not reflect the impact of material economic and market factors. Undue reliance should not be placed on hypothetical performance results in making an investment decision.
6 |
BBH Limited Duration Fund |
REPORT OF INDEPENDENT REGISTERED ACCOUNTING FIRM |
To the shareholders of BBH Limited Duration Fund and the Board of Trustees of BBH Trust:
Opinion on the Financial Statements and Financial Highlights
We have audited the accompanying statement of assets and liabilities, including the portfolio of investments, of BBH Limited Duration Fund (the “Fund”), one of the funds constituting BBH Trust, as of October 31, 2023, the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, the financial highlights for each of the five years in the period then ended, and the related notes. In our opinion, the financial statements and financial highlights present fairly, in all material respects, the financial position of the Fund as of October 31, 2023, and the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements and financial highlights are the responsibility of the Fund’s management. Our responsibility is to express an opinion on the Fund’s financial statements and financial highlights based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement, whether due to error or fraud. The Fund is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Fund’s internal control over financial reporting. Accordingly, we express no such opinion.
F I N A N C I A L S T A T E M E N T S O C T O B E R 3 1, 2 0 2 3 | 7 |
BBH Limited Duration Fund |
REPORT OF INDEPENDENT REGISTERED ACCOUNTING FIRM (continued) |
Our audits included performing procedures to assess the risks of material misstatement of the financial statements and financial highlights, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements and financial highlights. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements and financial highlights. Our procedures included confirmation of securities owned as of October 31, 2023, by correspondence with the custodian and brokers; when replies were not received from brokers, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinion.
/s/ DELOITTE & TOUCHE LLP
Boston, Massachusetts
December 20, 2023
We have served as the auditor of one or more Brown Brothers Harriman investment companies since 1991.
8 |
BBH Limited Duration Fund |
PORTFOLIO ALLOCATION October 31, 2023 |
BREAKDOWN BY SECURITY TYPE
U.S. $ Value | Percent of | |||||
Asset Backed Securities | $ | 1,686,260,819 | 23.6 | % | ||
Commercial Mortgage Backed Securities |
| 436,326,800 | 6.1 |
| ||
Corporate Bonds |
| 3,502,998,143 | 49.2 |
| ||
Loan Participations and Assignments |
| 897,097,289 | 12.6 |
| ||
Municipal Bonds |
| 122,733,175 | 1.7 |
| ||
Residential Mortgage Backed Securities |
| 22,513,685 | 0.3 |
| ||
U.S. Government Agency Obligations |
| 42,147,565 | 0.6 |
| ||
U.S. Treasury Bills |
| 409,268,097 | 5.8 |
| ||
Cash and Other Assets in Excess of Liabilities |
| 8,146,660 | 0.1 |
| ||
NET ASSETS | $ | 7,127,492,233 | 100.0 | % |
All data as of October 31, 2023. 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.
F I N A N C I A L S T A T E M E N T S O C T O B E R 3 1, 2 0 2 3 | 9 |
BBH Limited Duration Fund |
PORTFOLIO OF INVESTMENTS October 31, 2023 |
Principal | Maturity | Interest | Value | ||||||||
| ASSET BACKED SECURITIES (23.6%) |
|
| ||||||||
$ | 10,000,000 | AGL Core CLO 2, Ltd. 2019-2A (3-Month CME Term SOFR + 1.652%)1,2 | 04/20/32 | 7.067 | % | $ | 9,965,011 | ||||
| 10,146,804 | AIM Aviation Finance, Ltd. 2015-1A1 | 02/15/40 | 6.213 |
|
| 6,545,094 | ||||
| 7,555,000 | Aligned Data Centers Issuer LLC 2023-1A1 | 08/17/48 | 6.000 |
|
| 7,123,361 | ||||
| 6,982,421 | Amur Equipment Finance Receivables X LLC 2022-1A1 | 10/20/27 | 1.640 |
|
| 6,735,773 | ||||
| 8,000,000 | Amur Equipment Finance Receivables XII LLC 2023-1A1 | 12/20/29 | 6.090 |
|
| 7,980,186 | ||||
| 6,742,979 | ARI Fleet Lease Trust 2022-A1 | 01/15/31 | 3.120 |
|
| 6,660,525 | ||||
| 9,105,000 | ARI Fleet Lease Trust 2023-B1 | 07/15/32 | 6.050 |
|
| 9,077,084 | ||||
| 29,003,729 | Audax Senior Debt CLO III LLC 2020-1A (3-Month CME Term SOFR + 1.872%)1,2 | 01/20/30 | 7.287 |
|
| 28,930,332 | ||||
| 11,930,000 | Avis Budget Rental Car Funding AESOP LLC 2023-3A1 | 02/22/28 | 5.440 |
|
| 11,617,705 | ||||
| 9,500,000 | Avis Budget Rental Car Funding AESOP LLC 2023-7A1 | 08/21/28 | 5.900 |
|
| 9,372,968 | ||||
| 2,123,242 | Bankers Healthcare Group Securitization Trust 2020-A1 | 09/17/31 | 2.560 |
|
| 2,093,905 | ||||
| 17,263,696 | BHG Securitization Trust 2022-A1 | 02/20/35 | 1.710 |
|
| 16,705,862 | ||||
| 13,597,567 | BHG Securitization Trust 2023-A1 | 04/17/36 | 5.550 |
|
| 13,388,664 | ||||
| 8,690,000 | BHG Securitization Trust 2023-B1,3 | 12/17/36 | 6.920 |
|
| 8,688,844 | ||||
| 12,410,000 | BlackRock Elbert CLO V LLC 5A (3-Month CME Term SOFR + 1.850%)1,2 | 06/15/34 | 7.104 |
|
| 12,262,878 | ||||
| 4,474,340 | Business Jet Securities LLC 2020-1A1 | 11/15/35 | 2.981 |
|
| 4,218,989 | ||||
| 8,795,977 | Business Jet Securities LLC 2022-1A1 | 06/15/37 | 4.455 |
|
| 8,200,934 | ||||
| 44,170,000 | California Street CLO IX LP 2012-9A (3-Month CME Term SOFR + 1.362%)1,2 | 07/16/32 | 6.755 |
|
| 43,559,509 | ||||
| 29,280,000 | Carlyle US CLO, Ltd. 2019-2A (3-Month CME Term SOFR + 1.382%)1,2 | 07/15/32 | 6.775 |
|
| 29,078,466 | ||||
| 20,444,306 | CARS-DB4 LP 2020-1A1 | 02/15/50 | 3.190 |
|
| 19,366,298 | ||||
| 10,320,483 | CARS-DB7 LP 2023-1A1 | 09/15/53 | 5.750 |
|
| 10,110,485 | ||||
| 22,918,037 | CF Hippolyta Issuer LLC 2020-11 | 07/15/60 | 1.690 |
|
| 20,785,883 | ||||
| 6,122,819 | CFMT LLC 2021-HB51,2,4 | 02/25/31 | 0.801 |
|
| 6,062,083 | ||||
| 4,222,530 | Chesapeake Funding II LLC 2020-1A1 | 08/15/32 | 0.870 |
|
| 4,182,066 | ||||
| 12,844,440 | Chesapeake Funding II LLC 2023-1A1 | 05/15/35 | 5.650 |
|
| 12,747,786 | ||||
| 9,391,816 | Chesapeake Funding II LLC 2023-2A1 | 10/15/35 | 6.160 |
|
| 9,372,194 | ||||
| 25,000,000 | Churchill MMSLF CLO-I LP 2021-2A (3-Month SOFR + 1.450%)1,2 | 10/01/32 | 7.126 |
|
| 24,712,727 | ||||
| 6,470,000 | Credit Acceptance Auto Loan Trust 2023-1A1 | 07/15/33 | 7.710 |
|
| 6,431,460 | ||||
| 11,645,000 | Daimler Trucks Retail Trust 2023-1 | 03/15/27 | 5.900 |
|
| 11,634,762 | ||||
| 12,445,000 | Deerpath Capital CLO, Ltd. 2022-1A (3-Month CME Term SOFR + 1.950%)1,2 | 07/15/33 | 7.344 |
|
| 12,314,632 | ||||
| 657,800 | Dell Equipment Finance Trust 2022-11 | 08/23/27 | 2.110 |
|
| 656,708 |
The accompanying notes are an integral part of these financial statements.
10 |
BBH Limited Duration Fund |
PORTFOLIO OF INVESTMENTS (continued) October 31, 2023 |
Principal | Maturity | Interest | Value | ||||||||
| ASSET BACKED SECURITIES (continued) |
|
| ||||||||
$ | 6,749,009 | Donlen Fleet Lease Funding 2 LLC 2021-21 | 12/11/34 | 0.560 | % | $ | 6,622,899 | ||||
| 17,180,000 | Dryden 93 CLO, Ltd. 2021-93A (3-Month CME Term SOFR + 1.342%)1,2 | 01/15/34 | 6.735 |
|
| 17,003,467 | ||||
| 4,274,836 | ECAF I, Ltd. 2015-1A1 | 06/15/40 | 3.473 |
|
| 2,586,481 | ||||
| 11,586,815 | Elm Trust 2020-3A1 | 08/20/29 | 2.954 |
|
| 10,931,919 | ||||
| 9,009,084 | Enterprise Fleet Financing LLC 2022-11 | 01/20/28 | 3.030 |
|
| 8,788,654 | ||||
| 11,745,610 | Enterprise Fleet Financing LLC 2022-41 | 10/22/29 | 5.760 |
|
| 11,678,817 | ||||
| 10,445,000 | Enterprise Fleet Financing LLC 2023-31 | 03/20/30 | 6.400 |
|
| 10,455,246 | ||||
| 2,766,533 | Exeter Automobile Receivables Trust 2022-6A | 11/17/25 | 5.730 |
|
| 2,765,285 | ||||
| 1,931,213 | FCI Funding LLC 2021-1A1 | 04/15/33 | 1.130 |
|
| 1,886,287 | ||||
| 17,052,556 | Finance of America HECM Buyout 2022-HB11,2,4 | 02/25/32 | 2.695 |
|
| 16,009,557 | ||||
| 50,300,000 | Flexential Issuer 2021-1A1 | 11/27/51 | 3.250 |
|
| 43,541,717 | ||||
| 10,264,244 | FNA LLC 2019-11,2,4,5 | 12/10/31 | 3.000 |
|
| 9,289,141 | ||||
| 10,940,000 | Ford Credit Floorplan Master Owner Trust A 2023-11 | 05/15/28 | 4.920 |
|
| 10,706,724 | ||||
| 18,850,007 | Global SC Finance VII Srl 2020-1A1 | 10/17/40 | 2.170 |
|
| 16,824,794 | ||||
| 19,422,711 | Global SC Finance VII Srl 2020-2A1 | 11/19/40 | 2.260 |
|
| 17,274,252 | ||||
| 50,750,000 | Golub Capital Partners ABS Funding, Ltd. 2021-2A1 | 10/19/29 | 2.944 |
|
| 45,230,105 | ||||
| 8,300,000 | HPEFS Equipment Trust 2023-2A1 | 01/21/31 | 6.040 |
|
| 8,293,850 | ||||
| 19,476,699 | HTS Fund I LLC 2021-11 | 08/25/36 | 1.411 |
|
| 16,810,725 | ||||
| 11,917,432 | LCM XXIV, Ltd. 24A (3-Month CME Term SOFR + 1.242%)1,2 | 03/20/30 | 6.657 |
|
| 11,797,832 | ||||
| 38,308,100 | Madison Park Funding XXV, Ltd. 2017-25A (3-Month CME Term SOFR + 1.232%)1,2 | 04/25/29 | 6.610 |
|
| 38,110,603 | ||||
| 13,105,864 | Mariner Finance Issuance Trust 2020-AA1 | 08/21/34 | 2.190 |
|
| 12,740,389 | ||||
| 14,800,000 | Mariner Finance Issuance Trust 2023-AA1 | 10/22/35 | 6.700 |
|
| 14,780,058 | ||||
| 7,880,846 | MCF CLO IX, Ltd. 2019-1A (3-Month CME Term SOFR + 1.500%)1,2 | 07/17/31 | 6.903 |
|
| 7,789,640 | ||||
| 41,880,000 | Monroe Capital Income Plus ABS Funding LLC 2022-1A1 | 04/30/32 | 4.050 |
|
| 37,874,400 | ||||
| 12,410,000 | Monroe Capital Mml CLO X, Ltd. 2020-1A (3-Month CME Term SOFR + 1.870%)1,2 | 05/20/34 | 7.250 |
|
| 12,179,783 | ||||
| 47,600,000 | Neuberger Berman Loan Advisers CLO 34, Ltd. 2019-34A (3-Month CME Term SOFR + 1.240%)1,2 | 01/20/35 | 6.656 |
|
| 47,188,227 | ||||
| 17,690,000 | NextGear Floorplan Master Owner Trust 2022-1A1 | 03/15/27 | 2.800 |
|
| 16,883,897 | ||||
| 6,235,000 | Nissan Auto Receivables 2023-B Owner Trust | 03/15/28 | 5.930 |
|
| 6,215,815 | ||||
| 17,257,243 | NMEF Funding LLC 2022-A1 | 10/16/28 | 2.580 |
|
| 16,933,538 | ||||
| 15,695,000 | NMEF Funding LLC 2023-A1 | 06/17/30 | 6.570 |
|
| 15,682,150 | ||||
| 30,000,000 | Northwoods Capital XVIII, Ltd. 2019-18A (3-Month CME Term SOFR + 1.362%)1,2 | 05/20/32 | 6.741 |
|
| 29,711,334 |
The accompanying notes are an integral part of these financial statements.
F I N A N C I A L S T A T E M E N T S O C T O B E R 3 1, 2 0 2 3 | 11 |
BBH Limited Duration Fund |
PORTFOLIO OF INVESTMENTS (continued) October 31, 2023 |
Principal | Maturity | Interest | Value | ||||||||
| ASSET BACKED SECURITIES (continued) |
|
| ||||||||
$ | 32,920,000 | Octagon Investment Partners 20-R, Ltd. 2019-4A (3-Month CME Term SOFR + 1.412%)1,2 | 05/12/31 | 6.781 | % | $ | 32,738,710 | ||||
| 21,250,000 | OnDeck Asset Securitization Trust III LLC 2021-1A1 | 05/17/27 | 1.590 |
|
| 20,512,364 | ||||
| 14,337,000 | OnDeck Asset Securitization Trust IV LLC 2023-1A1 | 08/19/30 | 7.000 |
|
| 14,172,284 | ||||
| 14,640,000 | OneMain Financial Issuance Trust 2022-3A1 | 05/15/34 | 5.940 |
|
| 14,503,555 | ||||
| 13,350,000 | OneMain Financial Issuance Trust 2022-S11 | 05/14/35 | 4.130 |
|
| 12,714,747 | ||||
| 16,380,000 | OneMain Financial Issuance Trust 2023-2A1 | 09/15/36 | 5.840 |
|
| 16,059,211 | ||||
| 6,873,499 | Oportun Funding XIII LLC 2019-A1 | 08/08/25 | 3.080 |
|
| 6,820,569 | ||||
| 56,210,000 | Oportun Issuance Trust 2021-C1 | 10/08/31 | 2.180 |
|
| 50,809,124 | ||||
| 25,000,000 | Oportun Issuance Trust 2022-A1 | 06/09/31 | 5.050 |
|
| 24,310,655 | ||||
| 5,977,792 | OSCAR US Funding XIV LLC 2022-1A1 | 03/10/25 | 1.600 |
|
| 5,946,604 | ||||
| 25,930,000 | Oxford Finance Funding LLC 2022-1A1 | 02/15/30 | 3.602 |
|
| 24,491,689 | ||||
| 36,132,365 | Palmer Square Loan Funding, Ltd. 2022-1A (3-Month CME Term SOFR + 1.050%)1,2 | 04/15/30 | 6.444 |
|
| 35,816,608 | ||||
| 19,180,482 | Parliament CLO II, Ltd. 2021-2A (3-Month CME Term SOFR + 1.612%)1,2 | 08/20/32 | 6.991 |
|
| 19,134,378 | ||||
| 47,670,000 | PFS Financing Corp. 2022-A1 | 02/15/27 | 2.470 |
|
| 45,507,508 | ||||
| 19,980,000 | PFS Financing Corp. 2022-C1 | 05/15/27 | 3.890 |
|
| 19,303,877 | ||||
| 9,810,000 | PFS Financing Corp. 2023-A1 | 03/15/28 | 5.800 |
|
| 9,777,440 | ||||
| 16,532,318 | Regional Management Issuance Trust 2020-11 | 10/15/30 | 2.340 |
|
| 16,088,050 | ||||
| 16,470,000 | Republic Finance Issuance Trust 2020-A1 | 11/20/30 | 2.470 |
|
| 16,099,865 | ||||
| 56,030,000 | Republic Finance Issuance Trust 2021-A1 | 12/22/31 | 2.300 |
|
| 52,007,410 | ||||
| 23,320,000 | Retained Vantage Data Centers Issuer LLC 2023-1A1 | 09/15/48 | 5.000 |
|
| 21,039,630 | ||||
| 10,277,387 | RMF Buyout Issuance Trust 2021-HB11,2,4 | 11/25/31 | 1.259 |
|
| 9,834,229 | ||||
| 7,888,040 | Santander Drive Auto Receivables Trust 2023-2 | 03/16/26 | 5.870 |
|
| 7,871,515 | ||||
| 18,105,000 | Santander Drive Auto Receivables Trust 2023-5 | 07/15/27 | 6.310 |
|
| 18,101,991 | ||||
| 34,490,000 | Santander Revolving Auto Loan Trust 2019-A1 | 01/26/32 | 2.510 |
|
| 33,036,681 | ||||
| 1,100,527 | SCF Equipment Leasing LLC 2022-1A1 | 02/22/28 | 2.060 |
|
| 1,097,952 | ||||
| 8,157,678 | Shenton Aircraft Investment I, Ltd. 2015-1A1 | 10/15/42 | 4.750 |
|
| 6,871,702 | ||||
| 22,755,000 | Southwick Park CLO LLC 2019-4A (3-Month CME Term SOFR + 1.322%)1,2 | 07/20/32 | 6.737 |
|
| 22,548,724 | ||||
| 19,151,595 | Stack Infrastructure Issuer LLC 2019-1A1 | 02/25/44 | 4.540 |
|
| 18,999,275 | ||||
| 19,160,000 | Stack Infrastructure Issuer LLC 2020-1A1 | 08/25/45 | 1.893 |
|
| 17,421,860 | ||||
| 12,360,729 | SWC Funding LLC 2018-1A1 | 08/15/33 | 4.750 |
|
| 12,254,341 | ||||
| 50,790,000 | Symphony CLO XXI, Ltd. 2019-21A (3-Month CME Term SOFR + 1.322%)1,2 | 07/15/32 | 6.715 |
|
| 50,436,004 | ||||
| 12,760,000 | Synchrony Card Funding LLC 2022-A1 | 04/15/28 | 3.370 |
|
| 12,294,592 | ||||
| 13,310,000 | TierPoint Issuer LLC 2023-1A1 | 06/25/53 | 6.000 |
|
| 12,684,578 | ||||
| 12,920,000 | Vantage Data Centers Issuer LLC 2023-1A1 | 03/16/48 | 6.316 |
|
| 12,425,846 | ||||
| 3,831,956 | Veros Auto Receivables Trust 2022-11 | 12/15/25 | 3.470 |
|
| 3,796,470 |
The accompanying notes are an integral part of these financial statements.
12 |
BBH Limited Duration Fund |
PORTFOLIO OF INVESTMENTS (continued) October 31, 2023 |
Principal | Maturity | Interest | Value | ||||||||
| ASSET BACKED SECURITIES (continued) |
|
| ||||||||
$ | 10,652,044 | VFI ABS LLC 2022-1A1 | 03/24/28 | 2.230 | % | $ | 10,407,736 | ||||
| 9,635,000 | VFI ABS LLC 2023-1A1 | 03/26/29 | 7.270 |
|
| 9,631,975 | ||||
| 22,518,719 | Wheels Fleet Lease Funding 1 LLC 2022-1A1 | 10/18/36 | 2.470 |
|
| 22,049,532 | ||||
| 18,550,000 | Wheels Fleet Lease Funding 1 LLC 2023-1A1 | 04/18/38 | 5.800 |
|
| 18,427,698 | ||||
| 12,000,000 | Wheels Fleet Lease Funding 1 LLC 2023-2A1 | 08/18/38 | 6.460 |
|
| 11,962,332 | ||||
| 11,295,000 | World Financial Network Credit Card Master Trust 2023-A | 03/15/30 | 5.020 |
|
| 11,080,748 | ||||
| Total Asset Backed Securities |
|
| 1,686,260,819 | |||||||
| COMMERCIAL MORTGAGE BACKED SECURITIES (6.1%) |
|
| ||||||||
| 26,807,000 | BB-UBS Trust 2012-TFT1,2,4 | 06/05/30 | 3.678 |
|
| 20,425,918 | ||||
| 9,350,000 | BLP Commercial Mortgage Trust 2023-IND (1-Month CME Term SOFR + 1.692%)1,2 | 03/15/40 | 7.027 |
|
| 9,234,095 | ||||
| 20,300,000 | BPR Trust 2022-OANA (1-Month CME Term SOFR + 1.898%)1,2 | 04/15/37 | 7.233 |
|
| 19,842,310 | ||||
| 9,630,020 | BX Commercial Mortgage Trust 2019-XL (1-Month CME Term SOFR + 1.034%)1,2 | 10/15/36 | 6.369 |
|
| 9,575,396 | ||||
| 18,100,000 | BX Commercial Mortgage Trust 2022-CSMO (1-Month CME Term SOFR + 2.115%)1,2 | 06/15/27 | 7.449 |
|
| 18,065,988 | ||||
| 44,618,626 | BX Commercial Mortgage Trust 2022-LP2 (1-Month CME Term SOFR + 1.013%)1,2 | 02/15/39 | 6.347 |
|
| 43,305,080 | ||||
| 26,911,295 | BXMT, Ltd. 2020-FL2 (1-Month CME Term SOFR + 1.014%)1,2 | 02/15/38 | 6.350 |
|
| 25,700,286 | ||||
| 17,295,438 | BXMT, Ltd. 2020-FL3 (1-Month CME Term SOFR + 1.514%)1,2 | 11/15/37 | 6.850 |
|
| 16,520,735 | ||||
| 17,250,000 | BXMT, Ltd. 2021-FL4 (1-Month CME Term SOFR + 1.164%)1,2 | 05/15/38 | 6.500 |
|
| 16,128,750 | ||||
| 31,329,000 | CG-CCRE Commercial Mortgage Trust 2014-FL2 (1-Month CME Term SOFR + 3.014%)1,2 | 11/15/31 | 8.349 |
|
| 25,854,928 | ||||
| 11,715,000 | Commercial Mortgage Pass Through Certificate1 | 07/12/28 | 7.121 |
|
| 11,456,270 | ||||
| 18,200,276 | HPLY Trust 2019-HIT (1-Month CME Term SOFR + 1.114%)1,2 | 11/15/36 | 6.451 |
|
| 18,019,906 | ||||
| 23,600,000 | Life Mortgage Trust 2022-BMR2 (1-Month CME Term SOFR + 1.295%)1,2 | 05/15/39 | 6.630 |
|
| 23,085,119 | ||||
| 17,953,835 | Med Trust 2021-MDLN (1-Month CME Term SOFR + 1.064%)1,2 | 11/15/38 | 6.398 |
|
| 17,425,177 | ||||
| 31,078,720 | MHC Commercial Mortgage Trust 2021-MHC (1-Month CME Term SOFR + 0.915%)1,2 | 04/15/38 | 6.249 |
|
| 30,592,093 | ||||
| 16,040,000 | MTN Commercial Mortgage Trust 2022-LPFL (1-Month CME Term SOFR + 1.397%)1,2 | 03/15/39 | 6.737 |
|
| 15,679,061 |
The accompanying notes are an integral part of these financial statements.
F I N A N C I A L S T A T E M E N T S O C T O B E R 3 1, 2 0 2 3 | 13 |
BBH Limited Duration Fund |
PORTFOLIO OF INVESTMENTS (continued) October 31, 2023 |
Principal | Maturity | Interest | Value | ||||||||
| COMMERCIAL MORTGAGE BACKED SECURITIES (continued) |
|
| ||||||||
$ | 18,788,109 | Ready Capital Mortgage Financing 2022-FL8 LLC (30-Day SOFR + 1.650%)1,2 | 01/25/37 | 6.971 | % | $ | 18,528,833 | ||||
| 46,350,000 | SPGN 2022-TFLM Mortgage Trust (1-Month CME Term SOFR + 1.550%)1,2 | 02/15/39 | 6.885 |
|
| 44,181,279 | ||||
| 8,936,219 | STWD, Ltd. 2019-FL1 (1-Month CME Term SOFR + 1.194%)1,2 | 07/15/38 | 6.529 |
|
| 8,802,821 | ||||
| 24,300,000 | Taubman Centers Commercial Mortgage Trust 2022-DPM (1-Month CME Term SOFR + 2.186%)1,2 | 05/15/37 | 7.521 |
|
| 23,927,901 | ||||
| 20,000,000 | WMRK Commercial Mortgage Trust 2022-WMRK (1-Month CME Term SOFR + 2.789%)1,2 | 11/15/27 | 8.124 |
|
| 19,974,854 | ||||
| Total Commercial Mortgage Backed Securities |
|
| 436,326,800 | |||||||
|
|
| |||||||||
| CORPORATE BONDS (49.2%) |
|
| ||||||||
| ADVERTISING (0.0%) |
|
| ||||||||
| 1,000,000 | Omnicom Group, Inc. | 06/01/30 | 4.200 |
|
| 880,765 | ||||
|
|
| |||||||||
| AEROSPACE/DEFENSE (0.0%) |
|
| ||||||||
| 1,000,000 | HEICO Corp. | 08/01/28 | 5.250 |
|
| 964,637 | ||||
|
|
| |||||||||
| AGRICULTURE (0.0%) |
|
| ||||||||
| 1,000,000 | Cargill, Inc.1 | 02/02/31 | 1.700 |
|
| 755,569 | ||||
|
|
| |||||||||
| APPAREL (0.0%) |
|
| ||||||||
| 1,000,000 | VF Corp. | 04/23/25 | 2.400 |
|
| 941,621 | ||||
|
|
| |||||||||
| AUTO MANUFACTURERS (1.4%) |
|
| ||||||||
| 16,000,000 | Daimler Truck Finance North America LLC1 | 01/17/25 | 5.200 |
|
| 15,858,472 | ||||
| 1,000,000 | General Motors Financial Co., Inc. | 02/26/25 | 2.900 |
|
| 954,791 | ||||
| 23,920,000 | General Motors Financial Co., Inc. | 04/06/26 | 5.400 |
|
| 23,409,379 | ||||
| 9,175,000 | Hyundai Capital America1 | 11/03/25 | 6.250 |
|
| 9,173,657 | ||||
| 11,055,000 | Hyundai Capital America1 | 03/30/26 | 5.500 |
|
| 10,874,394 | ||||
| 13,795,000 | Hyundai Capital America1 | 06/26/26 | 5.650 |
|
| 13,615,061 | ||||
| 25,455,000 | Mercedes-Benz Finance North America LLC1 | 03/30/26 | 4.800 |
|
| 24,935,279 | ||||
|
|
| 98,821,033 | ||||||||
| BANKS (14.9%) |
|
| ||||||||
| 1,000,000 | Bank of America Corp. (SOFR + 1.750%)2 | 07/22/26 | 4.827 |
|
| 974,463 | ||||
| 30,000,000 | Bank of America Corp. (SOFR + 1.340%)2 | 09/15/27 | 5.933 |
|
| 29,693,552 | ||||
| 51,125,000 | Bank of Montreal | 01/10/25 | 1.500 |
|
| 48,478,888 | ||||
| 1,000,000 | Bank of New York Mellon Corp. (SOFR + 1.802%)2 | 10/25/28 | 5.802 |
|
| 987,104 | ||||
| 34,710,000 | Bank of New Zealand1 | 02/20/24 | 3.500 |
|
| 34,445,599 | ||||
| 19,870,000 | Bank of New Zealand1 | 02/07/28 | 4.846 |
|
| 19,000,420 | ||||
| 58,070,000 | Bank of Nova Scotia | 03/11/24 | 2.440 |
|
| 57,347,358 |
The accompanying notes are an integral part of these financial statements.
14 |
BBH Limited Duration Fund |
PORTFOLIO OF INVESTMENTS (continued) October 31, 2023 |
Principal | Maturity | Interest | Value | ||||||||
| CORPORATE BONDS (continued) |
|
| ||||||||
| BANKS (continued) |
|
| ||||||||
$ | 32,500,000 | Bank of Nova Scotia (SOFR + 0.380%)2 | 07/31/24 | 5.736 | % | $ | 32,508,626 | ||||
| 15,015,000 | Bank of Nova Scotia | 01/10/25 | 1.450 |
|
| 14,232,008 | ||||
| 16,915,000 | Canadian Imperial Bank of Commerce | 10/02/26 | 5.926 |
|
| 16,881,793 | ||||
| 19,725,000 | Canadian Imperial Bank of Commerce | 04/28/28 | 5.001 |
|
| 18,779,697 | ||||
| 1,000,000 | Citigroup, Inc. (SOFR + 1.528%)2 | 03/17/26 | 3.290 |
|
| 957,636 | ||||
| 33,540,000 | Commonwealth Bank of Australia (SOFR + 0.400%)1,2 | 07/07/25 | 5.744 |
|
| 33,432,834 | ||||
| 65,000,000 | DNB Bank ASA (1-Year CMT Index + 0.330%)1,2 | 09/30/25 | 0.856 |
|
| 61,832,911 | ||||
| 38,570,000 | Fifth Third Bancorp | 01/25/24 | 3.650 |
|
| 38,294,497 | ||||
| 1,000,000 | Fifth Third Bank NA | 02/01/27 | 2.250 |
|
| 871,471 | ||||
| 20,810,000 | Goldman Sachs Group, Inc. | 12/06/23 | 1.217 |
|
| 20,719,118 | ||||
| 1,000,000 | Goldman Sachs Group, Inc. (SOFR + 1.114%)2 | 02/24/28 | 2.640 |
|
| 885,848 | ||||
| 33,350,000 | HSBC Holdings, Plc. (SOFR + 1.929%)2 | 06/04/26 | 2.099 |
|
| 31,075,877 | ||||
| 5,780,000 | HSBC Holdings, Plc. (SOFR + 3.030%)2 | 11/03/26 | 7.336 |
|
| 5,879,757 | ||||
| 25,640,000 | HSBC Holdings, Plc. (SOFR + 1.570%)2 | 08/14/27 | 5.887 |
|
| 25,189,301 | ||||
| 1,000,000 | HSBC USA, Inc. | 03/17/25 | 5.625 |
|
| 993,496 | ||||
| 18,414,000 | Huntington Bancshares, Inc. (SOFR + 1.970%)2 | 08/04/28 | 4.443 |
|
| 16,818,627 | ||||
| 24,145,000 | Huntington National Bank (SOFR + 1.215%)2 | 11/18/25 | 5.699 |
|
| 23,442,786 | ||||
| 1,000,000 | Huntington National Bank (SOFR + 1.650%)2 | 05/17/28 | 4.552 |
|
| 919,119 | ||||
| 33,270,000 | JPMorgan Chase & Co. (3-Month CME Term SOFR + 1.585%)2 | 03/13/26 | 2.005 |
|
| 31,395,455 | ||||
| 1,000,000 | JPMorgan Chase & Co. (SOFR + 1.850%)2 | 04/22/26 | 2.083 |
|
| 939,825 | ||||
| 18,760,000 | KeyBank NA | 11/15/27 | 5.850 |
|
| 17,373,722 | ||||
| 33,923,000 | Lloyds Banking Group, Plc. | 03/12/24 | 3.900 |
|
| 33,643,279 | ||||
| 24,865,000 | Lloyds Banking Group, Plc. (1-Year CMT Index + 1.600%)2 | 03/18/26 | 3.511 |
|
| 23,836,803 | ||||
| 17,755,000 | Lloyds Banking Group, Plc. (1-Year CMT Index + 1.800%)2 | 03/18/28 | 3.750 |
|
| 16,181,863 | ||||
| 39,660,000 | Mitsubishi UFJ Financial Group, Inc. | 07/17/25 | 1.412 |
|
| 36,646,721 | ||||
| 42,665,000 | Morgan Stanley (SOFR + 1.770%)2 | 10/16/26 | 6.138 |
|
| 42,546,084 | ||||
| 1,000,000 | Morgan Stanley2,4 | 07/22/28 | 3.591 |
|
| 906,912 | ||||
| 1,000,000 | Northern Trust Corp. | 11/02/32 | 6.125 |
|
| 963,927 | ||||
| 15,190,000 | PNC Financial Services Group, Inc. (SOFR + 1.322%)2 | 06/12/26 | 5.812 |
|
| 14,988,578 | ||||
| 25,345,000 | PNC Financial Services Group, Inc. | 10/20/27 | 6.615 |
|
| 25,407,983 | ||||
| 1,000,000 | PNC Financial Services Group, Inc. (SOFR + 1.841%)2 | 06/12/29 | 5.582 |
|
| 957,458 | ||||
| 1,000,000 | Regions Financial Corp. | 05/18/25 | 2.250 |
|
| 918,208 | ||||
| 24,915,000 | Royal Bank of Canada | 08/03/27 | 4.240 |
|
| 23,399,418 | ||||
| 16,070,000 | Santander Holdings USA, Inc. | 06/07/24 | 3.500 |
|
| 15,750,043 | ||||
| 1,000,000 | Santander Holdings USA, Inc. | 06/02/25 | 3.450 |
|
| 946,088 |
The accompanying notes are an integral part of these financial statements.
F I N A N C I A L S T A T E M E N T S O C T O B E R 3 1, 2 0 2 3 | 15 |
BBH Limited Duration Fund |
PORTFOLIO OF INVESTMENTS (continued) October 31, 2023 |
Principal | Maturity | Interest | Value | ||||||||
| CORPORATE BONDS (continued) |
|
| ||||||||
| BANKS (continued) |
|
| ||||||||
$ | 26,360,000 | Skandinaviska Enskilda Banken AB1 | 09/09/24 | 0.650 | % | $ | 25,178,281 | ||||
| 10,085,000 | State Street Corp. (SOFR + 1.353%)2 | 11/04/26 | 5.751 |
|
| 10,027,898 | ||||
| 1,330,000 | State Street Corp. | 03/03/31 | 2.200 |
|
| 995,191 | ||||
| 14,435,000 | Truist Financial Corp. (SOFR + 1.626%)2 | 10/28/26 | 5.900 |
|
| 14,190,525 | ||||
| 1,000,000 | Truist Financial Corp. (SOFR + 1.435%)2 | 01/26/29 | 4.873 |
|
| 923,031 | ||||
| 53,570,000 | UBS Group AG (1-Year CMT Index + 1.550%)1,2 | 01/12/27 | 5.711 |
|
| 52,697,810 | ||||
| 42,990,000 | US Bancorp (5-Year CMT Index + 2.541%)2,6 | 3.700 |
|
| 30,180,489 | |||||
| 22,750,000 | US Bancorp (SOFR + 1.430%)2 | 10/21/26 | 5.727 |
|
| 22,423,614 | ||||
| 1,000,000 | US Bancorp (SOFR + 2.020%)2 | 06/12/29 | 5.775 |
|
| 961,561 | ||||
| 19,370,000 | Wells Fargo & Co. (SOFR + 2.000%)2 | 04/30/26 | 2.188 |
|
| 18,221,341 | ||||
| 7,920,000 | Wells Fargo & Co. (SOFR + 1.560%)2 | 08/15/26 | 4.540 |
|
| 7,675,285 | ||||
| 1,000,000 | Wells Fargo & Co. (3-Month CME Term SOFR + 4.032%)2 | 04/04/31 | 4.478 |
|
| 888,514 | ||||
| 26,655,000 | Westpac Banking Corp. | 11/18/27 | 5.457 |
|
| 26,453,993 | ||||
| 30,895,000 | Westpac New Zealand, Ltd.1 | 02/15/28 | 4.902 |
|
| 29,571,441 | ||||
|
|
| 1,061,834,127 | ||||||||
| BEVERAGES (0.3%) |
|
| ||||||||
| 8,175,000 | Constellation Brands, Inc. | 05/09/24 | 3.600 |
|
| 8,068,556 | ||||
| 15,335,000 | Diageo Capital, Plc. | 10/24/25 | 5.200 |
|
| 15,263,981 | ||||
|
|
| 23,332,537 | ||||||||
| BIOTECHNOLOGY (0.0%) |
|
| ||||||||
| 1,000,000 | Illumina, Inc. | 12/13/27 | 5.750 |
|
| 977,095 | ||||
|
|
| |||||||||
| CHEMICALS (0.0%) |
|
| ||||||||
| 1,000,000 | Albemarle Corp. | 06/01/27 | 4.650 |
|
| 944,351 | ||||
| 1,000,000 | International Flavors & Fragrances, Inc.1 | 10/01/25 | 1.230 |
|
| 901,540 | ||||
|
|
| 1,845,891 | ||||||||
| COMPUTERS (0.0%) |
|
| ||||||||
| 600,000 | Genpact Luxembourg S.a.r.l. | 12/01/24 | 3.375 |
|
| 578,559 | ||||
|
|
| |||||||||
| COSMETICS/PERSONAL CARE (0.0%) |
|
| ||||||||
| 1,000,000 | Estee Lauder Cos, Inc. | 04/15/30 | 2.600 |
|
| 824,243 | ||||
| 800,000 | Kenvue, Inc. | 03/22/25 | 5.500 |
|
| 798,700 | ||||
|
|
| 1,622,943 | ||||||||
| DIVERSIFIED FINANCIAL SERVICES (4.4%) |
|
| ||||||||
| 47,945,000 | AerCap Ireland Capital DAC/AerCap Global Aviation Trust | 02/15/24 | 3.150 |
|
| 47,474,770 | ||||
| 21,450,000 | AerCap Ireland Capital DAC/AerCap Global Aviation Trust | 10/29/24 | 1.750 |
|
| 20,481,164 | ||||
| 1,000,000 | Air Lease Corp. | 02/01/25 | 2.300 |
|
| 949,292 | ||||
| 1,000,000 | American Express Co. (SOFR + 0.999%)2 | 05/01/26 | 4.990 |
|
| 980,815 |
The accompanying notes are an integral part of these financial statements.
16 |
BBH Limited Duration Fund |
PORTFOLIO OF INVESTMENTS (continued) October 31, 2023 |
Principal | Maturity | Interest | Value | ||||||||
| CORPORATE BONDS (continued) |
|
| ||||||||
| DIVERSIFIED FINANCIAL SERVICES (continued) |
|
| ||||||||
$ | 34,045,000 | Aviation Capital Group LLC1 | 12/15/24 | 5.500 | % | $ | 33,501,668 | ||||
| 33,535,000 | Avolon Holdings Funding, Ltd.1 | 01/15/26 | 5.500 |
|
| 32,289,167 | ||||
| 37,385,000 | Bread Financial Holdings, Inc.1 | 12/15/24 | 4.750 |
|
| 36,157,030 | ||||
| 45,285,000 | Capital One Financial Corp. (SOFR + 0.690%)2 | 12/06/24 | 1.343 |
|
| 44,829,417 | ||||
| 10,000,000 | Capital One Financial Corp. (SOFR + 2.440%)2 | 10/29/27 | 7.149 |
|
| 10,001,489 | ||||
| 1,000,000 | Capital One Financial Corp. (SOFR + 2.057%)2 | 05/10/28 | 4.927 |
|
| 925,103 | ||||
| 14,430,000 | Credit Acceptance Corp.1 | 12/31/24 | 5.125 |
|
| 13,951,000 | ||||
| 2,785,000 | Credit Acceptance Corp. | 03/15/26 | 6.625 |
|
| 2,644,361 | ||||
| 48,895,000 | Drawbridge Special Opportunities Fund LP/Drawbridge Special Opportunities Finance1 | 02/15/26 | 3.875 |
|
| 43,137,575 | ||||
| 25,095,000 | Strategic Credit Opportunities Partners LLC | 04/01/26 | 4.250 |
|
| 22,729,470 | ||||
| 1,000,000 | Western Union Co. | 01/10/25 | 2.850 |
|
| 959,232 | ||||
|
|
| 311,011,553 | ||||||||
| ELECTRIC (3.6%) |
|
| ||||||||
| 74,190,000 | Alexander Funding Trust1 | 11/15/23 | 1.841 |
|
| 74,043,112 | ||||
| 1,000,000 | Appalachian Power Co. | 04/01/31 | 2.700 |
|
| 787,422 | ||||
| 1,000,000 | Atlantic City Electric Co. | 03/15/31 | 2.300 |
|
| 774,498 | ||||
| 1,000,000 | Avangrid, Inc. | 04/15/25 | 3.200 |
|
| 957,048 | ||||
| 1,000,000 | Black Hills Corp. | 06/15/30 | 2.500 |
|
| 782,215 | ||||
| 16,025,000 | Constellation Energy Generation LLC | 06/01/25 | 3.250 |
|
| 15,334,617 | ||||
| 1,000,000 | Duke Energy Ohio, Inc. | 06/01/30 | 2.125 |
|
| 781,545 | ||||
| 44,131,324 | Duke Energy Progress NC Storm Funding LLC | 07/01/30 | 1.295 |
|
| 39,655,418 | ||||
| 61,690,000 | Edison International (5-Year CMT Index + 4.698%)2,6 | 5.375 |
|
| 55,284,838 | |||||
| 1,000,000 | Edison International | 11/15/29 | 6.950 |
|
| 1,016,630 | ||||
| 1,000,000 | Entergy Louisiana LLC | 12/15/30 | 1.600 |
|
| 736,113 | ||||
| 1,000,000 | Evergy Missouri West, Inc.1 | 12/15/27 | 5.150 |
|
| 966,666 | ||||
| 1,000,000 | Fells Point Funding Trust1 | 01/31/27 | 3.046 |
|
| 902,251 | ||||
| 1,000,000 | Narragansett Electric Co.1 | 04/09/30 | 3.395 |
|
| 852,387 | ||||
| 1,000,000 | National Rural Utilities Cooperative Finance Corp. | 03/15/30 | 2.400 |
|
| 805,037 | ||||
| 1,000,000 | NextEra Energy Capital Holdings, Inc. | 06/20/25 | 4.450 |
|
| 975,025 | ||||
| 1,000,000 | NRG Energy, Inc.1 | 12/02/25 | 2.000 |
|
| 909,394 | ||||
| 1,000,000 | Oklahoma Gas & Electric Co. | 04/01/30 | 3.250 |
|
| 844,328 | ||||
| 1,000,000 | Pacific Gas & Electric Co. | 07/01/25 | 3.450 |
|
| 948,112 | ||||
| 1,000,000 | PacifiCorp | 09/15/30 | 2.700 |
|
| 799,736 | ||||
| 1,000,000 | Pennsylvania Electric Co.1 | 03/30/26 | 5.150 |
|
| 977,815 | ||||
| 18,615,000 | Public Service Enterprise Group, Inc. | 10/15/28 | 5.875 |
|
| 18,421,827 | ||||
| 1,000,000 | Tampa Electric Co. | 03/15/31 | 2.400 |
|
| 774,062 | ||||
| 1,000,000 | Vistra Operations Co. LLC1 | 05/13/25 | 5.125 |
|
| 977,144 | ||||
| 36,892,000 | Vistra Operations Co. LLC1 | 09/01/26 | 5.500 |
|
| 35,098,038 | ||||
|
|
| 254,405,278 |
The accompanying notes are an integral part of these financial statements.
F I N A N C I A L S T A T E M E N T S O C T O B E R 3 1, 2 0 2 3 | 17 |
BBH Limited Duration Fund |
PORTFOLIO OF INVESTMENTS (continued) October 31, 2023 |
Principal | Maturity | Interest | Value | ||||||||
| CORPORATE BONDS (continued) |
|
| ||||||||
| FOOD (0.2%) |
|
| ||||||||
$ | 15,535,000 | General Mills, Inc. | 10/17/28 | 5.500 | % | $ | 15,253,571 | ||||
| 1,000,000 | Mars, Inc.1 | 04/20/28 | 4.550 |
|
| 960,945 | ||||
|
|
| 16,214,516 | ||||||||
| GAS (0.0%) |
|
| ||||||||
| 1,000,000 | Brooklyn Union Gas Co.1 | 08/05/27 | 4.632 |
|
| 939,996 | ||||
| 265,000 | East Ohio Gas Co.1 | 06/15/25 | 1.300 |
|
| 246,030 | ||||
| 1,000,000 | Southern California Gas Co. | 02/01/30 | 2.550 |
|
| 813,768 | ||||
|
|
| 1,999,794 | ||||||||
| HAND/MACHINE TOOLS (0.0%) |
|
| ||||||||
| 1,000,000 | Regal Rexnord Corp.1 | 02/15/26 | 6.050 |
|
| 983,605 | ||||
|
|
| |||||||||
| HEALTHCARE – PRODUCTS (0.3%) |
|
| ||||||||
| 1,210,000 | Dentsply Sirona, Inc. | 06/01/30 | 3.250 |
|
| 984,941 | ||||
| 22,215,000 | Medtronic Global Holdings SCA | 03/30/28 | 4.250 |
|
| 21,161,477 | ||||
|
|
| 22,146,418 | ||||||||
| HEALTHCARE – SERVICES (0.9%) |
|
| ||||||||
| 1,000,000 | Adventist Health System | 03/01/29 | 2.952 |
|
| 853,338 | ||||
| 1,000,000 | CommonSpirit Health | 10/01/25 | 1.547 |
|
| 915,952 | ||||
| 1,000,000 | Providence St Joseph Health Obligated Group | 10/01/29 | 2.532 |
|
| 821,318 | ||||
| 1,000,000 | Roche Holdings, Inc.1 | 03/10/27 | 2.314 |
|
| 903,461 | ||||
| 60,630,000 | Sutter Health | 08/15/25 | 1.321 |
|
| 55,641,451 | ||||
|
|
| 59,135,520 | ||||||||
| HOME BUILDERS (0.0%) |
|
| ||||||||
| 1,000,000 | DR Horton, Inc. | 10/15/25 | 2.600 |
|
| 937,849 | ||||
| 1,000,000 | NVR, Inc. | 05/15/30 | 3.000 |
|
| 820,749 | ||||
|
|
| 1,758,598 | ||||||||
| INSURANCE (10.2%) |
|
| ||||||||
| 26,415,000 | American Coastal Insurance Corp. | 12/15/27 | 7.250 |
|
| 21,528,225 | ||||
| 16,760,000 | Athene Global Funding1 | 01/08/24 | 0.950 |
|
| 16,586,517 | ||||
| 18,000,000 | Athene Global Funding1 | 01/14/25 | 2.500 |
|
| 17,099,726 | ||||
| 14,345,000 | Athene Global Funding1 | 06/29/25 | 2.550 |
|
| 13,355,045 | ||||
| 1,000,000 | Athene Global Funding1 | 10/02/26 | 1.730 |
|
| 868,944 | ||||
| 1,000,000 | Brighthouse Financial Global Funding1 | 05/24/26 | 1.550 |
|
| 885,455 | ||||
| 1,000,000 | CNO Global Funding1 | 01/06/25 | 1.650 |
|
| 939,740 | ||||
| 1,000,000 | Corebridge Global Funding1 | 07/02/26 | 5.750 |
|
| 986,136 | ||||
| 14,025,000 | Corebridge Global Funding1 | 09/19/28 | 5.900 |
|
| 13,852,532 | ||||
| 26,595,000 | Equitable Financial Life Global Funding1 | 11/12/24 | 1.100 |
|
| 25,272,476 | ||||
| 59,274,000 | F&G Global Funding1 | 09/20/24 | 0.900 |
|
| 56,219,073 | ||||
| 1,000,000 | F&G Global Funding1 | 06/30/26 | 1.750 |
|
| 878,932 | ||||
| 64,675,000 | GA Global Funding Trust1 | 12/08/23 | 1.250 |
|
| 64,291,586 | ||||
| 50,000,000 | GA Global Funding Trust (SOFR + 0.500%)1,2 | 09/13/24 | 5.844 |
|
| 49,423,867 | ||||
| 1,000,000 | GA Global Funding Trust1 | 01/06/27 | 2.250 |
|
| 872,621 |
The accompanying notes are an integral part of these financial statements.
18 |
BBH Limited Duration Fund |
PORTFOLIO OF INVESTMENTS (continued) October 31, 2023 |
Principal | Maturity | Interest | Value | ||||||||
| CORPORATE BONDS (continued) |
|
| ||||||||
| INSURANCE (continued) |
|
| ||||||||
$ | 1,000,000 | Guardian Life Global Funding1 | 12/10/25 | 0.875 | % | $ | 900,194 | ||||
| 1,000,000 | Jackson National Life Global Funding1 | 01/12/25 | 1.750 |
|
| 941,813 | ||||
| 980,000 | MassMutual Global Funding II1 | 10/09/30 | 1.550 |
|
| 731,392 | ||||
| 44,790,000 | Met Tower Global Funding1 | 09/14/26 | 1.250 |
|
| 39,445,795 | ||||
| 1,000,000 | Metropolitan Life Global Funding I1 | 06/30/27 | 4.400 |
|
| 945,488 | ||||
| 73,445,000 | New York Life Global Funding1 | 01/14/25 | 1.450 |
|
| 69,777,312 | ||||
| 74,165,000 | Northwestern Mutual Global Funding1 | 03/25/24 | 0.600 |
|
| 72,682,067 | ||||
| 19,330,000 | Pacific Life Global Funding II1 | 06/24/25 | 1.200 |
|
| 17,918,969 | ||||
| 37,490,000 | Pacific Life Global Funding II1 | 04/04/28 | 4.900 |
|
| 35,707,874 | ||||
| 37,180,000 | Pricoa Global Funding I1 | 12/06/24 | 1.150 |
|
| 35,255,272 | ||||
| 47,175,000 | Principal Life Global Funding II1 | 01/10/25 | 1.375 |
|
| 44,701,108 | ||||
| 1,000,000 | Principal Life Global Funding II1 | 06/28/28 | 5.500 |
|
| 968,549 | ||||
| 29,855,000 | Protective Life Global Funding1 | 07/05/24 | 0.781 |
|
| 28,807,378 | ||||
| 42,465,000 | Protective Life Global Funding1 | 01/13/25 | 1.646 |
|
| 40,349,629 | ||||
| 1,000,000 | Protective Life Global Funding1 | 04/14/26 | 5.209 |
|
| 975,662 | ||||
| 1,180,000 | RGA Global Funding1 | 01/18/29 | 2.700 |
|
| 990,602 | ||||
| 37,290,000 | SiriusPoint, Ltd.1 | 11/01/26 | 4.600 |
|
| 32,628,750 | ||||
| 4,205,000 | Universal Insurance Holdings, Inc. | 11/30/26 | 5.625 |
|
| 3,696,675 | ||||
| 11,950,000 | Vitality Re XIII, Ltd. (3-Month U.S. Treasury Bill + 2.000%)1,2 | 01/06/26 | 7.445 |
|
| 11,724,145 | ||||
|
|
| 722,209,549 | ||||||||
| INVESTMENT COMPANIES (6.9%) |
|
| ||||||||
| 41,185,000 | BlackRock TCP Capital Corp. | 08/23/24 | 3.900 |
|
| 40,059,654 | ||||
| 46,600,000 | Blackstone Private Credit Fund | 09/15/24 | 1.750 |
|
| 44,572,313 | ||||
| 31,840,000 | Blackstone Private Credit Fund | 11/22/24 | 2.350 |
|
| 30,293,730 | ||||
| 9,654,000 | Blackstone Secured Lending Fund | 01/15/26 | 3.625 |
|
| 8,917,892 | ||||
| 31,201,000 | Blue Owl Capital Corp. | 04/15/24 | 5.250 |
|
| 30,955,439 | ||||
| 10,000,000 | Blue Owl Capital Corp. | 03/30/25 | 4.000 |
|
| 9,512,552 | ||||
| 27,070,000 | Blue Owl Capital Corp. II1 | 11/26/24 | 4.625 |
|
| 26,219,754 | ||||
| 18,000,000 | Blue Owl Credit Income Corp. | 09/23/26 | 3.125 |
|
| 15,796,167 | ||||
| 20,015,000 | Blue Owl Technology Finance Corp.1 | 12/15/25 | 4.750 |
|
| 18,542,952 | ||||
| 18,375,000 | Franklin BSP Lending Corp.1 | 12/15/24 | 4.850 |
|
| 17,683,628 | ||||
| 26,475,000 | Franklin BSP Lending Corp. | 03/30/26 | 3.250 |
|
| 23,686,644 | ||||
| 28,550,000 | FS KKR Capital Corp. | 07/15/24 | 4.625 |
|
| 28,070,545 | ||||
| 18,859,000 | FS KKR Capital Corp. | 02/01/25 | 4.125 |
|
| 18,171,832 | ||||
| 42,821,000 | FS KKR Capital Corp.1 | 02/14/25 | 4.250 |
|
| 41,095,340 | ||||
| 39,855,000 | Golub Capital BDC, Inc. | 04/15/24 | 3.375 |
|
| 39,229,507 | ||||
| 49,650,000 | Main Street Capital Corp. | 05/01/24 | 5.200 |
|
| 49,126,259 | ||||
| 33,980,000 | Main Street Capital Corp. | 07/14/26 | 3.000 |
|
| 30,074,728 | ||||
| 17,345,000 | PennantPark Investment Corp. | 11/01/26 | 4.000 |
|
| 15,294,729 | ||||
|
|
| 487,303,665 |
The accompanying notes are an integral part of these financial statements.
F I N A N C I A L S T A T E M E N T S O C T O B E R 3 1, 2 0 2 3 | 19 |
BBH Limited Duration Fund |
PORTFOLIO OF INVESTMENTS (continued) October 31, 2023 |
Principal | Maturity | Interest | Value | ||||||||
| CORPORATE BONDS (continued) |
|
| ||||||||
| IRON/STEEL (0.0%) |
|
| ||||||||
$ | 1,000,000 | Nucor Corp. | 05/23/25 | 3.950 | % | $ | 968,980 | ||||
|
|
| |||||||||
| MACHINERY – CONSTRUCTION & MINING (0.0%) |
|
| ||||||||
| 1,000,000 | Komatsu Finance America, Inc.1 | 10/06/27 | 5.499 |
|
| 990,266 | ||||
|
|
| |||||||||
| MACHINERY – DIVERSIFIED (0.2%) |
|
| ||||||||
| 1,000,000 | CNH Industrial Capital LLC | 05/23/25 | 3.950 |
|
| 969,047 | ||||
| 10,920,000 | CNH Industrial Capital LLC | 01/12/29 | 5.500 |
|
| 10,584,651 | ||||
| 1,000,000 | John Deere Capital Corp. | 03/08/27 | 2.350 |
|
| 903,744 | ||||
|
|
| 12,457,442 | ||||||||
| MISCELLANEOUS MANUFACTURERS (0.0%) |
|
| ||||||||
| 1,000,000 | 3M Co. | 04/15/25 | 2.650 |
|
| 952,771 | ||||
|
|
| |||||||||
| OIL & GAS (0.4%) |
|
| ||||||||
| 20,480,000 | Pioneer Natural Resources Co. | 03/29/26 | 5.100 |
|
| 20,254,113 | ||||
| 10,072,000 | Woodside Finance, Ltd.1 | 09/15/26 | 3.700 |
|
| 9,423,012 | ||||
|
|
| 29,677,125 | ||||||||
| PACKAGING & CONTAINERS (0.0%) |
|
| ||||||||
| 1,000,000 | Amcor Flexibles North America, Inc. | 05/17/25 | 4.000 |
|
| 968,226 | ||||
| 1,000,000 | Sonoco Products Co. | 02/01/25 | 1.800 |
|
| 946,453 | ||||
|
|
| 1,914,679 | ||||||||
| PHARMACEUTICALS (0.5%) |
|
| ||||||||
| 22,745,000 | CVS Health Corp. | 02/20/26 | 5.000 |
|
| 22,313,318 | ||||
| 12,815,000 | McKesson Corp. | 02/15/26 | 5.250 |
|
| 12,670,644 | ||||
| 1,000,000 | Pfizer Investment Enterprises Pte, Ltd. | 05/19/28 | 4.450 |
|
| 955,812 | ||||
|
|
| 35,939,774 | ||||||||
| PIPELINES (0.7%) |
|
| ||||||||
| 16,986,000 | EnLink Midstream Partners LP | 06/01/25 | 4.150 |
|
| 16,337,390 | ||||
| 31,985,000 | Northriver Midstream Finance LP1 | 02/15/26 | 5.625 |
|
| 30,225,825 | ||||
|
|
| 46,563,215 | ||||||||
| REAL ESTATE INVESTMENT TRUSTS (1.7%) |
|
| ||||||||
| 1,000,000 | Agree LP | 06/15/28 | 2.000 |
|
| 819,998 | ||||
| 9,290,000 | American Tower Trust #11 | 03/15/28 | 5.490 |
|
| 9,121,967 | ||||
| 1,000,000 | Boston Properties LP | 02/01/26 | 3.650 |
|
| 930,903 | ||||
| 1,000,000 | Digital Realty Trust LP | 01/15/28 | 5.550 |
|
| 969,440 | ||||
| 25,360,000 | EF Holdco/EF Cayman Hold/Ellington Finance | 04/01/27 | 5.875 |
|
| 22,950,061 | ||||
| 1,000,000 | Federal Realty OP LP | 05/01/28 | 5.375 |
|
| 963,903 | ||||
| 23,540,000 | HAT Holdings I LLC/HAT Holdings II LLC1 | 06/15/26 | 3.375 |
|
| 20,720,339 | ||||
| 1,195,000 | Kimco Realty OP LLC | 03/01/28 | 1.900 |
|
| 992,873 | ||||
| 14,480,000 | Realty Income Corp. | 01/13/26 | 5.050 |
|
| 14,220,689 |
The accompanying notes are an integral part of these financial statements.
20 |
BBH Limited Duration Fund |
PORTFOLIO OF INVESTMENTS (continued) October 31, 2023 |
Principal | Maturity | Interest | Value | ||||||||
| CORPORATE BONDS (continued) |
|
| ||||||||
| REAL ESTATE INVESTMENT TRUSTS (continued) |
|
| ||||||||
$ | 29,500,000 | Rexford Industrial Realty LP | 06/15/28 | 5.000 | % | $ | 27,879,132 | ||||
| 19,215,000 | Scentre Group Trust 1/Scentre Group Trust 21 | 01/28/26 | 3.625 |
|
| 18,239,328 | ||||
| 1,195,000 | Spirit Realty LP | 03/15/28 | 2.100 |
|
| 996,053 | ||||
| 1,000,000 | Ventas Realty LP | 11/15/30 | 4.750 |
|
| 894,212 | ||||
| 1,000,000 | VICI Properties LP/VICI Note Co., Inc.1 | 02/15/25 | 3.500 |
|
| 953,773 | ||||
|
|
| 120,652,671 | ||||||||
| RETAIL (1.3%) |
|
| ||||||||
| 10,900,000 | AutoZone, Inc. | 11/01/28 | 6.250 |
|
| 11,009,848 | ||||
| 11,000,000 | Nordstrom, Inc. | 04/08/24 | 2.300 |
|
| 10,738,750 | ||||
| 72,275,000 | Walgreens Boots Alliance, Inc. | 11/17/23 | 0.950 |
|
| 72,107,889 | ||||
|
|
| 93,856,487 | ||||||||
| SEMICONDUCTORS (0.8%) |
|
| ||||||||
| 33,545,000 | ams-OSRAM AG1 | 07/31/25 | 7.000 |
|
| 32,922,084 | ||||
| 25,270,000 | Intel Corp. | 02/10/28 | 4.875 |
|
| 24,599,517 | ||||
|
|
| 57,521,601 | ||||||||
| TOYS/GAMES/HOBBIES (0.0%) |
|
| ||||||||
| 1,000,000 | Hasbro, Inc. | 11/19/24 | 3.000 |
|
| 967,972 | ||||
|
|
| |||||||||
| TRUCKING & LEASING (0.5%) |
|
| ||||||||
| 1,000,000 | Penske Truck Leasing Co. LP/PTL Finance Corp.1 | 07/15/25 | 4.000 |
|
| 962,167 | ||||
| 31,000,000 | Penske Truck Leasing Co. LP/PTL Finance Corp.1 | 05/01/28 | 5.550 |
|
| 29,849,720 | ||||
|
|
| 30,811,887 | ||||||||
| Total Corporate Bonds |
|
| 3,502,998,143 | |||||||
|
|
| |||||||||
| LOAN PARTICIPATIONS AND ASSIGNMENTS (12.6%) |
|
| ||||||||
| 32,476,500 | AAdvantage Loyality IP, Ltd. (3-Month CME Term SOFR + 4.750%)2 | 04/20/28 | 10.427 |
|
| 32,882,456 | ||||
| 21,485,938 | Allen Media LLC (3-Month CME Term SOFR + 5.500%)2 | 02/10/27 | 11.040 |
|
| 18,934,483 | ||||
| 20,624,524 | Allspring Buyer LLC (3-Month CME Term SOFR + 3.250%)2 | 11/01/28 | 8.949 |
|
| 20,067,043 | ||||
| 6,637,950 | Allspring Buyer LLC (3-Month CME Term SOFR + 4.000%)2 | 11/01/28 | 9.438 |
|
| 6,463,704 | ||||
| 46,335,713 | Asplundh Tree Expert LLC (1-Month CME Term SOFR + 1.750%)2 | 09/07/27 | 7.174 |
|
| 46,357,490 | ||||
| 4,597,552 | Avantor Funding, Inc. Term B5 (1-Month CME Term SOFR + 2.250%)2 | 11/08/27 | 7.674 |
|
| 4,592,449 | ||||
| 14,587,500 | Avolon TLB Borrower 1 (US) LLC Term B5 (1-Month CME Term SOFR + 2.250%)2 | 12/01/27 | 7.689 |
|
| 14,571,745 | ||||
| 20,723,556 | Avolon TLB Borrower 1 (US) LLC Term B6 (1-Month CME Term SOFR + 2.500%)2 | 06/22/28 | 7.839 |
|
| 20,712,987 |
The accompanying notes are an integral part of these financial statements.
F I N A N C I A L S T A T E M E N T S O C T O B E R 3 1, 2 0 2 3 | 21 |
BBH Limited Duration Fund |
PORTFOLIO OF INVESTMENTS (continued) October 31, 2023 |
Principal | Maturity | Interest | Value | ||||||||
| LOAN PARTICIPATIONS AND ASSIGNMENTS (continued) |
|
| ||||||||
$ | 13,301,401 | Axalta Coating Systems Dutch Holding B BV (Axalta Coating Systems U.S. Holdings, Inc.) Term B5 (3-Month CME Term SOFR + 2.500%)2 | 12/20/29 | 7.890 | % | $ | 13,306,455 | ||||
| 10,225,723 | BCP Renaissance Parent LLC Term B4 (3-Month CME Term SOFR + 3.500%)2 | 10/31/28 | 8.896 |
|
| 10,161,813 | ||||
| 35,608,889 | Buckeye Partners LP Term B1 (1-Month CME Term SOFR + 2.250%)2 | 11/01/26 | 7.666 |
|
| 35,560,817 | ||||
| 35,787,080 | Charter Communications Operating LLC Term B1 (1-Month CME Term SOFR + 1.750%)2 | 04/30/25 | 7.133 |
|
| 35,781,712 | ||||
| 19,650,000 | Clean Harbors, Inc. (1-Month CME Term SOFR + 2.000%)2 | 10/08/28 | 7.439 |
|
| 19,707,378 | ||||
| 14,794,875 | Delos Aircraft Designated Activity Co. (3-Month CME Term SOFR + 2.000%)2 | 10/31/27 | 7.402 |
|
| 14,785,702 | ||||
| 21,409,800 | Eastern Power LLC (1-Month CME Term SOFR + 3.750%)2 | 10/02/25 | 9.189 |
|
| 20,707,986 | ||||
| 45,092,571 | Elanco Animal Health, Inc. (1-Month CME Term SOFR + 1.750%)2 | 08/01/27 | 7.165 |
|
| 44,004,938 | ||||
| 3,084,590 | Icon Plc. (3-Month CME Term SOFR + 2.250%)2 | 07/03/28 | 7.902 |
|
| 3,085,299 | ||||
| 12,380,421 | Icon Plc. (3-Month CME Term SOFR + 2.250%)2 | 07/03/28 | 7.902 |
|
| 12,383,269 | ||||
| 15,513,158 | Iqvia, Inc. Term A2 (1-Month CME Term SOFR + 1.250%)2 | 06/16/27 | 6.674 |
|
| 15,067,155 | ||||
| 6,309,540 | Iqvia, Inc. Term B2 (3-Month CME Term SOFR + 1.750%)2 | 01/17/25 | 7.402 |
|
| 6,321,402 | ||||
| 18,810,890 | Iqvia, Inc. Term B3 (3-Month CME Term SOFR + 1.750%)2 | 06/11/25 | 7.402 |
|
| 18,829,701 | ||||
| 31,224,234 | Iridium Satellite LLC Term B3 (1-Month CME Term SOFR + 2.500%)2 | 09/20/30 | 7.824 |
|
| 31,160,849 | ||||
| 32,635,295 | Jazz Pharmaceuticals Plc. (1-Month CME Term SOFR + 3.500%)2 | 05/05/28 | 8.939 |
|
| 32,617,019 | ||||
| 46,965,366 | Lumen Technologies, Inc. Term A (1-Month CME Term SOFR + 2.000%)2 | 01/31/25 | 7.439 |
|
| 44,264,858 | ||||
| 22,356,860 | Lumen Technologies, Inc. Term B (1-Month CME Term SOFR + 2.250%)2 | 03/15/27 | 7.689 |
|
| 16,778,153 | ||||
| 36,049,300 | MPH Acquisition Holdings LLC (3-Month CME Term SOFR + 4.250%)2 | 09/01/28 | 9.916 |
|
| 33,385,617 | ||||
| 50,000,000 | NVA Holdings Parent LLC (1-Month CME Term SOFR + 1.750%)2,5 | 12/16/24 | 7.189 |
|
| 48,865,000 | ||||
| 45,548,888 | Organon & Co. (1-Month CME Term SOFR + 3.000%)2 | 06/02/28 | 8.450 |
|
| 45,400,854 | ||||
| 15,000,000 | Setanta Aircraft Leasing DAC (3-Month CME Term SOFR + 2.000%)2 | 11/05/28 | 7.652 |
|
| 14,983,650 | ||||
| 36,000,000 | SkyMiles IP, Ltd. (3-Month CME Term SOFR + 3.750%)2 | 10/20/27 | 9.166 |
|
| 36,832,680 |
The accompanying notes are an integral part of these financial statements.
22 |
BBH Limited Duration Fund |
PORTFOLIO OF INVESTMENTS (continued) October 31, 2023 |
Principal | Maturity | Interest | Value | ||||||||
| LOAN PARTICIPATIONS AND ASSIGNMENTS (continued) |
|
| ||||||||
$ | 10,442,921 | SS&C Technologies Holdings, Inc. Term B3 (1-Month CME Term SOFR + 1.750%)2 | 04/16/25 | 7.189 | % | $ | 10,433,835 | ||||
| 9,139,414 | SS&C Technologies Holdings, Inc. Term B4 (1-Month CME Term SOFR + 1.750%)2 | 04/16/25 | 7.189 |
|
| 9,131,463 | ||||
| 7,546,753 | SS&C Technologies Holdings, Inc. Term B5 (1-Month CME Term SOFR + 1.750%)2 | 04/16/25 | 7.189 |
|
| 7,540,187 | ||||
| 17,225,359 | UGI Energy Services LLC (1-Month CME Term SOFR + 3.250%)2 | 02/22/30 | 8.674 |
|
| 17,179,540 | ||||
| 37,733,992 | United AirLines, Inc. Term B (1-Month CME Term SOFR + 3.750%)2 | 04/21/28 | 9.189 |
|
| 37,592,490 | ||||
| 30,444,294 | Vistra Operations Co. LLC (fka Tex Operations Co. LLC) (1-Month CME Term SOFR + 1.750%)2 | 12/31/25 | 7.189 |
|
| 30,415,677 | ||||
| 10,400,000 | Vontier Corp. (1-Month CME Term SOFR + 1.125%)2 | 10/28/24 | 6.564 |
|
| 10,374,000 | ||||
| 56,995,339 | Wynn Resorts, Ltd. Term A (1-Month CME Term SOFR + 1.750%)2 | 09/20/24 | 7.174 |
|
| 55,855,433 | ||||
| Total Loan Participations and Assignments |
|
| 897,097,289 | |||||||
|
|
| |||||||||
| MUNICIPAL BONDS (1.7%) |
|
| ||||||||
| 31,000,000 | Kentucky Public Energy Authority, Revenue Bonds (SOFR + 1.200%)2 | 08/01/52 | 4.758 |
|
| 29,695,222 | ||||
| 10,710,000 | Texas Municipal Gas Acquisition & Supply Corp. I, Revenue Bonds | 12/15/26 | 6.250 |
|
| 10,916,382 | ||||
| 83,975,000 | Texas Municipal Gas Acquisition & Supply Corp. II, Revenue Bonds (3-Month CME Term SOFR + 0.863%)2 | 09/15/27 | 4.433 |
|
| 82,121,571 | ||||
| Total Municipal Bonds |
|
| 122,733,175 | |||||||
|
|
| |||||||||
| RESIDENTIAL MORTGAGE BACKED SECURITIES (0.3%) |
|
| ||||||||
| 8,055,326 | Cascade Funding Mortgage Trust 2019-RM31,2,4 | 06/25/69 | 2.800 |
|
| 7,808,738 | ||||
| 653,982 | Pepper Residential Securities Trust No. 23A (SOFR + 1.064%)1,2 | 08/18/60 | 6.384 |
|
| 653,839 | ||||
| 328,485 | Pepper Residential Securities Trust No. 24A (SOFR + 1.014%)1,2 | 11/18/60 | 6.334 |
|
| 328,384 | ||||
| 2,893,692 | RESIMAC Premier 2020-1A (1-Month CME Term SOFR + 1.164%)1,2 | 02/07/52 | 6.506 |
|
| 2,892,694 | ||||
| 5,369,905 | RESIMAC Premier 2021-1A (1-Month CME Term SOFR + 0.814%)1,2 | 07/10/52 | 6.150 |
|
| 5,355,173 | ||||
| 6,474,737 | RMF Proprietary Issuance Trust 2019-11,2,4 | 10/25/63 | 2.750 |
|
| 5,474,857 | ||||
| Total Residential Mortgage Backed Securities |
|
| 22,513,685 |
The accompanying notes are an integral part of these financial statements.
F I N A N C I A L S T A T E M E N T S O C T O B E R 3 1, 2 0 2 3 | 23 |
BBH Limited Duration Fund |
PORTFOLIO OF INVESTMENTS (continued) October 31, 2023 |
Principal | Maturity | Interest | Value | ||||||||
| U.S. GOVERNMENT AGENCY OBLIGATIONS (0.6%) |
|
| ||||||||
$ | 40,500,000 | Federal Home Loan Mortgage Corp. | 11/12/25 | 0.600 | % | $ | 36,948,097 | ||||
| 13,344 | Federal Home Loan Mortgage Corp. (FHLMC) Non Gold Guaranteed (1-Year RFUCCT + 1.788%)2 | 04/01/36 | 4.698 |
|
| 13,084 | ||||
| 12,196 | Federal Home Loan Mortgage Corp. (FHLMC) Non Gold Guaranteed (6-Month RFUCCT + 1.740%)2 | 12/01/36 | 4.865 |
|
| 11,927 | ||||
| 10,071 | Federal Home Loan Mortgage Corp. (FHLMC) Non Gold Guaranteed (1-Year RFUCCT + 1.745%)2 | 01/01/37 | 3.995 |
|
| 9,927 | ||||
| 2,447,754 | Federal National Mortgage Association (FNMA) | 07/01/35 | 5.000 |
|
| 2,378,651 | ||||
| 149,047 | Federal National Mortgage Association (FNMA) | 11/01/35 | 5.500 |
|
| 146,440 | ||||
| 19,187 | Federal National Mortgage Association (FNMA) (1-Year RFUCCT + 1.933%)2 | 07/01/36 | 6.183 |
|
| 19,726 | ||||
| 31,137 | Federal National Mortgage Association (FNMA) (1-Year RFUCCT + 1.721%)2 | 09/01/36 | 5.971 |
|
| 31,079 | ||||
| 21,618 | Federal National Mortgage Association (FNMA) (1-Year RFUCCT + 1.729%)2 | 01/01/37 | 4.074 |
|
| 21,413 | ||||
| 143,526 | Federal National Mortgage Association (FNMA) | 08/01/37 | 5.500 |
|
| 140,986 | ||||
| 1,734,351 | Federal National Mortgage Association (FNMA) | 08/01/37 | 5.500 |
|
| 1,703,425 | ||||
| 699,482 | Federal National Mortgage Association (FNMA) | 06/01/40 | 6.500 |
|
| 719,348 | ||||
| 3,575 | Government National Mortgage Association (GNMA) (1-Year CMT Index + 1.500%)2 | 08/20/29 | 3.625 |
|
| 3,462 | ||||
| Total U.S. Government Agency Obligations |
|
| 42,147,565 | |||||||
|
|
| |||||||||
| U.S. TREASURY BILLS (5.8%) |
|
| ||||||||
| 66,650,000 | U.S. Treasury Bill7 | 11/02/23 | 0.000 |
|
| 66,640,357 | ||||
| 145,750,000 | U.S. Treasury Bill7 | 11/07/23 | 0.000 |
|
| 145,621,613 | ||||
| 152,000,000 | U.S. Treasury Bill7 | 12/05/23 | 0.000 |
|
| 151,234,175 | ||||
| 40,900,000 | U.S. Treasury Bill7 | 12/12/23 | 0.000 |
|
| 40,653,197 | ||||
| 5,250,000 | U.S. Treasury Bill7,8 | 04/18/24 | 0.000 |
|
| 5,118,755 | ||||
| Total U.S. Treasury Bills |
|
| 409,268,097 |
TOTAL INVESTMENTS (Cost $7,388,406,217)9 | 99.9 | % | $ | 7,119,345,573 | ||
CASH AND OTHER ASSETS IN EXCESS OF LIABILITIES | 0.1 | % |
| 8,146,660 | ||
NET ASSETS | 100.0 | % | $ | 7,127,492,233 |
____________
1 Security exempt from registration under Rule 144A of the Securities Act of 1933, as amended. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. Total market value of Rule 144A securities owned at October 31, 2023 was $3,662,092,013 or 51.4% 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, 2023 coupon or interest rate.
The accompanying notes are an integral part of these financial statements.
24 |
BBH Limited Duration Fund |
PORTFOLIO OF INVESTMENTS (continued) October 31, 2023 |
3 When-Issued transaction.
4 This variable rate security is based on a predetermined schedule and the rate at year end also represents the reference rate at year end.
5 Security that used significant unobservable inputs to determine fair value.
6 Security is perpetual in nature and has no stated maturity date.
7 Security issued with zero coupon. Income is recognized through accretion of discount.
8 All or a portion of this security is held at the broker as collateral for open futures contracts.
9 The aggregate cost of investments and derivatives for federal income tax purposes is $ 7,393,477,553, the aggregate gross unrealized appreciation is $7,121,224 and the aggregate gross unrealized depreciation is $276,183,205, resulting in net unrealized depreciation of $269,061,981.
Abbreviations: |
CME − Chicago Mercantile Exchange. |
CMT − Constant Maturity Treasury. |
FHLMC − Federal Home Loan Mortgage Corporation. |
FNMA − Federal National Mortgage Association. |
GNMA − Government National Mortgage Association. |
RFUCCT − Refinitiv USD IBOR Consumer Cash Fallbacks Term. |
SOFR − Secured Overnight Financing Rate. |
The accompanying notes are an integral part of these financial statements.
F I N A N C I A L S T A T E M E N T S O C T O B E R 3 1, 2 0 2 3 | 25 |
BBH Limited Duration Fund |
PORTFOLIO OF INVESTMENTS (continued) October 31, 2023 |
FINANCIAL FUTURES CONTRACTS
The following futures contracts were open at October 31, 2023:
Description | Number of | Expiration | Notional | Market | Unrealized | ||||||||
Contracts to Sell: |
|
|
| ||||||||||
U.S. Treasury 2-Year Notes | 630 | December 2023 | $ | 128,096,720 | $ | 127,525,782 | $ | 570,938 | |||||
U.S. Treasury 5-Year Notes | 2,800 | December 2023 |
| 297,033,437 |
| 292,534,376 |
| 4,499,061 | |||||
|
| $ | 5,069,999 |
Fair Value Measurements
The Fund is required to disclose information regarding the fair value measurements of the Fund’s assets and liabilities. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The disclosure requirement established a three-tier hierarchy to maximize the use of observable market data and minimize the use of unobservable inputs and to establish classification of fair value measurements for disclosure purposes. Inputs refer broadly to the assumptions that market participants would use in pricing the asset or liability, including, for example, the risk inherent in a particular valuation technique used to measure fair value, including the model and/or the risk inherent in the inputs to the valuation technique. Inputs may be observable or unobservable. Observable inputs are inputs that reflect the assumptions market participants would use in pricing the asset or liability developed based on market data obtained from sources independent of the reporting entity. Unobservable inputs are inputs that reflect the Fund’s own considerations about the assumptions market participants would use in pricing the asset or liability developed based on the best information available in the circumstances.
Authoritative guidance establishes three levels of the fair value hierarchy as follows:
— | Level 1 – unadjusted quoted prices in active markets for identical assets and liabilities. | |
— | Level 2 – significant other observable inputs (including quoted prices for similar assets and liabilities, interest rates, prepayment speeds, credit risk, etc.). | |
— | Level 3 – significant unobservable inputs (including the Fund’s own assumptions in determining the fair value of assets and liabilities). |
The accompanying notes are an integral part of these financial statements.
26 |
BBH Limited Duration Fund |
PORTFOLIO OF INVESTMENTS (continued) October 31, 2023 |
Inputs are used in applying the various valuation techniques and broadly refer to the assumptions that market participants use to make valuation decisions, including assumptions about risk. Inputs may include price information, specific and broad credit data, liquidity statistics, and other factors. A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. However, the determination of what constitutes “observable” requires judgment by the investment adviser. The investment adviser considers observable data to be that market data which is readily available, regularly distributed or updated, reliable and verifiable, not proprietary, and provided by independent sources that are actively involved in the relevant market. The categorization of a financial instrument within the hierarchy is based upon the pricing transparency of the instrument and does not necessarily correspond to the investment adviser’s perceived risk of that instrument.
Financial assets within Level 1 are based on quoted market prices in active markets. The Fund does not adjust the quoted price for these instruments.
Financial instruments that trade in markets that are not considered to be active but are valued based on quoted market prices, dealer quotations or alternative pricing sources supported by observable inputs are classified within Level 2. These include investment-grade corporate bonds, U.S. Treasury notes and bonds, and certain non-U.S. sovereign obligations and over-the-counter derivatives. As Level 2 financial assets include positions that are not traded in active markets and/or are subject to transfer restrictions, valuations may be adjusted to reflect illiquidity and/or non-transferability, which are generally based on available market information.
Financial assets classified within Level 3 have significant unobservable inputs, as they trade infrequently. Level 3 financial assets include asset backed securities and certain corporate debt securities.
Because of the inherent uncertainties of valuation, the values reflected in the financial statements may materially differ from the value received upon the actual sale of those investments.
The accompanying notes are an integral part of these financial statements.
F I N A N C I A L S T A T E M E N T S O C T O B E R 3 1, 2 0 2 3 | 27 |
BBH Limited Duration Fund |
PORTFOLIO OF INVESTMENTS (continued) October 31, 2023 |
The following table summarizes the valuation of the Fund’s investments by the above fair value hierarchy levels as of October 31, 2023.
Investments, at value | Unadjusted | Significant | Significant | Balance as of | ||||||||
Asset Backed Securities | $ | — | $ | 1,676,971,678 | $ | 9,289,141 | $ | 1,686,260,819 | ||||
Commercial Mortgage Backed |
| — |
| 436,326,800 |
| — |
| 436,326,800 | ||||
Corporate Bonds |
| — |
| 3,502,998,143 |
| — |
| 3,502,998,143 | ||||
Loan Participations and |
| — |
| 848,232,289 |
| 48,865,000 |
| 897,097,289 | ||||
Municipal Bonds |
| — |
| 122,733,175 |
| — |
| 122,733,175 | ||||
Residential Mortgage Backed |
| — |
| 22,513,685 |
| — |
| 22,513,685 | ||||
U.S. Government Agency |
| — |
| 42,147,565 |
| — |
| 42,147,565 | ||||
U.S. Treasury Bills |
| — |
| 409,268,097 |
| — |
| 409,268,097 | ||||
Total Investment, at value | $ | — | $ | 7,061,191,432 | $ | 58,154,141 | $ | 7,119,345,573 | ||||
|
|
|
| |||||||||
Other Financial Instruments, at value |
|
|
|
| ||||||||
Financial Futures Contracts | $ | 5,069,999 | $ | — | $ | — | $ | 5,069,999 | ||||
Other Financial Instruments, at value | $ | 5,069,999 | $ | — | $ | — | $ | 5,069,999 |
The accompanying notes are an integral part of these financial statements.
28 |
BBH Limited Duration Fund |
PORTFOLIO OF INVESTMENTS (continued) October 31, 2023 |
The following is a reconciliation of assets for which significant unobservable inputs (Level 3) were used in determining fair value during the year ended October 31, 2023:
Asset Backed | Corporate | Loan Participations | Total | ||||||||||||
Balance as of October 31, 2022 | $ | 12,906,891 |
| $ | 21,631,275 |
| $ | 47,785,000 | $ | 82,323,166 |
| ||||
Purchases |
| — |
|
| — |
|
| — |
| — |
| ||||
Sales/Paydowns |
| (3,764,985 | ) |
| (4,254,662 | ) |
| — |
| (8,019,647 | ) | ||||
Realized gains/(losses) |
| — |
|
| (1,080,338 | ) |
| — |
| (1,080,338 | ) | ||||
Change in unrealized appreciation/(depreciation) |
| 147,235 |
|
| 5,231,950 |
|
| 954,904 |
| 6,334,089 |
| ||||
Amortization |
| — |
|
| — |
|
| 125,096 |
| 125,096 |
| ||||
Transfers from Level 3 |
| — |
|
| (21,528,225 | ) |
| — |
| (21,528,225 | ) | ||||
Transfers to Level 3 |
| — |
|
| — |
|
| — |
| — |
| ||||
Balance as of October 31, 2023 | $ | 9,289,141 |
| $ | — |
| $ | 48,865,000 | $ | 58,154,141 |
|
Fund investments classified as Level 3 were either single broker quoted or fair valued using a market approach or an income approach with valuation inputs such as a discounted cash flow model or market price information adjusted for changes in an appropriate index. As of October 31, 2023, $9,289,141 of value of the Level 3 assets in the Fund was based on a single quote from a broker.
The accompanying notes are an integral part of these financial statements.
F I N A N C I A L S T A T E M E N T S O C T O B E R 3 1, 2 0 2 3 | 29 |
BBH LIMITED DURATION FUND |
STATEMENT OF ASSETS AND LIABILITIES October 31, 2023 |
ASSETS: |
| ||||||
Investments in securities, at value (Cost $7,388,406,217) | $ | 7,119,345,573 | |||||
Cash |
| 3,701,097 | |||||
Receivables for: |
| ||||||
Interest |
| 39,754,634 | |||||
Shares sold |
| 5,162,143 | |||||
Investments sold |
| 1,668,426 | |||||
Futures variation margin on open contracts |
| 302,425 | |||||
Interest from Custodian |
| 8,171 | |||||
Other |
| 83,931 | |||||
Prepaid expenses |
| 89,079 | |||||
Total Assets |
| 7,170,115,479 | |||||
| |||||||
LIABILITIES: |
| ||||||
Payables for: |
| ||||||
Investments purchased |
| 30,625,296 | |||||
Shares redeemed |
| 9,291,936 | |||||
Net investment advisory and administrative fees |
| 1,462,062 | |||||
Dividends declared |
| 861,731 | |||||
Custody and fund accounting fees |
| 188,139 | |||||
Professional fees |
| 97,655 | |||||
Shareholder servicing fees |
| 72,433 | |||||
Transfer agent fees |
| 6,529 | |||||
Board of Trustees’ fees |
| 1,456 | |||||
Accrued expenses and other liabilities |
| 16,009 | |||||
Total Liabilities |
| 42,623,246 | |||||
NET ASSETS | $ | 7,127,492,233 | |||||
| |||||||
Net Assets Consist of: |
| ||||||
Paid-in capital | $ | 7,393,605,973 | |||||
Accumulated deficit |
| (266,113,740) | |||||
Net Assets | $ | 7,127,492,233 | |||||
NET ASSET VALUE AND OFFERING PRICE PER SHARE |
| ||||||
CLASS N SHARES |
| ||||||
($439,585,086 ÷ 43,470,600 shares outstanding) |
|
| $ | 10.11 | |||
CLASS I SHARES |
| ||||||
($6,687,907,147 ÷ 661,721,106 shares outstanding) |
|
| $ | 10.11 |
The accompanying notes are an integral part of these financial statements.
30 |
BBH LIMITED DURATION FUND |
STATEMENT OF OPERATIONS For the year ended October 31, 2023 |
NET INVESTMENT INCOME: |
|
| ||
Income: |
|
| ||
Interest income | $ | 333,060,644 |
| |
Interest income from Custodian |
| 162,267 |
| |
Other income |
| 699,904 |
| |
Total Income |
| 333,922,815 |
| |
|
| |||
Expenses: |
|
| ||
Investment advisory and administrative fees |
| 19,446,593 |
| |
Shareholder servicing fees |
| 929,921 |
| |
Custody and fund accounting fees |
| 768,554 |
| |
Board of Trustees’ fees |
| 152,849 |
| |
Professional fees |
| 106,797 |
| |
Transfer agent fees |
| 76,109 |
| |
Miscellaneous expenses |
| 476,642 |
| |
Total Expenses |
| 21,957,465 |
| |
Investment advisory and administrative fee waiver |
| (665,947 | ) | |
Net Expenses |
| 21,291,518 |
| |
Net Investment Income |
| 312,631,297 |
| |
|
| |||
NET REALIZED AND UNREALIZED GAIN: |
|
| ||
Net realized loss on investments in securities |
| (10,309,710 | ) | |
Net realized gain on futures contracts |
| 30,501,930 |
| |
Net realized gain on investments in securities and futures contracts |
| 20,192,220 |
| |
Net change in unrealized appreciation/(depreciation) on investments in securities |
| 155,682,590 |
| |
Net change in unrealized appreciation/(depreciation) on futures contracts |
| (16,855,450 | ) | |
Net change in unrealized appreciation/(depreciation) on investments in securities and futures contracts |
| 138,827,140 |
| |
Net Realized and Unrealized Gain |
| 159,019,360 |
| |
Net Increase in Net Assets Resulting from Operations | $ | 471,650,657 |
|
The accompanying notes are an integral part of these financial statements.
F I N A N C I A L S T A T E M E N T S O C T O B E R 3 1, 2 0 2 3 | 31 |
BBH LIMITED DURATION FUND |
STATEMENTS OF CHANGES IN NET ASSETS |
For the years ended | ||||||||
2023 | 2022 | |||||||
INCREASE/(DECREASE) IN NET ASSETS FROM: |
|
|
|
| ||||
Operations: |
|
|
|
| ||||
Net investment income | $ | 312,631,297 |
| $ | 201,094,648 |
| ||
Net realized gain on investments in securities and futures |
| 20,192,220 |
|
| 41,202,171 |
| ||
Net change in unrealized appreciation/(depreciation) on |
| 138,827,140 |
|
| (483,236,708 | ) | ||
Net increase/(decrease) in net assets resulting from |
| 471,650,657 |
|
| (240,939,889 | ) | ||
|
|
|
| |||||
Dividends and distributions declared: |
|
|
|
| ||||
Class N |
| (18,843,572 | ) |
| (10,755,212 | ) | ||
Class I |
| (293,175,046 | ) |
| (189,176,618 | ) | ||
Total dividends and distributions declared |
| (312,018,618 | ) |
| (199,931,830 | ) | ||
|
|
|
| |||||
Share transactions: |
|
|
|
| ||||
Proceeds from sales of shares1 |
| 2,363,986,624 |
|
| 4,384,848,010 |
| ||
Net asset value of shares issued to shareholders for reinvestment of dividends and distributions |
| 79,989,422 |
|
| 46,841,299 |
| ||
Cost of shares redeemed1 |
| (3,715,647,694 | ) |
| (7,849,015,289 | ) | ||
Net decrease in net assets resulting from share transactions |
| (1,271,671,648 | ) |
| (3,417,325,980 | ) | ||
Total decrease in net assets |
| (1,112,039,609 | ) |
| (3,858,197,699 | ) | ||
|
|
|
| |||||
NET ASSETS: |
|
|
|
| ||||
Beginning of year |
| 8,239,531,842 |
|
| 12,097,729,541 |
| ||
End of year | $ | 7,127,492,233 |
| $ | 8,239,531,842 |
|
____________
1 Includes share exchanges. See Note 5 in Notes to Financial Statements.
The accompanying notes are an integral part of these financial statements.
32 |
BBH LIMITED DURATION FUND |
FINANCIAL HIGHLIGHTS Selected per share data and ratios for a Class N share outstanding throughout each year. |
For the years ended October 31, | ||||||||||||||||||||
2023 | 2022 | 2021 | 2020 | 2019 | ||||||||||||||||
Net asset value, beginning of year | $ | 9.91 |
| $ | 10.32 |
| $ | 10.23 |
| $ | 10.26 |
| $ | 10.15 |
| |||||
Income from investment operations: |
|
|
|
|
|
|
|
|
|
| ||||||||||
Net investment income1 |
| 0.41 |
|
| 0.19 |
|
| 0.15 |
|
| 0.24 |
|
| 0.30 |
| |||||
Net realized and unrealized gain/(loss) |
| 0.20 |
|
| (0.41 | ) |
| 0.09 |
|
| (0.03 | ) |
| 0.11 |
| |||||
Total income/(loss) from investment operations |
| 0.61 |
|
| (0.22 | ) |
| 0.24 |
|
| 0.21 |
|
| 0.41 |
| |||||
Dividends and distributions to shareholders: |
|
|
|
|
|
|
|
|
|
| ||||||||||
From net investment income |
| (0.41 | ) |
| (0.19 | ) |
| (0.15 | ) |
| (0.24 | ) |
| (0.30 | ) | |||||
Total dividends and distributions to shareholders |
| (0.41 | ) |
| (0.19 | ) |
| (0.15 | ) |
| (0.24 | ) |
| (0.30 | ) | |||||
Net asset value, end of year | $ | 10.11 |
| $ | 9.91 |
| $ | 10.32 |
| $ | 10.23 |
| $ | 10.26 |
| |||||
Total return2 |
| 6.24 | % |
| (2.12 | )% |
| 2.38 | % |
| 2.06 | % |
| 4.14 | % | |||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Ratios/Supplemental data: |
|
|
|
|
|
|
|
|
|
| ||||||||||
Net assets, end of year (in millions) | $ | 440 |
| $ | 490 |
| $ | 656 |
| $ | 461 |
| $ | 371 |
| |||||
Ratio of expenses to average net assets before reductions |
| 0.49 | % |
| 0.49 | % |
| 0.49 | % |
| 0.49 | % |
| 0.51 | % | |||||
Fee waiver3 |
| (0.14 | )% |
| (0.14 | )% |
| (0.14 | )% |
| (0.14 | )% |
| (0.16 | )% | |||||
Expense offset arrangement |
| — | % |
| — | % |
| — | % |
| — | % |
| (0.00 | )%4 | |||||
Ratio of expenses to average net assets after reductions |
| 0.35 | % |
| 0.35 | % |
| 0.35 | % |
| 0.35 | % |
| 0.35 | % | |||||
Ratio of net investment income to average net assets |
| 4.06 | % |
| 1.87 | % |
| 1.48 | % |
| 2.32 | % |
| 2.98 | % | |||||
Portfolio turnover rate |
| 22 | % |
| 46 | % |
| 34 | % |
| 51 | % |
| 53 | % |
____________
1 Calculated using average shares outstanding for the year.
2 Assumes the reinvestment of distributions.
3 The ratio of expenses to average net assets for the years ended October 31, 2023, 2022, 2021, 2020 and 2019 reflect fees reduced as result of a contractual operating expense limitation of the share class to 0.35%. The agreement is effective through March 1, 2024 and may only be terminated during its term with approval of the Fund’s Board of Trustees. For the years ended October 31, 2023, 2022, 2021, 2020 and 2019 the waived fees were $665,947, $797,646, $746,522, $595,975 and $538,703, respectively.
4 Less than 0.01%.
The accompanying notes are an integral part of these financial statements.
F I N A N C I A L S T A T E M E N T S O C T O B E R 3 1, 2 0 2 3 | 33 |
BBH LIMITED DURATION FUND |
FINANCIAL HIGHLIGHTS (continued) Selected per share data and ratios for a Class I share outstanding throughout each year. |
For the years ended October 31, | ||||||||||||||||||||
2023 | 2022 | 2021 | 2020 | 2019 | ||||||||||||||||
Net asset value, beginning of year | $ | 9.90 |
| $ | 10.32 |
| $ | 10.23 |
| $ | 10.25 |
| $ | 10.15 |
| |||||
Income from investment operations: |
|
|
|
|
|
|
|
|
|
| ||||||||||
Net investment income1 |
| 0.41 |
|
| 0.19 |
|
| 0.16 |
|
| 0.24 |
|
| 0.31 |
| |||||
Net realized and unrealized gain/(loss) |
| 0.22 |
|
| (0.41 | ) |
| 0.09 |
|
| (0.02 | ) |
| 0.10 |
| |||||
Total income/(loss) from investment operations |
| 0.63 |
|
| (0.22 | ) |
| 0.25 |
|
| 0.22 |
|
| 0.41 |
| |||||
Dividends and distributions to shareholders: |
|
|
|
|
|
|
|
|
|
| ||||||||||
From net investment income |
| (0.42 | ) |
| (0.20 | ) |
| (0.16 | ) |
| (0.24 | ) |
| (0.31 | ) | |||||
Total dividends and distributions to shareholders |
| (0.42 | ) |
| (0.20 | ) |
| (0.16 | ) |
| (0.24 | ) |
| (0.31 | ) | |||||
Net asset value, end of year | $ | 10.11 |
| $ | 9.90 |
| $ | 10.32 |
| $ | 10.23 |
| $ | 10.25 |
| |||||
Total return2 |
| 6.43 | % |
| (2.14 | )% |
| 2.46 | % |
| 2.24 | % |
| 4.12 | % | |||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Ratios/Supplemental data: |
|
|
|
|
|
|
|
|
|
| ||||||||||
Net assets, end of year (in millions) | $ | 6,688 |
| $ | 7,749 |
| $ | 11,442 |
| $ | 7,610 |
| $ | 6,769 |
| |||||
Ratio of expenses to average net assets before reductions |
| 0.28 | % |
| 0.27 | % |
| 0.27 | % |
| 0.27 | % |
| 0.28 | % | |||||
Expense offset arrangement |
| — | % |
| — | % |
| — | % |
| — | % |
| (0.00 | )%3 | |||||
Ratio of expenses to average net assets after reductions |
| 0.28 | % |
| 0.27 | % |
| 0.27 | % |
| 0.27 | % |
| 0.28 | % | |||||
Ratio of net investment income to average net assets |
| 4.13 | % |
| 1.92 | % |
| 1.55 | % |
| 2.40 | % |
| 3.04 | % | |||||
Portfolio turnover rate |
| 22 | % |
| 46 | % |
| 34 | % |
| 51 | % |
| 53 | % |
____________
1 Calculated using average shares outstanding for the year.
2 Assumes the reinvestment of distributions.
3 Less than 0.01%.
The accompanying notes are an integral part of these financial statements.
34 |
BBH LIMITED DURATION FUND |
NOTES TO FINANCIAL STATEMENTS October 31, 2023 |
1. Organization. The Fund is a separate, diversified series of BBH Trust (the “Trust”), which is registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as an open-end management investment company. The Trust was originally organized under the laws of the State of Maryland on July 16, 1990 as BBH Fund, Inc. and re-organized as a Delaware statutory trust on June 12, 2007. As of October 31, 2023, there were eight series of the Trust. The Fund commenced operation on December 22, 2000 and offers two share classes, Class N and Class I. Neither Class N shares nor Class I shares automatically convert to any other share class of the Fund. The investment objective of the Fund is to provide maximum total return, consistent with preservation of capital and prudent investment management.
2. Significant Accounting Policies. The Fund’s financial statements are prepared in accordance with Generally Accepted Accounting Principles in the United States of America (“GAAP”). The Fund is an investment company and accordingly follows the investment company accounting and reporting guidance of the Financial Accounting Standards Board (“FASB”) Accounting Standard Codification Topic 946 Financial Services — Investment Companies. The following summarizes significant accounting policies of the Fund:
A. Valuation of Investments. The Board of Trustees (the “Board”) has ultimate responsibility for determining the fair value of investments. Pursuant to Rule 2a-5 of the 1940 Act, the Board has designated the Investment Adviser as its valuation designee. The Investment Adviser monitors the continual appropriateness of valuation methods applied and determines if adjustments should be made in light of market factor changes and events affecting issuers. The Investment Adviser performs a series of activities to provide reasonable assurance of the appropriateness of the prices utilized, including but not limited to: periodic independent pricing service due diligence meetings and reviewing the results of back testing on a monthly basis. The Investment Adviser provides the Board with reporting on the results of the back testing as well as positions which were fair valued during the period.
All securities and other investments are recorded at their estimated fair value. The value of investments listed on a securities exchange is based on the last sale price prior to the time when assets are valued, or in the absence of recorded sales, at the most recent bid price on such exchange. If a readily available market quotation is not available or is determined to be unreliable, the investments may be valued utilizing evaluated prices provided by independent pricing services. In establishing such prices, the independent pricing service utilizes both dealer supplied prices and electronic data processing techniques which take into account appropriate factors such as institutional sized trading in similar groups of securities, yield, quality, coupon rate, maturity, type of issue, trading characteristics, the closure of the primary exchange on which securities trade and before the Fund’s net asset value is next determined and other market data without exclusive reliance on quoted exchange prices or over-the-counter prices since such valuations are believed to reflect more accurately the fair value of such investments. Investments may be fair valued by Brown Brothers Harriman & Co. (“BBH”) through a separately identifiable department (“SID” or “Investment Adviser”) in accordance with the BBH Trust Portfolio Valuation Policy and Procedures using methods
F I N A N C I A L S T A T E M E N T S O C T O B E R 3 1, 2 0 2 3 | 35 |
BBH LIMITED DURATION FUND |
NOTES TO FINANCIAL STATEMENTS (continued) October 31, 2023 |
that most fairly reflect the amount that the Fund would reasonably expect to receive for the investment on a current sale in its principal market in the ordinary course of business. Short-term investments, which mature in 60 days or less are valued at amortized cost if their original maturity was 60 days or less, or by amortizing their value on the 61st day prior to maturity, if their original maturity when acquired by the Fund was more than 60 days, unless the use of amortized cost is determined not to represent fair value. Any futures contracts held by the Fund are valued daily at the official settlement price of the exchange on which they are traded.
B. Accounting for Investments and Income. Investment transactions are accounted for on the trade date. Realized gains and losses on investment transactions are determined based on the identified cost method. Interest income is accrued daily and consists of interest accrued, discount earned (including, if any, both original issue and market discount) and premium amortization on the investments of the Fund. Investment income is recorded net of any foreign taxes withheld where recovery of such tax is uncertain. Debt obligations may be placed on non-accrual status and related interest income may be reduced by ceasing current accruals and writing off interest receivable when the collection of all or a portion of the interest has become doubtful based on consistently applied procedures. A debt obligation is removed from non-accrual status when the issuer resumes interest payments or when collectability of interest is reasonably assured.
C. Fund Expenses. Most expenses of the Trust can be directly attributed to a specific fund and share class. Expenses which cannot be directly attributed to a fund are generally apportioned among each fund in the Trust and the respective share classes on a net assets basis or other suitable method. Expense estimates are accrued in the period to which they relate and adjustments are made when actual amounts are known.
D. Financial Futures Contracts. The Fund may enter into open futures contracts in order to economically hedge against anticipated future changes in interest rates which otherwise might either adversely affect the value of securities held for the Fund or adversely affect the prices of securities that are intended to be purchased at a later date for the Fund. The contractual amount of the futures contracts represents the investment the Fund has in a particular contract and does not necessarily represent the amounts potentially subject to risk of loss. Trading in futures contracts involves, to varying degrees, risk of loss in excess of any futures variation margin reflected in the Statement of Assets and Liabilities. The measurement of risk associated with futures contracts is meaningful only when all related and offsetting transactions are considered. Gains and losses are realized upon the expiration or closing of the futures contracts.
Risks related to the use of futures contracts include possible illiquidity of the futures markets, contract prices that can be highly volatile and imperfectly correlated to movements in economically hedged security values and/or interest rates, and potential losses in excess of the Fund’s initial investment.
Open future contracts held at October 31, 2023, are listed in the Portfolio of Investments.
36 |
BBH LIMITED DURATION FUND |
NOTES TO FINANCIAL STATEMENTS (continued) October 31, 2023 |
For the year ended October 31, 2023, the average monthly notional amount of open futures contracts was $501,950,090. The range of monthly notional amounts was $387,422,969 to $646,042,425.
Fair Values of Derivative Instruments as of October 31, 2023
Derivatives not accounted for as economically hedging instruments under authoritative guidance for derivatives instruments and hedging activities:
Asset Derivatives | Liability Derivatives | |||||||||
Risk | Statement of Assets | Fair Value | Statement of Assets | Fair Value | ||||||
Interest Rate Risk | Net unrealized | $5,069,999 | * | Net unrealized | $ | — | ||||
Total | $5,069,999 |
| $ | — |
____________
* Includes cumulative appreciation/(depreciation) of futures contracts as reported in the Statement of Assets and Liabilities and Notes to Financial Statements. Only the current day’s variation margin is reported within the Statement of Assets and Liabilities.
Effect of Derivative Instruments on the Statement of Operations | ||||
Interest Rate | ||||
Net Realized Gain/(Loss) on Derivatives |
|
| ||
Futures Contracts | $ | 30,501,930 |
| |
Net Change in Unrealized Appreciation/(Depreciation) on Derivatives |
|
| ||
Futures Contracts | $ | (16,855,450 | ) |
E. Private Placement Securities. The Fund may purchase securities that are not registered under the Securities Act of 1933, as amended (“1933 Act”) but that can be sold to “qualified institutional buyers” in accordance with the requirements stated in Rule 144A or the requirements stated in Regulation D of the 1933 Act (”Private Placement Securities”). A Private Placement Security may be considered illiquid and therefore, under the U.S. Securities and Exchange Commission (“SEC”) Regulations for open-end investment companies, subject to the 15% limitation on the purchase of illiquid securities, unless it is determined on an ongoing basis that an adequate trading market exists for the security, which is the case for the Fund. Guidelines have been adopted and the daily function of determining and monitoring liquidity of Private Placement Securities has been delegated to the investment adviser. All relevant factors will be considered in determining the liquidity of Private Placement Securities and all investments in Private Placement Securities will be carefully monitored. Information regarding Private Placement Securities is included at the end of the Portfolio of Investments.
F I N A N C I A L S T A T E M E N T S O C T O B E R 3 1, 2 0 2 3 | 37 |
BBH LIMITED DURATION FUND |
NOTES TO FINANCIAL STATEMENTS (continued) October 31, 2023 |
F. Loan Participations and Assignments. The Fund may invest in loan participations and assignments, which include institutionally traded floating and fixed-rate debt securities generally acquired as an assignment from another holder of, or participation interest in, loans originated by a bank or financial institution (the “Lender”) that acts as agent for all holders. Some loan participations and assignments may be purchased on a “when-issued” basis. The agent administers the terms of the loan, as specified in the loan agreement. When investing in a loan assignment, the Fund acquires the loan in whole or in part and becomes a lender under the loan agreement. The Fund generally has the right to enforce compliance with the terms of the loan agreement with the borrower.
Assignments and participations involve credit, interest rate, and liquidity risk. Interest rates on floating rate securities adjust with interest rate changes and/or issuer credit quality, and unexpected changes in such rates could result in losses to the Fund. The interest rates paid on a floating rate security in which the Fund invests generally are readjusted periodically to an increment over a designated benchmark rate, such as the one-month, three-month, six-month, or one-year Secured Overnight Financing Rate (“SOFR”).
The Fund may have difficulty trading assignments and participations to third parties. There may be restrictions on transfer and only limited opportunities may exist to sell such securities in secondary markets. As a result, the Fund may be unable to sell assignments or participations at the desired time or may be able to sell only at a price less than fair market value. The Fund utilizes an independent third party to value individual loan participations and assignments on a daily basis.
G. Federal Income Taxes. It is the Trust’s policy to comply with the requirements of the Internal Revenue Code (the “Code”) applicable to regulated investment companies and to distribute substantially all of its taxable income to its shareholders. Accordingly, no federal income tax provision is required. The Fund files a tax return annually using tax accounting methods required under provisions of the Code, which may differ from GAAP, which is the basis on which these financial statements are prepared. Accordingly, the amount of net investment income and net realized gain reported in these financial statements may differ from that reported on the Fund’s tax return, due to certain book-to-tax timing differences such as losses deferred due to “wash sale” transactions and utilization of capital loss carryforwards. These differences may result in temporary over-distributions for financial statement purposes and are classified as distributions in excess of accumulated net realized gains or net investment income. These distributions do not constitute a return of capital. Permanent differences are reclassified between paid-in capital and retained earnings/(accumulated deficit) within the Statement of Assets and Liabilities based upon their tax classification. As such, the character of distributions to shareholders reported in the Financial Highlights table may differ from that reported to shareholders on Form 1099-DIV.
The Fund is subject to the provisions of Accounting Standards Codification 740 Income Taxes (“ASC 740”). ASC 740 sets forth a minimum threshold for financial statement recognition of the benefit of a tax position taken or expected to be taken in a tax return. The Fund did not have any
38 |
BBH LIMITED DURATION FUND |
NOTES TO FINANCIAL STATEMENTS (continued) October 31, 2023 |
unrecognized tax benefits as of October 31, 2023, nor were there any increases or decreases in unrecognized tax benefits for the year then ended. The Fund recognizes interest and penalties, if any, related to unrecognized tax benefits as an income tax expense in the Statement of Operations. During the year ended October 31, 2023, the Fund did not incur any such interest or penalties. The Fund is subject to examination by U.S. federal and state tax authorities for returns filed for the prior three fiscal years. The Fund is not aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will significantly change in the next twelve months.
H. Dividends and Distributions to Shareholders. Dividends and distributions from net investment income to shareholders are declared daily and paid monthly to shareholders. Distributions from net capital gains, if any, are generally declared and paid annually and are recorded on the ex-dividend date. The Fund declared dividends and distributions in the amount of $18,843,572 and $293,175,046 to Class N and Class I shareholders, respectively, during the year ended October 31, 2023, and in the amount of $10,755,212 and $189,176,618 to Class N and Class I shareholders, respectively, during the year ended October 31, 2022.
The tax character of distributions paid during the years ended October 31, 2023 and 2022, respectively, were as follows:
Distributions paid from: | |||||||||||
Ordinary | Net | Total taxable | Tax return | Total | |||||||
2023: | $ 312,018,618 | $ — | $ 312,018,618 | $ — | $ | 312,018,618 | |||||
2022: | 199,931,830 | — | 199,931,830 | — |
| 199,931,830 |
As of October 31, 2023 and 2022, respectively, the components of retained earnings/(accumulated deficit) on tax basis were as follows:
Components of retained earnings/(accumulated deficit): | ||||||||||||
Undistributed | Undistributed | Accumulated | Other | Book | Total | |||||||
2023: | $ 3,809,972 | $ — | $ — | $ (5,933,067) | $ (263,990,645) | $ (266,113,740) | ||||||
2022: | 144,719 | — | (1,015,984) | (21,960,797) | (402,817,785) | (425,649,847) |
The Fund did not have a net capital loss carryforward at October 31, 2023.
F I N A N C I A L S T A T E M E N T S O C T O B E R 3 1, 2 0 2 3 | 39 |
BBH LIMITED DURATION FUND |
NOTES TO FINANCIAL STATEMENTS (continued) October 31, 2023 |
The Fund is permitted to carryforward capital losses for an unlimited period and they will retain their character as either short-term or long-term capital losses.
Total distributions paid may differ from amounts reported in the Statements of Changes in Net Assets because, for tax purposes, dividends are recognized when actually paid.
The differences between book-basis and tax-basis unrealized appreciation/(depreciation) is attributable primarily to the tax deferral of losses on wash sales and paydowns on fixed income securities.
To the extent future capital gains are offset by capital loss carryforwards, if any, such gains will not be distributed.
I. Use of Estimates. The preparation of the financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities in the financial statements, disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of increase and decrease in net assets from operations during the reporting period. Actual results could differ from these estimates.
3. Fees and Other Transactions with Affiliates.
A. Investment Advisory and Administrative Fees. Under a combined Investment Advisory and Administrative Services Agreement (“Agreement”) with the Trust, Brown Brothers Harriman & Co. (“BBH”) through a separately identifiable department (“Investment Adviser”) provides investment advisory, portfolio management and administrative services to the Fund. The Fund pays a combined fee for investment advisory and administrative services calculated daily and paid monthly at an annual rate equivalent to 0.30% per annum on the first $1 billion of the Fund’s average daily net assets and 0.25% per annum on the Fund’s average daily net assets over $1 billion. For the year ended October 31, 2023, the Fund incurred $19,446,593 for services under the Agreement.
B. Investment Advisory and Administrative Fee Waivers. Effective June 14, 2018 the Investment Adviser has contractually agreed to waive fees and/or reimburse expenses for the Fund’s Class N shares in order to limit total annual fund operating expenses (excluding interest, taxes, brokerage commissions, other expenditures that are capitalized in accordance with GAAP, other extraordinary expenses not incurred in the ordinary course of the Fund’s business) for Class N to 0.35%. The agreement will terminate on March 1, 2024, unless it is renewed by all parties to the agreement. The agreement may only be terminated during its term with approval of the Fund’s Board of Trustees. For the year ended October 31, 2023, the Investment Adviser waived fees in the amount of $665,947 for Class N.
40 |
BBH LIMITED DURATION FUND |
NOTES TO FINANCIAL STATEMENTS (continued) October 31, 2023 |
C. Shareholder Servicing Fees. The Trust has a shareholder servicing agreement with BBH. BBH receives a fee from the Fund calculated daily and paid monthly at an annual rate of 0.20% of Class N shares’ average daily net assets. For the year ended October 31, 2023, Class N shares of the Fund incurred $929,921 in shareholder servicing fees.
D. Custody and Fund Accounting Fees. BBH acts as a custodian and fund accountant and receives custody and fund accounting fees from the Fund calculated daily and incurred monthly. BBH holds all of the Fund’s cash and investments and calculates the Fund’s daily net asset value. The custody fee is an asset and transaction-based fee. The fund accounting fee is an asset-based fee calculated at 0.325 basis points per annum of the Fund’s net asset value, effective September 1, 2023 based on the new agreement. The fund accounting fee was 0.40 basis points per annum until August 31, 2023. For the year ended October 31, 2023, the Fund incurred $768,554 in custody and fund accounting fees. As per agreement with the Fund’s custodian, the Fund receives interest income on cash balances held by the custodian at the BBH Base Rate. The BBH Base Rate is defined as BBH’s effective trading rate in local money markets on each day. The total interest earned by the Fund for the year ended October 31, 2023 was $162,267. This amount is included in “Interest income from Custodian” in the Statement of Operations. In the event that the Fund is overdrawn, under the custody agreement with BBH, BBH will make overnight loans to the Fund to cover overdrafts. Pursuant to their agreement, the Fund will pay the BBH Overdraft Base Rate plus 2% on the day of the overdraft. The Fund did not incur any such fees during the year ended October 31, 2023. This amount, if any, is included under line item “Custody and fund accounting fees” in the Statement of Operations.
E. Board of Trustees’ Fees. Each Trustee who is not an “interested person” as defined under the 1940 Act receives an annual fee as well as reimbursement for reasonable out-of-pocket expenses from the Fund. For the year ended October 31, 2023, the Fund incurred $152,849 in independent Trustee compensation and expense reimbursements.
F. Officers of the Trust. Officers of the Trust are also employees of BBH. Officers are paid no fees by the Trust for their services to the Trust.
4. Investment Transactions. For the year ended October 31, 2023, the cost of purchases and the proceeds of sales of investment securities, other than short-term investments, were $1,524,394,563 and $2,361,937,754, respectively.
F I N A N C I A L S T A T E M E N T S O C T O B E R 3 1, 2 0 2 3 | 41 |
BBH LIMITED DURATION FUND |
NOTES TO FINANCIAL STATEMENTS (continued) October 31, 2023 |
5. Shares of Beneficial Interest. The Trust is permitted to issue an unlimited number of Class N shares and Class I shares of beneficial interest, at no par value. Transactions in Class N and Class I shares were as follows:
For the year ended | For the year ended | |||||||||||
Shares | Dollars | Shares | Dollars | |||||||||
Class N |
|
|
|
| ||||||||
Shares sold | 16,648,681 |
| $ 167,017,042 |
| 25,540,936 |
| $ 259,500,608 |
| ||||
Shares issued in connection with reinvestments of dividends | 1,811,474 |
| 18,214,422 |
| 1,034,691 |
| 10,416,727 |
| ||||
Shares redeemed | (24,481,906 | ) | (245,721,231 | ) | (40,597,352 | ) | (411,405,769 | ) | ||||
Net decrease | (6,021,751 | ) | $ (60,489,767 | ) | (14,021,725 | ) | $ (141,488,434 | ) | ||||
|
|
|
| |||||||||
Class I |
|
|
|
| ||||||||
Shares sold | 218,901,381 |
| $ 2,196,969,582 |
| 406,100,699 |
| $ 4,125,347,402 |
| ||||
Shares issued in connection with reinvestments of dividends | 6,146,307 |
| 61,775,000 |
| 3,619,691 |
| 36,424,572 |
| ||||
Shares redeemed | (345,987,715 | ) | (3,469,926,463 | ) | (735,947,402 | ) | (7,437,609,520 | ) | ||||
Net decrease | (120,940,027 | ) | $ (1,211,181,881 | ) | (326,227,012 | ) | $ (3,275,837,546 | ) |
Included in Shares Sold and Shares Redeemed are shareholder exchanges during the years ended October 31, 2023 and October 31, 2022. Specifically:
During the year ended October 31, 2023, 489,572 shares of Class N were exchanged for 489,939 shares of Class I valued at $4,904,794 and 143,112 shares of Class I were exchanged for 142,972 shares of Class N valued at $1,438,063.
During the year ended October 31, 2022, 262,809 shares of Class N were exchanged for 263,024 shares of Class I valued at $2,665,672 and 644,524 shares of Class I were exchanged for 644,524 shares of Class N valued at $6,632,150.
6. Principal Risk Factors and Indemnifications.
A. Principal Risk Factors. Investing in the Fund may involve certain risks, as discussed in the Fund’s prospectus, including but not limited to, those described below:
A shareholder may lose money by investing in the Fund (investment risk). The Fund is actively managed and the decisions by the Investment Adviser may cause the Fund to incur losses or miss profit opportunities (management risk). In the normal course of business, the Fund invests in securities and enters into transactions where risks exist due to failure of a counterparty to a transaction to perform (credit risk), changes in interest rates (interest rate risk), higher volatility
42 |
BBH LIMITED DURATION FUND |
NOTES TO FINANCIAL STATEMENTS (continued) October 31, 2023 |
for securities with longer maturities (maturity risk), financial performance or leverage of the issuer (issuer risk), difficulty in being able to purchase or sell a security (illiquid securities risk), or certain risks associated with investing in non-U.S. securities not present in domestic investments, including, but not limited to, recovery of tax withheld by foreign jurisdictions (non-U.S. investment risk). The Fund may invest in securities of other investment companies, consisting of ETFs and money market funds. When purchasing shares of other investment companies, shareholders bear both their proportionate share of the Fund’s expenses and similar expenses of the underlying investment company when the Fund invests in shares of another investment company. The Fund is subject to the risks associated with the investment company’s investments (investment company risk), and risks from investing in securities of issuers based in developing countries (emerging markets risk). The Fund may use of derivatives that could create risks that are different from, or possibly greater than, the risks associated with investing directly in securities as the Fund could lose more than the principal amount invested (derivatives risk). Due to uncertainty regarding the ability of the issuer to pay principal and interest, securities that are rated below investment grade (i.e., Ba1/BB+ or lower) (junk bond risk), and their unrated equivalents, may be subject to greater risks than securities which have higher credit ratings, including a high risk of default. The Fund invests in asset-backed (asset-backed securities risk) and mortgage-backed securities (mortgage-backed securities risk) which are subject to the risk that borrowers may default on the obligations that underlie these securities. In addition, these securities may be paid off sooner (prepayment risk) or later than expected which may increase the volatility of securities during periods of fluctuating interest rates. The Fund may invest in bonds issued by foreign governments which may be unable or unwilling to make interest payments and/or repay the principal owed (sovereign debt risk). The Fund’s use of borrowing, in reverse repurchase agreements and investment in some derivatives, involves leverage. Leverage tends to exaggerate the effect of any increase or decrease in the value of the Fund’s securities and may cause the Fund to be more volatile (leverage risk). Loan participations and assignments, delayed funding loans and revolving credit facilities may have the effect of requiring the Fund to increase its investment in a company at a time when it might not otherwise decide to do so (loan risk). The value of securities held by the Fund may decline in response to certain events, including: those directly involving the companies or issuers whose securities are held by the Fund; conditions affecting the general economy; overall market changes; local, regional or political, social or economic instability; and currency and interest rate and price fluctuations. Natural disasters, the spread of infectious illness and other public health emergencies, recession, terrorism and other unforeseeable events may lead to increased market volatility and may have adverse effects on world economies and markets generally (market risk). The Fund’s shareholders may be adversely impacted by asset allocation decisions made by an investment adviser whose discretionary clients make up a large percentage of the Fund’s shareholders (large shareholder risk). While the U.S. Government has historically provided financial support to U.S. government-sponsored agencies or instrumentalities during times of financial stress, such as the various actions taken to stabilize the Federal National Mortgage Association and Federal Home Loan Mortgage Corporation during the credit crisis of 2008, no assurance can be given that it will do so in the future. Such securities are
F I N A N C I A L S T A T E M E N T S O C T O B E R 3 1, 2 0 2 3 | 43 |
BBH LIMITED DURATION FUND |
NOTES TO FINANCIAL STATEMENTS (continued) October 31, 2023 |
neither issued nor guaranteed by the U.S. Treasury (U.S. Government Agency Securities Risk). The Fund may invest in private placement securities that are issued pursuant to Regulation S, Regulation D and Rule 144A which have not been registered with SEC. These securities may be subject to contractual restrictions which prohibit or limit their resale (private placement risk). The United Kingdom’s Financial Conduct Authority announced a phase out of the London Interbank Offered Rate (“LIBOR”). Although many LIBOR rates were phased out by the end of 2021, some USD LIBOR settings will continue to be published under a synthetic methodology until September 30, 2024 for certain legacy contracts. SOFR has been used increasingly on a voluntary basis in new instruments and transactions. Under U.S. regulations that implement a statutory fallback mechanism to replace LIBOR, benchmark rates based on SOFR have replaced LIBOR in certain financial contracts. Any pricing adjustments to the fund’s investments resulting from a substitute reference rate may also adversely affect the fund’s performance and/or net asset value (LIBOR transition risk). The Fund may invest in convertible securities which may perform in a similar manner to a regular debt security and are subject to variety of risks, including investment risk, market risk, issuer risk and interest rate risk (convertible securities risk). The Fund may invest in preferred securities which are equity interests in a company that entitle the holder to receive common stock, dividends and a fixed share of the proceeds resulting from a liquidation of the company, in preference to the holders of other securities. Preferred securities are subject to issuer specific and market risks applicable generally to equity securities (preferred securities risk). The Fund may also invest in notes issued by Business Development Companies (“BDCs”). These notes are subject to risks similar to those of other issuers and those of investment companies (business development company risk). The extent of the Fund’s exposure to these risks in respect to these financial assets is included in their value as recorded in the Fund’s Statement of Assets and Liabilities.
Please refer to the Fund’s prospectus for a complete description of the principal risks of investing in the Fund.
B. Indemnifications. Under the Trust’s organizational documents, its officers and Trustees may be indemnified against certain liabilities and expenses arising out of the performance of their duties to the Fund, and shareholders are indemnified against personal liability for the obligations of the Trust. Additionally, in the normal course of business, the Fund enters into agreements with service providers that may contain indemnification clauses. The Fund’s maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Fund that have not yet occurred. The risk of material loss from such claims is considered remote.
7. Subsequent Events. Management has evaluated events and transactions that have occurred since October 31, 2023 through the date the financial statements were issued and determined that there were no subsequent events that would require recognition or additional disclosure in the financial statements.
44 |
BBH LIMITED DURATION FUND |
DISCLOSURE OF FUND EXPENSES October 31, 2023 (unaudited) |
EXAMPLE
As a shareholder of the Fund, you may incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments, reinvested distributions, or other distributions; redemption fees; and exchange fees; and (2) ongoing costs, including management fees; and other Fund expenses. This Example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The Example is based on an investment of $1,000 invested at the beginning of the six-month period and held for the entire period (May 1, 2023 to October 31, 2023).
ACTUAL EXPENSES
The first line of the table provides information about actual account values and actual expenses. You may use information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled “Expenses Paid During the Period” to estimate the expenses you paid on your account during the period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The second line of the table provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid during the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% Hypothetical Example with the 5% hypothetical examples that appear in the shareholder reports of other funds.
F I N A N C I A L S T A T E M E N T S O C T O B E R 3 1, 2 0 2 3 | 45 |
BBH LIMITED DURATION FUND |
DISCLOSURE OF FUND EXPENSES (continued) October 31, 2023 (unaudited) |
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as redemption fees or exchange fees. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
Beginning | Ending | Expenses Paid | ||||
Class N | ||||||
Actual | $1,000 | $1,027 | $1.79 | |||
Hypothetical2 | $1,000 | $1,023 | $1.79 |
Beginning | Ending | Expenses Paid | ||||
Class I | ||||||
Actual | $1,000 | $1,029 | $1.43 | |||
Hypothetical2 | $1,000 | $1,024 | $1.43 |
____________
1 Expenses are equal to the Fund’s annualized expense ratio of 0.35% and 0.28% for Class N and I shares, respectively, multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period).
2 Assumes a return of 5% before expenses. For the purposes of the calculation, the applicable annualized expenses ratio for each class of shares is subtracted from the assumed return before expenses.
46 |
BBH LIMITED DURATION FUND |
CONFLICTS OF INTEREST October 31, 2023 (unaudited) |
Description of Potential Material Conflicts of Interest — Investment Adviser
BBH, including the Investment Adviser, provides discretionary and non-discretionary investment management services and products to corporations, institutions and individual investors throughout the world. As a result, in the ordinary course of its businesses, BBH, including the Investment Adviser, may engage in activities in which its interests or the interests of its clients may conflict with or be adverse to the interests of the Funds. In addition, certain of such clients (including the Funds) utilize the services of BBH for which they will pay to BBH customary fees and expenses that will not be shared with the Funds.
The Investment Adviser has adopted and implemented policies and procedures that seek to manage conflicts of interest. Pursuant to such policies and procedures, the Investment Adviser monitors a variety of areas, including compliance with fund investment guidelines, the investment in only those securities that have been approved for purchase, and compliance with their respective Code of Ethics.
The Trust also manages these conflicts of interest. For example, the Trust has designated a chief compliance officer (“CCO”) and has adopted and implemented policies and procedures designed to manage the conflicts identified below and other conflicts that may arise in the course of the Funds’ operations in such a way as to safeguard the Funds from being negatively affected as a result of any such potential conflicts. From time to time, the Trustees receive reports from the Investment Adviser and the Trust’s CCO on areas of potential conflict.
Investors should carefully review the following, which describes potential and actual conflicts of interest that BBH, the Investment Adviser can face in the operation of their respective investment management services. This section is not, and is not intended to be, a complete enumeration or explanation of all of the potential conflicts of interest that may arise. The Investment Adviser and the Funds has adopted policies and procedures reasonably designed to appropriately prevent, limit or mitigate the conflicts of interest described below. Additional information about potential conflicts of interest regarding the Investment Adviser is set forth in the Investment Adviser’s Form ADV. A copy of Part 1 and Part 2A of the Investment Adviser’s Form ADV is available on the SEC’s website (www.adviserinfo.sec.gov). In addition, many of the activities that create these conflicts of interest are limited and/or prohibited by law, unless an exception is available.
Other Clients and Allocation of Investment Opportunities. BBH, the Investment Adviser manages funds and accounts of clients other than the Funds (“Other Clients”). In general, BBH, the Investment Adviser faces conflicts of interest when they render investment advisory services to different clients and, from time to time, provide dissimilar investment advice to different clients. Investment decisions will not necessarily be made in parallel among the Funds and Other Clients. Investments made by the Funds do not, and are not intended to, replicate the investments, or the investment methods and strategies, of Other Clients. Accordingly, such Other Clients may produce results that are materially different from those experienced by the Funds. Certain other conflicts of interest may arise in connection with a portfolio manager’s management of the Funds’ investments, on the one hand, and the investments of other funds or accounts for which the portfolio manager is responsible, on the other. For example, it is possible that the various funds or accounts managed by the Investment Adviser could have different investment strategies
F I N A N C I A L S T A T E M E N T S O C T O B E R 3 1, 2 0 2 3 | 47 |
BBH LIMITED DURATION FUND |
CONFLICTS OF INTEREST (continued) October 31, 2023 (unaudited) |
that, at times, might conflict with one another to the possible detriment of the Funds. From time to time, the Investment Adviser sponsors and with other investment pools and accounts which engage in the same or similar businesses as the Funds using the same or similar investment strategies. To the extent that the same investment opportunities might be desirable for more than one account or fund, possible conflicts could arise in determining how to allocate them because the Investment Adviser may have an incentive to allocate investment opportunities to certain accounts or funds. However, BBH and the Investment Adviser have implemented policies and procedures designed to ensure that information relevant to investment decisions is disseminated promptly within its portfolio management teams and investment opportunities are allocated equitably among different clients. The policies and procedures require, among other things, objective allocation for limited investment opportunities, and documentation and review of justifications for any decisions to make investments only for select accounts or in a manner disproportionate to the size of the account. Nevertheless, access to investment opportunities may be allocated differently among accounts due to the particular characteristics of an account, such as size of the account, cash position, tax status, risk tolerance and investment restrictions or for other reasons.
Actual or potential conflicts of interest may also arise when a portfolio manager has management responsibilities to multiple accounts or funds, resulting in unequal commitment of time and attention to the portfolio management of the funds or accounts.
Affiliated Service Providers. Other potential conflicts might include conflicts between the Funds and its affiliated and unaffiliated service providers (e.g., conflicting duties of loyalty). In addition to providing investment management services through the SID, BBH provides administrative, custody, shareholder servicing and fund accounting services to the Funds. BBH may have conflicting duties of loyalty while servicing the Funds and/or opportunities to further its own interest to the detriment of the Funds. For example, in negotiating fee arrangements with affiliated service providers, BBH may have an incentive to agree to higher fees than it would in the case of unaffiliated providers. BBH acting in its capacity as the Funds’ administrator is the primary valuation agent of the Funds. BBH values securities and assets in the Funds according to the Funds’ valuation policies. Because the Investment Adviser’s advisory and administrative fees are calculated by reference to a Funds’ net assets, BBH and its affiliates may have an incentive to seek to overvalue certain assets.
Aggregation. Potential conflicts of interest also arise with the aggregation of trade orders. Purchases and sales of securities for the Funds may be aggregated with orders for other client accounts managed by the Investment Adviser. The Investment Adviser, however, are not required to aggregate orders if portfolio management decisions for different accounts are made separately, or if it is determined that aggregating is not practicable, or in cases involving client direction. Prevailing trading activity frequently may make impossible the receipt of the same price or execution on the entire volume of securities purchased or sold. When this occurs, the various prices may be averaged, and the Funds will be charged or credited with the
48 |
BBH LIMITED DURATION FUND |
CONFLICTS OF INTEREST (continued) October 31, 2023 (unaudited) |
average price. Thus, the effect of the aggregation may operate on some occasions to the disadvantage of the Funds. In addition, under certain circumstances, the Funds will not be charged the same commission or commission equivalent rates in connection with an aggregated order.
Cross Trades. Under certain circumstances, the Investment Adviser, on behalf of the Funds, may seek to buy from or sell securities to another fund or account advised by BBH, the Investment Adviser. Subject to applicable law and regulation, BBH, the Investment Adviser may (but is not required to) effect purchases and sales between BBH, the Investment Adviser clients (“cross trades”), including the Funds, if BBH or the Investment Adviser believes such transactions are appropriate based on each party’s investment objectives and guidelines. There may be potential conflicts of interest or regulatory issues relating to these transactions which could limit the Investment Adviser’s decision to engage in these transactions for the Funds. BBH and/or the Investment Adviser may have a potentially conflicting division of loyalties and responsibilities to the parties in such transactions.
Soft Dollars. The Investment Adviser may direct brokerage transactions and/or payment of a portion of client commissions (“soft dollars”) to specific brokers or dealers or other providers to pay for research or other appropriate services which provide, in the Investment Adviser’s view, appropriate assistance in the investment decision-making process (including with respect to futures, fixed price offerings and over-the-counter transactions). The use of a broker that provides research and securities transaction services may result in a higher commission than that offered by a broker who does not provide such services. The Investment Adviser will determine in good faith whether the amount of commission is reasonable in relation to the value of research and services provided and whether the services provide lawful and appropriate assistance in its investment decision-making responsibilities.
Research or other services obtained in this manner may be used in servicing any or all of the Funds and other accounts managed by the Investment Adviser, including in connection with accounts that do not pay commissions to the broker related to the research or other service arrangements. Such products and services may disproportionately benefit other client accounts relative to the Funds based on the amount of brokerage commissions paid by the Funds and such other accounts. To the extent that a Sub-adviser uses soft dollars, it will not have to pay for those products and services itself.
BBH may receive research that is bundled with the trade execution, clearing, and/or settlement services provided by a particular broker-dealer. For example, the research effectively will be paid by client commissions that also will be used to pay for the execution, clearing, and settlement services provided by the broker-dealer and will not be paid by the Investment Adviser.
Arrangements regarding compensation and delegation of responsibility may create conflicts relating to selection of brokers or dealers to execute Fund portfolio trades and/or specific uses of commissions from Fund portfolio trades, administration of investment advice and valuation of securities.
F I N A N C I A L S T A T E M E N T S O C T O B E R 3 1, 2 0 2 3 | 49 |
BBH LIMITED DURATION FUND |
CONFLICTS OF INTEREST (continued) October 31, 2023 (unaudited) |
Investments in BBH Funds. From time to time BBH may invest a portion of the assets of its discretionary investment advisory clients in the Funds. That investment by BBH on behalf of its discretionary investment advisory clients in the Funds may be significant at times.
Increasing a Fund’s assets may enhance investment flexibility and diversification and may contribute to economies of scale that tend to reduce the Funds’ expense ratio. In selecting the Funds for its discretionary investment advisory clients, BBH may limit its selection to funds managed by BBH or the Investment Adviser. BBH may not consider or canvass the universe of unaffiliated investment companies available, even though there may be unaffiliated investment companies that may be more appropriate or that have superior performance. BBH, the Investment Adviser and their affiliates providing services to the Funds benefit from additional fees when the Funds is included as an investment by a discretionary investment advisory client.
BBH reserves the right to redeem at any time some or all of the shares of the Funds acquired for its discretionary investment advisory clients’ accounts. A large redemption of shares of the Funds by BBH on behalf of its discretionary investment advisory clients could significantly reduce the asset size of the Funds, which might have an adverse effect on the Funds’ investment flexibility, portfolio diversification and expense ratio.
Valuation. When market quotations are not readily available or are believed by BBH to be unreliable, the Funds’ investments will be valued at fair value by BBH pursuant to procedures adopted by the Funds’ Board. When determining an asset’s “fair value,” BBH seeks to determine the price that a Fund might reasonably expect to receive from the current sale of that asset in an arm’s-length transaction. The price generally may not be determined based on what the Funds might reasonably expect to receive for selling an asset at a later time or if it holds the asset to maturity. While fair value determinations will be based upon all available factors that BBH deems relevant at the time of the determination and may be based on analytical values determined by BBH using proprietary or third-party valuation models, fair value represents only a good faith approximation of the value of a security. The fair value of one or more securities may not, in retrospect, be the price at which those assets could have been sold during the period in which the particular fair values were used in determining the Funds’ net asset value. As a result, the Funds’ sale or redemption of its shares at net asset value, at a time when a holding or holdings are valued by BBH (pursuant to Board-adopted procedures) at fair value, may have the effect of diluting or increasing the economic interest of existing shareholders.
Referral Arrangements. BBH may enter into advisory and/or referral arrangements with third parties. Such arrangements may include compensation paid by BBH to the third party. BBH may pay a solicitation fee for referrals and/or advisory or incentive fees. BBH may benefit from increased amounts of assets under management.
Personal Trading. BBH, including the Investment Adviser, and any of their respective partners, principals, directors, officers, employees, affiliates or agents, face conflicts of interest when transacting in securities for their own accounts because they could benefit by trading in the same securities as the Funds, which could have an adverse effect on the Funds. However, the Investment Adviser has implemented policies
50 |
BBH LIMITED DURATION FUND |
CONFLICTS OF INTEREST (continued) October 31, 2023 (unaudited) |
and procedures concerning personal trading by BBH Partners and employees. The policy and procedures are intended to prevent BBH Partners and employees from trading in the same securities as the Funds. However, BBH, including the Investment Adviser, has implemented policies and procedures concerning personal trading by BBH Partners and employees. The policies and procedures are intended to prevent BBH Partners and employees with access to Fund material non-public information from trading in the same securities as the Funds.
Gifts and Entertainment. From time to time, employees of BBH, including the Investment Adviser, and any of their respective partners, principals, directors, officers, employees, affiliates or agents, may receive gifts and/or entertainment from clients, intermediaries, or service providers to the Funds or BBH, including the Investment Adviser, which could have the appearance of affecting or may potentially affect the judgment of the employees, or the manner in which they conduct business. The Investment Adviser has implemented policies and procedures concerning gifts and entertainment to mitigate any impact on the judgment of BBH Partners and employees. BBH, including the Investment Adviser, has implemented policies and procedures concerning gifts and entertainment to mitigate any impact on the judgment of BBH Partners and employees.
F I N A N C I A L S T A T E M E N T S O C T O B E R 3 1, 2 0 2 3 | 51 |
BBH LIMITED DURATION FUND |
ADDITIONAL FEDERAL TAX INFORMATION October 31, 2023 (unaudited) |
The qualified investment income (“QII”) percentage for the year ended October 31, 2023 was 78.07%. In January 2024, shareholders will receive Form 1099-DIV, which will include their share of qualified dividends distributed during the calendar year 2023. Shareholders are advised to check with their tax advisers for information on the treatment of these amounts on their individual income tax returns.
52 |
TRUSTEES AND OFFICERS OF BBH LIMITED DURATION FUND |
(unaudited) |
Information pertaining to the Trustees and executive officers of the Trust as of October 31, 2023 is set forth below. The mailing address for each Trustee is c/o BBH Trust, 140 Broadway, New York, NY 10005.
|
|
|
|
| Other Public |
Independent Trustees | |||||
H. Whitney Wagner | Chairman of the Board and Trustee | Chairman Since 2014; Trustee Since 2007 and 2006 – 2007 with the Predecessor Trust | President, Clear Brook Advisors, a registered investment adviser. | 8 | None. |
Andrew S. Frazier | Trustee | Since 2010 | Retired. | 8 | None. |
Mark M. Collins | Trustee | Since 2011 | Partner of Brown Investment Advisory Incorporated, a registered investment adviser. | 8 | Chairman of Dillon Trust Company. |
John M. Tesoro | Trustee | Since 2014 | Retired. | 8 | Independent Trustee, Bridge Builder Trust (11 funds) and Edward Jones Money Market Fund; Director, Teton Advisers, Inc. (a registered investment adviser) (2014 – 2021). |
Joan A. Binstock | Trustee | Since 2019 | Partner, Chief Financial and Operations Officer, Lord Abbett & Co. LLC (1999 – 2018); Lovell Minnick Partners, Advisers Counsel (2018 – present). | 8 | Independent Director, Morgan Stanley Direct Lending Fund; KKR Real Estate Interval Fund. |
Karen A. Kochevar | Trustee | Since 2023 | Retired. | 8 | Director, CAVA Group, Inc. |
F I N A N C I A L S T A T E M E N T S O C T O B E R 3 1, 2 0 2 3 | 53 |
TRUSTEES AND OFFICERS OF BBH LIMITED DURATION FUND |
(unaudited) |
|
|
|
|
| Other Public |
Interested Trustees | |||||
Susan C. Livingston+ | Trustee | Since 2011 | Partner (since 1998) and Senior Client Advocate (since 2010) for BBH&Co. | 8 | None. |
John A. Gehret+ | Trustee | Since 2011 | Limited Partner of BBH&Co. (2012 – present). | 8 | None. |
54 |
TRUSTEES AND OFFICERS OF BBH LIMITED DURATION FUND |
(unaudited) |
Name, Address | Position(s) | Term of | Principal Occupation(s) |
Officers | |||
Jean-Pierre Paquin | President and Principal Executive Officer | Since 2016 | Partner of BBH&Co. since 2015; joined BBH&Co. in 1996. |
Daniel Greifenkamp | Vice President | Since 2016 | Principal of BBH&Co. |
Charles H. Schreiber | Treasurer and Principal Financial Officer | Since 2007 2006 – 2007 with the Predecessor Trust | Managing Director of BBH&Co. since 2001; joined BBH&Co. in 1999. |
Paul F. Gallagher | Chief Compliance Officer (“CCO”) | Since 2015 | Managing Director of BBH&Co. since 2015. |
Nicole English | Anti-Money Laundering Officer (“AMLO”) | Since 2022 | Vice President of BBH&Co. |
Brian J. Carroll | Secretary | Since 2021 | Vice President of BBH&Co. |
Crystal Cheung | Assistant Treasurer | Since 2018 | Assistant Vice President of BBH&Co. since 2016; joined BBH&Co. in 2014. |
____________
# All officers of the Trust hold office for one year and until their respective successors are chosen and qualified (subject to the ability of the Trustees to remove any officer in accordance with the Trust’s By-laws). Mr. Wagner previously served on the Board of Trustees of the Predecessor Trust.
+ Ms. Livingston and Mr. Gehret are “interested persons” of the Trust as defined in the 1940 Act because of their positions as Partner and Limited Partner of BBH&Co., respectively.
^ The Fund Complex consists of the Trust, which has eight series, and each is counted as one “Portfolio” for purposes of this table.
F I N A N C I A L S T A T E M E N T S O C T O B E R 3 1, 2 0 2 3 | 55 |
BBH LIMITED DURATION FUND |
OPERATION AND EFFECTIVENESS OF THE FUND’S LIQUIDITY RISK MANAGEMENT PROGRAM October 31, 2023 (unaudited) |
The Securities and Exchange Commission adopted Rule 22e-4 under the Investment Company Act of 1940, as amended (the “Liquidity Rule”), to promote effective liquidity risk management throughout the open-end investment company industry in order to reduce the risk that funds will be unable to meet their redemption obligations and mitigate dilution of the interests of fund shareholders.
The Board of Trustees (the “Board”) of BBH Trust has appointed three members of the Brown Brothers Harriman & Co. Mutual Fund Advisory Department, the Investment Adviser to the funds of BBH Trust (the “Funds”), as the Program Administrator for the Fund’s liquidity risk management program (the “Program”). The Board met on March 7, 2023 to review the Program for the Funds pursuant to the Liquidity Rule. The Program Administrator provided the Board with a report (the “Report”) that addressed the operations of the Program and assessed its adequacy and effectiveness for the period from February 1, 2022 through January 31, 2023 (the “Reporting Period”).
The Report noted that the Program complied with the key factors for consideration under the Liquidity Rule for assessing, managing and periodically reviewing a Fund’s liquidity risk, including the following points.
Liquidity classification. The Report described the Program’s liquidity classification methodology for categorizing the Funds’ investments into one of four liquidity buckets. The Fund classified each of its investments into one of four liquidity categories based on the number of days reasonably needed to sell and convert a reasonably anticipated sized trade of each investment into cash without significantly impacting the price of the investments. The Program Administrator relied on a third-party data provider to facilitate the classification of the Fund’s investments based on criteria in the Fund’s Program. During the Reporting Period, the Fund did not hold more than 15% of its net assets in illiquid investments.
Highly Liquid Investment Minimum. The Report noted that one aspect of the Liquidity Rule is a requirement that funds that are expected to have less than 50% of assets classified as other than “highly liquid” should establish a minimum percentage of highly liquid assets that the fund is expected to hold on an on-going basis. The Program Administrator monitors the percentages of assets in each category on an ongoing basis and, given that the Fund did not approach the 50% threshold, has made the determination that it is not necessary to assign a Highly Liquid Investment Minimum to the Fund as provided for in the Liquidity Rule.
The Fund’s investment strategy and liquidity of portfolio investments during normal and reasonably foreseeable stressed market conditions. During the Reporting Period, the Program Administrator reviewed whether the Fund’s investment strategy is appropriate for an open-end fund structure with a focus on funds with more significant and consistent holdings of less liquid and illiquid assets and factored a Fund’s concentration in an issuer into the liquidity classification methodology by taking issuer position sizes into account.
56 |
BBH LIMITED DURATION FUND |
OPERATION AND EFFECTIVENESS OF THE FUND’S LIQUIDITY RISK MANAGEMENT PROGRAM October 31, 2023 (unaudited) |
Short-term and long-term cash flow projections during normal and reasonably foreseeable stressed market conditions. During the Reporting Period, the Program Administrator reviewed historical redemption activity and used this information as a component to establish the Fund’s reasonably anticipated trading size. The Program Administrator also took into consideration other factors such as shareholder ownership concentration, applicable distribution channels and the degree of certainty associated with the Fund’s short-term and long-term cash flow projections.
Holdings of cash and cash equivalents. The Program Administrator considered the degree to which the Fund held cash and cash equivalents as a component of each Fund’s ability to meet redemption requests.
There were no material changes to the Program during the Reporting Period. The Program Administrator has informed the Board that it believes that the Fund’s Program is adequately designed, has been implemented as intended, and has operated effectively since its implementation. No material exceptions have been noted since the implementation of the Program, and there were no liquidity events that impacted the Fund or its ability to meet redemption requests on a timely basis during the Reporting Period.
F I N A N C I A L S T A T E M E N T S O C T O B E R 3 1, 2 0 2 3 | 57 |
Administrator Distributor Shareholder Servicing Agent | Investment Adviser | |
To obtain information or make shareholder inquiries: | ||
By telephone: | Call 1-800-575-1265 | |
This report is submitted for the general information of shareholders and is not authorized for distribution to prospective investors unless preceded or accompanied by an effective prospectus. Nothing herein contained is to be considered an offer of sale or a solicitation of an offer to buy shares of the Fund. For more complete information, visit www.bbhfunds.com for a prospectus. You should consider the Fund’s investment objectives, risks, charges and expenses carefully before you invest. Information about these and other important subjects is in the Fund’s prospectus, which you should read carefully before investing. Holdings and allocations are subject to change. Fund holdings should not be relied on in making investment decisions and should not be construed as research or investment advice regarding particular securities. Current and future holdings are subject to risk. The Fund files a complete schedule of portfolio holdings with the Securities and Exchange Commission (SEC) for the first and third quarters of each fiscal year as an exhibit to its reports on Form N-PORT. The Fund’s Forms N-PORT are available electronically on the SEC’s website (sec.gov). For a complete list of a fund’s portfolio holdings, view the most recent holdings listing, semi-annual report, or annual report on the Fund’s web site at http://www.bbhfunds.com. A summary of the Fund’s Proxy Voting Policy that the Fund uses to determine how to vote proxies, if any, relating to securities held in the Fund’s portfolio, as well as a record of how the Fund voted any such proxies during the most recent 12-month period ended June 30, is available, without charge, upon request by calling the toll-free number listed above. This information is also available on the SEC’s website at www.sec.gov. NOT FDIC INSURED NO BANK GUARANTEE MAY LOSE VALUE |
Annual Report
OCTOBER 31, 2023
BBH Income Fund
BBH INCOME FUND |
MANAGEMENT’S DISCUSSION OF FUND PERFORMANCE October 31, 2023 |
The bond market continued to experience challenging conditions over the past year, as interest rates continued to rise and volatility emerged in pockets of the credit markets. Unlike last year, though, fixed income markets were able to perform through those headwinds as interest rates began the year at higher levels. U.S. Treasury rates rose across tenors over the past year as the Fed continued to hike interest rates to combat inflationary pressures. The Fed hiked the federal rates by 2.25% to a range of 5.00% – 5.25% from a range of 3.00% – 3.25% over the past year. Longer-term interest rates rose in tandem and proved a headwind for certain longer-duration assets. The unrelenting pace of monetary policy tightening brought volatility to pockets of the credit markets. Earlier in 2023, the sudden run on Silicon Valley Bank (SVB) spurred a chain reaction that resulted in runs on Silvergate Bank and Signature Bank, stress at Credit Suisse and First Republic Bank that culminated in their sales to UBS and J.P. Morgan, respectively, volatility among U.S. regional banks, and interventions by central banks around the globe to ease depositor concerns.
Performance of mainstream, investment-grade fixed income benchmarks were mixed over the trailing twelve months. The Bloomberg U.S. Aggregate Index returned 0.4% as Treasuries and agency mortgage-backed securities (MBS) in the Index had negative total returns and corporate bonds, asset-backed securities (ABS), and commercial mortgage-backed securities (CMBS) in the Index had positive total returns. Credit indexes generally had positive total returns and outperformed higher quality alternatives. Indices of senior bank loans, high yield corporate bonds, collateralized loan obligation (CLO) debt, investment-grade corporate bonds, and nontraditional ABS all posted positive returns and outperformed similar duration Treasuries by substantial levels. MBS underperformed Treasuries over the trailing year as the Fed’s Quantitative Tightening campaign combined with duration extensions amid the rising rate environment to challenge MBS. The Non-Agency CMBS Index posted a positive total return but underperformed Treasuries as the sector was challenged by broad concerns over conditions in the commercial real estate market and the ability to refinance debt obligations.
In last year’s letter, we wrote about the reasons we were optimistic for the prospects of actively managed fixed income funds. Credit spreads were elevated, and our valuation framework revealed that large parts of the markets for investment grade and high yield corporate bonds, nontraditional asset-backed securities (ABS)*, senior bank loans, and commercial mortgage-backed securities (CMBS) screened favorably. Importantly, the opportunities that emerged met our stringent credit criteria, including our analysts’ assessments of whether each credit evaluated for the Fund withstood severe stress scenarios — the worst environments experienced by their industries — without impairment of principal or interest. This was particularly important as we shared the then-pervasive concerns that the Fed’s aggressive pace of policy tightening could push the U.S. to recession and cause defaults to rise among highly levered borrowers.
On October 31, 2023, the Fund was positioned to benefit from the higher income opportunities afforded by durable credits offered at attractive yields. Credit holdings represented approximately 95% of the Fund, while holdings of high quality “reserves” (Treasury securities and cash equivalents) were relatively low
____________
* Traditional ABS include prime auto backed loans, credit cards and student loans (FFELP). Non-traditional ABS include ABS backed by other collateral types.
2 |
BBH INCOME FUND |
MANAGEMENT’S DISCUSSION OF FUND PERFORMANCE (continued) October 31, 2023 |
at 5% of the Fund. The Fund’s spread duration, a risk measure we use of how sensitive the portfolio is to changes in “credit spreads” (the additional yield on credit instruments over a comparable-maturity Treasury), was 4.1 years as of October 31, 2023.
This positioning helped the BBH Income Fund return 3.10% and attain outperformance versus the 0.36% return of the Fund’s benchmark, the Bloomberg U.S. Aggregate Index. The Fund’s one-year performance ending October 31, 2023 ranked in the 6th percentile out of 634 funds in its competitive Morningstar fund peer group, the Morningstar U.S. Intermediate Core-Plus Bond Fund universe.
The Fund’s outperformance relative to its benchmark was driven by its positioning in credit sectors, as overweights to those sectors and selection results within sectors impacted results favorably. Overweight exposures to investment-grade corporate bonds, senior bank loans, nontraditional ABS, and high yield corporate bonds contributed to results. The Fund experienced favorable selection results from its positions in CMBS and nontraditional ABS. The Fund’s avoidance of agency MBS contributed to results in two ways. First, it had a positive impact on the Fund’s sector allocation. Second, it contributed to a yield curve effect because the MBS Index’s duration extended as interest rates rose, and our process of managing the Fund’s duration to replicate the Index’s happens as transactions occur, and not with changes in the Index’s day-to-day duration swings. The Fund experienced modest underperformance in some corporate credit positions that detracted from relative results.
We purchased opportunities that met our durability and valuation criteria for the Fund throughout the year. The purchases were made across a wide range of sectors and industries. We purchased corporate bonds spanning 21 different industries, with most purchases coming from bonds issued by banks, electric utilities, and life insurers. We purchased bonds from 13 different types of nontraditional ABS issuances, including deals secured by data center leases and revenues, subprime auto loans, and small business loans. We purchased bonds from four different single-asset, single-borrower (SASB) CMBS deals secured by non-office properties. We also purchased loan syndications for companies in four different industries, including chemicals and specialty real estate investment trusts (REITs).
The banking sector experienced increased volatility and wider credit spreads in reaction to several idiosyncratic bank failures in the first half of 2023. Relying on our fundamental bottom-up approach we leaned into the volatility and purchased notes from several regional banks that possessed strong asset quality, solid liquidity, satisfactory capital adequacy and net earnings.
Our outlook for the market is that opportunities remain in the credit markets, although measures of aggregate valuation weakened. According to our valuation framework, the percentage of investment-grade corporate bonds that screened as a “buy” decreased to 38% as of October 31? versus 64% at the start of the year, while the percentage of high yield corporate bonds that screened as a “buy” remained near it’s beginning-of-year level at 41%. Senior bank loans continue to screen attractively, with over 90% of the universe screening as “buy” candidates. There remain an abundance of opportunities in select subsectors of the market, particularly the more interest rate-sensitive sectors. We continue to find opportunities in intermediate maturity bonds rated “single-A” and “BBB” in the investment-grade bond universe, particularly among bonds issued by banks, life insurers, electric utilities, and REITs. Several “BB” and “B” rated
F I N A N C I A L S T A T E M E N T S O C T O B E R 3 1, 2 0 2 3 | 3 |
BBH INCOME FUND |
MANAGEMENT’S DISCUSSION OF FUND PERFORMANCE (continued) October 31, 2023 |
bonds from smaller issuers screen attractively in the high yield bond universe. Away from the corporate credit markets, we observe a continuing disconnect between wider credit spread levels and solid credit performance. We are finding an abundance of attractively valued opportunities in non-traditional ABS issuances and collateralized loan obligation (CLO) debt. We believe that opportunities in the CMBS market will arise as stronger properties come to market with single asset single borrower (SASB) securitizations that facilitate strong transparency. Opportunities are emerging in parts of the agency MBS market as valuations improve, and we are prepared to add positions opportunistically. We continue generally to avoid non-agency residential mortgage-backed securities (RMBS) due to less favorable technical factors, inadequate equity cushions, weak fundamentals underpinned by weak housing affordability, low inventory of homes for sale, and stable-to-declining home prices.
The Fund remains positioned to benefit from the higher income potential of carefully-selected credits. However, the Fund’s credit risk profile is more conservative than it was twelve months ago. Credit positions still represent 91% of the Fund, but that decreased from 95% while holdings of “reserves” increased marginally to 9% from 5% last year. “High yield” investments (those rated at or below Ba1/BB+) decreased to 17% of the Fund from 23%. These Fund’s spread duration decreased to 3.6 years from 4.1 years amid these changes.
The Fund’s duration is managed to approximate that of the Bloomberg U.S. Aggregate Index. This is done by assessing the Fund’s holdings, then purchasing or selling Treasury futures to gain or reduce exposures to various points of the yield curve. The Fund’s duration was 6.0 years as of October 31, 2023. We expect this positioning will minimize the impact that active interest rate decisions will have on the Fund’s performance versus its performance benchmark, and instead allow the Fund’s performance to be driven by capturing the above-market yields offered by the carefully selected credits that comprise the Fund.
We believe the Income Fund is positioned well heading into the new fiscal year. Yields remain near their highest levels since before the Global Financial Crisis of 2008. The yield curve implies that the Fed’s tightening campaign may have ended already and could give way to rate cuts in the middle of 2024. Credit valuations are mixed but an abundance of opportunities remain. We are confident that our approach and process will allow us to adapt to changes, capitalize on opportunities, and perform through a variety of environments. Thank you for the trust placed in BBH, and we look forward to engaging with you in 2024 and beyond.
____________
Past performance does not guarantee future results.
Portfolio holdings and characteristics are subject to change.
Quality ratings reflect the credit quality of the underlying issues in the fund portfolio and not of the fund itself. Issuers with credit ratings of AA or better are considered to be of high credit quality, with little risk of issuer failure. Issuers with credit ratings of BBB or better are considered to be of good credit quality, with adequate capacity to meet financial commitments. Issuers with credit ratings below BBB are considered speculative in nature and are vulnerable to the possibility of issuer failure or business interruption.
4 |
BBH INCOME FUND |
MANAGEMENT’S DISCUSSION OF FUND PERFORMANCE (continued) October 31, 2023 |
Growth of $10,000 Invested in BBH Income
The graph below illustrates the hypothetical investment of $10,0001 in the Class I shares of the Fund since inception (June 27, 2018) to October 31, 2023 as compared to the Bloomberg U.S. Aggregate Bond Index.
The annualized gross expense ratio as shown in the February 28, 2023 prospectus for Class I shares was 0.47%. Performance data quoted represents past performance which is no guarantee of future results. Investment return and principal value will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Fund performance changes over time and current performance may be lower or higher than what is stated. Returns do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. For performance current to the most recent month-end please call 1-800-575-1265.
____________
1 The Fund’s performance assumes the reinvestment of all dividends and distributions. The Bloomberg U.S. Aggregate Bond Index has been adjusted to reflect reinvestment of dividends on securities in the index. The Bloomberg U.S. Aggregate Bond Index is not adjusted to reflect sales charges, expenses or other fees that the Securities and Exchange Commission requires to be reflected in the Fund’s performance. The index is unmanaged. Investments cannot be made in the index.
F I N A N C I A L S T A T E M E N T S O C T O B E R 3 1, 2 0 2 3 | 5 |
BBH INCOME FUND |
MANAGEMENT’S DISCUSSION OF FUND PERFORMANCE (continued) October 31, 2023 |
Hypothetical performance results are calculated on a total return basis and include all portfolio income, unrealized and realized capital gains, losses and reinvestment of dividends and other earnings. No one shareholder has actually achieved these results and no representation is being made that any actual shareholder achieved, or is likely to achieve, similar results to those shown. Hypothetical performance does not represent actual trading and may not reflect the impact of material economic and market factors. Undue reliance should not be placed on hypothetical performance results in making an investment decision.
6 |
BBH INCOME FUND |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM |
To the shareholders of BBH Income Fund and the Board of Trustees of BBH Trust:
Opinion on the Financial Statements and Financial Highlights
We have audited the accompanying statement of assets and liabilities, including the portfolio of investments, of BBH Income Fund (the “Fund”), one of the funds constituting BBH Trust, as of October 31, 2023, the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, the financial highlights for each of the five years in the period then ended, and the related notes. In our opinion, the financial statements and financial highlights present fairly, in all material respects, the financial position of the Fund as of October 31, 2023, and the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements and financial highlights are the responsibility of the Fund’s management. Our responsibility is to express an opinion on the Fund’s financial statements and financial highlights based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement, whether due to error or fraud. The Fund is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Fund’s internal control over financial reporting. Accordingly, we express no such opinion.
F I N A N C I A L S T A T E M E N T S O C T O B E R 3 1, 2 0 2 3 | 7 |
BBH INCOME FUND |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM (continued) |
Our audits included performing procedures to assess the risks of material misstatement of the financial statements and financial highlights, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements and financial highlights. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements and financial highlights. Our procedures included confirmation of securities owned as of October 31, 2023, by correspondence with the custodian and brokers; when replies were not received from brokers, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinion.
/s/ DELOITTE & TOUCHE LLP
Boston, Massachusetts
December 20, 2023
We have served as the auditor of one or more Brown Brothers Harriman investment companies since 1991.
8 |
BBH INCOME FUND |
PORTFOLIO ALLOCATION October 31, 2023 |
BREAKDOWN BY SECURITY TYPE
U.S. $ Value | Percent of | |||||
Asset Backed Securities | $ | 155,503,495 | 20.1 | % | ||
Commercial Mortgage Backed Securities |
| 50,259,572 | 6.5 |
| ||
Corporate Bonds |
| 369,836,029 | 47.9 |
| ||
Loan Participations and Assignments |
| 95,434,334 | 12.4 |
| ||
Municipal Bonds |
| 5,020,871 | 0.6 |
| ||
Preferred Stocks |
| 20,712,910 | 2.7 |
| ||
Residential Mortgage Backed Securities |
| 1,034,439 | 0.1 |
| ||
U.S. Treasury Bills |
| 2,648,089 | 0.3 |
| ||
U.S. Treasury Bonds and Notes |
| 65,575,879 | 8.5 |
| ||
Cash and Other Assets in Excess of Liabilities |
| 6,605,407 | 0.9 |
| ||
NET ASSETS | $ | 772,631,025 | 100.0 | % |
All data as of October 31, 2023. 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.
F I N A N C I A L S T A T E M E N T S O C T O B E R 3 1, 2 0 2 3 | 9 |
BBH INCOME FUND |
PORTFOLIO OF INVESTMENTS October 31, 2023 |
Principal | Maturity | Interest | Value | ||||||||
| ASSET BACKED SECURITIES (20.1%) |
|
| ||||||||
$ | 2,392,152 | ABPCI Direct Lending Fund ABS I, Ltd. 2020 – 1A1 | 12/20/30 | 3.199 | % | $ | 2,249,996 | ||||
| 2,270,000 | ABPCI Direct Lending Fund ABS II LLC 2022 – 2A1 | 03/01/32 | 4.987 |
|
| 2,013,672 | ||||
| 2,630,000 | Adams Outdoor Advertising LP 2023 – 11 | 07/15/53 | 6.967 |
|
| 2,565,282 | ||||
| 3,250,000 | Aligned Data Centers Issuer LLC 2023 – 1A1 | 08/17/48 | 6.000 |
|
| 3,064,318 | ||||
| 1,480,000 | Ares PBN Finance Co. LLC1,2 | 10/15/36 | 6.000 |
|
| 1,399,932 | ||||
| 5,200,000 | Avis Budget Rental Car Funding AESOP LLC 2023 – 4A1 | 06/20/29 | 5.490 |
|
| 5,010,754 | ||||
| 1,723,930 | BHG Securitization Trust 2022 – A1 | 02/20/35 | 1.710 |
|
| 1,668,226 | ||||
| 4,165,000 | BHG Securitization Trust 2023 – A1 | 04/17/36 | 6.350 |
|
| 4,042,525 | ||||
| 347,877 | Business Jet Securities LLC 2020 – 1A1 | 11/15/35 | 2.981 |
|
| 328,024 | ||||
| 1,430,000 | CARS-DB4 LP 2020 – 1A1 | 02/15/50 | 4.170 |
|
| 1,353,529 | ||||
| 3,446,406 | CARS-DB7 LP 2023 – 1A1 | 09/15/53 | 6.500 |
|
| 3,361,324 | ||||
| 1,025,375 | CF Hippolyta Issuer LLC 2020 – 11 | 07/15/60 | 2.280 |
|
| 905,135 | ||||
| 2,374,427 | CF Hippolyta Issuer LLC 2022 – 1A1 | 08/15/62 | 5.970 |
|
| 2,302,213 | ||||
| 2,330,000 | Credit Acceptance Auto Loan Trust 2023 – 1A1 | 07/15/33 | 7.710 |
|
| 2,316,121 | ||||
| 3,070,000 | DataBank Issuer 2023 – 1A1 | 02/25/53 | 5.116 |
|
| 2,771,039 | ||||
| 2,850,000 | DigitalBridge Issuer LLC 2021 – 1A1 | 09/25/51 | 3.933 |
|
| 2,589,909 | ||||
| 722,067 | Elm Trust 2020 – 3A1 | 08/20/29 | 2.954 |
|
| 681,255 | ||||
| 1,927,851 | Elm Trust 2020 – 4A1 | 10/20/29 | 2.286 |
|
| 1,799,921 | ||||
| 4,460,000 | Flexential Issuer 2021 – 1A1 | 11/27/51 | 3.250 |
|
| 3,860,757 | ||||
| 586,872 | FNA LLC 2019 – 11,2,3,4 | 12/10/31 | 3.000 |
|
| 531,119 | ||||
| 938,935 | FREED ABS Trust 2022 – 2CP1 | 05/18/29 | 4.490 |
|
| 931,464 | ||||
| 1,194,118 | Global SC Finance VII Srl 2020 – 1A1 | 10/17/40 | 2.170 |
|
| 1,065,824 | ||||
| 1,124,995 | Global SC Finance VII Srl 2020 – 2A1 | 11/19/40 | 2.260 |
|
| 1,000,553 | ||||
| 3,825,889 | Golub Capital Partners ABS Funding, Ltd. 2021 – 1A1 | 04/20/29 | 2.773 |
|
| 3,587,175 | ||||
| 2,980,000 | HPEFS Equipment Trust 2023 – 1A1 | 04/20/28 | 5.730 |
|
| 2,946,471 | ||||
| 2,540,000 | Lendmark Funding Trust 2023 – 1A1 | 05/20/33 | 5.590 |
|
| 2,496,904 | ||||
| 464,416 | LIAS Administration Fee Issuer LLC 2018 – 1A | 07/25/48 | 5.956 |
|
| 427,108 | ||||
| 851,961 | Mariner Finance Issuance Trust 2020 – AA1 | 08/21/34 | 2.190 |
|
| 828,203 | ||||
| 1,840,000 | MCF CLO 10, Ltd. 2023 – 1A (3-Month CME Term SOFR + 4.200%)1,4 | 04/15/35 | 9.032 |
|
| 1,843,320 | ||||
| 1,205,937 | Monroe Capital ABS Funding, Ltd. 2021 – 1A1 | 04/22/31 | 2.815 |
|
| 1,153,084 | ||||
| 1,870,000 | Monroe Capital ABS Funding II, Ltd. 2023 – 1A1 | 04/22/33 | 6.650 |
|
| 1,868,280 | ||||
| 1,790,000 | Monroe Capital Income Plus ABS Funding LLC 2022 – 1A1 | 04/30/32 | 5.150 |
|
| 1,545,163 | ||||
| 2,465,000 | Navistar Financial Dealer Note Master Owner Trust II 2023 – 11 | 08/25/28 | 6.180 |
|
| 2,456,271 | ||||
| 2,700,000 | Neuberger Berman Loan Advisers CLO 40, Ltd. 2021 – 40A (3-Month CME Term SOFR + 1.322%)1,4 | 04/16/33 | 6.715 |
|
| 2,680,839 | ||||
| 196,045 | Newtek Small Business Loan Trust 2018 – 1 (U.S. Prime Rate – 0.550%)1,4 | 02/25/44 | 7.950 |
|
| 194,236 |
The accompanying notes are an integral part of these financial statements.
10 |
BBH INCOME FUND |
PORTFOLIO OF INVESTMENTS (continued) October 31, 2023 |
Principal | Maturity | Interest | Value | ||||||||
| ASSET BACKED SECURITIES (continued) |
|
| ||||||||
$ | 92,996 | Newtek Small Business Loan Trust 2018 – 1 (U.S. Prime Rate + 0.750%)1,4 | 02/25/44 | 9.250 | % | $ | 92,352 | ||||
| 3,591,692 | Newtek Small Business Loan Trust 2023 – 1 (U.S. Prime Rate – 0.500%)1,4 | 07/25/50 | 8.000 |
|
| 3,582,963 | ||||
| 3,550,000 | NextGear Floorplan Master Owner Trust 2022 – 1A1 | 03/15/27 | 2.800 |
|
| 3,388,233 | ||||
| 5,440,000 | NextGear Floorplan Master Owner Trust 2023 – 1A1 | 03/15/28 | 5.740 |
|
| 5,416,851 | ||||
| 1,660,000 | NFAS2 LLC 2022 – 11 | 09/15/28 | 6.860 |
|
| 1,623,940 | ||||
| 3,960,000 | Niagara Park CLO, Ltd. 2019-1A (3-Month CME | 07/17/32 | 6.664 |
|
| 3,914,618 | ||||
| 2,180,000 | OnDeck Asset Securitization Trust III LLC 2021-1A1 | 05/17/27 | 1.590 |
|
| 2,104,327 | ||||
| 43,212 | OneMain Financial Issuance Trust 2020-1A1 | 05/14/32 | 3.840 |
|
| 43,165 | ||||
| 2,930,000 | OneMain Financial Issuance Trust 2022-S11 | 05/14/35 | 4.130 |
|
| 2,790,577 | ||||
| 6,610,000 | OneMain Financial Issuance Trust 2023-2A1 | 09/15/36 | 6.170 |
|
| 6,443,603 | ||||
| 5,630,000 | Oportun Issuance Trust 2021-C1 | 10/08/31 | 2.180 |
|
| 5,089,048 | ||||
| 185,455 | Oxford Finance Funding LLC 2019-1A1 | 02/15/27 | 4.459 |
|
| 185,215 | ||||
| 910,240 | Oxford Finance Funding LLC 2020-1A1 | 02/15/28 | 3.101 |
|
| 879,213 | ||||
| 2,320,000 | PennantPark CLO VII LLC 2023-7A (3-Month CME Term SOFR + 4.050%)1,4 | 07/20/35 | 9.396 |
|
| 2,324,840 | ||||
| 383,538 | ReadyCap Lending Small Business Loan Trust 2019-2 (U.S. Prime Rate – 0.500%)1,4 | 12/27/44 | 8.000 |
|
| 368,345 | ||||
| 5,150,000 | Regional Management Issuance Trust 2022-11 | 03/15/32 | 3.070 |
|
| 4,806,970 | ||||
| 2,060,000 | Republic Finance Issuance Trust 2020-A1 | 11/20/30 | 2.470 |
|
| 2,013,705 | ||||
| 5,240,000 | Retained Vantage Data Centers Issuer LLC | 09/15/48 | 5.000 |
|
| 4,727,601 | ||||
| 2,130,000 | Sabey Data Center Issuer LLC 2020-11 | 04/20/45 | 3.812 |
|
| 2,023,655 | ||||
| 1,795,000 | Sabey Data Center Issuer LLC 2023-11 | 04/20/48 | 6.250 |
|
| 1,730,568 | ||||
| 173,877 | Santander Drive Auto Receivables Trust 2020-1 | 12/15/25 | 4.110 |
|
| 173,454 | ||||
| 2,240,000 | Santander Drive Auto Receivables Trust 2023-5 | 02/18/31 | 6.430 |
|
| 2,217,353 | ||||
| 1,940,000 | Santander Revolving Auto Loan Trust 2019-A1 | 01/26/32 | 2.510 |
|
| 1,858,253 | ||||
| 2,310,000 | Southwick Park CLO LLC 2019-4A (3-Month CME Term SOFR + 1.322%)1,4 | 07/20/32 | 6.737 |
|
| 2,289,060 | ||||
| 824,162 | Stack Infrastructure Issuer LLC 2019-1A1 | 02/25/44 | 4.540 |
|
| 817,607 | ||||
| 1,150,000 | Stack Infrastructure Issuer LLC 2023-1A1 | 03/25/48 | 5.900 |
|
| 1,085,791 | ||||
| 240,754 | SWC Funding LLC 2018-1A1 | 08/15/33 | 4.750 |
|
| 238,682 | ||||
| 1,245,453 | Textainer Marine Containers VII, Ltd. 2020-1A1 | 08/21/45 | 2.730 |
|
| 1,130,879 | ||||
| 4,459,952 | Thrust Engine Leasing DAC 2021-1A1 | 07/15/40 | 4.163 |
|
| 3,804,472 | ||||
| 2,620,000 | TierPoint Issuer LLC 2023-1A1 | 06/25/53 | 6.000 |
|
| 2,496,889 | ||||
| 3,350,000 | Vantage Data Centers Issuer LLC 2023-1A1 | 03/16/48 | 6.316 |
|
| 3,221,872 | ||||
| 5,295,243 | VC 3 LS LP 2021-B1,2 | 10/15/41 | 4.750 |
|
| 4,195,421 | ||||
| 1,625,302 | VCP RRL ABS I, Ltd. 2021-1A1 | 10/20/31 | 2.152 |
|
| 1,481,621 |
The accompanying notes are an integral part of these financial statements.
F I N A N C I A L S T A T E M E N T S O C T O B E R 3 1, 2 0 2 3 | 11 |
BBH INCOME FUND |
PORTFOLIO OF INVESTMENTS (continued) October 31, 2023 |
Principal | Maturity | Interest | Value | ||||||||
| ASSET BACKED SECURITIES (continued) |
|
| ||||||||
$ | 4,830,000 | Westlake Automobile Receivables Trust 2023-2A1 | 03/15/28 | 6.290 | % | $ | 4,782,750 | ||||
| 2,340,000 | Willis Engine Structured Trust VII 2023-A1,5 | 10/15/48 | 8.000 |
|
| 2,319,656 | ||||
| Total Asset Backed Securities |
|
| 155,503,495 | |||||||
|
|
| |||||||||
| COMMERCIAL MORTGAGE BACKED SECURITIES (6.5%) |
|
| ||||||||
| 1,390,000 | BPR Trust 2022-OANA (1-Month CME Term SOFR + 2.697%)1,4 | 04/15/37 | 8.032 |
|
| 1,315,108 | ||||
| 4,740,000 | BX Commercial Mortgage Trust 2022-CSMO (1-Month CME Term SOFR + 3.889%)1,4 | 06/15/27 | 9.223 |
|
| 4,734,060 | ||||
| 1,492,800 | BXMT, Ltd. 2020-FL2 (1-Month CME Term SOFR + 1.014%)1,4 | 02/15/38 | 6.350 |
|
| 1,425,624 | ||||
| 1,250,000 | BXMT, Ltd. 2020-FL3 (1-Month CME Term SOFR + 2.664%)1,4 | 11/15/37 | 8.000 |
|
| 1,057,854 | ||||
| 146,085 | CG-CCRE Commercial Mortgage Trust 2014 – FL2 (1 – Month CME Term SOFR + 4.114%)1,2,4 | 11/15/31 | 9.449 |
|
| 98,929 | ||||
| 786,000 | CG-CCRE Commercial Mortgage Trust 2014 – FL2 (1 – Month CME Term SOFR + 4.114%)1,4 | 11/15/31 | 9.449 |
|
| 586,115 | ||||
| 1,375,473 | CG-CCRE Commercial Mortgage Trust 2014 – FL2 (1 – Month CME Term SOFR + 4.864%)1,2,4 | 11/15/31 | 10.199 |
|
| 671,368 | ||||
| 890,000 | Citigroup Commercial Mortgage Trust 2019 – SMRT1 | 01/10/36 | 4.149 |
|
| 888,286 | ||||
| 2,870,000 | Citigroup Commercial Mortgage Trust 2023 – PRM31,3,4 | 07/10/28 | 6.360 |
|
| 2,778,408 | ||||
| 3,540,000 | CSMC 2018 – SITE1,3,4 | 04/15/36 | 4.782 |
|
| 3,496,902 | ||||
| 2,460,000 | DC Commercial Mortgage Trust 2023 – DC1 | 09/12/40 | 6.804 |
|
| 2,422,987 | ||||
| 883,950 | DFVI 2021 – 1A1,2 | 12/15/29 | 2.982 |
|
| 813,234 | ||||
| 1,000,000 | Hudsons Bay Simon JV Trust 2015 – HB101,3,4 | 08/05/34 | 5.629 |
|
| 753,649 | ||||
| 3,150,000 | Intown Mortgage Trust 2022 – STAY (1-Month CME Term SOFR + 4.134%)1,4 | 08/15/39 | 9.468 |
|
| 3,142,109 | ||||
| 240,000 | JPMBB Commercial Mortgage Securities Trust 2014 – C241,3,4 | 11/15/47 | 3.881 |
|
| 172,873 | ||||
| 2,326,739 | Morgan Stanley Capital I Trust 2019 – BPR (1 – Month CME Term SOFR + 1.992%)1,4 | 05/15/36 | 7.307 |
|
| 2,251,063 | ||||
| 5,860,000 | MTN Commercial Mortgage Trust 2022 – LPFL (1 – Month CME Term SOFR + 1.896%)1,4 | 03/15/39 | 7.236 |
|
| 5,709,200 | ||||
| 1,069,181 | NADG NNN Operating LP 2019 – 11 | 12/28/49 | 3.368 |
|
| 1,009,039 | ||||
| 2,868,986 | Ready Capital Mortgage Financing LLC 2021 – FL7 (1 – Month CME Term SOFR + 1.314%)1,4 | 11/25/36 | 6.639 |
|
| 2,822,400 | ||||
| 2,700,000 | SCOTT Trust 2023 – SFS1 | 03/15/40 | 5.910 |
|
| 2,575,953 | ||||
| 2,270,000 | SPGN Mortgage Trust 2022 – TFLM (1-Month CME Term SOFR + 2.650%)1,4 | 02/15/39 | 7.985 |
|
| 2,124,829 |
The accompanying notes are an integral part of these financial statements.
12 |
BBH INCOME FUND |
PORTFOLIO OF INVESTMENTS (continued) October 31, 2023 |
Principal | Maturity | Interest | Value | ||||||||
| COMMERCIAL MORTGAGE BACKED SECURITIES (continued) |
|
| ||||||||
$ | 1,310,000 | SPGN Mortgage Trust 2022 – TFLM (1-Month CME Term SOFR + 3.500%)1,4 | 02/15/39 | 8.835 | % | $ | 1,214,908 | ||||
| 890,000 | STWD, Ltd. 2019 – FL1 (1-Month CME Term SOFR + 1.714%)1,4 | 07/15/38 | 7.049 |
|
| 823,940 | ||||
| 9,507 | UBS-BAMLL Trust 2012 – WRM1 | 06/10/30 | 3.663 |
|
| 8,730 | ||||
| 2,915,000 | Wells Fargo Commercial Mortgage Trust 2020 – SDAL (1-Month CME Term SOFR + 1.454%)1,4 | 02/15/37 | 6.789 |
|
| 2,873,376 | ||||
| 4,590,000 | WMRK Commercial Mortgage Trust 2022 – | 07/12/28 | 7.121 |
|
| 4,488,628 | ||||
| Total Commercial Mortgage Backed Securities |
|
| 50,259,572 | |||||||
|
|
| |||||||||
| CORPORATE BONDS (47.9%) |
|
| ||||||||
| AEROSPACE/DEFENSE (0.9%) |
|
| ||||||||
| 2,220,000 | BAE Systems, Plc.1 | 04/15/30 | 3.400 |
|
| 1,899,192 | ||||
| 2,700,000 | Boeing Co. | 02/01/28 | 3.250 |
|
| 2,412,912 | ||||
| 2,814,000 | Spirit AeroSystems, Inc.1 | 11/30/29 | 9.375 |
|
| 2,889,783 | ||||
|
|
| 7,201,887 | ||||||||
| AGRICULTURE (0.2%) |
|
| ||||||||
| 1,890,000 | Cargill, Inc.1 | 10/11/32 | 5.125 |
|
| 1,787,610 | ||||
|
|
| |||||||||
| BANKS (9.8%) |
|
| ||||||||
| 2,790,000 | ASB Bank, Ltd. (5 – Year CMT Index + 2.250%)1,4 | 06/17/32 | 5.284 |
|
| 2,637,229 | ||||
| 1,635,000 | Bank Leumi Le-Israel BM1 | 07/27/27 | 5.125 |
|
| 1,524,638 | ||||
| 5,910,000 | Bank of America Corp. (5 – Year CMT Index + 2.760%)4,6 | 4.375 |
|
| 4,769,968 | |||||
| 3,035,000 | Bank of New Zealand1 | 02/07/28 | 4.846 |
|
| 2,902,178 | ||||
| 3,095,000 | Bank of Nova Scotia | 03/11/27 | 2.951 |
|
| 2,806,414 | ||||
| 3,485,000 | Canadian Imperial Bank of Commerce | 10/03/28 | 5.986 |
|
| 3,441,779 | ||||
| 2,665,000 | Comerica Bank | 07/27/25 | 4.000 |
|
| 2,437,831 | ||||
| 2,920,000 | Comerica Bank (SOFR + 2.610%)4 | 08/25/33 | 5.332 |
|
| 2,261,217 | ||||
| 6,240,000 | Fifth Third Bancorp (SOFR + 2.192%)4 | 10/27/28 | 6.361 |
|
| 6,073,335 | ||||
| 165,000 | Fifth Third Bancorp (SOFR + 2.127%)4 | 07/28/30 | 4.772 |
|
| 146,226 | ||||
| 2,140,000 | HSBC Holdings, Plc (SOFR + 3.350%)4 | 11/03/28 | 7.390 |
|
| 2,195,212 | ||||
| 1,735,000 | HSBC Holdings, Plc | 03/31/30 | 4.950 |
|
| 1,595,967 | ||||
| 1,140,000 | HSBC Holdings, Plc (SOFR + 2.387%)4 | 06/04/31 | 2.848 |
|
| 894,597 | ||||
| 3,285,000 | HSBC Holdings, Plc (SOFR + 2.390%)4 | 03/09/34 | 6.254 |
|
| 3,118,042 | ||||
| 6,256,000 | Huntington Bancshares, Inc. (SOFR + 1.970%)4 | 08/04/28 | 4.443 |
|
| 5,713,986 | ||||
| 2,160,000 | Lloyds Banking Group, Plc. (1 – Year CMT Index + 1.700%)4 | 03/06/29 | 5.871 |
|
| 2,091,712 |
The accompanying notes are an integral part of these financial statements.
F I N A N C I A L S T A T E M E N T S O C T O B E R 3 1, 2 0 2 3 | 13 |
BBH INCOME FUND |
PORTFOLIO OF INVESTMENTS (continued) October 31, 2023 |
Principal | Maturity | Interest | Value | ||||||||
| CORPORATE BONDS (continued) |
|
| ||||||||
| BANKS (continued) |
|
| ||||||||
$ | 2,025,000 | Lloyds Banking Group, Plc. (1 – Year CMT Index + 3.750%)4 | 11/15/33 | 7.953 | % | $ | 2,053,356 | ||||
| 2,000,000 | Morgan Stanley (SOFR + 1.610%)4 | 04/20/28 | 4.210 |
|
| 1,865,201 | ||||
| 2,055,000 | Morgan Stanley (SOFR + 2.560%)4 | 10/18/33 | 6.342 |
|
| 2,014,678 | ||||
| 2,810,000 | National Australia Bank, Ltd.1 | 01/12/33 | 6.429 |
|
| 2,669,519 | ||||
| 2,445,000 | NatWest Group, Plc (1 – Year CMT Index + 2.850%)4 | 11/10/26 | 7.472 |
|
| 2,487,995 | ||||
| 1,780,000 | NatWest Group, Plc (1 – Year CMT Index + 2.100%)4 | 03/02/34 | 6.016 |
|
| 1,657,388 | ||||
| 2,360,000 | Santander Holdings USA, Inc. (SOFR + 2.356%)4 | 03/09/29 | 6.499 |
|
| 2,282,532 | ||||
| 1,620,000 | Truist Financial Corp. (SOFR + 2.446%)4 | 10/30/29 | 7.161 |
|
| 1,629,553 | ||||
| 1,525,000 | UBS Group AG (1 – Year CMT Index + 1.750%)1,4 | 05/12/28 | 4.751 |
|
| 1,432,683 | ||||
| 4,025,000 | UBS Group AG (1 – Year CMT Index + 2.200%)1,4 | 01/12/34 | 5.959 |
|
| 3,752,466 | ||||
| 6,100,000 | US Bancorp (5 – Year CMT Index + 2.541%)4,6 | 3.700 |
|
| 4,282,414 | |||||
| 1,245,000 | Wells Fargo & Co. (SOFR + 2.000%)4 | 04/30/26 | 2.188 |
|
| 1,171,170 | ||||
| 1,165,000 | Wells Fargo & Co. (SOFR + 2.100%)4 | 06/02/28 | 2.393 |
|
| 1,015,493 | ||||
| 3,020,000 | Wells Fargo & Co. (SOFR + 1.500%)4 | 03/02/33 | 3.350 |
|
| 2,377,847 | ||||
|
|
| 75,302,626 | ||||||||
| BEVERAGES (0.3%) |
|
| ||||||||
| 2,875,000 | Brown-Forman Corp. | 04/15/33 | 4.750 |
|
| 2,665,991 | ||||
|
|
| |||||||||
| DIVERSIFIED FINANCIAL SERVICES (3.5%) |
|
| ||||||||
| 1,265,000 | American Express Co. | 03/04/27 | 2.550 |
|
| 1,132,610 | ||||
| 1,250,000 | American Express Co. (SOFR + 2.255%)4 | 05/26/33 | 4.989 |
|
| 1,113,996 | ||||
| 2,685,000 | Avolon Holdings Funding, Ltd.1 | 07/01/24 | 3.950 |
|
| 2,631,787 | ||||
| 925,000 | Avolon Holdings Funding, Ltd.1 | 01/15/26 | 5.500 |
|
| 890,636 | ||||
| 3,055,000 | Bread Financial Holdings, Inc.1 | 12/15/24 | 4.750 |
|
| 2,954,654 | ||||
| 2,338,000 | Brightsphere Investment Group, Inc. | 07/27/26 | 4.800 |
|
| 2,115,890 | ||||
| 2,345,000 | Capital One Financial Corp. | 05/11/27 | 3.650 |
|
| 2,115,225 | ||||
| 1,630,000 | Capital One Financial Corp. (SOFR + 3.070%)4 | 10/30/31 | 7.624 |
|
| 1,629,210 | ||||
| 2,485,000 | Drawbridge Special Opportunities Fund | 02/15/26 | 3.875 |
|
| 2,192,389 | ||||
| 2,550,000 | GCM Grosvenor Diversified Alternatives Issuer LLC1,2 | 11/15/41 | 6.000 |
|
| 2,040,510 | ||||
| 2,050,000 | Oxford Finance LLC/Oxford Finance Co.-Issuer II, Inc.1 | 02/01/27 | 6.375 |
|
| 1,868,062 | ||||
| 4,620,000 | Sculptor Alternative Solutions LLC1,2 | 05/15/37 | 6.000 |
|
| 3,842,454 | ||||
| 2,655,000 | Strategic Credit Opportunities Partners LLC | 04/01/26 | 4.250 |
|
| 2,404,732 | ||||
|
|
| 26,932,155 | ||||||||
| ELECTRIC (3.3%) |
|
| ||||||||
| 1,840,000 | Alabama Power Co. | 03/15/32 | 3.050 |
|
| 1,493,652 | ||||
| 4,160,000 | Alexander Funding Trust II1 | 07/31/28 | 7.467 |
|
| 4,130,103 | ||||
| 2,100,000 | Duke Energy Florida LLC | 11/15/52 | 5.950 |
|
| 1,943,366 | ||||
| 1,880,000 | Duke Energy Ohio, Inc. | 04/01/53 | 5.650 |
|
| 1,667,017 | ||||
| 1,950,000 | Duke Energy Progress LLC | 03/15/53 | 5.350 |
|
| 1,660,214 |
The accompanying notes are an integral part of these financial statements.
14 |
BBH INCOME FUND |
PORTFOLIO OF INVESTMENTS (continued) October 31, 2023 |
Principal | Maturity | Interest | Value | ||||||||
| CORPORATE BONDS (continued) |
|
| ||||||||
| ELECTRIC (continued) |
|
| ||||||||
$ | 5,065,000 | Edison International (5-Year CMT Index + 4.698%)4,6 | 5.375 | % | $ | 4,539,110 | |||||
| 3,375,000 | Florida Power & Light Co. | 05/15/33 | 4.800 |
|
| 3,093,276 | ||||
| 2,095,000 | Narragansett Electric Co.1 | 04/09/30 | 3.395 |
|
| 1,785,750 | ||||
| 2,120,000 | Nevada Power Co. | 05/01/53 | 5.900 |
|
| 1,929,235 | ||||
| 3,500,000 | Oncor Electric Delivery Co. LLC1 | 05/15/28 | 4.300 |
|
| 3,306,956 | ||||
|
|
| 25,548,679 | ||||||||
| ENERGY-ALTERNATE SOURCES (0.5%) |
|
| ||||||||
| 4,500,000 | NextEra Energy Partners LP1 | 06/15/26 | 2.500 |
|
| 3,879,000 | ||||
|
|
| |||||||||
| FOOD (0.5%) |
|
| ||||||||
| 4,355,000 | Nestle Holdings, Inc.1 | 03/14/30 | 4.950 |
|
| 4,210,150 | ||||
|
|
| |||||||||
| HEALTHCARE-PRODUCTS (0.4%) |
|
| ||||||||
| 3,035,000 | Medtronic Global Holdings SCA | 03/30/33 | 4.500 |
|
| 2,757,840 | ||||
|
|
| |||||||||
| HEALTHCARE-SERVICES (0.6%) |
|
| ||||||||
| 2,545,000 | PeaceHealth Obligated Group | 11/15/50 | 3.218 |
|
| 1,422,818 | ||||
| 3,260,000 | Providence St Joseph Health Obligated Group | 10/01/33 | 5.403 |
|
| 3,055,766 | ||||
| 490,000 | Sutter Health | 08/15/30 | 2.294 |
|
| 386,927 | ||||
|
|
| 4,865,511 | ||||||||
| INSURANCE (10.5%) |
|
| ||||||||
| 4,175,000 | Aegon, Ltd. (6-Month USD-LIBOR + 3.540%)4 | 04/11/48 | 5.500 |
|
| 3,773,145 | ||||
| 2,940,000 | American Coastal Insurance Corp. | 12/15/27 | 7.250 |
|
| 2,396,100 | ||||
| 2,880,000 | Ascot Group, Ltd.1 | 12/15/30 | 4.250 |
|
| 2,102,971 | ||||
| 2,035,000 | Athene Global Funding1 | 06/29/25 | 2.550 |
|
| 1,894,564 | ||||
| 2,790,000 | Athene Holding, Ltd. | 02/01/33 | 6.650 |
|
| 2,688,659 | ||||
| 5,715,000 | AXIS Specialty Finance LLC (5-Year CMT Index + 3.186%)4 | 01/15/40 | 4.900 |
|
| 4,495,959 | ||||
| 2,920,000 | Corebridge Financial, Inc. (5-Year CMT Index + 3.846%)4 | 12/15/52 | 6.875 |
|
| 2,697,679 | ||||
| 3,175,000 | Corebridge Global Funding1 | 09/19/28 | 5.900 |
|
| 3,135,956 | ||||
| 4,210,000 | Doctors Co. An Interinsurance Exchange1 | 01/18/32 | 4.500 |
|
| 3,078,026 | ||||
| 1,600,000 | Enstar Finance LLC (5-Year CMT Index + 5.468%)4 | 09/01/40 | 5.750 |
|
| 1,407,731 | ||||
| 4,100,000 | Enstar Finance LLC (5-Year CMT Index + 4.006%)4 | 01/15/42 | 5.500 |
|
| 3,268,053 | ||||
| 5,540,000 | F&G Annuities & Life, Inc. | 01/13/28 | 7.400 |
|
| 5,472,978 | ||||
| 2,195,000 | Fairfax Financial Holdings, Ltd. | 04/29/30 | 4.625 |
|
| 1,948,424 | ||||
| 4,765,000 | Fidelis Insurance Holdings, Ltd. (5-Year CMT Index + 6.323%)1,4 | 04/01/41 | 6.625 |
|
| 4,515,158 | ||||
| 3,128,000 | First American Financial Corp. | 08/15/31 | 2.400 |
|
| 2,259,379 | ||||
| 3,485,000 | Global Atlantic Finance Co.1 | 06/15/33 | 7.950 |
|
| 3,241,514 |
The accompanying notes are an integral part of these financial statements.
F I N A N C I A L S T A T E M E N T S O C T O B E R 3 1, 2 0 2 3 | 15 |
BBH INCOME FUND |
PORTFOLIO OF INVESTMENTS (continued) October 31, 2023 |
Principal | Maturity | Interest | Value | ||||||||
| CORPORATE BONDS (continued) |
|
| ||||||||
| INSURANCE (continued) |
|
| ||||||||
$ | 1,690,000 | Metropolitan Life Global Funding I1 | 03/21/29 | 3.300 | % | $ | 1,476,850 | ||||
| 2,280,000 | Metropolitan Life Global Funding I1 | 03/28/33 | 5.150 |
|
| 2,086,653 | ||||
| 1,580,000 | Muenchener Rueckversicherungs-Gesellschaft AG in Muenchen (5 – Year CMT Index + 3.982%)1,4 | 05/23/42 | 5.875 |
|
| 1,495,552 | ||||
| 3,708,000 | PartnerRe Finance B LLC (5 – Year CMT Index + 3.815%)4 | 10/01/50 | 4.500 |
|
| 3,047,567 | ||||
| 5,720,000 | RenaissanceRe Holdings, Ltd. | 06/05/33 | 5.750 |
|
| 5,262,195 | ||||
| 2,995,000 | SiriusPoint, Ltd.1 | 11/01/26 | 4.600 |
|
| 2,620,625 | ||||
| 3,125,000 | Stewart Information Services Corp. | 11/15/31 | 3.600 |
|
| 2,224,608 | ||||
| 4,830,000 | Swiss Re Finance Luxembourg S.A. (5 – Year CMT Index + 3.582%)1,4 | 04/02/49 | 5.000 |
|
| 4,503,975 | ||||
| 2,520,000 | Teachers Insurance & Annuity Association of America1 | 05/15/50 | 3.300 |
|
| 1,511,001 | ||||
| 6,280,000 | Universal Insurance Holdings, Inc. | 11/30/26 | 5.625 |
|
| 5,520,836 | ||||
| 3,515,000 | Willis North America, Inc. | 05/15/33 | 5.350 |
|
| 3,203,418 | ||||
|
|
| 81,329,576 | ||||||||
| INVESTMENT COMPANIES (6.0%) |
|
| ||||||||
| 1,445,000 | Blue Owl Capital Corp. II1 | 11/26/24 | 4.625 |
|
| 1,399,614 | ||||
| 2,560,000 | Blue Owl Technology Finance Corp.1 | 06/30/25 | 6.750 |
|
| 2,483,526 | ||||
| 2,490,000 | Capital Southwest Corp. | 01/31/26 | 4.500 |
|
| 2,315,700 | ||||
| 1,635,000 | CION Investment Corp. | 02/11/26 | 4.500 |
|
| 1,496,998 | ||||
| 5,725,000 | Fairfax India Holdings Corp.1 | 02/26/28 | 5.000 |
|
| 5,080,937 | ||||
| 2,930,000 | Franklin BSP Lending Corp.1 | 12/15/24 | 4.850 |
|
| 2,819,757 | ||||
| 1,370,000 | FS KKR Capital Corp. | 02/01/25 | 4.125 |
|
| 1,320,081 | ||||
| 3,450,000 | FS KKR Capital Corp.1 | 02/14/25 | 4.250 |
|
| 3,310,967 | ||||
| 2,330,000 | Gladstone Capital Corp. | 01/31/26 | 5.125 |
|
| 2,196,025 | ||||
| 2,580,000 | Golub Capital BDC, Inc. | 04/15/24 | 3.375 |
|
| 2,539,509 | ||||
| 1,965,000 | Main Street Capital Corp. | 05/01/24 | 5.200 |
|
| 1,944,272 | ||||
| 2,960,000 | MidCap Financial Investment Corp. | 07/16/26 | 4.500 |
|
| 2,654,522 | ||||
| 3,185,000 | Morgan Stanley Direct Lending Fund | 02/11/27 | 4.500 |
|
| 2,922,607 | ||||
| 2,095,000 | OFS Capital Corp. | 02/10/26 | 4.750 |
|
| 1,839,473 | ||||
| 2,535,000 | PennantPark Floating Rate Capital, Ltd. | 04/01/26 | 4.250 |
|
| 2,314,274 | ||||
| 3,025,000 | Saratoga Investment Corp. | 02/28/26 | 4.375 |
|
| 2,789,002 | ||||
| 3,050,000 | Silver Point Specialty Credit Fund, L.P.1,2 | 11/04/26 | 4.000 |
|
| 2,624,070 | ||||
| 1,775,000 | Stellus Capital Investment Corp. | 03/30/26 | 4.875 |
|
| 1,569,512 | ||||
| 3,165,000 | Trinity Capital, Inc. | 12/15/26 | 4.250 |
|
| 2,769,427 | ||||
|
|
| 46,390,273 |
The accompanying notes are an integral part of these financial statements.
16 |
BBH INCOME FUND |
PORTFOLIO OF INVESTMENTS (continued) October 31, 2023 |
Principal | Maturity | Interest | Value | ||||||||
| CORPORATE BONDS (continued) |
|
| ||||||||
| MACHINERY-DIVERSIFIED (0.6%) |
|
| ||||||||
$ | 2,275,000 | CNH Industrial Capital LLC | 04/10/28 | 4.550 | % | $ | 2,137,954 | ||||
| 2,450,000 | CNH Industrial Capital LLC | 01/12/29 | 5.500 |
|
| 2,374,761 | ||||
|
|
| 4,512,715 | ||||||||
| MEDIA (0.4%) |
|
| ||||||||
| 2,850,000 | CCO Holdings LLC / CCO Holdings Capital Corp.1 | 03/01/31 | 7.375 |
|
| 2,693,310 | ||||
|
|
| |||||||||
| MINING (0.3%) |
|
| ||||||||
| 2,485,000 | Glencore Funding LLC1 | 10/06/28 | 6.125 |
|
| 2,463,480 | ||||
|
|
| |||||||||
| PACKAGING & CONTAINERS (0.5%) |
|
| ||||||||
| 2,465,000 | Amcor Finance USA, Inc. | 05/26/33 | 5.625 |
|
| 2,295,781 | ||||
| 1,465,000 | AptarGroup, Inc. | 03/15/32 | 3.600 |
|
| 1,194,293 | ||||
|
|
| 3,490,074 | ||||||||
| PHARMACEUTICALS (0.9%) |
|
| ||||||||
| 730,000 | Bausch Health Cos., Inc.1 | 06/01/28 | 4.875 |
|
| 364,117 | ||||
| 3,885,000 | Bristol-Myers Squibb Co. | 02/01/31 | 5.750 |
|
| 3,861,411 | ||||
| 2,945,000 | Pfizer Investment Enterprises Pte, Ltd. | 05/19/30 | 4.650 |
|
| 2,769,330 | ||||
|
|
| 6,994,858 | ||||||||
| PIPELINES (1.2%) |
|
| ||||||||
| 4,045,000 | Energy Transfer LP (3-Month USD-LIBOR + 4.028%)4,6 | 9.654 |
|
| 3,811,745 | |||||
| 1,725,000 | EnLink Midstream LLC1 | 09/01/30 | 6.500 |
|
| 1,655,775 | ||||
| 2,430,000 | Harvest Midstream I LP1 | 09/01/28 | 7.500 |
|
| 2,302,554 | ||||
| 1,150,000 | Northriver Midstream Finance LP1 | 02/15/26 | 5.625 |
|
| 1,086,750 | ||||
|
|
| 8,856,824 | ||||||||
| PRIVATE EQUITY (0.2%) |
|
| ||||||||
| 2,095,000 | Apollo Management Holdings LP (5 – Year CMT Index + 3.266%)1,4 | 01/14/50 | 4.950 |
|
| 1,861,639 | ||||
|
|
| |||||||||
| REAL ESTATE INVESTMENT TRUSTS (5.6%) |
|
| ||||||||
| 3,340,000 | American Tower Trust #11 | 03/15/28 | 5.490 |
|
| 3,279,588 | ||||
| 4,140,000 | Arbor Realty SR, Inc.1 | 10/15/27 | 8.500 |
|
| 3,911,670 | ||||
| 3,765,000 | Blackstone Mortgage Trust, Inc.1 | 01/15/27 | 3.750 |
|
| 3,130,731 | ||||
| 5,075,000 | EF Holdco / EF Cayman Hold / Ellington Finance REIT Cayman/TRS / EF Cayman Non-MTM1 | 04/01/27 | 5.875 |
|
| 4,592,727 | ||||
| 3,440,000 | Extra Space Storage LP | 07/01/30 | 5.500 |
|
| 3,253,835 | ||||
| 2,955,000 | Federal Realty OP LP | 05/01/28 | 5.375 |
|
| 2,848,332 | ||||
| 2,065,000 | HAT Holdings I LLC / HAT Holdings II LLC1 | 06/15/26 | 3.375 |
|
| 1,817,651 | ||||
| 2,300,000 | HAT Holdings I LLC / HAT Holdings II LLC1 | 09/15/30 | 3.750 |
|
| 1,650,925 |
The accompanying notes are an integral part of these financial statements.
F I N A N C I A L S T A T E M E N T S O C T O B E R 3 1, 2 0 2 3 | 17 |
BBH INCOME FUND |
PORTFOLIO OF INVESTMENTS (continued) October 31, 2023 |
Principal | Maturity | Interest | Value | ||||||||
| CORPORATE BONDS (continued) |
|
| ||||||||
| REAL ESTATE INVESTMENT |
|
| ||||||||
$ | 5,635,000 | Realty Income Corp. | 07/15/33 | 4.900 | % | $ | 5,008,701 | ||||
| 2,750,000 | Rexford Industrial Realty LP | 06/15/28 | 5.000 |
|
| 2,598,902 | ||||
| 2,000,000 | SBA Tower Trust1 | 01/15/28 | 6.599 |
|
| 1,995,681 | ||||
| 1,380,000 | Scentre Group Trust 1 / Scentre Group Trust 21 | 02/12/25 | 3.500 |
|
| 1,333,954 | ||||
| 1,945,000 | Scentre Group Trust 1 / Scentre Group Trust 21 | 01/28/26 | 3.625 |
|
| 1,846,240 | ||||
| 1,345,000 | Scentre Group Trust 2 (5 – Year CMT Index + 4.685%)1,4 | 09/24/80 | 5.125 |
|
| 1,108,883 | ||||
| 3,495,000 | Simon Property Group LP | 03/08/33 | 5.500 |
|
| 3,247,839 | ||||
| 2,065,000 | Starwood Property Trust, Inc.1 | 01/15/27 | 4.375 |
|
| 1,771,584 | ||||
|
|
| 43,397,243 | ||||||||
| RETAIL (0.5%) |
|
| ||||||||
| 1,155,000 | Macy’s Retail Holdings LLC1 | 03/15/30 | 5.875 |
|
| 977,115 | ||||
| 3,450,000 | Nordstrom, Inc. | 04/01/30 | 4.375 |
|
| 2,677,942 | ||||
|
|
| 3,655,057 | ||||||||
| SEMICONDUCTORS (0.3%) |
|
| ||||||||
| 2,100,000 | ams-OSRAM AG1 | 07/31/25 | 7.000 |
|
| 2,061,004 | ||||
|
|
| |||||||||
| TELECOMMUNICATIONS (0.1%) |
|
| ||||||||
| 875,000 | Connect Finco S.a r.l. / Connect US Finco LLC1 | 10/01/26 | 6.750 |
|
| 815,969 | ||||
|
|
| |||||||||
| TRUCKING & LEASING (0.8%) |
|
| ||||||||
| 1,925,000 | Penske Truck Leasing Co. LP / PTL Finance Corp.1 | 02/01/28 | 5.700 |
|
| 1,859,642 | ||||
| 2,380,000 | Penske Truck Leasing Co. LP / PTL Finance Corp.1 | 05/01/28 | 5.550 |
|
| 2,291,688 | ||||
| 2,050,000 | Penske Truck Leasing Co. LP / PTL Finance Corp.1 | 08/01/28 | 6.050 |
|
| 2,011,228 | ||||
|
|
| 6,162,558 | ||||||||
| Total Corporate Bonds |
|
| 369,836,029 | |||||||
|
|
| |||||||||
| LOAN PARTICIPATIONS AND |
|
| ||||||||
| 4,599,000 | AAdvantage Loyality IP, Ltd. (3-Month CME Term SOFR + 4.750%)4 | 04/20/28 | 10.427 |
|
| 4,656,487 | ||||
| 3,291,435 | AHP Health Partners, Inc. (1-Month CME Term SOFR + 3.500%)4 | 08/24/28 | 8.939 |
|
| 3,287,321 | ||||
| 4,503,000 | Air Canada (3-Month CME Term SOFR + 3.500%)4 | 08/11/28 | 9.128 |
|
| 4,495,120 | ||||
| 2,242,184 | AL NGPL Holdings LLC (1-Month CME Term SOFR + 3.500%)4 | 04/13/28 | 8.830 |
|
| 2,229,112 | ||||
| 2,995,836 | Allen Media LLC (3-Month CME Term SOFR + 5.500%)4 | 02/10/27 | 11.040 |
|
| 2,640,080 |
The accompanying notes are an integral part of these financial statements.
18 |
BBH INCOME FUND |
PORTFOLIO OF INVESTMENTS (continued) October 31, 2023 |
Principal | Maturity | Interest | Value | ||||||||
| LOAN PARTICIPATIONS AND |
|
| ||||||||
$ | 2,284,962 | Allspring Buyer LLC (3-Month CME Term SOFR + 3.250%)4 | 11/01/28 | 8.949 | % | $ | 2,223,199 | ||||
| 945,450 | Allspring Buyer LLC (3-Month CME Term SOFR + 4.000%)4 | 11/01/28 | 9.438 |
|
| 920,632 | ||||
| 2,412,139 | Athenahealth Group, Inc. (1-Month CME Term SOFR + 3.250%)4 | 02/15/29 | 8.577 |
|
| 2,333,311 | ||||
| 1,177,794 | Avolon TLB Borrower 1 (US) LLC Term B6 | 06/22/28 | 7.839 |
|
| 1,177,193 | ||||
| 1,914,003 | Axalta Coating Systems Dutch Holding B BV Term B5 (3-Month CME Term SOFR + 2.500%)4 | 12/20/29 | 7.890 |
|
| 1,914,730 | ||||
| 2,231,250 | Bausch Health Companies, Inc. (1-Month CME Term SOFR + 5.250%)4 | 02/01/27 | 10.689 |
|
| 1,684,594 | ||||
| 2,767,236 | BCP Renaissance Parent LLC Term B4 (3-Month CME Term SOFR + 3.500%)4 | 10/31/28 | 8.896 |
|
| 2,749,941 | ||||
| 1,365,767 | Buckeye Partners LP Term B1 (1-Month CME Term SOFR + 2.250%)4 | 11/01/26 | 7.666 |
|
| 1,363,923 | ||||
| 3,602,775 | Central Parent LLC (3-Month CME Term SOFR + 4.000%)4 | 07/06/29 | 9.406 |
|
| 3,579,213 | ||||
| 3,811,263 | Connect Finco S.a.r.l. (1-Month CME Term SOFR + 3.500%)4 | 12/11/26 | 8.824 |
|
| 3,714,799 | ||||
| 1,428,571 | Delos Aircraft Designated Activity Co. (3-Month CME Term SOFR + 2.000%)4 | 10/31/27 | 7.402 |
|
| 1,427,686 | ||||
| 2,260,442 | Eastern Power LLC (1-Month CME Term SOFR + 3.750%)4 | 10/02/25 | 9.189 |
|
| 2,186,344 | ||||
| 2,306,050 | Elanco Animal Health, Inc. (1-Month CME Term SOFR + 1.750%)4 | 08/01/27 | 7.165 |
|
| 2,250,428 | ||||
| 1,896,300 | Geon Performance Solutions LLC (Fka. Echo US Holdings LLC) (3-Month CME Term SOFR + 4.750%)4 | 08/18/28 | 10.402 |
|
| 1,847,319 | ||||
| 1,652,465 | GIP II Blue Holding, LP (1-Month CME Term | 09/29/28 | 9.939 |
|
| 1,652,168 | ||||
| 1,547,483 | Global Medical Response, Inc. (3-Month CME Term SOFR + 4.250%)4 | 03/14/25 | 9.895 |
|
| 998,776 | ||||
| 4,526,799 | ILPEA Parent, Inc. (1-Month CME Term SOFR + 4.500%)4 | 06/22/28 | 9.944 |
|
| 4,436,263 | ||||
| 3,890,000 | INEOS Enterprises Holdings US Finco LLC Term B | 07/08/30 | 9.272 |
|
| 3,805,704 | ||||
| 1,652,665 | Iridium Satellite LLC Term B3 (1-Month CME Term SOFR + 2.500%)4 | 09/20/30 | 7.824 |
|
| 1,649,310 | ||||
| 2,527,683 | Jazz Pharmaceuticals Plc. (1-Month CME Term SOFR + 3.500%)4 | 05/05/28 | 8.939 |
|
| 2,526,268 |
The accompanying notes are an integral part of these financial statements.
F I N A N C I A L S T A T E M E N T S O C T O B E R 3 1, 2 0 2 3 | 19 |
BBH INCOME FUND |
PORTFOLIO OF INVESTMENTS (continued) October 31, 2023 |
Principal | Maturity | Interest | Value | ||||||||
| LOAN PARTICIPATIONS AND |
|
| ||||||||
$ | 2,251,500 | LendingTree, Inc. Term B (1 – Month CME Term SOFR + 3.750%)4 | 09/15/28 | 9.189 | % | $ | 1,828,218 | ||||
| 2,705,625 | Lumen Technologies, Inc. Term A (1-Month CME Term SOFR + 2.000%)4 | 01/31/25 | 7.439 |
|
| 2,550,052 | ||||
| 3,004,250 | Medline Borrower, LP (1-Month CME Term | 10/23/28 | 8.689 |
|
| 2,983,611 | ||||
| 3,023,950 | MIP V Waste LLC (1-Month CME Term SOFR + 3.250%)4 | 12/08/28 | 8.689 |
|
| 3,008,830 | ||||
| 3,013,500 | MPH Acquisition Holdings LLC (3-Month CME Term SOFR + 4.250%)4 | 09/01/28 | 9.916 |
|
| 2,790,832 | ||||
| 5,517,988 | OCM System One Buyer CTB LLC (3-Month CME Term SOFR + 4.000%)4 | 03/02/28 | 9.540 |
|
| 5,483,500 | ||||
| 2,360,288 | Organon & Co. (1-Month CME Term SOFR + 3.000%)4 | 06/02/28 | 8.450 |
|
| 2,352,617 | ||||
| 3,371,900 | Propulsion (BC) Newco LLC (3-Month CME Term SOFR + 3.750%)4 | 09/14/29 | 9.140 |
|
| 3,349,983 | ||||
| 1,688,000 | SkyMiles IP, Ltd. (3-Month CME Term SOFR + 3.750%)4 | 10/20/27 | 9.166 |
|
| 1,727,043 | ||||
| 1,796,425 | Starwood Property Mortgage LLC (1-Month CME Term SOFR + 3.250%)4 | 11/18/27 | 8.574 |
|
| 1,784,084 | ||||
| 2,941,117 | United AirLines, Inc. Term B (1-Month CME Term SOFR + 3.750%)4 | 04/21/28 | 9.189 |
|
| 2,930,088 | ||||
| 1,120,077 | Verscend Holding Corp. Team B1 (1-Month CME Term SOFR + 4.000%)4 | 08/27/25 | 9.439 |
|
| 1,118,442 | ||||
| 1,778,786 | Vistra Operations Company LLC (fka Tex | 12/31/25 | 7.189 |
|
| 1,777,113 | ||||
| Total Loan Participations and Assignments |
|
| 95,434,334 | |||||||
|
|
| |||||||||
| MUNICIPAL BONDS (0.6%) |
|
| ||||||||
| 1,645,000 | Indiana Finance Authority, Revenue Bonds | 03/01/51 | 3.313 |
|
| 1,002,368 | ||||
| 5,605,000 | Port Authority of New York & New Jersey, Revenue Bonds | 10/01/33 | 2.000 |
|
| 4,018,503 | ||||
| Total Municipal Bonds |
|
| 5,020,871 | |||||||
|
|
| |||||||||
| PREFERRED STOCKS (2.7%) |
|
| ||||||||
| 79,000 | Apollo Global Management, Inc. (5 – Year CMT Index + 3.226%)4 | 09/15/53 | 7.625 |
|
| 2,066,640 | ||||
| 99,600 | Crescent Capital BDC, Inc. | 05/25/26 | 5.000 |
|
| 2,330,640 | ||||
| 178,600 | Eagle Point Credit Co., Inc. | 01/31/29 | 5.375 |
|
| 3,804,180 | ||||
| 66,200 | Ellington Financial, Inc. (5 – Year CMT Index + 5.130%)4,6 | 8.625 |
|
| 1,472,950 |
The accompanying notes are an integral part of these financial statements.
20 |
BBH INCOME FUND |
PORTFOLIO OF INVESTMENTS (continued) October 31, 2023 |
Principal | Maturity | Interest | Value | ||||||||
| PREFERRED STOCKS (continued) |
|
| ||||||||
$ | 132,600 | Gladstone Investment Corp. | 11/01/28 | 4.875 | % | $ | 2,994,108 | ||||
| 93,600 | Horizon Technology Finance Corp. | 03/30/26 | 4.875 |
|
| 2,245,464 | ||||
| 130,800 | Oxford Lane Capital Corp. | 01/31/27 | 5.000 |
|
| 2,918,148 | ||||
| 114,000 | Trinity Capital, Inc. | 01/16/25 | 7.000 |
|
| 2,880,780 | ||||
| Total Preferred Stocks |
|
| 20,712,910 | |||||||
|
|
| |||||||||
| RESIDENTIAL MORTGAGE BACKED SECURITIES (0.1%) |
|
| ||||||||
| 359,709 | Cascade Funding Mortgage Trust 2018 – RM21,3,4 | 10/25/68 | 4.000 |
|
| 353,978 | ||||
| 414,596 | Cascade Funding Mortgage Trust 2019 – RM31,3,4 | 06/25/69 | 2.800 |
|
| 401,905 | ||||
| 329,430 | RMF Proprietary Issuance Trust 2019 – 11,3,4 | 10/25/63 | 2.750 |
|
| 278,556 | ||||
| Total Residential Mortgage Backed |
|
| 1,034,439 | |||||||
|
|
| |||||||||
| U.S. TREASURY BILLS (0.3%) |
|
| ||||||||
| 1,250,000 | U.S. Treasury Bill7,8 | 01/25/24 | 0.000 |
|
| 1,234,338 | ||||
| 1,450,000 | U.S. Treasury Bill7,8 | 04/18/24 | 0.000 |
|
| 1,413,751 | ||||
| Total U.S. Treasury Bills |
|
| 2,648,089 | |||||||
|
|
| |||||||||
| U.S. TREASURY BONDS AND NOTES (8.5%) |
|
| ||||||||
| 3,900,000 | U.S. Treasury Bond | 08/15/41 | 1.750 |
|
| 2,315,473 | ||||
| 19,675,000 | U.S. Treasury Bond | 02/15/43 | 3.875 |
|
| 16,357,918 | ||||
| 3,085,000 | U.S. Treasury Bond | 08/15/50 | 1.375 |
|
| 1,404,398 | ||||
| 30,725,000 | U.S. Treasury Bond | 02/15/53 | 3.625 |
|
| 23,941,496 | ||||
| 300,000 | U.S. Treasury Note8 | 08/15/26 | 1.500 |
|
| 273,469 | ||||
| 500,000 | U.S. Treasury Note8 | 08/31/28 | 1.125 |
|
| 420,117 | ||||
| 400,000 | U.S. Treasury Note8 | 05/15/30 | 0.625 |
|
| 304,922 | ||||
| 23,250,000 | U.S. Treasury Note8 | 05/15/33 | 3.375 |
|
| 20,558,086 | ||||
| Total U.S. Treasury Bonds and Notes |
|
| 65,575,879 | |||||||
|
|
| |||||||||
| TOTAL INVESTMENTS (Cost $828,635,103)9 | 99.1 | % | $ | 766,025,618 | ||||||
| CASH AND OTHER ASSETS IN EXCESS OF LIABILITIES | 0.9 | % |
| 6,605,407 | ||||||
| NET ASSETS | 100.0 | % | $ | 772,631,025 |
____________
1 Security exempt from registration under Rule 144A of the Securities Act of 1933, as amended. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. Total market value of Rule 144A securities owned at October 31, 2023 was $357,472,961 or 46.3% of net assets.
2 Security that used significant unobservable inputs to determine fair value.
The accompanying notes are an integral part of these financial statements.
F I N A N C I A L S T A T E M E N T S O C T O B E R 3 1, 2 0 2 3 | 21 |
BBH INCOME FUND |
PORTFOLIO OF INVESTMENTS (continued) October 31, 2023 |
3 This variable rate security is based on a predetermined schedule and the rate at year end also represents the reference rate at year end.
4 Variable rate instrument. Interest rates change on specific dates (such as coupon or interest payment date). The yield shown represents the October 31, 2023 coupon or interest rate.
5 When-Issued transaction.
6 Security is perpetual in nature and has no stated maturity date.
7 Security issued with zero coupon. Income is recognized through accretion of discount.
8 All or a portion of this security is held at the broker as collateral for open futures contracts.
9 The aggregate cost of investments and derivatives for federal income tax purposes is $817,600,961, the aggregate gross unrealized appreciation is $13,421,123 and the aggregate gross unrealized depreciation is $77,346,914, resulting in net unrealized depreciation of $63,925,791.
Abbreviations:
CME – Chicago Mercantile Exchange.
CMT – Constant Maturity Treasury.
LIBOR – London Interbank Offered Rate.
SOFR – Secured Overnight Financing Rate.
The accompanying notes are an integral part of these financial statements.
22 |
BBH INCOME FUND |
PORTFOLIO OF INVESTMENTS (continued) October 31, 2023 |
FINANCIAL FUTURES CONTRACTS
The following futures contracts were open at October 31, 2023:
Description | Number of | Expiration | Notional | Market | Unrealized | |||||||||
Contracts to Buy: |
|
|
|
| ||||||||||
U.S. Long Bond | 247 | December 2023 | $ | 29,690,135 | $ | 27,031,062 | $ | (2,659,073 | ) | |||||
U.S. Treasury 10-Year Notes | 680 | December 2023 |
| 74,777,828 |
| 72,196,875 |
| (2,580,953 | ) | |||||
U.S. Ultra 10-Year Notes | 670 | December 2023 |
| 76,206,704 |
| 72,914,844 |
| (3,291,860 | ) | |||||
U.S. Ultra Bond | 284 | December 2023 |
| 36,168,906 |
| 31,967,750 |
| (4,201,156 | ) | |||||
|
| $ | (12,733,042 | ) | ||||||||||
Contracts to Sell: |
|
|
|
| ||||||||||
U.S. Treasury 5-Year Notes | 212 | December 2023 | $ | 22,531,625 | $ | 22,149,031 | $ | 382,594 |
| |||||
Net Unrealized (Loss) on Open Futures Contracts |
|
| $ | (12,350,448 | ) |
Fair Value Measurements
The Fund is required to disclose information regarding the fair value measurements of the Fund’s assets and liabilities. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The disclosure requirement established a three-tier hierarchy to maximize the use of observable market data and minimize the use of unobservable inputs and to establish classification of fair value measurements for disclosure purposes. Inputs refer broadly to the assumptions that market participants would use in pricing the asset or liability, including, for example, the risk inherent in a particular valuation technique used to measure fair value, including the model and/or the risk inherent in the inputs to the valuation technique. Inputs may be observable or unobservable. Observable inputs are inputs that reflect the assumptions market participants would use in pricing the asset or liability developed based on market data obtained from sources independent of the reporting entity. Unobservable inputs are inputs that reflect the Fund’s own considerations about the assumptions market participants would use in pricing the asset or liability developed based on the best information available in the circumstances.
Authoritative guidance establishes three levels of the fair value hierarchy as follows:
— | Level 1 – unadjusted quoted prices in active markets for identical assets and liabilities. |
— | Level 2 – significant other observable inputs (including quoted prices for similar assets and liabilities, interest rates, prepayment speeds, credit risk, etc.). |
— | Level 3 – significant unobservable inputs (including the Fund’s own assumptions in determining the fair value of assets and liabilities). |
The accompanying notes are an integral part of these financial statements.
F I N A N C I A L S T A T E M E N T S O C T O B E R 3 1, 2 0 2 3 | 23 |
BBH INCOME FUND |
PORTFOLIO OF INVESTMENTS (continued) October 31, 2023 |
Inputs are used in applying the various valuation techniques and broadly refer to the assumptions that market participants use to make valuation decisions, including assumptions about risk. Inputs may include price information, specific and broad credit data, liquidity statistics, and other factors. A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. However, the determination of what constitutes “observable” requires judgment by the investment adviser. The investment adviser considers observable data to be that market data which is readily available, regularly distributed or updated, reliable and verifiable, not proprietary, and provided by independent sources that are actively involved in the relevant market. The categorization of a financial instrument within the hierarchy is based upon the pricing transparency of the instrument and does not necessarily correspond to the investment adviser’s perceived risk of that instrument.
Financial assets within Level 1 are based on quoted market prices in active markets. The Fund does not adjust the quoted price for these instruments.
Financial instruments that trade in markets that are not considered to be active but are valued based on quoted market prices, dealer quotations or alternative pricing sources supported by observable inputs are classified within Level 2. These include investment-grade corporate bonds, U.S. Treasury notes and bonds, and certain non-U.S. sovereign obligations and over-the-counter derivatives. As Level 2 financial assets include positions that are not traded in active markets and/or are subject to transfer restrictions, valuations may be adjusted to reflect illiquidity and/or non-transferability, which are generally based on available market information.
Financial assets classified within Level 3 have significant unobservable inputs, as they trade infrequently. Level 3 financial assets include private equity and certain corporate debt securities.
Because of the inherent uncertainties of valuation, the values reflected in the financial statements may materially differ from the value received upon the actual sale of those investments.
The accompanying notes are an integral part of these financial statements.
24 |
BBH INCOME FUND |
PORTFOLIO OF INVESTMENTS (continued) October 31, 2023 |
The following table summarizes the valuation of the Fund’s investments by the above fair value hierarchy levels as of October 31, 2023.
Investments, at value | Unadjusted | Significant | Significant | Balance as of October 31, | ||||||||
Asset Backed Securities | $ | — | $ | 149,377,023 | $ | 6,126,472 | $ | 155,503,495 | ||||
Commercial Mortgage Backed |
| — |
| 48,676,041 |
| 1,583,531 |
| 50,259,572 | ||||
Corporate Bonds |
| — |
| 361,328,995 |
| 8,507,034 |
| 369,836,029 | ||||
Loan Participations and Assignments |
| — |
| 95,434,334 |
| — |
| 95,434,334 | ||||
Municipal Bonds |
| — |
| 5,020,871 |
| — |
| 5,020,871 | ||||
Preferred Stocks |
| 20,712,910 |
| — |
| — |
| 20,712,910 | ||||
Residential Mortgage Backed |
| — |
| 1,034,439 |
| — |
| 1,034,439 | ||||
U.S. Treasury Bills |
| — |
| 2,648,089 |
| — |
| 2,648,089 | ||||
U.S. Treasury Bonds and Notes |
| — |
| 65,575,879 |
| — |
| 65,575,879 | ||||
Total Investment, at value | $ | 20,712,910 | $ | 729,095,671 | $ | 16,217,037 | $ | 766,025,618 | ||||
|
|
|
| |||||||||
Other Financial Instruments, at value |
|
|
|
| ||||||||
Financial Futures Contracts | $ | (12,350,448) | $ | — | $ | — | $ | (12,350,448) | ||||
Other Financial Instruments, at value | $ | (12,350,448) | $ | — | $ | — | $ | (12,350,448) |
The accompanying notes are an integral part of these financial statements.
F I N A N C I A L S T A T E M E N T S O C T O B E R 3 1, 2 0 2 3 | 25 |
BBH INCOME FUND |
PORTFOLIO OF INVESTMENTS (continued) October 31, 2023 |
The following is a reconciliation of assets for which significant unobservable inputs (Level 3) were used in determining fair value during the year ended October 31, 2023:
Asset Backed | Commercial | Corporate | Total | |||||||||||||
Balance as of October 31, 2022 | $ | 6,860,896 |
| $ | 6,703,260 |
| $ | 11,623,862 |
| $ | 25,188,018 |
| ||||
Purchases |
| — |
|
| — |
|
| 395,513 |
|
| 395,513 |
| ||||
Sales/Paydowns |
| (727,779 | ) |
| (4,986,050 | ) |
| (570,213 | ) |
| (6,284,042 | ) | ||||
Realized gains/(losses) |
| — |
|
| — |
|
| (154,944 | ) |
| (154,944 | ) | ||||
Change in unrealized appreciation/ |
| (6,645 | ) |
| (133,660 | ) |
| 1,062,132 |
|
| 921,827 |
| ||||
Amortization |
| — |
|
| (19 | ) |
| 43,782 |
|
| 43,763 |
| ||||
Transfers from Level 3 |
| — |
|
| — |
|
| (3,893,098 | ) |
| (3,893,098 | ) | ||||
Transfers to Level 3 |
| — |
|
| — |
|
| — |
|
| — |
| ||||
Balance as of October 31, 2023 | $ | 6,126,472 |
| $ | 1,583,531 |
| $ | 8,507,034 |
| $ | 16,217,037 |
|
Fund investments classified as Level 3 were either single broker quoted or fair valued using a market approach or an income approach with valuation inputs such as a discounted cash flow model or market price information adjusted for changes in an appropriate index. As of October 31, 2023, $8,627,249 of value of the Level 3 assets in the Fund was based on a single quote from a broker.
The accompanying notes are an integral part of these financial statements.
26 |
BBH INCOME FUND |
STATEMENT OF ASSETS AND LIABILITIES October 31, 2023 |
ASSETS: |
|
| ||
Investments in securities, at value (Cost $828,635,103) | $ | 766,025,618 |
| |
Cash |
| 1,862,999 |
| |
Foreign currency at value (Cost $226) |
| 244 |
| |
Receivables for: |
|
| ||
Interest |
| 7,032,022 |
| |
Investments sold |
| 6,357,179 |
| |
Shares sold |
| 244,989 |
| |
Futures variation margin on open contracts |
| 97,051 |
| |
Dividends |
| 40,402 |
| |
Interest from Custodian |
| 1,133 |
| |
Total Assets |
| 781,661,637 |
| |
|
| |||
LIABILITIES: |
|
| ||
Payables for: |
|
| ||
Investments purchased |
| 6,999,337 |
| |
Shares redeemed |
| 1,504,232 |
| |
Investment advisory and administrative fees |
| 253,606 |
| |
Dividends declared |
| 124,377 |
| |
Professional fees |
| 94,155 |
| |
Custody and fund accounting fees |
| 37,079 |
| |
Transfer agent fees |
| 3,471 |
| |
Board of Trustees’ fees |
| 1,353 |
| |
Accrued expenses and other liabilities |
| 13,002 |
| |
Total Liabilities |
| 9,030,612 |
| |
NET ASSETS | $ | 772,631,025 |
| |
|
| |||
Net Assets Consist of: |
|
| ||
Paid-in capital | $ | 908,063,089 |
| |
Accumulated deficit |
| (135,432,064 | ) | |
Net Assets | $ | 772,631,025 |
| |
|
| |||
NET ASSET VALUE AND OFFERING PRICE PER SHARE |
|
| ||
CLASS I SHARES |
|
| ||
($772,631,025 ÷ 93,124,007 shares outstanding) | $ | 8.30 |
| |
|
|
The accompanying notes are an integral part of these financial statements.
F I N A N C I A L S T A T E M E N T S O C T O B E R 3 1, 2 0 2 3 | 27 |
BBH INCOME FUND |
STATEMENT OF OPERATIONS For the year ended October 31, 2023 |
NET INVESTMENT INCOME: |
|
| ||
Income: |
|
| ||
Dividends | $ | 1,107,855 |
| |
Interest income |
| 39,670,815 |
| |
Interest income from Custodian |
| 21,512 |
| |
Other income |
| 34,082 |
| |
Total Income |
| 40,834,264 |
| |
|
| |||
Expenses: |
|
| ||
Investment advisory and administrative fees |
| 2,806,785 |
| |
Custody and fund accounting fees |
| 139,086 |
| |
Professional fees |
| 106,477 |
| |
Board of Trustees’ fees |
| 77,238 |
| |
Transfer agent fees |
| 38,835 |
| |
Miscellaneous expenses |
| 67,786 |
| |
Total Expenses |
| 3,236,207 |
| |
Net Investment Income |
| 37,598,057 |
| |
|
| |||
NET REALIZED AND UNREALIZED LOSS: |
|
| ||
Net realized loss on investments in securities |
| (4,726,692 | ) | |
Net realized loss on futures contracts |
| (20,579,243 | ) | |
Net realized loss on investments in securities and futures contracts |
| (25,305,935 | ) | |
Net change in unrealized appreciation/(depreciation) on investments in securities |
| (4,325,411 | ) | |
Net change in unrealized appreciation/(depreciation) on futures contracts |
| 4,018,224 |
| |
Net change in unrealized appreciation/(depreciation) on foreign currency translations |
| 16 |
| |
Net change in unrealized appreciation/(depreciation) on investments in securities, futures contracts and foreign currency translations |
| (307,171 | ) | |
Net Realized and Unrealized Loss |
| (25,613,106 | ) | |
Net Increase in Net Assets Resulting from Operations | $ | 11,984,951 |
|
The accompanying notes are an integral part of these financial statements.
28 |
BBH INCOME FUND |
STATEMENTS OF CHANGES IN NET ASSETS |
For the years ended October 31, | ||||||||
2023 | 2022 | |||||||
INCREASE/(DECREASE) IN NET ASSETS FROM: |
|
|
|
| ||||
Operations: |
|
|
|
| ||||
Net investment income | $ | 37,598,057 |
| $ | 21,964,633 |
| ||
Net realized loss on investments in securities and futures |
| (25,305,935 | ) |
| (36,598,001 | ) | ||
Net change in unrealized appreciation/(depreciation) on |
| (307,171 | ) |
| (86,805,617 | ) | ||
Net increase/(decrease) in net assets resulting from |
| 11,984,951 |
|
| (101,438,985 | ) | ||
|
|
|
| |||||
Dividends and distributions declared: |
|
|
|
| ||||
Class I |
| (37,555,733 | ) |
| (21,910,553 | ) | ||
|
|
|
| |||||
Share transactions: |
|
|
|
| ||||
Proceeds from sales of shares |
| 377,670,836 |
|
| 141,932,385 |
| ||
Net asset value of shares issued to shareholders for reinvestment |
| 4,877,819 |
|
| 2,974,846 |
| ||
Proceeds from short-term redemption fees |
| 7,073 |
|
| 1,609 |
| ||
Cost of shares redeemed |
| (131,621,537 | ) |
| (86,537,595 | ) | ||
Net increase in net assets resulting from share transactions |
| 250,934,191 |
|
| 58,371,245 |
| ||
Total increase/(decrease) in net assets |
| 225,363,409 |
|
| (64,978,293 | ) | ||
|
|
|
| |||||
NET ASSETS: |
|
|
|
| ||||
Beginning of year |
| 547,267,616 |
|
| 612,245,909 |
| ||
End of year | $ | 772,631,025 |
| $ | 547,267,616 |
|
The accompanying notes are an integral part of these financial statements.
F I N A N C I A L S T A T E M E N T S O C T O B E R 3 1, 2 0 2 3 | 29 |
BBH INCOME FUND |
FINANCIAL HIGHLIGHTS Selected per share data and ratios for a Class I share outstanding throughout each year. |
For the years ended October 31, | ||||||||||||||||||||
2023 | 2022 | 2021 | 2020 | 2019 | ||||||||||||||||
Net asset value, beginning of year | $ | 8.49 |
| $ | 10.49 |
| $ | 10.77 |
| $ | 10.61 |
| $ | 9.83 |
| |||||
Income from investment operations: |
|
|
|
|
|
|
|
|
|
| ||||||||||
Net investment income1 |
| 0.47 |
|
| 0.36 |
|
| 0.34 |
|
| 0.34 |
|
| 0.36 |
| |||||
Net realized and unrealized gain/(loss) |
| (0.20 | ) |
| (2.00 | ) |
| 0.15 |
|
| 0.46 |
|
| 0.78 |
| |||||
Total income/(loss) from investment operations |
| 0.27 |
|
| (1.64 | ) |
| 0.49 |
|
| 0.80 |
|
| 1.14 |
| |||||
Dividends and distributions to shareholders: |
|
|
|
|
|
|
|
|
|
| ||||||||||
From net investment income |
| (0.46 | ) |
| (0.36 | ) |
| (0.33 | ) |
| (0.34 | ) |
| (0.36 | ) | |||||
From net realized gains |
| — |
|
| — |
|
| (0.44 | ) |
| (0.30 | ) |
| — |
| |||||
Total dividends and distributions to shareholders |
| (0.46 | ) |
| (0.36 | ) |
| (0.77 | ) |
| (0.64 | ) |
| (0.36 | ) | |||||
Short-term redemption fees1 |
| 0.002 |
|
| 0.002 |
|
| 0.002 |
|
| 0.002 |
|
| 0.002 |
| |||||
Net asset value, end of year | $ | 8.30 |
| $ | 8.49 |
| $ | 10.49 |
| $ | 10.77 |
| $ | 10.61 |
| |||||
Total return3 |
| 3.10 | % |
| (15.93 | )% |
| 4.64 | % |
| 7.87 | % |
| 11.76 | % | |||||
|
|
|
|
|
|
|
|
|
| |||||||||||
Ratios/Supplemental data: |
|
|
|
|
|
|
|
|
|
| ||||||||||
Net assets, end of year (in millions) | $ | 773 |
| $ | 547 |
| $ | 612 |
| $ | 468 |
| $ | 406 |
| |||||
Ratio of expenses to average net assets before reductions |
| 0.46 | % |
| 0.47 | % |
| 0.47 | % |
| 0.48 | % |
| 0.52 | % | |||||
Fee waiver4 |
| — | % |
| — | % |
| — | % |
| — | % |
| (0.02 | )% | |||||
Ratio of expenses to average net assets |
| 0.46 | % |
| 0.47 | % |
| 0.47 | % |
| 0.48 | % |
| 0.50 | % | |||||
Ratio of net investment income to average net assets |
| 5.36 | % |
| 3.77 | % |
| 3.19 | % |
| 3.24 | % |
| 3.49 | % | |||||
Portfolio turnover rate |
| 56 | % |
| 56 | % |
| 69 | % |
| 116 | % |
| 77 | % |
____________
1 Calculated using average shares outstanding for the year.
2 Less than $0.01.
3 Assumes the reinvestment of distributions.
4 The ratio of expenses to average net assets for the years ended October 31, 2023, 2022, 2021, 2020, 2019 reflect fees reduced as result of a contractual operating expense limitation of the Fund to 0.50%. The agreement is effective through March 1, 2024 and may only be terminated during its term with approval of the Fund’s Board of Trustees. For the years ended October 31, 2023, 2022, 2021, 2020, 2019, the waived fees were $–, $–, $–, $– and $55,757, respectively.
The accompanying notes are an integral part of these financial statements.
30 |
BBH INCOME FUND |
NOTES TO FINANCIAL STATEMENTS October 31, 2023 |
1. Organization. The Fund is a separate, diversified series of BBH Trust (the “Trust”), which is registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as an open-end management investment company. The Trust was originally organized under the laws of the State of Maryland on July 16, 1990 as BBH Fund, Inc. and re-organized as a Delaware statutory trust on June 12, 2007. As of October 31, 2023, there were eight series of the Trust. The Fund commenced operations on June 27, 2018 and offers two share classes, Class N and Class I. As of October 31, 2023, Class N shares are not available for purchase by investors but may be offered in the future. The investment objective of the Fund is to provide maximum total return, with an emphasis on current income, consistent with preservation of capital and prudent investment management. Neither Class N shares nor Class I shares automatically convert to any other share class of the Fund.
2. Significant Accounting Policies. The Fund’s financial statements are prepared in accordance with Generally Accepted Accounting Principles in the United States of America (“GAAP”). The Fund is an investment company and accordingly follows the investment company accounting and reporting guidance of the Financial Accounting Standards Board (“FASB”) Accounting Standard Codification Topic 946 Financial Services — Investment Companies. The following summarizes significant accounting policies of the Fund:
A. Valuation of Investments. The Board of Trustees (the “Board”) has ultimate responsibility for determining the fair value of investments. Pursuant to Rule 2a-5 of the 1940 Act, the Board has designated the Investment Adviser as its valuation designee. The Investment Adviser monitors the continual appropriateness of valuation methods applied and determines if adjustments should be made in light of market factor changes and events affecting issuers. The Investment Adviser performs a series of activities to provide reasonable assurance of the appropriateness of the prices utilized, including but not limited to: periodic independent pricing service due diligence meetings and reviewing the results of back testing on a monthly basis. The Investment Adviser provides the Board with reporting on the results of the back testing as well as positions which were fair valued during the period.
All securities and other investments are recorded at their estimated fair value. The value of investments listed on a securities exchange is based on the last sale price prior to the time when assets are valued, or in the absence of recorded sales, at the most recent bid price on such exchange. If a readily available market quotation is not available or is determined to be unreliable, the investments may be valued utilizing evaluated prices provided by independent pricing services. In establishing such prices, the independent pricing service utilizes both dealer supplied prices and electronic data processing techniques which take into account appropriate factors such as institutional sized trading in similar groups of securities, yield, quality, coupon rate, maturity, type of issue, trading characteristics, the closure of the primary exchange on which securities trade and before the Fund’s net asset value is next determined and other market data without exclusive reliance on quoted exchange prices or over-the-counter prices since such valuations are believed to reflect more accurately the fair value of such investments. Investments may be fair valued by Brown Brothers Harriman & Co. (“BBH”) through a separately identifiable department (“SID” or “Investment Adviser”) in accordance with the BBH Trust Portfolio Valuation Policy and Procedures using methods
F I N A N C I A L S T A T E M E N T S O C T O B E R 3 1, 2 0 2 3 | 31 |
BBH INCOME FUND |
NOTES TO FINANCIAL STATEMENTS (continued) October 31, 2023 |
that most fairly reflect the amount that the Fund would reasonably expect to receive for the investment on a current sale in its principal market in the ordinary course of business. Short-term investments, which mature in 60 days or less are valued at amortized cost if their original maturity was 60 days or less, or by amortizing their value on the 61st day prior to maturity, if their original maturity when acquired by the Fund was more than 60 days, unless the use of amortized cost is determined not to represent fair value. Any futures contracts held by the Fund are valued daily at the official settlement price of the exchange on which they are traded.
B. Accounting for Investments and Income. Investment transactions are accounted for on the trade date. Realized gains and losses on investment transactions are determined based on the identified cost method. Interest income is accrued daily and consists of interest accrued, discount earned (including, if any, both original issue and market discount) and premium amortization on the investments of the Fund. Investment income is recorded net of any foreign taxes withheld where recovery of such tax is uncertain. Debt obligations may be placed on non-accrual status and related interest income may be reduced by ceasing current accruals and writing off interest receivable when the collection of all or a portion of the interest has become doubtful based on consistently applied procedures. A debt obligation is removed from non-accrual status when the issuer resumes interest payments or when collectability of interest is reasonably assured.
C. Fund Expenses. Most expenses of the Trust can be directly attributed to a specific fund. Expenses which cannot be directly attributed to a fund are generally apportioned among each fund in the Trust on a net assets basis or other suitable method. Expense estimates are accrued in the period to which they relate and adjustments are made when actual amounts are known.
D. Financial Futures Contracts. The Fund may enter into open futures contracts in order to economically hedge against anticipated future changes in interest rates which otherwise might either adversely affect the value of securities held for the Fund or adversely affect the prices of securities that are intended to be purchased at a later date for the Fund. The contractual amount of the futures contracts represents the investment the Fund has in a particular contract and does not necessarily represent the amounts potentially subject to risk of loss. Trading in futures contracts involves, to varying degrees, risk of loss in excess of any futures variation margin reflected in the Statement of Assets and Liabilities. The measurement of risk associated with futures contracts is meaningful only when all related and offsetting transactions are considered. Gains and losses are realized upon the expiration or closing of the futures contracts.
Risks related to the use of futures contracts include possible illiquidity of the futures markets, contract prices that can be highly volatile and imperfectly correlated to movements in economically hedged security values and/or interest rates, and potential losses in excess of the Fund’s initial investment.
Open future contracts held at October 31, 2023, are listed in the Portfolio of Investments.
For the year ended October 31, 2023, the average monthly notional amount of open futures contracts was $236,244,986. The range of monthly notional amounts was $ 210,774,842 to $ 266,041,236.
32 |
BBH INCOME FUND |
NOTES TO FINANCIAL STATEMENTS (continued) October 31, 2023 |
Fair Values of Derivative Instruments as of October 31, 2023
Derivatives not accounted for as economically hedging instruments under authoritative guidance for derivatives instruments and hedging activities:
Asset Derivatives | Liability Derivatives | |||||||||||||
Risk | Statement of Assets | Fair Value | Statement of Assets | Fair Value | ||||||||||
Interest | Net unrealized | $ | 382,594 | * | Net unrealized | $ | (12,733,042 | )* | ||||||
|
|
|
|
|
| |||||||||
Total | $ | 382,594 |
| $ | (12,733,042 | ) |
____________
* Includes cumulative appreciation/(depreciation) of futures contracts as reported in the Statement of Assets and Liabilities and Notes to Financial Statements. Only the current day’s variation margin is reported within the Statement of Assets and Liabilities.
Effect of Derivative Instruments on the Statement of Operations | ||||||
Interest Rate Risk | ||||||
Net Realized Loss on Derivatives |
|
| ||||
Futures Contracts | $ | (20,579,243 | ) | |||
|
| |||||
Net Change in Unrealized Appreciation/(Depreciation) on Derivatives |
|
| ||||
Futures Contracts | $ | 4,018,224 |
|
E. Private Placement Securities. The Fund may purchase securities that are not registered under the Securities Act of 1933, as amended (“1933 Act”) but that can be sold to “qualified institutional buyers” in accordance with the requirements stated in Rule 144A or the requirements stated in Regulation S and Regulation D of the 1933 Act (“Private Placement Securities”). A Private Placement Security may be considered illiquid, under the U.S. Securities and Exchange Commission (“SEC”) Regulations for open-end investment companies, and therefore subject to the 15% limitation on the purchase of illiquid securities, unless it is determined on an ongoing basis that an adequate trading market exists for the security, which is the case for the Fund. Guidelines have been adopted and the daily function of determining and monitoring liquidity of Private Placement Securities has been delegated to the investment adviser. All relevant factors will be considered in determining the liquidity of Private Placement Securities and all investments in Private Placement Securities will be carefully monitored. Information regarding Private Placement Securities is included at the end of the Portfolio of Investments.
F I N A N C I A L S T A T E M E N T S O C T O B E R 3 1, 2 0 2 3 | 33 |
BBH INCOME FUND |
NOTES TO FINANCIAL STATEMENTS (continued) October 31, 2023 |
F. Loan Participations and Assignments. The Fund may invest in loan participations and assignments, which include institutionally traded floating and fixed-rate debt securities generally acquired as an assignment from another holder of, or participation interest in, loans originated by a bank or financial institution (the “Lender”) that acts as agent for all holders. Some loan participations and assignments may be purchased on a “when-issued” basis. The agent administers the terms of the loan, as specified in the loan agreement. When investing in a loan assignment, the Fund acquires the loan in whole or in part and becomes a lender under the loan agreement. The Fund generally has the right to enforce compliance with the terms of the loan agreement with the borrower.
Assignments and participations involve credit, interest rate, and liquidity risk. Interest rates on floating rate securities adjust with interest rate changes and/or issuer credit quality, and unexpected changes in such rates could result in losses to the Fund. The interest rates paid on a floating rate security in which the Fund invests generally are readjusted periodically to an increment over a designated benchmark rate, such as the one-month, three-month, six-month, or one-year Secured Overnight Financing Rate (“SOFR”).
The Fund may have difficulty trading assignments and participations to third parties. There may be restrictions on transfer and only limited opportunities may exist to sell such securities in secondary markets. As a result, the Fund may be unable to sell assignments or participations at the desired time or may be able to sell only at a price less than fair market value. The Fund utilizes an independent third party to value individual loan participations and assignments on a daily basis.
G. Federal Income Taxes. It is the Trust’s policy to comply with the requirements of the Internal Revenue Code (the “Code”) applicable to regulated investment companies and to distribute substantially all of its taxable income to its shareholders. Accordingly, no federal income tax provision is required. The Fund files a tax return annually using tax accounting methods required under provisions of the Code, which may differ from GAAP, which is the basis on which these financial statements are prepared. Accordingly, the amount of net investment income and net realized gain reported in these financial statements may differ from that reported on the Fund’s tax return, due to certain book-to-tax timing differences such as losses deferred due to “wash sale” transactions and utilization of capital loss carryforwards. These differences may result in temporary over-distributions for financial statement purposes and are classified as distributions in excess of accumulated net realized gains or net investment income. These distributions do not constitute a return of capital. Permanent differences are reclassified between paid-in capital and retained earnings/(accumulated deficit) within the Statement of Assets and Liabilities based upon their tax classification. As such, the character of distributions to shareholders reported in the Financial Highlights table may differ from that reported to shareholders on Form 1099-DIV.
The Fund is subject to the provisions of Accounting Standards Codification 740 Income Taxes (“ASC 740”). ASC 740 sets forth a minimum threshold for financial statement recognition of the benefit of a tax position taken or expected to be taken in a tax return. The Fund did not have any
34 |
BBH INCOME FUND |
NOTES TO FINANCIAL STATEMENTS (continued) October 31, 2023 |
unrecognized tax benefits as of October 31, 2023, nor were there any increases or decreases in unrecognized tax benefits for the period then ended. The Fund recognizes interest and penalties, if any, related to unrecognized tax benefits as an income tax expense in the Statement of Operations. During the year ended October 31, 2023, the Fund did not incur any such interest or penalties. The Fund is subject to examination by U.S. federal and state tax authorities for returns filed for the prior three fiscal years. The Fund is not aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will significantly change in the next twelve months.
H. Dividends and Distributions to Shareholders. Dividends and distributions from net investment income to shareholders are declared daily and paid monthly to shareholders. Distributions from net capital gains, if any, are generally declared and paid annually and are recorded on the ex-dividend date. The Fund declared dividends in the amount of $37,555,733 and $21,910,553 to Class I shares during the years ended October 31, 2023 and October 31, 2022, respectively. In addition, the Fund designated a portion of the payment made to redeeming shareholders as a distribution for income tax purposes.
The tax character of distributions paid during the years ended October 31, 2023 and 2022, respectively, were as follows:
Distributions paid from: | ||||||||||||
Ordinary | Net | Total | Tax return | Total | ||||||||
2023: | $ 37,555,733 | $ — | $ 37,555,733 | $ — | $ 37,555,733 | |||||||
2022: | 21,910,553 | — | 21,910,553 | — | 21,910,553 |
As of October 31, 2023 and 2022, respectively, the components of retained earnings/(accumulated deficit) on tax basis were as follows:
Components of retained earnings/(accumulated deficit): | ||||||||||||||
Undistributed | Undistributed | Accumulated | Other | Unrealized | Total | |||||||||
2023: | $ 93,181 | $ — | $ (71,475,095) | $ 10,909,765 | $ (74,959,915) | $ (135,432,064) | ||||||||
2022: | 28,575 | — | (48,543,872) | 13,306,759 | (74,652,744) | (109,861,282) |
The Fund had $71,475,095 net capital loss carryforwards as of October 31, 2023, of which $33,306,628 and $38,168,467, is attributable to short-term and long-term capital losses, respectively.
F I N A N C I A L S T A T E M E N T S O C T O B E R 3 1, 2 0 2 3 | 35 |
BBH INCOME FUND |
NOTES TO FINANCIAL STATEMENTS (continued) October 31, 2023 |
The Fund is permitted to carryforward capital losses for an unlimited period and they will retain their character as either short-term or long-term capital.
Total distributions paid may differ from amounts reported in the Statements of Changes in Net Assets because, for tax purposes, dividends are recognized when actually paid.
The differences between book-basis and tax-basis unrealized appreciation/(depreciation) is attributable primarily to the tax deferral of losses on wash sales and paydowns on fixed income securities.
To the extent future capital gains are offset by capital loss carryforwards, if any, such gains will not be distributed.
I. Use of Estimates. The preparation of the financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities in the financial statements, disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of increase and decrease in net assets from operations during the reporting period. Actual results could differ from these estimates.
3. Fees and Other Transactions with Affiliates.
A. Investment Advisory and Administrative Fees. Effective June 27, 2018 (commencement of operations), under a combined Investment Advisory and Administrative Services Agreement (“Agreement”) with the Trust, Brown Brothers Harriman & Co. (“BBH”) through a separately identifiable department (“Investment Adviser”) provides investment advisory, portfolio management and administrative services to the Fund. The Fund pays a combined fee for investment advisory and administrative services calculated daily and paid monthly at an annual rate equivalent to 0.40% per annum. For the year ended October 31, 2023, the Fund incurred $2,806,785 for services under the Agreement.
B. Investment Advisory and Administrative Fee Waivers. Effective June 27, 2018 (commencement of operations), the Investment Adviser has contractually agreed to waive fees and/or reimburse expenses in order to limit the total annual fund operating expenses (excluding interests, taxes, brokerage commissions, other expenditures that are capitalized in accordance with generally accepted accounting principles, and other extraordinary expenses not incurred in the ordinary course of the Fund’s business) for Class I shares to 0.50%. The agreement will terminate on March 1, 2024, unless it is renewed by all parties to the agreement. The agreement may only be terminated during its term with approval of the Fund’s Board of Trustees. For the year ended October 31, 2023, the Investment Adviser waived fees in the amount of $0 for Class I.
36 |
BBH INCOME FUND |
NOTES TO FINANCIAL STATEMENTS (continued) October 31, 2023 |
C. Custody and Fund Accounting Fees. BBH acts as a custodian and fund accountant and receives custody and fund accounting fees from the Fund calculated daily and incurred monthly. BBH holds all of the Fund’s cash and investments and calculates the Fund’s daily net asset value. The custody fee is an asset and transaction-based fee. The fund accounting fee is an asset-based fee calculated at 0.325 basis points per annum of the Fund’s net asset value, effective September 1, 2023 based on the new agreement. The fund accounting fee was 0.40 basis points per annum until August 31, 2023. For the year ended October 31, 2023, the Fund incurred $139,086 in custody and fund accounting fees. The Fund receives interest income on cash balances held by the custodian at the BBH Base Rate. The BBH Base Rate is defined as BBH’s effective trading rate in local money markets on each day. The total interest earned by the Fund for the year ended October 31, 2023 was $21,512. This amount is included in “Interest income from Custodian” in the Statement of Operations. In the event that the Fund is overdrawn, under the custody agreement with BBH, BBH will make overnight loans to the Fund to cover overdrafts. Pursuant to their agreement, the Fund will pay the BBH Overdraft Base Rate plus 2% on the day of the overdraft. The Fund did not incur any such fees during the year ended October 31, 2023. This amount, if any, is included under line item “Custody and fund accounting fees” in the Statement of Operations.
D. Board of Trustees’ Fees. Each Trustee who is not an “interested person” as defined under the 1940 Act receives an annual fee as well as reimbursement for reasonable out-of-pocket expenses from the Fund. For the year ended October 31, 2023, the Fund incurred $77,238 in independent Trustee compensation and expense reimbursements.
E. Officers of the Trust. Officers of the Trust are also employees of BBH. Officers are paid no fees by the Trust for their services to the Trust.
4. Investment Transactions. For the year ended October 31, 2023, the cost of purchases and the proceeds of sales of investment securities, other than short-term investments, were $615,879,516 and $389,274,114, respectively.
5. Shares of Beneficial Interest. The Trust is permitted to issue an unlimited number of Class I shares of beneficial interest, at no par value. Transactions in Class I shares were as follows:
For the year ended | For the year ended | |||||||||||||
Shares | Dollars | Shares | Dollars | |||||||||||
Class I |
|
|
|
| ||||||||||
Shares sold | 43,293,311 |
| $ 377,670,836 |
| 14,985,215 |
| $ 141,932,385 |
| ||||||
Shares issued in connection with reinvestments of dividends | 561,634 |
| 4,877,819 |
| 315,033 |
| 2,974,846 |
| ||||||
Proceeds from short-term redemption | N/A |
| 7,073 |
| N/A |
| 1,609 |
| ||||||
Shares redeemed | (15,212,056 | ) | (131,621,537 | ) | (9,170,419 | ) | (86,537,595 | ) | ||||||
Net increase | 28,642,889 |
| $ 250,934,191 |
| 6,129,829 |
| $ 58,371,245 |
|
F I N A N C I A L S T A T E M E N T S O C T O B E R 3 1, 2 0 2 3 | 37 |
BBH INCOME FUND |
NOTES TO FINANCIAL STATEMENTS (continued) October 31, 2023 |
6. Principal Risk Factors and Indemnifications.
A. Principal Risk Factors. Investing in the Fund may involve certain risks, as discussed in the Fund’s prospectus, including but not limited to, those described below:
A shareholder may lose money by investing in the Fund (investment risk). The Fund is actively managed and the decisions by the Investment Adviser may cause the Fund to incur losses or miss profit opportunities (management risk). In the normal course of business, the Fund invests in securities and enters into transactions where risks exist due to failure of a counterparty to a transaction to perform (credit risk), changes in interest rates (interest rate risk), higher volatility for securities with longer maturities (maturity risk), financial performance or leverage of the issuer (issuer risk), difficulty in being able to purchase or sell a security (illiquid investment risk), or certain risks associated with investing in foreign securities not present in domestic investments, including, but not limited to, recovery of tax withheld by foreign jurisdictions (non-U.S. investment risk). Investments in other investment companies are subject to market and selection risk, as well as the specific risks associated with the investment companies’ portfolio securities (investment in other investment companies risk), and risks from investing in securities of issuers based in developing countries (emerging markets risk). The Fund’s use of derivatives creates risks that are different from, or possibly greater than, the risks associated with investing directly in securities as the Fund could lose more than the principal amount invested (derivatives risk). Political, legislative and economic events may affect a municipal security’s value, interest payments, repayments of principal and the Fund’s ability to sell it (municipal issuer risk). Due to uncertainty regarding the ability of the issuer to pay principal and interest, securities that are rated below investment grade (i.e., Ba1/BB+ or lower) (junk bond risk), and their unrated equivalents, may be subject to greater risks than securities which have higher credit ratings, including a high risk of default. If the issuer of the securities in which the Fund invests redeems them before maturity the Fund may have to reinvest the proceeds in securities that pay a lower interest rate (call risk). The Fund invests in asset-backed (asset-backed securities risk) and mortgage-backed securities (mortgage-backed securities risk) which are subject to the risk that borrowers may default on the obligations that underlie these securities. In addition, these securities may be paid off sooner (prepayment risk) or later than expected which may increase the volatility of securities during periods of fluctuating interest rates. The Fund may invest in bonds issued by foreign governments which may be unable or unwilling to make interest payments and/or repay the principal owed (sovereign debt risk). The Fund’s use of borrowing, in reverse repurchase agreements and investment in some derivatives, involves leverage. Leverage tends to exaggerate the effect of any increase or decrease in the value of the Fund’s securities and may cause the Fund to be more volatile (leverage risk). Loan participations and assignment, delayed funding loans and revolving credit facilities may have the effect of requiring the Fund to increase its investments in a company at a time when it might not otherwise decide to do so (loan risk). The value of securities held by the Fund may decline in response to certain events, including: those directly involving the companies or issuers whose securities are held by the Fund; conditions affecting the general economy; overall market changes; local, regional or political, social or economic instability; and currency and interest rate and price fluctuations. Natural disasters, the spread of infectious illness and other public health
38 |
BBH INCOME FUND |
NOTES TO FINANCIAL STATEMENTS (continued) October 31, 2023 |
emergencies, recession, terrorism and other unforeseeable events may lead to increased market volatility and may have adverse effects on world economies and markets generally (market risk). A significant investment of Fund assets within one or more sectors, industries, securities and/or durations may increase the Fund’s sensitivity to adverse economic, business, political, or other, risks associated with such sector, industry, security or duration (sector risk). The Fund’s shareholders may be adversely impacted by asset allocation decisions made by an investment adviser whose discretionary clients make up a large percentage of the Fund’s shareholders (large shareholder risk). Even though the Fund’s investments in repurchase agreements are collateralized at all times, there is risk to the Fund if the other party to the agreement should default on its obligations (repurchase agreement risk). While the U.S. Government has historically provided financial support to U.S. government-sponsored agencies or instrumentalities during times of financial stress, such as the various actions taken to stabilize the Federal National Mortgage Association and Federal Home Loan Mortgage Corporation during the credit crisis of 2008, no assurance can be given that it will do so in the future. Such securities are neither issued nor guaranteed by the U.S. Treasury (U.S. Government Agency Securities Risk). The Fund may invest in private placement securities that are issued pursuant to Regulation S, Regulation D and Rule 144A which have not been registered with the SEC. These securities may be subject to contractual restrictions which prohibit or limit their resale (private placement risk). The United Kingdom’s Financial Conduct Authority announced a phase out of the London Interbank Offered Rate (“LIBOR”). Although many LIBOR rates were phased out by the end of 2021, some USD LIBOR settings will continue to be published under a synthetic methodology until September 30, 2024 for certain legacy contracts. The SOFR has been used increasingly on a voluntary basis in new instruments and transactions. Under U.S. regulations that implement a statutory fallback mechanism to replace LIBOR, benchmark rates based on SOFR have replaced LIBOR in certain financial contracts. Any pricing adjustments to the fund’s investments resulting from a substitute reference rate may also adversely affect the fund’s performance and/or net asset value (LIBOR transition risk). The Fund may invest in convertible securities which may perform in a similar manner to a regular debt security and are subject to variety of risks, including investment risk and interest rate risk (convertible securities risk). The Fund may invest in preferred securities which are equity interests in a company that entitle the holder to receive common stock, dividends and a fixed share of the proceeds resulting from a liquidation of the company, in preference to the holders of other securities. Preferred securities are subject to issuer specific and market risks applicable generally to equity securities (preferred securities risk). The Fund may also invest in notes issued by Business Development Companies (“BDCs”). These notes are subject to risks similar to those of other issuers and those of investment companies (business development company risk). The extent of the Fund’s exposure to these risks in respect to these financial assets is included in their value as recorded in the Fund’s Statement of Assets and Liabilities.
Please refer to the Fund’s prospectus for a complete description of the principal risks of investing in the Fund.
F I N A N C I A L S T A T E M E N T S O C T O B E R 3 1, 2 0 2 3 | 39 |
BBH INCOME FUND |
NOTES TO FINANCIAL STATEMENTS (continued) October 31, 2023 |
B. Indemnifications. Under the Trust’s organizational documents, its officers and Trustees may be indemnified against certain liabilities and expenses arising out of the performance of their duties to the Fund, and shareholders are indemnified against personal liability for the obligations of the Trust. Additionally, in the normal course of business, the Fund enters into agreements with service providers that may contain indemnification clauses. The Fund’s maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Fund that have not yet occurred. The risk of material loss from such claims is considered remote.
7. Subsequent Events. Management has evaluated events and transactions that have occurred since October 31, 2023 through the date the financial statements were issued and determined that there were no subsequent events that would require recognition or additional disclosure in the financial statements.
40 |
BBH INCOME FUND |
DISCLOSURE OF FUND EXPENSES October 31, 2023 (unaudited) |
EXAMPLE
As a shareholder of the Fund, you may incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments, reinvested distributions, or other distributions; redemption fees; and exchange fees; and (2) ongoing costs, including management fees; and other Fund expenses. This Example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The Example is based on an investment of $1,000 invested at the beginning of the six-month period and held for the entire period (May 1, 2023, to October 31, 2023).
ACTUAL EXPENSES
The first line of the table provides information about actual account values and actual expenses. You may use information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled “Expenses Paid During the Period” to estimate the expenses you paid on your account during the period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The second line of the table provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid during the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% Hypothetical Example with the 5% hypothetical examples that appear in the shareholder reports of other funds.
F I N A N C I A L S T A T E M E N T S O C T O B E R 3 1, 2 0 2 3 | 41 |
BBH INCOME FUND |
DISCLOSURE OF FUND EXPENSES (continued) October 31, 2023 (unaudited) |
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as redemption fees or exchange fees. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
Beginning | Ending | Expenses Paid | ||||
Class I | ||||||
Actual | $1,000 | $957 | $2.27 | |||
Hypothetical2 | $1,000 | $1,023 | $2.35 |
____________
1 Expenses are equal to the Fund’s annualized expense ratio of 0.46% for Class I shares, multiplied by the average account value over the period and multiplied by 184/365 (to reflect the one-half year period).
2 Assumes a return of 5% before expenses. For the purposes of the calculation, the applicable annualized expenses ratio for each class of shares is subtracted from the assumed return before expenses.
42 |
BBH INCOME FUND |
CONFLICTS OF INTEREST October 31, 2023 (unaudited) |
Description of Potential Material Conflicts of Interest — Investment Adviser
BBH, including the Investment Adviser, provides discretionary and non-discretionary investment management services and products to corporations, institutions and individual investors throughout the world. As a result, in the ordinary course of its businesses, BBH, including the Investment Adviser, may engage in activities in which its interests or the interests of its clients may conflict with or be adverse to the interests of the Funds. In addition, certain of such clients (including the Funds) utilize the services of BBH for which they will pay to BBH customary fees and expenses that will not be shared with the Funds.
The Investment Adviser has adopted and implemented policies and procedures that seek to manage conflicts of interest. Pursuant to such policies and procedures, the Investment Adviser monitors a variety of areas, including compliance with fund investment guidelines, the investment in only those securities that have been approved for purchase, and compliance with their respective Code of Ethics.
The Trust also manages these conflicts of interest. For example, the Trust has designated a chief compliance officer (“CCO”) and has adopted and implemented policies and procedures designed to manage the conflicts identified below and other conflicts that may arise in the course of the Funds’ operations in such a way as to safeguard the Funds from being negatively affected as a result of any such potential conflicts. From time to time, the Trustees receive reports from the Investment Adviser and the Trust’s CCO on areas of potential conflict.
Investors should carefully review the following, which describes potential and actual conflicts of interest that BBH, the Investment Adviser can face in the operation of their respective investment management services. This section is not, and is not intended to be, a complete enumeration or explanation of all of the potential conflicts of interest that may arise. The Investment Adviser and the Funds has adopted policies and procedures reasonably designed to appropriately prevent, limit or mitigate the conflicts of interest described below. Additional information about potential conflicts of interest regarding the Investment Adviser is set forth in the Investment Adviser’s Form ADV. A copy of Part 1 and Part 2A of the Investment Adviser’s Form ADV is available on the SEC’s website (www.adviserinfo.sec.gov). In addition, many of the activities that create these conflicts of interest are limited and/or prohibited by law, unless an exception is available.
Other Clients and Allocation of Investment Opportunities. BBH, the Investment Adviser manages funds and accounts of clients other than the Funds (“Other Clients”). In general, BBH, the Investment Adviser faces conflicts of interest when they render investment advisory services to different clients and, from time to time, provide dissimilar investment advice to different clients. Investment decisions will not necessarily be made in parallel among the Funds and Other Clients. Investments made by the Funds do not, and are not intended to, replicate the investments, or the investment methods and strategies, of Other Clients. Accordingly, such Other Clients may produce results that are materially different from those experienced by the Funds. Certain other conflicts of interest may arise in connection with a portfolio manager’s management of the Funds’ investments, on the one hand, and the investments of other funds or accounts for which the portfolio manager is responsible, on the other. For example, it is possible that the
F I N A N C I A L S T A T E M E N T S O C T O B E R 3 1, 2 0 2 3 | 43 |
BBH INCOME FUND |
CONFLICTS OF INTEREST (continued) October 31, 2023 (unaudited) |
various funds or accounts managed by the Investment Adviser could have different investment strategies that, at times, might conflict with one another to the possible detriment of the Funds. From time to time, the Investment Adviser sponsors and with other investment pools and accounts which engage in the same or similar businesses as the Funds using the same or similar investment strategies. To the extent that the same investment opportunities might be desirable for more than one account or fund, possible conflicts could arise in determining how to allocate them because the Investment Adviser may have an incentive to allocate investment opportunities to certain accounts or funds. However, BBH and the Investment Adviser have implemented policies and procedures designed to ensure that information relevant to investment decisions is disseminated promptly within its portfolio management teams and investment opportunities are allocated equitably among different clients. The policies and procedures require, among other things, objective allocation for limited investment opportunities, and documentation and review of justifications for any decisions to make investments only for select accounts or in a manner disproportionate to the size of the account. Nevertheless, access to investment opportunities may be allocated differently among accounts due to the particular characteristics of an account, such as size of the account, cash position, tax status, risk tolerance and investment restrictions or for other reasons.
Actual or potential conflicts of interest may also arise when a portfolio manager has management responsibilities to multiple accounts or funds, resulting in unequal commitment of time and attention to the portfolio management of the funds or accounts.
Affiliated Service Providers. Other potential conflicts might include conflicts between the Funds and its affiliated and unaffiliated service providers (e.g., conflicting duties of loyalty). In addition to providing investment management services through the SID, BBH provides administrative, custody, shareholder servicing and fund accounting services to the Funds. BBH may have conflicting duties of loyalty while servicing the Funds and/or opportunities to further its own interest to the detriment of the Funds. For example, in negotiating fee arrangements with affiliated service providers, BBH may have an incentive to agree to higher fees than it would in the case of unaffiliated providers. BBH acting in its capacity as the Funds’ administrator is the primary valuation agent of the Funds. BBH values securities and assets in the Funds according to the Funds’ valuation policies. Because the Investment Adviser’s advisory and administrative fees are calculated by reference to a Funds’ net assets, BBH and its affiliates may have an incentive to seek to overvalue certain assets.
Aggregation. Potential conflicts of interest also arise with the aggregation of trade orders. Purchases and sales of securities for the Funds may be aggregated with orders for other client accounts managed by the Investment Adviser. The Investment Adviser, however, are not required to aggregate orders if portfolio management decisions for different accounts are made separately, or if it is determined that aggregating is not practicable, or in cases involving client direction. Prevailing trading activity frequently may make impossible the receipt of the same price or execution on the entire volume of securities purchased or sold. When this occurs, the various prices may be averaged, and the Funds will be charged or credited with the average price. Thus, the effect of the aggregation may operate on some occasions to the disadvantage of the Funds. In addition, under certain circumstances, the Funds will not be charged the same commission or commission equivalent rates in connection with an aggregated order.
44 |
BBH INCOME FUND |
CONFLICTS OF INTEREST (continued) October 31, 2023 (unaudited) |
Cross Trades. Under certain circumstances, the Investment Adviser, on behalf of the Funds, may seek to buy from or sell securities to another fund or account advised by BBH, the Investment Adviser. Subject to applicable law and regulation, BBH, the Investment Adviser may (but is not required to) effect purchases and sales between BBH, the Investment Adviser clients (“cross trades”), including the Funds, if BBH or the Investment Adviser believes such transactions are appropriate based on each party’s investment objectives and guidelines. There may be potential conflicts of interest or regulatory issues relating to these transactions which could limit the Investment Adviser’s decision to engage in these transactions for the Funds. BBH and/or the Investment Adviser may have a potentially conflicting division of loyalties and responsibilities to the parties in such transactions.
Soft Dollars. The Investment Adviser may direct brokerage transactions and/or payment of a portion of client commissions (“soft dollars”) to specific brokers or dealers or other providers to pay for research or other appropriate services which provide, in the Investment Adviser’s view, appropriate assistance in the investment decision-making process (including with respect to futures, fixed price offerings and over-the-counter transactions). The use of a broker that provides research and securities transaction services may result in a higher commission than that offered by a broker who does not provide such services. The Investment Adviser will determine in good faith whether the amount of commission is reasonable in relation to the value of research and services provided and whether the services provide lawful and appropriate assistance in its investment decision-making responsibilities.
Research or other services obtained in this manner may be used in servicing any or all of the Funds and other accounts managed by the Investment Adviser, including in connection with accounts that do not pay commissions to the broker related to the research or other service arrangements. Such products and services may disproportionately benefit other client accounts relative to the Funds based on the amount of brokerage commissions paid by the Funds and such other accounts. To the extent that a Sub-adviser uses soft dollars, it will not have to pay for those products and services itself.
BBH may receive research that is bundled with the trade execution, clearing, and/or settlement services provided by a particular broker-dealer. For example, the research effectively will be paid by client commissions that also will be used to pay for the execution, clearing, and settlement services provided by the broker-dealer and will not be paid by the Investment Adviser.
Arrangements regarding compensation and delegation of responsibility may create conflicts relating to selection of brokers or dealers to execute Fund portfolio trades and/or specific uses of commissions from Fund portfolio trades, administration of investment advice and valuation of securities.
Investments in BBH Funds. From time to time BBH may invest a portion of the assets of its discretionary investment advisory clients in the Funds. That investment by BBH on behalf of its discretionary investment advisory clients in the Funds may be significant at times.
Increasing a Fund’s assets may enhance investment flexibility and diversification and may contribute to economies of scale that tend to reduce the Funds’ expense ratio. In selecting the Funds for its discretionary investment advisory clients, BBH may limit its selection to funds managed by BBH or the Investment
F I N A N C I A L S T A T E M E N T S O C T O B E R 3 1, 2 0 2 3 | 45 |
BBH INCOME FUND |
CONFLICTS OF INTEREST (continued) October 31, 2023 (unaudited) |
Adviser. BBH may not consider or canvass the universe of unaffiliated investment companies available, even though there may be unaffiliated investment companies that may be more appropriate or that have superior performance. BBH, the Investment Adviser and their affiliates providing services to the Funds benefit from additional fees when the Funds is included as an investment by a discretionary investment advisory client.
BBH reserves the right to redeem at any time some or all of the shares of the Funds acquired for its discretionary investment advisory clients’ accounts. A large redemption of shares of the Funds by BBH on behalf of its discretionary investment advisory clients could significantly reduce the asset size of the Funds, which might have an adverse effect on the Funds’ investment flexibility, portfolio diversification and expense ratio.
Valuation. When market quotations are not readily available or are believed by BBH to be unreliable, the Funds’ investments will be valued at fair value by BBH pursuant to procedures adopted by the Funds’ Board. When determining an asset’s “fair value,” BBH seeks to determine the price that a Fund might reasonably expect to receive from the current sale of that asset in an arm’s-length transaction. The price generally may not be determined based on what the Funds might reasonably expect to receive for selling an asset at a later time or if it holds the asset to maturity. While fair value determinations will be based upon all available factors that BBH deems relevant at the time of the determination and may be based on analytical values determined by BBH using proprietary or third-party valuation models, fair value represents only a good faith approximation of the value of a security. The fair value of one or more securities may not, in retrospect, be the price at which those assets could have been sold during the period in which the particular fair values were used in determining the Funds’ net asset value. As a result, the Funds’ sale or redemption of its shares at net asset value, at a time when a holding or holdings are valued by BBH (pursuant to Board-adopted procedures) at fair value, may have the effect of diluting or increasing the economic interest of existing shareholders.
Referral Arrangements. BBH may enter into advisory and/or referral arrangements with third parties. Such arrangements may include compensation paid by BBH to the third party. BBH may pay a solicitation fee for referrals and/or advisory or incentive fees. BBH may benefit from increased amounts of assets under management.
Personal Trading. BBH, including the Investment Adviser, and any of their respective partners, principals, directors, officers, employees, affiliates or agents, face conflicts of interest when transacting in securities for their own accounts because they could benefit by trading in the same securities as the Funds, which could have an adverse effect on the Funds. However, the Investment Adviser has implemented policies and procedures concerning personal trading by BBH Partners and employees. The policy and procedures are intended to prevent BBH Partners and employees from trading in the same securities as the Funds. However, BBH, including the Investment Adviser, has implemented policies and procedures concerning personal trading by BBH Partners and employees. The policies and procedures are intended to prevent BBH Partners and employees with access to Fund material non-public information from trading in the same securities as the Funds.
46 |
BBH INCOME FUND |
CONFLICTS OF INTEREST (continued) October 31, 2023 (unaudited) |
Gifts and Entertainment. From time to time, employees of BBH, including the Investment Adviser, and any of their respective partners, principals, directors, officers, employees, affiliates or agents, may receive gifts and/or entertainment from clients, intermediaries, or service providers to the Funds or BBH, including the Investment Adviser, which could have the appearance of affecting or may potentially affect the judgment of the employees, or the manner in which they conduct business. The Investment Adviser has implemented policies and procedures concerning gifts and entertainment to mitigate any impact on the judgment of BBH Partners and employees. BBH, including the Investment Adviser, has implemented policies and procedures concerning gifts and entertainment to mitigate any impact on the judgment of BBH Partners and employees.
F I N A N C I A L S T A T E M E N T S O C T O B E R 3 1, 2 0 2 3 | 47 |
BBH INCOME FUND |
ADDITIONAL FEDERAL TAX INFORMATION October 31, 2023 (unaudited) |
The qualified investment income (“QII”) percentage for the year ended October 31, 2023 was 81.70%. In January 2024, shareholders will receive Form 1099-DIV, which will include their share of qualified dividends distributed during the calendar year 2023. Shareholders are advised to check with their tax advisers for information on the treatment of these amounts on their individual income tax returns.
48 |
TRUSTEES AND OFFICERS OF BBH INCOME FUND |
(unaudited) |
Information pertaining to the Trustees and executive officers of the Trust as of October 31, 2023 is set forth below. The mailing address for each Trustee is c/o BBH Trust, 140 Broadway, New York, NY 10005.
|
|
|
|
| Other Public |
Independent Trustees | |||||
H. Whitney Wagner | Chairman of the Board and Trustee | Chairman Since 2014; Trustee Since 2007 and 2006 – 2007 with the Predecessor Trust | President, Clear Brook Advisors, a registered investment adviser. | 8 | None. |
Andrew S. Frazier | Trustee | Since 2010 | Retired. | 8 | None. |
Mark M. Collins | Trustee | Since 2011 | Partner of Brown Investment Advisory Incorporated, a registered investment adviser. | 8 | Chairman of Dillon Trust Company. |
John M. Tesoro | Trustee | Since 2014 | Retired. | 8 | Independent Trustee, Bridge Builder Trust (11 funds) and Edward Jones Money Market Fund; Director, Teton Advisers, Inc. (a registered investment adviser) (2014 – 2021). |
Joan A. Binstock | Trustee | Since 2019 | Partner, Chief Financial and Operations Officer, Lord Abbett & Co. LLC (1999 – 2018); Lovell Minnick Partners, Advisers Counsel (2018 – present). | 8 | Independent Director, Morgan Stanley Direct Lending Fund; KKR Real Estate Interval Fund. |
Karen A. Kochevar | Trustee | Since 2023 | Retired. | 8 | Director, CAVA Group, Inc. |
F I N A N C I A L S T A T E M E N T S O C T O B E R 3 1, 2 0 2 3 | 49 |
TRUSTEES AND OFFICERS OF BBH INCOME FUND |
(unaudited) |
|
|
|
|
| Other Public |
Interested Trustees | |||||
Susan C. Livingston+ | Trustee | Since 2011 | Partner (since 1998) and Senior Client Advocate (since 2010) for BBH&Co. | 8 | None. |
John A. Gehret+ | Trustee | Since 2011 | Limited Partner of BBH&Co. (2012 – present). | 8 | None. |
50 |
TRUSTEES AND OFFICERS OF BBH INCOME FUND |
(unaudited) |
|
| Term of |
|
Officers | |||
Jean-Pierre Paquin | President and Principal Executive Officer | Since 2016 | Partner of BBH&Co. since 2015; joined BBH&Co. in 1996. |
Daniel Greifenkamp | Vice President | Since 2016 | Principal of BBH&Co. |
Charles H. Schreiber | Treasurer and Principal Financial Officer | Since 2007 2006 – 2007 with the Predecessor Trust | Managing Director of BBH&Co. |
Paul F. Gallagher | Chief Compliance Officer (“CCO”) | Since 2015 | Managing Director of BBH&Co. |
Nicole English | Anti-Money Laundering Officer (“AMLO”) | Since 2022 | Vice President of BBH&Co. |
Brian J. Carroll | Secretary | Since 2021 | Vice President of BBH&Co. |
Crystal Cheung | Assistant Treasurer | Since 2018 | Assistant Vice President of BBH&Co. since 2016; joined BBH&Co. 2014. |
____________
# All officers of the Trust hold office for one year and until their respective successors are chosen and qualified (subject to the ability of the Trustees to remove any officer in accordance with the Trust’s By-laws). Mr. Wagner previously served on the Board of Trustees of the Predecessor Trust.
+ Ms. Livingston and Mr. Gehret are “interested persons” of the Trust as defined in the 1940 Act because of their positions as Partner and Limited Partner of BBH&Co., respectively.
^ The Fund Complex consists of the Trust, which has eight series, and each is counted as one “Portfolio” for purposes of this table.
F I N A N C I A L S T A T E M E N T S O C T O B E R 3 1, 2 0 2 3 | 51 |
BBH INCOME FUND |
OPERATION AND EFFECTIVENESS OF THE FUND’S LIQUIDITY RISK MANAGEMENT PROGRAM October 31, 2023 (unaudited) |
The Securities and Exchange Commission adopted Rule 22e-4 under the Investment Company Act of 1940, as amended (the “Liquidity Rule”), to promote effective liquidity risk management throughout the open-end investment company industry in order to reduce the risk that funds will be unable to meet their redemption obligations and mitigate dilution of the interests of fund shareholders.
The Board of Trustees (the “Board”) of BBH Trust has appointed three members of the Brown Brothers Harriman & Co. Mutual Fund Advisory Department, the Investment Adviser to the funds of BBH Trust (the “Funds”), as the Program Administrator for the Fund’s liquidity risk management program (the “Program”). The Board met on March 7, 2023 to review the Program for the Funds pursuant to the Liquidity Rule. The Program Administrator provided the Board with a report (the “Report”) that addressed the operations of the Program and assessed its adequacy and effectiveness for the period from February 1, 2022 through January 31, 2023 (the “Reporting Period”).
The Report noted that the Program complied with the key factors for consideration under the Liquidity Rule for assessing, managing and periodically reviewing a Fund’s liquidity risk, including the following points.
Liquidity classification. The Report described the Program’s liquidity classification methodology for categorizing the Funds’ investments into one of four liquidity buckets. The Fund classified each of its investments into one of four liquidity categories based on the number of days reasonably needed to sell and convert a reasonably anticipated sized trade of each investment into cash without significantly impacting the price of the investments. The Program Administrator relied on a third-party data provider to facilitate the classification of the Fund’s investments based on criteria in the Fund’s Program. During the Reporting Period, the Fund did not hold more than 15% of its net assets in illiquid investments.
Highly Liquid Investment Minimum. The Report noted that one aspect of the Liquidity Rule is a requirement that funds that are expected to have less than 50% of assets classified as other than “highly liquid” should establish a minimum percentage of highly liquid assets that the fund is expected to hold on an on-going basis. The Program Administrator monitors the percentages of assets in each category on an ongoing basis and, given that the Fund did not approach the 50% threshold, has made the determination that it is not necessary to assign a Highly Liquid Investment Minimum to the Fund as provided for in the Liquidity Rule.
The Fund’s investment strategy and liquidity of portfolio investments during normal and reasonably foreseeable stressed market conditions. During the Reporting Period, the Program Administrator reviewed whether the Fund’s investment strategy is appropriate for an open-end fund structure with a focus on funds with more significant and consistent holdings of less liquid and illiquid assets and factored a Fund’s concentration in an issuer into the liquidity classification methodology by taking issuer position sizes into account.
Short-term and long-term cash flow projections during normal and reasonably foreseeable stressed market conditions. During the Reporting Period, the Program Administrator reviewed historical redemption activity and used this information as a component to establish the Fund’s reasonably anticipated trading size.
52 |
BBH INCOME FUND |
OPERATION AND EFFECTIVENESS OF THE FUND’S LIQUIDITY RISK MANAGEMENT PROGRAM (continued) October 31, 2023 (unaudited) |
The Program Administrator also took into consideration other factors such as shareholder ownership concentration, applicable distribution channels and the degree of certainty associated with the Fund’s short-term and long-term cash flow projections.
Holdings of cash and cash equivalents. The Program Administrator considered the degree to which the Fund held cash and cash equivalents as a component of each Fund’s ability to meet redemption requests.
There were no material changes to the Program during the Reporting Period. The Program Administrator has informed the Board that it believes that the Fund’s Program is adequately designed, has been implemented as intended, and has operated effectively since its implementation. No material exceptions have been noted since the implementation of the Program, and there were no liquidity events that impacted the Fund or its ability to meet redemption requests on a timely basis during the Reporting Period.
F I N A N C I A L S T A T E M E N T S O C T O B E R 3 1, 2 0 2 3 | 53 |
Administrator Distributor Shareholder Servicing Agent | Investment Adviser | |
To obtain information or make shareholder inquiries: | ||
By telephone: | Call 1-800-575-1265 | |
This report is submitted for the general information of shareholders and is not authorized for distribution to prospective investors unless preceded or accompanied by an effective prospectus. Nothing herein contained is to be considered an offer of sale or a solicitation of an offer to buy shares of the Fund. For more complete information, visit www.bbhfunds.com for a prospectus. You should consider the Fund’s investment objectives, risks, charges and expenses carefully before you invest. Information about these and other important subjects is in the Fund’s prospectus, which you should read carefully before investing. Holdings and allocations are subject to change. Fund holdings should not be relied on in making investment decisions and should not be construed as research or investment advice regarding particular securities. Current and future holdings are subject to risk. The Fund files a complete schedule of portfolio holdings with the Securities and Exchange Commission (SEC) for the first and third quarters of each fiscal year as an exhibit to its reports on Form N-PORT. The Fund’s Forms N-PORT are available electronically on the SEC’s website (sec.gov). For a complete list of a fund’s portfolio holdings, view the most recent holdings listing, semi-annual report, or annual report on the Fund’s website at http://www.bbhfunds.com. A summary of the Fund’s Proxy Voting Policy that the Fund uses to determine how to vote proxies, if any, relating to securities held in the Fund’s portfolio, as well as a record of how the Fund voted any such proxies during the most recent 12-month period ended June 30, is available, without charge, upon request by calling the toll-free number listed above. This information is also available on the SEC’s website at www.sec.gov. NOT FDIC INSURED NO BANK GUARANTEE MAY LOSE VALUE |
Annual Report
OCTOBER 31, 2023
Bbh Select Series — Large Cap Fund
BBH SELECT SERIES – LARGE CAP FUND |
MANAGEMENT’S DISCUSSION OF FUND PERFORMANCE October 31, 2023 |
The investment objective of BBH Select Series-Large Cap Fund (the “Fund”) is to provide investors with long-term growth of capital. The Fund seeks to provide attractive compounded returns over full market cycles and outperform in down markets. We employ a bottom-up, fundamental process that seeks to invest in competitively advantaged, well-managed, cash generative businesses that provide essential products and services. With reducing the likelihood of permanent loss of capital on any single investment being one of our key goals, we work to identify risks outside of company management’s control so we can consider the range of potential outcomes for each business. Our portfolio construction decisions are driven by an approach that considers the quality of the businesses, its long-term growth prospects, and valuation relative to our appraisals of intrinsic value1. We invest with a long-term ownership perspective and an expectation that our returns will be driven by the underlying earnings power of the businesses, its effectiveness at deploying capital, and its operational and financial resilience during periods of economic stress. We do not prioritize benchmark sensitivity in managing the Fund – neither in terms of sector exposures nor individual position weights. As a result, we expect our active share2 will remain relatively high, and performance of the Fund may differ meaningfully from major indexes at various points within a market cycle as we maintain our independent perspective and focus on long-term compounding.
For the fiscal year ending October 31st, 2023, the Fund gained 14.16% net of fees. During the same period, the benchmark S&P 500 Index (“S&P 500”) gained 10.14%. Both the Fund and the benchmark Index benefited from moderating inflation, expectations of more benign monetary policy and resilient corporate profits. Outperformance of the Fund relative to the Index was primarily due to strong security selection in the Industrials, Consumer Discretionary and Materials sectors.
Since its inception on September 9th, 2019, the Fund returned 6.45% net of fees on an annualized basis, compared to 10.41% for the S&P 500. While security selection has remained positive, the Fund’s underperformance for the period primarily resulted from underexposure to a small group of Technology companies that drove a substantial share of the Index’s returns. Nevertheless, our portfolio companies have executed well and have produced solid growth and fundamental economic performance while maintaining appropriately conservative capital structures. These achievements are evident at the aggregate portfolio level, where we have observed attractive growth in revenue, cash flow and earnings, superior profit margins, returns on capital, and healthy balance sheets.
The Fund’s top contributors during fiscal 2023 were primarily in the Information Technology and Communication Services sectors. These holdings included Microsoft (MSFT), Alphabet (GOOG) and KLA Corp. (KLAC). All three holdings enjoyed strong secular growth, relative immunity to inflationary factors, and their exceptionally strong balance sheets positioned them well for the higher interest rate environment. The Fund’s largest detractors during the period were Signature Bank (SBNY), Dollar General (DG) and Thermo Fisher Scientific (TMO). Declines in these holdings were idiosyncratic; Signature Bank was seized by regulators following a run on deposits precipitated by a regional banking crisis, Dollar General experienced supply chain challenges and weakness among its core customer base, and Thermo Fisher experienced an unexpected softening of demand for its life sciences tools and services.
2 |
BBH SELECT SERIES – LARGE CAP FUND |
MANAGEMENT’S DISCUSSION OF FUND PERFORMANCE (continued) October 31, 2023 |
During fiscal 2023, the Fund initiated a new investment in UnitedHealth (UNH). As the largest and most diversified US managed care organization, healthcare IT company, physician group and the 3rd largest US pharmacy benefit manager (PBM), we believe United’s scale and diversification constitute sustainable competitive advantages that will continue to drive industry-leading growth and profitability. The Fund exited three positions during the period, which included Signature Bank (SBNY), Celanese (CE), and Dollar General (DG). Signature was seized by regulators following a run on its deposits in early March. Celanese was sold due to its high financial leverage and risks associated with two key end markets – China and the US automotive industry. And finally, Dollar General was sold due to concerns over weakness in key customer categories, as well operational and governance challenges.
As of October 31st, 2023, the Fund held positions in 26 companies, with 49.4% of the assets held in the 10 largest holdings and 6.3% in cash. Turnover for the 12-month period was 8.87%. The Fund ended the fiscal year trading at roughly 87% of our underlying intrinsic value estimates on a weighted average basis.
____________
1 BBH’s estimate of the present value of the cash that a business can generate and distribute to shareholders over its remaining life.
2 Active Share is defined as the percentage of a portfolio’s holding that differs from its benchmark index.
F I N A N C I A L S T A T E M E N T S O C T O B E R 3 1, 2 0 2 3 | 3 |
BBH SELECT SERIES – LARGE CAP FUND |
MANAGEMENT’S DISCUSSION OF FUND PERFORMANCE (continued) October 31, 2023 |
Growth of $10,000 Invested in BBH Select Series - Large Cap Fund
The graph below illustrates the hypothetical investment of $10,0001 in the Class I shares of the Fund since inception (September 9, 2019) to October 31, 2023 as compared to the S&P 500.
The annualized gross expense ratios as shown in the February 28, 2023 prospectus for Class I and Retail Class shares were 0.71% and 3.39%, respectively.
Performance data quoted represents past performance which is no guarantee of future results. Investment return and principal value will fluctuate, so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Fund performance changes over time and current performance may be lower or higher than what is stated. Fund shares redeemed within 30 days of purchase are subject to a redemption fee of 2.00%. Returns do not reflect the deductions of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. For performance current to the most recent month-end please call 1-800-575-1265.
Hypothetical performance results are calculated on a total return basis and include all portfolio income, unrealized and realized capital gains, losses and reinvestment of dividends and other earnings. No one shareholder has actually achieved these results and no representation is being made that any actual shareholder achieved, or is likely to achieve, similar results to those shown. Hypothetical performance does not represent actual trading and may not reflect the impact of material economic and market factors. Undue reliance should not be placed on hypothetical performance results in making an investment decision.
____________
1 The Fund’s performance assumes the reinvestment of all dividends and distributions. The S&P 500 has been adjusted to reflect reinvestment of dividends on securities. The S&P 500 is not adjusted to reflect sales charges, expenses or other fees that the Securities and Exchange Commission requires to be reflected in the Fund’s performance. The S&P 500 is an unmanaged weighted index of 500 stocks providing a broad indicator of stock price movements. The composition of the index is materially different than the Fund’s holdings. The index is unmanaged. Investments cannot be made in an index.
4 |
BBH SELECT SERIES – LARGE CAP FUND |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
|
To the shareholders of BBH Select Series – Large Cap Fund and the Board of Trustees of BBH Trust:
Opinion on the Financial Statements and Financial Highlights
We have audited the accompanying statement of assets and liabilities, including the portfolio of investments, of BBH Select Series – Large Cap Fund (the “Fund”), one of the funds constituting BBH Trust, as of October 31, 2023, the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, the financial highlights for each of the four years in the period then ended and for the period from September 9, 2019 (commencement of operations) through October 31, 2019, and the related notes. In our opinion, the financial statements and financial highlights present fairly, in all material respects, the financial position of the Fund as of October 31, 2023, and the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the four years in the period then ended and for the period from September 9, 2019 (commencement of operations) through October 31, 2019 in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements and financial highlights are the responsibility of the Fund’s management. Our responsibility is to express an opinion on the Fund’s financial statements and financial highlights based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement, whether due to error or fraud. The Fund is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Fund’s internal control over financial reporting. Accordingly, we express no such opinion.
F I N A N C I A L S T A T E M E N T S O C T O B E R 3 1, 2 0 2 3 | 5 |
BBH SELECT SERIES – LARGE CAP FUND |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM (continued)
|
Our audits included performing procedures to assess the risks of material misstatement of the financial statements and financial highlights, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements and financial highlights. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements and financial highlights. Our procedures included confirmation of securities owned as of October 31, 2023, by correspondence with the custodian and brokers; when replies were not received from brokers, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinion.
/s/ DELOITTE & TOUCHE LLP
Boston, Massachusetts
December 20, 2023
We have served as the auditor of one or more Brown Brothers Harriman investment companies since 1991.
6 |
BBH SELECT SERIES – LARGE CAP FUND |
PORTFOLIO ALLOCATION October 31, 2023 |
SECTOR DIVERSIFICATION
U.S. $ Value | Percent of | ||||
Common Stock: |
| ||||
Basic Materials | $ | 20,838,038 | 5.3% | ||
Communications |
| 47,381,793 | 12.2 | ||
Consumer Cyclical |
| 33,560,692 | 8.6 | ||
Consumer Non-Cyclical |
| 80,890,860 | 20.7 | ||
Financials |
| 78,846,731 | 20.2 | ||
Industrials |
| 35,031,201 | 9.0 | ||
Technology |
| 71,968,784 | 18.5 | ||
Cash and Other Assets in Excess of Liabilities |
| 21,584,002 | 5.5 | ||
NET ASSETS | $ | 390,102,101 | 100.0% |
All data as of October 31, 2023. 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.
F I N A N C I A L S T A T E M E N T S O C T O B E R 3 1, 2 0 2 3 | 7 |
BBH SELECT SERIES – LARGE CAP FUND |
PORTFOLIO OF INVESTMENTS October 31, 2023 |
All investments in the United States, except as noted.
Shares | Value | ||||||
COMMON STOCK (94.5%) |
| ||||||
BASIC MATERIALS (5.3%) |
| ||||||
54,527 | Linde, Plc. (Ireland) | $ | 20,838,038 | ||||
Total Basic Materials |
| 20,838,038 | |||||
| |||||||
COMMUNICATIONS (12.2%) |
| ||||||
191,389 | Alphabet, Inc. (Class C)1 |
| 23,981,042 | ||||
85,028 | Amazon.com, Inc.1 |
| 11,316,377 | ||||
4,332 | Booking Holdings, Inc.1 |
| 12,084,374 | ||||
Total Communications |
| 47,381,793 | |||||
| |||||||
CONSUMER CYCLICAL (8.6%) |
| ||||||
235,036 | Copart, Inc.1 |
| 10,228,767 | ||||
22,835 | Costco Wholesale Corp. |
| 12,614,967 | ||||
104,281 | NIKE, Inc. (Class B) |
| 10,716,958 | ||||
Total Consumer Cyclical |
| 33,560,692 | |||||
| |||||||
CONSUMER NON-CYCLICAL (20.7%) |
| ||||||
115,731 | Abbott Laboratories |
| 10,942,366 | ||||
199,086 | Alcon, Inc. (Switzerland) |
| 14,198,814 | ||||
46,508 | Diageo, Plc. ADR (United Kingdom) |
| 7,138,978 | ||||
55,213 | Nestle S.A. ADR (Switzerland) |
| 5,949,753 | ||||
28,982 | S&P Global, Inc. |
| 10,123,702 | ||||
26,669 | Thermo Fisher Scientific, Inc. |
| 11,861,571 | ||||
14,594 | UnitedHealth Group, Inc. |
| 7,815,963 | ||||
81,909 | Zoetis, Inc. (Class A) |
| 12,859,713 | ||||
Total Consumer Non-Cyclical |
| 80,890,860 | |||||
| |||||||
FINANCIALS (20.2%) |
| ||||||
70,842 | Arthur J Gallagher & Co. |
| 16,682,583 | ||||
50 | Berkshire Hathaway, Inc. (Class A)1 |
| 25,891,250 | ||||
52,263 | Mastercard, Inc. (Class A) |
| 19,669,180 | ||||
105,027 | Progressive Corp. |
| 16,603,718 | ||||
Total Financials |
| 78,846,731 | |||||
| |||||||
INDUSTRIALS (9.0%) |
| ||||||
141,769 | AO Smith Corp. |
| 9,889,805 | ||||
130,826 | Graco, Inc. |
| 9,726,913 | ||||
93,802 | Waste Management, Inc. |
| 15,414,483 | ||||
Total Industrials |
| 35,031,201 | |||||
|
The accompanying notes are an integral part of these financial statements.
8 |
BBH SELECT SERIES – LARGE CAP FUND |
PORTFOLIO OF INVESTMENTS (continued) October 31, 2023 |
All investments in the United States, except as noted.
Shares | Value | |||||||
COMMON STOCK (continued) |
|
| ||||||
TECHNOLOGY (18.5%) |
|
| ||||||
19,165 | Adobe, Inc.1 |
| $ | 10,196,930 | ||||
33,782 | KLA Corp. |
|
| 15,867,405 | ||||
63,609 | Microsoft Corp. |
|
| 21,506,839 | ||||
150,359 | Oracle Corp. |
|
| 15,547,121 | ||||
62,323 | Texas Instruments, Inc. |
|
| 8,850,489 | ||||
Total Technology |
|
| 71,968,784 | |||||
Total Common Stock |
|
| ||||||
(Cost $260,371,373) |
|
| 368,518,099 | |||||
|
| |||||||
TOTAL INVESTMENTS (Cost $260,371,373)2 | 94.5 | % | $ | 368,518,099 | ||||
CASH AND OTHER ASSETS IN EXCESS OF LIABILITIES | 5.5 | % |
| 21,584,002 | ||||
NET ASSETS | 100.00 | % | $ | 390,102,101 |
____________
1 Non-income producing security.
2 The aggregate cost for federal income tax purposes is $260,371,831, the aggregate gross unrealized appreciation is $112,815,764 and the aggregate gross unrealized depreciation is $4,669,496, resulting in net unrealized appreciation of $108,146,268.
Abbreviation:
ADR − American Depositary Receipt.
The accompanying notes are an integral part of these financial statements.
F I N A N C I A L S T A T E M E N T S O C T O B E R 3 1, 2 0 2 3 | 9 |
BBH SELECT SERIES – LARGE CAP FUND |
PORTFOLIO OF INVESTMENTS (continued) October 31, 2023 |
Fair Value Measurements
The Fund is required to disclose information regarding the fair value measurements of the Fund’s assets and liabilities. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The disclosure requirement established a three-tier hierarchy to maximize the use of observable market data and minimize the use of unobservable inputs and to establish classification of fair value measurements for disclosure purposes. Inputs refer broadly to the assumptions that market participants would use in pricing the asset or liability, including for example, the risk inherent in a particular valuation technique used to measure fair value including such a pricing model and/or the risk inherent in the inputs to the valuation technique. Inputs may be observable or unobservable. Observable inputs are inputs that reflect the assumptions market participants would use in pricing the asset or liability developed based on market data obtained from sources independent of the reporting entity. Unobservable inputs are inputs that reflect the Fund’s own considerations about the assumptions market participants would use in pricing the asset or liability developed based on the best information available in the circumstances.
Authoritative guidance establishes three levels of the fair value hierarchy as follows:
— Level 1 – unadjusted quoted prices in active markets for identical assets and liabilities.
— Level 2 – significant other observable inputs (including quoted prices for similar assets and liabilities, interest rates, prepayment speeds, credit risk, etc.).
— Level 3 – significant unobservable inputs (including the Fund’s own assumptions in determining the fair value of assets and liabilities).
Inputs are used in applying the various valuation techniques and broadly refer to the assumptions that market participants use to make valuation decisions, including assumptions about risk. Inputs may include price information, specific and broad credit data, liquidity statistics, and other factors. A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. However, the determination of what constitutes “observable” requires judgment by the investment adviser. The investment adviser considers observable data to be that market data which is readily available, regularly distributed or updated, reliable and verifiable, not proprietary, and provided by independent sources that are actively involved in the relevant market. The categorization of a financial instrument within the hierarchy is based upon the pricing transparency of the instrument and does not necessarily correspond to the investment adviser’s perceived risk of that instrument.
The accompanying notes are an integral part of these financial statements.
10 |
BBH SELECT SERIES – LARGE CAP FUND |
PORTFOLIO OF INVESTMENTS (continued) October 31, 2023 |
Financial assets within Level 1 are based on quoted market prices in active markets. The Fund does not adjust the quoted price for these instruments.
Financial instruments that trade in markets that are not considered to be active but are valued based on quoted market prices, dealer quotations or alternative pricing sources supported by observable inputs are classified within Level 2. These include investment-grade corporate bonds, U.S. Treasury notes and bonds, and certain non-U.S. sovereign obligations, listed equities and over-the-counter derivatives and foreign equity securities whose values could be impacted by events occurring before the Fund’s pricing time, but after the close of the securities’ primary markets and are, therefore, fair valued according to procedures adopted by the Board of Trustees. As Level 2 financial assets include positions that are not traded in active markets and/or are subject to transfer restrictions, valuations may be adjusted to reflect illiquidity and/or non-transferability, which are generally based on available market information.
Financial assets classified within Level 3 have significant unobservable inputs, as they trade infrequently. Level 3 financial assets include private equity and certain corporate debt securities.
Because of the inherent uncertainties of valuation, the values reflected in the financial statements may materially differ from the value received upon the actual sale of those investments.
The following table summarizes the valuation of the Fund’s investments by the above fair value hierarchy levels as of October 31, 2023.
Investments, at value | Unadjusted | Significant | Significant | Balance as of | ||||||||
Common Stock: |
|
|
|
| ||||||||
Basic Materials | $ | 20,838,038 | $ | — | $ | — | $ | 20,838,038 | ||||
Communications |
| 47,381,793 |
| — |
| — |
| 47,381,793 | ||||
Consumer Cyclical |
| 33,560,692 |
| — |
| — |
| 33,560,692 | ||||
Consumer Non-Cyclical |
| 80,890,860 |
| — |
| — |
| 80,890,860 | ||||
Financials |
| 78,846,731 |
| — |
| — |
| 78,846,731 | ||||
Industrials |
| 35,031,201 |
| — |
| — |
| 35,031,201 | ||||
Technology |
| 71,968,784 |
| — |
| — |
| 71,968,784 | ||||
Total Investments, at value | $ | 368,518,099 | $ | — | $ | — | $ | 368,518,099 |
The accompanying notes are an integral part of these financial statements.
F I N A N C I A L S T A T E M E N T S O C T O B E R 3 1, 2 0 2 3 | 11 |
BBH SELECT SERIES – LARGE CAP FUND |
STATEMENT OF ASSETS AND LIABILITIES October 31, 2023 |
ASSETS: |
| ||||||
Investments in securities, at value (Cost $260,371,373) | $ | 368,518,099 | |||||
Cash |
| 21,273,191 | |||||
Receivables for: |
| ||||||
Dividends |
| 383,779 | |||||
Shares sold |
| 293,512 | |||||
Interest from Custodian |
| 84,730 | |||||
Total Assets |
| 390,553,311 | |||||
LIABILITIES: |
| ||||||
Payables for: |
| ||||||
Net investment advisory and administrative fees |
| 207,623 | |||||
Shares redeemed |
| 164,774 | |||||
Professional fees |
| 60,755 | |||||
Custody and fund accounting fees |
| 7,322 | |||||
Transfer agent fees |
| 4,042 | |||||
Board of Trustees’ fees |
| 1,350 | |||||
Distribution fees |
| 182 | |||||
Accrued expenses and other liabilities |
| 5,162 | |||||
Total Liabilities |
| 451,210 | |||||
NET ASSETS | $ | 390,102,101 | |||||
Net Assets Consist of: |
| ||||||
Paid-in capital | $ | 283,443,674 | |||||
Retained earnings |
| 106,658,427 | |||||
Net Assets | $ | 390,102,101 | |||||
NET ASSET VALUE AND OFFERING PRICE PER SHARE |
| ||||||
CLASS I SHARES |
| ||||||
($389,228,131 ÷ 31,092,743 shares outstanding) |
| $12.52 | |||||
RETAIL CLASS SHARES |
| ||||||
($873,970 ÷ 70,652 shares outstanding) |
| $12.37 |
The accompanying notes are an integral part of these financial statements.
12 |
BBH SELECT SERIES – LARGE CAP FUND |
STATEMENT OF OPERATIONS For the year ended October 31, 2023 |
NET INVESTMENT INCOME: |
|
| ||
Income: |
|
| ||
Dividends (net of foreign withholding taxes of $37,053) | $ | 3,409,419 |
| |
Interest income from Custodian |
| 627,755 |
| |
Total Income |
| 4,037,174 |
| |
Expenses: |
|
| ||
Investment advisory and administrative fees |
| 2,567,296 |
| |
Board of Trustees’ fees |
| 74,184 |
| |
Professional fees |
| 69,897 |
| |
Transfer agent fees |
| 46,776 |
| |
Custody and fund accounting fees |
| 29,130 |
| |
Distribution fees |
| 2,200 |
| |
Miscellaneous expenses |
| 74,880 |
| |
Total Expenses |
| 2,864,363 |
| |
Investment advisory and administrative fee waiver |
| (33,607 | ) | |
Net Expenses |
| 2,830,756 |
| |
Net Investment Income |
| 1,206,418 |
| |
NET REALIZED AND UNREALIZED GAIN: |
|
| ||
Net realized loss on investments in securities |
| (2,691,557 | ) | |
Net change in unrealized appreciation/(depreciation) on investments in securities |
| 54,377,097 |
| |
Net Realized and Unrealized Gain |
| 51,685,540 |
| |
Net Increase in Net Assets Resulting from Operations | $ | 52,891,958 |
|
The accompanying notes are an integral part of these financial statements.
F I N A N C I A L S T A T E M E N T S O C T O B E R 3 1, 2 0 2 3 | 13 |
BBH SELECT SERIES – LARGE CAP FUND |
STATEMENTS OF CHANGES IN NET ASSETS
|
For the years ended | ||||||||
2023 | 2022 | |||||||
INCREASE/(DECREASE) IN NET ASSETS FROM: |
|
|
|
| ||||
Operations: |
|
|
|
| ||||
Net investment income | $ | 1,206,418 |
| $ | 833,410 |
| ||
Net realized gain/(loss) on investments in securities |
| (2,691,557 | ) |
| 6,011,951 |
| ||
Net change in unrealized appreciation/(depreciation) on investments in securities |
| 54,377,097 |
|
| (91,844,873 | ) | ||
Net increase/(decrease) in net assets resulting from operations |
| 52,891,958 |
|
| (84,999,512 | ) | ||
|
|
|
| |||||
Dividends and distributions declared: |
|
|
|
| ||||
Class I |
| (5,421,653 | ) |
| (15,461,745 | ) | ||
Retail Class |
| (10,209 | ) |
| (57,689 | ) | ||
Total dividends and distributions declared |
| (5,431,862 | ) |
| (15,519,434 | ) | ||
|
|
|
| |||||
Share transactions: |
|
|
|
| ||||
Proceeds from sales of shares |
| 32,816,223 |
|
| 69,625,181 |
| ||
Net asset value of shares issued to shareholders for reinvestment of dividends and distributions |
| 778,348 |
|
| 2,698,512 |
| ||
Proceeds from short-term redemption fees |
| 655 |
|
| 2 |
| ||
Cost of shares redeemed |
| (62,786,493 | ) |
| (68,824,127 | ) | ||
Net increase/(decrease) in net assets resulting from share transactions |
| (29,191,267 | ) |
| 3,499,568 |
| ||
Total increase/(decrease) in net assets |
| 18,268,829 |
|
| (97,019,378 | ) | ||
|
|
|
| |||||
NET ASSETS: |
|
|
|
| ||||
Beginning of year |
| 371,833,272 |
|
| 468,852,650 |
| ||
End of year | $ | 390,102,101 |
| $ | 371,833,272 |
|
The accompanying notes are an integral part of these financial statements.
14 |
BBH SELECT SERIES – LARGE CAP FUND |
FINANCIAL HIGHLIGHTS Selected per share data and ratios for a Class I share outstanding throughout each year/period. |
| For the period | ||||||||||||||||||||||||||
2023 | 2022 | 2021 | 2020 | ||||||||||||||||||||||||
Net asset value, beginning of year/period |
| $ | 11.08 |
|
|
| $ | 14.12 |
|
|
| $ | 10.30 |
|
|
| $ | 10.12 |
|
|
| $ | 10.00 |
|
| ||
Income from investment operations: |
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Net investment income1 |
| 0.04 |
|
| 0.03 |
|
| 0.04 |
|
| 0.03 |
|
| 0.01 |
| ||||||||||||
Net realized and unrealized gain/(loss) |
| 1.56 |
|
| (2.60 | ) |
| 3.82 |
|
| 0.15 |
|
| 0.11 |
| ||||||||||||
Total income/(loss) from investment operations |
| 1.60 |
|
| (2.57 | ) |
| 3.86 |
|
| 0.18 |
|
| 0.12 |
| ||||||||||||
Dividends and distributions to shareholders: |
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
From net investment income |
| (0.02 | ) |
| (0.04 | ) |
| (0.04 | ) |
| (0.00 | )2 |
| — |
| ||||||||||||
From net realized gains |
| (0.14 | ) |
| (0.43 | ) |
| — |
|
| — |
|
| — |
| ||||||||||||
Total dividends and distributions to shareholders |
| (0.16 | ) |
| (0.47 | ) |
| (0.04 | ) |
| (0.00 | )2 |
| — |
| ||||||||||||
Short-term redemption fees1 |
| 0.002 |
|
| — |
|
| 0.002 |
|
| 0.002 |
|
| — |
| ||||||||||||
Net asset value, end of year/period | $ | 12.52 |
| $ | 11.08 |
| $ | 14.12 |
| $ | 10.30 |
| $ | 10.12 |
| ||||||||||||
Total return3 |
| 14.63 | % |
| (18.93 | )% |
| 37.56 | % |
| 1.82 | % |
| 1.20 | %4 | ||||||||||||
Ratios/Supplemental data: |
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Net assets, end of year/period (in millions) | $ | 389 |
| $ | 371 |
| $ | 467 |
| $ | 387 |
| $ | 397 |
| ||||||||||||
Ratio of expenses to average net assets before reductions |
| 0.72 | % |
| 0.71 | % |
| 0.70 | % |
| 0.74 | % |
| 0.75 | %5 | ||||||||||||
Fee waiver6 |
| — | % |
| — | % |
| — | % |
| — | % |
| (0.01 | )%5 | ||||||||||||
Ratio of expenses to average net assets after reductions |
| 0.72 | % |
| 0.71 | % |
| 0.70 | % |
| 0.74 | % |
| 0.74 | %5 | ||||||||||||
Ratio of net investment income to average net assets |
| 0.31 | % |
| 0.20 | % |
| 0.29 | % |
| 0.34 | % |
| 0.52 | %5 | ||||||||||||
Portfolio turnover rate |
| 9 | % |
| 26 | % |
| 18 | % |
| 38 | % |
| 0 | %4 |
____________
1 Calculated using average shares outstanding for the year/period.
2 Less than $0.01.
3 Assumes the reinvestment of distributions.
4 Not annualized.
5 Annualized with the exception of audit fees, legal fees and registration fees.
6 The ratio of expenses to average net assets for the years ended October 31, 2023, 2022, 2021, 2020 and the period ended October 31, 2019 reflect fees reduced as result of a contractual operating expense limitation of the share class to 0.80%. The Agreement is effective through March 1, 2024 and may only be terminated during its term with approval of the Fund’s Board of Trustees. For the years ended October 31, 2023, 2022, 2021, 2020 and the period from September 9, 2019 to October 31, 2019 the waived fees were $0, $0, $0, $0 and $27,976, respectively.
The accompanying notes are an integral part of these financial statements.
F I N A N C I A L S T A T E M E N T S O C T O B E R 3 1, 2 0 2 3 | 15 |
BBH SELECT SERIES – LARGE CAP FUND |
FINANCIAL HIGHLIGHTS (continued) Selected per share data and ratios for a Retail Class share outstanding throughout each year/period. |
| For the period | ||||||||||||||||||||||||||
2023 | 2022 | 2021 | 2020 | ||||||||||||||||||||||||
Net asset value, beginning of year/period |
| $ | 10.97 |
|
|
| $ | 13.99 |
|
|
| $ | 10.24 |
|
|
| $ | 10.09 |
|
|
| $ | 10.00 |
|
| ||
Income from investment operations: |
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Net investment income/(loss)1 |
| (0.00)2 |
|
| (0.02 | ) |
| (0.01) |
|
| 0.002 |
|
| 0.01 |
| ||||||||||||
Net realized and unrealized gain/(loss) |
| 1.54 |
|
| (2.57 | ) |
| 3.80 |
|
| 0.15 |
|
| 0.08 |
| ||||||||||||
Total income/(loss) from investment operations |
| 1.54 |
|
| (2.59 | ) |
| 3.79 |
|
| 0.15 |
|
| 0.09 |
| ||||||||||||
Dividends and distributions to shareholders: |
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
From net investment income |
| — |
|
| — |
|
| (0.04 | ) |
| — |
|
| — |
| ||||||||||||
From net realized gains |
| (0.14 | ) |
| (0.43 | ) |
| — |
|
| — |
|
| — |
| ||||||||||||
Total dividends and distributions to shareholders |
| (0.14 | ) |
| (0.43 | ) |
| (0.04 | ) |
| — |
|
| — |
| ||||||||||||
Short-term redemption fees1 |
| — |
|
| 0.002 |
|
| — |
|
| — |
|
| 0.002 |
| ||||||||||||
Net asset value, end of year/period | $ | 12.37 |
| $ | 10.97 |
| $ | 13.99 |
| $ | 10.24 |
| $ | 10.09 |
| ||||||||||||
Total return3 |
| 14.16 | % |
| (19.17 | )% |
| 37.10 | % |
| 1.49 | % |
| 0.90 | %4 | ||||||||||||
Ratios/Supplemental data: |
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Net assets, end of year/period (in millions) | $ | 1 |
| $ | 1 |
| $ | 2 |
| $ | 2 |
| $ | 2 |
| ||||||||||||
Ratio of expenses to average net assets before reductions |
| 4.87 | % |
| 3.39 | % |
| 2.68 | % |
| 3.48 | % |
| 5.79 | %5 | ||||||||||||
Fee waiver6 |
| (3.82 | )% |
| (2.34 | )% |
| (1.63 | )% |
| (2.43 | )% |
| (4.74 | )%5 | ||||||||||||
Ratio of expenses to average net assets after reductions |
| 1.05 | % |
| 1.05 | % |
| 1.05 | % |
| 1.05 | % |
| 1.05 | %5 | ||||||||||||
Ratio of net investment income/(loss) to average net assets |
| (0.03 | )% |
| (0.14 | )% |
| (0.06 | )% |
| 0.03 | % |
| 0.46 | %5 | ||||||||||||
Portfolio turnover rate |
| 9 | % |
| 26 | % |
| 18 | % |
| 38 | % |
| 0 | %4 |
____________
1 Calculated using average shares outstanding for the year/period.
2 Less than $0.01.
3 Assumes the reinvestment of distributions.
4 Not annualized.
5 Annualized with the exception of audit fees, legal fees and registration fees.
6 The ratio of expenses to average net assets for the years ended October 31, 2023, 2022, 2021, 2020 and the period ended October 31, 2019 reflect fees reduced as result of a contractual operating expense limitation of the share class of 1.05%. The Agreement is effective through March 1, 2024 and may only be terminated during its term with approval of the Fund’s Board of Trustees. For the years ended October 31, 2023, 2022, 2021, 2020 and the period from September 9, 2019 to October 31, 2019 the waived fees were $33,607, $31,413, $27,841, $47,750 and $8,357, respectively.
The accompanying notes are an integral part of these financial statements.
16 |
BBH SELECT SERIES – LARGE CAP FUND |
NOTES TO FINANCIAL STATEMENTS October 31, 2023 |
1. Organization. The Fund is a separate, non-diversified series of BBH Trust (the “Trust”), which is registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as an open-end management investment company. The Trust was originally organized under the laws of the State of Maryland on July 16, 1990 as BBH Fund, Inc. and re-organized as a Delaware statutory trust on June 12, 2007. As of October 31, 2023, there were eight series of the Trust. The Fund commenced operations on September 9, 2019 and offers two share classes, Class I and Retail Class. Neither Class I shares nor Retail Class shares automatically convert to any other share class of the Fund. The investment objective of the Fund is to provide investors with long-term growth of capital. Under normal circumstances, the Fund invests at least 80% of its net assets, plus the amount of any borrowings for investment purposes, in large capitalization publicly traded equity securities, consisting primarily of common stock. The investment objective of the Fund is to provide investors with long-term growth of capital.
2. Significant Accounting Policies. The Fund’s financial statements are prepared in accordance with Generally Accepted Accounting Principles in the United States of America (“GAAP”). The Fund is an investment company and accordingly follows the investment company accounting and reporting guidance of the Financial Accounting Standards Board (“FASB”) Accounting Standard Codification Topic 946 Financial Services – Investment Companies. The following summarizes significant accounting policies of the Fund:
A. Valuation of Investments. The Board of Trustees (the “Board”) has ultimate responsibility for determining the fair value of investments. Pursuant to Rule 2a-5 of the 1940 Act, the Board has designated the Investment Adviser as its valuation designee. The Investment Adviser monitors the continual appropriateness of valuation methods applied and determines if adjustments should be made in light of market factor changes and events affecting issuers. The Investment Adviser performs a series of activities to provide reasonable assurance of the appropriateness of the prices utilized, including but not limited to: periodic independent pricing service due diligence meetings and reviewing the results of back testing on a monthly basis. The Investment Adviser provides the Board with reporting on the results of the back testing as well as positions which were fair valued during the period.
All securities and other investments are recorded at their estimated fair value. The value of investments listed on a securities exchange is based on the last sale price prior to the time when assets are valued, or in the absence of recorded sales, at the most recent bid price on such exchange. If a readily available market quotation is not available or is determined to be unreliable, the investments may be valued utilizing evaluated prices provided by independent pricing services. In establishing such prices, the independent pricing service utilizes both dealer supplied prices and electronic data processing techniques which take into account appropriate factors such as institutional sized trading in similar groups of securities, yield, quality, coupon rate, maturity, type of issue, trading characteristics, the closure of the primary exchange on which securities trade and before the Fund’s net asset value is next determined and other market data without exclusive reliance on quoted exchange prices or over-the-counter prices since such valuations are believed to reflect more accurately the fair value of such investments. Investments may be fair valued by Brown
F I N A N C I A L S T A T E M E N T S O C T O B E R 3 1, 2 0 2 3 | 17 |
BBH SELECT SERIES – LARGE CAP FUND |
NOTES TO FINANCIAL STATEMENTS (continued) October 31, 2023 |
Brothers Harriman & Co. (“BBH”) through a separately identifiable department (“SID” or “Investment Adviser”) in accordance with the BBH Trust Portfolio Valuation Policy and Procedures using methods that most fairly reflect the amount that the Fund would reasonably expect to receive for the investment on a current sale in its principal market in the ordinary course of business. Short-term investments, which mature in 60 days or less are valued at amortized cost if their original maturity was 60 days or less, or by amortizing their value on the 61st day prior to maturity, if their original maturity when acquired by the Fund was more than 60 days, unless the use of amortized cost is determined not to represent fair value. Any futures contracts held by the Fund are valued daily at the official settlement price of the exchange on which they are traded.
B. Accounting for Investments and Income. Investment transactions are accounted for on the trade date. Realized gains and losses on investment transactions are determined based on the identified cost method. Dividend income and other distributions received from portfolio securities are recorded on the ex-dividend date. Non-cash dividends included in dividend income, if any, are recorded at the fair market value of securities received at ex-date. Distributions received on securities that represent a return of capital are recorded as a reduction of cost of investments. Distributions received on securities that represent a capital gain are recorded as a realized gain. Interest income is accrued daily. Investment income is recorded net of any foreign taxes withheld where recovery of such tax is uncertain.
C. Fund Expenses. Most expenses of the Trust can be directly attributed to a specific fund and share class. Expenses which cannot be directly attributed to a fund are generally apportioned among each fund in the Trust and the respective share classes on a net assets basis or other suitable method. Expense estimates are accrued in the period to which they relate and adjustments are made when actual amounts are known.
D. Federal Income Taxes. It is the Trust’s policy to comply with the requirements of the Internal Revenue Code (the “Code”) applicable to regulated investment companies and to distribute substantially all of its taxable income to its shareholders. Accordingly, no federal income tax provision is required. The Fund files a tax return annually using tax accounting methods required under provisions of the Code, which may differ from GAAP, which is the basis on which these financial statements are prepared. Accordingly, the amount of net investment income and net realized gain reported in these financial statements may differ from that reported on the Fund’s tax return, due to certain book-to-tax timing differences such as losses deferred due to “wash sale” transactions and utilization of capital loss carryforwards. These differences may result in temporary over-distributions for financial statement purposes and are classified as distributions in excess of accumulated net realized gains or net investment income. These distributions do not constitute a return of capital. Permanent differences are reclassified between paid-in capital and retained earnings/(accumulated deficit) within the Statement of Assets and Liabilities based upon their tax classification. As such, the character of distributions to shareholders reported in the Financial Highlights table may differ from that reported to shareholders on Form 1099-DIV.
18 |
BBH SELECT SERIES – LARGE CAP FUND |
NOTES TO FINANCIAL STATEMENTS (continued) October 31, 2023 |
The Fund is subject to the provisions of Accounting Standards Codification 740 Income Taxes (“ASC 740”). ASC 740 sets forth a minimum threshold for financial statement recognition of the benefit of a tax position taken or expected to be taken in a tax return. The Fund did not have any unrecognized tax benefits as of October 31, 2023, nor were there any increases or decreases in unrecognized tax benefits for the year then ended. The Fund recognizes interest and penalties, if any, related to unrecognized tax benefits as an income tax expense in the Statement of Operations. During the year ended October 31, 2023, the Fund did not incur any such interest or penalties. The Fund is subject to examination by U.S. federal and state tax authorities for returns filed for open tax period since September 9, 2019 (commencement of operations). The Fund is not aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will significantly change in the next twelve months.
E. Dividends and Distributions to Shareholders. Dividends and distributions from net investment income to shareholders, if any, are paid annually and are recorded on the ex-dividend date. Distributions from net capital gains, if any, are generally declared and paid annually and are recorded on the ex-dividend date. The Fund declared dividends and distributions in the amount of $5,421,653 and $10,209 to Class I shares and Retail Class shareholders, respectively, during the year ended October 31, 2023 and the amount of $15,461,745 and $57,689 to Class I shares and Retail Class shareholders, respectively, during the year ended October 31, 2022.
The tax character of distributions paid during the years ended October 31, 2023 and 2022, respectively, were as follows:
Distributions paid from: | ||||||||||
Ordinary | Net | Total | Tax return | Total | ||||||
2023: | $ 829,034 | $ 4,602,828 | $ 5,431,862 | $ — | $ 5,431,862 | |||||
2022: | 1,201,040 | 14,318,394 | 15,519,434 | — | 15,519,434 |
As of October 31, 2023 and 2022, respectively, the components of retained earnings/(accumulated deficit) on tax basis were as follows:
Components of retained earnings/(accumulated deficit): | ||||||||||||
Undistributed | Undistributed | Accumulated | Other | Unrealized | Total | |||||||
2023: | $ 1,203,717 | $ — | $ (2,691,557) | $ (458) | $ 108,146,725 | $ 106,658,427 | ||||||
2022: | 826,333 | 4,602,828 | — | (458) | 53,769,628 | 59,198,331 |
F I N A N C I A L S T A T E M E N T S O C T O B E R 3 1, 2 0 2 3 | 19 |
BBH SELECT SERIES – LARGE CAP FUND |
NOTES TO FINANCIAL STATEMENTS (continued) October 31, 2023 |
The Fund had $2,691,557 net capital loss carryforwards as of October 31, 2023, of which $2,691,557 and $0, is attributable to short-term and long-term capital losses, respectively.
The Fund is permitted to carryforward capital losses for an unlimited period and they will retain their character as either short-term or long-term capital losses.
Total distributions paid may differ from amounts reported in the Statements of Changes in Net Assets because, for tax purposes, dividends are recognized when actually paid.
The differences between book-basis and tax-basis unrealized appreciation/(depreciation) would be attributable primarily to the tax deferral of losses on wash sales, if applicable.
To the extent future capital gains are offset by capital loss carryforwards, if any, such gains will not be distributed.
F. Use of Estimates. The preparation of the financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities in the financial statements, disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of increase and decrease in net assets from operations during the reporting period. Actual results could differ from these estimates.
3. Fees and Other Transactions with Affiliates.
A. Investment Advisory and Administrative Fees. Under a combined Investment Advisory and Administrative Services Agreement (“Agreement”) with the Trust, Brown Brothers Harriman & Co. (“BBH”) through a separately identifiable department (“Investment Adviser”) provides investment advisory, portfolio management and administrative services to the Fund. The Fund pays a combined fee for investment advisory and administrative services calculated daily and paid monthly at an annual rate equivalent to 0.65% per annum on the first $3 billion of the Fund’s average daily net assets and 0.60% per annum on the Fund’s average daily net assets over $3 billion. For year ended October 31, 2023, the Fund incurred $2,567,296 under the Agreement.
B. Investment Advisory and Administrative Fee Waivers. Effective September 9, 2019 (commencement of operations), the Investment Adviser contractually agreed to limit the annual fund operating expenses (excluding interest, taxes, brokerage commissions, other expenditures that are capitalized in accordance with GAAP, other extraordinary expenses not incurred in the ordinary course of the Fund’s business and for Retail Class, amounts payable pursuant to any plan adopted in accordance with Rule 12b-1) of Class I and Retail Class to 0.80%. The agreement will terminate on March 1, 2024, unless it is renewed by all parties to the agreement. The agreement may only be terminated during its term with approval of the Fund’s Board of Trustees. For the year ended October 31, 2023, the Investment Adviser waived fees in the amount of $0 and $33,607 for Class I and Retail Class, respectively.
20 |
BBH SELECT SERIES – LARGE CAP FUND |
NOTES TO FINANCIAL STATEMENTS (continued) October 31, 2023 |
C. Distribution (12b-1) Fees. The Fund has adopted a distribution plan pursuant to Rule 12b-1 for Retail Class shares that allows the Fund to pay distribution and other fees for the sale of its shares and for distribution-related services provided to shareholders. Because these fees are paid out of the Fund’s assets continuously, over time these fees will increase the cost of investment in Retail Class shares and may cost the Retail Class shareholder more than paying other types of sales charges. The maximum annual distribution fee for Retail Class shares is 0.25% of the average daily net assets of the Retail Class shares of the Fund. With this agreement along with the investment advisory and waiver agreements above, it is anticipated that total operating expenses for Retail Class shares will be no greater than 1.05% of the average daily net assets. For the year ended October 31, 2023, Retail Class shares of the Fund incurred $2,200 for Distribution (12b-1) Fees. This amount is presented under line item “Distribution fees” in the Statement of Operations.
D. Custody and Fund Accounting Fees. BBH acts as a custodian and fund accountant and receives custody and fund accounting fees from the Fund calculated daily and incurred monthly. BBH holds all of the Fund’s cash and investments and calculates the Fund’s daily net asset value. The custody fee is an asset and transaction-based fee. The fund accounting fee is an asset-based fee calculated at 0.325 basis points per annum of the Fund’s net asset value, effective September 1, 2023 based on the new agreement. The fund accounting fee was 0.40 basis points per annum until August 31, 2023. For the year ended October 31, 2023, the Fund incurred $29,130 in custody and fund accounting fees. As per agreement with the Fund’s custodian, the Fund receives interest income on cash balances held by the custodian at the BBH Base Rate. The BBH Base Rate is defined as BBH’s effective trading rate in local money markets on each day. The total interest earned by the Fund for the year ended October 31, 2023 was $627,755. This amount is included in “Interest income from Custodian” in the Statement of Operations. In the event that the Fund is overdrawn, under the custody agreement with BBH, BBH will make overnight loans to the Fund to cover overdrafts. Pursuant to their agreement, the Fund will pay the BBH Overdraft Base Rate plus 2% on the day of the overdraft. The Fund did not incur any such fees during the year ended October 31, 2023. This amount, if any, is included under line item “Custody and fund accounting fees” in the Statement of Operations.
E. Board of Trustees’ Fees. Each Trustee who is not an “interested person” as defined under the 1940 Act receives an annual fee as well as reimbursement for reasonable out-of-pocket expenses from the Fund. For the year ended October 31, 2023, the Fund incurred $74,184 in independent Trustee compensation and expense reimbursements.
F. Officers of the Trust. Officers of the Trust are also employees of BBH. Officers are paid no fees by the Trust for their services to the Trust.
4. Investment Transactions. For the year ended October 31, 2023, the cost of purchases and the proceeds of sales of investment securities, other than short-term investments, were $35,026,008 and $66,530,188, respectively.
F I N A N C I A L S T A T E M E N T S O C T O B E R 3 1, 2 0 2 3 | 21 |
BBH SELECT SERIES – LARGE CAP FUND |
NOTES TO FINANCIAL STATEMENTS (continued) October 31, 2023 |
5. Shares of Beneficial Interest. The Trust is permitted to issue an unlimited number of Class I and Retail Class shares of beneficial interest at no par value. Transactions in Class I and Retail Class shares were as follows:
For the year ended | For the year ended | ||||||||||||
Shares | Dollars | Shares | Dollars | ||||||||||
Class I |
|
|
|
|
| ||||||||
Shares sold | 2,715,842 |
| $ 32,782,805 |
| 5,522,010 |
|
| $ 69,601,637 |
| ||||
Shares issued in connection with reinvestments of dividends | 67,204 |
| 768,139 |
| 186,763 |
|
| 2,640,823 |
| ||||
Proceeds from short-term redemption fees | N/A |
| 655 |
| N/A |
|
| N/A |
| ||||
Shares redeemed | (5,163,596 | ) | (62,702,974 | ) | (5,303,439 | ) |
| (68,011,770 | ) | ||||
Net increase/(decrease) | (2,380,550 | ) | $ (29,151,375 | ) | 405,334 |
|
| $ 4,230,690 |
| ||||
Retail Class |
|
|
|
|
| ||||||||
Shares sold | 2,603 |
| $ 33,418 |
| 1,770 |
|
| $ 23,544 |
| ||||
Shares issued in connection with reinvestments of dividends | 904 |
| 10,209 |
| 4,112 |
|
| 57,689 |
| ||||
Proceeds from short-term redemption fees | N/A |
| N/A |
| N/A |
|
| 2 |
| ||||
Shares redeemed | (6,729 | ) | (83,519 | ) | (66,106 | ) |
| (812,357 | ) | ||||
Net decrease | (3,222 | ) | $ (39,892 | ) | (60,224 | ) | $ | (731,122 | ) |
Included in Shares Sold and Shares Redeemed are shareholder exchanges during the years ended October 31, 2023 and 2022. Specifically:
During the year ended October 31, 2023, there were no exchanges between Class I and Retail Class.
During the year ended October 31, 2022, there were no exchanges between Class I and Retail Class.
6. Principal Risk Factors and Indemnifications.
A. Principal Risk Factors. Investing in the Fund may involve certain risks, as discussed in the Fund’s prospectus, including but not limited to, those described below:
A shareholder may lose money by investing in the Fund (investment risk). The Fund is actively managed and the decisions by the Investment Adviser may cause the Fund to incur losses or miss profit opportunities (management risk). Price movements may occur due to factors affecting individual companies, such as the issuance of an unfavorable earnings report, or other events affecting particular industries or the equity market as a whole (equity securities risk). The value of securities held by the Fund may fall due to changing economic, political, regulatory or market conditions, or due to a company’s or issuer’s individual situation. Natural disasters, the spread of infectious illness and other public health emergencies, recession, terrorism and other unforeseeable
22 |
BBH SELECT SERIES – LARGE CAP FUND |
NOTES TO FINANCIAL STATEMENTS (continued) October 31, 2023 |
events may lead to increased market volatility and may have adverse effects on world economies and markets generally (market risk). In the normal course of business, the Fund invests in securities and enters into transactions where risks exist due to assumption of large positions in securities of a small number of issuers (non-diversification risk). There are certain risks associated with investing in foreign securities not present in domestic investments, including, but not limited to, recovery of tax withheld by foreign jurisdictions (non-U.S. investment risk). The Fund’s shareholders may be adversely impacted by asset allocation decisions made by an investment adviser whose discretionary clients make up a large percentage of the Fund’s shareholders (large shareholder risk). The Fund invests in large cap company securities, which may underperform other funds during periods when the Fund’s large cap securities are out of favor (large cap company risk). Preferred securities are subject to issuer-specific and market risks applicable generally to equity securities. In addition, a company’s preferred securities may pay dividends only after the company makes required payments on bonds and other debt. If a company experiences actual or perceived changes in its financial condition or prospects, the value of preferred securities may be more greatly affected than the value of bonds and other debt (Preferred Security risk). The extent of the Fund’s exposure to these risks in respect to these financial assets is included in their value as recorded in the Fund’s Statement of Assets and Liabilities.
Please refer to the Fund’s prospectus for a complete description of the principal risks of investing in the Fund.
B. Indemnifications. Under the Trust’s organizational documents, its officers and Trustees may be indemnified against certain liabilities and expenses arising out of the performance of their duties to the Fund, and shareholders are indemnified against personal liability for the obligations of the Trust. Additionally, in the normal course of business, the Fund enters into agreements with service providers that may contain indemnification clauses. The Fund’s maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Fund that have not yet occurred. The risk of material loss from such claims is considered remote.
7. Subsequent Events. The BBH Trust’s Board of Trustee’s has approved a one-time conversion of the BBH Select Series – Large Cap Fund’s Retail Class shares to the Fund’s Institutional Class shares to occur on or before December 21, 2023.
Management has evaluated events and transactions that have occurred since October 31, 2023 through the date the financial statements were issued and determined that there were no other subsequent events that would require recognition or additional disclosure in the financial statements.
F I N A N C I A L S T A T E M E N T S O C T O B E R 3 1, 2 0 2 3 | 23 |
BBH SELECT SERIES – LARGE CAP FUND |
DISCLOSURE OF FUND EXPENSES October 31, 2023 (unaudited) |
EXAMPLE
As a shareholder of the Fund, you may incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments, reinvested distributions, or other distributions; redemption fees; and exchange fees; and (2) ongoing costs, including management fees; distribution 12b-1 fees; and other Fund expenses. This Example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The Example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period (May 1, 2023 to October 31, 2023).
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.
24 |
BBH SELECT SERIES – LARGE CAP FUND |
DISCLOSURE OF FUND EXPENSES (continued) October 31, 2023 (unaudited) |
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as redemption fees or exchange fees. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
Beginning | Ending | Expenses Paid | ||||
Class I | ||||||
Actual | $1,000 | $1,026 | $3.63 | |||
Hypothetical2 | $1,000 | $1,022 | $3.62 |
Beginning | Ending | Expenses Paid | ||||
Retail Class | ||||||
Actual | $1,000 | $1,024 | $5.36 | |||
Hypothetical2 | $1,000 | $1,020 | $5.35 |
____________
1 Expenses are equal to the Fund’s annualized expense ratio of 0.71% and 1.05% for Class I and Retail Class shares, respectively, multiplied by the average account value over the period, multiplied by 184/365.
2 Assumes a return of 5% before expenses. For the purposes of the calculation, the applicable annualized expense ratio for each class of shares is subtracted from the assumed return before expenses.
F I N A N C I A L S T A T E M E N T S O C T O B E R 3 1, 2 0 2 3 | 25 |
BBH SELECT SERIES – LARGE CAP FUND |
CONFLICTS OF INTEREST October 31, 2023 (unaudited) |
Description of Potential Material Conflicts of Interest – Investment Adviser
BBH, including the Investment Adviser, provides discretionary and non-discretionary investment management services and products to corporations, institutions and individual investors throughout the world. As a result, in the ordinary course of its businesses, BBH, including the Investment Adviser, may engage in activities in which its interests or the interests of its clients may conflict with or be adverse to the interests of the Funds. In addition, certain of such clients (including the Funds) utilize the services of BBH for which they will pay to BBH customary fees and expenses that will not be shared with the Funds.
The Investment Adviser has adopted and implemented policies and procedures that seek to manage conflicts of interest. Pursuant to such policies and procedures, the Investment Adviser monitors a variety of areas, including compliance with fund investment guidelines, the investment in only those securities that have been approved for purchase, and compliance with their respective Code of Ethics.
The Trust also manages these conflicts of interest. For example, the Trust has designated a chief compliance officer (“CCO”) and has adopted and implemented policies and procedures designed to manage the conflicts identified below and other conflicts that may arise in the course of the Funds’ operations in such a way as to safeguard the Funds from being negatively affected as a result of any such potential conflicts. From time to time, the Trustees receive reports from the Investment Adviser, and the Trust’s CCO on areas of potential conflict.
Investors should carefully review the following, which describes potential and actual conflicts of interest that BBH, the Investment Adviser can face in the operation of their respective investment management services. This section is not, and is not intended to be, a complete enumeration or explanation of all of the potential conflicts of interest that may arise. The Investment Adviser and the Funds has adopted policies and procedures reasonably designed to appropriately prevent, limit or mitigate the conflicts of interest described below. Additional information about potential conflicts of interest regarding the Investment Adviser is set forth in the Investment Adviser’s Form ADV. A copy of Part 1 and Part 2A of the Investment Adviser’s Form ADV is available on the SEC’s website (www.adviserinfo.sec.gov). In addition, many of the activities that create these conflicts of interest are limited and/or prohibited by law, unless an exception is available.
Other Clients and Allocation of Investment Opportunities. BBH, the Investment Adviser manages funds and accounts of clients other than the Funds (“Other Clients”). In general, BBH, the Investment Adviser faces conflicts of interest when they render investment advisory services to different clients and, from time to time, provide dissimilar investment advice to different clients. Investment decisions will not necessarily be made in parallel among the Funds and Other Clients. Investments made by the Funds do not, and are not intended to, replicate the investments, or the investment methods and strategies, of Other Clients. Accordingly, such Other Clients may produce results that are materially different from those experienced by the Funds. Certain other conflicts of interest may arise in connection with a portfolio manager’s management of the Funds’ investments, on the one hand, and the investments of other funds or accounts for which the portfolio manager is responsible, on the other. For example, it is possible that the various funds or accounts managed by the Investment Adviser could have different investment strategies
26 |
BBH SELECT SERIES – LARGE CAP FUND |
CONFLICTS OF INTEREST (continued) October 31, 2023 (unaudited) |
that, at times, might conflict with one another to the possible detriment of the Funds. From time to time, the Investment Adviser sponsors and with other investment pools and accounts which engage in the same or similar businesses as the Funds using the same or similar investment strategies. To the extent that the same investment opportunities might be desirable for more than one account or fund, possible conflicts could arise in determining how to allocate them because the Investment Adviser may have an incentive to allocate investment opportunities to certain accounts or funds. However, BBH and the Investment Adviser have implemented policies and procedures designed to ensure that information relevant to investment decisions is disseminated promptly within its portfolio management teams and investment opportunities are allocated equitably among different clients. The policies and procedures require, among other things, objective allocation for limited investment opportunities, and documentation and review of justifications for any decisions to make investments only for select accounts or in a manner disproportionate to the size of the account. Nevertheless, access to investment opportunities may be allocated differently among accounts due to the particular characteristics of an account, such as size of the account, cash position, tax status, risk tolerance and investment restrictions or for other reasons.
Actual or potential conflicts of interest may also arise when a portfolio manager has management responsibilities to multiple accounts or funds, resulting in unequal commitment of time and attention to the portfolio management of the funds or accounts.
Affiliated Service Providers. Other potential conflicts might include conflicts between the Funds and its affiliated and unaffiliated service providers (e.g., conflicting duties of loyalty). In addition to providing investment management services through the SID, BBH provides administrative, custody, shareholder servicing and fund accounting services to the Funds. BBH may have conflicting duties of loyalty while servicing the Funds and/or opportunities to further its own interest to the detriment of the Funds. For example, in negotiating fee arrangements with affiliated service providers, BBH may have an incentive to agree to higher fees than it would in the case of unaffiliated providers. BBH acting in its capacity as the Funds’ administrator is the primary valuation agent of the Funds. BBH values securities and assets in the Funds according to the Funds’ valuation policies. Because the Investment Adviser’s advisory and administrative fees are calculated by reference to a Funds’ net assets, BBH and its affiliates may have an incentive to seek to overvalue certain assets.
Aggregation. Potential conflicts of interest also arise with the aggregation of trade orders. Purchases and sales of securities for the Funds may be aggregated with orders for other client accounts managed by the Investment Adviser. The Investment Adviser, however, are not required to aggregate orders if portfolio management decisions for different accounts are made separately, or if it is determined that aggregating is not practicable, or in cases involving client direction. Prevailing trading activity frequently may make impossible the receipt of the same price or execution on the entire volume of securities purchased or sold. When this occurs, the various prices may be averaged, and the Funds will be charged or credited with the average price. Thus, the effect of the aggregation may operate on some occasions to the disadvantage of the Funds. In addition, under certain circumstances, the Funds will not be charged the same commission or commission equivalent rates in connection with an aggregated order.
F I N A N C I A L S T A T E M E N T S O C T O B E R 3 1, 2 0 2 3 | 27 |
BBH SELECT SERIES – LARGE CAP FUND |
CONFLICTS OF INTEREST (continued) October 31, 2023 (unaudited) |
Cross Trades. Under certain circumstances, the Investment Adviser, on behalf of the Funds, may seek to buy from or sell securities to another fund or account advised by BBH, the Investment Adviser. Subject to applicable law and regulation, BBH, the Investment Adviser may (but is not required to) effect purchases and sales between BBH, the Investment Adviser clients (“cross trades”), including the Funds, if BBH or the Investment Adviser believes such transactions are appropriate based on each party’s investment objectives and guidelines. There may be potential conflicts of interest or regulatory issues relating to these transactions which could limit the Investment Adviser’s decision to engage in these transactions for the Funds. BBH and/or the Investment Adviser may have a potentially conflicting division of loyalties and responsibilities to the parties in such transactions.
Soft Dollars. The Investment Adviser may direct brokerage transactions and/or payment of a portion of client commissions (“soft dollars”) to specific brokers or dealers or other providers to pay for research or other appropriate services which provide, in the Investment Adviser’s view, appropriate assistance in the investment decision-making process (including with respect to futures, fixed price offerings and over-the-counter transactions). The use of a broker that provides research and securities transaction services may result in a higher commission than that offered by a broker who does not provide such services. The Investment Adviser will determine in good faith whether the amount of commission is reasonable in relation to the value of research and services provided and whether the services provide lawful and appropriate assistance in its investment decision-making responsibilities.
Research or other services obtained in this manner may be used in servicing any or all of the Funds and other accounts managed by the Investment Adviser, including in connection with accounts that do not pay commissions to the broker related to the research or other service arrangements. Such products and services may disproportionately benefit other client accounts relative to the Funds based on the amount of brokerage commissions paid by the Funds and such other accounts. To the extent that a Sub-adviser uses soft dollars, it will not have to pay for those products and services itself.
BBH may receive research that is bundled with the trade execution, clearing, and/or settlement services provided by a particular broker-dealer. For example, the research effectively will be paid by client commissions that also will be used to pay for the execution, clearing, and settlement services provided by the broker-dealer and will not be paid by the Investment Adviser.
Arrangements regarding compensation and delegation of responsibility may create conflicts relating to selection of brokers or dealers to execute Fund portfolio trades and/or specific uses of commissions from Fund portfolio trades, administration of investment advice and valuation of securities.
Investments in BBH Funds. From time to time BBH may invest a portion of the assets of its discretionary investment advisory clients in the Funds. That investment by BBH on behalf of its discretionary investment advisory clients in the Funds may be significant at times.
28 |
BBH SELECT SERIES – LARGE CAP FUND |
CONFLICTS OF INTEREST (continued) October 31, 2023 (unaudited) |
Increasing a Fund’s assets may enhance investment flexibility and diversification and may contribute to economies of scale that tend to reduce the Funds’ expense ratio. In selecting the Funds for its discretionary investment advisory clients, BBH may limit its selection to funds managed by BBH or the Investment Adviser. BBH may not consider or canvass the universe of unaffiliated investment companies available, even though there may be unaffiliated investment companies that may be more appropriate or that have superior performance. BBH, the Investment Adviser and their affiliates providing services to the Funds benefit from additional fees when the Funds is included as an investment by a discretionary investment advisory client.
BBH reserves the right to redeem at any time some or all of the shares of the Funds acquired for its discretionary investment advisory clients’ accounts. A large redemption of shares of the Funds by BBH on behalf of its discretionary investment advisory clients could significantly reduce the asset size of the Funds, which might have an adverse effect on the Funds’ investment flexibility, portfolio diversification and expense ratio.
Valuation. When market quotations are not readily available or are believed by BBH to be unreliable, the Funds’ investments will be valued at fair value by BBH pursuant to procedures adopted by the Funds’ Board. When determining an asset’s “fair value,” BBH seeks to determine the price that a Fund might reasonably expect to receive from the current sale of that asset in an arm’s-length transaction. The price generally may not be determined based on what the Funds might reasonably expect to receive for selling an asset at a later time or if it holds the asset to maturity. While fair value determinations will be based upon all available factors that BBH deems relevant at the time of the determination and may be based on analytical values determined by BBH using proprietary or third-party valuation models, fair value represents only a good faith approximation of the value of a security. The fair value of one or more securities may not, in retrospect, be the price at which those assets could have been sold during the period in which the particular fair values were used in determining the Funds’ net asset value. As a result, the Funds’ sale or redemption of its shares at net asset value, at a time when a holding or holdings are valued by BBH (pursuant to Board-adopted procedures) at fair value, may have the effect of diluting or increasing the economic interest of existing shareholders.
Referral Arrangements. BBH may enter into advisory and/or referral arrangements with third parties. Such arrangements may include compensation paid by BBH to the third party. BBH may pay a solicitation fee for referrals and/or advisory or incentive fees. BBH may benefit from increased amounts of assets under management.
F I N A N C I A L S T A T E M E N T S O C T O B E R 3 1, 2 0 2 3 | 29 |
BBH SELECT SERIES – LARGE CAP FUND |
CONFLICTS OF INTEREST (continued) October 31, 2023 (unaudited) |
Personal Trading. BBH, including the Investment Adviser, and any of their respective partners, principals, directors, officers, employees, affiliates or agents, face conflicts of interest when transacting in securities for their own accounts because they could benefit by trading in the same securities as the Funds, which could have an adverse effect on the Funds. However, the Investment Adviser has implemented policies and procedures concerning personal trading by BBH Partners and employees. The policy and procedures are intended to prevent BBH Partners and employees from trading in the same securities as the Funds. However, BBH, including the Investment Adviser, has implemented policies and procedures concerning personal trading by BBH Partners and employees. The policies and procedures are intended to prevent BBH Partners and employees with access to Fund material non-public information from trading in the same securities as the Funds.
Gifts and Entertainment. From time to time, employees of BBH, including the Investment Adviser, and any of their respective partners, principals, directors, officers, employees, affiliates or agents, may receive gifts and/or entertainment from clients, intermediaries, or service providers to the Funds or BBH, including the Investment Adviser, which could have the appearance of affecting or may potentially affect the judgment of the employees, or the manner in which they conduct business. The Investment Adviser has implemented policies and procedures concerning gifts and entertainment to mitigate any impact on the judgment of BBH Partners and employees. BBH, including the Investment Adviser, has implemented policies and procedures concerning gifts and entertainment to mitigate any impact on the judgment of BBH Partners and employees.
30 |
BBH SELECT SERIES – LARGE CAP FUND |
ADDITIONAL FEDERAL TAX INFORMATION October 31, 2023 (unaudited) |
The Fund hereby designates $4,604,154 as an approximate amount of capital gain dividend for the purpose of dividends paid deduction.
In January 2024, shareholders will receive Form 1099-DIV, which will include their share of qualified dividends distributed during the calendar year 2023. Shareholders are advised to check with their tax advisers for information on the treatment of these amounts on their individual income tax returns.
F I N A N C I A L S T A T E M E N T S O C T O B E R 3 1, 2 0 2 3 | 31 |
TRUSTEES AND OFFICERS OF BBH SELECT SERIES – LARGE CAP FUND |
(unaudited) |
Information pertaining to the Trustees and executive officers of the Trust as of October 31, 2023, is set forth below. The mailing address for each Trustee is c/o BBH Trust, 140 Broadway, New York, NY 10005.
|
|
|
|
| Other Public |
Independent Trustees | |||||
H. Whitney Wagner | Chairman of the Board and Trustee | Chairman Since 2014; Trustee Since 2007 and 2006 – 2007 with the Predecessor Trust | President, Clear Brook Advisors, a registered investment adviser. | 8 | None. |
Andrew S. Frazier | Trustee | Since 2010 | Retired. | 8 | None. |
Mark M. Collins | Trustee | Since 2011 | Partner of Brown Investment Advisory Incorporated, a registered investment adviser. | 8 | Chairman of Dillon Trust Company. |
John M. Tesoro | Trustee | Since 2014 | Retired. | 8 | Independent Trustee, Bridge Builder Trust (11 funds) and Edward Jones Money Market Fund; Director, Teton Advisers, Inc. (a registered investment adviser) (2014-2021). |
Joan A. Binstock | Trustee | Since 2019 | Partner, Chief Financial and Operations Officer, Lord Abbett & Co. LLC (1999-2018); Lovell Minnick Partners, Advisers Counsel (2018-Present). | 8 | Independent Director, Morgan Stanley Direct Lending Fund; KKR Real Estate Interval Fund. |
Karen A. Kochevar | Trustee | Since 2023 | Retired. | 8 | Director, CAVA Group, Inc. |
32 |
TRUSTEES AND OFFICERS OF BBH SELECT SERIES – LARGE CAP FUND |
(unaudited) |
|
|
|
|
| Other Public |
Interested Trustees | |||||
Susan C. Livingston+ | Trustee | Since 2011 | Partner (since 1998) and Senior Client Advocate (since 2010) for BBH&Co. | 8 | None. |
John A. Gehret+ | Trustee | Since 2011 | Limited Partner of BBH&Co. (2012-present). | 8 | None. |
F I N A N C I A L S T A T E M E N T S O C T O B E R 3 1, 2 0 2 3 | 33 |
TRUSTEES AND OFFICERS OF BBH SELECT SERIES – LARGE CAP FUND |
(unaudited) |
Name, Address | Position(s) | Term of | Principal Occupation(s) During |
Officers | |||
Jean-Pierre Paquin | President and Principal Executive Officer | Since 2016 | Partner of BBH&Co. since 2015; joined BBH&Co. in 1996. |
Daniel Greifenkamp | Vice President | Since 2016 | Principal of BBH&Co. since 2014; |
Charles H. Schreiber | Treasurer and Principal Financial Officer | Since 2007 2006 – 2007 with the Predecessor Trust | Managing Director of BBH&Co. since 2001; joined BBH&Co. in 1999. |
Paul F. Gallagher | Chief Compliance Officer (“CCO”) | Since 2015 | Managing Director of BBH&Co. since 2015. |
Nicole English | Anti-Money Laundering Officer | Since 2022 | Vice President of BBH&Co. |
Brian J. Carroll | Secretary | Since 2021 | Vice President of BBH&Co. |
Crystal Cheung | Assistant Treasurer | Since 2018 | Assistant Vice President of BBH&Co. since 2016; joined BBH&Co. 2014. |
____________
# All officers of the Trust hold office for one year and until their respective successors are chosen and qualified (subject to the ability of the Trustees to remove any officer in accordance with the Trust’s By-laws). Mr. Wagner previously served on the Board of Trustees of the Predecessor Trust.
+ Ms. Livingston and Mr. Gehret are “interested persons” of the Trust as defined in the 1940 Act because of their positions as Partner and Limited Partner of BBH&Co., respectively.
^ The Fund Complex consists of the Trust, which has eight series, and each is counted as one “Portfolio” for purposes of this table.
34 |
BBH SELECT SERIES – LARGE CAP FUND |
OPERATION AND EFFECTIVENESS OF THE FUND’S LIQUIDITY RISK MANAGEMENT PROGRAM October 31, 2023 (unaudited) |
The Securities and Exchange Commission adopted Rule 22e-4 under the Investment Company Act of 1940, as amended (the “Liquidity Rule”), to promote effective liquidity risk management throughout the open-end investment company industry in order to reduce the risk that funds will be unable to meet their redemption obligations and mitigate dilution of the interests of fund shareholders.
The Board of Trustees (the “Board”) of BBH Trust has appointed three members of the Brown Brothers Harriman & Co. Mutual Fund Advisory Department, the Investment Adviser to the funds of BBH Trust (the “Funds”), as the Program Administrator for the Fund’s liquidity risk management program (the “Program”). The Board met on March 7, 2023 to review the Program for the Funds pursuant to the Liquidity Rule. The Program Administrator provided the Board with a report (the “Report”) that addressed the operations of the Program and assessed its adequacy and effectiveness for the period from February 1, 2022 through January 31, 2023 (the “Reporting Period”).
The Report noted that the Program complied with the key factors for consideration under the Liquidity Rule for assessing, managing and periodically reviewing a Fund’s liquidity risk, including the following points.
Liquidity classification. The Report described the Program’s liquidity classification methodology for categorizing the Funds’ investments into one of four liquidity buckets. The Fund classified each of its investments into one of four liquidity categories based on the number of days reasonably needed to sell and convert a reasonably anticipated sized trade of each investment into cash without significantly impacting the price of the investments. The Program Administrator relied on a third-party data provider to facilitate the classification of the Fund’s investments based on criteria in the Fund’s Program. During the Reporting Period, the Fund did not hold more than 15% of its net assets in illiquid investments.
Highly Liquid Investment Minimum. The Report noted that one aspect of the Liquidity Rule is a requirement that funds that are expected to have less than 50% of assets classified as other than “highly liquid” should establish a minimum percentage of highly liquid assets that the fund is expected to hold on an on-going basis. The Program Administrator monitors the percentages of assets in each category on an ongoing basis and, given that the Fund did not approach the 50% threshold, has made the determination that it is not necessary to assign a Highly Liquid Investment Minimum to the Fund as provided for in the Liquidity Rule.
The Fund’s investment strategy and liquidity of portfolio investments during normal and reasonably foreseeable stressed market conditions. During the Reporting Period, the Program Administrator reviewed whether the Fund’s investment strategy is appropriate for an open-end fund structure with a focus on funds with more significant and consistent holdings of less liquid and illiquid assets and factored a Fund’s concentration in an issuer into the liquidity classification methodology by taking issuer position sizes into account.
F I N A N C I A L S T A T E M E N T S O C T O B E R 3 1, 2 0 2 3 | 35 |
BBH SELECT SERIES – LARGE CAP FUND |
OPERATION AND EFFECTIVENESS OF THE FUND’S LIQUIDITY RISK MANAGEMENT PROGRAM (continued) October 31, 2023 (unaudited) |
Short-term and long-term cash flow projections during normal and reasonably foreseeable stressed market conditions. During the Reporting Period, the Program Administrator reviewed historical redemption activity and used this information as a component to establish the Fund’s reasonably anticipated trading size. The Program Administrator also took into consideration other factors such as shareholder ownership concentration, applicable distribution channels and the degree of certainty associated with the Fund’s short-term and long-term cash flow projections.
Holdings of cash and cash equivalents. The Program Administrator considered the degree to which the Fund held cash and cash equivalents as a component of each Fund’s ability to meet redemption requests.
There were no material changes to the Program during the Reporting Period. The Program Administrator has informed the Board that it believes that the Fund’s Program is adequately designed, has been implemented as intended, and has operated effectively since its implementation. No material exceptions have been noted since the implementation of the Program, and there were no liquidity events that impacted the Fund or its ability to meet redemption requests on a timely basis during the Reporting Period.
36 |
Administrator Distributor Shareholder Servicing Agent | Investment Adviser | |
To obtain information or make shareholder inquiries: | ||
By telephone: | Call 1-800-575-1265 | |
This report is submitted for the general information of shareholders and is not authorized for distribution to prospective investors unless preceded or accompanied by an effective prospectus. Nothing herein contained is to be considered an offer of sale or a solicitation of an offer to buy shares of the Fund. For more complete information, visit www.bbhfunds.com for a prospectus. You should consider the Fund’s investment objectives, risks, charges and expenses carefully before you invest. Information about these and other important subjects is in the Fund’s prospectus, which you should read carefully before investing Holdings and allocations are subject to change. Fund holdings should not be relied on in making investment decisions and should not be construed as research or investment advice regarding particular securities. Current and future holdings are subject to risk. The Fund files a complete schedule of portfolio holdings with the Securities and Exchange Commission (SEC) for the first and third quarters of each fiscal year as an exhibit to its reports on Form N-PORT. The Fund’s Forms N-PORT are available electronically on the SEC’s website (sec.gov). For a complete list of a fund’s portfolio holdings, view the most recent holdings listing, semi-annual report, or annual report on the Fund’s web site at http://www.bbhfunds.com. A summary of the Fund’s Proxy Voting Policy that the Fund uses to determine how to vote proxies, if any, relating to securities held in the Fund’s portfolio, as well as a record of how the Fund voted any such proxies during the most recent 12-month period ended June 30, is available, without charge, upon request by calling the toll-free number listed above. This information is also available on the SEC’s website at www.sec.gov. NOT FDIC INSURED NO BANK GUARANTEE MAY LOSE VALUE |
Annual Report
OCTOBER 31, 2023
BBH Intermediate Municipal Bond Fund
BBH INTERMEDIATE MUNICIPAL BOND FUND |
MANAGEMENT’S DISCUSSION OF FUND PERFORMANCE October 31, 2023 |
BBH Intermediate Municipal Bond Fund (the “Fund”) Class I produced a total return of 3.60% (net of fees and expenses) for the twelve-month period ending October 31, 2023, as compared to its benchmark, Barclays Capital 1-15 Year Municipal Index,1 which had a return of 2.47% over the same period. Throughout the measurement period, changing investor expectations regarding inflation and monetary policy drove significant market volatility.
The objective of the Intermediate Municipal Bond Fund is to protect our investors’ capital and generate attractive risk-adjusted returns. We seek to achieve this objective by investing in a limited number of durable credits that provide attractive yields or return potential. Our objective and strategy have remained the same since we launched the Fund on April 1, 2014. The Fund’s net assets increased from both net inflows and positive returns, ending October at just under $750 million.
In the Municipal market, valuations are often disconnected from their underlying fundamentals, particularly during periods of heightened market volatility. We entered the fiscal year with very attractive valuations that resulted from the Fed’s most aggressive policy tightening in forty years along with record outflows from industry funds. Throughout the fiscal year we enjoyed a broad opportunity set from higher base rates, wide credit spreads, and healthy compensation for off-the-run structures. Elevated market volatility also enhanced our opportunity set and kept us on our toes. The lone weak spot was the second consecutive year of very light issuance, which helped drive strong competition for bonds in the primary market.
For the twelve-month period, intermediate and long-term tax-exempt interest rates increased by 30 basis points2, while short maturity yields climbed 50 basis points. The credit-sensitive portions of the Municipal market recovered some of their prior underperformance. Relative to an equal-weighted blend of AAA- and AA-rated securities, BBB-rated and Municipal High Yield outperformed by 100 basis points during the year. Despite the Fund’s low exposure to BBB-rated bonds and no high-yield positions, it still performed strongly relative to its benchmark and its peers. A core element of the Fund’s strategy is to focus on niches of the municipal market that fall outside the comfort zone of household investors. This has allowed us to enhance the risk-adjusted return of the Fund. To preserve Fund liquidity, we focus on high quality securities in these areas.
We invest our portfolios from the bottom-up and have continued to identify more opportunities in Revenue Bonds than in General Obligation issues (GO). As of October 31, 2023, the Fund held approximately 83% of its net assets in Revenue Bonds and the balance in GOs. Within the Revenue sector, the Fund’s largest exposure remained to State Housing Finance Authority (HFA) sector, which comprised 24% of net assets. The Fund also held significant exposures to the Prepaid Natural Gas and Airport sectors which represented 15% and 13% of net assets, respectively. Also of note was the significant variability in money market valuations. Throughout the year, we traded actively between Variable Rate Demand Notes (VRDNs) and Treasury Bills to maximize the after-tax yield on the Fund’s cash balances. Consequently, portfolio turnover for the fiscal year was elevated.
2 |
BBH INTERMEDIATE MUNICIPAL BOND FUND |
MANAGEMENT’S DISCUSSION OF FUND PERFORMANCE (continued) October 31, 2023 |
The Fund continued to hold large exposures to bonds with non-standard coupons such as zero-coupon bonds and floating-rate notes. As of October 31st, these two types of bonds comprised 15% and 10% of the fund’s net assets, respectively. Beyond these positions, we also accumulated many longer maturity holdings to lock in their yields, help bridge over the yield curve inversion, and to keep the Fund’s duration relatively in-line with its benchmark.
We are very excited about the opportunities currently available in the municipal market. We believe the Fund is well-positioned with its holdings of high-quality credits that have provided the most attractive yields in over a decade.
Thank you for your continued confidence.
____________
1 Bloomberg Municipal Bond 1-15 Year Blend (1-17) Index is a sub-index of the Barclays Capital Municipal Bond Index, a rules-based market value-weighted index of bonds with maturities of one year to 17 years engineered for the tax-exempt bond market. One cannot invest directly in an index. Bloomberg® and the Bloomberg indexes are service marks of Bloomberg Finance L.P. and its affiliates, including Bloomberg Index Services Limited (“BISL”), the administrator of the index (collectively, “Bloomberg”) and have been licensed for use for certain purposes by Brown Brothers Harriman & Co (BBH). Bloomberg is not affiliated with BBH, and Bloomberg does not approve, endorse, review, or recommend the BBH strategies. Bloomberg does not guarantee the timeliness, accurateness, or completeness of any data or information relating to the fund.
2 One “basis point” or “bp” is 1/100th of a percent (0.01% or 0.0001).
Credit ratings reflect the credit quality of the underlying issues in the portfolio and not of the portfolio itself. Issues with credit ratings of BBB or better are considered to be investment grade, with adequate capacity to meet financial commitments. Issues with credit ratings below BBB are considered speculative in nature and are vulnerable to the possibility of issuer failure or business interruption. Portfolio holdings and characteristics are subject to change.
Portfolio holdings and characteristics are subject to change.
F I N A N C I A L S T A T E M E N T S O C T O B E R 3 1, 2 0 2 3 | 3 |
BBH INTERMEDIATE MUNICIPAL BOND FUND |
MANAGEMENT’S DISCUSSION OF FUND PERFORMANCE (continued) October 31, 2023 |
Growth of $10,000 Invested in BBH Intermediate Municipal Bond
The graph below illustrates the hypothetical investment of $10,0001 in the Class N shares of the Fund since inception (April 1, 2014) to October 31, 2023 as compared to the BMBB.
The annualized gross expense ratios as shown in the February 28, 2023 prospectus for Class N and Class I shares were 0.70% and 0.46%, respectively.
Performance data quoted represents past performance which is no guarantee of future results. Investment return and principal value will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Fund performance changes over time and current performance may be lower or higher than what is stated. Returns do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. For performance current to the most recent month-end please call 1-800-575-1265.
Hypothetical performance results are calculated on a total return basis and include all portfolio income, unrealized and realized capital gains, losses and reinvestment of dividends and other earnings. No one shareholder has actually achieved these results and no representation is being made that any actual shareholder achieved, or is likely to achieve, similar results to those shown. Hypothetical performance does not represent actual trading and may not reflect the impact of material economic and market factors. Undue reliance should not be placed on hypothetical performance results in making an investment decision.
____________
1 The Fund’s performance assumes the reinvestment of all dividends and distributions. The Barclays Municipal Bond 1-15 Year Blend (1-17) Index (“BMBB”) has been adjusted to reflect reinvestment of dividends on securities in the index. The BMBB is not adjusted to reflect sales charges, expenses or other fees that the Securities and Exchange Commission requires to be reflected in the Fund’s performance. The index is unmanaged. Investments cannot be made in the index.
4 |
BBH INTERMEDIATE MUNICIPAL BOND FUND |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM |
To the shareholders of BBH Intermediate Municipal Bond Fund and the Board of Trustees of BBH Trust:
Opinion on the Financial Statements and Financial Highlights
We have audited the accompanying statement of assets and liabilities, including the portfolio of investments, of BBH Intermediate Municipal Bond Fund (the “Fund”), one of the funds constituting BBH Trust, as of October 31, 2023, the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, the financial highlights for each of the five years in the period then ended, and the related notes. In our opinion, the financial statements and financial highlights present fairly, in all material respects, the financial position of the Fund as of October 31, 2023, and the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements and financial highlights are the responsibility of the Fund’s management. Our responsibility is to express an opinion on the Fund’s financial statements and financial highlights based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement, whether due to error or fraud. The Fund is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Fund’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements and financial highlights, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements and financial highlights. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements and financial highlights. Our procedures included confirmation of securities owned as of October 31, 2023, by correspondence with the custodian and brokers; when replies were not received from brokers, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinion.
____________
/s/ DELOITTE & TOUCHE LLP
____________
Boston, Massachusetts
December 20, 2023
We have served as the auditor of one or more Brown Brothers Harriman investment companies since 1991.
F I N A N C I A L S T A T E M E N T S O C T O B E R 3 1, 2 0 2 3 | 5 |
BBH INTERMEDIATE MUNICIPAL BOND FUND |
PORTFOLIO ALLOCATION October 31, 2023 |
BREAKDOWN BY SECURITY TYPE
U.S. $ Value | Percent of | ||||||
Municipal Bonds | $ | 769,856,597 |
| 103.2 | % | ||
Liabilities in Excess of Cash and Other Assets |
| (24,006,521 | ) | (3.2 | ) | ||
NET ASSETS | $ | 745,850,076 |
| 100.0 | % |
All data as of October 31, 2023. The Fund’s security type diversification is expressed as a percentage of net assets and may vary over time.
CREDIT QUALITY
U.S. $ Value | Percent of | |||||
AAA | $ | 111,561,909 | 14.5 | % | ||
AA |
| 374,325,860 | 48.6 |
| ||
A |
| 236,182,856 | 30.7 |
| ||
BBB |
| 47,785,972 | 6.2 |
| ||
TOTAL INVESTMENTS | $ | 769,856,597 | 100.0 | % |
All data as of October 31, 2023. The Fund’s credit quality is expressed as a percentage of total investments and may vary over time. Ratings are provided by Standard and Poor’s (S&P). Where S&P ratings are not available, they are substituted with Moody’s. S&P and Moody’s are independent third parties.
The accompanying notes are an integral part of these financial statements.
6 |
BBH INTERMEDIATE MUNICIPAL BOND FUND |
PORTFOLIO OF INVESTMENTS October 31, 2023 |
Principal | Maturity | Interest | Value | ||||||||
| MUNICIPAL BONDS (103.2%) |
|
| ||||||||
| Alabama (0.7%) |
|
| ||||||||
$ | 2,000,000 | Black Belt Energy Gas District, Revenue Bonds1,2 | 06/01/49 | 5.500 | % | $ | 2,024,377 | ||||
| 3,375,000 | Industrial Development Board of the City of Mobile Alabama, Revenue Bonds1,2 | 06/01/34 | 3.920 |
|
| 3,323,944 | ||||
| Total Alabama |
|
| 5,348,321 | |||||||
|
|
| |||||||||
| Arizona (3.4%) |
|
| ||||||||
| 4,555,000 | Chandler Industrial Development Authority, Revenue Bonds1,2 | 12/01/37 | 4.100 |
|
| 4,429,340 | ||||
| 2,000,000 | Coconino County Pollution Control Corp., Revenue Bonds1,2 | 09/01/32 | 4.125 |
|
| 1,961,062 | ||||
| 3,000,000 | County of Yavapai Industrial Development Authority, Revenue Bonds | 06/01/27 | 1.300 |
|
| 2,627,558 | ||||
| 3,800,000 | Salt Verde Financial Corp., Revenue Bonds | 12/01/28 | 5.250 |
|
| 3,836,732 | ||||
| 3,000,000 | Salt Verde Financial Corp., Revenue Bonds | 12/01/32 | 5.000 |
|
| 2,982,424 | ||||
| 10,000,000 | Salt Verde Financial Corp., Revenue Bonds | 12/01/37 | 5.000 |
|
| 9,697,702 | ||||
| Total Arizona |
|
| 25,534,818 | |||||||
|
|
| |||||||||
| Arkansas (0.4%) |
|
| ||||||||
| 1,000,000 | County of Pulaski, Revenue Bonds | 03/01/40 | 5.000 |
|
| 1,008,130 | ||||
| 1,000,000 | County of Pulaski, Revenue Bonds | 03/01/41 | 5.000 |
|
| 1,004,034 | ||||
| 1,000,000 | County of Pulaski, Revenue Bonds | 03/01/42 | 5.000 |
|
| 996,868 | ||||
| Total Arkansas |
|
| 3,009,032 | |||||||
|
|
| |||||||||
| California (7.0%) |
|
| ||||||||
| 9,550,000 | Allan Hancock Joint Community College District, General Obligation Bonds3 | 08/01/42 | 0.000 |
|
| 7,007,418 | ||||
| 3,270,000 | Anaheim Public Financing Authority, Revenue Bonds, AGM3 | 09/01/30 | 0.000 |
|
| 2,412,332 | ||||
| 1,000,000 | Antelope Valley Community College District, General Obligation Bonds3 | 08/01/34 | 0.000 |
|
| 614,229 | ||||
| 1,000,000 | Antelope Valley Community College District, General Obligation Bonds3 | 08/01/36 | 0.000 |
|
| 544,141 | ||||
| 1,000,000 | Antelope Valley Community College District, General Obligation Bonds3 | 08/01/38 | 0.000 |
|
| 477,793 | ||||
| 1,000,000 | Chaffey Joint Union High School District, General Obligation Bonds3 | 08/01/39 | 0.000 |
|
| 461,815 | ||||
| 1,500,000 | Chaffey Joint Union High School District, General Obligation Bonds3 | 08/01/40 | 0.000 |
|
| 650,946 | ||||
| 1,000,000 | Chaffey Joint Union High School District, General Obligation Bonds3 | 08/01/42 | 0.000 |
|
| 386,048 | ||||
| 1,785,000 | Chaffey Joint Union High School District, General Obligation Bonds3 | 08/01/43 | 0.000 |
|
| 650,604 |
The accompanying notes are an integral part of these financial statements.
F I N A N C I A L S T A T E M E N T S O C T O B E R 3 1, 2 0 2 3 | 7 |
BBH INTERMEDIATE MUNICIPAL BOND FUND |
PORTFOLIO OF INVESTMENTS (continued) October 31, 2023 |
Principal | Maturity | Interest | Value | ||||||||
| MUNICIPAL BONDS (continued) |
|
| ||||||||
| California (continued) |
|
| ||||||||
$ | 1,000,000 | Chaffey Joint Union High School District, General Obligation Bonds3 | 08/01/44 | 0.000 | % | $ | 343,887 | ||||
| 1,450,000 | Chino Valley Unified School District, General Obligation Bonds3 | 08/01/34 | 0.000 |
|
| 904,279 | ||||
| 2,200,000 | Chino Valley Unified School District, General Obligation Bonds3 | 08/01/35 | 0.000 |
|
| 1,301,056 | ||||
| 5,645,000 | Lake Tahoe Unified School District, General Obligation Bonds, AGM3 | 08/01/45 | 0.000 |
|
| 3,892,028 | ||||
| 755,000 | Long Beach Bond Finance Authority, Revenue Bonds (3-Month CME Term SOFR + 1.450%)2 | 11/15/27 | 5.220 |
|
| 745,831 | ||||
| 6,775,000 | Mount San Antonio Community College District, General Obligation Bonds3 | 08/01/43 | 0.000 |
|
| 5,893,705 | ||||
| 7,030,000 | Northern California Gas Authority No 1, Revenue Bonds (3-Month CME Term SOFR + 0.720%)2 | 07/01/27 | 4.510 |
|
| 6,945,877 | ||||
| 1,200,000 | Rialto Unified School District, General Obligation Bonds, BAM3 | 08/01/40 | 0.000 |
|
| 495,870 | ||||
| 1,430,000 | Rialto Unified School District, General Obligation Bonds, BAM3 | 08/01/42 | 0.000 |
|
| 522,614 | ||||
| 6,300,000 | Rio Hondo Community College District, General Obligation Bonds3 | 08/01/36 | 0.000 |
|
| 3,449,446 | ||||
| 13,000,000 | Rio Hondo Community College District, General Obligation Bonds3 | 08/01/43 | 0.000 |
|
| 4,481,216 | ||||
| 4,350,000 | Rio Hondo Community College District, General Obligation Bonds3 | 08/01/44 | 0.000 |
|
| 1,413,621 | ||||
| 1,035,000 | Roseville Joint Union High School District, General Obligation Bonds3 | 08/01/33 | 0.000 |
|
| 666,040 | ||||
| 3,850,000 | San Diego County Regional Airport Authority, Revenue Bonds | 07/01/36 | 5.250 |
|
| 3,975,963 | ||||
| 3,070,000 | San Mateo Union High School District, General Obligation Bonds3 | 09/01/41 | 0.000 |
|
| 2,759,502 | ||||
| 1,075,000 | Santa Rita Union School District, General Obligation Bonds, AGM3 | 08/01/33 | 0.000 |
|
| 701,071 | ||||
| 1,040,000 | Windsor Unified School District, General Obligation Bonds3 | 08/01/33 | 0.000 |
|
| 661,650 | ||||
| Total California |
|
| 52,358,982 | |||||||
|
|
| |||||||||
| Colorado (1.4%) |
|
| ||||||||
| 3,000,000 | City & County of Denver Airport System Revenue, Revenue Bonds | 11/15/36 | 5.750 |
|
| 3,250,558 | ||||
| 2,500,000 | Colorado Health Facilities Authority, Revenue Bonds2,4 | 11/01/23 | 3.820 |
|
| 2,500,000 | ||||
| 2,620,000 | Colorado Health Facilities Authority, Revenue Bonds | 11/15/43 | 4.000 |
|
| 2,256,935 |
The accompanying notes are an integral part of these financial statements.
8 |
BBH INTERMEDIATE MUNICIPAL BOND FUND |
PORTFOLIO OF INVESTMENTS (continued) October 31, 2023 |
Principal | Maturity | Interest | Value | ||||||||
| MUNICIPAL BONDS (continued) |
|
| ||||||||
| Colorado (continued) |
|
| ||||||||
$ | 552,028 | Colorado Housing & Finance Authority, Revenue Bonds, GNMA | 11/01/48 | 4.200 | % | $ | 529,139 | ||||
| 3,700,000 | E-470 Public Highway Authority, Revenue Bonds, NPFG3 | 09/01/35 | 0.000 |
|
| 2,067,435 | ||||
| Total Colorado |
|
| 10,604,067 | |||||||
|
|
| |||||||||
| Connecticut (2.3%) |
|
| ||||||||
| 165,000 | Connecticut Housing Finance Authority, Revenue Bonds | 05/15/30 | 2.000 |
|
| 136,154 | ||||
| 450,000 | Connecticut Housing Finance Authority, Revenue Bonds | 11/15/30 | 2.050 |
|
| 371,104 | ||||
| 400,000 | Connecticut Housing Finance Authority, Revenue Bonds | 05/15/31 | 2.100 |
|
| 321,873 | ||||
| 2,155,000 | Connecticut Housing Finance Authority, Revenue Bonds, FHLMC, FNMA, GNMA | 05/15/42 | 4.250 |
|
| 2,121,790 | ||||
| 3,800,000 | Connecticut State Health & Educational Facilities Authority, Revenue Bonds1,2 | 07/01/35 | 0.375 |
|
| 3,682,167 | ||||
| 10,700,000 | Connecticut State Health & Educational Facilities Authority, Revenue Bonds1,2 | 07/01/49 | 1.100 |
|
| 10,246,375 | ||||
| Total Connecticut |
|
| 16,879,463 | |||||||
|
|
| |||||||||
| District of Columbia (3.5%) |
|
| ||||||||
| 9,600,000 | District of Columbia, Revenue Bonds2,4 | 11/01/23 | 3.870 |
|
| 9,600,000 | ||||
| 5,315,000 | District of Columbia, Revenue Bonds | 07/15/40 | 5.000 |
|
| 5,129,633 | ||||
| 5,000,000 | Metropolitan Washington Airports Authority Aviation Revenue, Revenue Bonds | 10/01/30 | 5.000 |
|
| 4,988,291 | ||||
| 2,840,000 | Metropolitan Washington Airports Authority Aviation Revenue, Revenue Bonds | 10/01/31 | 5.000 |
|
| 2,845,428 | ||||
| 1,170,000 | Metropolitan Washington Airports Authority Aviation Revenue, Revenue Bonds | 10/01/34 | 5.000 |
|
| 1,179,958 | ||||
| 2,085,000 | Metropolitan Washington Airports Authority Aviation Revenue, Revenue Bonds | 10/01/37 | 5.000 |
|
| 2,080,955 | ||||
| Total District of Columbia |
|
| 25,824,265 | |||||||
|
|
| |||||||||
| Florida (3.8%) |
|
| ||||||||
| 7,500,000 | City of South Miami Health Facilities Authority, Inc., Revenue Bonds | 08/15/42 | 5.000 |
|
| 7,255,607 | ||||
| 1,845,000 | County of Broward Airport System Revenue, Revenue Bonds | 10/01/27 | 5.000 |
|
| 1,878,464 | ||||
| 3,050,000 | County of Broward Airport System Revenue, Revenue Bonds | 10/01/31 | 5.000 |
|
| 3,092,370 | ||||
| 3,000,000 | Florida Housing Finance Corp., Revenue Bonds, FHLMC, FNMA, GNMA | 01/01/54 | 5.500 |
|
| 3,050,639 |
The accompanying notes are an integral part of these financial statements.
F I N A N C I A L S T A T E M E N T S O C T O B E R 3 1, 2 0 2 3 | 9 |
BBH INTERMEDIATE MUNICIPAL BOND FUND |
PORTFOLIO OF INVESTMENTS (continued) October 31, 2023 |
Principal | Maturity | Interest | Value | ||||||||
| MUNICIPAL BONDS (continued) |
|
| ||||||||
| Florida (continued) |
|
| ||||||||
$ | 1,920,000 | Greater Orlando Aviation Authority, Revenue Bonds | 10/01/32 | 5.000 | % | $ | 1,979,425 | ||||
| 2,500,000 | Greater Orlando Aviation Authority, Revenue Bonds | 10/01/36 | 5.000 |
|
| 2,495,559 | ||||
| 5,850,000 | Greater Orlando Aviation Authority, Revenue Bonds | 10/01/36 | 5.000 |
|
| 5,736,164 | ||||
| 3,275,000 | Greater Orlando Aviation Authority, Revenue Bonds | 10/01/38 | 5.000 |
|
| 3,224,833 | ||||
| Total Florida |
|
| 28,713,061 | |||||||
|
|
| |||||||||
| Georgia (2.8%) |
|
| ||||||||
| 5,000,000 | Development Authority of Burke County, Revenue Bonds1,2 | 01/01/40 | 1.500 |
|
| 4,731,616 | ||||
| 2,800,000 | Development Authority of Burke County, Revenue Bonds1,2 | 11/01/45 | 3.250 |
|
| 2,735,785 | ||||
| 780,000 | Development Authority of Burke County, Revenue Bonds1,2 | 12/01/49 | 1.700 |
|
| 753,830 | ||||
| 7,500,000 | Main Street Natural Gas, Inc., Revenue Bonds1,2 | 12/01/53 | 5.000 |
|
| 7,443,061 | ||||
| 1,750,000 | Monroe County Development Authority, Revenue Bonds | 07/01/25 | 2.250 |
|
| 1,649,270 | ||||
| 3,935,000 | Monroe County Development Authority, Revenue Bonds1,2 | 01/01/39 | 1.500 |
|
| 3,723,781 | ||||
| Total Georgia |
|
| 21,037,343 | |||||||
|
|
| |||||||||
| Illinois (3.5%) |
|
| ||||||||
| 4,600,000 | Illinois Finance Authority, Revenue Bonds2,4 | 11/01/23 | 3.870 |
|
| 4,600,000 | ||||
| 3,915,000 | Illinois Finance Authority, Revenue Bonds | 02/15/36 | 5.000 |
|
| 3,900,661 | ||||
| 3,470,000 | Illinois Finance Authority, Revenue Bonds | 08/15/36 | 4.000 |
|
| 3,208,176 | ||||
| 3,000,000 | Illinois Housing Development Authority, Revenue Bonds, FHLMC, FNMA, GNMA | 10/01/52 | 6.250 |
|
| 3,122,434 | ||||
| 5,890,000 | Illinois Housing Development Authority, Revenue Bonds, FHLMC, FNMA, GNMA | 04/01/53 | 5.250 |
|
| 5,969,912 | ||||
| 5,000,000 | Illinois Housing Development Authority, Revenue Bonds, FHLMC, FNMA, GNMA | 10/01/53 | 6.250 |
|
| 5,294,483 | ||||
| Total Illinois |
|
| 26,095,666 | |||||||
|
|
| |||||||||
| Indiana (1.5%) |
|
| ||||||||
| 3,000,000 | Indiana Finance Authority, Revenue Bonds | 11/01/43 | 5.000 |
|
| 2,917,894 | ||||
| 6,880,000 | Indiana Housing & Community Development Authority, Revenue Bonds, FHLMC, FNMA, GNMA | 07/01/52 | 4.750 |
|
| 6,798,294 | ||||
| 1,620,000 | Indiana Municipal Power Agency, Revenue Bonds2,4 | 11/01/23 | 4.000 |
|
| 1,620,000 | ||||
| Total Indiana |
|
| 11,336,188 |
The accompanying notes are an integral part of these financial statements.
10 |
BBH INTERMEDIATE MUNICIPAL BOND FUND |
PORTFOLIO OF INVESTMENTS (continued) October 31, 2023 |
Principal | Maturity | Interest | Value | ||||||||
| MUNICIPAL BONDS (continued) |
|
| ||||||||
| Iowa (0.6%) |
|
| ||||||||
$ | 185,000 | Iowa Finance Authority, Revenue Bonds, FHLMC, FNMA, GNMA | 07/01/46 | 4.000 | % | $ | 183,656 | ||||
| 630,000 | Iowa Finance Authority, Revenue Bonds, FHLMC, FNMA, GNMA | 01/01/49 | 3.500 |
|
| 599,389 | ||||
| 4,205,000 | Iowa Finance Authority, Revenue Bonds, FHLMC, FNMA, GNMA | 01/01/50 | 3.750 |
|
| 4,064,246 | ||||
| Total Iowa |
|
| 4,847,291 | |||||||
|
|
| |||||||||
| Kentucky (2.5%) |
|
| ||||||||
| 5,000,000 | County of Trimble, Revenue Bonds | 11/01/27 | 1.350 |
|
| 4,294,919 | ||||
| 7,355,000 | Kentucky Public Energy Authority, Revenue Bonds1,2 | 12/01/49 | 4.000 |
|
| 7,226,888 | ||||
| 6,500,000 | Kentucky Public Energy Authority, Revenue Bonds (SOFR + 1.200%)2 | 08/01/52 | 4.758 |
|
| 6,226,418 | ||||
| 1,000,000 | Louisville/Jefferson County Metropolitan Government, Revenue Bonds1,2 | 10/01/47 | 5.000 |
|
| 1,019,785 | ||||
| Total Kentucky |
|
| 18,768,010 | |||||||
|
|
| |||||||||
| Louisiana (0.7%) |
|
| ||||||||
| 5,500,000 | Louisiana Public Facilities Authority, Revenue Bonds, NPFG (3-Month CME Term SOFR + 0.700%)2 | 02/15/36 | 4.470 |
|
| 4,953,483 | ||||
| Total Louisiana |
|
| 4,953,483 | |||||||
|
|
| |||||||||
| Maryland (0.6%) |
|
| ||||||||
| 4,400,000 | County of Montgomery, General Obligation Bonds2,4 | 11/01/23 | 3.920 |
|
| 4,400,000 | ||||
| Total Maryland |
|
| 4,400,000 | |||||||
|
|
| |||||||||
| Massachusetts (0.1%) |
|
| ||||||||
| 370,000 | Massachusetts Housing Finance Agency, Revenue Bonds | 06/01/34 | 3.300 |
|
| 326,281 | ||||
| 485,000 | Massachusetts Housing Finance Agency, Revenue Bonds | 12/01/36 | 3.450 |
|
| 414,567 | ||||
| Total Massachusetts |
|
| 740,848 | |||||||
|
|
| |||||||||
| Michigan (0.4%) |
|
| ||||||||
| 40,000 | Detroit City School District, General Obligation Bonds, BHAC, FGIC | 05/01/25 | 5.250 |
|
| 40,512 | ||||
| 3,250,000 | Michigan Strategic Fund, Revenue Bonds1,2 | 06/01/53 | 3.875 |
|
| 3,031,871 | ||||
| Total Michigan |
|
| 3,072,383 | |||||||
|
|
| |||||||||
| Minnesota (2.2%) |
|
| ||||||||
| 1,400,000 | Becker Independent School District No 726, General Obligation Bonds3 | 02/01/32 | 0.000 |
|
| 938,531 |
The accompanying notes are an integral part of these financial statements.
F I N A N C I A L S T A T E M E N T S O C T O B E R 3 1, 2 0 2 3 | 11 |
BBH INTERMEDIATE MUNICIPAL BOND FUND |
PORTFOLIO OF INVESTMENTS (continued) October 31, 2023 |
Principal | Maturity | Interest | Value | ||||||||
| MUNICIPAL BONDS (continued) |
|
| ||||||||
| Minnesota (continued) |
|
| ||||||||
$ | 1,300,000 | Duluth Independent School District No 709, General Obligation Bonds3 | 02/01/31 | 0.000 | % | $ | 896,626 | ||||
| 1,050,000 | Duluth Independent School District No 709, General Obligation Bonds3 | 02/01/32 | 0.000 |
|
| 684,910 | ||||
| 1,035,000 | Duluth Independent School District No 709, General Obligation Bonds3 | 02/01/33 | 0.000 |
|
| 637,915 | ||||
| 1,000,000 | Minnesota Housing Finance Agency, Revenue Bonds, FHLMC, FNMA, GNMA | 07/01/36 | 5.350 |
|
| 977,611 | ||||
| 639,236 | Minnesota Housing Finance Agency, Revenue Bonds, FHLMC, FNMA, GNMA | 03/01/47 | 2.930 |
|
| 536,938 | ||||
| 557,309 | Minnesota Housing Finance Agency, Revenue Bonds, FHA, FHLMC, FNMA, GNMA | 01/01/49 | 3.600 |
|
| 511,741 | ||||
| 2,000,000 | Minnesota Housing Finance Agency, Revenue Bonds, FHLMC, FNMA, GNMA | 01/01/49 | 4.250 |
|
| 1,958,129 | ||||
| 1,398,241 | Minnesota Housing Finance Agency, Revenue Bonds, FHLMC, FNMA, GNMA | 03/01/49 | 3.450 |
|
| 1,277,043 | ||||
| 625,776 | Minnesota Housing Finance Agency, Revenue Bonds, FHLMC, FNMA, GNMA | 06/01/49 | 3.150 |
|
| 538,755 | ||||
| 3,213,107 | Minnesota Housing Finance Agency, Revenue Bonds, FHLMC, FNMA, GNMA | 01/01/50 | 2.470 |
|
| 2,658,670 | ||||
| 1,485,000 | Minnesota Housing Finance Agency, Revenue Bonds, FHLMC, FNMA, GNMA | 01/01/50 | 3.750 |
|
| 1,438,254 | ||||
| 3,385,000 | Minnesota Housing Finance Agency, Revenue Bonds, FHLMC, FNMA, GNMA | 07/01/53 | 5.000 |
|
| 3,381,422 | ||||
| Total Minnesota |
|
| 16,436,545 | |||||||
|
|
| |||||||||
| Mississippi (0.1%) |
|
| ||||||||
| 1,000,000 | Mississippi Business Finance Corp., Revenue Bonds1,2 | 03/01/27 | 2.200 |
|
| 985,186 | ||||
| Total Mississippi |
|
| 985,186 | |||||||
|
|
| |||||||||
| Missouri (1.2%) |
|
| ||||||||
| 2,835,000 | Missouri Housing Development Commission, Revenue Bonds, FHLMC, FNMA, GNMA | 11/01/52 | 4.750 |
|
| 2,807,148 | ||||
| 5,915,000 | Missouri Housing Development Commission, Revenue Bonds, FHLMC, FNMA, GNMA | 05/01/53 | 5.750 |
|
| 6,069,361 | ||||
| Total Missouri |
|
| 8,876,509 | |||||||
|
|
| |||||||||
| Montana (0.3%) |
|
| ||||||||
| 665,000 | Montana Board of Housing, Revenue Bonds | 12/01/43 | 4.000 |
|
| 653,752 | ||||
| 1,600,000 | Montana Board of Housing, Revenue Bonds | 12/01/52 | 5.000 |
|
| 1,597,554 | ||||
| Total Montana |
|
| 2,251,306 |
The accompanying notes are an integral part of these financial statements.
12 |
BBH INTERMEDIATE MUNICIPAL BOND FUND |
PORTFOLIO OF INVESTMENTS (continued) October 31, 2023 |
Principal | Maturity | Interest | Value | ||||||||
| MUNICIPAL BONDS (continued) |
|
| ||||||||
| Nebraska (2.3%) |
|
| ||||||||
$ | 14,150,000 | Central Plains Energy Project, Revenue Bonds1,2 | 05/01/53 | 5.000 | % | $ | 13,984,621 | ||||
| 1,430,000 | Nebraska Investment Finance Authority, Revenue Bonds, FHLMC, FNMA, GNMA | 09/01/49 | 3.750 |
|
| 1,389,101 | ||||
| 1,745,000 | Nebraska Investment Finance Authority, Revenue Bonds, FHLMC, FNMA, GNMA | 09/01/49 | 4.000 |
|
| 1,690,601 | ||||
| Total Nebraska |
|
| 17,064,323 | |||||||
|
|
| |||||||||
| Nevada (0.3%) |
|
| ||||||||
| 2,000,000 | County of Clark, Revenue Bonds1,2 | 01/01/36 | 3.750 |
|
| 1,963,844 | ||||
| Total Nevada |
|
| 1,963,844 | |||||||
|
|
| |||||||||
| New Hampshire (0.5%) |
|
| ||||||||
| 1,000,000 | New Hampshire Business Finance Authority, Revenue Bonds | 08/01/24 | 3.125 |
|
| 985,721 | ||||
| 2,700,000 | New Hampshire Health & Education Facilities Authority Act, Revenue Bonds2,4 | 11/01/23 | 4.000 |
|
| 2,700,000 | ||||
| Total New Hampshire |
|
| 3,685,721 | |||||||
|
|
| |||||||||
| New Jersey (4.3%) |
|
| ||||||||
| 4,000,000 | New Jersey Economic Development Authority, Revenue Bonds5 | 06/15/34 | 5.000 |
|
| 4,122,097 | ||||
| 6,330,000 | New Jersey Economic Development Authority, Revenue Bonds5 | 06/15/35 | 5.000 |
|
| 6,486,303 | ||||
| 2,250,000 | New Jersey Economic Development Authority, Revenue Bonds5 | 06/15/36 | 5.250 |
|
| 2,327,572 | ||||
| 3,900,000 | New Jersey Health Care Facilities Financing Authority, Revenue Bonds2,4 | 11/01/23 | 3.750 |
|
| 3,900,000 | ||||
| 11,660,000 | New Jersey Transportation Trust Fund Authority, Revenue Bonds3 | 12/15/31 | 0.000 |
|
| 8,003,775 | ||||
| 3,535,000 | New Jersey Transportation Trust Fund Authority, Revenue Bonds, AGM3 | 12/15/33 | 0.000 |
|
| 2,234,125 | ||||
| 1,565,000 | New Jersey Transportation Trust Fund Authority, Revenue Bonds3 | 12/15/34 | 0.000 |
|
| 914,890 | ||||
| 5,120,000 | New Jersey Transportation Trust Fund Authority, Revenue Bonds3 | 12/15/34 | 0.000 |
|
| 2,993,123 | ||||
| 1,750,000 | Township of Ewing, General Obligation Bonds | 08/01/29 | 2.000 |
|
| 1,478,345 | ||||
| Total New Jersey |
|
| 32,460,230 | |||||||
|
|
| |||||||||
| New Mexico (2.1%) |
|
| ||||||||
| 8,600,000 | City of Farmington, Revenue Bonds | 04/01/29 | 1.800 |
|
| 6,895,696 | ||||
| 1,020,000 | New Mexico Mortgage Finance Authority, Revenue Bonds, FHLMC, FNMA, GNMA | 01/01/49 | 4.000 |
|
| 996,780 |
The accompanying notes are an integral part of these financial statements.
F I N A N C I A L S T A T E M E N T S O C T O B E R 3 1, 2 0 2 3 | 13 |
BBH INTERMEDIATE MUNICIPAL BOND FUND |
PORTFOLIO OF INVESTMENTS (continued) October 31, 2023 |
Principal | Maturity | Interest | Value | ||||||||
| MUNICIPAL BONDS (continued) |
|
| ||||||||
| New Mexico (continued) |
|
| ||||||||
$ | 7,000,000 | New Mexico Mortgage Finance Authority, Revenue Bonds, FHLMC, FNMA, GNMA5 | 09/01/54 | 6.500 | % | $ | 7,459,533 | ||||
| Total New Mexico |
|
| 15,352,009 | |||||||
|
|
| |||||||||
| New York (6.4%) |
|
| ||||||||
| 800,000 | City of New York, General Obligation Bonds2,4 | 11/01/23 | 4.000 |
|
| 800,000 | ||||
| 1,250,000 | Metropolitan Transportation Authority, Revenue Bonds | 11/15/32 | 5.000 |
|
| 1,250,877 | ||||
| 9,230,000 | Metropolitan Transportation Authority, Revenue Bonds (SOFR + 0.330%)2 | 11/01/35 | 3.888 |
|
| 9,207,087 | ||||
| 3,165,000 | Metropolitan Transportation Authority, Revenue Bonds | 11/15/37 | 5.000 |
|
| 3,136,148 | ||||
| 1,500,000 | Metropolitan Transportation Authority, Revenue Bonds1,2 | 11/15/45 | 5.000 |
|
| 1,529,240 | ||||
| 900,000 | New York City Transitional Finance Authority Future Tax Secured Revenue, Revenue Bonds2,4 | 11/01/23 | 4.000 |
|
| 900,000 | ||||
| 8,000,000 | Port Authority of New York & New Jersey, Revenue Bonds | 07/15/26 | 5.000 |
|
| 7,999,845 | ||||
| 5,655,000 | Port Authority of New York & New Jersey, Revenue Bonds | 10/01/31 | 2.000 |
|
| 4,266,071 | ||||
| 1,320,000 | Port Authority of New York & New Jersey, Revenue Bonds | 10/15/34 | 5.000 |
|
| 1,366,911 | ||||
| 1,500,000 | Port Authority of New York & New Jersey, Revenue Bonds | 07/15/35 | 5.000 |
|
| 1,539,599 | ||||
| 2,105,000 | Port Authority of New York & New Jersey, Revenue Bonds | 04/01/36 | 5.000 |
|
| 2,119,895 | ||||
| 1,395,000 | Port Authority of New York & New Jersey, Revenue Bonds | 08/01/36 | 5.000 |
|
| 1,421,240 | ||||
| 4,800,000 | Triborough Bridge & Tunnel Authority, Revenue Bonds2,4 | 11/01/23 | 4.030 |
|
| 4,800,000 | ||||
| 3,280,000 | Triborough Bridge & Tunnel Authority, Revenue Bonds (SOFR + 0.380%)2 | 01/01/32 | 3.938 |
|
| 3,270,269 | ||||
| 1,165,000 | Triborough Bridge & Tunnel Authority, Revenue Bonds3 | 11/15/35 | 0.000 |
|
| 653,650 | ||||
| 6,500,000 | Triborough Bridge & Tunnel Authority, Revenue Bonds3 | 11/15/36 | 0.000 |
|
| 3,398,627 | ||||
| Total New York |
|
| 47,659,459 | |||||||
|
|
| |||||||||
| North Carolina (3.7%) |
|
| ||||||||
| 1,700,000 | Charlotte-Mecklenburg Hospital Authority, Revenue Bonds2,4 | 11/01/23 | 3.970 |
|
| 1,700,000 | ||||
| 6,300,000 | Charlotte-Mecklenburg Hospital Authority, Revenue Bonds2,4 | 11/01/23 | 3.970 |
|
| 6,300,000 |
The accompanying notes are an integral part of these financial statements.
14 |
BBH INTERMEDIATE MUNICIPAL BOND FUND |
PORTFOLIO OF INVESTMENTS (continued) October 31, 2023 |
Principal | Maturity | Interest | Value | ||||||||
| MUNICIPAL BONDS (continued) |
|
| ||||||||
| North Carolina (continued) |
|
| ||||||||
$ | 1,680,000 | North Carolina Housing Finance Agency, Revenue Bonds | 07/01/47 | 4.000 | % | $ | 1,652,812 | ||||
| 4,150,000 | North Carolina Housing Finance Agency, Revenue Bonds, FHLMC, FNMA, GNMA | 07/01/48 | 4.000 |
|
| 4,065,321 | ||||
| 3,580,000 | North Carolina Housing Finance Agency, Revenue Bonds, FHLMC, FNMA, GNMA | 01/01/50 | 4.000 |
|
| 3,485,225 | ||||
| 1,975,000 | North Carolina Housing Finance Agency, Revenue Bonds | 07/01/50 | 4.000 |
|
| 1,919,272 | ||||
| 2,675,000 | North Carolina Housing Finance Agency, Revenue Bonds, FHLMC, FNMA, GNMA | 07/01/51 | 3.000 |
|
| 2,509,016 | ||||
| 6,000,000 | North Carolina Housing Finance Agency, Revenue Bonds, FHLMC, FNMA, GNMA | 01/01/54 | 5.500 |
|
| 6,142,131 | ||||
| Total North Carolina |
|
| 27,773,777 | |||||||
|
|
| |||||||||
| North Dakota (2.1%) |
|
| ||||||||
| 875,000 | North Dakota Housing Finance Agency, Revenue Bonds | 01/01/49 | 4.250 |
|
| 861,808 | ||||
| 2,800,000 | North Dakota Housing Finance Agency, Revenue Bonds | 07/01/49 | 4.250 |
|
| 2,754,041 | ||||
| 1,885,000 | North Dakota Housing Finance Agency, Revenue Bonds | 01/01/52 | 3.000 |
|
| 1,771,790 | ||||
| 3,975,000 | North Dakota Housing Finance Agency, Revenue Bonds | 01/01/53 | 4.000 |
|
| 3,839,012 | ||||
| 6,200,000 | North Dakota Housing Finance Agency, Revenue Bonds | 07/01/53 | 5.750 |
|
| 6,361,919 | ||||
| Total North Dakota |
|
| 15,588,570 | |||||||
|
|
| |||||||||
| Ohio (0.8%) |
|
| ||||||||
| 6,285,000 | Ohio Air Quality Development Authority, Revenue Bonds1,2 | 11/01/39 | 4.250 |
|
| 6,149,778 | ||||
| Total Ohio |
|
| 6,149,778 | |||||||
|
|
| |||||||||
| Oklahoma (0.8%) |
|
| ||||||||
| 2,975,000 | Oklahoma Housing Finance Agency, Revenue Bonds, FHLMC, FNMA, GNMA | 09/01/49 | 4.000 |
|
| 2,890,980 | ||||
| 3,000,000 | Oklahoma Housing Finance Agency, Revenue Bonds, FHLMC, FNMA, GNMA | 03/01/54 | 6.000 |
|
| 3,155,339 | ||||
| Total Oklahoma |
|
| 6,046,319 | |||||||
|
|
| |||||||||
| Oregon (5.6%) |
|
| ||||||||
| 3,150,000 | Clackamas & Washington Counties School District No 3, General Obligation Bonds3 | 06/15/36 | 0.000 |
|
| 1,614,843 | ||||
| 3,250,000 | Clackamas County School District No 12 North Clackamas, General Obligation Bonds3 | 06/15/34 | 0.000 |
|
| 1,854,856 |
The accompanying notes are an integral part of these financial statements.
F I N A N C I A L S T A T E M E N T S O C T O B E R 3 1, 2 0 2 3 | 15 |
BBH INTERMEDIATE MUNICIPAL BOND FUND |
PORTFOLIO OF INVESTMENTS (continued) October 31, 2023 |
Principal | Maturity | Interest | Value | ||||||||
| MUNICIPAL BONDS (continued) |
|
| ||||||||
| Oregon (continued) |
|
| ||||||||
$ | 1,500,000 | Lane County School District No 40 Creswell, General Obligation Bonds3 | 06/15/43 | 0.000 | % | $ | 515,175 | ||||
| 1,445,000 | Multnomah & Clackamas Counties School District No 10JT Gresham-Barlow, General Obligation Bonds3 | 06/15/32 | 0.000 |
|
| 962,584 | ||||
| 6,000,000 | Multnomah & Clackamas Counties School District No 10JT Gresham-Barlow, General Obligation Bonds3 | 06/15/36 | 0.000 |
|
| 3,171,922 | ||||
| 2,250,000 | Multnomah County School District No 40, General Obligation Bonds3 | 06/15/38 | 0.000 |
|
| 1,043,111 | ||||
| 21,000,000 | Multnomah County School District No 40, General Obligation Bonds3 | 06/15/43 | 0.000 |
|
| 7,035,693 | ||||
| 12,000,000 | Multnomah County School District No 7 Reynolds, General Obligation Bonds3 | 06/15/35 | 0.000 |
|
| 6,446,024 | ||||
| 2,000,000 | Port of Portland Airport Revenue, Revenue Bonds | 07/01/36 | 5.000 |
|
| 2,008,759 | ||||
| 1,045,000 | Salem-Keizer School District No 24J, General Obligation Bonds3 | 06/15/35 | 0.000 |
|
| 580,734 | ||||
| 1,905,000 | Tillamook Bay Community College District, General Obligation Bonds3 | 06/15/38 | 0.000 |
|
| 883,167 | ||||
| 3,750,000 | Washington & Multnomah Counties School District No 48J Beaverton, General Obligation Bonds3 | 06/15/31 | 0.000 |
|
| 2,668,635 | ||||
| 3,250,000 | Washington & Multnomah Counties School District No 48J Beaverton, General Obligation Bonds3 | 06/15/34 | 0.000 |
|
| 1,986,695 | ||||
| 2,000,000 | Washington & Multnomah Counties School District No 48J Beaverton, General Obligation Bonds3 | 06/15/37 | 0.000 |
|
| 1,008,867 | ||||
| 1,800,000 | Washington & Multnomah Counties School District No 48J Beaverton, General Obligation Bonds3 | 06/15/41 | 0.000 |
|
| 694,708 | ||||
| 1,500,000 | Washington Clackamas & Yamhill Counties School District No 88J, General Obligation Bonds3 | 06/15/31 | 0.000 |
|
| 1,044,651 | ||||
| 1,055,000 | Washington Clackamas & Yamhill Counties School District No 88J, General Obligation Bonds3 | 06/15/33 | 0.000 |
|
| 656,261 | ||||
| 3,330,000 | Washington Clackamas & Yamhill Counties School District No 88J, General Obligation Bonds3 | 06/15/37 | 0.000 |
|
| 1,601,405 | ||||
| 6,000,000 | Washington Clackamas & Yamhill Counties School District No 88J, General Obligation Bonds3 | 06/15/39 | 0.000 |
|
| 2,544,755 |
The accompanying notes are an integral part of these financial statements.
16 |
BBH INTERMEDIATE MUNICIPAL BOND FUND |
PORTFOLIO OF INVESTMENTS (continued) October 31, 2023 |
Principal | Maturity | Interest | Value | ||||||||
| MUNICIPAL BONDS (continued) |
|
| ||||||||
| Oregon (continued) |
|
| ||||||||
$ | 4,800,000 | Washington Clackamas & Yamhill Counties School District No 88J, General Obligation Bonds3 | 06/15/40 | 0.000 | % | $ | 1,915,965 | ||||
| 5,000,000 | Washington Clackamas & Yamhill Counties School District No 88J, General Obligation Bonds3 | 06/15/41 | 0.000 |
|
| 1,877,533 | ||||
| Total Oregon |
|
| 42,116,343 | |||||||
|
|
| |||||||||
| Other Territory (0.1%) |
|
| ||||||||
| 915,000 | FHLMC Multifamily VRD Certificates, Revenue Bonds | 05/15/27 | 2.304 |
|
| 856,593 | ||||
| Total Other Territory |
|
| 856,593 | |||||||
|
|
| |||||||||
| Pennsylvania (3.2%) |
|
| ||||||||
| 1,980,000 | Allegheny County Airport Authority, Revenue Bonds, AGM | 01/01/35 | 5.000 |
|
| 2,010,361 | ||||
| 1,000,000 | Allegheny County Airport Authority, Revenue Bonds, AGM | 01/01/36 | 5.250 |
|
| 1,026,419 | ||||
| 1,000,000 | Allegheny County Airport Authority, Revenue Bonds, AGM | 01/01/37 | 5.250 |
|
| 1,017,834 | ||||
| 5,555,000 | Bethlehem Area School District Authority, Revenue Bonds (SOFR + 0.350%)2 | 07/01/31 | 3.908 |
|
| 5,424,222 | ||||
| 10,700,000 | Pennsylvania Economic Development Financing Authority, Revenue Bonds1,2 | 08/01/37 | 0.580 |
|
| 10,286,683 | ||||
| 2,500,000 | School District of Philadelphia, General Obligation Bonds | 09/01/34 | 5.000 |
|
| 2,516,369 | ||||
| 1,470,000 | School District of Philadelphia, General Obligation Bonds | 09/01/36 | 4.000 |
|
| 1,330,191 | ||||
| Total Pennsylvania |
|
| 23,612,079 | |||||||
|
|
| |||||||||
| South Carolina (0.8%) |
|
| ||||||||
| 850,000 | South Carolina State Housing Finance & Development Authority, Revenue Bonds | 07/01/34 | 2.650 |
|
| 687,574 | ||||
| 3,000,000 | South Carolina State Housing Finance & Development Authority, Revenue Bonds | 01/01/54 | 5.750 |
|
| 3,114,498 | ||||
| 2,000,000 | South Carolina State Housing Finance & Development Authority, Revenue Bonds | 01/01/54 | 6.000 |
|
| 2,099,404 | ||||
| Total South Carolina |
|
| 5,901,476 | |||||||
|
|
| |||||||||
| South Dakota (2.3%) |
|
| ||||||||
| 40,000 | South Dakota Housing Development Authority, Revenue Bonds | 11/01/44 | 4.000 |
|
| 39,902 | ||||
| 705,000 | South Dakota Housing Development Authority, Revenue Bonds | 11/01/45 | 4.000 |
|
| 699,378 |
The accompanying notes are an integral part of these financial statements.
F I N A N C I A L S T A T E M E N T S O C T O B E R 3 1, 2 0 2 3 | 17 |
BBH INTERMEDIATE MUNICIPAL BOND FUND |
PORTFOLIO OF INVESTMENTS (continued) October 31, 2023 |
Principal | Maturity | Interest | Value | ||||||||
| MUNICIPAL BONDS (continued) |
|
| ||||||||
| South Dakota (continued) |
|
| ||||||||
$ | 1,795,000 | South Dakota Housing Development Authority, Revenue Bonds | 11/01/46 | 3.500 | % | $ | 1,767,883 | ||||
| 1,475,000 | South Dakota Housing Development Authority, Revenue Bonds | 11/01/48 | 4.500 |
|
| 1,458,275 | ||||
| 2,295,000 | South Dakota Housing Development Authority, Revenue Bonds | 11/01/49 | 4.000 |
|
| 2,231,801 | ||||
| 4,840,000 | South Dakota Housing Development Authority, Revenue Bonds | 05/01/53 | 5.000 |
|
| 4,832,463 | ||||
| 5,580,000 | South Dakota Housing Development Authority, Revenue Bonds, FHLMC, FNMA, GNMA | 05/01/54 | 6.000 |
|
| 5,770,067 | ||||
| Total South Dakota |
|
| 16,799,769 | |||||||
|
|
| |||||||||
| Tennessee (4.5%) |
|
| ||||||||
| 1,200,000 | Metropolitan Nashville Airport Authority, | 07/01/34 | 5.250 |
|
| 1,248,986 | ||||
| 1,125,000 | Metropolitan Nashville Airport Authority, | 07/01/35 | 5.250 |
|
| 1,164,974 | ||||
| 5,575,000 | New Memphis Arena Public Building Authority, Revenue Bonds3 | 04/01/29 | 0.000 |
|
| 4,817,185 | ||||
| 1,750,000 | New Memphis Arena Public Building Authority, Revenue Bonds3 | 04/01/33 | 0.000 |
|
| 1,077,920 | ||||
| 3,000,000 | New Memphis Arena Public Building Authority, Revenue Bonds3 | 04/01/35 | 0.000 |
|
| 1,649,034 | ||||
| 10,800,000 | Public Building Authority of Blount County Tennessee, Revenue Bonds2,4 | 11/01/23 | 4.000 |
|
| 10,800,000 | ||||
| 1,000,000 | Tennessee Energy Acquisition Corp., Revenue Bonds | 11/01/28 | 5.000 |
|
| 1,003,557 | ||||
| 1,215,000 | Tennessee Housing Development Agency, | 01/01/43 | 4.000 |
|
| 1,192,058 | ||||
| 1,080,000 | Tennessee Housing Development Agency, | 07/01/48 | 4.000 |
|
| 1,061,423 | ||||
| 1,435,000 | Tennessee Housing Development Agency, | 07/01/49 | 4.250 |
|
| 1,411,653 | ||||
| 3,000,000 | Tennessee Housing Development Agency, | 01/01/53 | 5.000 |
|
| 2,995,150 | ||||
| 5,000,000 | Tennessee Housing Development Agency, | 01/01/54 | 6.250 |
|
| 5,246,616 | ||||
| Total Tennessee |
|
| 33,668,556 | |||||||
|
|
| |||||||||
| Texas (13.5%) |
|
| ||||||||
| 1,800,000 | City of Austin Airport System Revenue, Revenue Bonds | 11/15/36 | 5.000 |
|
| 1,800,419 | ||||
| 1,120,000 | City of Houston Airport System Revenue, Revenue Bonds | 07/01/24 | 5.000 |
|
| 1,123,085 |
The accompanying notes are an integral part of these financial statements.
18 |
BBH INTERMEDIATE MUNICIPAL BOND FUND |
PORTFOLIO OF INVESTMENTS (continued) October 31, 2023 |
Principal | Maturity | Interest | Value | ||||||||
| MUNICIPAL BONDS (continued) |
|
| ||||||||
| Texas (continued) |
|
| ||||||||
$ | 1,170,000 | City of Houston Airport System Revenue, Revenue Bonds | 07/01/25 | 5.000 | % | $ | 1,178,617 | ||||
| 2,000,000 | City of Houston Airport System Revenue, Revenue Bonds | 07/01/31 | 5.000 |
|
| 2,042,435 | ||||
| 3,355,000 | City of Houston Airport System Revenue, Revenue Bonds, AGM | 07/01/36 | 5.000 |
|
| 3,398,004 | ||||
| 3,640,000 | Fort Bend Independent School District, General Obligation Bonds1,2 | 08/01/51 | 0.720 |
|
| 3,162,377 | ||||
| 1,750,000 | Goose Creek Consolidated Independent School District, General Obligation Bonds1,2 | 02/15/35 | 0.600 |
|
| 1,589,149 | ||||
| 1,030,000 | Little Elm Independent School District, General Obligation Bonds1,2 | 08/15/48 | 0.680 |
|
| 967,566 | ||||
| 1,025,000 | Love Field Airport Modernization Corp., Revenue Bonds | 11/01/25 | 5.000 |
|
| 1,032,061 | ||||
| 2,500,000 | Love Field Airport Modernization Corp., Revenue Bonds | 11/01/30 | 5.000 |
|
| 2,539,775 | ||||
| 1,500,000 | Love Field Airport Modernization Corp., Revenue Bonds | 11/01/34 | 5.000 |
|
| 1,489,251 | ||||
| 1,000,000 | Love Field Airport Modernization Corp., Revenue Bonds | 11/01/35 | 5.000 |
|
| 984,644 | ||||
| 4,260,000 | Medina Valley Independent School District, General Obligation Bonds1,2 | 02/15/51 | 0.820 |
|
| 3,873,698 | ||||
| 520,000 | Texas Department of Housing & Community Affairs, Revenue Bonds, GNMA | 09/01/35 | 2.150 |
|
| 424,783 | ||||
| 2,220,000 | Texas Department of Housing & Community Affairs, Revenue Bonds, GNMA | 07/01/37 | 2.150 |
|
| 1,578,619 | ||||
| 705,000 | Texas Department of Housing & Community Affairs, Revenue Bonds, GNMA | 07/01/37 | 4.400 |
|
| 664,440 | ||||
| 1,575,000 | Texas Department of Housing & Community Affairs, Revenue Bonds, GNMA | 01/01/38 | 4.300 |
|
| 1,540,415 | ||||
| 5,725,000 | Texas Department of Housing & Community Affairs, Revenue Bonds, GNMA | 07/01/38 | 4.400 |
|
| 5,304,563 | ||||
| 1,000,000 | Texas Department of Housing & Community Affairs, Revenue Bonds, GNMA | 09/01/38 | 4.350 |
|
| 978,372 | ||||
| 8,974,483 | Texas Department of Housing & Community Affairs, Revenue Bonds, FHLMC, FNMA, GNMA | 09/01/47 | 2.835 |
|
| 6,910,515 | ||||
| 1,185,000 | Texas Department of Housing & Community Affairs, Revenue Bonds, GNMA | 03/01/50 | 4.000 |
|
| 1,146,325 | ||||
| 1,695,000 | Texas Department of Housing & Community Affairs, Revenue Bonds, GNMA | 03/01/51 | 3.500 |
|
| 1,608,880 | ||||
| 2,490,000 | Texas Department of Housing & Community Affairs, Revenue Bonds, GNMA | 01/01/53 | 5.750 |
|
| 2,559,084 |
The accompanying notes are an integral part of these financial statements.
F I N A N C I A L S T A T E M E N T S O C T O B E R 3 1, 2 0 2 3 | 19 |
BBH INTERMEDIATE MUNICIPAL BOND FUND |
PORTFOLIO OF INVESTMENTS (continued) October 31, 2023 |
Principal | Maturity | Interest | Value | |||||||
| MUNICIPAL BONDS (continued) |
| ||||||||
| Texas (continued) |
| ||||||||
$ | 3,460,000 | Texas Department of Housing & Community Affairs, Revenue Bonds, GNMA | 03/01/53 | 6.000% | $ | 3,623,601 | ||||
| 11,805,000 | Texas Municipal Gas Acquisition & Supply Corp. I, Revenue Bonds (3-Month CME Term SOFR + 0.700%)2 | 12/15/26 | 4.500 |
| 11,656,706 | ||||
| 11,675,000 | Texas Municipal Gas Acquisition & Supply Corp. I, Revenue Bonds | 12/15/26 | 6.250 |
| 11,899,977 | ||||
| 10,520,000 | Texas Municipal Gas Acquisition & Supply Corp. II, Revenue Bonds (3-Month CME Term SOFR + 0.863%)2 | 09/15/27 | 4.433 |
| 10,287,811 | ||||
| 9,660,000 | Texas Municipal Gas Acquisition & Supply Corp. II, Revenue Bonds (3-Month CME Term SOFR + 1.045%)2 | 09/15/27 | 4.670 |
| 9,505,470 | ||||
| 2,790,000 | Texas Municipal Gas Acquisition & Supply Corp. II, Revenue Bonds (SIFMA Municipal Swap Index Yield + 0.550%)2 | 09/15/27 | 4.740 |
| 2,748,983 | ||||
| 3,185,000 | Tomball Independent School District, General Obligation Bonds | 02/15/36 | 3.875 |
| 2,976,274 | ||||
| Total Texas |
| 100,595,899 | |||||||
|
| |||||||||
| Utah (0.9%) |
| ||||||||
| 6,500,000 | County of Utah, Revenue Bonds2,4 | 11/01/23 | 3.900 |
| 6,500,000 | ||||
| Total Utah |
| 6,500,000 | |||||||
|
| |||||||||
| Virginia (1.9%) |
| ||||||||
| 2,750,000 | Amelia County Industrial Development Authority, Revenue Bonds | 04/01/27 | 1.450 |
| 2,435,908 | ||||
| 8,700,000 | Wise County Industrial Development Authority, Revenue Bonds1,2 | 10/01/40 | 0.750 |
| 7,967,502 | ||||
| 3,700,000 | York County Economic Development Authority, Revenue Bonds1,2 | 05/01/33 | 3.650 |
| 3,557,552 | ||||
| Total Virginia |
| 13,960,962 | |||||||
|
| |||||||||
| Washington (2.3%) |
| ||||||||
| 1,590,000 | Port of Seattle, Revenue Bonds | 06/01/25 | 3.450 |
| 1,555,388 | ||||
| 1,500,000 | Port of Seattle, Revenue Bonds | 06/01/26 | 3.600 |
| 1,447,030 | ||||
| 3,750,000 | Port of Seattle, Revenue Bonds | 04/01/27 | 5.000 |
| 3,761,298 | ||||
| 425,000 | Port of Seattle, Revenue Bonds | 06/01/27 | 3.750 |
| 407,505 | ||||
| 5,050,000 | Port of Seattle, Revenue Bonds | 08/01/34 | 5.000 |
| 5,171,103 | ||||
| 1,415,000 | Port of Seattle, Revenue Bonds | 08/01/35 | 5.000 |
| 1,440,852 | ||||
| 3,000,000 | Port of Seattle, Revenue Bonds | 04/01/39 | 5.000 |
| 2,970,852 | ||||
| 295,000 | Washington State Housing Finance Commission, Revenue Bonds, FHLMC, FNMA, GNMA | 12/01/47 | 4.000 |
| 294,464 | ||||
| Total Washington |
| 17,048,492 |
The accompanying notes are an integral part of these financial statements.
20 |
BBH INTERMEDIATE MUNICIPAL BOND FUND |
PORTFOLIO OF INVESTMENTS (continued) October 31, 2023 |
Principal | Maturity | Interest | Value | |||||||||
| MUNICIPAL BONDS (continued) |
|
|
| ||||||||
| Wisconsin (5.0%) |
|
|
| ||||||||
$ | 300,000 | County of Milwaukee Airport Revenue, Revenue Bonds | 12/01/28 | 5.250 | % | $ | 300,275 |
| ||||
| 2,860,000 | County of Milwaukee Airport Revenue, Revenue Bonds | 12/01/30 | 5.000 |
|
| 2,862,238 |
| ||||
| 2,060,000 | County of Milwaukee Airport Revenue, Revenue Bonds | 12/01/31 | 5.000 |
|
| 2,054,773 |
| ||||
| 1,100,000 | Public Finance Authority, Revenue Bonds2,4 | 11/01/23 | 3.870 |
|
| 1,100,000 |
| ||||
| 5,345,000 | Public Finance Authority, Revenue Bonds1,2 | 10/01/46 | 3.700 |
|
| 5,096,311 |
| ||||
| 7,700,000 | University of Wisconsin Hospitals & Clinics, Revenue Bonds2,4 | 11/01/23 | 4.000 |
|
| 7,700,000 |
| ||||
| 1,000,000 | Wisconsin Health & Educational Facilities Authority, Revenue Bonds2,4 | 11/01/23 | 4.000 |
|
| 1,000,000 |
| ||||
| 10,000,000 | Wisconsin Health & Educational Facilities Authority, Revenue Bonds2,4 | 11/01/23 | 4.000 |
|
| 10,000,000 |
| ||||
| 3,000,000 | Wisconsin Health & Educational Facilities Authority, Revenue Bonds | 08/15/36 | 4.000 |
|
| 2,773,639 |
| ||||
| 4,950,000 | Wisconsin Health & Educational Facilities Authority, Revenue Bonds | 11/15/43 | 4.000 |
|
| 4,275,246 |
| ||||
| Total Wisconsin |
|
| 37,162,482 |
| |||||||
|
|
|
| |||||||||
| Wyoming (0.8%) |
|
|
| ||||||||
| 2,395,000 | Wyoming Community Development Authority, Revenue Bonds | 12/01/34 | 3.500 |
|
| 2,129,176 |
| ||||
| 1,665,000 | Wyoming Community Development Authority, Revenue Bonds | 12/01/48 | 4.000 |
|
| 1,629,550 |
| ||||
| 970,000 | Wyoming Community Development Authority, Revenue Bonds | 12/01/49 | 3.750 |
|
| 953,551 |
| ||||
| 1,160,000 | Wyoming Community Development Authority, Revenue Bonds, FHLMC, FNMA, GNMA | 06/01/50 | 3.000 |
|
| 1,104,872 |
| ||||
| Total Wyoming |
|
| 5,817,149 |
| |||||||
| Total Municipal Bonds |
|
| 769,856,597 |
| |||||||
|
|
|
| |||||||||
| TOTAL INVESTMENTS (Identified cost $809,995,755)6 | 103.2 | % | $ | 769,856,597 |
| ||||||
| LIABILITIES IN EXCESS OF CASH AND OTHER ASSETS | (3.2 | )% |
| (24,006,521 | ) | ||||||
| NET ASSETS | 100.00 | % | $ | 745,850,076 |
|
The accompanying notes are an integral part of these financial statements.
F I N A N C I A L S T A T E M E N T S O C T O B E R 3 1, 2 0 2 3 | 21 |
BBH INTERMEDIATE MUNICIPAL BOND FUND |
PORTFOLIO OF INVESTMENTS (continued) October 31, 2023 |
1 This variable rate security is based on a predetermined schedule and the rate at year end also represents the reference rate at year end.
2 Variable rate instrument. Interest rates change on specific dates (such as coupon or interest payment date). The yield shown represents the October 31, 2023 coupon or interest rate.
3 Security issued with zero coupon. Income is recognized through accretion of discount.
4 Variable rate demand note. The maturity date reflects the demand repayment dates. Interest rates change on specific dates (such as coupon or interest payment date). The yield shown represents the coupon or interest rate as of October 31, 2023.
5 Represent a security purchased on a when-issued basis.
6 The aggregate cost for federal income tax purposes is $810,020,977, the aggregate gross unrealized appreciation is $288,866 and the aggregate gross unrealized depreciation is $40,453,246, resulting in net unrealized depreciation of $40,164,380.
Abbreviations: |
AGM − Assured Guaranty Municipal Corporation. |
BAM − Build America Mutual. |
BHAC − Berkshire Hathaway Assurance Corporation. |
CME − Chicago Mercantile Exchange. |
FGIC − Financial Guaranty Insurance Company. |
FHA − Federal Housing Administration. |
FHLMC − Federal Home Loan Mortgage Corporation. |
FNMA − Federal National Mortgage Association. |
GNMA − Government National Mortgage Association. |
NPFG − National Public Finance Guarantee Corporation. |
SIFMA − Securities Industry and Financial Markets Association. |
SOFR − Secured Overnight Financing Rate. |
The accompanying notes are an integral part of these financial statements.
22 |
BBH INTERMEDIATE MUNICIPAL BOND FUND |
PORTFOLIO OF INVESTMENTS (continued) October 31, 2023 |
Fair Value Measurements
The Fund is required to disclose information regarding the fair value measurements of the Fund’s assets and liabilities. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The disclosure requirement established a three-tier hierarchy to maximize the use of observable market data and minimize the use of unobservable inputs and to establish classification of fair value measurements for disclosure purposes. Inputs refer broadly to the assumptions that market participants would use in pricing the asset or liability, including, for example, the risk inherent in a particular valuation technique used to measure fair value, including the model and/or the risk inherent in the inputs to the valuation technique. Inputs may be observable or unobservable. Observable inputs are inputs that reflect the assumptions market participants would use in pricing the asset or liability developed based on market data obtained from sources independent of the reporting entity. Unobservable inputs are inputs that reflect the Fund’s own considerations about the assumptions market participants would use in pricing the asset or liability developed based on the best information available in the circumstances.
Authoritative guidance establishes three levels of the fair value hierarchy as follows:
— | Level 1 – unadjusted quoted prices in active markets for identical assets and liabilities. |
— | Level 2 – significant other observable inputs (including quoted prices for similar assets and liabilities, interest rates, prepayment speeds, credit risk, etc.). |
— | Level 3 – significant unobservable inputs (including the Fund’s own assumptions in determining the fair value of assets and liabilities). |
Inputs are used in applying the various valuation techniques and broadly refer to the assumptions that market participants use to make valuation decisions, including assumptions about risk. Inputs may include price information, specific and broad credit data, liquidity statistics, and other factors. A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. However, the determination of what constitutes “observable” requires judgment by the investment adviser. The investment adviser considers observable data to be that market data which is readily available, regularly distributed or updated, reliable and verifiable, not proprietary, and provided by independent sources that are actively involved in the relevant market. The categorization of a financial instrument within the hierarchy is based upon the pricing transparency of the instrument and does not necessarily correspond to the investment adviser’s perceived risk of that instrument.
Financial assets within Level 1 are based on quoted market prices in active markets. The Fund does not adjust the quoted price for these instruments.
Financial instruments that trade in markets that are not considered to be active but are valued based on quoted market prices, dealer quotations or alternative pricing sources supported by observable inputs are classified within Level 2. These include municipal bonds, investment-grade corporate bonds, U.S. Treasury notes and bonds, and certain non-U.S. sovereign obligations and over-the-counter derivatives. As Level 2 financial
The accompanying notes are an integral part of these financial statements.
F I N A N C I A L S T A T E M E N T S O C T O B E R 3 1, 2 0 2 3 | 23 |
BBH INTERMEDIATE MUNICIPAL BOND FUND |
PORTFOLIO OF INVESTMENTS (continued) October 31, 2023 |
assets include positions that are not traded in active markets and/or are subject to transfer restrictions, valuations may be adjusted to reflect illiquidity and/or non-transferability, which are generally based on available market information.
Financial assets classified within Level 3 have significant unobservable inputs, as they trade infrequently. Level 3 financial assets include private equity and certain corporate debt securities.
Because of the inherent uncertainties of valuation, the values reflected in the financial statements may materially differ from the value received upon the actual sale of those investments.
The following table summarizes the valuation of the Fund’s investments by the above fair value hierarchy levels as of October 31, 2023.
Investments, at value | Unadjusted | Significant | Significant | Balance as of | ||||||||
Municipal Bonds* | $ | — | $ | 769,856,597 | $ | — | $ | 769,856,597 | ||||
Total Investment, at value | $ | — | $ | 769,856,597 | $ | — | $ | 769,856,597 |
____________
* For geographical breakdown of municipal bond investments, refer to the Portfolio of Investments.
The accompanying notes are an integral part of these financial statements.
24 |
BBH INTERMEDIATE MUNICIPAL BOND FUND |
STATEMENT OF ASSETS AND LIABILITIES October 31, 2023 |
ASSETS: |
| ||||||
Investments in securities, at value (Cost $809,995,755) | $ | 769,856,597 | |||||
Cash |
| 70,128 | |||||
Receivables for: |
| ||||||
Interest |
| 6,171,154 | |||||
Shares sold |
| 753,598 | |||||
Interest from Custodian |
| 2,170 | |||||
Total Assets |
| 776,853,647 | |||||
| |||||||
LIABILITIES: |
| ||||||
Payables for: |
| ||||||
Investments purchased |
| 28,792,587 | |||||
Shares redeemed |
| 1,761,776 | |||||
Net investment advisory and administrative fees |
| 241,324 | |||||
Professional fees |
| 80,255 | |||||
Dividends declared |
| 73,781 | |||||
Custody and fund accounting fees |
| 31,038 | |||||
Shareholder servicing fees |
| 7,857 | |||||
Transfer agent fees |
| 4,108 | |||||
Board of Trustees’ fees |
| 1,354 | |||||
Accrued expenses and other liabilities |
| 9,491 | |||||
Total Liabilities |
| 31,003,571 | |||||
| |||||||
Net Assets | $ | 745,850,076 | |||||
Net Assets Consist of: |
| ||||||
Paid-in capital | $ | 811,092,010 | |||||
Accumulated deficit |
| (65,241,934) | |||||
Net Assets | $ | 745,850,076 | |||||
| |||||||
NET ASSET VALUE AND OFFERING PRICE PER SHARE |
| ||||||
CLASS N SHARES |
| ||||||
($47,047,609 ÷ 4,829,416 shares outstanding) |
|
| $ | 9.74 | |||
CLASS I SHARES |
| ||||||
($698,802,467 ÷ 71,820,274 shares outstanding) |
|
| $ | 9.73 |
The accompanying notes are an integral part of these financial statements.
F I N A N C I A L S T A T E M E N T S O C T O B E R 3 1, 2 0 2 3 | 25 |
BBH INTERMEDIATE MUNICIPAL BOND FUND |
STATEMENT OF OPERATIONS For the year ended October 31, 2023 |
NET INVESTMENT INCOME: |
|
| ||
Income: |
|
| ||
Interest income | $ | 25,311,239 |
| |
Interest income from Custodian |
| 40,251 |
| |
Total Income |
| 25,351,490 |
| |
|
| |||
Expenses: |
|
| ||
Investment advisory and administrative fees |
| 2,909,381 |
| |
Custody and fund accounting fees |
| 131,564 |
| |
Shareholder servicing fees |
| 92,964 |
| |
Professional fees |
| 89,397 |
| |
Board of Trustees’ fees |
| 77,624 |
| |
Transfer agent fees |
| 46,787 |
| |
Miscellaneous expenses |
| 86,609 |
| |
Total Expenses |
| 3,434,326 |
| |
Investment advisory and administrative fee waiver |
| (33,916 | ) | |
Net Expenses |
| 3,400,410 |
| |
Net Investment Income |
| 21,951,080 |
| |
|
| |||
NET REALIZED AND UNREALIZED GAIN: |
|
| ||
Net realized loss on investments in securities |
| (14,828,253 | ) | |
Net change in unrealized appreciation/(depreciation) on investments in securities |
| 15,410,196 |
| |
Net Realized and Unrealized Gain |
| 581,943 |
| |
Net Increase in Net Assets Resulting from Operations | $ | 22,533,023 |
|
The accompanying notes are an integral part of these financial statements.
26 |
BBH INTERMEDIATE MUNICIPAL BOND FUND |
STATEMENTS OF CHANGES IN NET ASSETS |
For the years ended | ||||||||
2023 | 2022 | |||||||
INCREASE/(DECREASE) IN NET ASSETS FROM: |
|
|
|
| ||||
Operations: |
|
|
|
| ||||
Net investment income | $ | 21,951,080 |
| $ | 13,095,785 |
| ||
Net realized loss on investments in securities |
| (14,828,253 | ) |
| (10,290,517 | ) | ||
Net change in unrealized appreciation/(depreciation) on investments in securities |
| 15,410,196 |
|
| (82,490,952 | ) | ||
Net increase/(decrease) in net assets resulting from operations |
| 22,533,023 |
|
| (79,685,684 | ) | ||
|
|
|
| |||||
Dividends and distributions declared: |
|
|
|
| ||||
Class N |
| (1,317,041 | ) |
| (1,010,867 | ) | ||
Class I |
| (20,635,433 | ) |
| (12,703,639 | ) | ||
Total dividends and distributions declared |
| (21,952,474 | ) |
| (13,714,506 | ) | ||
|
|
|
| |||||
Share transactions: |
|
|
|
| ||||
Proceeds from sales of shares* |
| 281,950,065 |
|
| 237,067,693 |
| ||
Net asset value of shares issued to shareholders for reinvestment of dividends and distributions |
| 7,391,738 |
|
| 5,126,456 |
| ||
Proceeds from short-term redemption fees and entrance fees |
| 10,858 |
|
| 6,231 |
| ||
Cost of shares redeemed* |
| (195,992,872 | ) |
| (367,070,691 | ) | ||
Net increase/(decrease) in net assets resulting from share transactions |
| 93,359,789 |
|
| (124,870,311 | ) | ||
Total increase/(decrease) in net assets |
| 93,940,338 |
|
| (218,270,501 | ) | ||
|
|
|
| |||||
NET ASSETS: |
|
|
|
| ||||
Beginning of year |
| 651,909,738 |
|
| 870,180,239 |
| ||
End of year | $ | 745,850,076 |
| $ | 651,909,738 |
|
____________
* Includes share exchanges. See Note 5 in Notes to Financial Statements.
The accompanying notes are an integral part of these financial statements.
F I N A N C I A L S T A T E M E N T S O C T O B E R 3 1, 2 0 2 3 | 27 |
BBH INTERMEDIATE MUNICIPAL BOND FUND |
FINANCIAL HIGHLIGHTS Selected per share data and ratios for a Class N share outstanding throughout each year. |
For the years ended October 31, | |||||||||||||||||||||||||||
2023 | 2022 | 2021 | 2020 | 2019 | |||||||||||||||||||||||
Net asset value, beginning of year |
| $ | 9.69 |
|
|
| $ | 10.93 |
|
|
| $ | 10.96 |
|
|
| $ | 10.76 |
|
|
| $ | 10.15 |
|
| ||
Income from investment operations: |
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Net investment income1 |
| 0.29 |
|
| 0.15 |
|
| 0.13 |
|
| 0.17 |
|
| 0.21 |
| ||||||||||||
Net realized and unrealized gain/(loss) |
| 0.05 |
|
| (1.22 | ) |
| (0.02 | ) |
| 0.25 |
|
| 0.62 |
| ||||||||||||
Total income/(loss) from investment operations. |
| 0.34 |
|
| (1.07 | ) |
| 0.11 |
|
| 0.42 |
|
| 0.83 |
| ||||||||||||
Dividends and distributions to shareholders: |
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
From net investment income |
| (0.29 | ) |
| (0.16 | ) |
| (0.13 | ) |
| (0.17 | ) |
| (0.21 | ) | ||||||||||||
From net realized gains |
| — |
|
| (0.01 | ) |
| (0.01 | ) |
| (0.05 | ) |
| (0.01) |
| ||||||||||||
Total dividends and distributions to shareholders |
| (0.29 | ) |
| (0.17 | ) |
| (0.14 | ) |
| (0.22 | ) |
| (0.22 | ) | ||||||||||||
Short-term redemption fees and entrance fees1 |
| 0.002 |
|
| 0.002 |
|
| 0.002 |
|
| 0.002 |
|
| 0.002 |
| ||||||||||||
Net asset value, end of year | $ | 9.74 |
| $ | 9.69 |
| $ | 10.93 |
| $ | 10.96 |
| $ | 10.76 |
| ||||||||||||
Total return3 |
| 3.39 | % |
| (9.91 | )% |
| 1.01 | % |
| 4.00 | % |
| 8.21 | % | ||||||||||||
Ratios/Supplemental data: |
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Net assets, end of year (in millions) | $ | 47 |
| $ | 55 |
| $ | 82 |
| $ | 92 |
| $ | 54 |
| ||||||||||||
Ratio of expenses to average net assets before reductions |
| 0.72 | % |
| 0.70 | % |
| 0.69 | % |
| 0.71 | % |
| 0.77 | % | ||||||||||||
Fee waiver4 |
| (0.07 | )% |
| (0.05 | )% |
| (0.04 | )% |
| (0.06 | )% |
| (0.12 | )% | ||||||||||||
Expense offset arrangement |
| — | % |
| — | % |
| — | % |
| — | % |
| (0.00 | )%5 | ||||||||||||
Ratio of expenses to average net assets after reductions |
| 0.65 | % |
| 0.65 | % |
| 0.65 | % |
| 0.65 | % |
| 0.65 | % | ||||||||||||
Ratio of net investment income to average net assets |
| 2.83 | % |
| 1.46 | % |
| 1.18 | % |
| 1.58 | % |
| 2.01 | % | ||||||||||||
Portfolio turnover rate |
| 164 | % |
| 135 | % |
| 45 | % |
| 32 | % |
| 104 | % | ||||||||||||
Portfolio turnover rate6 |
| 63 | % |
| 73 | % |
| 23 | % |
| 19 | % |
| 32 | % |
____________
1 Calculated using average shares outstanding for the year.
2 Less than $0.01.
3 Assumes reinvestment of distributions.
4 The ratio of expenses to average net assets for the years ended October 31, 2023, 2022, 2021, 2020 and 2019 reflect fees reduced as result of a contractual operating expense limitation of the share class to 0.65%. The agreement is effective through March 1, 2024 and may only be terminated during its term with approval of the Fund’s Board of Trustees. For the years ended October 31, 2023, 2022, 2021, 2020 and 2019 the waived fees were $33,916, $31,643, $35,002, $41,531 and $55,422, respectively.
5 Less than 0.01%.
6 The portfolio turnover rate excludes variable rate demand notes.
The accompanying notes are an integral part of these financial statements.
28 |
BBH INTERMEDIATE MUNICIPAL BOND FUND |
FINANCIAL HIGHLIGHTS (continued) Selected per share data and ratios for a Class I share outstanding throughout each year. |
For the years ended October 31, | |||||||||||||||||||||||||||
2023 | 2022 | 2021 | 2020 | 2019 | |||||||||||||||||||||||
Net asset value, beginning of year |
| $ | 9.68 |
|
|
| $ | 10.92 |
|
|
| $ | 10.95 |
|
|
| $ | 10.75 |
|
|
| $ | 10.14 |
|
| ||
Income from investment operations: |
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Net investment income1 |
| 0.31 |
|
| 0.18 |
|
| 0.15 |
|
| 0.19 |
|
| 0.23 |
| ||||||||||||
Net realized and unrealized gain/(loss) |
| 0.04 |
|
| (1.23 | ) |
| (0.02 | ) |
| 0.25 |
|
| 0.61 |
| ||||||||||||
Total income/(loss) from investment operations |
| 0.35 |
|
| (1.05 | ) |
| 0.13 |
|
| 0.44 |
|
| 0.84 |
| ||||||||||||
Dividends and distributions to shareholders: |
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
From net investment income |
| (0.30 | ) |
| (0.18 | ) |
| (0.15 | ) |
| (0.19 | ) |
| (0.22 | ) | ||||||||||||
From net realized gains |
| — |
|
| (0.01 | ) |
| (0.01 | ) |
| (0.05 | ) |
| (0.01 | ) | ||||||||||||
Total dividends and distributions to shareholders |
| (0.30 | ) |
| (0.19 | ) |
| (0.16 | ) |
| (0.24 | ) |
| (0.23 | ) | ||||||||||||
Short-term redemption fees1 |
| 0.002 |
|
| 0.002 |
|
| 0.002 |
|
| 0.002 |
|
| 0.002 |
| ||||||||||||
Net asset value, end of year | $ | 9.73 |
| $ | 9.68 |
| $ | 10.92 |
| $ | 10.95 |
| $ | 10.75 |
| ||||||||||||
Total return3 |
| 3.60 | % |
| (9.74 | )% |
| 1.21 | % |
| 4.18 | % |
| 8.38 | % | ||||||||||||
Ratios/Supplemental data: |
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Net assets, end of year (in millions) | $ | 699 |
| $ | 597 |
| $ | 788 |
| $ | 656 |
| $ | 334 |
| ||||||||||||
Ratio of expenses to average net assets before reductions |
| 0.45 | % |
| 0.46 | % |
| 0.45 | % |
| 0.47 | % |
| 0.50 | % | ||||||||||||
Fee waiver4 |
| — | % |
| — | % |
| — | % |
| — | % |
| (0.00 | )%5 | ||||||||||||
Expense offset arrangement |
| — | % |
| — | % |
| — | % |
| — | % |
| (0.00 | )%5 | ||||||||||||
Ratio of expenses to average net assets after reductions |
| 0.45 | % |
| 0.46 | % |
| 0.45 | % |
| 0.47 | % |
| 0.50 | % | ||||||||||||
Ratio of net investment income to average net assets |
| 3.03 | % |
| 1.69 | % |
| 1.38 | % |
| 1.75 | % |
| 2.17 | % | ||||||||||||
Portfolio turnover rate |
| 164 | % |
| 135 | % |
| 45 | % |
| 32 | % |
| 104 | % | ||||||||||||
Portfolio turnover rate6 |
| 63 | % |
| 73 | % |
| 23 | % |
| 19 | % |
| 32 | % |
____________
1 Calculated using average shares outstanding for the year.
2 Less than $0.01.
3 Assumes reinvestment of distributions.
4 The ratio of expenses to average net assets for the years ended October 31, 2023, 2022, 2021, 2020 and 2019 reflect fees reduced as result of a contractual operating expense limitation of the share class to 0.50%. The agreement is effective through March 1, 2024 and may only be terminated during its term with approval of the Fund’s Board of Trustees. For the years ended October 31, 2023, 2022, 2021, 2020 and 2019 the waived fees were $—, $—, $—, $— and $6,608, respectively.
5 Less than 0.01%.
6 The portfolio turnover rate excludes variable rate demand notes.
The accompanying notes are an integral part of these financial statements.
F I N A N C I A L S T A T E M E N T S O C T O B E R 3 1, 2 0 2 3 | 29 |
BBH INTERMEDIATE MUNICIPAL BOND FUND |
NOTES TO FINANCIAL STATEMENTS October 31, 2023 |
1. Organization. The Fund is a separate, diversified series of BBH Trust (the “Trust”), which is registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as an open-end management investment company. The Trust was originally organized under the laws of the State of Maryland on July 16, 1990 as BBH Fund, Inc. and re-organized as a Delaware statutory trust on June 12, 2007. As of October 31, 2023, there were eight series of the Trust. The Fund commenced operations on April 1, 2014 and offers two share classes, Class N and Class I. Neither Class N shares nor Class I shares automatically convert to any other share class of the Fund. The investment objective of the Fund is to protect investor’s capital and generate attractive risk-adjusted returns. Under normal circumstances, the Fund will invest at least 80% of its net assets, plus any borrowings for investment purposes, in municipal bonds that pay interest that is generally excludable from gross income for federal income tax purposes (except that the interest paid by certain municipal securities may be includable in taxable income for purposes of the federal alternative minimum tax).
2. Significant Accounting Policies. The Fund’s financial statements are prepared in accordance with Generally Accepted Accounting Principles in the United States of America (“GAAP”). The Fund is an investment company and accordingly follows the investment company accounting and reporting guidance of the Financial Accounting Standards Board (“FASB”) Accounting Standard Codification Topic 946 Financial Services – Investment Companies. The following summarizes significant accounting policies of the Fund:
A. Valuation of Investments. The Board of Trustees (the “Board”) has ultimate responsibility for determining the fair value of investments. Pursuant to Rule 2a-5 of the 1940 Act, the Board has designated the Investment Adviser as its valuation designee. The Investment Adviser monitors the continual appropriateness of valuation methods applied and determines if adjustments should be made in light of market factor changes and events affecting issuers. The Investment Adviser performs a series of activities to provide reasonable assurance of the appropriateness of the prices utilized, including but not limited to: periodic independent pricing service due diligence meetings and reviewing the results of back testing on a monthly basis. The Investment Adviser provides the Board with reporting on the results of the back testing as well as positions which were fair valued during the period.
All securities and other investments are recorded at their estimated fair value. The value of investments listed on a securities exchange is based on the last sale price prior to the time when assets are valued, or in the absence of recorded sales, at the most recent bid price on such exchange. If a readily available market quotation is not available or is determined to be unreliable, the investments may be valued utilizing evaluated prices provided by independent pricing services. In establishing such prices, the independent pricing service utilizes both dealer supplied prices and electronic data processing techniques which take into account appropriate factors such as institutional sized trading in similar groups of securities, yield, quality, coupon rate, maturity, type of issue, trading characteristics, the closure of the primary exchange on which securities trade and before the Fund’s net asset value is next determined and other market data without exclusive reliance on quoted exchange prices or over-the-counter prices since such valuations are believed to reflect more accurately the fair value of
30 |
BBH INTERMEDIATE MUNICIPAL BOND FUND |
NOTES TO FINANCIAL STATEMENTS (continued) October 31, 2023 |
such investments. Investments may be fair valued by Brown Brothers Harriman & Co. (“BBH”) through a separately identifiable department (“SID” or “Investment Adviser”) in accordance with the BBH Trust Portfolio Valuation Policy and Procedures using methods that most fairly reflect the amount that the Fund would reasonably expect to receive for the investment on a current sale in its principal market in the ordinary course of business. Short-term investments, which mature in 60 days or less are valued at amortized cost if their original maturity was 60 days or less, or by amortizing their value on the 61st day prior to maturity, if their original maturity when acquired by the Fund was more than 60 days, unless the use of amortized cost is determined not to represent fair value. Any futures contracts held by the Fund are valued daily at the official settlement price of the exchange on which they are traded.
B. Accounting for Investments and Income. Investment transactions are accounted for on the trade date. Realized gains and losses on investment transactions are determined based on the identified cost method. Interest income is accrued daily and consists of interest accrued, discount earned (including, if any, both original issue and market discount) and premium amortization on the investments of the Fund. Debt obligations may be placed on non-accrual status and related interest income may be reduced by ceasing current accruals and writing off interest receivable when the collection of all or a portion of the interest has become doubtful based on consistently applied procedures. A debt obligation is removed from non-accrual status when the issuer resumes interest payments or when collectability of interest is reasonably assured.
C. Fund Expenses. Most expenses of the Trust can be directly attributed to a specific fund and share class. Expenses which cannot be directly attributed to a fund are generally apportioned among each fund in the Trust and the respective share classes on a net assets basis or other suitable method. Expense estimates are accrued in the period to which they relate and adjustments are made when actual amounts are known.
D. Federal Income Taxes. It is the Trust’s policy to comply with the requirements of the Internal Revenue Code (the “Code”) applicable to regulated investment companies and to distribute substantially all of its taxable income to its shareholders. Accordingly, no federal income tax provision is required. The Fund files a tax return annually using tax accounting methods required under provisions of the Code, which may differ from GAAP, which is the basis on which these financial statements are prepared. Accordingly, the amount of net investment income and net realized gain reported in these financial statements may differ from that reported on the Fund’s tax return, due to certain book-to-tax timing differences such as losses deferred due to “wash sale” transactions and utilization of capital loss carryforwards. These differences may result in temporary over-distributions for financial statement purposes and are classified as distributions in excess of accumulated net realized gains or net investment income. These distributions do not constitute a return of capital. Permanent differences are reclassified between paid-in capital and retained earnings/(accumulated deficit) within the Statement of Assets and Liabilities based upon their tax classification. As such, the character of distributions to shareholders reported in the Financial Highlights table may differ from that reported to shareholders on Form 1099-DIV.
F I N A N C I A L S T A T E M E N T S O C T O B E R 3 1, 2 0 2 3 | 31 |
BBH INTERMEDIATE MUNICIPAL BOND FUND |
NOTES TO FINANCIAL STATEMENTS (continued) October 31, 2023 |
The Fund is subject to the provisions of Accounting Standards Codification 740 Income Taxes (“ASC 740”). ASC 740 sets forth a minimum threshold for financial statement recognition of the benefit of a tax position taken or expected to be taken in a tax return. The Fund did not have any unrecognized tax benefits as of October 31, 2023, nor were there any increases or decreases in unrecognized tax benefits for the year then ended. The Fund recognizes interest and penalties, if any, related to unrecognized tax benefits as an income tax expense in the Statement of Operations. During the year ended October 31, 2023, the Fund did not incur any such interest or penalties. The Fund is subject to examination by U.S. federal and state tax authorities for returns filed for the prior three years. The Fund is not aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will significantly change in the next twelve months.
E. Dividends and Distributions to Shareholders. Dividends and distributions from net investment income to shareholders are declared daily and paid monthly to shareholders. Distributions from net capital gains, if any, are generally declared and paid annually and are recorded on the ex-dividend date. The Fund declared dividends and distributions in the amount of $1,317,041 and $20,635,433 to Class N and Class I shareholders, respectively, during the year ended October 31, 2023, and in the amount of $1,010,867 and $12,703,639 to Class N and Class I shareholders, respectively, during the year ended October 31, 2022. In addition, the Fund designated a portion of the payment made to redeeming shareholders as a distribution for income tax purpose.
The tax character of distributions paid during the years ended October 31, 2023 and 2022, respectively, were as follows:
Distributions paid from: | ||||||||||||||||||
Ordinary | Net | Total taxable | Tax exempt | Tax return | Total | |||||||||||||
2023: | $ | 1,294,293 | $ | — | $ | 1,294,293 | $ | 20,658,181 | $ | — | $ | 21,952,474 | ||||||
2022: |
| 733,210 |
| — |
| 733,210 |
| 12,981,296 |
| — |
| 13,714,506 |
As of October 31, 2023 and 2022, respectively, the components of retained earnings/(accumulated deficit) on tax basis were as follows:
Components of retained earnings/(accumulated deficit): | |||||||||||||||||||||||||
Undistributed | Undistributed | Undistributed | Accumulated | Other | Unrealized | Total | |||||||||||||||||||
2023: | $ | — | $ | — | $ | 97,537 | $ | (25,101,310 | ) | $ | (99,003 | ) | $ | (40,139,158 | ) | $ | (65,241,934 | ) | |||||||
2022: |
| — |
| — |
| 23,756 |
| (10,231,396 | ) |
| (65,489 | ) |
| (55,549,354 | ) |
| (65,822,483 | ) |
The Fund had $25,101,310 net capital loss carryforwards as of October 31, 2023, of which $8,409,021 and $16,692,289, is attributable to short-term and long-term capital losses, respectively.
32 |
BBH INTERMEDIATE MUNICIPAL BOND FUND |
NOTES TO FINANCIAL STATEMENTS (continued) October 31, 2023 |
The Fund is permitted to carryforward capital losses for an unlimited period and they will retain their character as either short-term or long-term capital losses.
Total distributions paid may differ from amounts reported in the Statements of Changes in Net Assets because, for tax purposes, dividends are recognized when actually paid.
To the extent future capital gains are offset by capital loss carryforwards, if any, such gains will not be distributed.
F. Use of Estimates. The preparation of financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities in the financial statements, disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of increases and decreases in net assets from operations during the reporting period. Actual results could differ from these estimates.
3. Fees and Other Transactions with Affiliates.
A. Investment Advisory and Administrative Fees. Effective April 1, 2014 (commencement of operations), under a combined Investment Advisory and Administrative Services Agreement (“Agreement”) with the Trust, Brown Brothers Harriman & Co. (“BBH”) through a separately identifiable department (“Investment Adviser”) provides investment advisory, portfolio management and administrative services to the Fund. The Fund’s investment advisory and administrative services fee is calculated daily and paid monthly at an annual rate equivalent to 0.40% of the Fund’s average daily net assets. For the year ended October 31, 2023, the Fund incurred $2,909,381 under the Agreement.
B. Investment Advisory and Administrative Fee Waiver. Effective April 1, 2014 (commencement of operations), the Investment Adviser contractually agreed to limit the annual fund operating expenses (excluding interest, taxes, brokerage commissions, other expenditures that are capitalized in accordance with GAAP and other extraordinary expenses not incurred in the ordinary course of the Fund’s business) of Class N and Class I to 0.65% and 0.50%, respectively. The agreement will terminate on March 1, 2024, unless it is renewed by all parties to the agreement. The agreement may only be terminated during its term with approval of the Fund’s Board of Trustees. For the year ended October 31, 2023, the Investment Adviser waived fees in the amount of $33,916 and $0 for Class N and Class I, respectively.
C. Shareholder Servicing Fees. The Trust has a shareholder servicing agreement with BBH. BBH receives a fee from the Fund calculated daily and paid monthly at an annual rate of 0.20% of Class N shares’ average daily net assets. For the year ended October 31, 2023, Class N shares of the Fund incurred $92,964 in shareholder servicing fees.
F I N A N C I A L S T A T E M E N T S O C T O B E R 3 1, 2 0 2 3 | 33 |
BBH INTERMEDIATE MUNICIPAL BOND FUND |
NOTES TO FINANCIAL STATEMENTS (continued) October 31, 2023 |
D. Custody and Fund Accounting Fees. BBH acts as a custodian and fund accountant and receives custody and fund accounting fees from the Fund calculated daily and incurred monthly. BBH holds all of the Fund’s cash and investments and calculates the Fund’s daily net asset value. The custody fee is an asset and transaction-based fee. The fund accounting fee is an asset-based fee calculated at 0.325 basis points per annum of the Fund’s net asset value, effective September 1, 2023 based on the new agreement. The fund accounting fee was 0.40 basis points per annum until August 31, 2023. For the year ended October 31, 2023, the Fund incurred $131,564 in custody and fund accounting fees. As per agreement with the Fund’s custodian, the Fund receives interest income on cash balances held by the custodian at the BBH Base Rate. The BBH Base Rate is defined as BBH’s effective trading rate in local money markets on each day. The total interest earned by the Fund under the revised agreement for the year ended October 31, 2023 was $40,251. This amount is included in “Interest income from Custodian” in the Statement of Operations. In the event that the Fund is overdrawn, under the custody agreement with BBH, BBH will make overnight loans to the Fund to cover overdrafts. Pursuant to their agreement, the Fund will pay the BBH Overdraft Base Rate plus 2% on the day of the overdraft. The total interest incurred by the Fund for the year ended October 31, 2023 was $4,839. This amount is included under line item “Custody and fund accounting fees” in the Statement of Operations.
E. Board of Trustees’ Fees. Each Trustee who is not an “interested person” as defined under the 1940 Act receives an annual fee as well as reimbursement for reasonable out-of-pocket expenses from the Fund. For the year ended October 31, 2023, the Fund incurred $77,624 in independent Trustee compensation and expense reimbursements.
F. Officers of the Trust. Officers of the Trust are also employees of BBH. Officers are paid no fees by the Trust for their services to the Trust.
4. Investment Transactions. For the year ended October 31, 2023, the cost of purchases and the proceeds of sales of investment securities, other than short-term investments, was $1,296,522,371 and $1,199,171,649, respectively.
34 |
BBH INTERMEDIATE MUNICIPAL BOND FUND |
NOTES TO FINANCIAL STATEMENTS (continued) October 31, 2023 |
5. Shares of Beneficial Interest. The Trust is permitted to issue an unlimited number of Class N shares and Class I shares of beneficial interest, at no par value. Transactions in Class N and Class I shares were as follows:
For the year ended October 31, 2023 | For the year ended | |||||||||||||
Shares | Dollars | Shares | Dollars | |||||||||||
Class N |
|
|
|
|
|
| ||||||||
Shares sold | 2,755,041 |
| $ | 27,945,104 |
| 2,781,950 |
| $ | 28,567,253 |
| ||||
Shares issued in connection with reinvestments of dividends | 130,330 |
|
| 1,313,338 |
| 98,378 |
|
| 1,012,544 |
| ||||
Proceeds from short-term redemption fees and entrance fees | N/A |
|
| 17 |
| N/A |
|
| 179 |
| ||||
Shares redeemed | (3,693,972 | ) |
| (37,075,353 | ) | (4,724,453 | ) |
| (48,680,636 | ) | ||||
Net decrease | (808,601 | ) | $ | (7,816,894 | ) | (1,844,125 | ) | $ | (19,100,660 | ) | ||||
|
|
|
|
|
| |||||||||
Class I |
|
|
|
|
|
| ||||||||
Shares sold | 25,379,215 |
| $ | 254,004,961 |
| 20,229,459 |
| $ | 208,500,440 |
| ||||
Shares issued in connection with reinvestments of dividends | 603,868 |
|
| 6,078,400 |
| 399,708 |
|
| 4,113,912 |
| ||||
Proceeds from short-term redemption fees | N/A |
|
| 10,841 |
| N/A |
|
| 6,052 |
| ||||
Shares redeemed | (15,840,151 | ) |
| (158,917,519 | ) | (31,176,617 | ) |
| (318,390,055 | ) | ||||
Net increase/(decrease) | 10,142,932 |
| $ | 101,176,683 |
| (10,547,450 | ) | $ | (105,769,651 | ) |
Included in Shares Sold and Shares Redeemed are shareholder exchanges during the years ended October 31, 2023 and 2022. Specifically:
During the year ended 2023, 10,018 shares of Class I were exchanged for 10,008 shares of Class N valued at $102,417.
During the year ended 2022, 1,958 shares of Class N were exchanged for 1,958 shares of Class I valued at $19,950.
6. Principal Risk Factors and Indemnifications.
A. Principal Risk Factors. Investing in the Fund may involve certain risks, as discussed in the Fund’s prospectus, including but not limited to, those described below:
A shareholder may lose money by investing in the Fund (investment risk). The Fund is actively managed and the decisions by the Investment Adviser may cause the Fund to incur losses or miss profit opportunities (management risk). Additionally, in the normal course of business, the Fund invests in securities and enters into transactions where risks exist due to redemption of securities by the issuer before maturity (call risk), failure of a counterparty to a transaction to perform (credit
F I N A N C I A L S T A T E M E N T S O C T O B E R 3 1, 2 0 2 3 | 35 |
BBH INTERMEDIATE MUNICIPAL BOND FUND |
NOTES TO FINANCIAL STATEMENTS (continued) October 31, 2023 |
risk), changes in interest rates, higher volatility for securities with longer maturities (interest rate risk), difficulty in being able to purchase or sell a security (liquidity risk) and a significant position in municipal securities in a particular state (geographic risk). Political, legislative and economic events may affect a municipal security’s value, interest payments, repayments of principal and the Fund’s ability to sell it (municipal issuer risk). Additionally, as the Fund’s exposure to similar municipal revenue sectors increases, the Fund will become more sensitive to adverse economic, business or political developments relevant to these sectors (municipal revenue sector risk). The Fund may use derivatives that could create risks that are different from, or possibly greater than, the risks associated with investing directly in securities as the Fund could lose more than the principal amount invested (derivatives risk). The value of securities held by the Fund may decline in response to certain events, including: those directly involving the companies or issuers whose securities are held by the Fund; conditions affecting the general economy; overall market changes; and political and regulatory events. Natural disasters, the spread of infectious illness and other public health emergencies, recession, terrorism and other unforeseeable events may lead to increased market volatility and may have adverse effects on world economies and markets generally (market risk). While the Fund endeavors to purchase only bona fide tax exempt bonds, there is a risk that a bond may be reclassified by the IRS as a taxable bond creating taxable income for the Fund and its shareholders (taxation risk). The Fund may remain substantially fully invested at a time when a purchase is outstanding, then the purchases may result in a form of leverage. If the counterparty to a when-issued or delayed-delivery transaction fails to deliver the securities, the fund may receive a less favorable price or yield, or may suffer a loss (when-issued and delayed delivery securities risk). The Fund’s shareholders may be adversely impacted by asset allocation decisions made by an investment adviser whose discretionary clients may make up a large percentage of the Fund’s shareholders (large shareholder risk). The United Kingdom’s Financial Conduct Authority announced a phase out of the London Interbank Offered Rate (“LIBOR”). Although many LIBOR rates were phased out by the end of 2021, some USD LIBOR settings will continue to be published under a synthetic methodology until September 30, 2024 for certain legacy contracts. The Secured Overnight Financing Rate (“SOFR“) has been used increasingly on a voluntary basis in new instruments and transactions. Under U.S. regulations that implement a statutory fallback mechanism to replace LIBOR, benchmark rates based on SOFR have replaced LIBOR in certain financial contracts. Any pricing adjustments to the fund’s investments resulting from a substitute reference rate may also adversely affect the fund’s performance and/or net asset value (LIBOR Transition Risk). The extent of the Fund’s exposure to these risks in respect to these financial assets is included in their value as recorded in the Fund’s Statement of Assets and Liabilities.
Please refer to the Fund’s prospectus for a complete description of the principal risks of investing in the Fund.
36 |
BBH INTERMEDIATE MUNICIPAL BOND FUND |
NOTES TO FINANCIAL STATEMENTS (continued) October 31, 2023 |
B. Indemnifications. Under the Trust’s organizational documents, its officers and Trustees may be indemnified against certain liabilities and expenses arising out of the performance of their duties to the Fund, and shareholders are indemnified against personal liability for the obligations of the Trust. Additionally, in the normal course of business, the Fund enters into agreements with service providers that may contain indemnification clauses. The Fund’s maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Fund that have not yet occurred. The risk of material loss from such claims is considered remote.
7. Subsequent Events. Management has evaluated events and transactions that have occurred since October 31, 2023 through the date the financial statements were issued and determined that there were no subsequent events that would require recognition or additional disclosure in the financial statements.
F I N A N C I A L S T A T E M E N T S O C T O B E R 3 1, 2 0 2 3 | 37 |
BBH INTERMEDIATE MUNICIPAL BOND FUND |
DISCLOSURE OF FUND EXPENSES October 31, 2023 (unaudited) |
EXAMPLE
As a shareholder of the Fund, you may incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments, reinvested distributions, or other distributions; redemption fees; and exchange fees; and (2) ongoing costs, including management fees; and other Fund expenses. This Example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The Example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period (May 1, 2023 to October 31, 2023).
ACTUAL EXPENSES
The first line of the table provides information about actual account values and actual expenses. You may use information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled “Expenses Paid During the Period” to estimate the expenses you paid on your account during the period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The second line of the table provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid during the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% Hypothetical Example with the 5% hypothetical examples that appear in the shareholder reports of other funds.
38 |
BBH INTERMEDIATE MUNICIPAL BOND FUND |
DISCLOSURE OF FUND EXPENSES (continued) October 31, 2023 (unaudited) |
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as redemption fees or exchange fees. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
Beginning | Ending | Expenses Paid | ||||
Class N | ||||||
Actual | $1,000 | $ 967 | $3.22 | |||
Hypothetical2 | $1,000 | $1,022 | $3.31 |
Beginning | Ending | Expenses Paid | ||||
Class I | ||||||
Actual | $1,000 | $ 968 | $2.23 | |||
Hypothetical2 | $1,000 | $1,023 | $2.29 |
____________
1 Expenses are equal to the Fund’s annualized expense ratio of 0.65% and 0.45% for Class N and I shares, respectively, multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period).
2 Assumes a return of 5% before expenses. For the purposes of the calculation, the applicable annualized expenses ratio for each class of shares is subtracted from the assumed return before expenses.
F I N A N C I A L S T A T E M E N T S O C T O B E R 3 1, 2 0 2 3 | 39 |
BBH INTERMEDIATE MUNICIPAL BOND FUND |
CONFLICTS OF INTEREST October 31, 2023 (unaudited) |
Description of Potential Material Conflicts of Interest — Investment Adviser
BBH, including the Investment Adviser, provides discretionary and non-discretionary investment management services and products to corporations, institutions and individual investors throughout the world. As a result, in the ordinary course of its businesses, BBH, including the Investment Adviser, may engage in activities in which its interests or the interests of its clients may conflict with or be adverse to the interests of the Funds. In addition, certain of such clients (including the Funds) utilize the services of BBH for which they will pay to BBH customary fees and expenses that will not be shared with the Funds.
The Investment Adviser has adopted and implemented policies and procedures that seek to manage conflicts of interest. Pursuant to such policies and procedures, the Investment Adviser monitors a variety of areas, including compliance with fund investment guidelines, the investment in only those securities that have been approved for purchase, and compliance with their respective Code of Ethics.
The Trust also manages these conflicts of interest. For example, the Trust has designated a chief compliance officer (“CCO”) and has adopted and implemented policies and procedures designed to manage the conflicts identified below and other conflicts that may arise in the course of the Funds’ operations in such a way as to safeguard the Funds from being negatively affected as a result of any such potential conflicts. From time to time, the Trustees receive reports from the Investment Adviser and the Trust’s CCO on areas of potential conflict.
Investors should carefully review the following, which describes potential and actual conflicts of interest that BBH, the Investment Adviser can face in the operation of their respective investment management services. This section is not, and is not intended to be, a complete enumeration or explanation of all of the potential conflicts of interest that may arise. The Investment Adviser and the Funds has adopted policies and procedures reasonably designed to appropriately prevent, limit or mitigate the conflicts of interest described below. Additional information about potential conflicts of interest regarding the Investment Adviser is set forth in the Investment Adviser’s Form ADV. A copy of Part 1 and Part 2A of the Investment Adviser’s Form ADV is available on the SEC’s website (www.adviserinfo.sec.gov). In addition, many of the activities that create these conflicts of interest are limited and/or prohibited by law, unless an exception is available.
Other Clients and Allocation of Investment Opportunities. BBH, the Investment Adviser manages funds and accounts of clients other than the Funds (“Other Clients”). In general, BBH, the Investment Adviser faces conflicts of interest when they render investment advisory services to different clients and, from time to time, provide dissimilar investment advice to different clients. Investment decisions will not necessarily be made in parallel among the Funds and Other Clients. Investments made by the Funds do not, and are not intended to, replicate the investments, or the investment methods and strategies, of Other Clients. Accordingly, such Other Clients may produce results that are materially different from those experienced by the Funds. Certain other conflicts of interest may arise in connection with a portfolio manager’s management of the Funds’ investments, on the one hand, and the investments of other funds or accounts for which the portfolio manager is responsible, on the other. For example, it is possible that the
40 |
BBH INTERMEDIATE MUNICIPAL BOND FUND |
CONFLICTS OF INTEREST (continued) October 31, 2023 (unaudited) |
various funds or accounts managed by the Investment Adviser could have different investment strategies that, at times, might conflict with one another to the possible detriment of the Funds. From time to time, the Investment Adviser sponsors and with other investment pools and accounts which engage in the same or similar businesses as the Funds using the same or similar investment strategies. To the extent that the same investment opportunities might be desirable for more than one account or fund, possible conflicts could arise in determining how to allocate them because the Investment Adviser may have an incentive to allocate investment opportunities to certain accounts or funds. However, BBH and the Investment Adviser have implemented policies and procedures designed to ensure that information relevant to investment decisions is disseminated promptly within its portfolio management teams and investment opportunities are allocated equitably among different clients. The policies and procedures require, among other things, objective allocation for limited investment opportunities, and documentation and review of justifications for any decisions to make investments only for select accounts or in a manner disproportionate to the size of the account. Nevertheless, access to investment opportunities may be allocated differently among accounts due to the particular characteristics of an account, such as size of the account, cash position, tax status, risk tolerance and investment restrictions or for other reasons.
Actual or potential conflicts of interest may also arise when a portfolio manager has management responsibilities to multiple accounts or funds, resulting in unequal commitment of time and attention to the portfolio management of the funds or accounts.
Affiliated Service Providers. Other potential conflicts might include conflicts between the Funds and its affiliated and unaffiliated service providers (e.g., conflicting duties of loyalty). In addition to providing investment management services through the SID, BBH provides administrative, custody, shareholder servicing and fund accounting services to the Funds. BBH may have conflicting duties of loyalty while servicing the Funds and/or opportunities to further its own interest to the detriment of the Funds. For example, in negotiating fee arrangements with affiliated service providers, BBH may have an incentive to agree to higher fees than it would in the case of unaffiliated providers. BBH acting in its capacity as the Funds’ administrator is the primary valuation agent of the Funds. BBH values securities and assets in the Funds according to the Funds’ valuation policies. Because the Investment Adviser’s advisory and administrative fees are calculated by reference to a Funds’ net assets, BBH and its affiliates may have an incentive to seek to overvalue certain assets.
Aggregation. Potential conflicts of interest also arise with the aggregation of trade orders. Purchases and sales of securities for the Funds may be aggregated with orders for other client accounts managed by the Investment Adviser. The Investment Adviser, however, are not required to aggregate orders if portfolio management decisions for different accounts are made separately, or if it is determined that aggregating is not practicable, or in cases involving client direction. Prevailing trading activity frequently may make impossible the receipt of the same price or execution on the entire volume of securities purchased or sold. When this occurs, the various prices may be averaged, and the Funds will be charged or credited with the average price. Thus, the effect of the aggregation may operate on some occasions to the disadvantage of the Funds. In addition, under certain circumstances, the Funds will not be charged the same commission or commission equivalent rates in connection with an aggregated order.
F I N A N C I A L S T A T E M E N T S O C T O B E R 3 1, 2 0 2 3 | 41 |
BBH INTERMEDIATE MUNICIPAL BOND FUND |
CONFLICTS OF INTEREST (continued) October 31, 2023 (unaudited) |
Cross Trades. Under certain circumstances, the Investment Adviser, on behalf of the Funds, may seek to buy from or sell securities to another fund or account advised by BBH, the Investment Adviser. Subject to applicable law and regulation, BBH, the Investment Adviser may (but is not required to) effect purchases and sales between BBH, the Investment Adviser clients (“cross trades”), including the Funds, if BBH or the Investment Adviser believes such transactions are appropriate based on each party’s investment objectives and guidelines. There may be potential conflicts of interest or regulatory issues relating to these transactions which could limit the Investment Adviser’s decision to engage in these transactions for the Funds. BBH and/or the Investment Adviser may have a potentially conflicting division of loyalties and responsibilities to the parties in such transactions.
Soft Dollars. The Investment Adviser may direct brokerage transactions and/or payment of a portion of client commissions (“soft dollars”) to specific brokers or dealers or other providers to pay for research or other appropriate services which provide, in the Investment Adviser’s view, appropriate assistance in the investment decision-making process (including with respect to futures, fixed price offerings and over-the-counter transactions). The use of a broker that provides research and securities transaction services may result in a higher commission than that offered by a broker who does not provide such services. The Investment Adviser will determine in good faith whether the amount of commission is reasonable in relation to the value of research and services provided and whether the services provide lawful and appropriate assistance in its investment decision-making responsibilities.
Research or other services obtained in this manner may be used in servicing any or all of the Funds and other accounts managed by the Investment Adviser, including in connection with accounts that do not pay commissions to the broker related to the research or other service arrangements. Such products and services may disproportionately benefit other client accounts relative to the Funds based on the amount of brokerage commissions paid by the Funds and such other accounts. To the extent that a Sub-adviser uses soft dollars, it will not have to pay for those products and services itself.
BBH may receive research that is bundled with the trade execution, clearing, and/or settlement services provided by a particular broker-dealer. For example, the research effectively will be paid by client commissions that also will be used to pay for the execution, clearing, and settlement services provided by the broker-dealer and will not be paid by the Investment Adviser.
Arrangements regarding compensation and delegation of responsibility may create conflicts relating to selection of brokers or dealers to execute Fund portfolio trades and/or specific uses of commissions from Fund portfolio trades, administration of investment advice and valuation of securities.
Investments in BBH Funds. From time to time BBH may invest a portion of the assets of its discretionary investment advisory clients in the Funds. That investment by BBH on behalf of its discretionary investment advisory clients in the Funds may be significant at times.
Increasing a Fund’s assets may enhance investment flexibility and diversification and may contribute to economies of scale that tend to reduce the Funds’ expense ratio. In selecting the Funds for its discretionary investment advisory clients, BBH may limit its selection to funds managed by BBH or the Investment
42 |
BBH INTERMEDIATE MUNICIPAL BOND FUND |
CONFLICTS OF INTEREST (continued) October 31, 2023 (unaudited) |
Adviser. BBH may not consider or canvass the universe of unaffiliated investment companies available, even though there may be unaffiliated investment companies that may be more appropriate or that have superior performance. BBH, the Investment Adviser and their affiliates providing services to the Funds benefit from additional fees when the Funds is included as an investment by a discretionary investment advisory client.
BBH reserves the right to redeem at any time some or all of the shares of the Funds acquired for its discretionary investment advisory clients’ accounts. A large redemption of shares of the Funds by BBH on behalf of its discretionary investment advisory clients could significantly reduce the asset size of the Funds, which might have an adverse effect on the Funds’ investment flexibility, portfolio diversification and expense ratio.
Valuation. When market quotations are not readily available or are believed by BBH to be unreliable, the Funds’ investments will be valued at fair value by BBH pursuant to procedures adopted by the Funds’ Board. When determining an asset’s “fair value,” BBH seeks to determine the price that a Fund might reasonably expect to receive from the current sale of that asset in an arm’s-length transaction. The price generally may not be determined based on what the Funds might reasonably expect to receive for selling an asset at a later time or if it holds the asset to maturity. While fair value determinations will be based upon all available factors that BBH deems relevant at the time of the determination and may be based on analytical values determined by BBH using proprietary or third-party valuation models, fair value represents only a good faith approximation of the value of a security. The fair value of one or more securities may not, in retrospect, be the price at which those assets could have been sold during the period in which the particular fair values were used in determining the Funds’ net asset value. As a result, the Funds’ sale or redemption of its shares at net asset value, at a time when a holding or holdings are valued by BBH (pursuant to Board-adopted procedures) at fair value, may have the effect of diluting or increasing the economic interest of existing shareholders.
Referral Arrangements. BBH may enter into advisory and/or referral arrangements with third parties. Such arrangements may include compensation paid by BBH to the third party. BBH may pay a solicitation fee for referrals and/or advisory or incentive fees. BBH may benefit from increased amounts of assets under management.
Personal Trading. BBH, including the Investment Adviser, and any of their respective partners, principals, directors, officers, employees, affiliates or agents, face conflicts of interest when transacting in securities for their own accounts because they could benefit by trading in the same securities as the Funds, which could have an adverse effect on the Funds. However, the Investment Adviser has implemented policies and procedures concerning personal trading by BBH Partners and employees. The policy and procedures are intended to prevent BBH Partners and employees from trading in the same securities as the Funds. However, BBH, including the Investment Adviser, has implemented policies and procedures concerning personal trading by BBH Partners and employees. The policies and procedures are intended to prevent BBH Partners and employees with access to Fund material non-public information from trading in the same securities as the Funds.
F I N A N C I A L S T A T E M E N T S O C T O B E R 3 1, 2 0 2 3 | 43 |
BBH INTERMEDIATE MUNICIPAL BOND FUND |
CONFLICTS OF INTEREST (continued) October 31, 2023 (unaudited) |
Gifts and Entertainment. From time to time, employees of BBH, including the Investment Adviser, and any of their respective partners, principals, directors, officers, employees, affiliates or agents, may receive gifts and/or entertainment from clients, intermediaries, or service providers to the Funds or BBH, including the Investment Adviser, which could have the appearance of affecting or may potentially affect the judgment of the employees, or the manner in which they conduct business. The Investment Adviser has implemented policies and procedures concerning gifts and entertainment to mitigate any impact on the judgment of BBH Partners and employees. BBH, including the Investment Adviser, has implemented policies and procedures concerning gifts and entertainment to mitigate any impact on the judgment of BBH Partners and employees.
44 |
BBH INTERMEDIATE MUNICIPAL BOND FUND |
ADDITIONAL FEDERAL TAX INFORMATION October 31, 2023 (unaudited) |
In January 2024, shareholders will receive Form 1099-DIV, which will include their share of qualified dividends distributed during the calendar year 2023. Shareholders are advised to check with their tax advisers for information on the treatment of these amounts on their individual income tax returns.
F I N A N C I A L S T A T E M E N T S O C T O B E R 3 1, 2 0 2 3 | 45 |
TRUSTEES AND OFFICERS OF BBH INTERMEDIATE MUNICIPAL BOND FUND |
(unaudited) |
Information pertaining to the Trustees and executive officers of the Trust as of October 31, 2023 is set forth below. The mailing address for each Trustee is c/o BBH Trust, 140 Broadway, New York, NY 10005.
|
|
|
|
| Other Public |
Independent Trustees | |||||
H. Whitney Wagner | Chairman of the Board and Trustee | Chairman Since 2014; Trustee Since 2007 and 2006 – 2007 with the Predecessor Trust | President, Clear Brook Advisors, | 8 | None. |
Andrew S. Frazier | Trustee | Since 2010 | Retired. | 8 | None. |
Mark M. Collins | Trustee | Since 2011 | Partner of Brown Investment Advisory Incorporated, | 8 | Chairman of Dillon Trust Company. |
John M. Tesoro | Trustee | Since 2014 | Retired. | 8 | Independent Trustee, Bridge Builder Trust (11 funds) and Edward Jones Money Market Fund; Director, Teton Advisers, Inc. (a registered investment adviser) (2014 – 2021). |
Joan A. Binstock | Trustee | Since 2019 | Partner, Chief Financial and Operations | 8 | Independent Director, Morgan Stanley Direct Lending Fund; KKR Real Estate Interval Fund. |
Karen A. Kochevar | Trustee | Since 2023 | Retired. | 8 | Director, CAVA Group, Inc. |
46 |
TRUSTEES AND OFFICERS OF BBH INTERMEDIATE MUNICIPAL BOND FUND |
(unaudited) |
|
|
|
|
| Other Public |
Interested Trustees | |||||
Susan C. Livingston+ | Trustee | Since 2011 | Partner (since 1998) and Senior Client Advocate (since 2010) for BBH&Co. | 8 | None. |
John A. Gehret+ | Trustee | Since 2011 | Limited Partner of BBH&Co. (2012 – present). | 8 | None. |
F I N A N C I A L S T A T E M E N T S O C T O B E R 3 1, 2 0 2 3 | 47 |
TRUSTEES AND OFFICERS OF BBH INTERMEDIATE MUNICIPAL BOND FUND |
(unaudited) |
|
| Term of |
|
Officers | |||
Jean-Pierre Paquin | President and Principal Executive Officer | Since 2016 | Partner of BBH&Co. since 2015; joined BBH&Co. in 1996. |
Daniel Greifenkamp | Vice President | Since 2016 | Principal of BBH&Co. since 2014; joined BBH&Co. in 2011. |
Charles H. Schreiber | Treasurer and Principal Financial Officer | Since 2007 2006 – 2007 with the Predecessor Trust | Managing Director of BBH&Co. since 2001; joined BBH&Co. in 1999. |
Paul F. Gallagher | Chief Compliance Officer (“CCO”) | Since 2015 | Managing Director of BBH&Co. since 2015. |
Nicole English | Anti-Money Laundering Officer (“AMLO”) | Since 2022 | Vice President of BBH&Co. since 2019; joined BBH&Co. in 2016. |
Brian J. Carroll | Secretary | Since 2021 | Vice President of BBH&Co. since 2023; joined BBH&Co. in 2014. |
Crystal Cheung | Assistant Treasurer | Since 2018 | Assistant Vice President of BBH&Co. since 2016; joined BBH&Co. in 2014. |
____________
# All officers of the Trust hold office for one year and until their respective successors are chosen and qualified (subject to the ability of the Trustees to remove any officer in accordance with the Trust’s By-laws). Mr. Wagner previously served on the Board of Trustees of the Predecessor Trust.
+ Ms. Livingston and Mr. Gehret are “interested persons” of the Trust as defined in the 1940 Act because of their positions as Partner and Limited Partner of BBH&Co., respectively.
^ The Fund Complex consists of the Trust, which has eight series, and each is counted as one “Portfolio” for purposes of this table.
48 |
BBH INTERMEDIATE MUNICIPAL BOND FUND |
OPERATION AND EFFECTIVENESS OF THE FUND’S LIQUIDITY RISK MANAGEMENT PROGRAM October 31, 2023 (unaudited) |
The Securities and Exchange Commission adopted Rule 22e-4 under the Investment Company Act of 1940, as amended (the “Liquidity Rule”), to promote effective liquidity risk management throughout the open-end investment company industry in order to reduce the risk that funds will be unable to meet their redemption obligations and mitigate dilution of the interests of fund shareholders.
The Board of Trustees (the “Board”) of BBH Trust has appointed three members of the Brown Brothers Harriman & Co. Mutual Fund Advisory Department, the Investment Adviser to the funds of BBH Trust (the “Funds”), as the Program Administrator for the Fund’s liquidity risk management program (the “Program”). The Board met on March 7, 2023 to review the Program for the Funds pursuant to the Liquidity Rule. The Program Administrator provided the Board with a report (the “Report”) that addressed the operations of the Program and assessed its adequacy and effectiveness for the period from February 1, 2022 through January 31, 2023 (the “Reporting Period”).
The Report noted that the Program complied with the key factors for consideration under the Liquidity Rule for assessing, managing and periodically reviewing a Fund’s liquidity risk, including the following points.
Liquidity classification. The Report described the Program’s liquidity classification methodology for categorizing the Funds’ investments into one of four liquidity buckets. The Fund classified each of its investments into one of four liquidity categories based on the number of days reasonably needed to sell and convert a reasonably anticipated sized trade of each investment into cash without significantly impacting the price of the investments. The Program Administrator relied on a third-party data provider to facilitate the classification of the Fund’s investments based on criteria in the Fund’s Program. During the Reporting Period, the Fund did not hold more than 15% of its net assets in illiquid investments.
Highly Liquid Investment Minimum. The Report noted that one aspect of the Liquidity Rule is a requirement that funds that are expected to have less than 50% of assets classified as other than “highly liquid” should establish a minimum percentage of highly liquid assets that the fund is expected to hold on an on-going basis. The Program Administrator monitors the percentages of assets in each category on an ongoing basis and, given that the Fund did not approach the 50% threshold, has made the determination that it is not necessary to assign a Highly Liquid Investment Minimum to the Fund as provided for in the Liquidity Rule.
The Fund’s investment strategy and liquidity of portfolio investments during normal and reasonably foreseeable stressed market conditions. During the Reporting Period, the Program Administrator reviewed whether the Fund’s investment strategy is appropriate for an open-end fund structure with a focus on funds with more significant and consistent holdings of less liquid and illiquid assets and factored a Fund’s concentration in an issuer into the liquidity classification methodology by taking issuer position sizes into account.
F I N A N C I A L S T A T E M E N T S O C T O B E R 3 1, 2 0 2 3 | 49 |
BBH INTERMEDIATE MUNICIPAL BOND FUND |
OPERATION AND EFFECTIVENESS OF THE FUND’S LIQUIDITY RISK MANAGEMENT PROGRAM (continued) October 31, 2023 (unaudited) |
Short-term and long-term cash flow projections during normal and reasonably foreseeable stressed market conditions. During the Reporting Period, the Program Administrator reviewed historical redemption activity and used this information as a component to establish the Fund’s reasonably anticipated trading size. The Program Administrator also took into consideration other factors such as shareholder ownership concentration, applicable distribution channels and the degree of certainty associated with the Fund’s short-term and long-term cash flow projections.
Holdings of cash and cash equivalents. The Program Administrator considered the degree to which the Fund held cash and cash equivalents as a component of each Fund’s ability to meet redemption requests.
There were no material changes to the Program during the Reporting Period. The Program Administrator has informed the Board that it believes that the Fund’s Program is adequately designed, has been implemented as intended, and has operated effectively since its implementation. No material exceptions have been noted since the implementation of the Program, and there were no liquidity events that impacted the Fund or its ability to meet redemption requests on a timely basis during the Reporting Period.
50 |
Administrator Distributor Shareholder Servicing Agent | Investment Adviser | |
To obtain information or make shareholder inquiries: | ||
By telephone: | Call 1-800-575-1265 | |
This report is submitted for the general information of shareholders and is not authorized for distribution to prospective investors unless preceded or accompanied by an effective prospectus. Nothing herein contained is to be considered an offer of sale or a solicitation of an offer to buy shares of the Fund. For more complete information, visit www.bbhfunds.com for a prospectus. You should consider the Fund’s investment objectives, risks, charges and expenses carefully before you invest. Information about these and other important subjects is in the Fund’s prospectus, which you should read carefully before investing. Holdings and allocations are subject to change. Fund holdings should not be relied on in making investment decisions and should not be construed as research or investment advice regarding particular securities. Current and future holdings are subject to risk. The Fund files a complete schedule of portfolio holdings with the Securities and Exchange Commission (SEC) for the first and third quarters of each fiscal year as an exhibit to its reports on Form N-PORT. The Fund’s Forms N-PORT are available electronically on the SEC’s website (sec.gov). For a complete list of a fund’s portfolio holdings, view the most recent holdings listing, semi-annual report, or annual report on the Fund’s web site at http://www.bbhfunds.com. A summary of the Fund’s Proxy Voting Policy that the Fund uses to determine how to vote proxies, if any, relating to securities held in the Fund’s portfolio, as well as a record of how the Fund voted any such proxies during the most recent 12-month period ended June 30, is available, without charge, upon request by calling the toll-free number listed above. This information is also available on the SEC’s website at www.sec.gov. NOT FDIC INSURED NO BANK GUARANTEE MAY LOSE VALUE |
Annual Report
OCTOBER 31, 2023
BBH U.S. Government Money Market Fund
BBH U.S. GOVERNMENT MONEY MARKET FUND |
MANAGEMENT’S DISCUSSION OF FUND PERFORMANCE October 31, 2023 |
For the 12-month period ended October 31, 2023, the BBH U.S. Government Money Market Fund (the “Fund”) returned 4.56%. We believe the performance of the Fund remains competitive with industry peers, while maintaining a high degree of quality and liquidity throughout the period.
The Fund seeks to maximize income while attempting to preserve capital and maintain liquidity by investing in securities issued or guaranteed as to principal and interest by the U.S. Government or its Agencies and repurchase agreements fully backed by such instruments.
At the start of the reporting period the Federal Reserve (“Fed”) increased the Federal Funds Rate by 75 basis points to a range of 3.75% to 4.00%, but signaled a slower pace of rate hikes to come noting the magnitude and length of the tightening cycle were data dependent. This was following a 3% increase in the Federal Funds Rate during the first three quarters of 2022 due to persistently higher-than-forecasted inflation. In December, the Fed increased the Federal Funds Rate by an additional 50 basis points to a range of 4.25% to 4.50%, indicating that the economy was stronger than anticipated and reaffirming their commitment to price stability; stating that rates could further increase and stay at restrictive levels until there is convincing evidence that inflation is returning to its long-term 2% target.
The Fed reduced the pace of rate increases to 25 basis points at each of the first three meetings of 2023. In May, the Fed indicated a willingness to pause future rate hikes given that inflation had begun to moderate and concerns that stress in the banking sector were “likely to weigh on economic activity, hiring, and inflation.” The Fed paused in June followed by a 25 basis point increase in July due to persistent above-target inflation and a surprisingly strong economy. Continued strength in the labor market and a rebound in the housing market have pressed the Fed to keep policy rates higher for longer. The Fed held the Federal Funds Rate at a range of 5.25% to 5.50% in September and early November while the futures market indicates expectations of rate cuts beginning in the middle of 2024.
The investment team for the BBH Money Market Fund maintained what it believed to be a prudent investment strategy throughout the period, with a weighted average maturity typically between 25 and 35 days. The increase in short-term interest rates pushed the Fund’s yield meaningfully higher during the reporting period helping deliver on the Fund’s goal of maximizing income while attempting to preserve capital.
____________
One basis point or “bp” is 1/100th of a percent (0.01% or 0.0001).
Portfolio holdings and characteristics are subject to change.
2 |
BBH U.S. GOVERNMENT MONEY MARKET FUND |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM |
To the shareholders of BBH U.S. Government Money Market Fund and the Board of Trustees of BBH Trust:
Opinion on the Financial Statements and Financial Highlights
We have audited the accompanying statement of assets and liabilities, including the portfolio of investments, of BBH U.S. Government Money Market Fund (the “Fund”), one of the funds constituting BBH Trust, as of October 31, 2023, the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, the financial highlights for each of the four years in the period then ended, for the period from July 1, 2019 through October 31, 2019, and for the year ended June 30, 2019, and the related notes. In our opinion, the financial statements and financial highlights present fairly, in all material respects, the financial position of the Fund as of October 31, 2023, and the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the four years in the period then ended, for the period from July 1, 2019 through October 31, 2019, and for the year ended June 30, 2019 in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements and financial highlights are the responsibility of the Fund’s management. Our responsibility is to express an opinion on the Fund’s financial statements and financial highlights based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement, whether due to error or fraud. The Fund is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Fund’s internal control over financial reporting. Accordingly, we express no such opinion.
F I N A N C I A L S T A T E M E N T S O C T O B E R 3 1, 2 0 2 3 | 3 |
BBH U.S. GOVERNMENT MONEY MARKET FUND |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM (continued) |
Our audits included performing procedures to assess the risks of material misstatement of the financial statements and financial highlights, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements and financial highlights. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements and financial highlights. Our procedures included confirmation of securities owned as of October 31, 2023, by correspondence with the custodian and brokers; when replies were not received from brokers, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinion.
/s/ DELOITTE & TOUCHE LLP
Boston, Massachusetts
December 20, 2023
We have served as the auditor of one or more Brown Brothers Harriman investment companies since 1991.
4 |
BBH U.S. GOVERNMENT MONEY MARKET FUND |
PORTFOLIO ALLOCATION October 31, 2023 |
BREAKDOWN BY SECURITY TYPE
U.S. $ Value | Percent of | |||||
U.S. Treasury Bills | $ | 4,365,022,127 | 74.0 | % | ||
Repurchase Agreements |
| 1,500,000,000 | 25.4 |
| ||
Cash and Other Assets in Excess of Liabilities |
| 33,944,154 | 0.6 |
| ||
NET ASSETS | $ | 5,898,966,281 | 100.0 | % |
All data as of October 31, 2023. The Fund’s breakdown by security type is expressed as a percentage of net assets and may vary over time.
BBH U.S. GOVERNMENT MONEY MARKET FUND |
PORTFOLIO OF INVESTMENTS October 31, 2023 |
Principal | Maturity | Interest | Value | ||||||||
| U.S. TREASURY BILLS (74.0%) |
|
| ||||||||
$ | 280,000,000 | U.S. Treasury Bill1,2 | 11/02/23 | 5.263 | % | $ | 279,959,661 | ||||
| 245,000,000 | U.S. Treasury Bill1,2 | 11/07/23 | 5.330 |
|
| 244,784,150 | ||||
| 270,000,000 | U.S. Treasury Bill1,2 | 11/09/23 | 5.341 |
|
| 269,683,522 | ||||
| 170,000,000 | U.S. Treasury Bill1 | 11/14/23 | 5.334 |
|
| 169,675,222 | ||||
| 185,000,000 | U.S. Treasury Bill1,2 | 11/16/23 | 5.352 |
|
| 184,592,706 | ||||
| 200,000,000 | U.S. Treasury Bill1,2 | 11/21/23 | 5.358 |
|
| 199,409,444 | ||||
| 250,000,000 | U.S. Treasury Bill1,2 | 11/28/23 | 5.339 |
|
| 249,009,560 | ||||
| 145,000,000 | U.S. Treasury Bill1,2 | 11/30/23 | 5.379 |
|
| 144,380,155 | ||||
| 250,000,000 | U.S. Treasury Bill1,2 | 12/05/23 | 5.363 |
|
| 248,749,744 | ||||
| 200,000,000 | U.S. Treasury Bill1,2 | 12/07/23 | 5.368 |
|
| 198,940,460 | ||||
| 200,000,000 | U.S. Treasury Bill1,2 | 12/12/23 | 5.362 |
|
| 198,796,963 | ||||
| 220,000,000 | U.S. Treasury Bill1,2 | 12/14/23 | 5.374 |
|
| 218,606,394 | ||||
| 230,000,000 | U.S. Treasury Bill1,2 | 12/19/23 | 5.383 |
|
| 228,372,477 | ||||
| 180,000,000 | U.S. Treasury Bill1,2 | 12/21/23 | 5.385 |
|
| 178,671,063 | ||||
| 250,000,000 | U.S. Treasury Bill1,2 | 01/04/24 | 5.382 |
|
| 247,649,938 | ||||
| 250,000,000 | U.S. Treasury Bill1,2 | 01/11/24 | 5.402 |
|
| 247,372,014 | ||||
| 200,000,000 | U.S. Treasury Bill1,2 | 01/16/24 | 5.380 |
|
| 197,759,963 | ||||
| 100,000,000 | U.S. Treasury Bill1 | 01/23/24 | 5.418 |
|
| 98,769,871 | ||||
| 190,000,000 | U.S. Treasury Bill1,2 | 01/25/24 | 5.376 |
|
| 187,619,481 | ||||
| 85,000,000 | U.S. Treasury Bill1,2 | 02/13/24 | 5.398 |
|
| 83,696,821 | ||||
| 85,000,000 | U.S. Treasury Bill1,2 | 02/29/24 | 5.429 |
|
| 83,501,658 | ||||
| 50,000,000 | U.S. Treasury Bill1 | 03/21/24 | 5.456 |
|
| 48,959,146 | ||||
| 50,000,000 | U.S. Treasury Bill1 | 04/04/24 | 5.448 |
|
| 48,857,628 | ||||
| 60,000,000 | U.S. Treasury Bill1 | 04/18/24 | 5.462 |
|
| 58,502,942 | ||||
| 50,000,000 | U.S. Treasury Bill1 | 04/25/24 | 5.457 |
|
| 48,701,144 | ||||
| Total U.S. Treasury Bills |
|
| 4,365,022,127 | |||||||
|
|
| |||||||||
| REPURCHASE AGREEMENTS (25.4%) |
|
| ||||||||
| 375,000,000 | BNP Paribas (Agreement dated 10/31/23 collateralized by FCSB 2.310%-2.930%, due 07/14/36-02/03/42, original par $6,043,000, value $4,039,685, FHLMC 2.000%-6.000%, due 11/01/37-09/01/53, original par $159,232,906, value $117,884,683, FNMA 2.500%-7.250%, due 05/15/30-10/01/53, original par $268,326,369, value $107,316,874, GNMA 1.500%-7.000%, due 12/20/25-10/20/63, original par $222,259,720, value $118,480,332, U.S. Treasury Securities 0.000%-5.551%, due 11/30/23-04/15/28, original par $29,632,388, value $34,778,468) | 11/01/23 | 5.280 |
|
| 375,000,000 |
BBH U.S. GOVERNMENT MONEY MARKET FUND |
PORTFOLIO OF INVESTMENTS (continued) October 31, 2023 |
Principal | Maturity | Interest | Value | ||||||||
| REPURCHASE AGREEMENTS (continued) |
|
| ||||||||
$ | 375,000,000 | National Australia Bank Ltd. (Agreement dated 10/31/23 collateralized by U.S. Treasury Notes 2.875%, due 05/15/28, original par $408,860,000, value $382,500,000) | 11/01/23 | 5.250 | % | $ | 375,000,000 | ||||
| 375,000,000 | Royal Bank of Canada (Agreement dated 10/31/23 collateralized by U.S. Treasury Notes 2.875%, due 06/15/25, original par $391,963,000, value $386,451,606) | 11/01/23 | 5.250 |
|
| 375,000,000 | ||||
| 375,000,000 | Societe Generale (Agreement dated 10/31/23 collateralized by FHLMC 5.000%-5.500%, due 03/01/53-08/01/53, original par $175,667,893, value $158,256,215, GNMA 2.625%-6.500%, due 01/20/26-04/20/53, original par $3,178,716,470, value $224,243,786) | 11/01/23 | 5.270 |
|
| 375,000,000 | ||||
| Total Repurchase Agreements |
|
| 1,500,000,000 |
TOTAL INVESTMENTS (Cost $5,865,022,127)3 | 99.4 | % | $ | 5,865,022,127 | ||
CASH AND OTHER ASSETS IN EXCESS OF LIABILITIES | 0.6 | % |
| 33,944,154 | ||
NET ASSETS | 100.0 | % | $ | 5,898,966,281 |
____________
1 Coupon represents a yield to maturity.
2 Coupon represents a weighted average yield.
3 The cost of securities for federal income tax purposes is substantially the same as for financial reporting purposes.
Abbreviations:
FCSB – Federal Farm Credit Consolidated System Wide Bond.
FHLMC – Federal Home Loan Mortgage Corporation.
FNMA – Federal National Mortgage Association.
GNMA – Government National Mortgage Association.
BBH U.S. GOVERNMENT MONEY MARKET FUND |
PORTFOLIO OF INVESTMENTS (continued) October 31, 2023 |
FAIR VALUE MEASUREMENTS
The Fund is required to disclose information regarding the fair value measurements of the Fund’s assets and liabilities. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The disclosure requirement established a three-tier hierarchy to maximize the use of observable market data and minimize the use of unobservable inputs and to establish classification of fair value measurements for disclosure purposes. Inputs refer broadly to the assumptions that market participants would use in pricing the asset or liability, including, for example, the risk inherent in a particular valuation technique used to measure fair value, including the model and/or the risk inherent in the inputs to the valuation technique. Inputs may be observable or unobservable. Observable inputs are inputs that reflect the assumptions market participants would use in pricing the asset or liability developed based on market data obtained from sources independent of the reporting entity. Unobservable inputs are inputs that reflect the Fund’s own considerations about the assumptions market participants would use in pricing the asset or liability developed based on the best information available in the circumstances.
Authoritative guidance establishes three levels of the fair value hierarchy as follows:
— Level 1 – unadjusted quoted prices in active markets for identical assets and liabilities.
— Level 2 – significant other observable inputs (including quoted prices for similar assets and liabilities, interest rates, prepayment speeds, credit risk, etc.).
— Level 3 – significant unobservable inputs (including the Fund’s own assumptions in determining the fair value of assets and liabilities).
Inputs are used in applying the various valuation techniques and broadly refer to the assumptions that market participants use to make valuation decisions, including assumptions about risk. Inputs may include price information, specific and broad credit data, liquidity statistics, and other factors. A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. However, the determination of what constitutes “observable” requires judgment by the investment adviser. The investment adviser considers observable data to be that market data which is readily available, regularly distributed or updated, reliable and verifiable, not proprietary, and provided by independent sources that are actively involved in the relevant market. The categorization of a financial instrument within the hierarchy is based upon the pricing transparency of the instrument and does not necessarily correspond to the investment adviser’s perceived risk of that instrument.
Financial assets within Level 1 are based on quoted market prices in active markets. The Fund does not adjust the quoted price for these instruments.
Financial instruments that trade in markets that are not considered to be active but are valued based on quoted market prices, dealer quotations or alternative pricing sources supported by observable inputs are classified within Level 2. These include investment-grade corporate bonds, U.S. Treasury notes and bonds, and certain non-U.S. sovereign obligations and over-the-counter derivatives. As Level 2 financial
BBH U.S. GOVERNMENT MONEY MARKET FUND |
PORTFOLIO OF INVESTMENTS (continued) October 31, 2023 |
assets include positions that are not traded in active markets and/or are subject to transfer restrictions, valuations may be adjusted to reflect illiquidity and/or non-transferability, which are generally based on available market information.
Financial assets classified within Level 3 have significant unobservable inputs, as they trade infrequently. Level 3 financial assets include private equity and certain corporate debt securities. As observable prices are not available for these securities, valuation techniques are used to derive fair value.
At October 31, 2023, 100% of the Fund’s investments in securities were valued using amortized cost, in accordance with rules under the Investment Company Act of 1940, as amended (the “1940 Act”). Amortized cost approximates the fair value of a security, but since the value is not obtained from a quoted price in an active market, securities valued at amortized cost are considered to be valued using Level 2 inputs.
Because of the inherent uncertainties of valuation, the values reflected in the financial statements may materially differ from the value received upon the actual sale of those investments.
The following table summarizes the valuation of the Fund’s investments by the above fair value hierarchy levels as of October 31, 2023.
Investments, at value | Unadjusted | Significant | Significant | Balance as of | ||||||||
U.S. Treasury Bills | $ | — | $ | 4,365,022,127 | $ | — | $ | 4,365,022,127 | ||||
Repurchase Agreements |
| — |
| 1,500,000,000 |
| — |
| 1,500,000,000 | ||||
Total Investment, at value | $ | — | $ | 5,865,022,127 | $ | — | $ | 5,865,022,127 |
BBH U.S. GOVERNMENT MONEY MARKET FUND |
STATEMENT OF ASSETS AND LIABILITIES October 31, 2023 |
ASSETS: | |||||||
Investments in securities, at amortized cost which approximates fair value | $ | 4,365,022,127 | |||||
Repurchase agreements (Cost $1,500,000,000) |
| 1,500,000,000 | |||||
Cash |
| 35,683,664 | |||||
Receivables for: |
| ||||||
Interest |
| 219,271 | |||||
Interest from Custodian |
| 36,719 | |||||
Prepaid expenses |
| 2,212 | |||||
Total Assets |
| 5,900,963,993 | |||||
LIABILITIES: |
| ||||||
Payables for: |
| ||||||
Investment advisory and administrative fees |
| 1,015,673 | |||||
Dividends declared |
| 826,993 | |||||
Custody and fund accounting fees |
| 94,587 | |||||
Professional fees |
| 54,385 | |||||
Transfer agent fees |
| 2,557 | |||||
Board of Trustees’ fees |
| 1,420 | |||||
Accrued expenses and other liabilities |
| 2,097 | |||||
Total Liabilities |
| 1,997,712 | |||||
NET ASSETS | $ | 5,898,966,281 | |||||
| |||||||
Net Assets Consist of: |
| ||||||
Paid-in capital | $ | 5,898,967,715 | |||||
Distributions in excess of net investment income |
| (1,434) | |||||
Net Assets | $ | 5,898,966,281 | |||||
| |||||||
NET ASSET VALUE AND OFFERING PRICE PER SHARE |
| ||||||
INSTITUTIONAL SHARES |
| ||||||
($5,898,966,281 ÷ 5,898,973,733 shares outstanding) |
|
| $ | 1.00 |
The accompanying notes are an integral part of these financial statements.
10 |
BBH U.S. GOVERNMENT MONEY MARKET FUND |
STATEMENT OF OPERATIONS For the year ended October 31, 2023 |
NET INVESTMENT INCOME: |
|
| ||
Income: |
|
| ||
Interest income | $ | 254,810,860 |
| |
Interest income from Custodian |
| 1,028,445 |
| |
Total Income |
| 255,839,305 |
| |
|
| |||
Expenses: |
|
| ||
Investment advisory and administrative fees |
| 11,284,053 |
| |
Custody and fund accounting fees |
| 499,969 |
| |
Board of Trustees’ fees |
| 126,348 |
| |
Professional fees |
| 63,528 |
| |
Transfer agent fees |
| 33,200 |
| |
Miscellaneous expenses |
| 149,366 |
| |
Total Expenses |
| 12,156,464 |
| |
Net Investment Income |
| 243,682,841 |
| |
|
| |||
NET REALIZED LOSS: |
|
| ||
Net realized loss on investments |
| (477,212 | ) | |
Net Increase in Net Assets Resulting from Operations | $ | 243,205,629 |
|
The accompanying notes are an integral part of these financial statements.
F I N A N C I A L S T A T E M E N T S O C T O B E R 3 1, 2 0 2 3 | 11 |
BBH U.S. GOVERNMENT MONEY MARKET FUND |
STATEMENTS OF CHANGES IN NET ASSETS |
For the years | ||||||||
2023 | 2022 | |||||||
INCREASE IN NET ASSETS FROM: |
|
|
|
| ||||
Operations: |
|
|
|
| ||||
Net investment income | $ | 243,682,841 |
| $ | 35,393,588 |
| ||
Net realized loss on investments |
| (477,212 | ) |
| (948 | ) | ||
Net increase in net assets resulting from operations |
| 243,205,629 |
|
| 35,392,640 |
| ||
|
|
|
| |||||
Dividends and distributions declared: |
|
|
|
| ||||
Institutional Shares |
| (243,205,629 | ) |
| (35,394,673 | ) | ||
|
|
|
| |||||
Share transactions: |
|
|
|
| ||||
Fund shares sold and fund shares issued in connection with reinvestments of dividends |
| 7,328,113,029 |
|
| 10,783,214,063 |
| ||
Fund shares repurchased |
| (6,224,168,203 | ) |
| (10,215,607,377 | ) | ||
Net increase in net assets resulting from fund share transactions |
| 1,103,944,826 |
|
| 567,606,686 |
| ||
Total increase in net assets |
| 1,103,944,826 |
|
| 567,604,653 |
| ||
|
|
|
| |||||
NET ASSETS: |
|
|
|
| ||||
Beginning of year |
| 4,795,021,455 |
|
| 4,227,416,802 |
| ||
End of year | $ | 5,898,966,281 |
| $ | 4,795,021,455 |
|
The accompanying notes are an integral part of these financial statements.
12 |
BBH U.S. GOVERNMENT MONEY MARKET FUND |
FINANCIAL HIGHLIGHTS Selected per share data and ratios for an Institutional Share outstanding throughout each year/period. |
| For the |
| ||||||||||||||||||||||
2023 | 2022 | 2021 | 2020 | |||||||||||||||||||||
Net asset value, beginning of year/period | $ | 1.00 |
| $ | 1.00 |
| $ | 1.00 |
| $ | 1.00 |
| $ | 1.00 |
| $ | 1.00 |
| ||||||
Income from investment operations: |
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
Net investment income1 |
| 0.05 |
|
| 0.01 |
|
| 0.002 |
|
| 0.01 |
|
| 0.01 |
|
| 0.02 |
| ||||||
Net realized and unrealized gain/(loss) |
| (0.01 | ) |
| 0.002 |
|
| (0.00 | )2 |
| 0.002 |
|
| 0.002 |
|
| 0.002 |
| ||||||
Total income/(loss) from investment operations |
| 0.04 |
|
| 0.01 |
|
| 0.002 |
|
| 0.01 |
|
| 0.01 |
|
| 0.02 |
| ||||||
Dividends and distributions to shareholders: |
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
From net investment income |
| (0.04 | ) |
| (0.01 | ) |
| (0.00 | )2 |
| (0.01 | ) |
| (0.01 | ) |
| (0.02 | ) | ||||||
Total dividends and distributions to shareholders |
| (0.04 | ) |
| (0.01 | ) |
| (0.00 | )2 |
| (0.01 | ) |
| (0.01 | ) |
| (0.02 | ) | ||||||
Net asset value, end of year/period | $ | 1.00 |
| $ | 1.00 |
| $ | 1.00 |
| $ | 1.00 |
| $ | 1.00 |
| $ | 1.00 |
| ||||||
Total return3 |
| 4.59 | % |
| 0.75 | % |
| 0.01 | % |
| 0.59 | % |
| 0.63 | %4 |
| 2.02 | % | ||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Ratios/Supplemental data: |
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
Net assets, end of year/period (in millions) | $ | 5,899 |
| $ | 4,795 |
| $ | 4,227 |
| $ | 3,475 |
| $ | 2,040 |
| $ | 2,126 |
| ||||||
Ratio of expenses to average net assets before reductions |
| 0.23 | % |
| 0.23 | % |
| 0.23 | % |
| 0.24 | % |
| 0.24 | %5 |
| 0.24 | % | ||||||
Expense reimbursement6 |
| — | % |
| (0.08 | )% |
| (0.19 | )% |
| (0.05 | )% |
| — | % |
| — | % | ||||||
Expense offset arrangement |
| — | % |
| — | % |
| — | % |
| — | % |
| — | % |
| (0.01 | )% | ||||||
Ratio of expenses to average net assets after reductions |
| 0.23 | % |
| 0.15 | % |
| 0.04 | % |
| 0.19 | % |
| 0.24 | %5 |
| 0.23 | % | ||||||
Ratio of net investment income to average net assets |
| 4.52 | % |
| 0.73 | % |
| 0.01 | % |
| 0.48 | % |
| 1.86 | %5 |
| 2.02 | % |
____________
1 Calculated using average shares outstanding for the year/period.
2 Less than $0.01 per share.
3 Assumes the reinvestment of distributions.
4 Not Annualized.
5 Annualized with the exception of audit fees.
6 During the years ended October 31, 2023, 2022, 2021, 2020, the period from July 1, 2019 to October 31, 2019, and the year ended June 30, 2019, the investment advisory and administrative fee/shareholder servicing fee waivers, as a result of a voluntary minimum yield agreement, were $-, $3,724,415, $7,060,486, $1,299,428, $-, and $-, respectively.
The accompanying notes are an integral part of these financial statements.
F I N A N C I A L S T A T E M E N T S O C T O B E R 3 1, 2 0 2 3 | 13 |
BBH U.S. GOVERNMENT MONEY MARKET FUND |
NOTES TO FINANCIAL STATEMENTS October 31, 2023 |
1. Organization. The Fund is a separate series of BBH Trust (the “Trust”), which is registered under the 1940 Act, as an open-end management investment company. The Trust was originally organized as a Massachusetts business trust on June 7, 1983 and re-organized as a Delaware statutory trust on June 12, 2007. At October 31, 2023, there were eight series of the Trust. The Fund commenced operations on December 12, 1983. The Fund currently offers one class of shares designated as Institutional Shares. The investment objective of the Fund is to provide investors with as high a level of income as is consistent with the preservation of capital and the maintenance of liquidity. Under normal circumstances, the Fund invests at least 99.5% of its total assets in cash and short-term U.S. Treasury securities and securities issued by U.S. government agencies or government-sponsored enterprises and repurchase agreements fully collateralized by such instruments. Additionally, under normal circumstances, at least 80% of the value of the Fund’s net assets will be invested in U.S. government securities and repurchase agreements fully collateralized by U.S. government securities. Effective July 1, 2019, the Fund changed its fiscal year end from June 30 to October 31.
2. Significant Accounting Policies. The Fund’s financial statements are prepared in accordance with Generally Accepted Accounting Principles in the United States of America (“GAAP”). The Fund is an investment company and accordingly follows the investment company accounting and reporting guidance of the Financial Accounting Standards Board (FASB) Accounting Standard Codification Topic 946 Financial Services – Investment Companies. The following summarizes significant accounting policies of the Fund:
A. Valuation of Investments. The Board of Trustees (the “Board”) has ultimate responsibility for determining the fair value of investments. Pursuant to Rule 2a-5 of the 1940 Act, the Board has designated the Investment Adviser as its valuation designee. The Investment Adviser monitors the continual appropriateness of valuation methods applied and determines if adjustments should be made in light of market factor changes and events affecting issuers. The Investment Adviser performs a series of activities to provide reasonable assurance of the appropriateness of the prices utilized, including but not limited to: periodic independent pricing service due diligence meetings and reviewing the results of back testing on a monthly basis. The Investment Adviser provides the Board with reporting on the results of the back testing as well as positions which were fair valued during the period.
The Fund values its investments at amortized cost, which approximates fair value. The amortized cost method values a security at its cost at the time of purchase and thereafter assumes a constant amortization to maturity of any discount or premium. The Fund’s use of amortized cost is in compliance with Rule 2a-7 of the 1940 Act. In the event that security valuations do not approximate fair value, securities may be valued as determined in accordance with procedures adopted by the Board.
B. Accounting for Investments and Income. Investment transactions are accounted for on the trade date. Realized gains and losses on investment transactions are determined based on the identified cost method. Interest income is accrued as earned and consists of interest accrued, accretion of discount on debt securities (including both original issue and market discount) and premium amortization on the investments of the Fund.
14 |
BBH U.S. GOVERNMENT MONEY MARKET FUND |
NOTES TO FINANCIAL STATEMENTS (continued) October 31, 2023 |
C. Fund Expenses. Most expenses of the Trust can be directly attributed to a specific fund. Expenses which cannot be directly attributed to a fund are generally apportioned among each fund in the Trust on a net assets basis or other suitable method. Expense estimates are accrued in the period to which they relate and adjustments are made when actual amounts are known.
D. Repurchase Agreements. The Fund may enter into repurchase agreements. Repurchase agreements are transactions in which the Fund buys a security from a dealer or bank and agrees to sell the security back at a mutually agreed upon time and price. The repurchase price normally is in excess of the purchase price, reflecting an agreed upon interest rate. The rate is effective for the period of time that assets of the Fund are invested in the agreement and is not related to the coupon rate on the underlying security. The Fund will enter into repurchase agreements only with banks and other recognized financial institutions, such as securities dealers, deemed creditworthy by the investment adviser. The Fund’s custodian or sub-custodian will take possession of the securities subject to repurchase agreements. The investment adviser, custodian or sub-custodian will monitor the marked-to-market value of the underlying collateral each day to ensure that the value of the security always equals or exceeds the repurchase price.
Repurchase agreements are entered into by the Fund under Master Repurchase Agreements (MRA) which permit the Fund, under certain circumstances including an event of default (such as bankruptcy or insolvency), to offset payables and/or receivables under the MRA with collateral held and/or posted to the counterparty and create one single net payment due to or from the Fund. However, bankruptcy or insolvency laws of a particular jurisdiction may impose restrictions on or prohibitions against such a right of offset in the event of the MRA counterparty’s bankruptcy or insolvency. Lastly, the MRA does not preclude the Fund from selling, transferring, pledging or hypothecating the underlying collateral but no such transaction shall relieve the Fund of its obligation to transfer the collateral to the counterparty upon the latter’s repurchase of the securities.
The Fund’s repurchase agreements and information related to collateral, which could be offset in event of default, are shown in the Portfolio of Investments.
E. Federal Income Taxes. It is the Trust’s policy to comply with the requirements of the Internal Revenue Code (the “Code”) applicable to regulated investment companies and to distribute substantially all of its taxable income to its shareholders. Accordingly, no federal income tax provision is required. The Fund files a tax return annually using tax accounting methods required under provisions of the Code, which may differ from GAAP, which is the basis on which these financial statements are prepared. Accordingly, the amount of net investment income and net realized gain reported in these financial statements may differ from that reported on the Fund’s tax return, due to certain book-to-tax timing differences such as losses deferred due to “wash sale” transactions and utilization of capital loss carryforwards. These differences result in temporary over-distributions for financial statement purposes and are classified as distributions in excess of accumulated net realized gains or net investment income. These distributions do not constitute a return of capital. Permanent differences are reclassified between paid-in capital and retained
F I N A N C I A L S T A T E M E N T S O C T O B E R 3 1, 2 0 2 3 | 15 |
BBH U.S. GOVERNMENT MONEY MARKET FUND |
NOTES TO FINANCIAL STATEMENTS (continued) October 31, 2023 |
earnings/(accumulated deficit) within the Statement of Assets and Liabilities based upon their tax classification. As such, the character of distributions to shareholders reported in the Financial Highlights table may differ from that reported to shareholders on Form 1099-DIV.
The Fund is subject to the provisions of Accounting Standards Codification 740 Income Taxes (“ASC 740”). ASC 740 sets forth a minimum threshold for financial statement recognition of the benefit of a tax position taken or expected to be taken in a tax return. The Fund did not have any unrecognized tax benefits as of October 31, 2023, nor were there any increases or decreases in unrecognized tax benefits for the period then ended. The Fund recognizes interest and penalties, if any, related to unrecognized tax benefits as an income tax expense in the Statement of Operations. During the year ended October 31, 2023, the Fund did not incur any such interest or penalties. The Fund is subject to examination by U.S. federal and state tax authorities for returns filed for the prior three years. The Fund is not aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will significantly change in the next twelve months.
F. Dividends and Distributions to Shareholders. Dividends and distributions from net investment income to shareholders are declared daily and paid monthly to shareholders. Distributions from net capital gains, if any, are generally declared and paid annually and are recorded on the ex-dividend date. The Fund declared dividends in the amount of $243,205,629 and $35,394,673 to Institutional shareholders during the years ended October 31, 2023 and October 31, 2022, respectively.
The tax character of distributions paid during the years ended October 31, 2023 and 2022, respectively, were as follows:
Distributions paid from: | ||||||||||||
Ordinary | Net | Total taxable | Total | |||||||||
2023: | $ | 243,205,629 | $ | — | $ | 243,205,629 | $ | 243,205,629 | ||||
2022: |
| 35,394,673 |
| — |
| 35,394,673 |
| 35,394,673 |
As of October 31, 2023 and 2022, respectively, the components of retained earnings/(accumulated deficit) on tax basis were as follows:
Components of retained earnings/(accumulated deficit): | |||||||||||||||||||||
Undistributed | Undistributed | Accumulated | Other | Unrealized | Total | ||||||||||||||||
2023: | $ | 1,303,719 | $ | — | $ | (478,160 | ) | $ | (826,993 | ) | $ | — | $ | (1,434 | ) | ||||||
2022: |
| 380,489 |
| — |
| (948 | ) |
| (380,975 | ) |
| — |
| (1,434 | ) |
16 |
BBH U.S. GOVERNMENT MONEY MARKET FUND |
NOTES TO FINANCIAL STATEMENTS (continued) October 31, 2023 |
The Fund had $478,160 net capital loss carryforwards as of October 31, 2023, of which $478,160 and $0, is attributable to short-term and long-term capital losses, respectively.
The Fund is permitted to carryforward capital losses incurred in taxable years beginning after December 22, 2010, for an unlimited period and they will retain their character as either short-term or long-term capital losses.
Total distributions paid may differ from the amounts shown in the Statements of Changes in Net Assets because, for tax purposes, dividends are recognized when actually paid.
There are no significant differences between book-basis and tax-basis unrealized appreciation/(depreciation) for investments for the current year.
To the extent future capital gains are offset by future capital loss carryforwards, if any, such gains will not be distributed.
G. Use of Estimates. The preparation of the financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities in the financial statements, disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of income and expense during the reporting period. Actual results could differ from these estimates.
3. Fees and Other Transactions with Affiliates.
A. Investment Advisory and Administrative Fees. Under a combined Investment Advisory and Administrative Services Agreement (“Agreement”) with the Trust, Brown Brothers Harriman & Co. (“BBH”) through a separately identifiable department (“Investment Adviser”) provides investment advisory and portfolio management services to the Fund. BBH also provides administrative services to the Fund. The Fund pays a combined fee for investment advisory and administrative services calculated daily and paid monthly at an annual rate equivalent to 0.25% on the first $1,000,000,000 of the Fund’s average daily net assets and 0.20% of the Fund’s average daily net assets in excess of $1,000,000,000. For the year ended October 31, 2023, the Fund incurred $11,284,053 for services under the Agreement.
B. Investment Advisory and Administrative Fee Waiver. BBH has voluntarily agreed to waive its Investment Advisory and Administrative Fee and credit daily to the Fund an amount necessary to maintain the minimum annualized yield of the Fund at 0.01%. The amount credited each day will offset the daily accrual of the Investment Advisory and Administrative Fee. This is a voluntary waiver that can be changed at any time at the sole discretion of BBH. For the year ended October 31, 2023, BBH waived fees in the amount of $0 for Institutional Shares.
F I N A N C I A L S T A T E M E N T S O C T O B E R 3 1, 2 0 2 3 | 17 |
BBH U.S. GOVERNMENT MONEY MARKET FUND |
NOTES TO FINANCIAL STATEMENTS (continued) October 31, 2023 |
C. Custody and Fund Accounting Fees. BBH acts as a custodian and fund accountant and receives custody and fund accounting fees from the Fund calculated daily and paid monthly. BBH holds all of the Fund’s cash and investments and calculates the Fund’s daily net asset value. The custody fee is an asset and transaction-based fee. The fund accounting fee is an asset-based fee calculated at 0.325 basis points per annum of average daily net assets, effective from September 1, 2023 based on the new agreement. The fund accounting fee was 0.40 basis points per annum until August 31, 2023. For the year ended October 31, 2023, the Fund incurred $499,969 in custody and fund accounting fees. As per agreement with the Fund’s custodian, the Fund receives interest income on cash balances held by the custodian at the BBH Base Rate. The BBH Base Rate is defined as BBH’s effective trading rate in local money markets on each day. The total interest earned by the Fund under the agreement for the year ended October 31, 2023 was $1,028,445. This amount is included in “Interest income from Custodian” in the Statement of Operations. In the event that the Fund is overdrawn, under the custody agreement with BBH, BBH will make overnight loans to the Fund to cover overdrafts. Pursuant to their agreement, the Fund will pay the BBH Overdraft Base Rate plus 2% on the day of the overdraft. The total interest incurred by the Fund for the year ended October 31, 2023 was $197,106. This amount is included in the “Custody and fund accounting fees” in the Statement of Operations.
D. Board of Trustees’ Fees. Each Trustee who is not an “interested person” as defined under the 1940 Act (referred to here as an “Independent Trustee”) receives an annual fee as well as reimbursement for reasonable out-of-pocket expenses from the Fund. For the year ended October 31, 2023, the Fund incurred $126,348 in Independent Trustee compensation and expense reimbursements.
E. Officers of the Trust. Officers of the Trust are also employees of BBH. Officers are paid no fees by the Trust for their services to the Trust.
4. Shares of Beneficial Interest. The Trust is permitted to issue an unlimited number of Institutional Shares of beneficial interest, at no par value. Transactions in Institutional Shares were as follows:
For the year ended | For the year ended | |||||||||||||
Shares | Dollars | Shares | Dollars | |||||||||||
Institutional Shares |
|
|
|
|
|
| ||||||||
Shares sold | 7,328,089,995 |
| $ | 7,328,089,995 |
| 10,783,210,361 |
| $ | 10,783,210,361 |
| ||||
Shares issued in connection with reinvestments of dividends | 23,034 |
|
| 23,034 |
| 3,702 |
|
| 3,702 |
| ||||
Shares redeemed | (6,224,168,203 | ) |
| (6,224,168,203 | ) | (10,215,607,377 | ) |
| (10,215,607,377 | ) | ||||
Net increase | 1,103,944,826 |
| $ | 1,103,944,826 |
| 567,606,686 |
| $ | 567,606,686 |
|
18 |
BBH U.S. GOVERNMENT MONEY MARKET FUND |
NOTES TO FINANCIAL STATEMENTS (continued) October 31, 2023 |
5. Principal Risk Factors and Indemnifications.
A. Principal Risk Factors. Investing in the Fund may involve certain risks, as discussed in the Fund’s prospectus, including but not limited to, those described below:
Investments in the Fund are neither insured nor guaranteed by the U.S. Government. Shares of the Fund are not deposits or obligations of, or guaranteed by, BBH or any other bank, and the shares are neither insured nor guaranteed by the Federal Deposit Insurance Corporation, the Federal Reserve Board or any other federal, state or other governmental agency. BBH has no legal obligation to provide financial support to the Fund and you should not expect that BBH as the Fund’s sponsor will provide financial support to the Fund at any time. Although the Fund seeks to preserve the value of your investment at $1.00 per share, it is possible to lose money by investing in the Fund.
The divergence of the Fund’s amortized cost price per share from its market based net asset value per share may result in the Fund’s inability to maintain a stable $1.00 NAV, resulting in material dilution or other unfair results to shareholders (stable NAV risk). In the normal course of business, the Fund invests in securities and enters into transactions where risks exist due to fluctuations in the market (market risk), failure of an issuer, guarantor or counterparty to a transaction to perform (credit risk) or changes in interest rates (interest rate risk). The Fund is subject to the risk that the securities selected by the investment adviser may underperform (management risk). Even though the Fund’s investments in repurchase agreements are collateralized at all times, there is some risk to the Fund if the other party to the agreement should default on its obligations (repurchase agreement risk). The Fund’s investments in certain U.S. government agency securities may not be backed by the U.S. Treasury and may be supported only by the credit of the issuer (U.S. government agency securities risk). The Fund’s shareholders may be adversely impacted by asset allocation decisions made by the Fund’s investment adviser whose discretionary clients make up a large percentage of the Fund’s shareholders (large shareholder risk). The Fund’s exposure to these risks with respect to these financial assets held by the Fund is reflected in their value as recorded in the Fund’s Statement of Assets and Liabilities. The U.S. Securities and Exchange Commission (“SEC”) and other regulators may adopt additional money market fund regulations in the future, which may impact the operation and performance of the Fund (Regulatory Risk). The absence of an active market for the Fund’s variable and floating rate securities could make it difficult for the Fund to dispose of them if the issuer defaults (variable and floating rate instrument risk). The extent of the Fund’s exposure to these risks in respect to these financial assets is included in their value as recorded in the Fund’s Statement of Assets and Liabilities.
Please refer to the Fund’s prospectus for a complete description of the principal risks of investing in the Fund.
F I N A N C I A L S T A T E M E N T S O C T O B E R 3 1, 2 0 2 3 | 19 |
BBH U.S. GOVERNMENT MONEY MARKET FUND |
NOTES TO FINANCIAL STATEMENTS (continued) October 31, 2023 |
B. Indemnifications. Under the Trust’s organizational documents, its officers and Trustees may be indemnified against certain liabilities and expenses arising out of the performance of their duties to the Fund, and shareholders are indemnified against personal liability for the obligations of the Trust. Additionally, in the normal course of business, the Fund enters into agreements with service providers that may contain indemnification clauses. The Fund’s maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Fund that have not yet occurred. The risk of material loss from such claims is considered remote.
6. Money Market Regulation. Money market funds are required to comply with SEC regulations and governing rules for money market funds. Government money market funds, such as BBH U.S. Government Money Market Fund, are permitted to continue to transact fund shares at a NAV calculated using the amortized cost valuation method. The Fund’s Board of Trustees has determined not to impose any liquidity-based redemption fees or redemption gates on the Fund as permitted by the SEC amendments. As a government money market fund, the Fund must invest 99.5% or more of its total assets in cash, short-term U.S. Treasury securities, U.S. government agency securities, and/or repurchase agreements that are collateralized fully by cash or government securities.
7. Subsequent Events. Management has evaluated events and transactions that have occurred since October 31, 2023 through the date the financial statements were issued and determined that there were no subsequent events that would require recognition or additional disclosure in the financial statements.
20 |
BBH U.S. GOVERNMENT MONEY MARKET FUND |
DISCLOSURE OF FUND EXPENSES October 31, 2023 (unaudited) |
EXAMPLE
As a shareholder of the Fund, you may incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments, reinvested distributions, or other distributions; redemption fees; and exchange fees; and (2) ongoing costs, including management fees, and other Fund expenses. This Example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The Example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period (May 1, 2023 to October 31, 2023).
ACTUAL EXPENSES
The first line of the table below provides information about actual account values and actual expenses. You may use information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled “Expenses Paid During the Period” to estimate the expenses you paid on your account during the period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The second line of the table below provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid during the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% Hypothetical Example with the 5% hypothetical examples that appear in the shareholder reports of other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as redemption fees or exchange fees. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
Beginning | Ending | Expenses Paid | ||||
Institutional Shares | ||||||
Actual | $1,000 | $1,025 | $1.15 | |||
Hypothetical2 | $1,000 | $1,024 | $1.15 |
____________
1 Expenses are equal to the Fund’s annualized net expense ratio of 0.22% for Institutional Shares, multiplied by 184/365 (to reflect the one half-year period).
2 Assumes a return of 5% before expenses. For the purpose of the calculation, the applicable annualized expense ratio for each class of shares is subtracted from the assumed return before expenses.
F I N A N C I A L S T A T E M E N T S O C T O B E R 3 1, 2 0 2 3 | 21 |
BBH U.S. GOVERNMENT MONEY MARKET FUND |
CONFLICTS OF INTEREST October 31, 2023 (unaudited) |
Description of Potential Material Conflicts of Interest — Investment Adviser
BBH, including the Investment Adviser, provides discretionary and non-discretionary investment management services and products to corporations, institutions and individual investors throughout the world. As a result, in the ordinary course of its businesses, BBH, including the Investment Adviser, may engage in activities in which its interests or the interests of its clients may conflict with or be adverse to the interests of the Funds. In addition, certain of such clients (including the Funds) utilize the services of BBH for which they will pay to BBH customary fees and expenses that will not be shared with the Funds.
The Investment Adviser has adopted and implemented policies and procedures that seek to manage conflicts of interest. Pursuant to such policies and procedures, the Investment Adviser monitors a variety of areas, including compliance with fund investment guidelines, the investment in only those securities that have been approved for purchase, and compliance with their respective Code of Ethics.
The Trust also manages these conflicts of interest. For example, the Trust has designated a chief compliance officer (“CCO”) and has adopted and implemented policies and procedures designed to manage the conflicts identified below and other conflicts that may arise in the course of the Funds’ operations in such a way as to safeguard the Funds from being negatively affected as a result of any such potential conflicts. From time to time, the Trustees receive reports from the Investment Adviser and the Trust’s CCO on areas of potential conflict.
Investors should carefully review the following, which describes potential and actual conflicts of interest that BBH, the Investment Adviser can face in the operation of their respective investment management services. This section is not, and is not intended to be, a complete enumeration or explanation of all of the potential conflicts of interest that may arise. The Investment Adviser and the Funds has adopted policies and procedures reasonably designed to appropriately prevent, limit or mitigate the conflicts of interest described below. Additional information about potential conflicts of interest regarding the Investment Adviser is set forth in the Investment Adviser’s Form ADV. A copy of Part 1 and Part 2A of the Investment Adviser’s Form ADV is available on the SEC’s website (www.adviserinfo.sec.gov). In addition, many of the activities that create these conflicts of interest are limited and/or prohibited by law, unless an exception is available.
Other Clients and Allocation of Investment Opportunities. BBH, the Investment Adviser manages funds and accounts of clients other than the Funds (“Other Clients”). In general, BBH, the Investment Adviser faces conflicts of interest when they render investment advisory services to different clients and, from time to time, provide dissimilar investment advice to different clients. Investment decisions will not necessarily be made in parallel among the Funds and Other Clients. Investments made by the Funds do not, and are not intended to, replicate the investments, or the investment methods and strategies, of Other Clients. Accordingly, such Other Clients may produce results that are materially different from those experienced by the Funds. Certain other conflicts of interest may arise in connection with a portfolio manager’s management of the Funds’ investments, on the one hand, and the investments of other funds or accounts for which the portfolio manager is responsible, on the other. For example, it is possible that the various funds or accounts managed by the Investment Adviser could have different investment strategies
22 |
BBH U.S. GOVERNMENT MONEY MARKET FUND |
CONFLICTS OF INTEREST (continued) October 31, 2023 (unaudited) |
that, at times, might conflict with one another to the possible detriment of the Funds. From time to time, the Investment Adviser sponsors and with other investment pools and accounts which engage in the same or similar businesses as the Funds using the same or similar investment strategies. To the extent that the same investment opportunities might be desirable for more than one account or fund, possible conflicts could arise in determining how to allocate them because the Investment Adviser may have an incentive to allocate investment opportunities to certain accounts or funds. However, BBH and the Investment Adviser have implemented policies and procedures designed to ensure that information relevant to investment decisions is disseminated promptly within its portfolio management teams and investment opportunities are allocated equitably among different clients. The policies and procedures require, among other things, objective allocation for limited investment opportunities, and documentation and review of justifications for any decisions to make investments only for select accounts or in a manner disproportionate to the size of the account. Nevertheless, access to investment opportunities may be allocated differently among accounts due to the particular characteristics of an account, such as size of the account, cash position, tax status, risk tolerance and investment restrictions or for other reasons.
Actual or potential conflicts of interest may also arise when a portfolio manager has management responsibilities to multiple accounts or funds, resulting in unequal commitment of time and attention to the portfolio management of the funds or accounts.
Affiliated Service Providers. Other potential conflicts might include conflicts between the Funds and its affiliated and unaffiliated service providers (e.g., conflicting duties of loyalty). In addition to providing investment management services through the SID, BBH provides administrative, custody, shareholder servicing and fund accounting services to the Funds. BBH may have conflicting duties of loyalty while servicing the Funds and/or opportunities to further its own interest to the detriment of the Funds. For example, in negotiating fee arrangements with affiliated service providers, BBH may have an incentive to agree to higher fees than it would in the case of unaffiliated providers. BBH acting in its capacity as the Funds’ administrator is the primary valuation agent of the Funds. BBH values securities and assets in the Funds according to the Funds’ valuation policies. Because the Investment Adviser’s advisory and administrative fees are calculated by reference to a Funds’ net assets, BBH and its affiliates may have an incentive to seek to overvalue certain assets.
Aggregation. Potential conflicts of interest also arise with the aggregation of trade orders. Purchases and sales of securities for the Funds may be aggregated with orders for other client accounts managed by the Investment Adviser. The Investment Adviser, however, are not required to aggregate orders if portfolio management decisions for different accounts are made separately, or if it is determined that aggregating is not practicable, or in cases involving client direction. Prevailing trading activity frequently may make impossible the receipt of the same price or execution on the entire volume of securities purchased or sold. When this occurs, the various prices may be averaged, and the Funds will be charged or credited with the average price. Thus, the effect of the aggregation may operate on some occasions to the disadvantage of the Funds. In addition, under certain circumstances, the Funds will not be charged the same commission or commission equivalent rates in connection with an aggregated order.
F I N A N C I A L S T A T E M E N T S O C T O B E R 3 1, 2 0 2 3 | 23 |
BBH U.S. GOVERNMENT MONEY MARKET FUND |
CONFLICTS OF INTEREST (continued) October 31, 2023 (unaudited) |
Cross Trades. Under certain circumstances, the Investment Adviser, on behalf of the Funds, may seek to buy from or sell securities to another fund or account advised by BBH, the Investment Adviser. Subject to applicable law and regulation, BBH, the Investment Adviser may (but is not required to) effect purchases and sales between BBH, the Investment Adviser clients (“cross trades”), including the Funds, if BBH or the Investment Adviser believes such transactions are appropriate based on each party’s investment objectives and guidelines. There may be potential conflicts of interest or regulatory issues relating to these transactions which could limit the Investment Adviser’s decision to engage in these transactions for the Funds. BBH and/or the Investment Adviser may have a potentially conflicting division of loyalties and responsibilities to the parties in such transactions.
Soft Dollars. The Investment Adviser may direct brokerage transactions and/or payment of a portion of client commissions (“soft dollars”) to specific brokers or dealers or other providers to pay for research or other appropriate services which provide, in the Investment Adviser’s view, appropriate assistance in the investment decision-making process (including with respect to futures, fixed price offerings and over-the-counter transactions). The use of a broker that provides research and securities transaction services may result in a higher commission than that offered by a broker who does not provide such services. The Investment Adviser will determine in good faith whether the amount of commission is reasonable in relation to the value of research and services provided and whether the services provide lawful and appropriate assistance in its investment decision-making responsibilities.
Research or other services obtained in this manner may be used in servicing any or all of the Funds and other accounts managed by the Investment Adviser, including in connection with accounts that do not pay commissions to the broker related to the research or other service arrangements. Such products and services may disproportionately benefit other client accounts relative to the Funds based on the amount of brokerage commissions paid by the Funds and such other accounts. To the extent that a Sub-adviser uses soft dollars, it will not have to pay for those products and services itself.
BBH may receive research that is bundled with the trade execution, clearing, and/or settlement services provided by a particular broker-dealer. For example, the research effectively will be paid by client commissions that also will be used to pay for the execution, clearing, and settlement services provided by the broker-dealer and will not be paid by the Investment Adviser.
Arrangements regarding compensation and delegation of responsibility may create conflicts relating to selection of brokers or dealers to execute Fund portfolio trades and/or specific uses of commissions from Fund portfolio trades, administration of investment advice and valuation of securities.
Investments in BBH Funds. From time to time BBH may invest a portion of the assets of its discretionary investment advisory clients in the Funds. That investment by BBH on behalf of its discretionary investment advisory clients in the Funds may be significant at times.
Increasing a Fund’s assets may enhance investment flexibility and diversification and may contribute to economies of scale that tend to reduce the Funds’ expense ratio. In selecting the Funds for its discretionary investment advisory clients, BBH may limit its selection to funds managed by BBH or the Investment
24 |
BBH U.S. GOVERNMENT MONEY MARKET FUND |
CONFLICTS OF INTEREST (continued) October 31, 2023 (unaudited) |
Adviser. BBH may not consider or canvass the universe of unaffiliated investment companies available, even though there may be unaffiliated investment companies that may be more appropriate or that have superior performance. BBH, the Investment Adviser and their affiliates providing services to the Funds benefit from additional fees when the Funds is included as an investment by a discretionary investment advisory client.
BBH reserves the right to redeem at any time some or all of the shares of the Funds acquired for its discretionary investment advisory clients’ accounts. A large redemption of shares of the Funds by BBH on behalf of its discretionary investment advisory clients could significantly reduce the asset size of the Funds, which might have an adverse effect on the Funds’ investment flexibility, portfolio diversification and expense ratio.
Valuation. When market quotations are not readily available or are believed by BBH to be unreliable, the Funds’ investments will be valued at fair value by BBH pursuant to procedures adopted by the Funds’ Board. When determining an asset’s “fair value,” BBH seeks to determine the price that a Fund might reasonably expect to receive from the current sale of that asset in an arm’s-length transaction. The price generally may not be determined based on what the Funds might reasonably expect to receive for selling an asset at a later time or if it holds the asset to maturity. While fair value determinations will be based upon all available factors that BBH deems relevant at the time of the determination and may be based on analytical values determined by BBH using proprietary or third-party valuation models, fair value represents only a good faith approximation of the value of a security. The fair value of one or more securities may not, in retrospect, be the price at which those assets could have been sold during the period in which the particular fair values were used in determining the Funds’ net asset value. As a result, the Funds’ sale or redemption of its shares at net asset value, at a time when a holding or holdings are valued by BBH (pursuant to Board-adopted procedures) at fair value, may have the effect of diluting or increasing the economic interest of existing shareholders.
Referral Arrangements. BBH may enter into advisory and/or referral arrangements with third parties. Such arrangements may include compensation paid by BBH to the third party. BBH may pay a solicitation fee for referrals and/or advisory or incentive fees. BBH may benefit from increased amounts of assets under management.
Personal Trading. BBH, including the Investment Adviser, and any of their respective partners, principals, directors, officers, employees, affiliates or agents, face conflicts of interest when transacting in securities for their own accounts because they could benefit by trading in the same securities as the Funds, which could have an adverse effect on the Funds. However, the Investment Adviser has implemented policies and procedures concerning personal trading by BBH Partners and employees. The policy and procedures are intended to prevent BBH Partners and employees from trading in the same securities as the Funds. However, BBH, including the Investment Adviser, has implemented policies and procedures concerning personal trading by BBH Partners and employees. The policies and procedures are intended to prevent BBH Partners and employees with access to Fund material non-public information from trading in the same securities as the Funds.
F I N A N C I A L S T A T E M E N T S O C T O B E R 3 1, 2 0 2 3 | 25 |
BBH U.S. GOVERNMENT MONEY MARKET FUND |
CONFLICTS OF INTEREST (continued) October 31, 2023 (unaudited) |
Gifts and Entertainment. From time to time, employees of BBH, including the Investment Adviser, and any of their respective partners, principals, directors, officers, employees, affiliates or agents, may receive gifts and/or entertainment from clients, intermediaries, or service providers to the Funds or BBH, including the Investment Adviser, which could have the appearance of affecting or may potentially affect the judgment of the employees, or the manner in which they conduct business. The Investment Adviser has implemented policies and procedures concerning gifts and entertainment to mitigate any impact on the judgment of BBH Partners and employees. BBH, including the Investment Adviser, has implemented policies and procedures concerning gifts and entertainment to mitigate any impact on the judgment of BBH Partners and employees.
26 |
BBH U.S. GOVERNMENT MONEY MARKET FUND |
ADDITIONAL FEDERAL TAX INFORMATION October 31, 2023 (unaudited) |
In January 2024, the Fund will report on Form 1099 the tax status of all distributions made during the calendar year 2023. Shareholders should use the information on Form 1099 for their income tax returns.
F I N A N C I A L S T A T E M E N T S O C T O B E R 3 1, 2 0 2 3 | 27 |
TRUSTEES AND OFFICERS OF BBH U.S. GOVERNMENT MONEY MARKET FUND |
(unaudited) |
Information pertaining to the Trustees and executive officers of BBH Trust as of October 31, 2023 is set forth below. The mailing address for each Trustee is c/o BBH Trust, 140 Broadway, New York, NY 10005.
|
|
|
|
| Other Public |
Independent Trustees | |||||
H. Whitney Wagner | Chairman of the Board and Trustee | Chairman Since 2014; Trustee Since 2007 and 2006 – 2007 with the Predecessor Trust | President, Clear Brook Advisors, a registered investment adviser. | 8 | None. |
Andrew S. Frazier | Trustee | Since 2010 | Retired. | 8 | None. |
Mark M. Collins | Trustee | Since 2011 | Partner of Brown Investment Advisory Incorporated, a registered investment adviser. | 8 | Chairman of Dillon Trust Company. |
John M. Tesoro | Trustee | Since 2014 | Retired. | 8 | Independent Trustee, Bridge Builder Trust (11 funds) and Edward Jones Money Market Fund; Director, Teton Advisers, Inc. (a registered investment adviser) (2014-2021). |
Joan A. Binstock | Trustee | Since 2019 | Partner, Chief Financial and Operations Officer, Lord Abbett & Co. LLC (1999-2018); Lovell Minnick Partners, Advisers Counsel (2018-present). | 8 | Independent Director, Morgan Stanley Direct Lending Fund; KKR Real Estate Interval Fund. |
Karen A. Kochevar | Trustee | Since 2023 | Retired. | 8 | Director, CAVA Group, Inc. |
28 |
TRUSTEES AND OFFICERS OF BBH U.S. GOVERNMENT MONEY MARKET FUND |
(unaudited) |
|
|
|
|
| Other Public |
Interested Trustees | |||||
Susan C. Livingston+ | Trustee | Since 2011 | Partner (since 1998) and Senior Client Advocate (since 2010) for BBH&Co. | 8 | None. |
John A. Gehret+ | Trustee | Since 2011 | Limited Partner of BBH&Co. (2012-present). | 8 | None. |
F I N A N C I A L S T A T E M E N T S O C T O B E R 3 1, 2 0 2 3 | 29 |
TRUSTEES AND OFFICERS OF BBH U.S. GOVERNMENT MONEY MARKET FUND |
(unaudited) |
Name, Address | Position(s) | Term of | Principal Occupation(s) During |
Officers | |||
Jean-Pierre Paquin | President and Principal Executive Officer | Since 2016 | Partner of BBH&Co. since 2015; joined BBH&Co. in 1996. |
Daniel Greifenkamp | Vice President | Since 2016 | Principal of BBH&Co. |
Charles H. Schreiber | Treasurer and Principal Financial Officer | Since 2007 2006 – 2007 with the Predecessor Trust | Managing Director of BBH&Co. since 2001; joined BBH&Co. in 1999. |
Paul F. Gallagher | Chief Compliance Officer (“CCO”) | Since 2015 | Managing Director of BBH&Co. since 2015. |
Nicole English | Anti-Money Laundering Officer (“AMLO”) | Since 2022 | Vice President of BBH&Co. |
Brian J. Carroll | Secretary | Since 2021 | Vice President of BBH&Co. |
Crystal Cheung | Assistant Treasurer | Since 2018 | Assistant Vice President of BBH&Co. since 2016; joined BBH&Co. 2014. |
____________
# All officers of the Trust hold office for one year and until their respective successors are chosen and qualified (subject to the ability of the Trustees to remove any officer in accordance with the Trust’s By-laws). Mr. Wagner previously served on the Board of Trustees of the Predecessor Trust.
+ Ms. Livingston and Mr. Gehret are “interested persons” of the Trust as defined in the 1940 Act because of their positions as Partner and Limited Partner of BBH&Co., respectively.
^ The Fund Complex consists of the Trust, which has eight series, and each is counted as one “Portfolio” for purposes of this table.
30 |
Administrator Distributor Shareholder Servicing Agent | Investment Adviser | |
To obtain information or make shareholder inquiries: | ||
By telephone: | Call 1-800-575-1265 | |
This report is submitted for the general information of shareholders and is not authorized for distribution to prospective investors unless preceded or accompanied by an effective prospectus. Nothing herein contained is to be considered an offer of sale or a solicitation of an offer to buy shares of the Fund. For more complete information, visit www.bbhfunds.com for a prospectus. You should consider the Fund’s investment objectives, risks, charges and expenses carefully before you invest. Information about these and other important subjects is in the Fund’s prospectus, which you should read carefully before investing. Holdings and allocations are subject to change. Fund holdings should not be relied on in making investment decisions and should not be construed as research or investment advice regarding particular securities. Current and future holdings are subject to risk. The Fund’s Forms N-MFP are available electronically on the SEC’s website (sec.gov). For a complete list of a fund’s portfolio holdings, view the most recent holdings listing, semi-annual report, or annual report on the Fund’s web site at http://www.bbhfunds.com. A summary of the Fund’s Proxy Voting Policy that the Fund uses to determine how to vote proxies, if any, relating to securities held in the Fund’s portfolio, as well as a record of how the Fund voted any such proxies during the most recent 12-month period ended June 30, is available, without charge, upon request by calling the toll-free number listed above. This information is also available on the SEC’s website at www.sec.gov. NOT FDIC INSURED NO BANK GUARANTEE MAY LOSE VALUE |
Item 2. Code of Ethics.
As of the period ended October 31, 2023 (the “Reporting Period”), the Registrant has adopted a code of ethics that applies to the Registrant’s principal executive officer and principal financial officer, principal accounting officer or controller or persons performing similar functions. During the Reporting Period, there have been no changes to, amendments to or waivers from, any provision of the code of ethics. A copy of this code of ethics can be obtained upon request, free of charge, by calling (800) 575-1265.
Item 3. Audit Committee Financial Expert.
The Board of Trustees of the Registrant has determined that John M. Tesoro, Mark M. Collins, Joan A. Binstock and Karen Kochevar possess the attributes identified in Instruction (b) of Item 3 to Form N-CSR to each qualify as an “audit committee financial expert,” and has designated John M. Tesoro, Mark M. Collins, Joan A. Binstock and Karen Kochevar as the Registrant’s audit committee financial experts. Messrs. Tesoro and Collins and Mses. Binstock and Kochevar are “independent” Trustees pursuant to paragraph (a)(2) of Item 3 to Form N-CSR.
Item 4. Principal Accountant Fees and Services.
(a) | Audit Fees The aggregate fees billed for each of the last two fiscal years for professional services rendered by the principal accountant for the audit of the Registrant’s annual financial statements or services that are normally provided by the accountant in connection with statutory and regulatory filings or engagements for those fiscal years were $399,900 for 2023, and $391,860 for 2022. | |
(b) | Audit Related Fees The aggregate fees billed in each of the last two fiscal years for assurance and related services rendered to the Registrant by the principal accountant that are reasonably related to the performance of the audit of the Registrant’s financial statements and are not reported under paragraph (a) of this Item were $0 for 2023 and $0 for 2022. | |
(c) | Tax Fees The aggregate fees billed in each of the last two fiscal years for professional services rendered to the Registrant by the principal accountant for tax compliance, tax advice and tax planning were $64,408 for 2023, and $61,000 for 2022. These services consisted of (i) review or preparation of U.S. federal, state, local and excise tax returns; (ii) U.S. federal, state and local entity tax planning, advice and assistance regarding statutory, regulatory or administrative developments, and (iii) tax advice regarding tax qualification. | |
(d) | All Other Fees The aggregate fees billed in each of the last two fiscal years for products and services provided by the principal accountant, other than the services reported in paragraphs (a) through (c) of this Item were $80,000 for 2023, and $80,000 for 2022. The other services provided to the Registrant consisted of examinations pursuant to Rule 17f-2 of the Investment Company Act of 1940, as amended and filings of Form N-17f-2 “Certificate of Accounting of Securities and Similar Investments in the Custody of Management Investment Companies” with the U.S. Securities and Exchange Commission (“17f-2 Services”) in addition to audit services, tax services and 17f-2 Services provided to other series of the Registrant. | |
(e)(1) | Pursuant to the Registrant’s Audit Committee Charter that has been adopted by the audit committee, the audit committee shall approve all audit and permissible non-audit services to be provided to the Registrant and all permissible non-audit services to be provided to its investment adviser or any entity controlling, controlled by or under common control with the investment adviser that provides ongoing services to the Registrant if the engagement relates directly to the operations and financial reporting of the Registrant. The audit committee has delegated to its Chairman the approval of such services subject to reports to the full audit committee at its next subsequent meeting. | |
(e)(2) | The percentage of services described in each of paragraphs (b) through (d) of this Item that were approved by the audit committee pursuant to paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X, with respect to: Audit-Related Fees were 0%; Tax Fees were 0%; and Other Fees were 0%. |
(f) | Not applicable. | |
(g) | The aggregate non-audit fees billed by the Registrant’s accountant for services rendered to the Registrant, and rendered to the Registrant’s investment adviser (not including any sub-adviser whose role is primarily portfolio management and is subcontracted with or overseen by another investment adviser), and any entity controlling, controlled by, or under common control with the investment adviser that provides ongoing services to the Registrant for each of the last two fiscal years of the Registrant were $1,506,227 for 2023, and $1,092,000 for 2022. | |
(h) | The Registrant’s audit committee has considered whether the provision of non-audit services that were rendered to the Registrant’s investment adviser (not including any subadviser whose role is primarily portfolio management and is subcontracted with or overseen by another investment adviser), and any entity controlling, controlled by, or under common control with the investment adviser that provides ongoing services to the Registrant that were not pre-approved pursuant to paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X is compatible with maintaining the principal accountant’s independence. |
Item 5. Audit Committee of Listed Registrants.
Not Applicable
Item 6. Investments.
(a) | A Schedule of Investments in securities of unaffiliated issuers as of the close of the Reporting Period is included as part of the report to shareholders filed under Item 1 of this Form N-CSR. | |
(b) | Not applicable. |
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies.
Not applicable.
Item 8. Portfolio Managers of Closed-End Management Investment Companies.
Not applicable.
Item 9. Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers.
Not applicable.
Item 10. Submission of Matters to a Vote of Security Holders.
Not applicable.
Item 11. Controls and Procedures.
(a) | The Registrant’s principal executive and financial officers have concluded that the Registrant’s disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940, as amended (the “1940 Act”)) are effective, as of a date within 90 days of the filing date of this Form N-CSR, based on their evaluation of these controls and procedures required by Rule 30a-3(b) under the 1940 Act and Rules 13a-15(b) or 15d-15(b) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). | |
(b) | There were no changes in the Registrant’s internal control over financial reporting (as defined in Rule 30a-3(d) under the 1940 Act) that occurred during the Registrant’s second fiscal quarter of the period covered by this Form N-CSR, that have materially affected, or are reasonably likely to materially affect, the Registrant’s internal control over financial reporting. |
Item 12. Disclosure of Securities Lending Activities for Closed-End Management Investment Companies.
Not applicable.
Item 13. Exhibits.
(a)(1) | Not applicable. | |
(a)(2) | ||
(a)(3) | Not applicable. | |
(a)(4) | Not applicable. | |
(b) |
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/ Daniel Greifenkamp | ||
Daniel Greifenkamp | ||
Title: President (Principal Executive Officer) | ||
Date: January 5, 2024 |
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/ Daniel Greifenkamp | ||
Daniel Greifenkamp | ||
Title: President (Principal Executive Officer) | ||
Date: January 5, 2024 |
By: (Signature and Title) | ||
/s/ Charles H. Schreiber | ||
Charles H. Schreiber | ||
Title: Treasurer (Principal Financial Officer) | ||
Date: January 5, 2024 |