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: April 30, 2024
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.
Semi-Annual Report
APRIL 30, 2024
BBH Partner Fund — Small Cap Equity
BBH PARTNER FUND – SMALL CAP EQUITY |
PORTFOLIO ALLOCATION April 30, 2024 (unaudited) |
SECTOR DIVERSIFICATION
U.S. $ Value | Percent of | |||||
Common Stock: |
|
| ||||
Basic Materials | $ | 13,878,000 | 4.7 | % | ||
Communications |
| 36,625,500 | 12.2 |
| ||
Consumer Cyclical |
| 37,530,000 | 12.6 |
| ||
Consumer Non-Cyclical |
| 91,268,458 | 30.7 |
| ||
Financials |
| 22,739,200 | 7.6 |
| ||
Industrials |
| 12,996,750 | 4.4 |
| ||
Technology |
| 60,280,800 | 20.3 |
| ||
Cash and Other Assets in Excess of Liabilities |
| 22,296,201 | 7.5 |
| ||
NET ASSETS | $ | 297,614,909 | 100.0% |
|
All data as of April 30, 2024. The BBH Partner Fund — Small Cap Equity (the “Fund”) sector diversification is expressed as a percentage of net assets and may vary over time.
The accompanying notes are an integral part of these financial statements.
2 |
BBH PARTNER FUND – SMALL CAP EQUITY |
PORTFOLIO OF INVESTMENTS April 30, 2024 (unaudited) All investments in the United States, except as noted. |
Shares | Value | ||||||
COMMON STOCK (92.5%) |
| ||||||
BASIC MATERIALS (4.7%) |
| ||||||
600,000 | Element Solutions, Inc. | $ | 13,878,000 | ||||
Total Basic Materials |
| 13,878,000 | |||||
| |||||||
COMMUNICATIONS (12.2%) |
| ||||||
1,350,000 | Despegar.com Corp. (British Virgin Islands)1 |
| 16,456,500 | ||||
900,000 | Upwork, Inc.1 |
| 10,530,000 | ||||
2,700,000 | WideOpenWest, Inc.1 |
| 9,639,000 | ||||
Total Communications |
| 36,625,500 | |||||
| |||||||
CONSUMER CYCLICAL (12.6%) |
| ||||||
3,750,000 | ThredUp, Inc. (Class A)1 |
| 6,000,000 | ||||
600,000 | XPEL, Inc.1 |
| 31,530,000 | ||||
Total Consumer Cyclical |
| 37,530,000 | |||||
| |||||||
CONSUMER NON-CYCLICAL (30.7%) |
| ||||||
525,000 | Alarm.com Holdings, Inc.1 |
| 34,912,500 | ||||
155,142 | Cimpress, Plc. (Ireland)1 |
| 13,228,958 | ||||
250,000 | EVERTEC, Inc. (Puerto Rico) |
| 9,382,500 | ||||
400,000 | Franklin Covey Co.1 |
| 15,576,000 | ||||
250,000 | iRadimed Corp. |
| 10,152,500 | ||||
600,000 | SoundThinking, Inc.1 |
| 8,016,000 | ||||
Total Consumer Non-Cyclical |
| 91,268,458 | |||||
| |||||||
FINANCIALS (7.6%) |
| ||||||
100,000 | StoneX Group, Inc.1 |
| 7,260,000 | ||||
220,000 | Triumph Financial, Inc.1 |
| 15,479,200 | ||||
Total Financials |
| 22,739,200 | |||||
| |||||||
INDUSTRIALS (4.4%) |
| ||||||
775,000 | Astronics Corp.1 |
| 12,996,750 | ||||
Total Industrials |
| 12,996,750 |
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 A P R I L 3 0, 2 0 2 4 | 3 |
BBH PARTNER FUND – SMALL CAP EQUITY |
PORTFOLIO OF INVESTMENTS (continued) April 30, 2024 (unaudited) All investments in the United States, except as noted. |
Shares | Value | |||||||
COMMON STOCK (continued) |
|
| ||||||
TECHNOLOGY (20.3%) |
|
| ||||||
150,000 | Agilysys, Inc.1 |
| $ | 12,457,500 | ||||
340,000 | Model N, Inc.1 |
|
| 10,081,000 | ||||
70,000 | Onto Innovation, Inc.1 |
|
| 12,984,300 | ||||
450,000 | PagerDuty, Inc.1 |
|
| 8,982,000 | ||||
1,600,000 | Zuora, Inc. (Class A)1 |
|
| 15,776,000 | ||||
Total Technology |
|
| 60,280,800 | |||||
Total Common Stock |
|
| 275,318,708 | |||||
|
| |||||||
TOTAL INVESTMENTS (Cost $286,864,126)2 | 92.5 | % | $ | 275,318,708 | ||||
CASH AND OTHER ASSETS IN EXCESS OF LIABILITIES | 7.5 | % |
| 22,296,201 | ||||
NET ASSETS | 100.00 | % | $ | 297,614,909 |
____________
1 Non-income producing security.
2 The aggregate cost for federal income tax purposes is $286,864,126, the aggregate gross unrealized appreciation is $42,013,052 and the aggregate gross unrealized depreciation is $53,558,470, resulting in net unrealized depreciation of $11,545,418.
The accompanying notes are an integral part of these financial statements.
4 |
BBH PARTNER FUND – SMALL CAP EQUITY |
PORTFOLIO OF INVESTMENTS (continued) April 30, 2024 (unaudited) |
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 A P R I L 3 0, 2 0 2 4 | 5 |
BBH PARTNER FUND – SMALL CAP EQUITY |
PORTFOLIO OF INVESTMENTS (continued) April 30, 2024 (unaudited) |
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 April 30, 2024.
Investments, at value | Unadjusted | Significant | Significant | Balance as of | ||||||||
Common Stock: |
|
|
|
| ||||||||
Basic Materials | $ | 13,878,000 | $ | — | $ | — | $ | 13,878,000 | ||||
Communications |
| 36,625,500 |
| — |
| — |
| 36,625,500 | ||||
Consumer Cyclical |
| 37,530,000 |
| — |
| — |
| 37,530,000 | ||||
Consumer Non-Cyclical |
| 91,268,458 |
| — |
| — |
| 91,268,458 | ||||
Financials |
| 22,739,200 |
| — |
| — |
| 22,739,200 | ||||
Industrials |
| 12,996,750 |
| — |
| — |
| 12,996,750 | ||||
Technology |
| 60,280,800 |
| — |
| — |
| 60,280,800 | ||||
Total Investments, at value | $ | 275,318,708 | $ | — | $ | — | $ | 275,318,708 |
The accompanying notes are an integral part of these financial statements.
6 |
BBH PARTNER FUND – SMALL CAP EQUITY |
STATEMENT OF ASSETS AND LIABILITIES April 30, 2024 (unaudited) |
ASSETS: | ||||
Investments in securities, at value (Cost $286,864,126) | $ | 275,318,708 |
| |
Cash |
| 23,279,915 |
| |
Receivables for: |
|
| ||
Investments sold |
| 296,403 |
| |
Shares sold |
| 50,800 |
| |
Interest from Custodian |
| 30,113 |
| |
Dividends |
| 11,250 |
| |
Prepaid expenses |
| 2,517 |
| |
Total Assets |
| 298,989,706 |
| |
|
| |||
LIABILITIES: |
|
| ||
Payables for: |
|
| ||
Shares redeemed |
| 671,212 |
| |
Investments purchased |
| 430,200 |
| |
Investment advisory and administrative fees |
| 213,409 |
| |
Professional fees |
| 34,608 |
| |
Custody and fund accounting fees |
| 12,092 |
| |
Transfer agent fees |
| 6,532 |
| |
Board of Trustees’ fees |
| 368 |
| |
Accrued expenses and other liabilities |
| 6,376 |
| |
Total Liabilities |
| 1,374,797 |
| |
NET ASSETS | $ | 297,614,909 |
| |
|
| |||
Net Assets Consist of: |
|
| ||
Paid-in capital | $ | 404,492,055 |
| |
Accumulated deficit |
| (106,877,146 | ) | |
Net Assets | $ | 297,614,909 |
| |
|
| |||
NET ASSET VALUE AND OFFERING PRICE PER SHARE |
|
| ||
CLASS I SHARES |
|
| ||
($297,614,909 ÷ 40,456,782 shares outstanding) |
| $7.36 |
|
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 A P R I L 3 0, 2 0 2 4 | 7 |
BBH PARTNER FUND – SMALL CAP EQUITY |
STATEMENT OF OPERATIONS For the six months ended April 30, 2024 |
NET INVESTMENT LOSS: |
|
| ||
Income: |
|
| ||
Dividends | $ | 281,250 |
| |
Interest income from Custodian |
| 284,055 |
| |
Total Income |
| 565,305 |
| |
|
| |||
Expenses: |
|
| ||
Investment advisory and administrative fees |
| 1,324,516 |
| |
Board of Trustees’ fees |
| 39,549 |
| |
Professional fees |
| 30,635 |
| |
Transfer agent fees |
| 19,864 |
| |
Custody and fund accounting fees |
| 10,701 |
| |
Miscellaneous expenses |
| 22,197 |
| |
Total Expenses |
| 1,447,462 |
| |
Net Investment Loss |
| (882,157 | ) | |
|
| |||
NET REALIZED AND UNREALIZED GAIN: |
|
| ||
Net realized loss on investments in securities |
| (10,034,336 | ) | |
Net change in unrealized appreciation/(depreciation) on investments in securities |
| 49,888,655 |
| |
Net Realized and Unrealized Gain |
| 39,854,319 |
| |
Net Increase in Net Assets Resulting from Operations | $ | 38,972,162 |
|
The accompanying notes are an integral part of these financial statements.
8 |
BBH PARTNER FUND – SMALL CAP EQUITY |
STATEMENTS OF CHANGES IN NET ASSETS |
For the | For the | |||||||
INCREASE/(DECREASE) IN NET ASSETS FROM: |
|
|
|
| ||||
Operations: |
|
|
|
| ||||
Net investment loss | $ | (882,157 | ) | $ | (1,881,867 | ) | ||
Net realized loss on investments in securities |
| (10,034,336 | ) |
| (44,430,148 | ) | ||
Net change in unrealized appreciation/(depreciation) on investments in securities |
| 49,888,655 |
|
| 44,905,317 |
| ||
Net increase/(decrease) in net assets resulting from operations |
| 38,972,162 |
|
| (1,406,698 | ) | ||
|
|
|
| |||||
Share transactions: |
|
|
|
| ||||
Proceeds from sales of shares |
| 16,739,668 |
|
| 38,511,518 |
| ||
Cost of shares redeemed |
| (50,947,083 | ) |
| (88,309,082 | ) | ||
Net decrease in net assets resulting from share transactions |
| (34,207,415 | ) |
| (49,797,564 | ) | ||
Total increase/(decrease) in net assets |
| 4,764,747 |
|
| (51,204,262 | ) | ||
|
|
|
| |||||
NET ASSETS: |
|
|
|
| ||||
Beginning of period/year |
| 292,850,162 |
|
| 344,054,424 |
| ||
End of period/year | $ | 297,614,909 |
| $ | 292,850,162 |
|
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 A P R I L 3 0, 2 0 2 4 | 9 |
BBH PARTNER FUND – SMALL CAP EQUITY |
FINANCIAL HIGHLIGHTS Selected per share data and ratios for a Class I share outstanding throughout each period/year. |
|
| For the period from | ||||||||||||||
2023 | 2022 | |||||||||||||||
Net asset value, beginning of period/year | $ | 6.49 |
| $ | 6.56 |
| $ | 9.85 |
| $ | 10.00 |
| ||||
Income from investment operations: |
|
|
|
|
|
|
|
| ||||||||
Net investment loss1 |
| (0.02 | ) |
| (0.04 | ) |
| (0.05 | ) |
| (0.03 | ) | ||||
Net realized and unrealized gain/(loss) |
| 0.89 |
|
| (0.03 | ) |
| (3.18 | ) |
| (0.12 | ) | ||||
Total income/(loss) from investment operations |
| 0.87 |
|
| (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 period/year | $ | 7.36 |
| $ | 6.49 |
| $ | 6.56 |
| $ | 9.85 |
| ||||
Total return2 |
| 13.41 | %3 |
| (1.07 | )% |
| (32.97 | )% |
| (1.50 | )%3 | ||||
|
|
|
|
|
|
|
| |||||||||
Ratios/Supplemental data: |
|
|
|
|
|
|
|
| ||||||||
Net assets, end of period/year (in millions) | $ | 298 |
| $ | 293 |
| $ | 344 |
| $ | 322 |
| ||||
Ratio of expenses to average net assets before reductions |
| 0.93 | %4 |
| 0.92 | % |
| 0.92 | % |
| 0.93 | %5 | ||||
Fee waiver6 |
| — | % |
| — | % |
| (0.00 | )%7 |
| (0.01 | )%5 | ||||
Ratio of expenses to average net assets after reductions |
| 0.93 | %4 |
| 0.92 | % |
| 0.92 | % |
| 0.92 | %5 | ||||
Ratio of net investment loss to average net assets |
| (0.57 | )%4 |
| (0.56 | )% |
| (0.70 | )% |
| (0.83 | )%5 | ||||
Portfolio turnover rate |
| 7 | %3 |
| 27 | % |
| 16 | % |
| 3 | %3 |
____________
1 Calculated using average shares outstanding for the period/year.
2 Assumes the reinvestment of distributions.
3 Not annualized.
4 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 six months ended April 30, 2024, the years ended October 31, 2023, 2022 and the period from July 8, 2021 to October 31, 2021 reflects fees reduced as result of a voluntary operating expense waiver. For the six months ended April 30, 2024, the years ended October 31, 2023, 2022 and the period from July 8, 2021 to October 31, 2021, the waived fees were $-, $-, $2,089 and $40,593, respectively.
7 Less than 0.01%.
The accompanying notes are an integral part of these financial statements.
10 |
BBH PARTNER FUND – SMALL CAP EQUITY |
NOTES TO FINANCIAL STATEMENTS April 30, 2024 (unaudited) |
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 April 30, 2024, 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 the supervision and oversight of the determination of 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 A P R I L 3 0, 2 0 2 4 | 11 |
BBH PARTNER FUND – SMALL CAP EQUITY |
NOTES TO FINANCIAL STATEMENTS (continued) April 30, 2024 (unaudited) |
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.
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
12 |
BBH PARTNER FUND – SMALL CAP EQUITY |
NOTES TO FINANCIAL STATEMENTS (continued) April 30, 2024 (unaudited) |
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 six months ended April 30, 2024, 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 did not declare any dividends and distributions to shareholders during the six months ended April 30, 2024.
The tax character of distribution paid during the year 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) 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.
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.
F I N A N C I A L S T A T E M E N T S A P R I L 3 0, 2 0 2 4 | 13 |
BBH PARTNER FUND – SMALL CAP EQUITY |
NOTES TO FINANCIAL STATEMENTS (continued) April 30, 2024 (unaudited) |
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 0.85% 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. 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 Investment Adviser pays its Sub-Adviser the entire amount of its investment advisory and administrative fees. For the six months ended April 30, 2024, the Fund incurred $1,324,516 under the Agreement.
B. Custody and Fund Accounting Fees. BBH acts as a custodian and fund accountant and receives custody and fund accounting fees from the Fund calculated daily and 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 based partially on asset values and partially on individual fund transactions. The fund accounting fee is primarily an asset-based fee calculated at 0.325 basis points per annum of the Fund’s net asset value. For the six months ended April 30, 2024, the Fund incurred $10,701 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 six months ended April 30, 2024 was $284,055. 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
14 |
BBH PARTNER FUND – SMALL CAP EQUITY |
NOTES TO FINANCIAL STATEMENTS (continued) April 30, 2024 (unaudited) |
the overdraft. The total interest incurred by the Fund for the six months ended April 30, 2024, was $43. 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 six months ended April 30, 2024, the Fund incurred $39,549 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 six months ended April 30, 2024, the cost of purchases and the proceeds of sales of investment securities, other than short-term investments, were $22,179,265 and $69,087,428, 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 six months ended | For the year ended | |||||||||||||
Shares | Dollars | Shares | Dollars | |||||||||||
Class I |
|
|
|
|
|
| ||||||||
Shares sold | 2,292,032 |
| $ | 16,739,668 |
| 5,587,651 |
| $ | 38,511,518 |
| ||||
Shares redeemed | (6,931,395 | ) |
| (50,947,083 | ) | (12,908,538 | ) |
| (88,309,082 | ) | ||||
Net decrease | (4,639,363 | ) | $ | (34,207,415 | ) | (7,320,887 | ) | $ | (49,797,564 | ) |
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
F I N A N C I A L S T A T E M E N T S A P R I L 3 0, 2 0 2 4 | 15 |
BBH PARTNER FUND – SMALL CAP EQUITY |
NOTES TO FINANCIAL STATEMENTS (continued) April 30, 2024 (unaudited) |
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 April 30, 2024 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.
16 |
BBH PARTNER FUND – SMALL CAP EQUITY |
DISCLOSURE OF FUND EXPENSES April 30, 2024 (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 (November 1, 2023 to April 30, 2024).
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 A P R I L 3 0, 2 0 2 4 | 17 |
BBH PARTNER FUND – SMALL CAP EQUITY |
DISCLOSURE OF FUND EXPENSES (continued) April 30, 2024 (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 | $1,134 | $4.93 | |||
Hypothetical2 | $1,000 | $1,020 | $4.67 |
____________
1 Expenses are equal to the Fund’s annualized net expense ratio of 0.93% for Class I, multiplied by the average account value over the period, multiplied by 182/366.
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.
18 |
BBH PARTNER FUND – SMALL CAP EQUITY |
DISCLOSURE OF ADVISOR SELECTION April 30, 2024 (unaudited) |
Investment Advisory and Administrative Services and Sub-Advisory Agreements Approval
The 1940 Act requires that a fund’s investment advisory agreements must be approved both by a fund’s board of trustees and by a majority of the trustees who are not parties to the investment advisory agreements or “interested persons” of any party (“Independent Trustees”), cast in person at a meeting called for the purpose of voting on such approval.
The Board, a majority of which is comprised of Independent Trustees, held a telephonic meeting on November 16, 2023 and an in-person meeting December 12, 2023, in reliance on the Exemptive Relief, to consider whether to renew the combined Amended and Restated Investment Advisory and Administrative Services Agreement (the “Advisory Agreement”) between the Trust and the Investment Adviser with respect to the existing funds in the Trust, including the Fund. At these meetings, the Board also considered the renewal of the sub-advisory agreement (the “Sub-Advisory Agreement” and, together with the Advisory Agreement, the “Agreements”) between the Investment Adviser and Bares Capital Management, Inc. (“Bares Capital” or the “Sub-Adviser”). At the December 12, 2023 meeting, the Board voted to approve the renewal of the Agreements with respect to the Fund for an additional one-year term. In doing so, the Board determined that the terms of the Agreements were fair and reasonable in the best interest of the Fund and its shareholders, and that it had received sufficient information to make an informed business decision with respect to the continuation of the Agreements.
Both in the meetings specifically held to address the continuance of the Agreements and at other meetings over the course of the year, the Board requested, received and assessed a variety of materials provided by the Investment Adviser, Sub-Adviser and BBH, including, among other things, information about the nature, extent and quality of the services provided to the Fund by the Investment Adviser, the Sub-Adviser and BBH, including investment management and administrative, the oversight of Fund service providers, marketing, risk oversight, compliance, and the ability to meet applicable legal and regulatory requirements. The Board also received comparative performance and fee and expense information for the Fund prepared by Broadridge Financial Solutions, Inc. (“Broadridge”) using data from Lipper Inc., an independent provider of investment company data (“Lipper Report”). The Board reviewed this report with Broadridge, Fund Counsel and BBH. 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.
In approving the continuation of the Agreements, the Board considered: (a) the nature, extent and quality of services provided by the Investment Adviser and Sub-Adviser; (b) the investment performance of the Fund; (c) the advisory fee and the cost of the services and profits to be realized by the Investment Adviser from its relationship with the Fund; (d) the Fund’s costs to investors compared to the costs of comparative funds and performance compared to the relevant performance of comparative funds; (e) the sharing of potential economies of scale; (f) fall-out benefits to the Investment Adviser as a result of its relationship with the Fund; and (g) other factors deemed relevant by the Board. The following is a summary of the factors the Board considered in making its determination to approve the continuance of the Agreements. No single
F I N A N C I A L S T A T E M E N T S A P R I L 3 0, 2 0 2 4 | 19 |
BBH PARTNER FUND – SMALL CAP EQUITY |
DISCLOSURE OF ADVISOR SELECTION (continued) April 30, 2024 (unaudited) |
factor reviewed by the Board was identified as the principal factor in determining whether to approve the Advisory Agreement, and individual Trustees may have given different weight to various factors. The Board reviewed these factors with Fund Counsel. The Board concluded that the fees paid by the Fund to the Investment Adviser and Bares Capital were reasonable based on the comparative performance, expense information, the cost of the services provided, and the profits realized by the Investment Adviser.
Nature, Extent and Quality of Services
The Board noted that, under the Advisory Agreement and with respect to the Fund, the Investment Adviser, subject to the supervision of the Board, is responsible for providing administrative services and overseeing the investment advisory services provided to the Fund under the same fee structure. Pursuant to the Sub-Advisory Agreement, the Sub-Adviser, subject to the supervision of the Investment Adviser and the Board is responsible for providing a continuous investment program and making purchases and sales of portfolio securities consistent with the Fund’s investment objective and policies.
The Board received and considered information during the December 12, 2023 meeting, and over the course of the previous year, regarding the nature, extent and quality of services provided to the Trust and the Fund by the Investment Adviser including: the supervision of the Sub-Adviser, supervision of operations and compliance, and regulatory filings, disclosures to Fund shareholders, general oversight of service providers, organizing Board meetings and preparing the materials for such Board meetings, assisting to the Board (including the Independent Trustees in their capacity as Trustees), legal and Chief Compliance Officer services for the Trust, and other services necessary for the operation of the Fund.
The Board considered the resources of the Investment Adviser and BBH, as a whole, dedicated to the Fund noting that, pursuant to separate agreements, BBH also provides custody and fund accounting services to the Fund. The Board considered the depth and range of services provided pursuant to the Agreement, noting that the Investment Adviser also coordinates the provision of services to the Fund by affiliated and nonaffiliated service providers.
The Board considered the scope and quality of services provided by the Investment Adviser under the Advisory Agreement. The Board also considered the policies and practices followed by BBH and the Investment Adviser. The Board noted that during the course of its regular meetings it received reports on each of the foregoing topics. The Board concluded that, overall, they were satisfied with the nature, extent and quality of the investment advisory and administrative services provided, and expected to be provided, to the Fund pursuant to the Agreements. The Board received and considered information, during the meeting held on December 12, 2023, and over the course of the year, regarding the nature, extent and quality of services provided to the Fund by the Sub-Adviser, particularly portfolio management in light of the narrower scope of services performed by the Sub-Adviser. The Board also considered brokerage policies and practices and the standards applied in seeking best execution. The Board reviewed the qualifications of the key investment personnel primarily responsible for the day-to-day portfolio management of the Fund.
20 |
BBH PARTNER FUND – SMALL CAP EQUITY |
DISCLOSURE OF ADVISOR SELECTION (continued) April 30, 2024 (unaudited) |
Fund Performance
At the November 16, 2023 and December 12, 2023 meetings, and throughout the year, the Board received and considered performance information for the Fund provided by BBH. The Board considered the Fund’s performance relative to a peer category of other mutual funds in a report compiled by Broadridge. As part of this review, the Trustees considered the composition of the peer category, selection criteria and reputation of Broadridge who prepared the peer category analysis. The Board reviewed and discussed with both BBH and Broadridge, the report’s findings and discussed the positioning of the Fund relative to the selected peer category. The Board considered the investment performance for the Fund over the 1-year period as compared to a select peer category, noting the Fund’s below average performance for the period ended September 30, 2023. In evaluating the performance of the Fund, the Board considered the Fund’s investment strategy, risk expectations for the Fund as well as the level of Fund performance in the context of Fund expenses and Investment Adviser’s profitability.
Costs of Services Provided and Profitability
The Board considered the fee rates paid by the Fund to the Investment Adviser and BBH in light of the nature, extent and quality of the services provided to the Fund. The Board considered the depth and range of services provide pursuant to the Advisory Agreement, noting the Investment Adviser also coordinates the provision of services to the Fund by affiliated and nonaffiliated service providers. The Board received and considered information comparing the Fund’s combined investment advisory and administration fee and the Fund’s net operating expenses with those of other comparable mutual funds, such peer group and comparisons having been selected and calculated by Broadridge, noting that the Fund compared favorably to the selected peer-set. The Board recognized that it is difficult to make comparisons of the fee rate, or of combined advisory and administration fees, because there are variations in the services that are included in the fees paid by other funds. The Board concluded that the advisory and administration fee appeared to be both reasonable in light of the services rendered and the result of arm’s length negotiations.
The Board also considered the fees paid to the Sub-Adviser for their services to the Fund. The compensation paid to the Sub-Adviser is paid by the Investment Adviser, not the Fund directly, and, accordingly, the retention of the Sub-Adviser does not increase the fees or expenses otherwise incurred by the Fund’s shareholders.
With regard to profitability, the Trustees considered the compensation flowing to the Adviser and BBH, directly or indirectly, and to the Sub-Adviser. The Board reviewed profitability data from October 1, 2022 through September 30, 2023, and the year for both the Investment Adviser and BBH. The data also included the effect of revenue generated by the custody and fund accounting fees paid by the Fund to BBH and corresponding expenses. The Board conducted a detailed review of the expense allocation methods used in preparing the profitability data. The Board focused on profitability of the Investment Adviser and BBH’s relationships with the Fund before taxes and distribution expenses. The Board also reviewed the Sub-Adviser’s profitability data for the Fund. The Board concluded that the Investment Adviser’s and BBH’s profitability was not excessive in light of the nature, extent and quality of services provided to the Fund.
F I N A N C I A L S T A T E M E N T S A P R I L 3 0, 2 0 2 4 | 21 |
BBH PARTNER FUND – SMALL CAP EQUITY |
DISCLOSURE OF ADVISOR SELECTION (continued) April 30, 2024 (unaudited) |
The Board also considered the effect of fall-out benefits on the expenses of the Investment Adviser and BBH such as the increased visibility of BBH’s investment management business due to the distribution of the Funds. The Board focused on profitability of the Investment Adviser’s and BBH’s relationships with the Fund before taxes and distribution expenses. The Board concluded that neither the Investment Adviser, BBH, nor the Sub-Adviser’s profitability was excessive in light of the nature, extent and quality of services provided to the Fund. The Board considered other benefits received by BBH and the Investment Adviser, as applicable, as a result of their relationships with the Fund. These other benefits include proprietary research received from brokers that execute the Fund’s purchases and sales of securities and fees received for being the Fund’s administrator, custodian and fund accounting agent. In light of the costs of providing services pursuant to the Advisory Agreement as well as the Investment Adviser and BBH’s commitment to the Fund, the ancillary benefits that the Investment Adviser and BBH received were considered reasonable.
Economies of Scale
The Board also considered the existence of economies of scale and whether those economies are passed along to the Fund’s shareholders through a graduated investment advisory fee schedule or other means, including any fee waivers by the Investment Adviser, and BBH. The Board considered the fee schedule for the Fund on the information they had been provided over many years, the Board observed that in the mutual fund industry as a whole, as well as among funds similar to the Fund, there appeared to be no uniformity or pattern in the fees and asset levels at which breakpoints apply. In light of the Fund’s current size and expense structure, the Board concluded that the current breakpoints for the Fund were reasonable. The Board concluded that the fees paid by the Fund to the Investment Adviser, and from the Investment Adviser to the Sub-Adviser, were reasonable based on the comparative performance, expense information, the cost of the services comparative performance, expense information, the cost of the services provided and the profits to be realized by the Investment Adviser.
22 |
BBH PARTNER FUND – SMALL CAP EQUITY |
CONFLICTS OF INTEREST April 30, 2024 (unaudited) |
BBH&Co., 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&Co., 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&Co. for which they will pay to BBH&Co. customary fees and expenses that will not be shared with the Funds.
The Investment Adviser and the Sub-advisers have adopted and implemented policies and procedures that seek to manage conflicts of interest. Pursuant to such policies and procedures, the Investment Adviser and each Sub-adviser monitor a variety of areas, including compliance with fund investment guidelines, the investment in only those securities that have been approved for purchase, and compliance with their respective Code of Ethics.
The Trust also manages these conflicts of interest. For example, the Trust has designated a CCO and has adopted and implemented policies and procedures designed to manage the conflicts identified below and other conflicts that may arise in the course of the Funds’ operations in such a way as to safeguard the Funds from being negatively affected as a result of any such potential conflicts. From time to time, the Trustees receive reports from the Investment Adviser, the Sub-advisers 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&Co., the Investment Adviser and Sub-advisers can face in the operation of their respective investment management services. This section is not, and is not intended to be, a complete enumeration or explanation of all of the potential conflicts of interest that may arise. The Investment Adviser, the Sub-advisers 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&Co., the Investment Adviser, and the Sub-advisers manage funds and accounts of clients other than the Funds (“Other Clients”). In general, BBH&Co., the Investment Adviser, and the Sub-advisers face conflicts of interest when they render investment advisory services to different clients and, from time to time, provide dissimilar investment advice to different clients. Investment decisions will not necessarily be made in parallel among the Funds and Other Clients. Investments made by the Funds do not, and are not intended to, replicate the investments, or the investment methods and strategies, of Other Clients. Accordingly, such Other Clients 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
F I N A N C I A L S T A T E M E N T S A P R I L 3 0, 2 0 2 4 | 23 |
BBH PARTNER FUND – SMALL CAP EQUITY |
CONFLICTS OF INTEREST (continued) April 30, 2024 (unaudited) |
by the Investment Adviser or Sub-advisers could have different investment strategies that, at times, might conflict with one another to the possible detriment of the Funds. From time to time, the Investment Adviser and Sub-advisers, sponsor and with other investment pools and accounts which engage in the same or similar businesses as the Funds using the same or similar investment strategies. To the extent that the same investment opportunities might be desirable for more than one account or fund, possible conflicts could arise in determining how to allocate them because the Investment Adviser or Sub-advisers may have an incentive to allocate investment opportunities to certain accounts or funds. However, BBH&Co. 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&Co. provides administrative, custody, shareholder servicing and fund accounting services to the Funds. BBH&Co. 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&Co. may have an incentive to agree to higher fees than it would in the case of unaffiliated providers. BBH&Co. acting in its capacity as the Funds’ administrator is the primary valuation agent of the Funds. BBH&Co. 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&Co. and its affiliates may have an incentive to seek to overvalue certain assets.
Aggregation. Potential conflicts of interest also arise with the aggregation of trade orders. Purchases and sales of securities for the Funds may be aggregated with orders for other client accounts managed by the Sub-advisers. The Sub-advisers, 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 PARTNER FUND – SMALL CAP EQUITY |
CONFLICTS OF INTEREST (continued) April 30, 2024 (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&Co., the Investment Adviser may (but is not required to) effect purchases and sales between BBH&Co., the Investment Adviser clients (“cross trades”), including the Funds, if BBH&Co., the Investment Adviser or a Fund’s Sub-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&Co., the Investment Adviser and/or a Fund’s Sub-adviser may have a potentially conflicting division of loyalties and responsibilities to the parties in such transactions.
Soft Dollars. The Investment Adviser may direct brokerage transactions and/or payment of a portion of client commissions (“soft dollars”) to specific brokers or dealers or other providers to pay for research or other appropriate services which provide, in the Investment Adviser’s view, appropriate assistance in the investment decision-making process (including with respect to futures, fixed price offerings and over-the-counter transactions). The use of a broker that provides research and securities transaction services may result in a higher commission than that offered by a broker who does not provide such services. The Investment Adviser will determine in good faith whether the amount of commission is reasonable in relation to the value of research and services provided and whether the services provide lawful and appropriate assistance in its investment decision-making responsibilities.
Research or other services obtained in this manner may be used in servicing any or all of the Funds and other accounts managed by the Investment Adviser, including in connection with accounts that do not pay commissions to the broker related to the research or other service arrangements. Such products and services may disproportionately benefit other client accounts relative to the Funds based on the amount of brokerage commissions paid by the Funds and such other accounts. To the extent that a Sub-adviser uses soft dollars, it will not have to pay for those products and services itself.
BBH&Co. may receive research that is bundled with the trade execution, clearing, and/or settlement services provided by a particular broker-dealer. To the extent that a Sub-adviser receives research on this basis, many of the same conflicts related to traditional soft dollars may exist. For example, the research effectively will be paid by client commissions that also will be used to pay for the execution, clearing, and settlement services provided by the broker-dealer and will not be paid by the Sub-adviser.
Arrangements regarding compensation and delegation of responsibility may create conflicts relating to selection of brokers or dealers to execute Fund portfolio trades and/or specific uses of commissions from Fund portfolio trades, administration of investment advice and valuation of securities.
Investments in BBH Funds. From time to time BBH&Co. may invest a portion of the assets of its discretionary investment advisory clients in the Funds. That investment by BBH&Co. on behalf of its discretionary investment advisory clients in the Funds may be significant at times.
F I N A N C I A L S T A T E M E N T S A P R I L 3 0, 2 0 2 4 | 25 |
BBH PARTNER FUND – SMALL CAP EQUITY |
CONFLICTS OF INTEREST (continued) April 30, 2024 (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&Co. may limit its selection to funds managed by BBH&Co. or the Investment Adviser. BBH&Co. 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&Co., 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&Co. 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&Co. 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&Co. to be unreliable, the Funds’ investments will be valued at fair value by BBH&Co. pursuant to procedures adopted by the Funds’ Board. When determining an asset’s “fair value,” BBH&Co. 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&Co. deems relevant at the time of the determination and may be based on analytical values determined by BBH&Co. 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&Co. (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&Co. may enter into advisory and/or referral arrangements with third parties. Such arrangements may include compensation paid by BBH&Co. to the third party. BBH&Co. may pay a solicitation fee for referrals and/or advisory or incentive fees. BBH&Co. may benefit from increased amounts of assets under management.
Personal Trading. BBH&Co., 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&Co. Partners and employees. The policy and procedures are intended to prevent BBH&Co. Partners and employees from trading in the same securities as the Funds. However, BBH&Co., including the Investment Adviser, has implemented
26 |
BBH PARTNER FUND – SMALL CAP EQUITY |
CONFLICTS OF INTEREST (continued) April 30, 2024 (unaudited) |
policies and procedures concerning personal trading by BBH&Co. Partners and employees. The policies and procedures are intended to prevent BBH&Co. 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&Co., 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&Co., 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&Co. Partners and employees. BBH&Co., including the Investment Adviser, has implemented policies and procedures concerning gifts and entertainment to mitigate any impact on the judgment of BBH&Co. Partners and employees.
F I N A N C I A L S T A T E M E N T S A P R I L 3 0, 2 0 2 4 | 27 |
BBH PARTNER FUND – SMALL CAP EQUITY |
OPERATION AND EFFECTIVNESS OF THE FUND’S LIQUIDITY RISK MANAGEMENT PROGRAM April 30, 2024 (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 each Fund’s liquidity risk management program (the “Program”). The Board met on March 6, 2024 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, 2023 through January 31, 2024 (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 Funds classified each of their 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 each Fund’s investments based on criteria in each Fund’s Program. During the Reporting Period, no Fund held 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 no Fund has approached the 50% threshold, has made the determination that it is not necessary to assign a Highly Liquid Investment Minimum to any of the Funds 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 each Fund’s investment strategy is appropriate for an open-end fund structure with a focus on Funds with more significant and consistent holdings of less liquid and illiquid assets and factored a Fund’s concentration in an issuer into the liquidity classification methodology by taking issuer position sizes into account.
Short-term and long-term cash flow projections during normal and reasonably foreseeable stressed market conditions. During the Reporting Period, the Program Administrator reviewed historical redemption activity and used this information as a component to establish each Fund’s
28 |
BBH PARTNER FUND – SMALL CAP EQUITY |
OPERATION AND EFFECTIVNESS OF THE FUND’S LIQUIDITY RISK MANAGEMENT PROGRAM April 30, 2024 (unaudited) |
reasonably anticipated trading size. The Program Administrator also took into consideration other factors such as shareholder ownership concentration, applicable distribution channels and the degree of certainty associated with a Fund’s short-term and long-term cash flow projections.
Holdings of cash and cash equivalents. The Program Administrator considered the degree to which each Fund held cash and cash equivalents as a component of each Fund’s ability to meet redemption requests.
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 A P R I L 3 0, 2 0 2 4 | 29 |
Administrator Distributor Shareholder Servicing Agent To obtain information or make shareholder inquiries: | Investment Adviser | |
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 |
Semi-Annual Report
APRIL 30, 2024
BBH Select Series — Mid cap Fund
BBH SELECT SERIES – MID CAP FUND |
PORTFOLIO ALLOCATION April 30, 2024 (unaudited) |
SECTOR DIVERSIFICATION
U.S. $ Value | Percent of | |||||
Common Stock: |
|
| ||||
Communications | $ | 8,460,836 | 3.1 | % | ||
Consumer Cyclical |
| 31,631,088 | 11.5 |
| ||
Consumer Non-Cyclical |
| 64,560,270 | 23.5 |
| ||
Financials |
| 30,933,846 | 11.2 |
| ||
Industrials |
| 66,048,752 | 24.0 |
| ||
Technology |
| 69,976,236 | 25.4 |
| ||
Cash and Other Assets in Excess of Liabilities |
| 3,564,494 | 1.3 |
| ||
NET ASSETS | $ | 275,175,522 | 100.0 | % |
All data as of April 30, 2024. The BBH Select Series – Mid Cap Fund’s (the “Fund”) sector diversification is expressed as a percentage of net assets and may vary over time.
The accompanying notes are an integral part of these financial statements.
2 |
BBH SELECT SERIES – MID CAP FUND |
PORTFOLIO OF INVESTMENTS April 30, 2024 (unaudited) All investments in the United States, except as noted. |
Shares | Value | ||||||
COMMON STOCK (98.7%) |
| ||||||
COMMUNICATIONS (3.1%) |
| ||||||
32,978 | Arista Networks, Inc.1 | $ | 8,460,836 | ||||
Total Communications |
| 8,460,836 | |||||
| |||||||
CONSUMER CYCLICAL (11.5%) |
| ||||||
948 | NVR, Inc.1 |
| 7,052,030 | ||||
37,588 | Watsco, Inc. |
| 16,828,899 | ||||
105,430 | Wyndham Hotels & Resorts, Inc. |
| 7,750,159 | ||||
Total Consumer Cyclical |
| 31,631,088 | |||||
| |||||||
CONSUMER NON-CYCLICAL (23.5%) |
| ||||||
121,819 | AMN Healthcare Services, Inc.1 |
| 7,306,703 | ||||
72,053 | Bright Horizons Family Solutions, Inc.1 |
| 7,472,617 | ||||
166,141 | Bruker Corp. |
| 12,960,659 | ||||
226,950 | Darling Ingredients, Inc.1 |
| 9,615,871 | ||||
168,589 | GXO Logistics, Inc.1 |
| 8,372,130 | ||||
21,236 | ICON, Plc. ADR (Ireland)1 |
| 6,325,780 | ||||
682,750 | Mister Car Wash, Inc.1 |
| 4,567,597 | ||||
137,209 | Shift4 Payments, Inc. (Class A)1 |
| 7,938,913 | ||||
Total Consumer Non-Cyclical |
| 64,560,270 | |||||
| |||||||
FINANCIALS (11.2%) |
| ||||||
188,076 | Brown & Brown, Inc. |
| 15,335,717 | ||||
62,358 | CBRE Group, Inc. (Class A)1 |
| 5,418,287 | ||||
37,825 | LPL Financial Holdings, Inc. |
| 10,179,842 | ||||
Total Financials |
| 30,933,846 | |||||
| |||||||
INDUSTRIALS (24.0%) |
| ||||||
83,295 | Advanced Drainage Systems, Inc. |
| 13,077,315 | ||||
74,650 | AptarGroup, Inc. |
| 10,777,967 | ||||
137,728 | Crown Holdings, Inc. |
| 11,303,337 | ||||
183,629 | GFL Environmental, Inc. (Canada) |
| 5,857,765 | ||||
62,090 | HEICO Corp. (Class A) |
| 10,297,626 | ||||
59,910 | Toro Co. |
| 5,247,517 | ||||
36,825 | Vulcan Materials Co. |
| 9,487,225 | ||||
Total Industrials |
| 66,048,752 |
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 A P R I L 3 0, 2 0 2 4 | 3 |
BBH SELECT SERIES – MID CAP FUND |
PORTFOLIO OF INVESTMENTS (continued) April 30, 2024 (unaudited) All investments in the United States, except as noted. |
Shares | Value | |||||||
COMMON STOCK (continued) |
|
| ||||||
TECHNOLOGY (25.4%) |
|
| ||||||
44,072 | Aspen Technology, Inc.1 |
| $ | 8,676,455 | ||||
130,772 | Entegris, Inc. |
|
| 17,382,214 | ||||
45,120 | Globant S.A. (Luxembourg)1 |
|
| 8,057,981 | ||||
143,805 | Guidewire Software, Inc.1 |
|
| 15,876,072 | ||||
69,054 | Take-Two Interactive Software, Inc.1 |
|
| 9,861,602 | ||||
32,178 | Zebra Technologies Corp. (Class A)1 |
|
| 10,121,912 | ||||
Total Technology |
|
| 69,976,236 | |||||
Total Common Stock |
|
| ||||||
(Cost $247,269,634) |
|
| 271,611,028 | |||||
|
| |||||||
TOTAL INVESTMENTS (Cost $247,269,634)2 | 98.7 | % | $ | 271,611,028 | ||||
CASH AND OTHER ASSETS IN EXCESS OF LIABILITIES | 1.3 | % |
| 3,564,494 | ||||
NET ASSETS | 100.00 | % | $ | 275,175,522 |
____________
1 Non-income producing security.
2 The aggregate cost for federal income tax purposes is $247,269,634, the aggregate gross unrealized appreciation is $33,171,783 and the aggregate gross unrealized depreciation is $8,830,389, resulting in net unrealized appreciation of $24,341,394.
Abbreviation:
ADR − American Depositary Receipt.
The accompanying notes are an integral part of these financial statements.
4 |
BBH SELECT SERIES – MID CAP FUND |
PORTFOLIO OF INVESTMENTS (continued) April 30, 2024 (unaudited) |
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.
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
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 A P R I L 3 0, 2 0 2 4 | 5 |
BBH SELECT SERIES – MID CAP FUND |
PORTFOLIO OF INVESTMENTS (continued) April 30, 2024 (unaudited) |
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 April 30, 2024.
Investments, at value | Unadjusted | Significant | Significant | Balance as of | ||||||||
Common Stock: |
|
|
|
| ||||||||
Communications | $ | 8,460,836 | $ | — | $ | — | $ | 8,460,836 | ||||
Consumer Cyclical |
| 31,631,088 |
| — |
| — |
| 31,631,088 | ||||
Consumer Non-Cyclical |
| 64,560,270 |
| — |
| — |
| 64,560,270 | ||||
Financials |
| 30,933,846 |
| — |
| — |
| 30,933,846 | ||||
Industrials |
| 66,048,752 |
| — |
| — |
| 66,048,752 | ||||
Technology |
| 69,976,236 |
| — |
| — |
| 69,976,236 | ||||
Total Investments, at value | $ | 271,611,028 | $ | — | $ | — | $ | 271,611,028 |
The accompanying notes are an integral part of these financial statements.
6 |
BBH SELECT SERIES – MID CAP FUND |
STATEMENT OF ASSETS AND LIABILITIES April 30, 2024 (unaudited) |
ASSETS: |
| ||
Investments in securities, at value (Cost $247,269,634) | $ | 271,611,028 | |
Cash |
| 4,585,418 | |
Receivables for: |
| ||
Shares sold |
| 942,700 | |
Dividends |
| 43,783 | |
Interest from Custodian |
| 29,271 | |
Prepaid expenses |
| 1,069 | |
Total Assets |
| 277,213,269 | |
| |||
LIABILITIES: |
| ||
Payables for: |
| ||
Investments purchased |
| 1,816,868 | |
Investment advisory and administrative fees |
| 166,657 | |
Professional fees |
| 34,608 | |
Custody and fund accounting fees |
| 11,092 | |
Transfer agent fees |
| 6,535 | |
Board of Trustees’ fees |
| 367 | |
Shares redeemed |
| 100 | |
Accrued expenses and other liabilities |
| 1,520 | |
Total Liabilities |
| 2,037,747 | |
| |||
NET ASSETS | $ | 275,175,522 | |
| |||
Net Assets Consist of: |
| ||
Paid-in capital | $ | 253,761,145 | |
Retained earnings |
| 21,414,377 | |
Net Assets | $ | 275,175,522 | |
| |||
NET ASSET VALUE AND OFFERING PRICE PER SHARE |
| ||
CLASS I SHARES |
| ||
($275,175,522 ÷ 25,458,037 shares outstanding) | $ | 10.81 |
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 A P R I L 3 0, 2 0 2 4 | 7 |
BBH SELECT SERIES – MID CAP FUND |
STATEMENT OF OPERATIONS For the six months ended April 30, 2024 (unaudited) |
NET INVESTMENT LOSS: |
|
| ||
Income: |
|
| ||
Dividends (net of foreign withholding taxes of $490) | $ | 505,792 |
| |
Interest income from Custodian |
| 208,647 |
| |
Total Income |
| 714,439 |
| |
|
| |||
Expenses: |
|
| ||
Investment advisory and administrative fees |
| 811,910 |
| |
Board of Trustees’ fees |
| 38,856 |
| |
Professional fees |
| 30,635 |
| |
Transfer agent fees |
| 19,873 |
| |
Custody and fund accounting fees |
| 9,827 |
| |
Miscellaneous expenses |
| 31,491 |
| |
Total Expenses |
| 942,592 |
| |
Net Investment Loss |
| (228,153 | ) | |
|
| |||
NET REALIZED AND UNREALIZED GAIN: |
|
| ||
Net realized gain on investments in securities |
| 210,398 |
| |
Net change in unrealized appreciation/(depreciation) on investments in securities |
| 30,380,247 |
| |
Net Realized and Unrealized Gain |
| 30,590,645 |
| |
Net Increase in Net Assets Resulting from Operations | $ | 30,362,492 |
|
The accompanying notes are an integral part of these financial statements.
8 |
BBH SELECT SERIES – MID CAP FUND |
STATEMENTS OF CHANGES IN NET ASSETS |
For the | For the | |||||||
INCREASE/(DECREASE) IN NET ASSETS FROM: |
|
|
|
| ||||
Operations: |
|
|
|
| ||||
Net investment income/(loss) | $ | (228,153 | ) | $ | 89,911 |
| ||
Net realized gain/(loss) on investments in securities |
| 210,398 |
|
| (2,636,683 | ) | ||
Net change in unrealized appreciation/(depreciation) on investments in securities |
| 30,380,247 |
|
| (4,643,880 | ) | ||
Net increase/(decrease) in net assets resulting from operations |
| 30,362,492 |
|
| (7,190,652 | ) | ||
|
|
|
| |||||
Dividends and distributions declared: |
|
|
|
| ||||
Class I |
| (190,598 | ) |
| — |
| ||
|
|
|
| |||||
Share transactions: |
|
|
|
| ||||
Proceeds from sales of shares |
| 117,102,050 |
|
| 142,150,080 |
| ||
Net asset value of shares issued to shareholders for reinvestment of dividends and distributions |
| 4,516 |
|
| — |
| ||
Cost of shares redeemed |
| (12,485,908 | ) |
| (6,673,281 | ) | ||
Net increase in net assets resulting from share transactions |
| 104,620,658 |
|
| 135,476,799 |
| ||
Total increase in net assets |
| 134,792,552 |
|
| 128,286,147 |
| ||
|
|
|
| |||||
NET ASSETS: |
|
|
|
| ||||
Beginning of period/year |
| 140,382,970 |
|
| 12,096,823 |
| ||
End of period/year | $ | 275,175,522 |
| $ | 140,382,970 |
|
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 A P R I L 3 0, 2 0 2 4 | 9 |
BBH SELECT SERIES – MID CAP FUND |
FINANCIAL HIGHLIGHTS Selected per share data and ratios for a Class I share outstanding throughout each period/year. |
For the |
| For the | ||||||||||||||
2023 | 2022 | |||||||||||||||
Net asset value, beginning of period/year | $ | 8.95 |
| $ | 8.85 |
| $ | 10.68 |
| $ | 10.00 |
| ||||
Income from investment operations: |
|
|
|
|
|
|
|
| ||||||||
Net investment income/(loss)1 |
| (0.01 | ) |
| 0.01 |
|
| (0.04 | ) |
| (0.02 | ) | ||||
Net realized and unrealized gain/(loss) |
| 1.88 |
|
| 0.09 |
|
| (1.79 | ) |
| 0.70 |
| ||||
Total income/(loss) from investment operations |
| 1.87 |
|
| 0.10 |
|
| (1.83 | ) |
| 0.68 |
| ||||
Dividends and distributions to shareholders: |
|
|
|
|
|
|
|
| ||||||||
From net investment income |
| (0.01 | ) |
| — |
|
| — |
|
| — |
| ||||
Total dividends and distributions to shareholders |
| (0.01 | ) |
| — |
|
| — |
|
| — |
| ||||
Net asset value, end of period/year | $ | 10.81 |
| $ | 8.95 |
| $ | 8.85 |
| $ | 10.68 |
| ||||
Total return2 |
| 20.91 | %3 |
| 1.13 | % |
| (17.13 | )% |
| 6.80 | %3 | ||||
|
|
|
|
|
|
|
| |||||||||
Ratios/Supplemental data: |
|
|
|
|
|
|
|
| ||||||||
Net assets, end of period/year (in millions) | $ | 275 |
| $ | 140 |
| $ | 12 |
| $ | 14 |
| ||||
Ratio of expenses to average net assets before reductions |
| 0.87 | %4 |
| 1.09 | % |
| 2.29 | % |
| 2.46 | %5 | ||||
Fee waiver6 |
| — | % |
| (0.19 | )% |
| (1.39 | )% |
| (1.56 | )%5 | ||||
Ratio of expenses to average net assets after reductions |
| 0.87 | %4 |
| 0.90 | % |
| 0.90 | % |
| 0.90 | %5 | ||||
Ratio of net investment income/(loss) to average net assets |
| (0.21 | )%4 |
| 0.14 | % |
| (0.38 | )% |
| (0.40 | )%5 | ||||
Portfolio turnover rate |
| 2 | %3 |
| 7 | % |
| 23 | % |
| 3 | %3 |
____________
1 Calculated using average shares outstanding for the period/year.
2 Assumes the reinvestment of distributions.
3 Not annualized.
4 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 six months ended April 30, 2024, the years ended October 31, 2023, 2022 and the period from May 24, 2021 to October 31, 2021, reflects fees reduced as result of a contractual operating expense limitation of the share class to 0.90%. The Agreement is effective through March 1, 2025 and may only be terminated during its term with approval of the Fund’s Board of Trustees. For the six months ended April 30, 2024, the years ended October 31, 2023, 2022 and the period from May 24, 2021 to October 31, 2021, the waived fees were $0, $124,636, $179,874 and $135,159, respectively.
The accompanying notes are an integral part of these financial statements.
10 |
BBH SELECT SERIES – MID CAP FUND |
NOTES TO FINANCIAL STATEMENTS April 30, 2024 (unaudited) |
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 April 30, 2024, 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 April 30, 2024, 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 the supervision and oversight of the determination of 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
| ||
F I N A N C I A L S T A T E M E N T S A P R I L 3 0, 2 0 2 4 | 11 |
BBH SELECT SERIES – MID CAP FUND |
NOTES TO FINANCIAL STATEMENTS (continued) April 30, 2024 (unaudited) |
“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.
| ||
12 |
BBH SELECT SERIES – MID CAP FUND |
NOTES TO FINANCIAL STATEMENTS (continued) April 30, 2024 (unaudited) |
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 six months ended April 30, 2024, 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 declared dividends and distributions in the amount of $190,598 to Class I shares during the six months ended April 30, 2024.
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 A P R I L 3 0, 2 0 2 4 | 13 |
BBH SELECT SERIES – MID CAP FUND |
NOTES TO FINANCIAL STATEMENTS (continued) April 30, 2024 (unaudited) |
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 six months ended April 30, 2024, the Fund incurred $811,910 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, 2025, 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 six months ended April 30, 2024, the Investment Adviser waived Investment Advisory and Administrative fees in the amount of $0 for Class I.
C. Custody and Fund Accounting Fees. BBH acts as a custodian and fund accountant and receives custody and fund accounting fees from the Fund calculated daily and 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 based partially on asset values and partially on individual fund transactions. The fund accounting fee is primarily an asset-based fee calculated at 0.325 basis points per annum of the Fund’s net asset value. For the six months ended April 30, 2024, the Fund incurred $9,827 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 six months ended April 30, 2024 was $208,647. 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 six months ended April 30, 2024. This amount, if any, is included under line item “Custody and fund accounting fees” in the Statement of Operations.
| ||
14 |
BBH SELECT SERIES – MID CAP FUND |
NOTES TO FINANCIAL STATEMENTS (continued) April 30, 2024 (unaudited) |
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 six months ended April 30, 2024, the Fund incurred $38,856 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 six months ended April 30, 2024, the cost of purchases and the proceeds of sales of investment securities, other than short-term investments, were $110,128,124 and $4,105,582, 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 six months ended | For the year ended | |||||||||||||||
Shares | Dollars | Shares | Dollars | |||||||||||||
Class I |
|
|
|
|
|
| ||||||||||
Shares sold | 10,910,591 |
| $ | 117,102,050 |
| 15,036,110 |
| $ | 142,150,080 |
| ||||||
Shares issued in connection with reinvestments of dividends | 429 |
|
| 4,516 |
| — |
|
| — |
| ||||||
Shares redeemed | (1,138,750 | ) |
| (12,485,908 | ) | (716,784 | ) |
| (6,673,281 | ) | ||||||
Net increase | 9,772,270 |
| $ | 104,620,658 |
| 14,319,326 |
| $ | 135,476,799 |
|
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
| ||
F I N A N C I A L S T A T E M E N T S A P R I L 3 0, 2 0 2 4 | 15 |
BBH SELECT SERIES – MID CAP FUND |
NOTES TO FINANCIAL STATEMENTS (continued) April 30, 2024 (unaudited) |
enters into transactions where risks exist due to assumption of large positions in securities of a small number of issuers (non-diversification risk). There are certain risks associated with investing in foreign securities not present in domestic investments, including, but not limited to, recovery of tax withheld by foreign jurisdictions (foreign investment risk). Investments in other investment companies are subject to market and selection risk, as well as the specific risks associated with the investment companies’ portfolio securities (investment in other investment companies risk). Initial public offerings (“IPOs”) are new issues of equity securities, as such they have no trading history and there may be limited information about the companies for a very limited period. Additionally, the prices of securities sold in IPOs may be highly volatile (IPO risk). Preferred securities are subject to issuer-specific and market risks. Generally, issuers only pay dividends after the company makes required payments to holders of bonds and other debt, as such the value of preferred securities may react more strongly to market conditions than bonds and other debts (preferred securities risk). The Fund’s shareholders may be adversely impacted by asset 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 April 30, 2024 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.
| ||
16 |
BBH SELECT SERIES – MID CAP FUND |
DISCLOSURE OF FUND EXPENSES April 30, 2024 (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 (November 1, 2023 to April 30, 2024).
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 A P R I L 3 0, 2 0 2 4 | 17 |
BBH SELECT SERIES – MID CAP FUND |
DISCLOSURE OF FUND EXPENSES (continued) April 30, 2024 (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 | $1,209 | $4.78 | |||
Hypothetical2 | $1,000 | $1,021 | $4.37 |
____________
1 Expenses are equal to the Fund’s annualized net expense ratio of 0.87%, multiplied by the average account value over the period, multiplied by 182/366 (to reflect the one-half year period).
2 Assumes a return of 5% before expenses. For the purposes of the calculation, the applicable annualized expense ratio for each class of shares is subtracted from the assumed return before expenses.
| ||
18 |
BBH SELECT SERIES – MID CAP FUND |
DISCLOSURE OF ADVISOR SELECTION April 30, 2024 (unaudited) |
Investment Advisory and Administrative Services Agreement Approval
The 1940 Act requires that a fund’s investment advisory agreements must be approved both by a fund’s board of trustees and by a majority of the trustees who are not parties to the investment advisory agreements or “interested persons” of any party (“Independent Trustees”), cast in person at a meeting called for the purpose of voting on such approval.
The Board, a majority of which is comprised of Independent Trustees, held a telephonic meeting on November 16, 2023 and an in-person meeting on December 12, 2023, to consider whether to renew the combined Amended and Restated Investment Advisory and Administrative Services Agreement (the “Advisory Agreement”) between the Trust and the Investment Adviser with respect to the existing funds in the Trust, including the Fund. At the December 12, 2023 meeting, the Board voted to approve the renewal of the Agreement with respect to the Fund for an additional one-year term. In doing so, the Board determined that the terms of the Agreement were fair and reasonable and in the best interest of the Fund and its shareholders and that it had received sufficient information throughout the year to make an informed business decision with respect to the continuation of the Agreement.
Both in the meetings specifically held to address the continuance of the Agreement and at other meetings over the course of the year, the Board requested, received and assessed a variety of materials provided by the Investment Adviser and BBH, including, among other things, information about the nature, extent and quality of the services provided to the Trust and the Fund by the Investment Adviser and BBH, including investment management and administrative the oversight of Fund service providers, marketing, risk oversight, compliance, and the ability to meet applicable legal and regulatory requirements. The Board also received and reviewed third-party comparative fee and expense information for the Fund prepared by Broadridge Financial Solutions, Inc. (“Broadridge”) using data from Lipper Inc., an independent provider of investment company data (“Lipper Report”). The Board reviewed this report with Broadridge, counsel to the Trust (“Fund Counsel”) and BBH. The Board received from, and discussed with, Fund Counsel a memorandum regarding the responsibilities of trustees for the approval of investment advisory agreements under the 1940 Act, as well as the guidance provided in 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.
In approving the continuation of the Agreement, the Board considered: (a) the nature, extent and quality of services provided by the Investment Adviser; (b) the investment performance of the Fund; (c) the advisory fee and the cost of the services and profits to be realized by the Investment Adviser from its relationship with the Fund; (d) the Fund’s costs to investors compared to the costs of comparative funds; (e) the sharing of potential economies of scale; (f) fall-out benefits to the Investment Adviser as a result of its relationship with the Fund; and (g) other factors deemed relevant by the Board. The following is a summary of certain factors the Board considered in making its determination to approve the continuance of the Agreement. No single factor reviewed by the Board was identified as the principal factor in determining whether to approve the Agreement, and individual Trustees may have given different weight to various factors. The Board reviewed these factors with Fund Counsel. The Board concluded that the fees paid by the Fund to the Investment Adviser were reasonable based on the expense information, the cost of the services provided, and the profits realized by the Investment Adviser.
| ||
F I N A N C I A L S T A T E M E N T S A P R I L 3 0, 2 0 2 4 | 19 |
BBH SELECT SERIES – MID CAP FUND |
DISCLOSURE OF ADVISOR SELECTION (continued) April 30, 2024 (unaudited) |
Nature, Extent and Quality of Services
The Board noted that, under the Agreement and with respect to the Fund, the Investment Adviser, subject to the supervision of the Board, is responsible for providing a continuous investment program and making purchases and sales of portfolio securities consistent with the Fund’s investment objective and policies. The Board further noted that, as a combined investment advisory and administration agreement, the Agreement also contemplates the provision of administrative services by the Investment Adviser to the Fund within the same fee structure.
The Board received and considered information during the December 12, 2023 meeting, and over the course of the previous year, regarding the nature, extent and quality of services provided to the Trust and the Fund by the Investment Adviser including: portfolio management, the supervision of operations and compliance, preparation of regulatory filings, disclosures to Fund shareholders, general oversight of service providers, organizing Board meetings and preparing the materials for such Board meetings, assistance to the Board (including the Independent Trustees in their capacity as Trustees), legal and Chief Compliance Officer services for the Trust, and other services necessary for the operation of the Fund.
The Board considered the resources of the Investment Adviser and BBH, as a whole, dedicated to the Fund noting that, pursuant to separate agreements, BBH also provides custody and fund accounting services to the Fund. The Board considered the depth and range of services provided pursuant to the Agreement, noting that the Investment Adviser also coordinates the provision of services to the Fund by affiliated and nonaffiliated service providers.
The Board considered the scope and quality of services provided by the Investment Adviser under the Agreement. The Board reviewed the qualifications of the key investment personnel primarily responsible for the day-to-day portfolio management of the Fund. The Board also considered the policies and practices followed by BBH and the Investment Adviser. The Board noted that during the course of its regular meetings, it received reports on each of the foregoing topics. The Board concluded that, overall, it was satisfied with the nature, extent and quality of the investment advisory and administrative services provided, and expected to be provided, to the Fund pursuant to the Agreement.
Fund Performance
At the November 16, 2023 and December 12, 2023 meetings, and throughout the year, the Board received and considered performance information for the Fund provided by BBH. The Board also considered the Fund’s performance relative to a peer category of other mutual funds in a report compiled by Broadridge. As part of this review, the Trustees considered the composition of the peer category, selection criteria and reputation of Broadridge who prepared the peer category analysis. The Board reviewed and discussed with both BBH and Broadridge the report’s findings and discussed the positioning of the Fund relative to its selected peer category. The Board considered investment performance for the Fund over the 1-year period of time, noting the Fund had above average performance as compared to its peer category for the period ended September 30, 2023. In evaluating the performance of the Fund, the Board considered the risk expectations for the Fund as well as level of Fund performance in the context of Fund expenses and the Investment Adviser’s profitability. Based on this information, the Board concluded that it was satisfied with the Fund’s investment results.
| ||
20 |
BBH SELECT SERIES – MID CAP FUND |
DISCLOSURE OF ADVISOR SELECTION (continued) April 30, 2024 (unaudited) |
Costs of Services Provided and Profitability
The Board considered the fee rates paid by the Fund to the Investment Adviser and BBH in light of the nature, extent and quality of the services provided to the Fund. The Board also considered and reviewed the fee waiver arrangement that was in place for the Fund and considered the actual fee rates after taking into account the contractual fee waiver. The Board noted that they had previously received and considered information comparing the Fund’s combined investment advisory and administration fee and the Fund’s net operating expenses with those of other comparable mutual funds, such peer category and comparisons having been selected and calculated by Broadridge. The Board recognized that it is difficult to make comparisons of the fee rate, or of combined advisory and administration fees, because there are variations in the services that are included in the fees paid by other funds. The Board concluded that the advisory and administration fee appeared to be both reasonable in light of the services rendered and the result of arm’s length negotiations.
With regard to profitability, the Trustees considered the compensation and benefits flowing to the Investment Adviser and BBH, directly or indirectly. The Board reviewed annualized profitability data for the Fund using data from October 1, 2022 through September 30, 2023, for both the Investment Adviser and BBH. The data also included the effect of revenue generated by the custody and fund accounting fees paid by the Fund to BBH and corresponding expenses. The Board conducted a detailed review of the expense allocation methods used in preparing the profitability data. The Board focused on profitability of the Investment Adviser and BBH’s relationships with the Fund before taxes and distribution expenses. The Board concluded that the Investment Adviser’s and BBH’s profitability was not excessive in light of the nature, extent and quality of services provided to the Fund.
The Board also considered the effect of fall-out benefits to the Investment Adviser and BBH such as the increased visibility of BBH’s investment management business due to the distribution of the Trust’s funds. The Board considered other benefits received by BBH and the Investment Adviser as a result of their relationships with the Fund. These other benefits include fees received for being the Fund’s administrator, custodian and fund accounting agent. In light of the costs of providing services pursuant to the Agreement as well as the Investment Adviser and BBH’s commitment to the Fund, the ancillary benefits that the Investment Adviser and BBH received were considered reasonable.
Economies of Scale
The Board also considered the existence of any economies of scale and whether those economies are passed along to the Fund’s shareholders through a graduated investment advisory fee schedule or other means, including any fee waivers by the Investment Adviser and BBH. The Board considered the fee schedule for the Fund on the information it had been provided over many years, the Board observed that in the mutual fund industry as a whole, as well as among funds similar to the Fund, there appeared to be no uniformity or pattern in the fees and asset levels at which breakpoints apply. In light of the Fund’s current size and expense structure, the Board concluded that the current breakpoints for the Fund were reasonable. The Board concluded that the fees paid by the Fund to the Investment Adviser were reasonable based on the comparative expense information, the cost of the services provided by the Investment Adviser.
| ||
F I N A N C I A L S T A T E M E N T S A P R I L 3 0, 2 0 2 4 | 21 |
BBH SELECT SERIES – MID CAP FUND |
CONFLICTS OF INTEREST April 30, 2024 (unaudited) |
BBH&Co., 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&Co., 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&Co. for which they will pay to BBH&Co. customary fees and expenses that will not be shared with the Funds.
The Investment Adviser and the Sub-advisers have adopted and implemented policies and procedures that seek to manage conflicts of interest. Pursuant to such policies and procedures, the Investment Adviser and each Sub-adviser monitor a variety of areas, including compliance with fund investment guidelines, the investment in only those securities that have been approved for purchase, and compliance with their respective Code of Ethics.
The Trust also manages these conflicts of interest. For example, the Trust has designated a CCO and has adopted and implemented policies and procedures designed to manage the conflicts identified below and other conflicts that may arise in the course of the Funds’ operations in such a way as to safeguard the Funds from being negatively affected as a result of any such potential conflicts. From time to time, the Trustees receive reports from the Investment Adviser, the Sub-advisers 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&Co., the Investment Adviser and Sub-advisers can face in the operation of their respective investment management services. This section is not, and is not intended to be, a complete enumeration or explanation of all of the potential conflicts of interest that may arise. The Investment Adviser, the Sub-advisers 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&Co., the Investment Adviser, and the Sub-advisers manage funds and accounts of clients other than the Funds (“Other Clients”). In general, BBH&Co., the Investment Adviser, and the Sub-advisers face conflicts of interest when they render investment advisory services to different clients and, from time to time, provide dissimilar investment advice to different clients. Investment decisions will not necessarily be made in parallel among the Funds and Other Clients. Investments made by the Funds do not, and are not intended to, replicate the investments, or the investment methods and strategies, of Other Clients. Accordingly, such Other Clients 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’
| ||
22 |
BBH SELECT SERIES – MID CAP FUND |
CONFLICTS OF INTEREST (continued) April 30, 2024 (unaudited) |
investments, on the one hand, and the investments of other funds or accounts for which the portfolio manager is responsible, on the other. For example, it is possible that the various funds or accounts managed by the Investment Adviser or Sub-advisers could have different investment strategies that, at times, might conflict with one another to the possible detriment of the Funds. From time to time, the Investment Adviser and Sub-advisers, sponsor and with other investment pools and accounts which engage in the same or similar businesses as the Funds using the same or similar investment strategies. To the extent that the same investment opportunities might be desirable for more than one account or fund, possible conflicts could arise in determining how to allocate them because the Investment Adviser or Sub-advisers may have an incentive to allocate investment opportunities to certain accounts or funds. However, BBH&Co. 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&Co. provides administrative, custody, shareholder servicing and fund accounting services to the Funds. BBH&Co. 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&Co. may have an incentive to agree to higher fees than it would in the case of unaffiliated providers. BBH&Co. acting in its capacity as the Funds’ administrator is the primary valuation agent of the Funds. BBH&Co. 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&Co. and its affiliates may have an incentive to seek to overvalue certain assets.
Aggregation. Potential conflicts of interest also arise with the aggregation of trade orders. Purchases and sales of securities for the Funds may be aggregated with orders for other client accounts managed by the Sub-advisers. The Sub-advisers, 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
| ||
F I N A N C I A L S T A T E M E N T S A P R I L 3 0, 2 0 2 4 | 23 |
BBH SELECT SERIES – MID CAP FUND |
CONFLICTS OF INTEREST (continued) April 30, 2024 (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&Co., the Investment Adviser may (but is not required to) effect purchases and sales between BBH&Co., the Investment Adviser clients (“cross trades”), including the Funds, if BBH&Co., the Investment Adviser or a Fund’s Sub-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&Co., the Investment Adviser and/or a Fund’s Sub-adviser may have a potentially conflicting division of loyalties and responsibilities to the parties in such transactions.
Soft Dollars. The Investment Adviser may direct brokerage transactions and/or payment of a portion of client commissions (“soft dollars”) to specific brokers or dealers or other providers to pay for research or other appropriate services which provide, in the Investment Adviser’s view, appropriate assistance in the investment decision-making process (including with respect to futures, fixed price offerings and over-the-counter transactions). The use of a broker that provides research and securities transaction services may result in a higher commission than that offered by a broker who does not provide such services. The Investment Adviser will determine in good faith whether the amount of commission is reasonable in relation to the value of research and services provided and whether the services provide lawful and appropriate assistance in its investment decision-making responsibilities.
Research or other services obtained in this manner may be used in servicing any or all of the Funds and other accounts managed by the Investment Adviser, including in connection with accounts that do not pay commissions to the broker related to the research or other service arrangements. Such products and services may disproportionately benefit other client accounts relative to the Funds based on the amount of brokerage commissions paid by the Funds and such other accounts. To the extent that a Sub-adviser uses soft dollars, it will not have to pay for those products and services itself.
BBH&Co. may receive research that is bundled with the trade execution, clearing, and/or settlement services provided by a particular broker-dealer. To the extent that a Sub-adviser receives research on this basis, many of the same conflicts related to traditional soft dollars may exist. For example, the research effectively will be paid by client commissions that also will be used to pay for the execution, clearing, and settlement services provided by the broker-dealer and will not be paid by the Sub-adviser.
Arrangements regarding compensation and delegation of responsibility may create conflicts relating to selection of brokers or dealers to execute Fund portfolio trades and/or specific uses of commissions from Fund portfolio trades, administration of investment advice and valuation of securities.
| ||
24 |
BBH SELECT SERIES – MID CAP FUND |
CONFLICTS OF INTEREST (continued) April 30, 2024 (unaudited) |
Investments in BBH Funds. From time to time BBH&Co. may invest a portion of the assets of its discretionary investment advisory clients in the Funds. That investment by BBH&Co. 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&Co. may limit its selection to funds managed by BBH&Co. or the Investment Adviser. BBH&Co. 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&Co., 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&Co. 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&Co. 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&Co. to be unreliable, the Funds’ investments will be valued at fair value by BBH&Co. pursuant to procedures adopted by the Funds’ Board. When determining an asset’s “fair value,” BBH&Co. 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&Co. deems relevant at the time of the determination and may be based on analytical values determined by BBH&Co. 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&Co. (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&Co. may enter into advisory and/or referral arrangements with third parties. Such arrangements may include compensation paid by BBH&Co. to the third party. BBH&Co. may pay a solicitation fee for referrals and/or advisory or incentive fees. BBH&Co. may benefit from increased amounts of assets under management.
Personal Trading. BBH&Co., 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
| ||
F I N A N C I A L S T A T E M E N T S A P R I L 3 0, 2 0 2 4 | 25 |
BBH SELECT SERIES – MID CAP FUND |
CONFLICTS OF INTEREST (continued) April 30, 2024 (unaudited) |
implemented policies and procedures concerning personal trading by BBH&Co. Partners and employees. The policy and procedures are intended to prevent BBH&Co. Partners and employees from trading in the same securities as the Funds. However, BBH&Co., including the Investment Adviser, has implemented policies and procedures concerning personal trading by BBH&Co. Partners and employees. The policies and procedures are intended to prevent BBH&Co. 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&Co., 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&Co., 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&Co. Partners and employees. BBH&Co., including the Investment Adviser, has implemented policies and procedures concerning gifts and entertainment to mitigate any impact on the judgment of BBH&Co. Partners and employees.
| ||
26 |
BBH SELECT SERIES – MID CAP FUND |
OPERATION AND EFFECTIVENESS OF THE FUND’S LIQUIDITY RISK MANAGEMENT PROGRAM April 30, 2024 (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 each Fund’s liquidity risk management program (the “Program”). The Board met on March 6, 2024 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, 2023 through January 31, 2024 (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 Funds classified each of their 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 each Fund’s investments based on criteria in each Fund’s Program. During the Reporting Period, no Fund held 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 no Fund has approached the 50% threshold, has made the determination that it is not necessary to assign a Highly Liquid Investment Minimum to any of the Funds 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 each Fund’s investment strategy is appropriate for an open-end fund structure with a focus on Funds with more significant and consistent holdings of less liquid and illiquid assets and factored a Fund’s concentration in an issuer into the liquidity classification methodology by taking issuer position sizes into account.
| ||
F I N A N C I A L S T A T E M E N T S A P R I L 3 0, 2 0 2 4 | 27 |
BBH SELECT SERIES – MID CAP FUND |
OPERATION AND EFFECTIVENESS OF THE FUND’S LIQUIDITY RISK MANAGEMENT PROGRAM (continued) April 30, 2024 (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 each Fund’s reasonably anticipated trading size. The Program Administrator also took into consideration other factors such as shareholder ownership concentration, applicable distribution channels and the degree of certainty associated with a Fund’s short-term and long-term cash flow projections.
Holdings of cash and cash equivalents. The Program Administrator considered the degree to which each Fund held cash and cash equivalents as a component of each Fund’s ability to meet redemption requests.
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.
| ||
28 |
Administrator Distributor Shareholder Servicing Agent To obtain information or make shareholder inquiries: | Investment Adviser | |
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, semiannual 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 |
Semi-Annual Report
APRIL 30, 2024
BBH Partner Fund — International Equity
BBH PARTNER FUND – INTERNATIONAL EQUITY |
PORTFOLIO ALLOCATION April 30, 2024 (unaudited) |
COUNTRY DIVERSIFICATION
U.S. $ Value | Percent of | |||||||||
Common Stock: |
|
| ||||||||
Canada | $ | 158,025,601 | 7.6 | % | ||||||
Cayman Islands |
| 8,750,034 | 0.4 |
| ||||||
Denmark |
| 29,906,791 | 1.4 |
| ||||||
Finland |
| 26,497,804 | 1.3 |
| ||||||
France |
| 345,506,441 | 16.7 |
| ||||||
Germany |
| 173,499,461 | 8.4 |
| ||||||
Hong Kong |
| 24,427,946 | 1.2 |
| ||||||
India |
| 26,881,920 | 1.3 |
| ||||||
Ireland |
| 180,373,013 | 8.8 |
| ||||||
Japan |
| 217,602,954 | 10.5 |
| ||||||
Jersey |
| 47,065,063 | 2.3 |
| ||||||
Luxembourg |
| 12,654,575 | 0.6 |
| ||||||
Netherlands |
| 126,387,480 | 6.1 |
| ||||||
Singapore |
| 29,272,214 | 1.4 |
| ||||||
South Korea |
| 52,325,507 | 2.5 |
| ||||||
Spain |
| 29,745,492 | 1.4 |
| ||||||
Sweden |
| 42,916,365 | 2.1 |
| ||||||
Switzerland |
| 94,152,410 | 4.5 |
| ||||||
Taiwan |
| 98,225,936 | 4.7 |
| ||||||
United Kingdom |
| 213,178,631 | 10.3 |
| ||||||
United States |
| 43,562,593 | 2.1 |
| ||||||
Registered Investment Companies: |
|
| ||||||||
United States |
| 32,400,000 | 1.6 |
| ||||||
Preferred Stocks: |
|
| ||||||||
Germany |
| 16,910,633 | 0.8 |
| ||||||
Warrants: |
|
| ||||||||
Canada |
| 0 | 0.0 |
| ||||||
Cash and Other Assets in Excess of Liabilities |
| 40,436,862 | 2.0 |
| ||||||
NET ASSETS | $ | 2,070,705,726 | 100.0 | % |
All data as of April 30, 2024. BBH Partner Fund – International Equity’s (the “Fund”) 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.
2 |
BBH PARTNER FUND – INTERNATIONAL EQUITY |
PORTFOLIO ALLOCATION (continued) April 30, 2024 (unaudited) |
SECTOR DIVERSIFICATION
U.S. $ Value | Percent of | |||||||||
Common Stock: |
|
| ||||||||
Basic Materials | $ | 58,459,636 | 2.8 | % | ||||||
Communications |
| 65,455,149 | 3.2 |
| ||||||
Consumer Cyclical |
| 318,838,884 | 15.4 |
| ||||||
Consumer Non-Cyclical |
| 344,373,563 | 16.6 |
| ||||||
Energy |
| 29,906,791 | 1.4 |
| ||||||
Financials |
| 289,207,078 | 14.0 |
| ||||||
Industrials |
| 501,889,964 | 24.2 |
| ||||||
Technology |
| 372,827,166 | 18.0 |
| ||||||
Registered Investment Companies |
| 32,400,000 | 1.6 |
| ||||||
Preferred Stocks: |
|
| ||||||||
Consumer Cyclical |
| 16,910,633 | 0.8 |
| ||||||
Warrants: |
|
| ||||||||
Technology |
| 0 | 0.0 |
| ||||||
Cash and Other Assets in Excess of Liabilities |
| 40,436,862 | 2.0 |
| ||||||
NET ASSETS | $ | 2,070,705,726 | 100.0 | % |
All data as of April 30, 2024. 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 A P R I L 3 0, 2 0 2 4 | 3 |
BBH PARTNER FUND – INTERNATIONAL EQUITY |
PORTFOLIO OF INVESTMENTS April 30, 2024 (unaudited) |
Shares/ | Value | ||||
COMMON STOCK (95.6%) |
| ||||
CANADA (7.6%) |
| ||||
BASIC MATERIALS |
| ||||
175,600 | Franco-Nevada Corp. | $ | 21,165,490 | ||
COMMUNICATIONS |
| ||||
177,852 | Shopify, Inc. (Class A)1 |
| 12,485,210 | ||
CONSUMER CYCLICAL |
| ||||
457,070 | Alimentation Couche-Tard, Inc. |
| 25,365,075 | ||
FINANCIALS |
| ||||
1,596,103 | Brookfield Corp. |
| 64,104,159 | ||
INDUSTRIALS |
| ||||
197,516 | Canadian Pacific Kansas City, Ltd. |
| 15,515,112 | ||
TECHNOLOGY |
| ||||
7,522 | Constellation Software, Inc. |
| 19,390,555 | ||
Total Canada |
| 158,025,601 | |||
CAYMAN ISLANDS (0.4%) |
| ||||
COMMUNICATIONS |
| ||||
603,355 | JD.com, Inc. (Class A) |
| 8,750,034 | ||
Total Cayman Islands |
| 8,750,034 | |||
DENMARK (1.4%) |
| ||||
ENERGY |
| ||||
1,113,964 | Vestas Wind Systems A/S1 |
| 29,906,791 | ||
Total Denmark |
| 29,906,791 | |||
FINLAND (1.3%) |
| ||||
INDUSTRIALS |
| ||||
543,110 | Kone Oyj (Class B) |
| 26,497,804 | ||
Total Finland |
| 26,497,804 | |||
FRANCE (16.7%) |
| ||||
CONSUMER CYCLICAL |
| ||||
44,609 | Kering S.A. |
| 15,413,338 | ||
21,681 | LVMH Moet Hennessy Louis Vuitton SE |
| 17,473,949 | ||
| 32,887,287 | ||||
CONSUMER NON-CYCLICAL |
| ||||
14,948 | L’Oreal S.A. |
| 6,991,109 | ||
172,808 | Sartorius Stedim Biotech |
| 37,364,259 | ||
| 44,355,368 | ||||
INDUSTRIALS |
| ||||
392,581 | Safran S.A. |
| 84,992,251 | ||
189,666 | Schneider Electric SE |
| 43,247,866 | ||
352,868 | Thales S.A. |
| 59,422,186 | ||
| 187,662,303 |
The accompanying notes are an integral part of these financial statements.
4 |
BBH PARTNER FUND – INTERNATIONAL EQUITY |
PORTFOLIO OF INVESTMENTS (continued) April 30, 2024 (unaudited) |
Shares/ | Value | ||||
COMMON STOCK (continued) |
| ||||
FRANCE (continued) |
| ||||
TECHNOLOGY |
| ||||
261,070 | Capgemini SE | $ | 54,916,522 | ||
655,003 | Dassault Systemes SE |
| 25,684,961 | ||
| 80,601,483 | ||||
Total France |
| 345,506,441 | |||
GERMANY (8.4%) |
| ||||
CONSUMER CYCLICAL |
| ||||
224,054 | Adidas AG |
| 54,125,693 | ||
FINANCIALS |
| ||||
149,007 | Deutsche Boerse AG |
| 28,800,628 | ||
INDUSTRIALS |
| ||||
68,043 | Rheinmetall AG |
| 37,584,732 | ||
TECHNOLOGY |
| ||||
292,302 | SAP SE |
| 52,988,408 | ||
Total Germany |
| 173,499,461 | |||
HONG KONG (1.2%) |
| ||||
CONSUMER CYCLICAL |
| ||||
2,430,000 | Galaxy Entertainment Group, Ltd. |
| 10,922,862 | ||
FINANCIALS |
| ||||
1,841,300 | AIA Group, Ltd. |
| 13,505,084 | ||
Total Hong Kong |
| 24,427,946 | |||
INDIA (1.3%) |
| ||||
FINANCIALS |
| ||||
466,700 | HDFC Bank, Ltd. ADR |
| 26,881,920 | ||
Total India |
| 26,881,920 | |||
IRELAND (8.8%) |
| ||||
BASIC MATERIALS |
| ||||
604,271 | Smurfit Kappa Group, Plc. |
| 26,286,486 | ||
CONSUMER CYCLICAL |
| ||||
230,200 | Ryanair Holdings, Plc. ADR |
| 31,353,240 | ||
CONSUMER NON-CYCLICAL |
| ||||
115,574 | ICON, Plc. ADR1 |
| 34,427,183 | ||
INDUSTRIALS |
| ||||
1,140,611 | CRH, Plc. |
| 88,306,104 | ||
Total Ireland |
| 180,373,013 | |||
JAPAN (10.5%) |
| ||||
CONSUMER CYCLICAL |
| ||||
378,200 | Nintendo Co., Ltd. |
| 18,453,942 | ||
278,500 | Sony Group Corp. |
| 23,033,928 | ||
2,252,000 | Suzuki Motor Corp. |
| 26,232,380 | ||
| 67,720,250 |
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 A P R I L 3 0, 2 0 2 4 | 5 |
BBH PARTNER FUND – INTERNATIONAL EQUITY |
PORTFOLIO OF INVESTMENTS (continued) April 30, 2024 (unaudited) |
Shares/ | Value | ||||
COMMON STOCK (continued) |
| ||||
JAPAN (continued) |
| ||||
CONSUMER NON-CYCLICAL |
| ||||
465,800 | Eisai Co., Ltd | $ | 19,197,850 | ||
494,515 | Recruit Holdings Co., Ltd. |
| 21,519,645 | ||
| 40,717,495 | ||||
INDUSTRIALS |
| ||||
117,900 | Daikin Industries, Ltd. |
| 16,021,561 | ||
50,648 | Keyence Corp. |
| 22,463,331 | ||
938,400 | Komatsu, Ltd. |
| 28,118,191 | ||
| 66,603,083 | ||||
TECHNOLOGY |
| ||||
329,665 | Obic Co., Ltd. |
| 42,562,126 | ||
Total Japan |
| 217,602,954 | |||
JERSEY (2.3%) |
| ||||
CONSUMER NON-CYCLICAL |
| ||||
1,165,070 | Experian, Plc. |
| 47,065,063 | ||
Total Jersey |
| 47,065,063 | |||
LUXEMBOURG (0.6%) |
| ||||
COMMUNICATIONS |
| ||||
45,124 | Spotify Technology S.A.1 |
| 12,654,575 | ||
Total Luxembourg |
| 12,654,575 | |||
NETHERLANDS (6.1%) |
| ||||
COMMUNICATIONS |
| ||||
939,073 | Prosus NV1 |
| 31,565,330 | ||
CONSUMER CYCLICAL |
| ||||
1,279,801 | Universal Music Group NV |
| 37,639,678 | ||
CONSUMER NON-CYCLICAL |
| ||||
72,755 | Heineken NV |
| 7,092,023 | ||
TECHNOLOGY |
| ||||
30,460 | ASML Holding NV |
| 26,581,970 | ||
594,637 | STMicroelectronics NV |
| 23,508,479 | ||
| 50,090,449 | ||||
Total Netherlands |
| 126,387,480 | |||
SINGAPORE (1.4%) |
| ||||
FINANCIALS |
| ||||
1,143,560 | DBS Group Holdings, Ltd. |
| 29,272,214 | ||
Total Singapore |
| 29,272,214 | |||
SOUTH KOREA (2.5%) |
| ||||
FINANCIALS |
| ||||
431,869 | KB Financial Group, Inc. |
| 23,357,298 |
The accompanying notes are an integral part of these financial statements.
6 |
BBH PARTNER FUND – INTERNATIONAL EQUITY |
PORTFOLIO OF INVESTMENTS (continued) April 30, 2024 (unaudited) |
Shares/ | Value | ||||
COMMON STOCK (continued) |
| ||||
SOUTH KOREA (continued) |
| ||||
TECHNOLOGY |
| ||||
524,416 | Samsung Electronics Co., Ltd. | $ | 28,968,209 | ||
Total South Korea |
| 52,325,507 | |||
SPAIN (1.4%) |
| ||||
CONSUMER NON-CYCLICAL |
| ||||
468,238 | Amadeus IT Group S.A. |
| 29,745,492 | ||
Total Spain |
| 29,745,492 | |||
SWEDEN (2.1%) |
| ||||
CONSUMER NON-CYCLICAL |
| ||||
980,498 | Essity AB (Class B) |
| 24,473,982 | ||
FINANCIALS |
| ||||
2,106,765 | Svenska Handelsbanken AB (Class A) |
| 18,442,383 | ||
Total Sweden |
| 42,916,365 | |||
SWITZERLAND (4.5%) |
| ||||
BASIC MATERIALS |
| ||||
98,200 | DSM-Firmenich AG |
| 11,007,660 | ||
CONSUMER CYCLICAL |
| ||||
96,665 | Cie Financiere Richemont S.A. (Class A) |
| 13,404,445 | ||
CONSUMER NON-CYCLICAL |
| ||||
501,638 | Alcon, Inc. |
| 38,599,794 | ||
78,692 | Sonova Holding AG |
| 21,872,650 | ||
| 60,472,444 | ||||
FINANCIALS |
| ||||
7,213 | Partners Group Holding AG |
| 9,267,861 | ||
Total Switzerland |
| 94,152,410 | |||
TAIWAN (4.7%) |
| ||||
TECHNOLOGY |
| ||||
366,004 | MediaTek, Inc. |
| 11,072,169 | ||
634,584 | Taiwan Semiconductor Manufacturing Co., Ltd. ADR |
| 87,153,767 | ||
Total Taiwan |
| 98,225,936 | |||
UNITED KINGDOM (10.3%) |
| ||||
CONSUMER CYCLICAL |
| ||||
681,859 | Compass Group, Plc. |
| 18,973,877 | ||
235,556 | Next, Plc. |
| 26,446,477 | ||
| 45,420,354 | ||||
CONSUMER NON-CYCLICAL |
| ||||
106,389 | Reckitt Benckiser Group, Plc. |
| 5,942,777 | ||
1,284,788 | Rentokil Initial, Plc. |
| 6,519,143 | ||
| 12,461,920 |
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 A P R I L 3 0, 2 0 2 4 | 7 |
BBH PARTNER FUND – INTERNATIONAL EQUITY |
PORTFOLIO OF INVESTMENTS (continued) April 30, 2024 (unaudited) |
Shares/ | Value | ||||
COMMON STOCK (continued) |
| ||||
UNITED KINGDOM (continued) |
| ||||
FINANCIALS |
| ||||
684,995 | London Stock Exchange Group, Plc. | $ | 75,575,531 | ||
INDUSTRIALS |
| ||||
3,796,837 | BAE Systems, Plc. |
| 63,234,145 | ||
2,102,095 | Melrose Industries, Plc. |
| 16,486,681 | ||
| 79,720,826 | ||||
Total United Kingdom |
| 213,178,631 | |||
UNITED STATES (2.1%) |
| ||||
CONSUMER NON-CYCLICAL |
| ||||
264,361 | Revvity, Inc. |
| 27,089,072 | ||
39,616 | S&P Global, Inc. |
| 16,473,521 | ||
Total United States |
| 43,562,593 | |||
Total Common Stock (Cost $1,604,490,443) |
| 1,980,958,231 | |||
REGISTERED INVESTMENT COMPANIES (1.6%) |
| ||||
UNITED STATES (1.6%) |
| ||||
32,400,000 | Morgan Stanley Institutional Liquidity Funds – Treasury Securities Portfolio, Institutional Share Class. |
| 32,400,000 | ||
Total United States |
| 32,400,000 | |||
Total Registered Investment Companies (Cost $32,400,000) |
| 32,400,000 | |||
PREFERRED STOCKS (0.8%) |
| ||||
GERMANY (0.8%) |
| ||||
CONSUMER CYCLICAL |
| ||||
189,570 | Dr Ing hc F Porsche AG (Class Preference)2 |
| 16,910,633 | ||
Total Germany |
| 16,910,633 | |||
Total Preferred Stocks (Cost $18,873,326) |
| 16,910,633 |
The accompanying notes are an integral part of these financial statements.
8 |
BBH PARTNER FUND – INTERNATIONAL EQUITY |
PORTFOLIO OF INVESTMENTS (continued) April 30, 2024 (unaudited) |
Shares/ | Value | ||||
WARRANTS (0.0%) |
| ||||
CANADA (0.0%) |
| ||||
18,143 | Constellation Software Inc., expires 03/31/20401,3 | $ | 0 | ||
Total Canada |
| 0 | |||
Total Warrants (Cost $0) |
| 0 |
TOTAL INVESTMENTS (Cost $1,655,763,769)4 | 98.0 | % | $ | 2,030,268,864 | ||||
CASH AND OTHER ASSETS IN EXCESS OF LIABILITIES | 2.0 | % |
| 40,436,862 | ||||
NET ASSETS | 100.00 | % | $ | 2,070,705,726 |
____________
1 Non-income producing security.
2 Security exempt from registration under Rule 144A of the Securities Act of 1933, as amended. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. Total market value of Rule 144A securities owned at April 30, 2024 was $16,910,633 or 0.8% of net assets.
3 Security that used significant unobservable inputs to determine fair value.
4 The aggregate cost of investments and derivatives for federal income tax purposes is $1,655,763,769, the aggregate gross unrealized appreciation is $469,517,563 and the aggregate gross unrealized depreciation is $95,012,468, resulting in net unrealized appreciation of $374,505,095.
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.
F I N A N C I A L S T A T E M E N T S A P R I L 3 0, 2 0 2 4 | 9 |
BBH PARTNER FUND – INTERNATIONAL EQUITY |
PORTFOLIO OF INVESTMENTS (continued) April 30, 2024 (unaudited) |
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 close of the securities’
The accompanying notes are an integral part of these financial statements.
10 |
BBH PARTNER FUND – INTERNATIONAL EQUITY |
PORTFOLIO OF INVESTMENTS (continued) April 30, 2024 (unaudited) |
primary markets and are, therefore, fair valued according to procedures adopted by the Board of Trustees. As Level 2 financial assets include positions that are not traded in active markets and/or are subject to transfer restrictions, valuations may be adjusted to reflect illiquidity and/or non-transferability, which are generally based on available market information.
Financial assets classified within Level 3 have significant unobservable inputs, as they trade infrequently. Level 3 financial assets include private equity and certain corporate debt securities.
Because of the inherent uncertainties of valuation, the values reflected in the financial statements may materially differ from the value received upon the actual sale of those investments.
The accompanying notes are an integral part of these financial statements.
F I N A N C I A L S T A T E M E N T S A P R I L 3 0, 2 0 2 4 | 11 |
BBH PARTNER FUND – INTERNATIONAL EQUITY |
PORTFOLIO OF INVESTMENTS (continued) April 30, 2024 (unaudited) |
The following table summarizes the valuation of the Fund’s investments by the above fair value hierarchy levels as of April 30, 2024.
Investments, at value | Unadjusted | Significant | Significant | Balance as of | ||||||||
Common Stock: |
|
|
|
| ||||||||
Canada | $ | 158,025,601 | $ | – | $ | — | $ | 158,025,601 | ||||
Cayman Islands |
| — |
| 8,750,034 |
| — |
| 8,750,034 | ||||
Denmark |
| — |
| 29,906,791 |
| — |
| 29,906,791 | ||||
Finland |
| — |
| 26,497,804 |
| — |
| 26,497,804 | ||||
France |
| — |
| 345,506,441 |
| — |
| 345,506,441 | ||||
Germany |
| — |
| 173,499,460 |
| — |
| 173,499,460 | ||||
Hong Kong |
| — |
| 24,427,946 |
| — |
| 24,427,946 | ||||
India |
| 26,881,920 |
| — |
| — |
| 26,881,920 | ||||
Ireland |
| 154,086,527 |
| 26,286,486 |
| — |
| 180,373,013 | ||||
Japan |
| — |
| 217,602,955 |
| — |
| 217,602,955 | ||||
Jersey |
| — |
| 47,065,063 |
| — |
| 47,065,063 | ||||
Luxembourg |
| 12,654,575 |
| — |
| — |
| 12,654,575 | ||||
Netherlands |
| — |
| 126,387,480 |
| — |
| 126,387,480 | ||||
Singapore |
| — |
| 29,272,214 |
| — |
| 29,272,214 | ||||
South Korea |
| — |
| 52,325,507 |
| — |
| 52,325,507 | ||||
Spain |
| — |
| 29,745,492 |
| — |
| 29,745,492 | ||||
Sweden |
| — |
| 42,916,365 |
| — |
| 42,916,365 | ||||
Switzerland |
| — |
| 94,152,410 |
| — |
| 94,152,410 | ||||
Taiwan |
| 87,153,767 |
| 11,072,169 |
| — |
| 98,225,936 | ||||
United Kingdom |
| — |
| 213,178,631 |
| — |
| 213,178,631 | ||||
United States |
| 43,562,593 |
| — |
| — |
| 43,562,593 | ||||
Registered Investment Companies: |
|
|
|
| ||||||||
United States |
| 32,400,000 |
| — |
| — |
| 32,400,000 | ||||
Preferred Stocks: |
|
|
|
| ||||||||
Germany |
| — |
| 16,910,633 |
| — |
| 16,910,633 | ||||
Warrants: |
|
|
|
| ||||||||
Canada |
| — |
| — |
| 0 |
| 0 | ||||
Total Investments, at value | $ | 514,764,983 | $ | 1,515,503,881 | $ | 0 | $ | 2,030,268,864 |
The accompanying notes are an integral part of these financial statements.
12 |
BBH PARTNER FUND – INTERNATIONAL EQUITY |
PORTFOLIO OF INVESTMENTS (continued) April 30, 2024 (unaudited) |
The following is a reconciliation of assets for which significant unobservable inputs (Level 3) were used in determining fair value during the period ended April 30, 2024:
Warrants | |||
Balance as of October 31, 2023 | $ | 0 | |
Purchases |
| — | |
Sales/Paydowns |
| — | |
Realized gains/(losses) |
| — | |
Change in unrealized appreciation/(depreciation) |
| — | |
Amortization |
| — | |
Transfers from Level 3 |
| — | |
Transfers to Level 3 |
| 0 | |
Balance as of April 30, 2024 | $ | 0 |
The Fund investment classified as Level 3 was deemed to have no value as of April 30, 2024.
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 A P R I L 3 0, 2 0 2 4 | 13 |
BBH PARTNER FUND – INTERNATIONAL EQUITY |
STATEMENT OF ASSETS AND LIABILITIES April 30, 2024 (unaudited) |
ASSETS: |
| ||
Investments in securities, at value (Cost $1,655,763,769) | $ | 2,030,268,864 | |
Cash |
| 42,756,255 | |
Foreign currency at value (Cost $7,424) |
| 8,956 | |
Receivables for: |
| ||
Dividends |
| 6,610,735 | |
Investments sold |
| 2,533,725 | |
Shares sold |
| 736,100 | |
Interest from Custodian |
| 78,575 | |
Prepaid expenses |
| 13,765 | |
Total Assets |
| 2,083,006,975 | |
LIABILITIES: |
| ||
Payables for: |
| ||
Investments purchased |
| 10,796,449 | |
Investment advisory and administrative fees |
| 1,040,048 | |
Shares redeemed |
| 215,900 | |
Custody and fund accounting fees |
| 176,546 | |
Professional fees |
| 52,956 | |
Transfer agent fees |
| 6,725 | |
Board of Trustees’ fees |
| 547 | |
Accrued expenses and other liabilities |
| 12,078 | |
Total Liabilities |
| 12,301,249 | |
NET ASSETS | $ | 2,070,705,726 | |
| |||
Net Assets Consist of: |
| ||
Paid-in capital | $ | 2,029,578,083 | |
Retained earnings |
| 41,127,643 | |
Net Assets | $ | 2,070,705,726 | |
| |||
NET ASSET VALUE AND OFFERING PRICE PER SHARE |
| ||
CLASS I SHARES |
| ||
($2,070,705,726 ÷ 130,335,337 shares outstanding) | $ | 15.89 |
The accompanying notes are an integral part of these financial statements.
14 |
BBH PARTNER FUND – INTERNATIONAL EQUITY |
STATEMENT OF OPERATIONS For the six months ended April 30, 2024 (unaudited) |
NET INVESTMENT INCOME: |
| ||
Income: |
| ||
Dividends (net of foreign withholding taxes of $1,511,224) | $ | 15,676,462 | |
Interest income |
| 6,614 | |
Interest income from Custodian |
| 492,007 | |
Other income |
| 30,480 | |
Total Income |
| 16,205,563 | |
| |||
Expenses: |
| ||
Investment advisory and administrative fees |
| 6,238,227 | |
Custody and fund accounting fees |
| 141,236 | |
Board of Trustees’ fees |
| 48,967 | |
Professional fees |
| 38,377 | |
Transfer agent fees |
| 20,538 | |
Miscellaneous expenses |
| 40,399 | |
Total Expenses |
| 6,527,744 | |
Net Investment Income |
| 9,677,819 | |
| |||
NET REALIZED AND UNREALIZED GAIN: |
| ||
Net realized gain on investments in securities |
| 70,725,756 | |
Net realized gain on foreign exchange translations |
| 57,712 | |
Net realized gain on investments in securities and foreign exchange translations |
| 70,783,468 | |
Net change in unrealized appreciation/(depreciation) on investments in securities |
| 298,984,170 | |
Net change in unrealized appreciation/(depreciation) on foreign currency transactions and translations |
| (78,138) | |
Net change in unrealized appreciation/(depreciation) on investments in securities, foreign currency transactions and translations |
| 298,906,032 | |
Net Realized and Unrealized Gain |
| 369,689,500 | |
Net Increase in Net Assets Resulting from Operations | $ | 379,367,319 |
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 A P R I L 3 0, 2 0 2 4 | 15 |
BBH PARTNER FUND – INTERNATIONAL EQUITY |
STATEMENTS OF CHANGES IN NET ASSETS |
For the | For the | |||||||
INCREASE/(DECREASE) IN NET ASSETS FROM: |
|
|
|
| ||||
Operations: |
|
|
|
| ||||
Net investment income | $ | 9,677,819 |
| $ | 18,135,247 |
| ||
Net realized gain/(loss) on investments in securities and foreign exchange translations |
| 70,783,468 |
|
| (199,953,321 | ) | ||
Net change in unrealized appreciation/(depreciation) on investments in securities, foreign currency transactions and translations |
| 298,906,032 |
|
| 306,291,936 |
| ||
Net increase in net assets resulting from operations |
| 379,367,319 |
|
| 124,473,862 |
| ||
|
|
|
| |||||
Dividends and distributions declared: |
|
|
|
| ||||
Class I |
| (18,885,138 | ) |
| (10,360,602 | ) | ||
|
|
|
| |||||
Share transactions: |
|
|
|
| ||||
Proceeds from sales of shares |
| 71,870,622 |
|
| 135,165,601 |
| ||
Net asset value of shares issued to shareholders for reinvestment of dividends and distributions |
| 495,649 |
|
| 276,268 |
| ||
Cost of shares redeemed |
| (219,365,176 | ) |
| (442,745,407 | ) | ||
Net decrease in net assets resulting from share transactions |
| (146,998,905 | ) |
| (307,303,538) |
| ||
Total increase/(decrease) in net assets |
| 213,483,276 |
|
| (193,190,278 | ) | ||
NET ASSETS: |
|
|
|
| ||||
Beginning of period/year |
| 1,857,222,450 |
|
| 2,050,412,728 |
| ||
End of period/year | $ | 2,070,705,726 |
| $ | 1,857,222,450 |
|
The accompanying notes are an integral part of these financial statements.
16 |
BBH PARTNER FUND – INTERNATIONAL EQUITY |
FINANCIAL HIGHLIGHTS Selected per share data and ratios for a Class I share outstanding throughout each period/year. |
For the |
| |||||||||||||||||||||||
2023 | 2022 | 2021 | 2020 | 2019 | ||||||||||||||||||||
Net asset value, beginning of | $ | 13.28 |
| $ | 12.68 |
| $ | 21.10 |
| $ | 17.73 |
| $ | 16.15 |
| $ | 14.90 |
| ||||||
Income from investment operations: |
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
Net investment income1 |
| 0.07 |
|
| 0.12 |
|
| 0.07 |
|
| 0.14 |
|
| 0.04 |
|
| 0.10 |
| ||||||
Net realized and unrealized |
| 2.68 |
|
| 0.55 |
|
| (6.14 | ) |
| 3.79 |
|
| 1.81 |
|
| 2.19 |
| ||||||
Total income/(loss) from investment operations |
| 2.75 |
|
| 0.67 |
|
| (6.07 | ) |
| 3.93 |
|
| 1.85 |
|
| 2.29 |
| ||||||
Dividends and distributions to shareholders: |
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
From net investment income |
| (0.14 | ) |
| (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 |
| (0.14 | ) |
| (0.07 | ) |
| (2.35 | ) |
| (0.56 | ) |
| (0.27 | ) |
| (1.04 | ) | ||||||
Net asset value, end of period/year | $ | 15.89 |
| $ | 13.28 |
| $ | 12.68 |
| $ | 21.10 |
| $ | 17.73 |
| $ | 16.15 |
| ||||||
Total return2 |
| 20.73 | %3 |
| 5.24 | % |
| (31.91 | )% |
| 22.38 | % |
| 11.59 | % |
| 16.92 | % | ||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Ratios/Supplemental data: |
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
Net assets, end of period/year | $ | 2,071 |
| $ | 1,857 |
| $ | 2,050 |
| $ | 2,718 |
| $ | 2,029 |
| $ | 1,790 |
| ||||||
Ratio of expenses to average net assets before reductions |
| 0.63 | %4 |
| 0.64 | % |
| 0.68 | % |
| 0.68 | % |
| 0.69 | % |
| 0.71 | % | ||||||
Expense offset arrangement |
| — | % |
| — | % |
| — | % |
| — | % |
| — | % |
| (0.01 | )% | ||||||
Ratio of expenses to average net assets after reductions |
| 0.63 | %4 |
| 0.64 | % |
| 0.68 | % |
| 0.68 | % |
| 0.69 | % |
| 0.70 | % | ||||||
Ratio of net investment income to average net assets |
| 0.93 | %4 |
| 0.85 | % |
| 0.45 | % |
| 0.65 | % |
| 0.22 | % |
| 0.66 | % | ||||||
Portfolio turnover rate |
| 37 | %3 |
| 65 | % |
| 52 | % |
| 86 | % |
| 77 | % |
| 135 | % | ||||||
|
|
|
|
|
|
|
|
|
|
|
|
____________
1 Calculated using average shares outstanding for the period/year.
2 Assumes the reinvestment of distributions.
3 Not annualized.
4 Annualized.
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 A P R I L 3 0, 2 0 2 4 | 17 |
BBH PARTNER FUND – INTERNATIONAL EQUITY |
NOTES TO FINANCIAL STATEMENTS April 30, 2024 (unaudited) |
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 April 30, 2024, 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 the supervision and oversight of the determination of 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
18 |
BBH PARTNER FUND – INTERNATIONAL EQUITY |
NOTES TO FINANCIAL STATEMENTS (continued) April 30, 2024 (unaudited) |
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 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 six months ended April 30, 2024, 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.
F I N A N C I A L S T A T E M E N T S A P R I L 3 0, 2 0 2 4 | 19 |
BBH PARTNER FUND – INTERNATIONAL EQUITY |
NOTES TO FINANCIAL STATEMENTS (continued) April 30, 2024 (unaudited) |
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 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.
20 |
BBH PARTNER FUND – INTERNATIONAL EQUITY |
NOTES TO FINANCIAL STATEMENTS (continued) April 30, 2024 (unaudited) |
It is the Trust’s policy to comply with the requirements of the Internal Revenue Code (the “Code”) applicable to regulated investment companies and to distribute substantially all of its taxable income to its shareholders. Accordingly, no federal income tax provision is required. The Fund files a tax return annually using tax accounting methods required under provisions of the Code, which may differ from GAAP, which is the basis on which these financial statements are prepared. Accordingly, the amount of net investment income and net realized gain reported in these financial statements may differ from that reported on the Fund’s tax return, due to certain book-to-tax timing differences such as losses deferred due to “wash sale” transactions and utilization of capital loss carryforwards. These differences may result in temporary over-distributions for financial statement purposes and are classified as distributions in excess of accumulated net realized gains or net investment income. These distributions do not constitute a return of capital. Permanent differences are reclassified between paid-in capital and retained earnings/(accumulated deficit) within the Statement of Assets and Liabilities based upon their tax classification. As such, the character of distributions to shareholders reported in the Financial Highlights table may differ from that reported to shareholders on Form 1099-DIV.
The Fund is subject to the provisions of Accounting Standards Codification 740 Income Taxes (“ASC 740”). ASC 740 sets forth a minimum threshold for financial statement recognition of the benefit of a tax position taken or expected to be taken in a tax return. The Fund did not have any unrecognized tax benefits as of October 31, 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 six months ended April 30, 2024, 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 $18,885,138 to Class I shares during the six months ended April 30, 2024. In addition, the Fund designated a portion of the payment made to redeeming shareholders as a distribution for income tax purposes.
F I N A N C I A L S T A T E M E N T S A P R I L 3 0, 2 0 2 4 | 21 |
BBH PARTNER FUND – INTERNATIONAL EQUITY |
NOTES TO FINANCIAL STATEMENTS (continued) April 30, 2024 (unaudited) |
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) 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) |
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.
22 |
BBH PARTNER FUND – INTERNATIONAL EQUITY |
NOTES TO FINANCIAL STATEMENTS (continued) April 30, 2024 (unaudited) |
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. 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. 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 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 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 six months ended April 30, 2024, the Fund incurred $6,238,227 for services under the Agreement.
B. Custody and Fund Accounting Fees. BBH acts as a custodian and fund accountant and receives custody and fund accounting fees from the Fund calculated daily and 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 based partially on asset values and partially on individual fund transactions. The fund accounting fee is primarily an asset-based fee calculated at 0.325 basis points per annum of the Fund’s net asset value. For the six months ended April 30, 2024, the Fund incurred $141,236 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 six months ended April 30, 2024 was $492,007. 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 six months ended April 30, 2024, was $18,671. 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 six months ended April 30, 2024, the Fund incurred $48,967 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.
F I N A N C I A L S T A T E M E N T S A P R I L 3 0, 2 0 2 4 | 23 |
BBH PARTNER FUND – INTERNATIONAL EQUITY |
NOTES TO FINANCIAL STATEMENTS (continued) April 30, 2024 (unaudited) |
4. Investment Transactions. For the six months ended April 30, 2024, the cost of purchases and the proceeds of sales of investment securities, other than short-term investments, were $750,881,649 and $890,596,431, 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 six months ended | For the year ended | |||||||||||||||
Shares | Dollars | Shares | Dollars | |||||||||||||
Class I |
|
|
|
|
|
| ||||||||||
Shares sold | 4,589,418 |
| $ | 71,870,622 |
| 9,345,985 |
| $ | 135,165,601 |
| ||||||
Shares issued in connection with reinvestments of dividends | 32,587 |
|
| 495,649 |
| 19,947 |
|
| 276,268 |
| ||||||
Shares redeemed | (14,147,195 | ) |
| (219,365,176 | ) | (31,157,761 | ) |
| (442,745,407 | ) | ||||||
Net decrease | (9,525,190 | ) | $ | (146,998,905 | ) | (21,791,829 | ) | $ | (307,303,538 | ) |
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
24 |
BBH PARTNER FUND – INTERNATIONAL EQUITY |
NOTES TO FINANCIAL STATEMENTS (continued) April 30, 2024 (unaudited) |
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). 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.
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 April 30, 2024 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 A P R I L 3 0, 2 0 2 4 | 25 |
BBH PARTNER FUND – INTERNATIONAL EQUITY |
DISCLOSURE OF FUND EXPENSES April 30, 2024 (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 (November 1, 2023 to April 30, 2024).
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.
26 |
BBH PARTNER FUND – INTERNATIONAL EQUITY |
DISCLOSURE OF FUND EXPENSES (continued) April 30, 2024 (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 | $1,207 | $3.46 | |||
Hypothetical2 | $1,000 | $1,022 | $3.17 |
____________
1 Expenses are equal to the Fund’s annualized net expense ratio of 0.63% for I shares, multiplied by the average account value over the period, multiplied by 182/366 (to reflect the one-half year period).
2 Assumes a return of 5% before expenses. For the purposes of the calculation, the applicable annualized expenses ratio for each class of shares is subtracted from the assumed return before expenses.
F I N A N C I A L S T A T E M E N T S A P R I L 3 0, 2 0 2 4 | 27 |
BBH PARTNER FUND – INTERNATIONAL EQUITY |
DISCLOSURE OF ADVISOR SELECTION April 30, 2024 (unaudited) |
Investment Advisory and Administrative Services and Sub-Advisory Agreements Approval
The 1940 Act requires that a fund’s investment advisory agreements must be approved both by a fund’s board of trustees and by a majority of the trustees who are not parties to the investment advisory agreements or “interested persons” of any party (“Independent Trustees”), cast in person at a meeting called for the purpose of voting on such approval.
The Board, a majority of which is comprised of Independent Trustees, held meetings on November 16, 2023 and December 12, 2023, to consider whether to renew the combined Amended and Restated Investment Advisory and Administrative Services Agreement (the “Advisory Agreement”) between the Trust and the Investment Adviser with respect to the existing funds in the Trust, including the Fund. At these meetings, the Board also considered the renewal of the sub-advisory agreement (the “Sub-Advisory” and, together with the Advisory Agreement, the “Agreements”) between the Investment Adviser and Select Equity Group, L.P. (“Select Equity Group” or the “Sub-Adviser”). At the December 12, 2023 meeting, the Board voted to approve the renewal of the Agreements with respect to the Fund for an additional one-year term. In doing so, the Board determined that the terms of the Agreements were fair and reasonable in the best interest of the Fund and its shareholders, and that it had received sufficient information to make an informed business decision with respect to the continuation of the Agreements. The Board had reviewed and approved the initial sub-advisory agreement between the Investment Adviser and a second sub-adviser, Trinity Street Asset Management, in July 2023. That agreement was not renewed as it was still in its initial two years period.
Both in the meetings specifically held to address the continuance of the Agreements and at other meetings over the course of the year, the Board requested, received and assessed a variety of materials provided by the Investment Adviser, Sub-Adviser and BBH, including, among other things, information about the nature, extent and quality of the services provided to the Fund by the Investment Adviser, the Sub-Adviser and BBH, including investment management and administrative, the oversight of Fund service providers, marketing, risk oversight, compliance, and the ability to meet applicable legal and regulatory requirements.
The Board also received comparative performance and fee and expense information for the Fund prepared by Broadridge Financial Solutions, Inc. (“Broadridge”) using data from Lipper Inc., an independent provider of investment company data (“Lipper Report”). The Board reviewed this report with Broadridge, Fund Counsel and BBH. 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.
In approving the continuation of the Agreements, the Board considered: (a) the nature, extent and quality of services provided by the Investment Adviser and Sub-Adviser; (b) the investment performance of the Fund; (c) the advisory fee and the cost of the services and profits to be realized by the Investment Adviser from its relationship with the Fund; (d) the Fund’s costs to investors compared to the costs of comparative funds and performance compared to the relevant performance of comparative funds; (e) the sharing of potential
28 |
BBH PARTNER FUND – INTERNATIONAL EQUITY |
DISCLOSURE OF ADVISOR SELECTION (continued) April 30, 2024 (unaudited) |
economies of scale; (f) fall-out benefits to the Investment Adviser as a result of its relationship with the Fund; and (g) other factors deemed relevant by the Board. The following is a summary of the factors the Board considered in making its determination to approve the continuance of the Agreements. No single factor reviewed by the Board was identified as the principal factor in determining whether to approve the Advisory Agreement, and individual Trustees may have given different weight to various factors. The Board reviewed these factors with Fund Counsel. The Board concluded that the fees paid by the Fund to the Investment Adviser and Select Equity Group were reasonable based on the comparative performance, expense information, the cost of the services provided, and the profits realized by the Investment Adviser.
Nature, Extent and Quality of Services
The Board noted that, under the Advisory Agreement and with respect to the Fund, the Investment Adviser, subject to the supervision of the Board, is responsible for providing administrative services and overseeing the investment advisory services provided to the Fund under the same fee structure. Pursuant to the Sub-Advisory Agreement, the Sub-Adviser, subject to the supervision of the Investment Adviser and the Board is responsible for providing a continuous investment program and making purchases and sales of portfolio securities consistent with the Fund’s investment objective and policies.
The Board received and considered information during the December 12, 2023 meeting, and over the course of the previous year, regarding the nature, extent and quality of services provided to the Fund by the Investment Adviser including: the supervision of the Sub-Adviser, supervision of operations and compliance and regulatory filings, disclosures to Fund shareholders, general oversight of service providers, organizing Board meetings and preparing the materials for such Board meetings, assisting the Board (including the Independent Trustees in their capacity as Trustees), legal and Chief Compliance Officer services for the Trust, and other services necessary for the operation of the Fund. The Board considered the resources of the Investment Adviser and BBH, as a whole, dedicated to the Fund noting that, pursuant to separate agreements, BBH also provides custody and fund accounting services to the Fund. The Board considered the depth and range of services provided pursuant to the Agreement, noting that the Investment Adviser also coordinates the provision of services to the Fund by affiliated and nonaffiliated service providers.
The Board considered the scope and quality of services provided by the Investment Adviser under the Advisory Agreement. The Board also considered the policies and practices followed by BBH and the Investment Adviser. The Board noted that during the course of its regular meetings it received reports on each of the foregoing topics. The Board concluded that, overall, they were satisfied with the nature, extent and quality of the investment advisory and administrative services provided, and expected to be provided, to the Fund pursuant to the Agreements. The Board received and considered information, during the meeting held on December 12, 2023, and over the course of the year, regarding the nature, extent and quality of services provided to the Fund by the Sub-Adviser, particularly portfolio management in light of the narrower scope of services performed by the Sub-Adviser. The Board also considered brokerage policies and practices and the standards applied in seeking best execution. The Board reviewed the qualifications of the key investment personnel primarily responsible for the day-to-day portfolio management of the Fund.
F I N A N C I A L S T A T E M E N T S A P R I L 3 0, 2 0 2 4 | 29 |
BBH PARTNER FUND – INTERNATIONAL EQUITY |
DISCLOSURE OF ADVISOR SELECTION (continued) April 30, 2024 (unaudited) |
Fund Performance
At the November 16, 2023 and December 12, 2023 meetings, and throughout the year, the Board received and considered performance information for the Fund provided by BBH. The Board considered the Fund’s performance relative to a peer category of other mutual funds in a report compiled by Broadridge. As part of this review, the Trustees considered the composition of the peer category, selection criteria and reputation of Broadridge who prepared the peer category analysis. The Board reviewed and discussed, with both BBH and Broadridge, the report’s findings and discussed the positioning of the Fund relative to the selected peer category.
The Board considered short-term and long-term investment performance for the Fund over various periods of time as compared to a selection of peer funds, noting the Fund’s below average performance in the 1-, 2-, 3-, 4-, 5- and 10-year periods ended September 30, 2023. They further noted the Fund’s historical track record of positive absolute returns was consistent with the investment approach communicated to investors. In evaluating the performance of the Fund, the Board considered the addition of the new sub-adviser, the risk expectations for the Fund as well as the level of Fund performance in the context of Fund expenses and the Investment Adviser’s profitability.
Costs of Services Provided and Profitability
The Board considered the fee rates paid by the Fund to the Investment Adviser and BBH in light of the nature, extent and quality of the services provided to the Fund. The Board considered the depth and range of services provided pursuant to the Advisory Agreement, noting that the Investment Adviser also coordinates the provision of services to the Fund by affiliated and nonaffiliated service providers. The Board received and considered information comparing the Fund’s combined investment advisory and administration fee and the Fund’s net operating expenses with those of other comparable mutual funds, such peer group and comparisons having been selected and calculated by Broadridge, noting that the Fund compared favorably to the selected peer-set. The Board recognized that it is difficult to make comparisons of the fee rate, or of combined advisory and administration fees, because there are variations in the services that are included in the fees paid by other funds. The Board concluded that the advisory and administration fee appeared to be both reasonable in light of the services rendered and the result of arm’s length negotiations.
The Board also considered the fees paid to the Sub-Adviser for their services to the Fund. The compensation paid to the Sub-Adviser is paid by the Investment Adviser, not the Fund directly, and, accordingly, the retention of the Sub-Adviser does not increase the fees or expenses otherwise incurred by the Fund’s shareholders.
With regard to profitability, the Trustees considered the compensation flowing to the Adviser and BBH, directly or indirectly, and to the Sub-Adviser. The Board reviewed profitability data for the Fund using data from October 1, 2022 through September 30, 2023 for both the Investment Adviser and BBH. The data also included the effect of revenue generated by the custody and fund accounting and administration fees paid by the Fund to BBH and corresponding expenses. The Board conducted a detailed review of the allocation methods used in preparing the profitability data.
30 |
BBH PARTNER FUND – INTERNATIONAL EQUITY |
DISCLOSURE OF ADVISOR SELECTION (continued) April 30, 2024 (unaudited) |
The Board also considered the effect of fall-out benefits on the expenses of the Investment Adviser and BBH such as the increased visibility of BBH’s investment management business due to the distribution of the Funds. The Board focused on profitability of the Investment Adviser’s and BBH’s relationships with the Fund before taxes and distribution expenses. The Board concluded that neither the Investment Adviser and BBH’s nor the Sub-Adviser’s profitability was excessive in light of the nature, extent and quality of services provided to the Fund. The Board considered other benefits received by BBH, the Investment Adviser, and the Sub-Adviser, as applicable, as a result of their relationships with the Fund. These other benefits include proprietary research received from brokers that execute the Fund’s purchases and sales of securities and fees received for being the Fund’s administer, custodian and fund accounting agent. In light of the costs of providing services pursuant to the Advisory Agreement as well as the Investment Adviser and BBH’s commitment to the Fund, the ancillary benefits that the Investment Adviser and BBH received were considered reasonable.
Economies of Scale
The Board also considered the existence of economies of scale and whether those economies are passed along to the Fund’s shareholders through a graduated investment advisory fee schedule or other means, including any fee waivers by the Investment Adviser and BBH. The Board considered the fee schedule for the Fund, noting the existence of a graduated investment advisory fee. Based on information they had provided over many years, the Board observed that in the mutual fund industry as a whole, as well as among funds similar to the Fund, there appeared to be no uniformity or pattern in the fees and asset levels at which breakpoints apply. In light of the Fund’s current size and expense structure, the Board concluded that the current breakpoints for the Fund were reasonable. The Board concluded that the fees paid by the Fund to the Investment Adviser, and from the Investment Adviser to the Sub-Adviser, were reasonable based on the comparative performance, expense information, the cost of the services comparative performance, expense information, the cost of the services provided and the profits to the realized by the Investment Adviser.
F I N A N C I A L S T A T E M E N T S A P R I L 3 0, 2 0 2 4 | 31 |
BBH PARTNER FUND – INTERNATIONAL EQUITY |
CONFLICTS OF INTEREST April 30, 2024 (unaudited) |
BBH&Co., 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&Co., 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&Co. for which they will pay to BBH&Co. customary fees and expenses that will not be shared with the Funds.
The Investment Adviser and the Sub-advisers have adopted and implemented policies and procedures that seek to manage conflicts of interest. Pursuant to such policies and procedures, the Investment Adviser and each Sub-adviser monitor a variety of areas, including compliance with fund investment guidelines, the investment in only those securities that have been approved for purchase, and compliance with their respective Code of Ethics.
The Trust also manages these conflicts of interest. For example, the Trust has designated a CCO and has adopted and implemented policies and procedures designed to manage the conflicts identified below and other conflicts that may arise in the course of the Funds’ operations in such a way as to safeguard the Funds from being negatively affected as a result of any such potential conflicts. From time to time, the Trustees receive reports from the Investment Adviser, the Sub-advisers 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&Co., the Investment Adviser and Sub-advisers can face in the operation of their respective investment management services. This section is not, and is not intended to be, a complete enumeration or explanation of all of the potential conflicts of interest that may arise. The Investment Adviser, the Sub-advisers 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&Co., the Investment Adviser, and the Sub-advisers manage funds and accounts of clients other than the Funds (“Other Clients”). In general, BBH&Co., the Investment Adviser, and the Sub-advisers face conflicts of interest when they render investment advisory services to different clients and, from time to time, provide dissimilar investment advice to different clients. Investment decisions will not necessarily be made in parallel among the Funds and Other Clients. Investments made by the Funds do not, and are not intended to, replicate the investments, or the investment methods and strategies, of Other Clients. Accordingly, such Other Clients 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
32 |
BBH PARTNER FUND – INTERNATIONAL EQUITY |
CONFLICTS OF INTEREST (continued) April 30, 2024 (unaudited) |
by the Investment Adviser or Sub-advisers could have different investment strategies that, at times, might conflict with one another to the possible detriment of the Funds. From time to time, the Investment Adviser and Sub-advisers, sponsor and with other investment pools and accounts which engage in the same or similar businesses as the Funds using the same or similar investment strategies. To the extent that the same investment opportunities might be desirable for more than one account or fund, possible conflicts could arise in determining how to allocate them because the Investment Adviser or Sub-advisers may have an incentive to allocate investment opportunities to certain accounts or funds. However, BBH&Co. 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&Co. provides administrative, custody, shareholder servicing and fund accounting services to the Funds. BBH&Co. 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&Co. may have an incentive to agree to higher fees than it would in the case of unaffiliated providers. BBH&Co. acting in its capacity as the Funds’ administrator is the primary valuation agent of the Funds. BBH&Co. 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&Co. and its affiliates may have an incentive to seek to overvalue certain assets.
Aggregation. Potential conflicts of interest also arise with the aggregation of trade orders. Purchases and sales of securities for the Funds may be aggregated with orders for other client accounts managed by the Sub-advisers. The Sub-advisers, 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 A P R I L 3 0, 2 0 2 4 | 33 |
BBH PARTNER FUND – INTERNATIONAL EQUITY |
CONFLICTS OF INTEREST (continued) April 30, 2024 (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&Co., the Investment Adviser may (but is not required to) effect purchases and sales between BBH&Co., the Investment Adviser clients (“cross trades”), including the Funds, if BBH&Co., the Investment Adviser or a Fund’s Sub-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&Co., the Investment Adviser and/or a Fund’s Sub-adviser may have a potentially conflicting division of loyalties and responsibilities to the parties in such transactions.
Soft Dollars. The Investment Adviser may direct brokerage transactions and/or payment of a portion of client commissions (“soft dollars”) to specific brokers or dealers or other providers to pay for research or other appropriate services which provide, in the Investment Adviser’s view, appropriate assistance in the investment decision-making process (including with respect to futures, fixed price offerings and over-the-counter transactions). The use of a broker that provides research and securities transaction services may result in a higher commission than that offered by a broker who does not provide such services. The Investment Adviser will determine in good faith whether the amount of commission is reasonable in relation to the value of research and services provided and whether the services provide lawful and appropriate assistance in its investment decision-making responsibilities.
Research or other services obtained in this manner may be used in servicing any or all of the Funds and other accounts managed by the Investment Adviser, including in connection with accounts that do not pay commissions to the broker related to the research or other service arrangements. Such products and services may disproportionately benefit other client accounts relative to the Funds based on the amount of brokerage commissions paid by the Funds and such other accounts. To the extent that a Sub-adviser uses soft dollars, it will not have to pay for those products and services itself.
BBH&Co. may receive research that is bundled with the trade execution, clearing, and/or settlement services provided by a particular broker-dealer. To the extent that a Sub-adviser receives research on this basis, many of the same conflicts related to traditional soft dollars may exist. For example, the research effectively will be paid by client commissions that also will be used to pay for the execution, clearing, and settlement services provided by the broker-dealer and will not be paid by the Sub-adviser.
Arrangements regarding compensation and delegation of responsibility may create conflicts relating to selection of brokers or dealers to execute Fund portfolio trades and/or specific uses of commissions from Fund portfolio trades, administration of investment advice and valuation of securities.
Investments in BBH Funds. From time to time BBH&Co. may invest a portion of the assets of its discretionary investment advisory clients in the Funds. That investment by BBH&Co. on behalf of its discretionary investment advisory clients in the Funds may be significant at times.
34 |
BBH PARTNER FUND – INTERNATIONAL EQUITY |
CONFLICTS OF INTEREST (continued) April 30, 2024 (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&Co. may limit its selection to funds managed by BBH&Co. or the Investment Adviser. BBH&Co. 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&Co., 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&Co. 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&Co. 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&Co. to be unreliable, the Funds’ investments will be valued at fair value by BBH&Co. pursuant to procedures adopted by the Funds’ Board. When determining an asset’s “fair value,” BBH&Co. 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&Co. deems relevant at the time of the determination and may be based on analytical values determined by BBH&Co. 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&Co. (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&Co. may enter into advisory and/or referral arrangements with third parties. Such arrangements may include compensation paid by BBH&Co. to the third party. BBH&Co. may pay a solicitation fee for referrals and/or advisory or incentive fees. BBH&Co. may benefit from increased amounts of assets under management.
Personal Trading. BBH&Co., 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&Co. Partners and employees. The policy and procedures are intended to prevent BBH&Co. Partners and employees from trading in the same securities as the Funds. However, BBH&Co., including the Investment Adviser, has implemented
F I N A N C I A L S T A T E M E N T S A P R I L 3 0, 2 0 2 4 | 35 |
BBH PARTNER FUND – INTERNATIONAL EQUITY |
CONFLICTS OF INTEREST (continued) April 30, 2024 (unaudited) |
policies and procedures concerning personal trading by BBH&Co. Partners and employees. The policies and procedures are intended to prevent BBH&Co. 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&Co., 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&Co., 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&Co. Partners and employees. BBH&Co., including the Investment Adviser, has implemented policies and procedures concerning gifts and entertainment to mitigate any impact on the judgment of BBH&Co. Partners and employees.
36 |
BBH PARTNER FUND – INTERNATIONAL EQUITY |
OPERATION AND EFFECTIVENESS OF THE FUND’S LIQUIDITY RISK MANAGEMENT PROGRAM April 30, 2024 (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 each Fund’s liquidity risk management program (the “Program”). The Board met on March 6, 2024 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, 2023 through January 31, 2024 (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 Funds classified each of their 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 each Fund’s investments based on criteria in each Fund’s Program. During the Reporting Period, no Fund held 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 no Fund has approached the 50% threshold, has made the determination that it is not necessary to assign a Highly Liquid Investment Minimum to any of the Funds 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 each Fund’s investment strategy is appropriate for an open-end fund structure with a focus on Funds with more significant and consistent holdings of less liquid and illiquid assets and factored a Fund’s concentration in an issuer into the liquidity classification methodology by taking issuer position sizes into account.
F I N A N C I A L S T A T E M E N T S A P R I L 3 0, 2 0 2 4 | 37 |
BBH PARTNER FUND – INTERNATIONAL EQUITY |
OPERATION AND EFFECTIVENESS OF THE FUND’S LIQUIDITY RISK MANAGEMENT PROGRAM (continued) April 30, 2024 (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 each Fund’s reasonably anticipated trading size. The Program Administrator also took into consideration other factors such as shareholder ownership concentration, applicable distribution channels and the degree of certainty associated with a Fund’s short-term and long-term cash flow projections.
Holdings of cash and cash equivalents. The Program Administrator considered the degree to which each Fund held cash and cash equivalents as a component of each Fund’s ability to meet redemption requests.
There were no material changes to the Program during the Reporting Period. The Program Administrator has informed the Board that it believes that the Fund’s Program is adequately designed, has been implemented as intended, and has operated effectively since its implementation. No material exceptions have been noted since the implementation of the Program, and there were no liquidity events that impacted the Fund or its ability to meet redemption requests on a timely basis during the Reporting Period.
38 |
Administrator Distributor Shareholder Servicing Agent To obtain information or make shareholder inquiries: | Investment Adviser |
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 |
Semi-Annual Report
APRIL 30, 2024
BBH Limited Duration Fund
BBH LIMITED DURATION FUND |
PORTFOLIO ALLOCATION April 30, 2024 (unaudited) |
BREAKDOWN BY SECURITY TYPE
U.S. $ Value | Percent of | |||||
Asset Backed Securities | $ | 1,583,948,731 | 21.9 | % | ||
Commercial Mortgage Backed Securities |
| 430,859,580 | 6.0 |
| ||
Corporate Bonds |
| 3,139,574,551 | 43.5 |
| ||
Loan Participations and Assignments |
| 856,241,515 | 11.9 |
| ||
Municipal Bonds |
| 30,297,301 | 0.4 |
| ||
Residential Mortgage Backed Securities |
| 19,487,634 | 0.3 |
| ||
U.S. Government Agency Obligations |
| 67,653,646 | 0.9 |
| ||
U.S. Treasury Bills |
| 1,020,423,431 | 14.1 |
| ||
U.S. Treasury Bonds and Notes |
| 14,540,299 | 0.2 |
| ||
Cash and Other Assets in Excess of Liabilities |
| 57,653,833 | 0.8 |
| ||
NET ASSETS | $ | 7,220,680,521 | 100.0 | % |
All data as of April 30, 2024. The BBH Limited Duration Fund’s (the “Fund”) 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.
2 |
BBH LIMITED DURATION FUND |
PORTFOLIO OF INVESTMENTS April 30, 2024 (unaudited) |
Principal | Maturity | Interest | Value | ||||||||
| ASSET BACKED SECURITIES (21.9%) |
|
| ||||||||
$ | 10,000,000 | AGL Core CLO 2, Ltd. 2019-2A (3-Month CME Term SOFR + 1.652%)1,2 | 04/20/32 | 6.976 | % | $ | 10,016,889 | ||||
| 9,114,335 | AIM Aviation Finance, Ltd. 2015-1A1 | 02/15/40 | 6.213 |
|
| 6,084,092 | ||||
| 7,555,000 | Aligned Data Centers Issuer LLC 2023-1A1 | 08/17/48 | 6.000 |
|
| 7,419,279 | ||||
| 4,571,246 | Amur Equipment Finance Receivables X LLC 2022-1A1 | 10/20/27 | 1.640 |
|
| 4,468,545 | ||||
| 7,002,172 | Amur Equipment Finance Receivables XII LLC 2023-1A1 | 12/20/29 | 6.090 |
|
| 7,023,232 | ||||
| 3,187,171 | ARI Fleet Lease Trust 2022-A1 | 01/15/31 | 3.120 |
|
| 3,169,721 | ||||
| 9,105,000 | ARI Fleet Lease Trust 2023-B1 | 07/15/32 | 6.050 |
|
| 9,131,412 | ||||
| 11,930,000 | Avis Budget Rental Car Funding AESOP LLC 2023-3A1 | 02/22/28 | 5.440 |
|
| 11,846,560 | ||||
| 9,500,000 | Avis Budget Rental Car Funding AESOP LLC 2023-7A1 | 08/21/28 | 5.900 |
|
| 9,529,287 | ||||
| 297,620 | Bankers Healthcare Group Securitization Trust 2020-A1 | 09/17/31 | 2.560 |
|
| 297,068 | ||||
| 10,458,575 | BHG Securitization Trust 2022-A1 | 02/20/35 | 1.710 |
|
| 10,300,333 | ||||
| 10,971,629 | BHG Securitization Trust 2023-A1 | 04/17/36 | 5.550 |
|
| 10,873,066 | ||||
| 7,625,929 | BHG Securitization Trust 2023-B1 | 12/17/36 | 6.920 |
|
| 7,734,445 | ||||
| 10,839,168 | BHG Securitization Trust 2024-1CON1 | 04/17/35 | 5.810 |
|
| 10,799,417 | ||||
| 12,410,000 | BlackRock Elbert CLO V LLC 5A (3-Month CME Term SOFR + 1.850%)1,2 | 06/15/34 | 7.179 |
|
| 12,412,122 | ||||
| 7,784,292 | Business Jet Securities LLC 2022-1A1 | 06/15/37 | 4.455 |
|
| 7,495,728 | ||||
| 44,170,000 | California Street CLO IX LP 2012-9A (3-Month CME Term SOFR + 1.362%)1,2 | 07/16/32 | 6.689 |
|
| 44,262,253 | ||||
| 29,280,000 | Carlyle US CLO, Ltd. 2019-2A (3-Month CME | 07/15/32 | 6.710 |
|
| 29,359,586 | ||||
| 20,392,581 | CARS-DB4 LP 2020-1A1 | 02/15/50 | 3.190 |
|
| 19,788,276 | ||||
| 10,113,383 | CARS-DB7 LP 2023-1A1 | 09/15/53 | 5.750 |
|
| 9,897,783 | ||||
| 8,085,000 | CCG Receivables Trust 2023-21 | 04/14/32 | 6.280 |
|
| 8,142,147 | ||||
| 22,918,037 | CF Hippolyta Issuer LLC 2020-11 | 07/15/60 | 1.690 |
|
| 21,481,502 | ||||
| 11,053,379 | Chesapeake Funding II LLC 2023-1A1 | 05/15/35 | 5.650 |
|
| 11,027,307 | ||||
| 8,205,687 | Chesapeake Funding II LLC 2023-2A1 | 10/15/35 | 6.160 |
|
| 8,239,933 | ||||
| 25,000,000 | Churchill MMSLF CLO-I LP 2021-2A (3-Month CME Term SOFR + 1.712%)1,2 | 10/01/32 | 7.018 |
|
| 25,005,617 | ||||
| 6,470,000 | Credit Acceptance Auto Loan Trust 2023-1A1 | 07/15/33 | 7.710 |
|
| 6,591,882 | ||||
| 11,645,000 | Daimler Trucks Retail Trust 2023-1 | 03/15/27 | 5.900 |
|
| 11,690,560 | ||||
| 12,445,000 | Deerpath Capital CLO, Ltd. 2022-1A (3-Month CME Term SOFR + 1.950%)1,2 | 07/15/33 | 7.279 |
|
| 12,437,283 | ||||
| 697,033 | Donlen Fleet Lease Funding 2 LLC 2021-21 | 12/11/34 | 0.560 |
|
| 695,876 | ||||
| 17,180,000 | Dryden 93 CLO, Ltd. 2021-93A (3-Month CME Term SOFR + 1.342%)1,2 | 01/15/34 | 6.670 |
|
| 17,183,175 | ||||
| 3,727,676 | ECAF I, Ltd. 2015-1A1 | 06/15/40 | 3.473 |
|
| 2,460,177 | ||||
| 6,169,170 | Elm Trust 2020-3A1 | 08/20/29 | 2.954 |
|
| 5,905,087 |
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 A P R I L 3 0, 2 0 2 4 | 3 |
BBH LIMITED DURATION FUND |
PORTFOLIO OF INVESTMENTS (continued) April 30, 2024 (unaudited) |
Principal | Maturity | Interest | Value | ||||||||
| ASSET BACKED SECURITIES (continued) |
|
| ||||||||
$ | 5,859,803 | Enterprise Fleet Financing LLC 2022-11 | 01/20/28 | 3.030 | % | $ | 5,784,521 | ||||
| 9,207,648 | Enterprise Fleet Financing LLC 2022-41 | 10/22/29 | 5.760 |
|
| 9,204,404 | ||||
| 10,445,000 | Enterprise Fleet Financing LLC 2023-31 | 03/20/30 | 6.400 |
|
| 10,548,550 | ||||
| 916,655 | FCI Funding LLC 2021-1A1 | 04/15/33 | 1.130 |
|
| 912,875 | ||||
| 11,912,961 | Finance of America HECM Buyout 2022-HB11,2,3 | 02/25/32 | 2.695 |
|
| 11,611,430 | ||||
| 50,300,000 | Flexential Issuer 2021-1A1 | 11/27/51 | 3.250 |
|
| 45,529,623 | ||||
| 9,425,061 | FNA LLC 2019-11,2,3,4 | 12/10/31 | 3.000 |
|
| 8,887,832 | ||||
| 10,940,000 | Ford Credit Floorplan Master Owner Trust A 2023-11 | 05/15/28 | 4.920 |
|
| 10,805,173 | ||||
| 16,420,000 | Foursight Capital Automobile Receivables Trust 2024-11 | 01/16/29 | 5.490 |
|
| 16,339,723 | ||||
| 17,272,614 | Global SC Finance VII Srl 2020-1A1 | 10/17/40 | 2.170 |
|
| 15,892,959 | ||||
| 17,838,917 | Global SC Finance VII Srl 2020-2A1 | 11/19/40 | 2.260 |
|
| 16,369,796 | ||||
| 10,900,000 | GM Financial Revolving Receivables Trust 2023-21 | 08/11/36 | 5.770 |
|
| 11,046,092 | ||||
| 50,193,437 | Golub Capital Partners ABS Funding, Ltd. 2021-2A1 | 10/19/29 | 2.944 |
|
| 46,302,833 | ||||
| 8,300,000 | HPEFS Equipment Trust 2023-2A1 | 01/21/31 | 6.040 |
|
| 8,320,972 | ||||
| 17,344,688 | HTS Fund I LLC 2021-11 | 08/25/36 | 1.411 |
|
| 15,038,450 | ||||
| 9,275,000 | Kubota Credit Owner Trust 2024-1A1 | 07/17/28 | 5.190 |
|
| 9,199,530 | ||||
| 7,365,656 | LCM XXIV, Ltd. 24A (3-Month CME Term SOFR + 1.242%)1,2 | 03/20/30 | 6.566 |
|
| 7,378,804 | ||||
| 5,306,755 | Mariner Finance Issuance Trust 2020-AA1 | 08/21/34 | 2.190 |
|
| 5,239,077 | ||||
| 14,800,000 | Mariner Finance Issuance Trust 2023-AA1 | 10/22/35 | 6.700 |
|
| 14,912,098 | ||||
| 41,880,000 | Monroe Capital Income Plus ABS Funding LLC 2022-1A1 | 04/30/32 | 4.050 |
|
| 38,071,676 | ||||
| 12,410,000 | Monroe Capital Mml CLO X, Ltd. 2020-1A (3-Month CME Term SOFR + 1.870%)1,2 | 05/20/34 | 7.189 |
|
| 12,404,873 | ||||
| 47,600,000 | Neuberger Berman Loan Advisers CLO 34, Ltd. 2019-34A (3-Month CME Term SOFR + 1.240%)1,2 | 01/20/35 | 6.565 |
|
| 47,644,549 | ||||
| 17,690,000 | NextGear Floorplan Master Owner Trust 2022-1A1 | 03/15/27 | 2.800 |
|
| 17,223,561 | ||||
| 24,520,000 | NextGear Floorplan Master Owner Trust 2024-1A1 | 03/15/29 | 5.120 |
|
| 24,289,519 | ||||
| 6,235,000 | Nissan Auto Receivables Owner Trust 2023-B | 03/15/28 | 5.930 |
|
| 6,276,747 | ||||
| 7,702,176 | NMEF Funding LLC 2022-A1 | 10/16/28 | 2.580 |
|
| 7,635,172 | ||||
| 14,424,325 | NMEF Funding LLC 2023-A1 | 06/17/30 | 6.570 |
|
| 14,490,625 | ||||
| 30,000,000 | Northwoods Capital XVIII, Ltd. 2019-18A (3-Month CME Term SOFR + 1.362%)1,2 | 05/20/32 | 6.681 |
|
| 30,029,076 | ||||
| 32,920,000 | Octagon Investment Partners 20-R, Ltd. 2019-4A (3-Month CME Term SOFR + 1.412%)1,2 | 05/12/31 | 6.713 |
|
| 32,974,295 | ||||
| 21,250,000 | OnDeck Asset Securitization Trust III LLC 2021-1A1 | 05/17/27 | 1.590 |
|
| 21,199,215 | ||||
| 14,337,000 | OnDeck Asset Securitization Trust IV LLC 2023-1A1 | 08/19/30 | 7.000 |
|
| 14,211,666 | ||||
| 14,640,000 | OneMain Financial Issuance Trust 2022-3A1 | 05/15/34 | 5.940 |
|
| 14,654,633 |
The accompanying notes are an integral part of these financial statements.
4 |
BBH LIMITED DURATION FUND |
PORTFOLIO OF INVESTMENTS (continued) April 30, 2024 (unaudited) |
Principal | Maturity | Interest | Value | ||||||||
| ASSET BACKED SECURITIES (continued) |
|
| ||||||||
$ | 13,350,000 | OneMain Financial Issuance Trust 2022-S11 | 05/14/35 | 4.130 | % | $ | 13,001,628 | ||||
| 16,380,000 | OneMain Financial Issuance Trust 2023-2A1 | 09/15/36 | 5.840 |
|
| 16,464,442 | ||||
| 56,210,000 | Oportun Issuance Trust 2021-C1 | 10/08/31 | 2.180 |
|
| 52,979,949 | ||||
| 25,000,000 | Oportun Issuance Trust 2022-A1 | 06/09/31 | 5.050 |
|
| 24,775,303 | ||||
| 25,271,984 | Oxford Finance Funding LLC 2022-1A1 | 02/15/30 | 3.602 |
|
| 24,119,567 | ||||
| 27,376,782 | Palmer Square Loan Funding, Ltd. 2022-1A (3-Month CME Term SOFR + 1.050%)1,2 | 04/15/30 | 6.379 |
|
| 27,388,918 | ||||
| 16,357,353 | Parliament CLO II, Ltd. 2021-2A (3-Month CME Term SOFR + 1.612%)1,2 | 08/20/32 | 6.931 |
|
| 16,357,752 | ||||
| 47,670,000 | PFS Financing Corp. 2022-A1 | 02/15/27 | 2.470 |
|
| 46,408,261 | ||||
| 19,980,000 | PFS Financing Corp. 2022-C1 | 05/15/27 | 3.890 |
|
| 19,604,126 | ||||
| 9,810,000 | PFS Financing Corp. 2023-A1 | 03/15/28 | 5.800 |
|
| 9,837,713 | ||||
| 31,020,000 | Purchasing Power Funding LLC 2024-A1 | 08/15/28 | 5.890 |
|
| 30,780,578 | ||||
| 7,748,441 | Regional Management Issuance Trust 2020-11 | 10/15/30 | 2.340 |
|
| 7,622,244 | ||||
| 6,234,904 | Republic Finance Issuance Trust 2020-A1 | 11/20/30 | 2.470 |
|
| 6,171,501 | ||||
| 56,030,000 | Republic Finance Issuance Trust 2021-A1 | 12/22/31 | 2.300 |
|
| 53,565,319 | ||||
| 23,320,000 | Retained Vantage Data Centers Issuer LLC 2023-1A1 | 09/15/48 | 5.000 |
|
| 22,084,616 | ||||
| 2,178,018 | Santander Drive Auto Receivables Trust 2023-2 | 03/16/26 | 5.870 |
|
| 2,178,950 | ||||
| 12,961,932 | Santander Drive Auto Receivables Trust 2023-5 | 07/15/27 | 6.310 |
|
| 12,991,843 | ||||
| 34,490,000 | Santander Revolving Auto Loan Trust 2019-A1 | 01/26/32 | 2.510 |
|
| 33,821,905 | ||||
| 7,498,189 | Shenton Aircraft Investment I, Ltd. 2015-1A1 | 10/15/42 | 4.750 |
|
| 7,010,957 | ||||
| 24,210,000 | Sotheby’s Artfi Master Trust 2024-1A1 | 12/22/31 | 6.430 |
|
| 24,196,297 | ||||
| 22,755,000 | Southwick Park CLO LLC 2019-4A (3-Month CME Term SOFR + 1.322%)1,2 | 07/20/32 | 6.646 |
|
| 22,755,196 | ||||
| 19,160,000 | Stack Infrastructure Issuer LLC 2020-1A1 | 08/25/45 | 1.893 |
|
| 18,003,826 | ||||
| 6,357,790 | SWC Funding LLC 2018-1A1 | 08/15/33 | 4.750 |
|
| 6,349,475 | ||||
| 50,790,000 | Symphony CLO XXI, Ltd. 2019-21A (3-Month CME Term SOFR + 1.322%)1,2 | 07/15/32 | 6.650 |
|
| 50,826,422 | ||||
| 12,760,000 | Synchrony Card Funding LLC 2022-A1 | 04/15/28 | 3.370 |
|
| 12,485,028 | ||||
| 13,310,000 | TierPoint Issuer LLC 2023-1A1 | 06/25/53 | 6.000 |
|
| 12,778,614 | ||||
| 12,345,000 | T-Mobile US Trust 2024-1A1 | 09/20/29 | 5.050 |
|
| 12,240,701 | ||||
| 12,920,000 | Vantage Data Centers Issuer LLC 2023-1A1 | 03/16/48 | 6.316 |
|
| 12,811,591 | ||||
| 613,282 | Veros Auto Receivables Trust 2022-11 | 12/15/25 | 3.470 |
|
| 612,429 | ||||
| 3,303,623 | VFI ABS LLC 2022-1A1 | 03/24/28 | 2.230 |
|
| 3,268,868 | ||||
| 6,315,400 | VFI ABS LLC 2023-1A1 | 03/26/29 | 7.270 |
|
| 6,330,788 | ||||
| 7,040,000 | Westlake Automobile Receivables Trust 2023-4A1 | 11/15/28 | 6.640 |
|
| 7,116,295 | ||||
| 12,135,244 | Wheels Fleet Lease Funding 1 LLC 2022-1A1 | 10/18/36 | 2.470 |
|
| 12,066,301 | ||||
| 18,550,000 | Wheels Fleet Lease Funding 1 LLC 2023-1A1 | 04/18/38 | 5.800 |
|
| 18,536,529 | ||||
| 12,000,000 | Wheels Fleet Lease Funding 1 LLC 2023-2A1 | 08/18/38 | 6.460 |
|
| 12,073,734 | ||||
| 11,295,000 | World Financial Network Credit Card Master Trust 2023-A | 03/15/30 | 5.020 |
|
| 11,131,076 | ||||
| Total Asset Backed Securities |
|
| 1,583,948,731 | |||||||
|
|
|
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 A P R I L 3 0, 2 0 2 4 | 5 |
BBH LIMITED DURATION FUND |
PORTFOLIO OF INVESTMENTS (continued) April 30, 2024 (unaudited) |
Principal | Maturity | Interest | Value | ||||||||
| COMMERCIAL MORTGAGE BACKED SECURITIES (6.0%) |
|
| ||||||||
$ | 26,807,000 | BB-UBS Trust 2012-TFT1,2,3 | 06/05/30 | 3.559 | % | $ | 21,463,646 | ||||
| 9,350,000 | BLP Commercial Mortgage Trust 2023-IND (1-Month CME Term SOFR + 1.692%)1,2 | 03/15/40 | 7.013 |
|
| 9,361,688 | ||||
| 20,300,000 | BPR Trust 2022-OANA (1-Month CME Term | 04/15/37 | 7.219 |
|
| 20,388,813 | ||||
| 18,100,000 | BX Commercial Mortgage Trust 2022-CSMO (1-Month CME Term SOFR + 2.115%)1,2 | 06/15/27 | 7.436 |
|
| 18,167,875 | ||||
| 43,914,830 | BX Commercial Mortgage Trust 2022-LP2 (1-Month CME Term SOFR + 1.013%)1,2 | 02/15/39 | 6.334 |
|
| 43,705,203 | ||||
| 19,954,560 | BXMT, Ltd. 2020-FL2 (1-Month CME Term | 02/15/38 | 6.331 |
|
| 19,140,950 | ||||
| 16,217,622 | BXMT, Ltd. 2020-FL3 (1-Month CME Term | 11/15/37 | 6.831 |
|
| 15,768,860 | ||||
| 16,609,136 | BXMT, Ltd. 2021-FL4 (1-Month CME Term | 05/15/38 | 6.481 |
|
| 15,778,679 | ||||
| 31,329,000 | CG-CCRE Commercial Mortgage Trust 2014-FL2 (1-Month CME Term SOFR + 3.014%)1,2 | 11/15/31 | 8.335 |
|
| 25,157,976 | ||||
| 11,715,000 | Commercial Mortgage Pass Through Certificate1 | 07/12/28 | 7.121 |
|
| 12,016,915 | ||||
| 20,885,000 | DK Trust 2024-SPBX (1-Month CME Term | 03/15/34 | 6.821 |
|
| 20,858,894 | ||||
| 14,946,810 | HPLY Trust 2019-HIT (1-Month CME Term | 11/15/36 | 6.436 |
|
| 14,900,101 | ||||
| 23,600,000 | Life Mortgage Trust 2022-BMR2 (1-Month CME Term SOFR + 1.295%)1,2 | 05/15/39 | 6.616 |
|
| 23,305,000 | ||||
| 17,953,835 | Med Trust 2021-MDLN (1-Month CME Term | 11/15/38 | 6.385 |
|
| 17,875,287 | ||||
| 28,261,755 | MHC Commercial Mortgage Trust 2021-MHC (1-Month CME Term SOFR + 0.915%)1,2 | 04/15/38 | 6.236 |
|
| 28,085,119 | ||||
| 16,040,000 | MTN Commercial Mortgage Trust 2022-LPFL (1-Month CME Term SOFR + 1.397%)1,2 | 03/15/39 | 6.727 |
|
| 15,789,375 | ||||
| 17,543,704 | Ready Capital Mortgage Financing LLC 2022-FL8 (30-Day SOFR + 1.650%)1,2 | 01/25/37 | 6.980 |
|
| 17,477,040 | ||||
| 46,350,000 | SPGN Mortgage Trust 2022-TFLM (1-Month CME Term SOFR + 1.550%)1,2 | 02/15/39 | 6.871 |
|
| 45,931,789 | ||||
| 1,155,473 | STWD, Ltd. 2019-FL1 (1-Month CME Term | 07/15/38 | 6.515 |
|
| 1,149,682 | ||||
| 24,300,000 | Taubman Centers Commercial Mortgage Trust 2022-DPM (1-Month CME Term SOFR + 2.186%)1,2 | 05/15/37 | 7.507 |
|
| 24,436,688 | ||||
| 20,000,000 | WMRK Commercial Mortgage Trust 2022-WMRK (1-Month CME Term SOFR + 2.789%)1,2 | 11/15/27 | 8.110 |
|
| 20,100,000 | ||||
| Total Commercial Mortgage Backed Securities |
|
| 430,859,580 |
The accompanying notes are an integral part of these financial statements.
6 |
BBH LIMITED DURATION FUND |
PORTFOLIO OF INVESTMENTS (continued) April 30, 2024 (unaudited) |
Principal | Maturity | Interest | Value | ||||||||
| CORPORATE BONDS (43.5%) |
|
| ||||||||
| AEROSPACE/DEFENSE (0.2%) |
|
| ||||||||
$ | 11,105,000 | BAE Systems, Plc.1 | 03/26/27 | 5.000 | % | $ | 10,945,080 | ||||
|
|
| |||||||||
| AGRICULTURE (0.0%) |
|
| ||||||||
| 1,250,000 | Cargill, Inc.1 | 02/02/31 | 1.700 |
|
| 995,506 | ||||
|
|
| |||||||||
| APPAREL (0.0%) |
|
| ||||||||
| 1,000,000 | Tapestry, Inc. | 11/27/26 | 7.000 |
|
| 1,019,126 | ||||
| 1,000,000 | VF Corp. | 04/23/25 | 2.400 |
|
| 964,599 | ||||
|
|
| 1,983,725 | ||||||||
| AUTO MANUFACTURERS (1.6%) |
|
| ||||||||
| 16,000,000 | Daimler Truck Finance North America LLC1 | 01/17/25 | 5.200 |
|
| 15,930,211 | ||||
| 1,000,000 | Ford Motor Credit Co. LLC | 02/10/25 | 2.300 |
|
| 971,773 | ||||
| 23,920,000 | General Motors Financial Co., Inc. | 04/06/26 | 5.400 |
|
| 23,770,144 | ||||
| 9,175,000 | Hyundai Capital America1 | 11/03/25 | 6.250 |
|
| 9,213,857 | ||||
| 1,000,000 | Hyundai Capital America1 | 01/08/26 | 1.300 |
|
| 927,034 | ||||
| 11,055,000 | Hyundai Capital America1 | 03/30/26 | 5.500 |
|
| 10,986,012 | ||||
| 13,795,000 | Hyundai Capital America1 | 06/26/26 | 5.650 |
|
| 13,735,363 | ||||
| 11,580,000 | Hyundai Capital America1 | 01/08/27 | 5.250 |
|
| 11,442,809 | ||||
| 25,455,000 | Mercedes-Benz Finance North America LLC1 | 03/30/26 | 4.800 |
|
| 25,144,846 | ||||
|
|
| 112,122,049 | ||||||||
| BANKS (13.0%) |
|
| ||||||||
| 17,000,000 | Banco Santander S.A. (1-Year CMT Index + 1.250%)2 | 03/14/28 | 5.552 |
|
| 16,791,359 | ||||
| 30,000,000 | Bank of America Corp. (SOFR + 1.340%)2 | 09/15/27 | 5.933 |
|
| 30,139,540 | ||||
| 1,000,000 | Bank of America Corp. (3-Month CME Term SOFR + 1.774%)2 | 04/24/28 | 3.705 |
|
| 946,918 | ||||
| 51,125,000 | Bank of Montreal | 01/10/25 | 1.500 |
|
| 49,679,333 | ||||
| 1,000,000 | Bank of New York Mellon Corp. (SOFR + 1.802%)2 | 10/25/28 | 5.802 |
|
| 1,013,488 | ||||
| 19,870,000 | Bank of New Zealand1 | 02/07/28 | 4.846 |
|
| 19,403,807 | ||||
| 9,500,000 | Bank of New Zealand1 | 01/30/29 | 5.076 |
|
| 9,332,458 | ||||
| 32,500,000 | Bank of Nova Scotia (SOFR + 0.380%)2 | 07/31/24 | 5.736 |
|
| 32,513,617 | ||||
| 15,015,000 | Bank of Nova Scotia | 01/10/25 | 1.450 |
|
| 14,587,698 | ||||
| 16,915,000 | Canadian Imperial Bank of Commerce | 10/02/26 | 5.926 |
|
| 17,073,083 | ||||
| 19,725,000 | Canadian Imperial Bank of Commerce | 04/28/28 | 5.001 |
|
| 19,329,430 | ||||
| 1,000,000 | Citigroup, Inc. (SOFR + 1.528%)2 | 03/17/26 | 3.290 |
|
| 976,997 | ||||
| 33,540,000 | Commonwealth Bank of Australia (SOFR + 0.400%)1,2 | 07/07/25 | 5.753 |
|
| 33,568,424 | ||||
| 1,000,000 | Discover Bank | 07/27/26 | 3.450 |
|
| 944,939 | ||||
| 65,000,000 | DNB Bank ASA (1-Year CMT Index + 0.330%)1,2 | 09/30/25 | 0.856 |
|
| 63,623,171 | ||||
| 1,000,000 | Fifth Third Bancorp (SOFR + 2.192%)2 | 10/27/28 | 6.361 |
|
| 1,008,076 | ||||
| 1,000,000 | Goldman Sachs Group, Inc. (SOFR + 1.114%)2 | 02/24/28 | 2.640 |
|
| 922,409 | ||||
| 33,350,000 | HSBC Holdings, Plc. (SOFR + 1.929%)2 | 06/04/26 | 2.099 |
|
| 31,964,886 | ||||
| 5,780,000 | HSBC Holdings, Plc. (SOFR + 3.030%)2 | 11/03/26 | 7.336 |
|
| 5,909,759 |
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 A P R I L 3 0, 2 0 2 4 | 7 |
BBH LIMITED DURATION FUND |
PORTFOLIO OF INVESTMENTS (continued) April 30, 2024 (unaudited) |
Principal | Maturity | Interest | Value | ||||||||
| CORPORATE BONDS (continued) |
|
| ||||||||
| BANKS (continued) |
|
| ||||||||
$ | 25,640,000 | HSBC Holdings, Plc. (SOFR + 1.570%)2 | 08/14/27 | 5.887 | % | $ | 25,661,946 | ||||
| 18,414,000 | Huntington Bancshares, Inc. (SOFR + 1.970%)2 | 08/04/28 | 4.443 |
|
| 17,640,564 | ||||
| 24,145,000 | Huntington National Bank (SOFR + 1.215%)2 | 11/18/25 | 5.699 |
|
| 24,002,334 | ||||
| 1,000,000 | Huntington National Bank (SOFR + 1.650%)2 | 05/17/28 | 4.552 |
|
| 963,044 | ||||
| 33,270,000 | JPMorgan Chase & Co. (3-Month CME Term SOFR + 1.585%)2 | 03/13/26 | 2.005 |
|
| 32,184,297 | ||||
| 1,000,000 | JPMorgan Chase & Co. (SOFR + 1.850%)2 | 04/22/26 | 2.083 |
|
| 964,119 | ||||
| 1,000,000 | KeyBank NA | 08/08/25 | 4.150 |
|
| 970,708 | ||||
| 18,760,000 | KeyBank NA | 11/15/27 | 5.850 |
|
| 18,420,390 | ||||
| 24,865,000 | Lloyds Banking Group, Plc. (1-Year CMT Index + 1.600%)2 | 03/18/26 | 3.511 |
|
| 24,318,214 | ||||
| 17,755,000 | Lloyds Banking Group, Plc. (1-Year CMT Index + 1.800%)2 | 03/18/28 | 3.750 |
|
| 16,818,404 | ||||
| 1,000,000 | Manufacturers & Traders Trust Co. | 01/27/28 | 4.700 |
|
| 946,728 | ||||
| 39,660,000 | Mitsubishi UFJ Financial Group, Inc. | 07/17/25 | 1.412 |
|
| 37,684,414 | ||||
| 42,665,000 | Morgan Stanley (SOFR + 1.770%)2 | 10/16/26 | 6.138 |
|
| 42,900,510 | ||||
| 1,000,000 | Morgan Stanley2,3 | 07/22/28 | 3.591 |
|
| 940,972 | ||||
| 1,000,000 | PNC Bank NA | 07/26/28 | 4.050 |
|
| 936,815 | ||||
| 15,190,000 | PNC Financial Services Group, Inc. (SOFR + 1.322%)2 | 06/12/26 | 5.812 |
|
| 15,193,137 | ||||
| 25,345,000 | PNC Financial Services Group, Inc. (SOFR + 1.730%)2 | 10/20/27 | 6.615 |
|
| 25,898,710 | ||||
| 1,000,000 | Regions Financial Corp. | 05/18/25 | 2.250 |
|
| 963,255 | ||||
| 24,915,000 | Royal Bank of Canada | 08/03/27 | 4.240 |
|
| 24,086,244 | ||||
| 16,070,000 | Santander Holdings USA, Inc. | 06/07/24 | 3.500 |
|
| 16,063,931 | ||||
| 1,000,000 | Santander Holdings USA, Inc. (SOFR + 1.249%)2 | 01/06/28 | 2.490 |
|
| 906,137 | ||||
| 26,360,000 | Skandinaviska Enskilda Banken AB1 | 09/09/24 | 0.650 |
|
| 25,866,863 | ||||
| 11,875,000 | Skandinaviska Enskilda Banken AB1 | 03/05/29 | 5.375 |
|
| 11,672,297 | ||||
| 10,085,000 | State Street Corp. (SOFR + 1.353%)2 | 11/04/26 | 5.751 |
|
| 10,094,077 | ||||
| 1,000,000 | Synchrony Bank | 08/22/25 | 5.400 |
|
| 987,329 | ||||
| 14,435,000 | Truist Financial Corp. (SOFR + 1.626%)2 | 10/28/26 | 5.900 |
|
| 14,427,693 | ||||
| 1,000,000 | Truist Financial Corp. (SOFR + 1.435%)2 | 01/26/29 | 4.873 |
|
| 969,861 | ||||
| 53,570,000 | UBS Group AG (1-Year CMT Index + 1.550%)1,2 | 01/12/27 | 5.711 |
|
| 53,429,996 | ||||
| 42,990,000 | US Bancorp (5-Year CMT Index + 2.541%)2,4 | 3.700 |
|
| 36,996,313 | |||||
| 22,750,000 | US Bancorp (SOFR + 1.430%)2 | 10/21/26 | 5.727 |
|
| 22,742,276 | ||||
| 1,000,000 | US Bancorp (SOFR + 2.020%)2 | 06/12/29 | 5.775 |
|
| 1,001,978 | ||||
| 19,370,000 | Wells Fargo & Co. (SOFR + 2.000%)2 | 04/30/26 | 2.188 |
|
| 18,675,363 | ||||
| 7,920,000 | Wells Fargo & Co. (SOFR + 1.560%)2 | 08/15/26 | 4.540 |
|
| 7,793,465 | ||||
| 1,000,000 | Wells Fargo & Co. (3-Month CME Term SOFR + 4.032%)2 | 04/04/31 | 4.478 |
|
| 939,649 | ||||
| 26,655,000 | Westpac Banking Corp. | 11/18/27 | 5.457 |
|
| 26,817,051 | ||||
| 30,895,000 | Westpac New Zealand, Ltd.1 | 02/15/28 | 4.902 |
|
| 30,244,835 | ||||
|
|
| 940,853,311 |
The accompanying notes are an integral part of these financial statements.
8 |
BBH LIMITED DURATION FUND |
PORTFOLIO OF INVESTMENTS (continued) April 30, 2024 (unaudited) |
Principal | Maturity | Interest | Value | ||||||||
| CORPORATE BONDS (continued) |
|
| ||||||||
| BEVERAGES (0.4%) |
|
| ||||||||
$ | 8,175,000 | Constellation Brands, Inc. | 05/09/24 | 3.600 | % | $ | 8,170,697 | ||||
| 21,670,000 | Keurig Dr Pepper, Inc. | 03/15/27 | 5.100 |
|
| 21,519,075 | ||||
|
|
| 29,689,772 | ||||||||
| BIOTECHNOLOGY (0.0%) |
|
| ||||||||
| 1,000,000 | Baxalta, Inc. | 06/23/25 | 4.000 |
|
| 980,994 | ||||
| 1,000,000 | Illumina, Inc. | 12/13/27 | 5.750 |
|
| 999,922 | ||||
|
|
| 1,980,916 | ||||||||
| BUILDING MATERIALS (0.0%) |
|
| ||||||||
| 1,000,000 | CRH America, Inc.1 | 05/18/25 | 3.875 |
|
| 979,181 | ||||
|
|
| |||||||||
| COMPUTERS (0.0%) |
|
| ||||||||
| 600,000 | Genpact Luxembourg S.a.r.l. | 12/01/24 | 3.375 |
|
| 589,892 | ||||
|
|
| |||||||||
| COSMETICS/PERSONAL CARE (0.0%) |
|
| ||||||||
| 1,000,000 | Estee Lauder Cos, Inc. | 04/15/30 | 2.600 |
|
| 862,386 | ||||
|
|
| |||||||||
| DIVERSIFIED FINANCIAL SERVICES (3.0%) |
|
| ||||||||
| 19,638,000 | AerCap Ireland Capital DAC / AerCap Global Aviation Trust | 04/15/27 | 6.450 |
|
| 20,019,752 | ||||
| 1,000,000 | American Express Co. (SOFR + 0.999%)2 | 05/01/26 | 4.990 |
|
| 991,966 | ||||
| 20,960,000 | American Express Co. (SOFR + 0.750%)2 | 04/23/27 | 5.645 |
|
| 20,964,908 | ||||
| 34,045,000 | Aviation Capital Group LLC1 | 12/15/24 | 5.500 |
|
| 33,867,602 | ||||
| 33,535,000 | Avolon Holdings Funding, Ltd.1 | 01/15/26 | 5.500 |
|
| 33,041,707 | ||||
| 10,000,000 | Capital One Financial Corp. (SOFR + 2.440%)2 | 10/29/27 | 7.149 |
|
| 10,290,838 | ||||
| 1,000,000 | Capital One Financial Corp. (SOFR + 2.080%)2 | 02/01/29 | 5.468 |
|
| 982,355 | ||||
| 2,785,000 | Credit Acceptance Corp. | 03/15/26 | 6.625 |
|
| 2,776,560 | ||||
| 18,620,000 | Credit Acceptance Corp.1 | 12/15/28 | 9.250 |
|
| 19,741,855 | ||||
| 48,895,000 | Drawbridge Special Opportunities Fund LP / Drawbridge Special Opportunities Finance1 | 02/15/26 | 3.875 |
|
| 46,101,425 | ||||
| 1,000,000 | Enact Holdings, Inc.1 | 08/15/25 | 6.500 |
|
| 999,100 | ||||
| 25,095,000 | Strategic Credit Opportunities Partners LLC | 04/01/26 | 4.250 |
|
| 23,495,896 | ||||
| 1,000,000 | Western Union Co. | 01/10/25 | 2.850 |
|
| 978,654 | ||||
|
|
| 214,252,618 | ||||||||
| ELECTRIC (2.0%) |
|
| ||||||||
| 500,000 | AES Corp.1 | 07/15/25 | 3.300 |
|
| 484,213 | ||||
| 1,000,000 | Appalachian Power Co. | 04/01/31 | 2.700 |
|
| 823,312 | ||||
| 1,000,000 | Atlantic City Electric Co. | 03/15/31 | 2.300 |
|
| 819,275 | ||||
| 1,000,000 | Avangrid, Inc. | 04/15/25 | 3.200 |
|
| 975,029 | ||||
| 1,000,000 | Black Hills Corp. | 06/15/30 | 2.500 |
|
| 818,370 | ||||
| 16,025,000 | Constellation Energy Generation LLC | 06/01/25 | 3.250 |
|
| 15,608,238 | ||||
| 1,000,000 | DTE Energy Co. | 06/01/25 | 1.050 |
|
| 950,384 | ||||
| 1,000,000 | Duke Energy Ohio, Inc. | 06/01/30 | 2.125 |
|
| 826,077 | ||||
| 39,737,382 | Duke Energy Progress NC Storm Funding LLC | 07/01/30 | 1.295 |
|
| 36,271,212 | ||||
| 61,690,000 | Edison International (5-Year CMT Index + 4.698%)2,5 | 5.375 |
|
| 59,098,705 |
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 A P R I L 3 0, 2 0 2 4 | 9 |
BBH LIMITED DURATION FUND |
PORTFOLIO OF INVESTMENTS (continued) April 30, 2024 (unaudited) |
Principal | Maturity | Interest | Value | ||||||||
| CORPORATE BONDS (continued) |
|
| ||||||||
| ELECTRIC (continued) |
|
| ||||||||
$ | 1,000,000 | Edison International | 11/15/29 | 6.950 | % | $ | 1,050,067 | ||||
| 1,000,000 | Entergy Louisiana LLC | 12/15/30 | 1.600 |
|
| 783,210 | ||||
| 1,000,000 | Evergy Missouri West, Inc.1 | 12/15/27 | 5.150 |
|
| 984,879 | ||||
| 1,000,000 | Fells Point Funding Trust1 | 01/31/27 | 3.046 |
|
| 930,180 | ||||
| 1,000,000 | FirstEnergy Pennsylvania Electric Co.1 | 03/30/26 | 5.150 |
|
| 985,472 | ||||
| 1,000,000 | Narragansett Electric Co.1 | 04/09/30 | 3.395 |
|
| 893,191 | ||||
| 1,000,000 | National Rural Utilities Cooperative Finance Corp. | 03/15/30 | 2.400 |
|
| 844,149 | ||||
| 1,000,000 | NextEra Energy Capital Holdings, Inc. | 06/20/25 | 4.450 |
|
| 985,802 | ||||
| 1,000,000 | NRG Energy, Inc.1 | 12/02/25 | 2.000 |
|
| 935,661 | ||||
| 1,000,000 | Pacific Gas & Electric Co. | 01/01/26 | 3.150 |
|
| 956,022 | ||||
| 1,000,000 | PacifiCorp | 09/15/30 | 2.700 |
|
| 844,298 | ||||
| 18,615,000 | Public Service Enterprise Group, Inc. | 10/15/28 | 5.875 |
|
| 18,794,919 | ||||
| 1,000,000 | Vistra Operations Co. LLC1 | 05/13/25 | 5.125 |
|
| 985,003 | ||||
|
|
| 146,647,668 | ||||||||
| ENERGY-ALTERNATE SOURCES (0.4%) |
|
| ||||||||
| 25,000,000 | NextEra Energy Partners LP1,6 | 06/15/24 | 0.000 |
|
| 24,762,500 | ||||
|
|
| |||||||||
| FOOD (0.9%) |
|
| ||||||||
| 1,000,000 | Campbell Soup Co. | 03/15/25 | 3.950 |
|
| 984,200 | ||||
| 15,535,000 | General Mills, Inc. | 10/17/28 | 5.500 |
|
| 15,569,091 | ||||
| 12,590,000 | Hormel Foods Corp. | 03/30/27 | 4.800 |
|
| 12,447,193 | ||||
| 1,000,000 | Mars, Inc.1 | 04/20/28 | 4.550 |
|
| 973,295 | ||||
| 21,220,000 | Nestle Capital Corp.1 | 03/12/29 | 4.650 |
|
| 20,730,934 | ||||
| 11,460,000 | Sysco Corp. | 01/17/29 | 5.750 |
|
| 11,575,851 | ||||
|
|
| 62,280,564 | ||||||||
| GAS (0.0%) |
|
| ||||||||
| 1,000,000 | Brooklyn Union Gas Co.1 | 08/05/27 | 4.632 |
|
| 960,123 | ||||
| 265,000 | East Ohio Gas Co.1 | 06/15/25 | 1.300 |
|
| 251,885 | ||||
| 1,000,000 | Southern California Gas Co. | 02/01/30 | 2.550 |
|
| 855,607 | ||||
|
|
| 2,067,615 | ||||||||
| HEALTHCARE-PRODUCTS (0.3%) |
|
| ||||||||
| 22,215,000 | Medtronic Global Holdings SCA | 03/30/28 | 4.250 |
|
| 21,449,752 | ||||
|
|
| |||||||||
| HEALTHCARE-SERVICES (1.6%) |
|
| ||||||||
| 1,000,000 | Adventist Health System | 03/01/29 | 2.952 |
|
| 882,522 | ||||
| 1,000,000 | CommonSpirit Health | 10/01/25 | 1.547 |
|
| 940,744 | ||||
| 1,000,000 | Providence St Joseph Health Obligated Group | 10/01/29 | 2.532 |
|
| 863,137 | ||||
| 32,090,000 | Roche Holdings, Inc.1 | 11/13/26 | 5.265 |
|
| 32,096,221 | ||||
| 1,000,000 | Roche Holdings, Inc.1 | 11/13/28 | 5.338 |
|
| 1,005,091 | ||||
| 22,000,000 | Roche Holdings, Inc.1 | 03/08/29 | 4.790 |
|
| 21,692,674 | ||||
| 60,630,000 | Sutter Health | 08/15/25 | 1.321 |
|
| 57,259,150 | ||||
|
|
| 114,739,539 | ||||||||
| HOME BUILDERS (0.0%) |
|
| ||||||||
| 1,000,000 | DR Horton, Inc. | 10/15/25 | 2.600 |
|
| 955,764 |
The accompanying notes are an integral part of these financial statements.
10 |
BBH LIMITED DURATION FUND |
PORTFOLIO OF INVESTMENTS (continued) April 30, 2024 (unaudited) |
Principal | Maturity | Interest | Value | ||||||||
| CORPORATE BONDS (continued) |
|
| ||||||||
| INSURANCE (9.9%) |
|
| ||||||||
$ | 26,415,000 | American Coastal Insurance Corp. | 12/15/27 | 7.250 | % | $ | 24,235,763 | ||||
| 18,000,000 | Athene Global Funding1 | 01/14/25 | 2.500 |
|
| 17,576,375 | ||||
| 14,345,000 | Athene Global Funding1 | 06/29/25 | 2.550 |
|
| 13,770,513 | ||||
| 35,075,000 | Athene Global Funding1 | 02/23/26 | 5.684 |
|
| 34,992,872 | ||||
| 1,000,000 | Athene Global Funding1 | 10/02/26 | 1.730 |
|
| 904,673 | ||||
| 17,070,000 | Athene Global Funding1 | 01/09/29 | 5.583 |
|
| 16,910,942 | ||||
| 1,000,000 | Brighthouse Financial Global Funding1 | 05/24/26 | 1.550 |
|
| 913,165 | ||||
| 1,000,000 | CNO Global Funding1 | 01/06/25 | 1.650 |
|
| 966,059 | ||||
| 1,000,000 | Corebridge Global Funding1 | 07/02/26 | 5.750 |
|
| 994,704 | ||||
| 14,025,000 | Corebridge Global Funding1 | 09/19/28 | 5.900 |
|
| 14,101,523 | ||||
| 26,595,000 | Equitable Financial Life Global Funding1 | 11/12/24 | 1.100 |
|
| 25,882,799 | ||||
| 59,274,000 | F&G Global Funding1 | 09/20/24 | 0.900 |
|
| 57,975,503 | ||||
| 1,000,000 | F&G Global Funding1 | 06/30/26 | 1.750 |
|
| 906,041 | ||||
| 50,000,000 | GA Global Funding Trust (SOFR + 0.500%)1,2 | 09/13/24 | 5.853 |
|
| 50,013,617 | ||||
| 1,000,000 | GA Global Funding Trust1 | 01/06/27 | 2.250 |
|
| 909,381 | ||||
| 17,225,000 | GA Global Funding Trust1 | 01/08/29 | 5.500 |
|
| 16,946,876 | ||||
| 1,000,000 | Guardian Life Global Funding1 | 12/10/25 | 0.875 |
|
| 928,347 | ||||
| 1,000,000 | Jackson National Life Global Funding1 | 01/12/25 | 1.750 |
|
| 969,396 | ||||
| 1,230,000 | MassMutual Global Funding II1 | 10/09/30 | 1.550 |
|
| 970,908 | ||||
| 44,790,000 | Met Tower Global Funding1 | 09/14/26 | 1.250 |
|
| 40,555,216 | ||||
| 23,485,000 | Met Tower Global Funding1 | 04/12/29 | 5.250 |
|
| 23,164,917 | ||||
| 1,000,000 | Metropolitan Life Global Funding I1 | 06/30/27 | 4.400 |
|
| 968,029 | ||||
| 73,445,000 | New York Life Global Funding1 | 01/14/25 | 1.450 |
|
| 71,349,277 | ||||
| 1,000,000 | New York Life Global Funding1 | 01/09/28 | 4.850 |
|
| 982,014 | ||||
| 15,850,000 | Northwestern Mutual Global Funding1 | 01/10/29 | 4.710 |
|
| 15,421,572 | ||||
| 19,330,000 | Pacific Life Global Funding II1 | 06/24/25 | 1.200 |
|
| 18,396,981 | ||||
| 37,490,000 | Pacific Life Global Funding II1 | 04/04/28 | 4.900 |
|
| 36,613,084 | ||||
| 37,180,000 | Pricoa Global Funding I1 | 12/06/24 | 1.150 |
|
| 36,187,653 | ||||
| 47,175,000 | Principal Life Global Funding II1 | 01/10/25 | 1.375 |
|
| 45,827,121 | ||||
| 12,560,000 | Principal Life Global Funding II1 | 01/16/27 | 5.000 |
|
| 12,428,766 | ||||
| 1,000,000 | Principal Life Global Funding II1 | 06/28/28 | 5.500 |
|
| 985,194 | ||||
| 29,855,000 | Protective Life Global Funding1 | 07/05/24 | 0.781 |
|
| 29,601,571 | ||||
| 42,465,000 | Protective Life Global Funding1 | 01/13/25 | 1.646 |
|
| 41,299,895 | ||||
| 1,000,000 | Protective Life Global Funding1 | 04/14/26 | 5.209 |
|
| 993,831 | ||||
| 16,160,000 | RGA Global Funding1 | 11/21/28 | 6.000 |
|
| 16,417,146 | ||||
| 1,180,000 | RGA Global Funding1 | 01/18/29 | 2.700 |
|
| 1,039,782 | ||||
| 27,515,000 | SiriusPoint, Ltd. | 04/05/29 | 7.000 |
|
| 27,447,567 | ||||
| 4,205,000 | Universal Insurance Holdings, Inc. | 11/30/26 | 5.625 |
|
| 3,929,425 | ||||
| 11,950,000 | Vitality Re XIII, Ltd. (3-Month U.S. Treasury Bill + 2.000%)1,2 | 01/06/26 | 7.387 |
|
| 11,859,180 | ||||
|
|
| 716,337,678 |
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 A P R I L 3 0, 2 0 2 4 | 11 |
BBH LIMITED DURATION FUND |
PORTFOLIO OF INVESTMENTS (continued) April 30, 2024 (unaudited) |
Principal | Maturity | Interest | Value | ||||||||
| CORPORATE BONDS (continued) |
|
| ||||||||
| INVESTMENT COMPANIES (5.7%) |
|
| ||||||||
$ | 41,185,000 | BlackRock TCP Capital Corp. | 08/23/24 | 3.900 | % | $ | 40,878,860 | ||||
| 46,600,000 | Blackstone Private Credit Fund | 09/15/24 | 1.750 |
|
| 45,749,154 | ||||
| 31,840,000 | Blackstone Private Credit Fund | 11/22/24 | 2.350 |
|
| 31,170,722 | ||||
| 9,654,000 | Blackstone Secured Lending Fund | 01/15/26 | 3.625 |
|
| 9,206,468 | ||||
| 10,000,000 | Blue Owl Capital Corp. | 03/30/25 | 4.000 |
|
| 9,798,623 | ||||
| 6,028,000 | Blue Owl Capital Corp. II1 | 11/26/24 | 4.625 |
|
| 5,971,041 | ||||
| 18,000,000 | Blue Owl Credit Income Corp. | 09/23/26 | 3.125 |
|
| 16,459,397 | ||||
| 20,015,000 | Blue Owl Technology Finance Corp.1 | 12/15/25 | 4.750 |
|
| 19,192,648 | ||||
| 18,375,000 | Franklin BSP Lending Corp.1 | 12/15/24 | 4.850 |
|
| 18,147,523 | ||||
| 26,475,000 | Franklin BSP Lending Corp. | 03/30/26 | 3.250 |
|
| 24,755,088 | ||||
| 28,550,000 | FS KKR Capital Corp. | 07/15/24 | 4.625 |
|
| 28,438,144 | ||||
| 18,859,000 | FS KKR Capital Corp. | 02/01/25 | 4.125 |
|
| 18,537,628 | ||||
| 27,321,000 | FS KKR Capital Corp.1 | 02/14/25 | 4.250 |
|
| 26,904,897 | ||||
| 15,940,000 | FS KKR Capital Corp. | 01/15/26 | 3.400 |
|
| 15,070,417 | ||||
| 49,650,000 | Main Street Capital Corp. | 05/01/24 | 5.200 |
|
| 49,650,000 | ||||
| 33,980,000 | Main Street Capital Corp. | 07/14/26 | 3.000 |
|
| 31,643,775 | ||||
| 17,345,000 | PennantPark Investment Corp. | 11/01/26 | 4.000 |
|
| 16,027,945 | ||||
|
|
| 407,602,330 | ||||||||
| MACHINERY-CONSTRACTION & MINING (0.0%) |
|
| ||||||||
| 800,000 | Caterpillar Financial Services Corp. | 08/12/25 | 3.650 |
|
| 782,559 | ||||
| 1,000,000 | Komatsu Finance America, Inc.1 | 10/06/27 | 5.499 |
|
| 1,001,084 | ||||
|
|
| 1,783,643 | ||||||||
| MACHINERY-DIVERSIFIED (0.5%) |
|
| ||||||||
| 1,000,000 | CNH Industrial Capital LLC | 05/23/25 | 3.950 |
|
| 979,738 | ||||
| 10,920,000 | CNH Industrial Capital LLC | 01/12/29 | 5.500 |
|
| 10,882,572 | ||||
| 27,185,000 | CNH Industrial Capital LLC | 04/20/29 | 5.100 |
|
| 26,602,315 | ||||
|
|
| 38,464,625 | ||||||||
| METAL FABRICATE/HARDWARE (0.0%) |
|
| ||||||||
| 1,000,000 | Precision Castparts Corp. | 06/15/25 | 3.250 |
|
| 975,643 | ||||
|
|
| |||||||||
| OIL & GAS (0.1%) |
|
| ||||||||
| 10,072,000 | Woodside Finance, Ltd.1 | 09/15/26 | 3.700 |
|
| 9,574,740 | ||||
|
|
| |||||||||
| PACKAGING & CONTAINERS (0.0%) |
|
| ||||||||
| 1,000,000 | Amcor Flexibles North America, Inc. | 05/17/25 | 4.000 |
|
| 979,895 | ||||
|
|
| |||||||||
| PHARMACEUTICALS (0.5%) |
|
| ||||||||
| 22,745,000 | CVS Health Corp. | 02/20/26 | 5.000 |
|
| 22,517,975 | ||||
| 12,815,000 | McKesson Corp. | 02/15/26 | 5.250 |
|
| 12,751,042 | ||||
|
|
| 35,269,017 | ||||||||
| PIPELINES (0.7%) |
|
| ||||||||
| 1,000,000 | Columbia Pipeline Group, Inc. | 06/01/25 | 4.500 |
|
| 984,389 | ||||
| 16,986,000 | EnLink Midstream Partners LP | 06/01/25 | 4.150 |
|
| 16,577,775 | ||||
| 31,985,000 | Northriver Midstream Finance LP1 | 02/15/26 | 5.625 |
|
| 31,310,110 | ||||
|
|
| 48,872,274 |
The accompanying notes are an integral part of these financial statements.
12 |
BBH LIMITED DURATION FUND |
PORTFOLIO OF INVESTMENTS (continued) April 30, 2024 (unaudited) |
Principal | Maturity | Interest | Value | ||||||||
| CORPORATE BONDS (continued) |
|
| ||||||||
| PRIVATE EQUITY (0.5%) |
|
| ||||||||
$ | 10,600,000 | HAT Holdings I LLC / HAT Holdings II LLC1 | 04/15/25 | 6.000 | % | $ | 10,543,509 | ||||
| 23,540,000 | HAT Holdings I LLC / HAT Holdings II LLC1 | 06/15/26 | 3.375 |
|
| 21,878,507 | ||||
|
|
| 32,422,016 | ||||||||
| REAL ESTATE INVESTMENT TRUSTS (1.4%) |
|
| ||||||||
| 1,000,000 | Agree LP | 06/15/28 | 2.000 |
|
| 865,152 | ||||
| 9,290,000 | American Tower Trust #11 | 03/15/28 | 5.490 |
|
| 9,248,461 | ||||
| 1,000,000 | Boston Properties LP | 10/01/26 | 2.750 |
|
| 925,627 | ||||
| 25,360,000 | EF Holdco / EF Cayman Hold / Ellington Finance REIT Cayman / TRS / EF Cayman Non-MTM1 | 04/01/27 | 5.875 |
|
| 23,839,851 | ||||
| 1,000,000 | Federal Realty OP LP | 05/01/28 | 5.375 |
|
| 988,622 | ||||
| 14,480,000 | Realty Income Corp. | 01/13/26 | 5.050 |
|
| 14,397,044 | ||||
| 29,500,000 | Rexford Industrial Realty LP | 06/15/28 | 5.000 |
|
| 28,785,969 | ||||
| 19,215,000 | Scentre Group Trust 1 / Scentre Group Trust 21 | 01/28/26 | 3.625 |
|
| 18,534,434 | ||||
| 1,000,000 | VICI Properties LP / VICI Note Co., Inc.1 | 02/15/25 | 3.500 |
|
| 980,007 | ||||
|
|
| 98,565,167 | ||||||||
| RETAIL (0.2%) |
|
| ||||||||
| 10,900,000 | AutoZone, Inc. | 11/01/28 | 6.250 |
|
| 11,232,886 | ||||
|
|
| |||||||||
| SEMICONDUCTORS (0.2%) |
|
| ||||||||
| 16,565,000 | ams-OSRAM AG1 | 03/30/29 | 12.250 |
|
| 16,575,436 | ||||
|
|
| |||||||||
| TOYS/GAMES/HOBBIES (0.0%) |
|
| ||||||||
| 1,000,000 | Hasbro, Inc. | 11/19/24 | 3.000 |
|
| 984,312 | ||||
|
|
| |||||||||
| TRUCKING & LEASING (0.4%) |
|
| ||||||||
| 1,000,000 | Penske Truck Leasing Co. LP / PTL Finance Corp.1 | 07/15/25 | 4.000 |
|
| 977,167 | ||||
| 31,000,000 | Penske Truck Leasing Co. LP / PTL Finance Corp.1 | 05/01/28 | 5.550 |
|
| 30,799,884 | ||||
|
|
| 31,777,051 | ||||||||
| Total Corporate Bonds |
|
| 3,139,574,551 | |||||||
|
|
| |||||||||
| LOAN PARTICIPATIONS AND ASSIGNMENTS (11.9%) |
|
| ||||||||
| 28,868,000 | AAdvantage Loyality IP, Ltd. (3-Month CME Term SOFR + 4.750%)2 | 04/20/28 | 10.336 |
|
| 29,995,584 | ||||
| 21,374,594 | Allen Media LLC (3-Month CME Term SOFR + 5.500%)2 | 02/10/27 | 10.959 |
|
| 19,032,366 | ||||
| 20,519,831 | Allspring Buyer LLC (3-Month CME Term SOFR + 3.250%)2 | 11/01/28 | 8.824 |
|
| 20,445,549 | ||||
| 6,604,425 | Allspring Buyer LLC (3-Month CME Term SOFR + 4.000%)2 | 11/01/28 | 9.313 |
|
| 6,602,113 | ||||
| 46,096,869 | Asplundh Tree Expert LLC (1-Month CME Term SOFR + 1.750%)2 | 09/07/27 | 7.166 |
|
| 46,128,676 | ||||
| 4,479,557 | Avantor Funding, Inc. Term B6 (1-Month CME Term SOFR + 2.000%)2 | 11/08/27 | 7.316 |
|
| 4,490,039 |
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 A P R I L 3 0, 2 0 2 4 | 13 |
BBH LIMITED DURATION FUND |
PORTFOLIO OF INVESTMENTS (continued) April 30, 2024 (unaudited) |
Principal | Maturity | Interest | Value | ||||||||
| LOAN PARTICIPATIONS AND ASSIGNMENTS (continued) |
|
| ||||||||
$ | 35,222,779 | Avolon TLB Borrower 1 (US) LLC Term B6 (1-Month CME Term SOFR + 2.000%)2 | 06/22/28 | 7.315 | % | $ | 35,285,124 | ||||
| 12,364,626 | Axalta Coating Systems Dutch Holding B BV (Axalta Coating Systems U.S. Holdings, Inc.) Term B6 (3-Month CME Term SOFR + 2.000%)2 | 12/20/29 | 7.330 |
|
| 12,395,538 | ||||
| 10,171,904 | BCP Renaissance Parent LLC Term B4 (3-Month CME Term SOFR + 3.500%)2 | 10/31/28 | 8.829 |
|
| 10,207,505 | ||||
| 23,219,844 | Buckeye Partners LP Term B3 (1-Month CME Term SOFR + 2.000%)2 | 11/01/26 | 7.316 |
|
| 23,281,608 | ||||
| 43,680,525 | Charter Communications Operating LLC Term B4 (3-Month CME Term SOFR + 2.000%)2 | 12/07/30 | 7.302 |
|
| 43,052,836 | ||||
| 40,795,663 | Clean Harbors, Inc. (1-Month CME Term SOFR + 1.750%)2 | 10/08/28 | 7.180 |
|
| 40,897,652 | ||||
| 13,032,317 | Delos Aircraft Designated Activity Co. (3-Month CME Term SOFR + 2.000%)2 | 10/31/27 | 7.302 |
|
| 13,038,833 | ||||
| 21,409,800 | Eastern Power LLC (1-Month CME Term SOFR + 3.750%)2 | 10/02/25 | 9.180 |
|
| 21,359,058 | ||||
| 44,842,136 | Elanco Animal Health, Inc. (1-Month CME Term SOFR + 1.750%)2 | 08/01/27 | 7.177 |
|
| 44,737,654 | ||||
| 2,615,506 | Icon Plc. (1-Month CME Term SOFR + 2.000%)2 | 07/03/28 | 7.309 |
|
| 2,624,818 | ||||
| 10,497,691 | Icon Plc. (3-Month CME Term SOFR + 2.000%)2 | 07/03/28 | 7.309 |
|
| 10,535,063 | ||||
| 15,099,474 | Iqvia, Inc. Term A2 (3-Month CME Term SOFR + 1.250%)2 | 06/16/27 | 6.693 |
|
| 14,986,228 | ||||
| 31,146,174 | Iridium Satellite LLC Term B3 (1-Month CME Term SOFR + 2.500%)2 | 09/20/30 | 7.816 |
|
| 31,155,829 | ||||
| 32,450,020 | Jazz Pharmaceuticals Plc. Term B1 (1-Month CME Term SOFR + 3.000%)2 | 05/05/28 | 8.430 |
|
| 32,632,713 | ||||
| 15,206,374 | Lumen Technologies, Inc. Term A (1-Month CME Term SOFR + 6.000%)2 | 06/01/28 | 11.316 |
|
| 12,849,386 | ||||
| 9,343,634 | Lumen Technologies, Inc. Term B1 (1-Month CME Term SOFR + 2.350%)2 | 04/15/29 | 7.780 |
|
| 6,708,730 | ||||
| 9,575,419 | Lumen Technologies, Inc. Term B2 (1-Month CME Term SOFR + 2.350%)2 | 04/15/30 | 7.780 |
|
| 6,686,803 | ||||
| 35,865,375 | MPH Acquisition Holdings LLC (3-Month CME Term SOFR + 4.250%)2 | 09/01/28 | 9.855 |
|
| 33,117,011 | ||||
| 10,710,000 | NRG Energy, Inc. (3-Month CME Term SOFR + 2.000%)2 | 04/16/31 | 7.328 |
|
| 10,751,876 | ||||
| 50,000,000 | NVA Holdings Parent LLC (1-Month CME Term SOFR + 1.750%)2,4 | 12/15/25 | 7.180 |
|
| 49,270,000 | ||||
| 45,548,888 | Organon & Co. (1-Month CME Term SOFR + 3.000%)2 | 06/02/28 | 8.433 |
|
| 45,733,816 | ||||
| 45,000,000 | Relam Amsterdam Holdings BV Term A (6-Month Term SOFR + 1.750%)2,4 | 07/10/28 | 5.330 |
|
| 44,775,000 |
The accompanying notes are an integral part of these financial statements.
14 |
BBH LIMITED DURATION FUND |
PORTFOLIO OF INVESTMENTS (continued) April 30, 2024 (unaudited) |
Principal | Maturity | Interest | Value | ||||||||
| LOAN PARTICIPATIONS AND ASSIGNMENTS (continued) |
|
| ||||||||
$ | 15,000,000 | Setanta Aircraft Leasing DAC (3-Month CME Term SOFR + 2.000%)2 | 11/05/28 | 7.564 | % | $ | 15,033,750 | ||||
| 19,317,395 | SkyMiles IP, Ltd. (3-Month CME Term SOFR + 3.750%)2 | 10/20/27 | 9.075 |
|
| 19,898,848 | ||||
| 10,384,440 | SS&C Technologies Holdings, Inc. Term B3 (1-Month CME Term SOFR + 1.750%)2 | 04/16/25 | 7.180 |
|
| 10,381,948 | ||||
| 9,087,149 | SS&C Technologies Holdings, Inc. Term B4 (1-Month CME Term SOFR + 1.750%)2 | 04/16/25 | 7.180 |
|
| 9,084,968 | ||||
| 7,504,534 | SS&C Technologies Holdings, Inc. Term B5 (1-Month CME Term SOFR + 1.750%)2 | 04/16/25 | 7.180 |
|
| 7,502,958 | ||||
| 15,352,941 | UGI Corp. Term A2 (1-Month CME Term SOFR + 2.250%)2 | 05/05/25 | 7.668 |
|
| 15,334,518 | ||||
| 17,138,581 | UGI Energy Services LLC (1-Month CME Term SOFR + 3.250%)2 | 02/22/30 | 8.666 |
|
| 17,218,961 | ||||
| 30,368,183 | Vistra Operations Co. LLC (fka Tex Operations Co. LLC) (1-Month CME Term SOFR + 2.000%)2 | 12/20/30 | 7.316 |
|
| 30,381,849 | ||||
| 3,250,000 | Vontier Corp. (1-Month CME Term SOFR + 1.125%)2 | 10/28/24 | 6.555 |
|
| 3,246,100 | ||||
| 55,552,419 | Wynn Resorts, Ltd. Term A (1-Month CME Term SOFR + 1.750%)2,4 | 09/20/24 | 7.166 |
|
| 55,380,207 | ||||
| Total Loan Participations and Assignments |
|
| 856,241,515 | |||||||
|
|
| |||||||||
| MUNICIPAL BONDS (0.4%) |
|
| ||||||||
| 31,000,000 | Kentucky Public Energy Authority, Revenue Bonds (SOFR + 1.200%)2 | 08/01/52 | 4.764 |
|
| 30,297,301 | ||||
| Total Municipal Bonds |
|
| 30,297,301 | |||||||
|
|
| |||||||||
| RESIDENTIAL MORTGAGE BACKED SECURITIES (0.3%) |
|
| ||||||||
| 3,622,013 | Cascade Funding Mortgage Trust 2019-RM31,2,3 | 06/25/69 | 2.800 |
|
| 3,551,750 | ||||
| 1,314,832 | RESIMAC Premier 2020-1A (1-Month CME Term SOFR + 1.164%)1,2 | 02/07/52 | 6.486 |
|
| 1,314,837 | ||||
| 3,532,291 | RESIMAC Premier 2021-1A (1-Month CME Term SOFR + 0.814%)1,2 | 07/10/52 | 6.132 |
|
| 3,526,969 | ||||
| 6,199,039 | RMF Buyout Issuance Trust 2021-HB11,2,3 | 11/25/31 | 1.259 |
|
| 6,034,332 | ||||
| 5,974,691 | RMF Proprietary Issuance Trust 2019-11,2,3 | 10/25/63 | 2.750 |
|
| 5,059,746 | ||||
| Total Residential Mortgage Backed Securities |
|
| 19,487,634 |
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 A P R I L 3 0, 2 0 2 4 | 15 |
BBH LIMITED DURATION FUND |
PORTFOLIO OF INVESTMENTS (continued) April 30, 2024 (unaudited) |
Principal | Maturity | Interest | Value | ||||||||
| U.S. GOVERNMENT AGENCY OBLIGATIONS (0.9%) |
|
| ||||||||
$ | 25,000,000 | Federal Home Loan Bank Discount Notes6 | 05/01/24 | 0.000 | % | $ | 25,000,000 | ||||
| 40,500,000 | Federal Home Loan Mortgage Corp. | 11/12/25 | 0.600 |
|
| 37,804,677 | ||||
| 11,959 | Federal Home Loan Mortgage Corp. (FHLMC) Non Gold Guaranteed (1-Year RFUCCT + 1.792%)2 | 04/01/36 | 4.733 |
|
| 11,890 | ||||
| 11,887 | Federal Home Loan Mortgage Corp. (FHLMC) Non Gold Guaranteed (6-Month RFUCCT + 1.740%)2 | 12/01/36 | 5.865 |
|
| 11,739 | ||||
| 9,809 | Federal Home Loan Mortgage Corp. (FHLMC) Non Gold Guaranteed (1-Year RFUCCT + 1.745%)2 | 01/01/37 | 5.995 |
|
| 9,787 | ||||
| 2,266,029 | Federal National Mortgage Association (FNMA) | 07/01/35 | 5.000 |
|
| 2,212,714 | ||||
| 137,237 | Federal National Mortgage Association (FNMA) | 11/01/35 | 5.500 |
|
| 136,636 | ||||
| 17,478 | Federal National Mortgage Association (FNMA) (1-Year RFUCCT + 1.938%)2 | 07/01/36 | 6.188 |
|
| 18,060 | ||||
| 27,153 | Federal National Mortgage Association (FNMA) (1-Year RFUCCT + 1.720%)2 | 09/01/36 | 5.970 |
|
| 27,292 | ||||
| 20,844 | Federal National Mortgage Association (FNMA) (1-Year RFUCCT + 1.728%)2 | 01/01/37 | 6.073 |
|
| 20,874 | ||||
| 134,806 | Federal National Mortgage Association (FNMA) | 08/01/37 | 5.500 |
|
| 134,216 | ||||
| 1,596,767 | Federal National Mortgage Association (FNMA) | 08/01/37 | 5.500 |
|
| 1,587,442 | ||||
| 654,380 | Federal National Mortgage Association (FNMA) | 06/01/40 | 6.500 |
|
| 675,347 | ||||
| 3,037 | Government National Mortgage Association (GNMA) (1-Year CMT Index + 1.500%)2 | 08/20/29 | 3.625 |
|
| 2,972 | ||||
| Total U.S. Government Agency Obligations |
|
| 67,653,646 | |||||||
|
|
| |||||||||
| U.S. TREASURY BILLS (14.1%) |
|
| ||||||||
| 2,700,000 | U.S. Treasury Bill6 | 05/07/24 | 0.000 |
|
| 2,697,626 | ||||
| 115,500,000 | U.S. Treasury Bill6 | 05/09/24 | 0.000 |
|
| 115,365,373 | ||||
| 3,750,000 | U.S. Treasury Bill6 | 05/14/24 | 0.000 |
|
| 3,742,854 | ||||
| 120,750,000 | U.S. Treasury Bill6 | 05/16/24 | 0.000 |
|
| 120,487,204 | ||||
| 112,750,000 | U.S. Treasury Bill6 | 05/30/24 | 0.000 |
|
| 112,275,535 | ||||
| 116,150,000 | U.S. Treasury Bill6 | 06/04/24 | 0.000 |
|
| 115,572,398 | ||||
| 108,250,000 | U.S. Treasury Bill6 | 06/06/24 | 0.000 |
|
| 107,684,300 | ||||
| 107,800,000 | U.S. Treasury Bill6 | 06/13/24 | 0.000 |
|
| 107,124,810 | ||||
| 127,450,000 | U.S. Treasury Bill6 | 07/05/24 | 0.000 |
|
| 126,238,429 | ||||
| 107,750,000 | U.S. Treasury Bill6 | 07/16/24 | 0.000 |
|
| 106,556,908 | ||||
| 100,000,000 | U.S. Treasury Bill6 | 08/20/24 | 0.000 |
|
| 98,380,531 | ||||
| 4,400,000 | U.S. Treasury Bill6,7 | 10/10/24 | 0.000 |
|
| 4,297,463 | ||||
| Total U.S. Treasury Bills |
|
| 1,020,423,431 |
The accompanying notes are an integral part of these financial statements.
16 |
BBH LIMITED DURATION FUND |
PORTFOLIO OF INVESTMENTS (continued) April 30, 2024 (unaudited) |
Principal | Maturity | Interest | Value | ||||||||
| U.S. TREASURY BONDS AND NOTES (0.2%) |
|
| ||||||||
$ | 11,600,000 | U.S. Treasury Note | 01/31/26 | 4.250 | % | $ | 11,436,422 | ||||
3,250,000 | U.S. Treasury Note | 01/31/28 | 3.500 |
| 3,103,877 | ||||||
| Total U.S. Treasury Bonds and Notes |
| 14,540,299 | ||||||||
|
|
| |||||||||
| TOTAL INVESTMENTS (Cost $7,291,501,427)8 | 99.2 | % | $ | 7,163,026,688 | ||||||
| CASH AND OTHER ASSETS IN EXCESS OF LIABILITIES | 0.8 | % |
| 57,653,833 | ||||||
| NET ASSETS | 100.0 | % | $ | 7,220,680,521 |
____________
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 April 30, 2024 was $3,473,610,724 or 48.1% 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 April 30, 2024 coupon or interest rate.
3 This variable rate security is based on a predetermined schedule and the rate at period end also represents the reference rate at period end.
4 Security that used significant unobservable inputs to determine fair value.
5 Security is perpetual in nature and has no stated maturity date.
6 Security issued with zero coupon. Income is recognized through accretion of discount.
7 All or a portion of this security is held at the broker as collateral for open futures contracts.
8 The aggregate cost of investments and derivatives for federal income tax purposes is $7,291,501,427, the aggregate gross unrealized appreciation is $21,728,680 and the aggregate gross unrealized depreciation is $144,820,115, resulting in net unrealized depreciation of $123,091,435.
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 A P R I L 3 0, 2 0 2 4 | 17 |
BBH LIMITED DURATION FUND |
PORTFOLIO OF INVESTMENTS (continued) April 30, 2024 (unaudited) |
FINANCIAL FUTURES CONTRACTS
The following futures contracts were open at April 30, 2024:
Description | Number | Expiration | Notional | Market | Unrealized | ||||||||
Contracts to Sell: |
|
|
| ||||||||||
U.S. Treasury 2-Year Notes | 521 | June 2024 | $ | 106,613,695 | $ | 105,583,906 | $ | 1,029,789 | |||||
U.S. Treasury 5-Year Notes | 2,229 | June 2024 |
| 237,823,852 |
| 233,470,337 |
| 4,353,515 | |||||
|
| $ | 5,383,304 |
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
The accompanying notes are an integral part of these financial statements.
18 |
BBH LIMITED DURATION FUND |
PORTFOLIO OF INVESTMENTS (continued) April 30, 2024 (unaudited) |
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 A P R I L 3 0, 2 0 2 4 | 19 |
BBH LIMITED DURATION FUND |
PORTFOLIO OF INVESTMENTS (continued) April 30, 2024 (unaudited) |
The following table summarizes the valuation of the Fund’s investments by the above fair value hierarchy levels as of April 30, 2024.
Investments, at value | Unadjusted | Significant | Significant | Balance as of | ||||||||
Asset Backed Securities | $ | — | $ | 1,575,060,899 | $ | 8,887,832 | $ | 1,583,948,731 | ||||
Commercial Mortgage Backed Securities |
| — |
| 430,859,580 |
| — |
| 430,859,580 | ||||
Corporate Bonds |
| — |
| 3,139,574,551 |
| — |
| 3,139,574,551 | ||||
Loan Participations and Assignments |
| — |
| 706,816,308 |
| 149,425,207 |
| 856,241,515 | ||||
Municipal Bonds |
| — |
| 30,297,301 |
| — |
| 30,297,301 | ||||
Residential Mortgage Backed Securities |
| — |
| 19,487,634 |
| — |
| 19,487,634 | ||||
U.S. Government Agency Obligations |
| — |
| 67,653,646 |
| — |
| 67,653,646 | ||||
U.S. Treasury Bills |
| — |
| 1,020,423,431 |
| — |
| 1,020,423,431 | ||||
U.S. Treasury Bonds and Notes |
| — |
| 14,540,299 |
| — |
| 14,540,299 | ||||
Total Investments, at value | $ | — | $ | 7,004,713,649 | $ | 158,313,039 | $ | 7,163,026,688 | ||||
Other Financial Instruments, at value |
|
|
|
| ||||||||
Financial Futures Contracts | $ | 5,383,304 | $ | — | $ | — | $ | 5,383,304 | ||||
Other Financial Instruments, at value | $ | 5,383,304 | $ | — | $ | — | $ | 5,383,304 |
The accompanying notes are an integral part of these financial statements.
20 |
BBH LIMITED DURATION FUND |
PORTFOLIO OF INVESTMENTS (continued) April 30, 2024 (unaudited) |
The following is a reconciliation of assets for which significant unobservable inputs (Level 3) were used in determining fair value during the period ended April 30, 2024:
Asset Backed | Loan | Total | ||||||||||
Balance as of October 31, 2023 | $ | 9,289,141 |
| $ | 48,865,000 |
| $ | 58,154,141 |
| |||
Purchases |
| — |
|
| 94,001,875 |
|
| 94,001,875 |
| |||
Sales/Paydowns |
| (839,183 | ) |
| (50,472,920 | ) |
| (51,312,103 | ) | |||
Realized gains/(losses) |
| — |
|
| (834,004 | ) |
| (834,004 | ) | |||
Change in unrealized appreciation/(depreciation) |
| 437,874 |
|
| 1,631,705 |
|
| 2,069,579 |
| |||
Amortization |
| — |
|
| 378,118 |
|
| 378,118 |
| |||
Transfers from Level 3 |
| — |
|
| — |
|
| — |
| |||
Transfers to Level 3 |
| — |
|
| 55,855,433 |
|
| 55,855,433 |
| |||
Balance as of April 30, 2024 | $ | 8,887,832 |
| $ | 149,425,207 |
| $ | 158,313,039 |
|
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 April 30, 2024, $58,157,832 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 A p r i l 3 0, 2 0 2 4 | 21 |
BBH LIMITED DURATION FUND |
STATEMENT OF ASSETS AND LIABILITIES April 30, 2024 (unaudited) |
ASSETS: | ||||
Investments in securities, at value (Cost $7,291,501,427) | $ | 7,163,026,688 |
| |
Cash |
| 392,205 |
| |
Receivables for: |
|
| ||
Interest |
| 37,438,980 |
| |
Investments sold |
| 21,674,876 |
| |
Shares sold |
| 3,265,616 |
| |
Futures variation margin on open contracts |
| 930,171 |
| |
Interest from Custodian |
| 18,065 |
| |
Prepaid expenses |
| 59,386 |
| |
Total Assets |
| 7,226,805,987 |
| |
LIABILITIES: |
|
| ||
Payables for: |
|
| ||
Shares redeemed |
| 3,436,880 |
| |
Net investment advisory and administrative fees |
| 1,481,572 |
| |
Dividends declared |
| 695,702 |
| |
Custody and fund accounting fees |
| 317,929 |
| |
Shareholder servicing fees |
| 74,278 |
| |
Professional fees |
| 57,139 |
| |
Transfer agent fees |
| 12,524 |
| |
Board of Trustees' fees |
| 579 |
| |
Accrued expenses and other liabilities |
| 48,863 |
| |
Total Liabilities |
| 6,125,466 |
| |
NET ASSETS | $ | 7,220,680,521 |
| |
|
| |||
Net Assets Consist of: |
|
| ||
Paid-in capital | $ | 7,356,418,551 |
| |
Accumulated deficit |
| (135,738,030 | ) | |
Net Assets | $ | 7,220,680,521 |
| |
|
| |||
NET ASSET VALUE AND OFFERING PRICE PER SHARE |
|
| ||
CLASS N SHARES |
|
| ||
($454,753,308 ÷ 44,157,219 shares outstanding) | $ | 10.30 |
| |
CLASS I SHARES |
|
| ||
($6,765,927,213 ÷ 657,323,877 shares outstanding) | $ | 10.29 |
|
The accompanying notes are an integral part of these financial statements.
22 |
BBH LIMITED DURATION FUND |
STATEMENT OF OPERATIONS For the six months ended April 30, 2024 (unaudited) |
NET INVESTMENT INCOME: |
|
| ||
Income: |
|
| ||
Interest income | $ | 182,622,843 |
| |
Interest income from Custodian |
| 127,553 |
| |
Other income |
| 2,992,386 |
| |
Total Income |
| 185,742,782 |
| |
|
| |||
Expenses: |
|
| ||
Investment advisory and administrative fees |
| 9,210,713 |
| |
Shareholder servicing fees |
| 443,037 |
| |
Custody and fund accounting fees |
| 290,042 |
| |
Board of Trustees' fees |
| 77,876 |
| |
Professional fees |
| 53,166 |
| |
Transfer agent fees |
| 38,017 |
| |
Miscellaneous expenses |
| 277,002 |
| |
Total Expenses |
| 10,389,853 |
| |
Investment advisory and administrative fee waiver |
| (314,248 | ) | |
Net Expenses |
| 10,075,605 |
| |
Net Investment Income |
| 175,667,177 |
| |
|
| |||
NET REALIZED AND UNREALIZED GAIN: |
|
| ||
Net realized loss on investments in securities |
| (8,623,348 | ) | |
Net realized gain on futures contracts |
| 922,398 |
| |
Net realized loss on investments in securities and futures contracts |
| (7,700,950 | ) | |
Net change in unrealized appreciation/(depreciation) on investments in securities |
| 140,585,905 |
| |
Net change in unrealized appreciation/(depreciation) on futures contracts |
| 313,305 |
| |
Net change in unrealized appreciation/(depreciation) on investments in securities and futures contracts |
| 140,899,210 |
| |
Net Realized and Unrealized Gain |
| 133,198,260 |
| |
Net Increase in Net Assets Resulting from Operations | $ | 308,865,437 |
|
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 A P R I L 3 0, 2 0 2 4 | 23 |
BBH LIMITED DURATION FUND |
STATEMENTS OF CHANGES IN NET ASSETS |
For the | For the | |||||||
INCREASE/(DECREASE) IN NET ASSETS FROM: |
|
|
|
| ||||
Operations: |
|
|
|
| ||||
Net investment income | $ | 175,667,177 |
| $ | 312,631,297 |
| ||
Net realized gain/(loss) on investments in securities and futures contracts |
| (7,700,950 | ) |
| 20,192,220 |
| ||
Net change in unrealized appreciation/(depreciation) on investments in securities and futures contracts |
| 140,899,210 |
|
| 138,827,140 |
| ||
Net increase in net assets resulting from operations |
| 308,865,437 |
|
| 471,650,657 |
| ||
|
|
|
| |||||
Dividends and distributions declared: |
|
|
|
| ||||
Class N |
| (10,879,225 | ) |
| (18,843,572 | ) | ||
Class I |
| (167,610,502 | ) |
| (293,175,046 | ) | ||
Total dividends and distributions declared |
| (178,489,727 | ) |
| (312,018,618 | ) | ||
|
|
|
| |||||
Share transactions: |
|
|
|
| ||||
Proceeds from sales of shares1 |
| 1,139,373,779 |
|
| 2,363,986,624 |
| ||
Net asset value of shares issued to shareholders for reinvestment of dividends and distributions |
| 46,764,847 |
|
| 79,989,422 |
| ||
Cost of shares redeemed1 |
| (1,223,326,048 | ) |
| (3,715,647,694 | ) | ||
Net decrease in net assets resulting from share transactions |
| (37,187,422 | ) |
| (1,271,671,648 | ) | ||
Total increase/(decrease) in net assets |
| 93,188,288 |
|
| (1,112,039,609 | ) | ||
|
|
|
| |||||
NET ASSETS: |
|
|
|
| ||||
Beginning of period/year |
| 7,127,492,233 |
|
| 8,239,531,842 |
| ||
End of period/year | $ | 7,220,680,521 |
| $ | 7,127,492,233 |
|
____________
1 Includes share exchanges. See Note 5 in Notes to Financial Statements.
The accompanying notes are an integral part of these financial statements.
24 |
BBH LIMITED DURATION FUND |
FINANCIAL HIGHLIGHTS Selected per share data and ratios for a Class N share outstanding throughout each period/year. |
For the |
| |||||||||||||||||||||||||||||||
2023 | 2022 | 2021 | 2020 | 2019 | ||||||||||||||||||||||||||||
Net asset value, beginning of period/year |
| $ | 10.11 |
|
|
| $ | 9.91 |
|
|
| $ | 10.32 |
|
|
| $ | 10.23 |
|
|
| $ | 10.26 |
|
|
| $ | 10.15 |
| |||
Income from investment operations: |
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||
Net investment income1 |
| 0.25 |
|
| 0.41 |
|
| 0.19 |
|
| 0.15 |
|
| 0.24 |
|
| 0.30 |
| ||||||||||||||
Net realized and unrealized gain/(loss) |
| 0.19 |
|
| 0.20 |
|
| (0.41 | ) |
| 0.09 |
|
| (0.03 | ) |
| 0.11 |
| ||||||||||||||
Total income/(loss) from investment operations |
| 0.44 |
|
| 0.61 |
|
| (0.22 | ) |
| 0.24 |
|
| 0.21 |
|
| 0.41 |
| ||||||||||||||
Dividends and distributions to shareholders: |
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||
From net investment income |
| (0.25 | ) |
| (0.41 | ) |
| (0.19 | ) |
| (0.15 | ) |
| (0.24 | ) |
| (0.30 | ) | ||||||||||||||
From net realized gains |
| (0.00 | )2 |
| — |
|
| — |
|
| — |
|
| — |
|
| — |
| ||||||||||||||
Total dividends and distributions to shareholders |
| (0.25 | ) |
| (0.41 | ) |
| (0.19 | ) |
| (0.15 | ) |
| (0.24 | ) |
| (0.30 | ) | ||||||||||||||
Net asset value, end of period/year | $ | 10.30 |
| $ | 10.11 |
| $ | 9.91 |
| $ | 10.32 |
| $ | 10.23 |
| $ | 10.26 |
| ||||||||||||||
Total return3 |
| 4.39 | %4 |
| 6.24 | % |
| (2.12 | )% |
| 2.38 | % |
| 2.06 | % |
| 4.14 | % | ||||||||||||||
Ratios/Supplemental data: |
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||
Net assets, end of period/year (in millions) | $ | 455 |
| $ | 440 |
| $ | 490 |
| $ | 656 |
| $ | 461 |
| $ | 371 |
| ||||||||||||||
Ratio of expenses to average net assets before reductions |
| 0.49 | %5 |
| 0.49 | % |
| 0.49 | % |
| 0.49 | % |
| 0.49 | % |
| 0.51 | % | ||||||||||||||
Fee waiver6 |
| (0.14 | )%5 |
| (0.14 | )% |
| (0.14 | )% |
| (0.14 | )% |
| (0.14 | )% |
| (0.16 | )% | ||||||||||||||
Expense offset arrangement |
| — | % |
| — | % |
| — | % |
| — | % |
| — | % |
| (0.00 | )%7 | ||||||||||||||
Ratio of expenses to average net assets after reductions |
| 0.35 | %5 |
| 0.35 | % |
| 0.35 | % |
| 0.35 | % |
| 0.35 | % |
| 0.35 | % | ||||||||||||||
Ratio of net investment income to average net assets |
| 4.83 | %5 |
| 4.06 | % |
| 1.87 | % |
| 1.48 | % |
| 2.32 | % |
| 2.98 | % | ||||||||||||||
Portfolio turnover rate |
| 16 | %4 |
| 22 | % |
| 46 | % |
| 34 | % |
| 51 | % |
| 53 | % |
____________
1 Calculated using average shares outstanding for the period/year.
2 Less than $0.01.
3 Assumes the reinvestment of distributions.
4 Not annualized.
5 Annualized.
6 The ratio of expenses to average net assets for the six months ended April 30, 2024, the years ended October 31, 2023, 2022, 2021, 2020 and 2019, reflects fees reduced as result of a contractual operating expense limitation of the share class to 0.35%. The agreement is effective through March 1, 2025 and may only be terminated during its term with approval of the Fund’s Board of Trustees. For the six months ended April 30, 2024 and the years ended October 31, 2023, 2022, 2021, 2020 and 2019 the waived fees were $314,248, $665,947, $797,646, $746,522, $595,975 and $538,703, respectively.
7 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 A P R I L 3 0, 2 0 2 4 | 25 |
BBH LIMITED DURATION FUND |
FINANCIAL HIGHLIGHTS (continued) Selected per share data and ratios for a Class I share outstanding throughout each period/year. |
For the |
| |||||||||||||||||||||||||||||||
2023 | 2022 | 2021 | 2020 | 2019 | ||||||||||||||||||||||||||||
Net asset value, beginning of period/year |
| $ | 10.11 |
|
|
| $ | 9.90 |
|
|
| $ | 10.32 |
|
|
| $ | 10.23 |
|
| $ | 10.25 |
| $ | 10.15 |
| ||||||
Income from investment operations: |
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||
Net investment income1 |
| 0.25 |
|
| 0.41 |
|
| 0.19 |
|
| 0.16 |
|
| 0.24 |
|
| 0.31 |
| ||||||||||||||
Net realized and unrealized gain/(loss) |
| 0.18 |
|
| 0.22 |
|
| (0.41 | ) |
| 0.09 |
|
| (0.02) |
|
| 0.10 |
| ||||||||||||||
Total income/(loss) from investment operations |
| 0.43 |
|
| 0.63 |
|
| (0.22) |
|
| 0.25 |
|
| 0.22 |
|
| 0.41 |
| ||||||||||||||
Dividends and distributions to shareholders: |
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||
From net investment income |
| (0.25 | ) |
| (0.42 | ) |
| (0.20 | ) |
| (0.16 | ) |
| (0.24 | ) |
| (0.31 | ) | ||||||||||||||
From net realized gains |
| (0.00 | )2 |
| — |
|
| — |
|
| — |
|
| — |
|
| — |
| ||||||||||||||
Total dividends and distributions to shareholders |
| (0.25 | ) |
| (0.42 | ) |
| (0.20 | ) |
| (0.16 | ) |
| (0.24 | ) |
| (0.31 | ) | ||||||||||||||
Net asset value, end of period/year | $ | 10.29 |
| $ | 10.11 |
| $ | 9.90 |
| $ | 10.32 |
| $ | 10.23 |
| $ | 10.25 |
| ||||||||||||||
Total return3 |
| 4.33 | %4 |
| 6.43 | % |
| (2.14 | )% |
| 2.46 | % |
| 2.24 | % |
| 4.12 | % | ||||||||||||||
Ratios/Supplemental data: |
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||
Net assets, end of period/year (in millions) | $ | 6,766 |
| $ | 6,688 |
| $ | 7,749 |
| $ | 11,442 |
| $ | 7,610 |
| $ | 6,769 |
| ||||||||||||||
Ratio of expenses to average net assets before reductions |
| 0.28 | %5 |
| 0.28 | % |
| 0.27 | % |
| 0.27 | % |
| 0.27 | % |
| 0.28 | % | ||||||||||||||
Expense offset arrangement |
| — | % |
| — | % |
| — | % |
| — | % |
| — | % |
| (0.00 | )%6 | ||||||||||||||
Ratio of expenses to average net assets after reductions |
| 0.28 | %5 |
| 0.28 | % |
| 0.27 | % |
| 0.27 | % |
| 0.27 | % |
| 0.28 | % | ||||||||||||||
Ratio of net investment income to average net assets |
| 4.90 | %5 |
| 4.13 | % |
| 1.92 | % |
| 1.55 | % |
| 2.40 | % |
| 3.04 | % | ||||||||||||||
Portfolio turnover rate |
| 16 | %4 |
| 22 | % |
| 46 | % |
| 34 | % |
| 51 | % |
| 53 | % |
____________
1 Calculated using average shares outstanding for the period/year.
2 Less than $0.01.
3 Assumes the reinvestment of distributions.
4 Not annualized.
5 Annualized.
6 Less than 0.01%.
The accompanying notes are an integral part of these financial statements.
26 |
BBH LIMITED DURATION FUND |
NOTES TO FINANCIAL STATEMENTS April 30, 2024 (unaudited) |
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 April 30, 2024, 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 the supervision and oversight of the determination of 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 A P R I L 3 0, 2 0 2 4 | 27 |
BBH LIMITED DURATION FUND |
NOTES TO FINANCIAL STATEMENTS (continued) April 30, 2024 (unaudited) |
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 April 30, 2024, are listed in the Portfolio of Investments.
28 |
BBH LIMITED DURATION FUND |
NOTES TO FINANCIAL STATEMENTS (continued) April 30, 2024 (unaudited) |
For the six months ended April 30, 2024, the average monthly notional amount of open futures contracts was $378,999,917. The range of monthly notional amounts was $344,437,548 to $425,130,157.
Fair Values of Derivative Instruments as of April 30, 2024
Derivatives not accounted for as economically hedging instruments under authoritative guidance for derivatives instruments and hedging activities:
Risk | Asset Derivatives | Liability Derivatives | ||||||||||
Statement of Assets | Fair Value | Statement of Assets | Fair Value | |||||||||
Interest Rate Risk | Net unrealized | $5,383,304 | * | Net unrealized | $ | — | ||||||
|
|
|
| |||||||||
Total | $5,383,304 |
| $ | — |
––––––––––––––––––––––––––
* Includes cumulative appreciation/(depreciation) of futures contracts as reported in the Statement of Assets and Liabilities and Notes to Financial Statements. Only the current day’s variation margin is reported within the Statement of Assets and Liabilities.
Effect of Derivative Instruments on the Statement of Operations | |||||
Interest Rate Risk | |||||
Net Realized Gain/(Loss) on Derivatives |
| ||||
Futures Contracts | $ | 922,398 | |||
| |||||
Net Change in Unrealized Appreciation/(Depreciation) on Derivatives |
| ||||
Futures Contracts | $ | 313,305 |
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 A P R I L 3 0, 2 0 2 4 | 29 |
BBH LIMITED DURATION FUND |
NOTES TO FINANCIAL STATEMENTS (continued) April 30, 2024 (unaudited) |
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 unrecognized tax benefits as of October 31, 2023, nor were there any increases or decreases in
30 |
BBH LIMITED DURATION FUND |
NOTES TO FINANCIAL STATEMENTS (continued) April 30, 2024 (unaudited) |
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 six months ended April 30, 2024, 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 $10,879,225 and $167,610,502 to Class N and Class I shareholders, respectively, during the six months ended April 30, 2024.
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: | $ 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.
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.
F I N A N C I A L S T A T E M E N T S A P R I L 3 0, 2 0 2 4 | 31 |
BBH LIMITED DURATION FUND |
NOTES TO FINANCIAL STATEMENTS (continued) April 30, 2024 (unaudited) |
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 six months ended April 30, 2024, the Fund incurred $9,210,713 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, 2025 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 six months ended April 30, 2024, the Investment Adviser waived fees in the amount of $314,248 for Class N.
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 six months ended April 30, 2024, Class N shares of the Fund incurred $443,037 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 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 based partially on asset values and partially on individual fund transactions. The fund accounting fee
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BBH LIMITED DURATION FUND |
NOTES TO FINANCIAL STATEMENTS (continued) April 30, 2024 (unaudited) |
is primarily an asset-based fee calculated at 0.325 basis points per annum of the Fund’s net asset value. For the six months ended April 30, 2024, the Fund incurred $290,042 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 six months ended April 30, 2024 was $127,553. 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 six months ended April 30, 2024. 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 six months ended April 30, 2024, the Fund incurred $77,876 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 six months ended April 30, 2024, the cost of purchases and the proceeds of sales of investment securities, other than short-term investments, were $1,037,288,678 and $1,743,334,161, respectively.
5. Shares of Beneficial Interest. The Trust is permitted to issue an unlimited number of Class N shares and Class I shares of beneficial interest, at no par value. Transactions in Class N and Class I shares were as follows:
F I N A N C I A L S T A T E M E N T S A P R I L 3 0, 2 0 2 4 | 33 |
BBH LIMITED DURATION FUND |
NOTES TO FINANCIAL STATEMENTS (continued) April 30, 2024 (unaudited) |
For the six months ended | For the year ended | |||||||||||||||
Shares | Dollars | Shares | Dollars | |||||||||||||
Class N |
|
|
|
|
|
| ||||||||||
Shares sold | 8,090,568 |
| $ | 83,028,603 |
| 16,648,681 |
| $ | 167,017,042 |
| ||||||
Shares issued in connection with reinvestments of dividends | 1,025,695 |
|
| 10,538,223 |
| 1,811,474 |
|
| 18,214,422 |
| ||||||
Shares redeemed | (8,429,644 | ) |
| (86,461,791 | ) | (24,481,906 | ) |
| (245,721,231 | ) | ||||||
Net increase/(decrease) | 686,619 |
| $ | 7,105,035 |
| (6,021,751 | ) | $ | (60,489,767 | ) | ||||||
|
|
|
|
|
| |||||||||||
Class I |
|
|
|
|
|
| ||||||||||
Shares sold | 102,945,564 |
| $ | 1,056,345,176 |
| 218,901,381 |
| $ | 2,196,969,582 |
| ||||||
Shares issued in connection with reinvestments of dividends | 3,527,052 |
|
| 36,226,624 |
| 6,146,307 |
|
| 61,775,000 |
| ||||||
Shares redeemed | (110,869,845 | ) |
| (1,136,864,257 | ) | (345,987,715 | ) |
| (3,469,926,463 | ) | ||||||
Net decrease | (4,397,229 | ) | $ | (44,292,457 | ) | (120,940,027 | ) | $ | (1,211,181,881 | ) |
Included in Shares Sold and Shares Redeemed are shareholder exchanges during the six months ended April 30, 2024 and the year ended October 31, 2023. Specifically:
During the six months ended April 30, 2024, 753,996 shares of Class N were exchanged for 754,652 shares of Class I valued at $7,769,629 and 12,560 shares of Class I were exchanged for 12,548 shares of Class N valued at $129,464.
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.
6. Principal Risk Factors and Indemnifications.
A. Principal Risk Factors. Investing in the Fund may involve certain risks, as discussed in the Fund’s prospectus, including but not limited to, those described below:
A shareholder may lose money by investing in the Fund (investment risk). The Fund is actively managed and the decisions by the Investment Adviser may cause the Fund to incur losses or miss profit opportunities (management risk). In the normal course of business, the Fund invests in securities and enters into transactions where risks exist due to failure of a counterparty to a transaction to perform (credit risk), changes in interest rates (interest rate risk), higher volatility for securities with longer maturities (maturity risk), financial performance or leverage of the issuer (issuer risk), difficulty in being able to purchase or sell a security (illiquid securities risk), or certain risks associated with investing in 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
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BBH LIMITED DURATION FUND |
NOTES TO FINANCIAL STATEMENTS (continued) April 30, 2024 (unaudited) |
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 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
F I N A N C I A L S T A T E M E N T S A P R I L 3 0, 2 0 2 4 | 35 |
BBH LIMITED DURATION FUND |
NOTES TO FINANCIAL STATEMENTS (continued) April 30, 2024 (unaudited) |
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 April 30, 2024 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.
36 |
BBH LIMITED DURATION FUND |
DISCLOSURE OF FUND EXPENSES April 30, 2024 (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 (November 1, 2023 to April 30, 2024).
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.
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BBH LIMITED DURATION FUND |
DISCLOSURE OF FUND EXPENSES (continued) April 30, 2024 (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 | $1,044 | $1.78 | |||
Hypothetical2 | $1,000 | $1,023 | $1.76 |
Beginning | Ending | Expenses Paid | ||||
Class I | ||||||
Actual | $1,000 | $1,043 | $1.42 | |||
Hypothetical2 | $1,000 | $1,023 | $1.41 |
____________
1 Expenses are equal to the Fund’s annualized net 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 182/366 (to reflect the one-half year period).
2 Assumes a return of 5% before expenses. For the purposes of the calculation, the applicable annualized expenses ratio for each class of shares is subtracted from the assumed return before expenses.
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BBH LIMITED DURATION FUND |
DISCLOSURE OF ADVISOR SELECTION April 30, 2024 (unaudited) |
Investment Advisory and Administrative Services Agreement Approval
The 1940 Act requires that a fund’s investment advisory agreements be approved annually by the fund’s board of trustees, including 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.
The Board, a majority of which is comprised of Independent Trustees, held a telephonic meeting on November 16, 2023 and an in-person meeting on December 12, 2023, in reliance on the Exemptive Relief, to consider whether to renew the combined Amended and Restated Investment Advisory and Administrative Services Agreement (the “Agreement”) between the Trust and the Investment Adviser with respect to the existing funds in the Trust, including the Fund. At the December 12, 2023 meeting, the Board voted to approve the renewal of the Agreement with respect to the Fund for an additional one-year term. In doing so, the Board determined that the terms of the Agreement were fair and reasonable and in the best interest of the Fund and its shareholders, and that it had received sufficient information to make an informed business decision with respect to the continuation of the Agreement.
Both in the meetings specifically held to address the continuance of the Agreement and at other meetings over the course of the year, the Board requested, received and assessed a variety of materials provided by the Investment Adviser and BBH, including, among other things, information about the nature, extent and quality of the services provided to the Fund by the Investment Adviser and BBH, including investment management, administrative and shareholder services, the oversight of Fund service providers, marketing, risk oversight, compliance, and the ability to meet applicable legal and regulatory requirements.
The Board also received third-party comparative performance and fee and expense information for the Fund prepared by Broadridge Financial Solutions, Inc. (“Broadridge”) using data from Lipper Inc., an independent provider of investment company data (“Lipper Report”). The Board reviewed this report with Broadridge, counsel to the Trust (“Fund Counsel”) and BBH. The Board received from, and discussed with Fund Counsel a memorandum regarding the responsibilities of trustees for the approval of investment advisory agreements under the 1940 Act, as well as the guidance provided in 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.
In approving the continuation of the Agreement, the Board considered: (a) the nature, extent and quality of services provided by the Investment Adviser; (b) the investment performance of the Fund; (c) the advisory fee and the cost of the services and profits to be realized by the Investment Adviser from its relationship with the Fund; (d) the Fund’s costs to investors compared to the costs of comparative funds and performance compared to the relevant performance of comparative funds; (e) the sharing of potential economies of scale; (f) fall-out benefits to the Investment Adviser as a result of its relationship with the Fund; and (g) other factors deemed relevant by the Board. The following is a summary of certain factors the Board considered in making its determination to approve the continuance of the Agreement. No single factor reviewed by the Board was identified as the principal factor in determining whether to approve the Agreement, and individual Trustees may have given different weight to various factors. The Board
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BBH LIMITED DURATION FUND |
DISCLOSURE OF ADVISOR SELECTION (continued) April 30, 2024 (unaudited) |
reviewed these factors with Fund Counsel. The Board concluded that the fees paid by the Fund to the Investment Adviser were reasonable based on the comparative performance, expense information, the cost of the services provided, and the profits realized by the Investment Adviser.
Nature, Extent and Quality of Services
The Board noted that, under the Agreement and with respect to the Fund, the Investment Adviser, subject to the supervision of the Board, is responsible for providing a continuous investment program and making purchases and sales of portfolio securities consistent with the Fund’s investment objective and policies. The Board further noted that, as a combined investment advisory and administration agreement, the Agreement also contemplates the provision of administrative services by the Investment Adviser to the Fund within the same fee structure.
The Board received and considered information during the December 12, 2023 meeting, and over the course of the previous year, regarding the nature, extent and quality of services provided to the Fund by the Investment Adviser including: portfolio management, the supervision of operations and compliance, preparation of regulatory filings, disclosures to Fund shareholders, general oversight of service providers, organizing Board meetings and preparing the materials for such Board meetings, assistance to the Board (including the Independent Trustees in their capacity as Trustees), legal and Chief Compliance Officer services for the Trust, and other services necessary for the operation of the Fund.
The Board considered the resources of the Investment Adviser and BBH, as a whole, dedicated to the Fund noting that, pursuant to separate agreements, BBH also provides custody, shareholder servicing, and fund accounting services to the Fund. The Board considered the depth and range of services provided pursuant to the Agreement, noting that the Investment Adviser also coordinates the provision of services to the Fund by affiliated and nonaffiliated service providers.
The Board considered the scope and quality of services provided by the Investment Adviser under the Agreement. The Board reviewed the qualifications of the key investment personnel primarily responsible for the day-to-day portfolio management of the Fund. The Board also considered the policies and practices followed by BBH and the Investment Adviser. The Board noted that during the course of its regular meetings, it received reports on each of the foregoing topics. The Board concluded that, overall, it was satisfied with the nature, extent and quality of the investment advisory and administrative services provided, and expected to be provided, to the Fund pursuant to the Agreement.
Fund Performance
At the November 16, 2023 and December 12, 2023 meetings, and throughout the year, the Board received and considered performance information for the Fund provided by BBH. The Board also considered the Fund’s performance relative to a peer category of other mutual funds in a report compiled by Broadridge. As part of this review, the Trustees considered the composition of the peer category, selection criteria and reputation of Broadridge who prepared the peer category analysis. The Board reviewed and discussed with both BBH and Broadridge the report’s findings and discussed the positioning of the Fund relative to
40 |
BBH LIMITED DURATION FUND |
DISCLOSURE OF ADVISOR SELECTION (continued) April 30, 2024 (unaudited) |
its selected peer category. The Board considered short-term and long-term investment performance for the Fund over various periods of time as compared to a selection of peer category, noting the Fund’s above average performance in the 1-, 2-, 3-, 4-, 5- and 10-year periods, ended September 30, 2023. In evaluating the performance of the Fund, the Board considered the risk expectations for the Fund as well as the relevant market conditions for the Fund’s investments and investment strategy. Based on this information, and in light of the Fund’s historic investment style, the Board concluded that it was satisfied with the Fund’s investment results.
Costs of Services Provided and Profitability
The Board considered the fee rates paid by the Fund to the Investment Adviser in light of the nature, extent and quality of the services provided to the Fund. The Board also considered and reviewed the fee waiver arrangement that was in place for the Fund’s Class N shares and considered the actual fee rates after taking into account the contractual fee waiver. The Board received and considered information comparing the Fund’s combined investment advisory and administration fee and the Fund’s net operating expenses with those of other comparable mutual funds, such peer category and comparisons having been selected and calculated by Broadridge, noting that the Fund compared exceedingly well to the selected peer category. The Board recognized that it is difficult to make comparisons of the fee rate, or of combined advisory and administration fees, because there are variations in the services that are included in the fees paid by other funds. The Board concluded that the advisory and administration fee appeared to be both reasonable in light of the services rendered and the result of arm’s length negotiations.
With regard to profitability, the Trustees considered the compensation and benefits flowing to the Investment Adviser and BBH, directly or indirectly. The Board reviewed profitability data for the Fund using data from October 1, 2022 through September 30, 2023, for both the Investment Adviser and BBH. The data also included the effect of revenue generated by the shareholder servicing, custody and fund accounting fees paid by the Fund to BBH and corresponding expenses. The Board conducted a detailed review of the expense allocation methods used in preparing the profitability data. The Board focused on profitability of the Investment Adviser and BBH’s relationships with the Fund before taxes and distribution expenses. The Board concluded that the Investment Adviser’s and BBH’s profitability was not excessive in light of the nature, extent and quality of services provided to the Fund.
The Board also considered the effect of fall-out benefits to the Investment Adviser and BBH such as the increased visibility of BBH’s investment management business due to the distribution of the Trust’s funds. The Board considered other benefits received by BBH and the Investment Adviser as a result of their relationships with the Fund. These other benefits include fees received for being the Fund’s administrator, custodian, fund accounting and shareholder servicing agent. In light of the costs of providing services pursuant to the Agreement as well as the Investment Adviser and BBH’s commitment to the Fund, the ancillary benefits that the Investment Adviser and BBH received were considered reasonable.
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BBH LIMITED DURATION FUND |
DISCLOSURE OF ADVISOR SELECTION (continued) April 30, 2024 (unaudited) |
Economies of Scale
The Board also considered the existence of economies of scale and whether those economies are passed along to the Fund’s shareholders through a graduated investment advisory fee schedule or other means, including any fee waivers by the Investment Adviser and BBH. The Board considered the fee schedule for the Fund on the information they had been provided over many years, the Board observed that in the mutual fund industry as a whole, as well as among funds similar to the Fund, there appeared to be no uniformity or pattern in the fees and asset levels at which breakpoints apply. In light of the Fund’s current size and expense structure, the Board concluded that the current breakpoints for the Fund were reasonable. The Board concluded that the fees paid by the Fund to the Investment Adviser were reasonable based on the comparative performance, expense information, the cost of the services provided and the profits to be realized by the Investment Adviser.
42 |
BBH LIMITED DURATION FUND |
CONFLICTS OF INTEREST April 30, 2024 (unaudited) |
BBH&Co., 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&Co., 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&Co. for which they will pay to BBH&Co. customary fees and expenses that will not be shared with the Funds.
The Investment Adviser and the Sub-advisers have adopted and implemented policies and procedures that seek to manage conflicts of interest. Pursuant to such policies and procedures, the Investment Adviser and each Sub-adviser monitor a variety of areas, including compliance with fund investment guidelines, the investment in only those securities that have been approved for purchase, and compliance with their respective Code of Ethics.
The Trust also manages these conflicts of interest. For example, the Trust has designated a CCO and has adopted and implemented policies and procedures designed to manage the conflicts identified below and other conflicts that may arise in the course of the Funds’ operations in such a way as to safeguard the Funds from being negatively affected as a result of any such potential conflicts. From time to time, the Trustees receive reports from the Investment Adviser, the Sub-advisers 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&Co., the Investment Adviser and Sub-advisers can face in the operation of their respective investment management services. This section is not, and is not intended to be, a complete enumeration or explanation of all of the potential conflicts of interest that may arise. The Investment Adviser, the Sub-advisers 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&Co., the Investment Adviser, and the Sub-advisers manage funds and accounts of clients other than the Funds (“Other Clients”). In general, BBH&Co., the Investment Adviser, and the Sub-advisers face conflicts of interest when they render investment advisory services to different clients and, from time to time, provide dissimilar investment advice to different clients. Investment decisions will not necessarily be made in parallel among the Funds and Other Clients. Investments made by the Funds do not, and are not intended to, replicate the investments, or the investment methods and strategies, of Other Clients. Accordingly, such Other Clients 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
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BBH LIMITED DURATION FUND |
CONFLICTS OF INTEREST (continued) April 30, 2024 (unaudited) |
manager is responsible, on the other. For example, it is possible that the various funds or accounts managed by the Investment Adviser or Sub-advisers could have different investment strategies that, at times, might conflict with one another to the possible detriment of the Funds. From time to time, the Investment Adviser and Sub-advisers, sponsor and with other investment pools and accounts which engage in the same or similar businesses as the Funds using the same or similar investment strategies. To the extent that the same investment opportunities might be desirable for more than one account or fund, possible conflicts could arise in determining how to allocate them because the Investment Adviser or Sub-advisers may have an incentive to allocate investment opportunities to certain accounts or funds. However, BBH&Co. 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&Co. provides administrative, custody, shareholder servicing and fund accounting services to the Funds. BBH&Co. 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&Co. may have an incentive to agree to higher fees than it would in the case of unaffiliated providers. BBH&Co. acting in its capacity as the Funds’ administrator is the primary valuation agent of the Funds. BBH&Co. 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&Co. and its affiliates may have an incentive to seek to overvalue certain assets.
Aggregation. Potential conflicts of interest also arise with the aggregation of trade orders. Purchases and sales of securities for the Funds may be aggregated with orders for other client accounts managed by the Sub-advisers. The Sub-advisers, 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
44 |
BBH LIMITED DURATION FUND |
CONFLICTS OF INTEREST (continued) April 30, 2024 (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&Co., the Investment Adviser may (but is not required to) effect purchases and sales between BBH&Co., the Investment Adviser clients (“cross trades”), including the Funds, if BBH&Co., the Investment Adviser or a Fund’s Sub-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&Co., the Investment Adviser and/or a Fund’s Sub-adviser may have a potentially conflicting division of loyalties and responsibilities to the parties in such transactions.
Soft Dollars. The Investment Adviser may direct brokerage transactions and/or payment of a portion of client commissions (“soft dollars”) to specific brokers or dealers or other providers to pay for research or other appropriate services which provide, in the Investment Adviser’s view, appropriate assistance in the investment decision-making process (including with respect to futures, fixed price offerings and over-the-counter transactions). The use of a broker that provides research and securities transaction services may result in a higher commission than that offered by a broker who does not provide such services. The Investment Adviser will determine in good faith whether the amount of commission is reasonable in relation to the value of research and services provided and whether the services provide lawful and appropriate assistance in its investment decision-making responsibilities.
Research or other services obtained in this manner may be used in servicing any or all of the Funds and other accounts managed by the Investment Adviser, including in connection with accounts that do not pay commissions to the broker related to the research or other service arrangements. Such products and services may disproportionately benefit other client accounts relative to the Funds based on the amount of brokerage commissions paid by the Funds and such other accounts. To the extent that a Sub-adviser uses soft dollars, it will not have to pay for those products and services itself.
BBH&Co. may receive research that is bundled with the trade execution, clearing, and/or settlement services provided by a particular broker-dealer. To the extent that a Sub-adviser receives research on this basis, many of the same conflicts related to traditional soft dollars may exist. For example, the research effectively will be paid by client commissions that also will be used to pay for the execution, clearing, and settlement services provided by the broker-dealer and will not be paid by the Sub-adviser.
Arrangements regarding compensation and delegation of responsibility may create conflicts relating to selection of brokers or dealers to execute Fund portfolio trades and/or specific uses of commissions from Fund portfolio trades, administration of investment advice and valuation of securities.
F I N A N C I A L S T A T E M E N T S A P R I L 3 0, 2 0 2 4 | 45 |
BBH LIMITED DURATION FUND |
CONFLICTS OF INTEREST (continued) April 30, 2024 (unaudited) |
Investments in BBH Funds. From time to time BBH&Co. may invest a portion of the assets of its discretionary investment advisory clients in the Funds. That investment by BBH&Co. 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&Co. may limit its selection to funds managed by BBH&Co. or the Investment Adviser. BBH&Co. 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&Co., 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&Co. 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&Co. 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&Co. to be unreliable, the Funds’ investments will be valued at fair value by BBH&Co. pursuant to procedures adopted by the Funds’ Board. When determining an asset’s “fair value,” BBH&Co. 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&Co. deems relevant at the time of the determination and may be based on analytical values determined by BBH&Co. 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&Co. (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&Co. may enter into advisory and/or referral arrangements with third parties. Such arrangements may include compensation paid by BBH&Co. to the third party. BBH&Co. may pay a solicitation fee for referrals and/or advisory or incentive fees. BBH&Co. may benefit from increased amounts of assets under management.
46 |
BBH LIMITED DURATION FUND |
CONFLICTS OF INTEREST (continued) April 30, 2024 (unaudited) |
Personal Trading. BBH&Co., 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&Co. Partners and employees. The policy and procedures are intended to prevent BBH&Co. Partners and employees from trading in the same securities as the Funds. However, BBH&Co., including the Investment Adviser, has implemented policies and procedures concerning personal trading by BBH&Co. Partners and employees. The policies and procedures are intended to prevent BBH&Co. 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&Co., 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&Co., 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&Co. Partners and employees. BBH&Co., including the Investment Adviser, has implemented policies and procedures concerning gifts and entertainment to mitigate any impact on the judgment of BBH&Co. Partners and employees.
F I N A N C I A L S T A T E M E N T S A P R I L 3 0, 2 0 2 4 | 47 |
BBH LIMITED DURATION FUND |
OPERATION AND EFFECTIVENESS OF THE FUND’S LIQUIDITY RISK MANAGEMENT PROGRAM April 30, 2024 (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 each Fund’s liquidity risk management program (the “Program”). The Board met on March 6, 2024 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, 2023 through January 31, 2024 (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 Funds classified each of their 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 each Fund’s investments based on criteria in each Fund’s Program. During the Reporting Period, no Fund held 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 no Fund has approached the 50% threshold, has made the determination that it is not necessary to assign a Highly Liquid Investment Minimum to any of the Funds 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 each Fund’s investment strategy is appropriate for an open-end fund structure with a focus on Funds with more significant and consistent holdings of less liquid and illiquid assets and factored a Fund’s concentration in an issuer into the liquidity classification methodology by taking issuer position sizes into account.
Short-term and long-term cash flow projections during normal and reasonably foreseeable stressed market conditions. During the Reporting Period, the Program Administrator reviewed historical redemption activity and used this information as a component to establish each Fund’s reasonably
48 |
BBH LIMITED DURATION FUND |
OPERATION AND EFFECTIVENESS OF THE FUND’S LIQUIDITY RISK MANAGEMENT PROGRAM (continued) April 30, 2024 (unaudited) |
anticipated trading size. The Program Administrator also took into consideration other factors such as shareholder ownership concentration, applicable distribution channels and the degree of certainty associated with a Fund’s short-term and long-term cash flow projections.
Holdings of cash and cash equivalents. The Program Administrator considered the degree to which each Fund held cash and cash equivalents as a component of each Fund’s ability to meet redemption requests.
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 A P R I L 3 0, 2 0 2 4 | 49 |
Administrator Distributor Shareholder Servicing Agent To obtain information or make shareholder inquiries: | Investment Adviser | |
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 |
Semi-Annual Report
APRIL 30, 2024
BBH Income Fund
BBH INCOME FUND |
PORTFOLIO ALLOCATION April 30, 2024 (unaudited) |
BREAKDOWN BY SECURITY TYPE
U.S. $ Value | Percent of | ||||||
Asset Backed Securities | $ | 200,956,904 |
| 20.1 | % | ||
Commercial Mortgage Backed Securities |
| 65,024,937 |
| 6.5 |
| ||
Corporate Bonds |
| 419,213,644 |
| 42.0 |
| ||
Loan Participations and Assignments |
| 117,144,904 |
| 11.7 |
| ||
Municipal Bonds |
| 1,086,280 |
| 0.1 |
| ||
Preferred Securities |
| 25,651,914 |
| 2.6 |
| ||
Residential Mortgage Backed Securities |
| 793,137 |
| 0.1 |
| ||
U.S. Government Agency Obligations |
| 15,200,000 |
| 1.5 |
| ||
U.S. Treasury Bills |
| 4,320,382 |
| 0.4 |
| ||
U.S. Treasury Bonds and Notes |
| 158,697,253 |
| 15.9 |
| ||
Liabilities in Excess of Cash and Other Assets |
| (9,245,402 | ) | (0.9 | ) | ||
NET ASSETS | $ | 998,843,953 |
| 100.0 | % |
All data as of April 30, 2024. The BBH Income Fund’s (the “Fund”) 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.
2 |
BBH INCOME FUND |
PORTFOLIO OF INVESTMENTS April 30, 2024 (unaudited) |
Principal | Maturity | Interest | Value | ||||||||
| ASSET BACKED SECURITIES (20.1%) |
|
| ||||||||
$ | 4,054,399 | ABPCI Direct Lending Fund ABS I, Ltd. 2020-1A1 | 12/20/30 | 3.199 | % | $ | 3,916,675 | ||||
| 2,261,310 | ABPCI Direct Lending Fund ABS II LLC 2022-2A1 | 03/01/32 | 4.987 |
|
| 2,041,670 | ||||
| 2,630,000 | Adams Outdoor Advertising LP 2023-11 | 07/15/53 | 6.967 |
|
| 2,684,627 | ||||
| 3,250,000 | Aligned Data Centers Issuer LLC 2023-1A1 | 08/17/48 | 6.000 |
|
| 3,191,616 | ||||
| 1,480,000 | Ares PBN Finance Co. LLC1,2 | 10/15/36 | 6.000 |
|
| 1,444,924 | ||||
| 5,200,000 | Avis Budget Rental Car Funding AESOP LLC 2023-4A1 | 06/20/29 | 5.490 |
|
| 5,147,848 | ||||
| 1,044,380 | BHG Securitization Trust 2022-A1 | 02/20/35 | 1.710 |
|
| 1,028,578 | ||||
| 4,165,000 | BHG Securitization Trust 2023-A1 | 04/17/36 | 6.350 |
|
| 4,103,702 | ||||
| 4,860,000 | Business Jet Securities LLC 2024-1A1 | 05/15/39 | 6.197 |
|
| 4,829,110 | ||||
| 1,430,000 | CARS-DB4 LP 2020-1A1 | 02/15/50 | 4.170 |
|
| 1,383,801 | ||||
| 3,424,844 | CARS-DB7 LP 2023-1A1 | 09/15/53 | 6.500 |
|
| 3,365,765 | ||||
| 1,025,375 | CF Hippolyta Issuer LLC 2020-11 | 07/15/60 | 2.280 |
|
| 942,693 | ||||
| 2,374,427 | CF Hippolyta Issuer LLC 2022-1A1 | 08/15/62 | 5.970 |
|
| 2,315,613 | ||||
| 8,990,000 | Cogent Ipv4 LLC 2024-1A1 | 05/25/54 | 7.924 |
|
| 8,993,596 | ||||
| 2,330,000 | Credit Acceptance Auto Loan Trust 2023-1A1 | 07/15/33 | 7.710 |
|
| 2,373,893 | ||||
| 3,070,000 | DataBank Issuer 2023-1A1 | 02/25/53 | 5.116 |
|
| 2,875,092 | ||||
| 2,850,000 | DigitalBridge Issuer LLC 2021-1A1 | 09/25/51 | 3.933 |
|
| 2,639,670 | ||||
| 4,630,000 | Dryden 115 CLO, Ltd. 2024-115A (3-Month CME Term SOFR + 2.000%)1,3 | 04/18/37 | 7.301 |
|
| 4,643,488 | ||||
| 384,450 | Elm Trust 2020-3A1 | 08/20/29 | 2.954 |
|
| 367,993 | ||||
| 1,138,870 | Elm Trust 2020-4A1 | 10/20/29 | 2.286 |
|
| 1,081,547 | ||||
| 4,460,000 | Flexential Issuer 2021-1A1 | 11/27/51 | 3.250 |
|
| 4,037,020 | ||||
| 538,891 | FNA LLC 2019-11,2,3,4 | 12/10/31 | 3.000 |
|
| 508,174 | ||||
| 3,340,000 | Ford Credit Auto Owner Trust 2024-11 | 08/15/36 | 4.870 |
|
| 3,268,364 | ||||
| 39,434 | FREED ABS Trust 2022-2CP1 | 05/18/29 | 4.490 |
|
| 39,393 | ||||
| 1,094,193 | Global SC Finance VII Srl 2020-1A1 | 10/17/40 | 2.170 |
|
| 1,006,794 | ||||
| 1,033,259 | Global SC Finance VII Srl 2020-2A1 | 11/19/40 | 2.260 |
|
| 948,165 | ||||
| 3,684,898 | Golub Capital Partners ABS Funding, Ltd. 2021-1A1 | 04/20/29 | 2.773 |
|
| 3,476,509 | ||||
| 6,810,000 | Hartwick Park CLO, Ltd. 2023-1A (3-Month CME Term SOFR + 2.250%)1,3 | 01/21/36 | 7.591 |
|
| 6,810,708 | ||||
| 2,980,000 | HPEFS Equipment Trust 2023-1A1 | 04/20/28 | 5.730 |
|
| 2,977,065 | ||||
| 2,540,000 | Lendmark Funding Trust 2023-1A1 | 05/20/33 | 5.590 |
|
| 2,526,695 | ||||
| 448,264 | LIAS Administration Fee Issuer LLC 2018-1A | 07/25/48 | 5.956 |
|
| 406,789 | ||||
| 4,340,000 | Madison Park Funding LXVII, Ltd. 2024-67A (3-Month CME Term SOFR + 2.050%)1,3 | 04/25/37 | 7.340 |
|
| 4,323,236 | ||||
| 3,060,000 | Madison Park Funding XLVII, Ltd. 2020-47A (3-Month CME Term SOFR + 1.950%)1,3 | 04/19/37 | 7.277 |
|
| 3,048,952 | ||||
| 344,971 | Mariner Finance Issuance Trust 2020-AA1 | 08/21/34 | 2.190 |
|
| 340,572 | ||||
| 1,840,000 | MCF CLO 10, Ltd. 2023-1A (3-Month CME Term SOFR + 4.200%)1,3 | 04/15/35 | 9.529 |
|
| 1,846,195 | ||||
| 1,065,620 | Monroe Capital ABS Funding, Ltd. 2021-1A1 | 04/22/31 | 2.815 |
|
| 1,008,294 | ||||
| 1,870,000 | Monroe Capital ABS Funding II, Ltd. 2023-1A1 | 04/22/33 | 6.650 |
|
| 1,872,090 |
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 A P R I L 3 0, 2 0 2 4 | 3 |
BBH INCOME FUND |
PORTFOLIO OF INVESTMENTS (continued) April 30, 2024 (unaudited) |
Principal | Maturity | Interest | Value | ||||||||
| ASSET BACKED SECURITIES (continued) |
|
| ||||||||
$ | 1,790,000 | Monroe Capital Income Plus ABS Funding LLC 2022-1A1 | 04/30/32 | 5.150 | % | $ | 1,564,945 | ||||
| 2,465,000 | Navistar Financial Dealer Note Master Owner Trust II 2023-11 | 08/25/28 | 6.180 |
|
| 2,469,556 | ||||
| 2,700,000 | Neuberger Berman Loan Advisers CLO 40, Ltd. 2021-40A (3-Month CME Term SOFR + 1.322%)1,3 | 04/16/33 | 6.649 |
|
| 2,703,888 | ||||
| 140,866 | Newtek Small Business Loan Trust 2018-1 (U.S. Prime Rate - 0.550%)1,3 | 02/25/44 | 7.950 |
|
| 139,846 | ||||
| 66,821 | Newtek Small Business Loan Trust 2018-1 (U.S. Prime Rate + 0.750%)1,3 | 02/25/44 | 9.250 |
|
| 66,457 | ||||
| 3,276,066 | Newtek Small Business Loan Trust 2023-1 (U.S. Prime Rate - 0.500%)1,3 | 07/25/50 | 8.000 |
|
| 3,267,901 | ||||
| 3,550,000 | NextGear Floorplan Master Owner Trust 2022-1A1 | 03/15/27 | 2.800 |
|
| 3,456,396 | ||||
| 5,440,000 | NextGear Floorplan Master Owner Trust 2023-1A1 | 03/15/28 | 5.740 |
|
| 5,448,349 | ||||
| 1,660,000 | NFAS2 LLC 2022-11 | 09/15/28 | 6.860 |
|
| 1,634,300 | ||||
| 3,960,000 | Niagara Park CLO, Ltd. 2019-1A (3-Month CME Term SOFR + 1.262%)1,3 | 07/17/32 | 6.579 |
|
| 3,958,812 | ||||
| 4,500,000 | Octagon 71, Ltd. 2024-1A (3-Month CME Term SOFR + 2.050%)1,3 | 04/18/37 | 7.341 |
|
| 4,509,557 | ||||
| 2,180,000 | OnDeck Asset Securitization Trust III LLC 2021-1A1 | 05/17/27 | 1.590 |
|
| 2,174,790 | ||||
| 2,930,000 | OneMain Financial Issuance Trust 2022-S11 | 05/14/35 | 4.130 |
|
| 2,853,541 | ||||
| 6,610,000 | OneMain Financial Issuance Trust 2023-2A1 | 09/15/36 | 6.170 |
|
| 6,649,053 | ||||
| 5,630,000 | Oportun Issuance Trust 2021-C1 | 10/08/31 | 2.180 |
|
| 5,306,478 | ||||
| 649,133 | Oxford Finance Funding LLC 2020-1A1 | 02/15/28 | 3.101 |
|
| 639,234 | ||||
| 2,320,000 | PennantPark CLO VII LLC 2023-7A (3-Month CME Term SOFR + 4.050%)1,3 | 07/20/35 | 9.375 |
|
| 2,350,614 | ||||
| 305,287 | ReadyCap Lending Small Business Loan Trust 2019-2 (U.S. Prime Rate - 0.500%)1,3 | 12/27/44 | 8.000 |
|
| 305,498 | ||||
| 5,150,000 | Regional Management Issuance Trust 2022-11 | 03/15/32 | 3.070 |
|
| 4,928,355 | ||||
| 779,836 | Republic Finance Issuance Trust 2020-A1 | 11/20/30 | 2.470 |
|
| 771,906 | ||||
| 5,240,000 | Retained Vantage Data Centers Issuer LLC 2023-1A1 | 09/15/48 | 5.000 |
|
| 4,962,409 | ||||
| 2,130,000 | Sabey Data Center Issuer LLC 2020-11 | 04/20/45 | 3.812 |
|
| 2,064,149 | ||||
| 1,795,000 | Sabey Data Center Issuer LLC 2023-11 | 04/20/48 | 6.250 |
|
| 1,787,807 | ||||
| 2,240,000 | Santander Drive Auto Receivables Trust 2023-5 | 02/18/31 | 6.430 |
|
| 2,281,601 | ||||
| 6,250,000 | Sotheby’s Artfi Master Trust 2024-1A1 | 12/22/31 | 6.430 |
|
| 6,246,463 | ||||
| 2,310,000 | Southwick Park CLO LLC 2019-4A (3-Month CME Term SOFR + 1.322%)1,3 | 07/20/32 | 6.646 |
|
| 2,310,020 | ||||
| 1,150,000 | Stack Infrastructure Issuer LLC 2023-1A1 | 03/25/48 | 5.900 |
|
| 1,130,962 | ||||
| 3,520,000 | Stack Infrastructure Issuer LLC 2023-3A1 | 10/25/48 | 5.900 |
|
| 3,470,663 | ||||
| 123,833 | SWC Funding LLC 2018-1A1 | 08/15/33 | 4.750 |
|
| 123,671 | ||||
| 1,137,974 | Textainer Marine Containers VII, Ltd. 2020-1A1 | 08/21/45 | 2.730 |
|
| 1,056,744 | ||||
| 4,388,843 | Thrust Engine Leasing DAC 2021-1A1 | 07/15/40 | 4.163 |
|
| 4,017,240 | ||||
| 2,620,000 | TierPoint Issuer LLC 2023-1A1 | 06/25/53 | 6.000 |
|
| 2,515,400 |
The accompanying notes are an integral part of these financial statements.
4 |
BBH INCOME FUND |
PORTFOLIO OF INVESTMENTS (continued) April 30, 2024 (unaudited) |
Principal | Maturity | Interest | Value | ||||||||
| ASSET BACKED SECURITIES (continued) |
|
| ||||||||
$ | 3,350,000 | Vantage Data Centers Issuer LLC 2023-1A1 | 03/16/48 | 6.316 | % | $ | 3,321,891 | ||||
| 4,916,356 | VC 3 LS LP 2021-B1,2 | 10/15/41 | 4.750 |
|
| 3,955,208 | ||||
| 1,574,115 | VCP RRL ABS I, Ltd. 2021-1A1 | 10/20/31 | 2.152 |
|
| 1,483,561 | ||||
| 4,830,000 | Westlake Automobile Receivables Trust 2023-2A1 | 03/15/28 | 6.290 |
|
| 4,850,086 | ||||
| 2,253,500 | Willis Engine Structured Trust VII 2023-A1 | 10/15/48 | 8.000 |
|
| 2,362,637 | ||||
| Total Asset Backed Securities |
|
| 200,956,904 | |||||||
|
|
| |||||||||
| COMMERCIAL MORTGAGE BACKED SECURITIES (6.5%) |
|
| ||||||||
| 1,390,000 | BPR Trust 2022-OANA (1-Month CME Term SOFR + 2.697%)1,3 | 04/15/37 | 8.018 |
|
| 1,386,525 | ||||
| 4,740,000 | BX Commercial Mortgage Trust 2022-CSMO (1-Month CME Term SOFR + 3.889%)1,3 | 06/15/27 | 9.209 |
|
| 4,763,700 | ||||
| 1,106,902 | BXMT, Ltd. 2020-FL2 (1-Month CME Term SOFR + 1.014%)1,3 | 02/15/38 | 6.331 |
|
| 1,061,770 | ||||
| 1,250,000 | BXMT, Ltd. 2020-FL3 (1-Month CME Term SOFR + 2.664%)1,3 | 11/15/37 | 7.981 |
|
| 1,060,432 | ||||
| 786,000 | CG-CCRE Commercial Mortgage Trust 2014-FL2 (1-Month CME Term SOFR + 4.114%)1,3 | 11/15/31 | 8.142 |
|
| 547,927 | ||||
| 144,567 | CG-CCRE Commercial Mortgage Trust 2014-FL2 (1-Month CME Term SOFR + 4.114%)1,2,3 | 11/15/31 | 9.436 |
|
| 104,290 | ||||
| 1,361,180 | CG-CCRE Commercial Mortgage Trust 2014-FL2 (1-Month CME Term SOFR + 4.864%)1,2,3 | 11/15/31 | 10.186 |
|
| 645,199 | ||||
| 2,870,000 | Citigroup Commercial Mortgage Trust 2023-PRM31,3,4 | 07/10/28 | 6.360 |
|
| 2,861,683 | ||||
| 4,590,000 | Commercial Mortgage Pass Through Certificate1 | 07/12/28 | 7.121 |
|
| 4,708,292 | ||||
| 2,460,000 | DC Commercial Mortgage Trust 2023-DC1 | 09/12/40 | 6.804 |
|
| 2,477,384 | ||||
| 7,330,000 | DK Trust 2024-SPBX (1-Month CME Term SOFR + 1.750%)1,3 | 03/15/34 | 7.071 |
|
| 7,316,256 | ||||
| 7,660,000 | Freddie Mac Multifamily Structured Pass Through Certificates 2023-K7531,2,5 | 12/25/30 | 0.000 |
|
| 3,750,336 | ||||
| 26,240,000 | Freddie Mac Multifamily Structured Pass Through Certificates 2023-K7531 | 12/25/30 | 0.100 |
|
| 122,040 | ||||
| 126,956,393 | Freddie Mac Multifamily Structured Pass Through Certificates 2023-K7531 | 01/01/50 | 0.100 |
|
| 572,789 | ||||
| 7,660,000 | Freddie Mac Multifamily Structured Pass Through Certificates K7533,4 | 12/25/30 | 5.208 |
|
| 1,933,909 | ||||
| 4,220,000 | FREMF Mortgage Trust 2024-K5161,2,3,4 | 01/25/29 | 6.122 |
|
| 3,577,716 | ||||
| 1,000,000 | Hudsons Bay Simon JV Trust 2015-HB101,3,4 | 08/05/34 | 5.447 |
|
| 814,421 | ||||
| 3,150,000 | INTOWN Mortgage Trust 2022-STAY (1-Month CME Term SOFR + 4.134%)1,3 | 08/15/39 | 9.455 |
|
| 3,166,734 | ||||
| 240,000 | JPMBB Commercial Mortgage Securities Trust 2014-C241,3,4 | 11/15/47 | 4.013 |
|
| 176,685 |
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 A P R I L 3 0, 2 0 2 4 | 5 |
BBH INCOME FUND |
PORTFOLIO OF INVESTMENTS (continued) April 30, 2024 (unaudited) |
Principal | Maturity | Interest | Value | ||||||||
| COMMERCIAL MORTGAGE BACKED SECURITIES (continued) |
|
| ||||||||
$ | 5,240,000 | MED Commercial Mortgage Trust 2024-MOB (1-Month CME Term SOFR + 1.592%)1,3 | 05/15/41 | 6.902 | % | $ | 5,226,898 | ||||
| 2,326,739 | Morgan Stanley Capital I Trust 2019-BPR (1-Month CME Term SOFR + 1.992%)1,3 | 05/15/36 | 7.320 |
|
| 2,321,777 | ||||
| 5,860,000 | MTN Commercial Mortgage Trust 2022-LPFL (1-Month CME Term SOFR + 1.896%)1,3 | 03/15/39 | 7.226 |
|
| 5,753,788 | ||||
| 1,058,537 | NADG NNN Operating LP 2019-11 | 12/28/49 | 3.368 |
|
| 1,019,174 | ||||
| 2,635,877 | Ready Capital Mortgage Financing LLC 2021-FL7 (1-Month CME Term SOFR + 1.314%)1,3 | 11/25/36 | 6.631 |
|
| 2,623,146 | ||||
| 2,700,000 | SCOTT Trust 2023-SFS1 | 03/15/40 | 5.910 |
|
| 2,671,618 | ||||
| 2,270,000 | SPGN Mortgage Trust 2022-TFLM (1-Month CME Term SOFR + 2.650%)1,3 | 02/15/39 | 7.971 |
|
| 2,202,545 | ||||
| 1,310,000 | SPGN Mortgage Trust 2022-TFLM (1-Month CME Term SOFR + 3.500%)1,3 | 02/15/39 | 8.821 |
|
| 1,268,816 | ||||
| 890,000 | STWD, Ltd. 2019-FL1 (1-Month CME Term SOFR + 1.714%)1,3 | 07/15/38 | 7.035 |
|
| 880,155 | ||||
| 9,507 | UBS-BAMLL Trust 2012-WRM1 | 06/10/30 | 3.663 |
|
| 8,932 | ||||
| Total Commercial Mortgage Backed Securities |
|
| 65,024,937 | |||||||
|
|
| |||||||||
| CORPORATE BONDS (42.0%) |
|
| ||||||||
| AEROSPACE/DEFENSE (0.4%) |
|
| ||||||||
| 2,220,000 | BAE Systems, Plc.1 | 04/15/30 | 3.400 |
|
| 1,974,323 | ||||
| 1,708,000 | Spirit AeroSystems, Inc.1 | 11/30/29 | 9.375 |
|
| 1,847,238 | ||||
|
|
| 3,821,561 | ||||||||
| AGRICULTURE (0.2%) |
|
| ||||||||
| 1,890,000 | Cargill, Inc.1 | 10/11/32 | 5.125 |
|
| 1,846,302 | ||||
|
|
| |||||||||
| AIRLINES (0.5%) |
|
| ||||||||
| 4,955,000 | Hawaiian Brand Intellectual Property, Ltd. / HawaiianMiles Loyalty, Ltd.1 | 01/20/26 | 5.750 |
|
| 4,647,242 | ||||
|
|
| |||||||||
| BANKS (9.0%) |
|
| ||||||||
| 2,790,000 | ASB Bank, Ltd. (5-Year CMT Index + 2.250%)1,3 | 06/17/32 | 5.284 |
|
| 2,722,761 | ||||
| 4,600,000 | Banco Santander S.A. (1-Year CMT Index + 1.250%)3 | 03/14/28 | 5.552 |
|
| 4,543,544 | ||||
| 1,635,000 | Bank Leumi Le-Israel BM1 | 07/27/27 | 5.125 |
|
| 1,571,912 | ||||
| 5,910,000 | Bank of America Corp. (5-Year CMT Index + 2.760%)3,6 | 4.375 |
|
| 5,420,162 | |||||
| 3,035,000 | Bank of New Zealand1 | 02/07/28 | 4.846 |
|
| 2,963,792 | ||||
| 3,095,000 | Bank of Nova Scotia | 03/11/27 | 2.951 |
|
| 2,893,375 | ||||
| 3,485,000 | Canadian Imperial Bank of Commerce | 10/03/28 | 5.986 |
|
| 3,545,012 | ||||
| 2,665,000 | Comerica Bank | 07/27/25 | 4.000 |
|
| 2,579,944 | ||||
| 2,920,000 | Comerica Bank (SOFR + 2.610%)3 | 08/25/33 | 5.332 |
|
| 2,555,804 | ||||
| 6,240,000 | Fifth Third Bancorp (SOFR + 2.192%)3 | 10/27/28 | 6.361 |
|
| 6,290,396 |
The accompanying notes are an integral part of these financial statements.
6 |
BBH INCOME FUND |
PORTFOLIO OF INVESTMENTS (continued) April 30, 2024 (unaudited) |
Principal | Maturity | Interest | Value | ||||||||
| CORPORATE BONDS (continued) |
|
| ||||||||
| BANKS (continued) |
|
| ||||||||
$ | 165,000 | Fifth Third Bancorp (SOFR + 2.127%)3 | 07/28/30 | 4.772 | % | $ | 155,630 | ||||
| 2,140,000 | HSBC Holdings, Plc (SOFR + 3.350%)3 | 11/03/28 | 7.390 |
|
| 2,243,439 | ||||
| 1,140,000 | HSBC Holdings, Plc (SOFR + 2.387%)3 | 06/04/31 | 2.848 |
|
| 961,340 | ||||
| 3,285,000 | HSBC Holdings, Plc (SOFR + 2.390%)3 | 03/09/34 | 6.254 |
|
| 3,355,177 | ||||
| 6,256,000 | Huntington Bancshares, Inc. (SOFR + 1.970%)3 | 08/04/28 | 4.443 |
|
| 5,993,232 | ||||
| 2,160,000 | Lloyds Banking Group, Plc. (1-Year CMT Index + 1.700%)3 | 03/06/29 | 5.871 |
|
| 2,163,427 | ||||
| 2,025,000 | Lloyds Banking Group, Plc. (1-Year CMT Index + 3.750%)3 | 11/15/33 | 7.953 |
|
| 2,222,657 | ||||
| 2,000,000 | Morgan Stanley (SOFR + 1.610%)3 | 04/20/28 | 4.210 |
|
| 1,926,498 | ||||
| 2,055,000 | Morgan Stanley (SOFR + 2.560%)3 | 10/18/33 | 6.342 |
|
| 2,131,353 | ||||
| 2,810,000 | National Australia Bank, Ltd.1 | 01/12/33 | 6.429 |
|
| 2,882,200 | ||||
| 2,445,000 | NatWest Group, Plc (1-Year CMT Index + 2.850%)3 | 11/10/26 | 7.472 |
|
| 2,501,216 | ||||
| 1,780,000 | NatWest Group, Plc (1-Year CMT Index + 2.100%)3 | 03/02/34 | 6.016 |
|
| 1,780,508 | ||||
| 2,360,000 | Santander Holdings USA, Inc. (SOFR + 2.356%)3 | 03/09/29 | 6.499 |
|
| 2,378,310 | ||||
| 3,070,000 | Skandinaviska Enskilda Banken AB1 | 03/05/29 | 5.375 |
|
| 3,017,596 | ||||
| 1,620,000 | Truist Financial Corp. (SOFR + 2.446%)3 | 10/30/29 | 7.161 |
|
| 1,696,263 | ||||
| 4,445,000 | Truist Financial Corp. (SOFR + 1.620%)3 | 01/24/30 | 5.435 |
|
| 4,354,210 | ||||
| 1,525,000 | UBS Group AG (1-Year CMT Index + 1.750%)1,3 | 05/12/28 | 4.751 |
|
| 1,476,159 | ||||
| 4,025,000 | UBS Group AG (1-Year CMT Index + 2.200%)1,3 | 01/12/34 | 5.959 |
|
| 3,994,979 | ||||
| 6,100,000 | US Bancorp (5-Year CMT Index + 2.541%)3,6 | 3.700 |
|
| 5,249,535 | |||||
| 1,245,000 | Wells Fargo & Co. (SOFR + 2.000%)3 | 04/30/26 | 2.188 |
|
| 1,200,353 | ||||
| 1,165,000 | Wells Fargo & Co. (SOFR + 2.100%)3 | 06/02/28 | 2.393 |
|
| 1,059,161 | ||||
| 3,020,000 | Wells Fargo & Co. (SOFR + 1.500%)3 | 03/02/33 | 3.350 |
|
| 2,549,365 | ||||
|
|
| 90,379,310 | ||||||||
| BEVERAGES (0.3%) |
|
| ||||||||
| 3,170,000 | Keurig Dr Pepper, Inc. | 03/15/29 | 5.050 |
|
| 3,123,517 | ||||
|
|
| |||||||||
| DIVERSIFIED FINANCIAL SERVICES (4.4%) |
|
| ||||||||
| 4,365,000 | Ally Financial, Inc. (SOFR + 2.820%)3 | 01/03/30 | 6.848 |
|
| 4,410,392 | ||||
| 1,265,000 | American Express Co. | 03/04/27 | 2.550 |
|
| 1,170,284 | ||||
| 1,250,000 | American Express Co. (SOFR + 2.255%)3 | 05/26/33 | 4.989 |
|
| 1,182,448 | ||||
| 2,685,000 | Avolon Holdings Funding, Ltd.1 | 07/01/24 | 3.950 |
|
| 2,674,860 | ||||
| 925,000 | Avolon Holdings Funding, Ltd.1 | 01/15/26 | 5.500 |
|
| 911,393 | ||||
| 5,705,000 | Bread Financial Holdings, Inc.1 | 03/15/29 | 9.750 |
|
| 5,932,869 | ||||
| 2,338,000 | Brightsphere Investment Group, Inc. | 07/27/26 | 4.800 |
|
| 2,250,535 | ||||
| 2,345,000 | Capital One Financial Corp. | 05/11/27 | 3.650 |
|
| 2,218,263 | ||||
| 1,630,000 | Capital One Financial Corp. (SOFR + 3.070%)3 | 10/30/31 | 7.624 |
|
| 1,754,043 | ||||
| 4,125,000 | Credit Acceptance Corp.1 | 12/15/28 | 9.250 |
|
| 4,373,531 | ||||
| 2,485,000 | Drawbridge Special Opportunities Fund LP / Drawbridge Special Opportunities Finance1 | 02/15/26 | 3.875 |
|
| 2,343,022 | ||||
| 2,550,000 | GCM Grosvenor Diversified Alternatives Issuer LLC1,2 | 11/15/41 | 6.000 |
|
| 2,002,005 |
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 A P R I L 3 0, 2 0 2 4 | 7 |
BBH INCOME FUND |
PORTFOLIO OF INVESTMENTS (continued) April 30, 2024 (unaudited) |
Principal | Maturity | Interest | Value | ||||||||
| CORPORATE BONDS (continued) |
|
| ||||||||
| DIVERSIFIED FINANCIAL SERVICES (continued) |
|
| ||||||||
$ | 7,300,000 | Oxford Finance LLC / Oxford Finance Co.-Issuer II, Inc.1 | 02/01/27 | 6.375 | % | $ | 6,849,812 | ||||
| 4,620,000 | Sculptor Alternative Solutions LLC1,2 | 05/15/37 | 6.000 |
|
| 3,867,864 | ||||
| 2,655,000 | Strategic Credit Opportunities Partners LLC | 04/01/26 | 4.250 |
|
| 2,485,818 | ||||
|
|
| 44,427,139 | ||||||||
| ELECTRIC (2.9%) |
|
| ||||||||
| 1,840,000 | Alabama Power Co. | 03/15/32 | 3.050 |
|
| 1,566,646 | ||||
| 4,160,000 | Alexander Funding Trust II1 | 07/31/28 | 7.467 |
|
| 4,340,362 | ||||
| 2,100,000 | Duke Energy Florida LLC | 11/15/52 | 5.950 |
|
| 2,113,847 | ||||
| 1,880,000 | Duke Energy Ohio, Inc. | 04/01/53 | 5.650 |
|
| 1,801,304 | ||||
| 5,065,000 | Edison International (5-Year CMT Index + 4.698%)3,6 | 5.375 |
|
| 4,852,244 | |||||
| 3,375,000 | Florida Power & Light Co. | 05/15/33 | 4.800 |
|
| 3,213,629 | ||||
| 2,095,000 | Narragansett Electric Co.1 | 04/09/30 | 3.395 |
|
| 1,871,236 | ||||
| 2,120,000 | Nevada Power Co. | 05/01/53 | 5.900 |
|
| 2,078,473 | ||||
| 3,500,000 | Oncor Electric Delivery Co. LLC | 05/15/28 | 4.300 |
|
| 3,370,632 | ||||
| 3,455,000 | Vistra Operations Co. LLC1 | 10/15/33 | 6.950 |
|
| 3,600,148 | ||||
|
|
| 28,808,521 | ||||||||
| ENERGY-ALTERNATE SOURCES (0.4%) |
|
| ||||||||
| 4,500,000 | NextEra Energy Partners LP1 | 06/15/26 | 2.500 |
|
| 4,043,093 | ||||
|
|
| |||||||||
| FOOD (0.8%) |
|
| ||||||||
| 4,765,000 | Nestle Capital Corp.1 | 03/12/31 | 4.750 |
|
| 4,625,453 | ||||
| 2,985,000 | Tyson Foods, Inc. | 03/15/34 | 5.700 |
|
| 2,928,183 | ||||
|
|
| 7,553,636 | ||||||||
| HEALTHCARE-SERVICES (0.7%) |
|
| ||||||||
| 3,260,000 | Providence St Joseph Health Obligated Group | 10/01/33 | 5.403 |
|
| 3,199,204 | ||||
| 4,210,000 | Roche Holdings, Inc.1 | 03/08/31 | 4.909 |
|
| 4,115,917 | ||||
|
|
| 7,315,121 | ||||||||
| INSURANCE (9.4%) |
|
| ||||||||
| 4,175,000 | Aegon, Ltd. (6-Month USD-LIBOR + 3.540%)3 | 04/11/48 | 5.500 |
|
| 4,008,212 | ||||
| 2,940,000 | American Coastal Insurance Corp. | 12/15/27 | 7.250 |
|
| 2,697,450 | ||||
| 2,880,000 | Ascot Group, Ltd.1 | 12/15/30 | 4.250 |
|
| 2,336,793 | ||||
| 2,035,000 | Athene Global Funding1 | 06/29/25 | 2.550 |
|
| 1,953,503 | ||||
| 2,790,000 | Athene Holding, Ltd. | 02/01/33 | 6.650 |
|
| 2,882,857 | ||||
| 5,715,000 | AXIS Specialty Finance LLC (5-Year CMT Index + 3.186%)3 | 01/15/40 | 4.900 |
|
| 5,121,988 | ||||
| 2,920,000 | Corebridge Financial, Inc. (5-Year CMT Index + 3.846%)3 | 12/15/52 | 6.875 |
|
| 2,890,658 | ||||
| 3,175,000 | Corebridge Global Funding1 | 09/19/28 | 5.900 |
|
| 3,192,323 | ||||
| 4,210,000 | Doctors Co. An Interinsurance Exchange1 | 01/18/32 | 4.500 |
|
| 3,237,448 | ||||
| 1,600,000 | Enstar Finance LLC (5-Year CMT Index + 5.468%)3 | 09/01/40 | 5.750 |
|
| 1,556,127 | ||||
| 4,100,000 | Enstar Finance LLC (5-Year CMT Index + 4.006%)3 | 01/15/42 | 5.500 |
|
| 3,867,387 | ||||
| 5,540,000 | F&G Annuities & Life, Inc. | 01/13/28 | 7.400 |
|
| 5,693,521 |
The accompanying notes are an integral part of these financial statements.
8 |
BBH INCOME FUND |
PORTFOLIO OF INVESTMENTS (continued) April 30, 2024 (unaudited) |
Principal | Maturity | Interest | Value | ||||||||
| CORPORATE BONDS (continued) |
|
| ||||||||
| INSURANCE (continued) |
|
| ||||||||
$ | 4,765,000 | Fidelis Insurance Holdings, Ltd. (5-Year CMT Index + 6.323%)1,3 | 04/01/41 | 6.625 | % | $ | 4,717,350 | ||||
| 3,128,000 | First American Financial Corp. | 08/15/31 | 2.400 |
|
| 2,417,686 | ||||
| 3,485,000 | Global Atlantic Finance Co.1 | 06/15/33 | 7.950 |
|
| 3,771,338 | ||||
| 1,690,000 | Metropolitan Life Global Funding I1 | 03/21/29 | 3.300 |
|
| 1,534,256 | ||||
| 2,280,000 | Metropolitan Life Global Funding I1 | 03/28/33 | 5.150 |
|
| 2,208,488 | ||||
| 1,580,000 | Muenchener Rueckversicherungs-Gesellschaft AG in Muenchen (5-Year CMT Index + 3.982%)1,3 | 05/23/42 | 5.875 |
|
| 1,566,175 | ||||
| 5,090,000 | Northwestern Mutual Global Funding1 | 03/25/27 | 5.070 |
|
| 5,053,756 | ||||
| 3,708,000 | PartnerRe Finance B LLC (5-Year CMT Index + 3.815%)3 | 10/01/50 | 4.500 |
|
| 3,354,764 | ||||
| 4,365,000 | Protective Life Global Funding1 | 01/12/27 | 4.992 |
|
| 4,308,807 | ||||
| 5,720,000 | RenaissanceRe Holdings, Ltd. | 06/05/33 | 5.750 |
|
| 5,575,654 | ||||
| 3,460,000 | RGA Global Funding1 | 01/11/31 | 5.500 |
|
| 3,403,959 | ||||
| 3,735,000 | SiriusPoint, Ltd. | 04/05/29 | 7.000 |
|
| 3,725,846 | ||||
| 3,125,000 | Stewart Information Services Corp. | 11/15/31 | 3.600 |
|
| 2,544,477 | ||||
| 4,830,000 | Swiss Re Finance Luxembourg S.A. (5-Year CMT Index + 3.582%)1,3 | 04/02/49 | 5.000 |
|
| 4,624,725 | ||||
| 6,280,000 | Universal Insurance Holdings, Inc. | 11/30/26 | 5.625 |
|
| 5,868,440 | ||||
|
|
| 94,113,988 | ||||||||
| INVESTMENT COMPANIES (4.4%) |
|
| ||||||||
| 317,000 | Blue Owl Capital Corp. II1 | 11/26/24 | 4.625 |
|
| 314,005 | ||||
| 2,560,000 | Blue Owl Technology Finance Corp.1 | 06/30/25 | 6.750 |
|
| 2,534,929 | ||||
| 2,490,000 | Capital Southwest Corp. | 01/31/26 | 4.500 |
|
| 2,363,633 | ||||
| 1,635,000 | CION Investment Corp. | 02/11/26 | 4.500 |
|
| 1,554,861 | ||||
| 5,725,000 | Fairfax India Holdings Corp.1 | 02/26/28 | 5.000 |
|
| 5,173,768 | ||||
| 2,930,000 | Franklin BSP Lending Corp.1 | 12/15/24 | 4.850 |
|
| 2,893,727 | ||||
| 1,370,000 | FS KKR Capital Corp. | 02/01/25 | 4.125 |
|
| 1,346,654 | ||||
| 3,450,000 | FS KKR Capital Corp.1 | 02/14/25 | 4.250 |
|
| 3,397,456 | ||||
| 2,330,000 | Gladstone Capital Corp. | 01/31/26 | 5.125 |
|
| 2,248,450 | ||||
| 1,965,000 | Main Street Capital Corp. | 05/01/24 | 5.200 |
|
| 1,965,000 | ||||
| 2,960,000 | MidCap Financial Investment Corp. | 07/16/26 | 4.500 |
|
| 2,748,424 | ||||
| 3,185,000 | Morgan Stanley Direct Lending Fund | 02/11/27 | 4.500 |
|
| 3,064,961 | ||||
| 2,095,000 | OFS Capital Corp. | 02/10/26 | 4.750 |
|
| 1,909,247 | ||||
| 2,535,000 | PennantPark Floating Rate Capital, Ltd. | 04/01/26 | 4.250 |
|
| 2,369,904 | ||||
| 3,025,000 | Saratoga Investment Corp. | 02/28/26 | 4.375 |
|
| 2,887,737 | ||||
| 3,050,000 | Silver Point Specialty Credit Fund, L.P1,2 | 11/04/26 | 4.000 |
|
| 2,701,995 | ||||
| 1,775,000 | Stellus Capital Investment Corp. | 03/30/26 | 4.875 |
|
| 1,637,452 | ||||
| 3,165,000 | Trinity Capital, Inc. | 12/15/26 | 4.250 |
|
| 2,849,467 | ||||
|
|
| 43,961,670 |
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 A P R I L 3 0, 2 0 2 4 | 9 |
BBH INCOME FUND |
PORTFOLIO OF INVESTMENTS (continued) April 30, 2024 (unaudited) |
Principal | Maturity | Interest | Value | ||||||||
| CORPORATE BONDS (continued) |
|
| ||||||||
| MACHINERY-DIVERSIFIED (0.9%) |
|
| ||||||||
$ | 2,275,000 | CNH Industrial Capital LLC | 04/10/28 | 4.550 | % | $ | 2,189,942 | ||||
| 2,450,000 | CNH Industrial Capital LLC | 01/12/29 | 5.500 |
|
| 2,441,603 | ||||
| 4,710,000 | John Deere Capital Corp. | 03/07/31 | 4.900 |
|
| 4,602,012 | ||||
|
|
| 9,233,557 | ||||||||
| MEDIA (0.5%) |
|
| ||||||||
| 5,110,000 | CCO Holdings LLC / CCO Holdings Capital Corp.1 | 03/01/31 | 7.375 |
|
| 4,849,060 | ||||
|
|
| |||||||||
| MINING (0.3%) |
|
| ||||||||
| 2,485,000 | Glencore Funding LLC1 | 10/06/28 | 6.125 |
|
| 2,516,397 | ||||
|
|
| |||||||||
| OIL & GAS (0.5%) |
|
| ||||||||
| 4,480,000 | Sunoco LP1 | 05/01/29 | 7.000 |
|
| 4,549,827 | ||||
|
|
| |||||||||
| PACKAGING & CONTAINERS (0.1%) |
|
| ||||||||
| 1,465,000 | AptarGroup, Inc. | 03/15/32 | 3.600 |
|
| 1,255,304 | ||||
|
|
| |||||||||
| PHARMACEUTICALS (0.7%) |
|
| ||||||||
| 730,000 | Bausch Health Cos., Inc.1 | 06/01/28 | 4.875 |
|
| 471,565 | ||||
| 3,885,000 | Bristol-Myers Squibb Co. | 02/01/31 | 5.750 |
|
| 3,971,513 | ||||
| 2,945,000 | Pfizer Investment Enterprises Pte, Ltd. | 05/19/30 | 4.650 |
|
| 2,847,883 | ||||
|
|
| 7,290,961 | ||||||||
| PIPELINES (0.8%) |
|
| ||||||||
| 4,045,000 | Energy Transfer LP (3-Month CME Term SOFR + 4.290%)3,6 | 9.597 |
|
| 4,045,377 | |||||
| 2,430,000 | Harvest Midstream I LP1 | 09/01/28 | 7.500 |
|
| 2,436,658 | ||||
| 1,150,000 | Northriver Midstream Finance LP1 | 02/15/26 | 5.625 |
|
| 1,125,735 | ||||
|
|
| 7,607,770 | ||||||||
| PRIVATE EQUITY (0.6%) |
|
| ||||||||
| 2,095,000 | Apollo Management Holdings LP (5-Year CMT Index + 3.266%)1,3 | 01/14/50 | 4.950 |
|
| 2,002,621 | ||||
| 2,065,000 | HAT Holdings I LLC / HAT Holdings II LLC1 | 06/15/26 | 3.375 |
|
| 1,919,249 | ||||
| 2,300,000 | HAT Holdings I LLC / HAT Holdings II LLC1 | 09/15/30 | 3.750 |
|
| 1,908,302 | ||||
|
|
| 5,830,172 | ||||||||
| REAL ESTATE INVESTMENT TRUSTS (2.9%) |
|
| ||||||||
| 3,340,000 | American Tower Trust #11 | 03/15/28 | 5.490 |
|
| 3,325,065 | ||||
| 4,140,000 | Arbor Realty SR, Inc.1 | 10/15/27 | 8.500 |
|
| 3,975,205 | ||||
| 3,765,000 | Blackstone Mortgage Trust, Inc.1 | 01/15/27 | 3.750 |
|
| 3,372,980 | ||||
| 5,075,000 | EF Holdco / EF Cayman Hold / Ellington Finance REIT Cayman / TRS / EF Cayman Non-MTM1 | 04/01/27 | 5.875 |
|
| 4,770,790 | ||||
| 2,955,000 | Federal Realty OP LP | 05/01/28 | 5.375 |
|
| 2,921,379 | ||||
| 2,750,000 | Rexford Industrial Realty LP | 06/15/28 | 5.000 |
|
| 2,683,438 |
The accompanying notes are an integral part of these financial statements.
10 |
BBH INCOME FUND |
PORTFOLIO OF INVESTMENTS (continued) April 30, 2024 (unaudited) |
Principal | Maturity | Interest | Value | ||||||||
| CORPORATE BONDS (continued) |
|
| ||||||||
| REAL ESTATE INVESTMENT TRUSTS (continued) |
|
| ||||||||
$ | 2,000,000 | SBA Tower Trust1 | 01/15/28 | 6.599 | % | $ | 2,030,054 | ||||
| 1,380,000 | Scentre Group Trust 1 / Scentre Group Trust 21 | 02/12/25 | 3.500 |
|
| 1,354,073 | ||||
| 1,945,000 | Scentre Group Trust 1 / Scentre Group Trust 21 | 01/28/26 | 3.625 |
|
| 1,876,111 | ||||
| 1,345,000 | Scentre Group Trust 2 (5-Year CMT Index + 4.685%)1,3 | 09/24/80 | 5.125 |
|
| 1,226,471 | ||||
| 2,065,000 | Starwood Property Trust, Inc.1 | 01/15/27 | 4.375 |
|
| 1,912,403 | ||||
|
|
| 29,447,969 | ||||||||
| RETAIL (0.6%) |
|
| ||||||||
| 3,238,000 | Macy’s Retail Holdings LLC1 | 03/15/30 | 5.875 |
|
| 3,086,433 | ||||
| 3,450,000 | Nordstrom, Inc. | 04/01/30 | 4.375 |
|
| 3,079,155 | ||||
|
|
| 6,165,588 | ||||||||
| SEMICONDUCTORS (0.6%) |
|
| ||||||||
| 5,575,000 | ams-OSRAM AG1 | 03/30/29 | 12.250 |
|
| 5,578,512 | ||||
|
|
| |||||||||
| TELECOMMUNICATIONS (0.1%) |
|
| ||||||||
| 875,000 | Connect Finco S.a r.l. / Connect US Finco LLC1 | 10/01/26 | 6.750 |
|
| 847,427 | ||||
| Total Corporate Bonds |
|
| 419,213,644 | |||||||
|
|
| |||||||||
| LOAN PARTICIPATIONS AND ASSIGNMENTS (11.7%) |
|
| ||||||||
| 4,088,000 | AAdvantage Loyality IP, Ltd. (3-Month CME Term SOFR + 4.750%)3 | 04/20/28 | 10.336 |
|
| 4,247,677 | ||||
| 3,274,642 | AHP Health Partners, Inc. (1-Month CME Term SOFR + 3.500%)3 | 08/24/28 | 8.930 |
|
| 3,280,111 | ||||
| 2,196,675 | AL NGPL Holdings LLC (3-Month CME Term SOFR + 3.250%)3 | 04/13/28 | 8.556 |
|
| 2,201,069 | ||||
| 2,980,311 | Allen Media LLC (3-Month CME Term SOFR + 5.500%)3 | 02/10/27 | 10.959 |
|
| 2,653,728 | ||||
| 2,273,363 | Allspring Buyer LLC (3-Month CME Term SOFR + 3.250%)3 | 11/01/28 | 8.824 |
|
| 2,265,133 | ||||
| 940,675 | Allspring Buyer LLC (3-Month CME Term SOFR + 4.000%)3 | 11/01/28 | 9.313 |
|
| 940,346 | ||||
| 2,050,000 | American Airlines, Inc. (6-Month CME Term SOFR + 3.500%)3 | 06/04/29 | 8.775 |
|
| 2,055,986 | ||||
| 2,399,926 | Athenahealth Group, Inc. (1-Month CME Term SOFR + 3.250%)3 | 02/15/29 | 8.566 |
|
| 2,393,926 | ||||
| 1,174,849 | Avolon TLB Borrower 1 (US) LLC Term B6 (1-Month CME Term SOFR + 2.000%)3 | 06/22/28 | 7.315 |
|
| 1,176,929 | ||||
| 1,779,206 | Axalta Coating Systems Dutch Holding B BV Term B6 (3-Month CME Term SOFR + 2.000%)3 | 12/20/29 | 7.330 |
|
| 1,783,654 | ||||
| 2,171,750 | Bausch Health Companies, Inc. (1-Month CME Term SOFR + 5.250%)3 | 02/01/27 | 10.668 |
|
| 1,817,755 |
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 A P R I L 3 0, 2 0 2 4 | 11 |
BBH INCOME FUND |
PORTFOLIO OF INVESTMENTS (continued) April 30, 2024 (unaudited) |
Principal | Maturity | Interest | Value | ||||||||
| LOAN PARTICIPATIONS AND |
|
| ||||||||
$ | 2,752,672 | BCP Renaissance Parent LLC Term B4 (3-Month CME Term SOFR + 3.500%)3 | 10/31/28 | 8.829 | % | $ | 2,762,306 | ||||
| 890,589 | Buckeye Partners LP Term B3 (1-Month CME Term SOFR + 2.000%)3 | 11/01/26 | 7.316 |
|
| 892,958 | ||||
| 3,602,775 | Central Parent LLC (3-Month CME Term SOFR + 4.000%)3 | 07/06/29 | 9.309 |
|
| 3,615,565 | ||||
| 11,453,401 | Connect Finco S.a.r.l. (1-Month CME Term SOFR + 4.500%)3 | 09/27/29 | 9.816 |
|
| 11,095,482 | ||||
| 2,707,408 | Delos Aircraft Designated Activity Co. (3-Month CME Term SOFR + 2.000%)3 | 10/31/27 | 7.302 |
|
| 2,708,761 | ||||
| 1,445,000 | Delos Aircraft Designated Activity Co. Term B (3-Month CME Term SOFR + 1.750%)3 | 10/13/27 | 7.416 |
|
| 1,445,722 | ||||
| 2,260,442 | Eastern Power LLC (1-Month CME Term SOFR + 3.750%)3 | 10/02/25 | 9.180 |
|
| 2,255,084 | ||||
| 2,293,243 | Elanco Animal Health, Inc. (1-Month CME Term SOFR + 1.750%)3 | 08/01/27 | 7.177 |
|
| 2,287,900 | ||||
| 1,886,625 | Geon Performance Solutions LLC (Fka. Echo US Holdings LLC) (3-Month CME Term SOFR + 4.750%)3 | 08/18/28 | 10.314 |
|
| 1,890,549 | ||||
| 881,326 | GIP II Blue Holding, LP (1-Month CME Term SOFR + 3.750%)3 | 09/29/28 | 9.066 |
|
| 885,592 | ||||
| 1,539,354 | Global Medical Response, Inc. (1-Month CME Term SOFR + 4.250%)3 | 03/14/25 | 9.680 |
|
| 1,456,937 | ||||
| 3,261,269 | ILPEA Parent, Inc. (1-Month CME Term SOFR + 4.500%)3 | 06/22/28 | 9.930 |
|
| 3,244,962 | ||||
| 3,880,275 | INEOS Enterprises Holdings US Finco LLC Term B (3-Month CME Term SOFR + 3.750%)3 | 07/08/30 | 9.193 |
|
| 3,881,478 | ||||
| 3,695,738 | Iqvia, Inc. Term B4 (3-Month CME Term SOFR + 2.000%)3 | 01/02/31 | 7.309 |
|
| 3,710,225 | ||||
| 4,182,183 | Iridium Satellite LLC Term B3 (1-Month CME Term SOFR + 2.500%)3 | 09/20/30 | 7.816 |
|
| 4,183,479 | ||||
| 2,513,333 | Jazz Pharmaceuticals Plc. Term B1 (1-Month CME Term SOFR + 3.000%)3 | 05/05/28 | 8.430 |
|
| 2,527,483 | ||||
| 4,575,303 | LendingTree, Inc. Term B (1-Month CME Term SOFR + 3.750%)3 | 09/15/28 | 9.180 |
|
| 4,433,469 | ||||
| 876,023 | Lumen Technologies, Inc. Term A (1-Month CME Term SOFR + 6.000%)3 | 06/01/28 | 11.316 |
|
| 740,240 | ||||
| 3,625,913 | Medallion Midland Acquisition, LP (3-Month CME Term SOFR + 3.500%)3 | 10/18/28 | 8.830 |
|
| 3,638,386 | ||||
| 2,722,623 | Medline Borrower, LP (1-Month CME Term SOFR + 2.750%)3 | 10/23/28 | 8.068 |
|
| 2,728,640 | ||||
| 3,000,925 | MIP V Waste LLC (3-Month CME Term SOFR + 3.250%)3 | 12/08/28 | 8.841 |
|
| 3,005,937 |
The accompanying notes are an integral part of these financial statements.
12 |
BBH INCOME FUND |
PORTFOLIO OF INVESTMENTS (continued) April 30, 2024 (unaudited) |
Principal | Maturity | Interest | Value | ||||||||
| LOAN PARTICIPATIONS AND |
|
| ||||||||
$ | 6,429,327 | MPH Acquisition Holdings LLC (3-Month CME Term SOFR + 4.250%)3 | 09/01/28 | 9.855 | % | $ | 5,936,648 | ||||
| 6,352,545 | OCM System One Buyer CTB LLC (3-Month CME Term SOFR + 4.000%)3 | 03/02/28 | 9.459 |
|
| 6,368,426 | ||||
| 2,360,288 | Organon & Co. (1-Month CME Term SOFR + 3.000%)3 | 06/02/28 | 8.433 |
|
| 2,369,870 | ||||
| 3,355,705 | Propulsion (BC) Newco LLC (3-Month CME Term SOFR + 3.750%)3 | 09/14/29 | 9.058 |
|
| 3,368,993 | ||||
| 905,771 | SkyMiles IP, Ltd. (3-Month CME Term SOFR + 3.750%)3 | 10/20/27 | 9.075 |
|
| 933,035 | ||||
| 1,787,375 | Starwood Property Mortgage LLC (1-Month CME Term SOFR + 3.250%)3 | 11/18/27 | 8.566 |
|
| 1,785,891 | ||||
| 5,270,000 | United AirLines, Inc. Term B (3-Month CME Term SOFR + 2.750%)3 | 02/22/31 | 8.076 |
|
| 5,284,809 | ||||
| 1,114,348 | Verscend Holding Corp. Team B1 (3-Month U.S. Prime Rate + 3.000%)3 | 08/27/25 | 11.500 |
|
| 1,114,626 | ||||
| 1,774,339 | Vistra Operations Company LLC (fka Tex Operations Co. LLC) (1-Month CME Term SOFR + 2.000%)3 | 12/20/30 | 7.316 |
|
| 1,775,137 | ||||
| Total Loan Participations and Assignments |
|
| 117,144,904 | |||||||
|
|
| |||||||||
| MUNICIPAL BONDS (0.1%) |
|
| ||||||||
| 1,645,000 | Indiana Finance Authority, Revenue Bonds | 03/01/51 | 3.313 |
|
| 1,086,280 | ||||
| Total Municipal Bonds |
|
| 1,086,280 | |||||||
|
|
| |||||||||
| PREFERRED SECURITIES (2.6%) |
|
| ||||||||
| 79,000 | Apollo Global Management, Inc. (5-Year CMT Index + 3.226%)3 | 09/15/53 | 7.625 |
|
| 2,087,180 | ||||
| 99,600 | Crescent Capital BDC, Inc. | 05/25/26 | 5.000 |
|
| 2,404,344 | ||||
| 178,600 | Eagle Point Credit Co., Inc. | 01/31/29 | 5.375 |
|
| 4,009,570 | ||||
| 66,200 | Ellington Financial, Inc. (5-Year CMT Index + 5.130%)3,6 | 8.625 |
|
| 1,543,784 | |||||
| 132,600 | Gladstone Investment Corp. | 11/01/28 | 4.875 |
|
| 3,010,020 | ||||
| 93,600 | Horizon Technology Finance Corp. | 03/30/26 | 4.875 |
|
| 2,232,706 | ||||
| 130,800 | Oxford Lane Capital Corp. | 01/31/27 | 5.000 |
|
| 3,010,035 | ||||
| 114,000 | Trinity Capital, Inc. | 01/16/25 | 7.000 |
|
| 2,883,060 | ||||
| 175,000 | Trinity Capital, Inc. | 03/30/29 | 7.875 |
|
| 4,471,215 | ||||
| Total Preferred Securities |
|
| 25,651,914 | |||||||
|
|
|
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 A P R I L 3 0, 2 0 2 4 | 13 |
BBH INCOME FUND |
PORTFOLIO OF INVESTMENTS (continued) April 30, 2024 (unaudited) |
Principal | Maturity | Interest | Value | |||||||||
| RESIDENTIAL MORTGAGE BACKED SECURITIES (0.1%) |
|
|
| ||||||||
$ | 359,709 | Cascade Funding Mortgage Trust 2018-RM21,3,4 | 10/25/68 | 4.000 | % | $ | 352,897 |
| ||||
| 186,420 | Cascade Funding Mortgage Trust 2019-RM31,3,4 | 06/25/69 | 2.800 |
|
| 182,804 |
| ||||
| 303,988 | RMF Proprietary Issuance Trust 2019-11,3,4 | 10/25/63 | 2.750 |
|
| 257,436 |
| ||||
| Total Residential Mortgage Backed Securities |
|
| 793,137 |
| |||||||
|
|
|
| |||||||||
| U.S. GOVERNMENT AGENCY |
|
|
| ||||||||
| 15,200,000 | Federal Home Loan Bank Discount Notes5 | 05/01/24 | 0.000 |
|
| 15,200,000 |
| ||||
| Total U.S. Government Agency Obligations |
|
| 15,200,000 |
| |||||||
|
|
|
| |||||||||
| U.S. TREASURY BILLS (0.4%) |
|
|
| ||||||||
| 2,100,000 | U.S. Treasury Bill5,7 | 07/25/24 | 0.000 |
|
| 2,073,981 |
| ||||
| 2,300,000 | U.S. Treasury Bill5,7 | 10/10/24 | 0.000 |
|
| 2,246,401 |
| ||||
| Total U.S. Treasury Bills |
|
| 4,320,382 |
| |||||||
|
|
|
| |||||||||
| U.S. TREASURY BONDS AND NOTES (15.9%) |
|
|
| ||||||||
| 26,120,000 | U.S. Treasury Bond | 02/15/39 | 3.500 |
|
| 22,756,030 |
| ||||
| 3,900,000 | U.S. Treasury Bond | 08/15/41 | 1.750 |
|
| 2,476,347 |
| ||||
| 31,500,000 | U.S. Treasury Bond | 02/15/43 | 3.875 |
|
| 27,516,973 |
| ||||
| 34,365,000 | U.S. Treasury Bond | 08/15/50 | 1.375 |
|
| 16,767,704 |
| ||||
| 37,725,000 | U.S. Treasury Bond | 02/15/53 | 3.625 |
|
| 30,822,504 |
| ||||
| 13,600,000 | U.S. Treasury Bond | 05/15/53 | 3.625 |
|
| 11,115,875 |
| ||||
| 12,750,000 | U.S. Treasury Note | 03/31/29 | 4.125 |
|
| 12,417,305 |
| ||||
| 3,000,000 | U.S. Treasury Note7 | 05/15/33 | 3.375 |
|
| 2,711,250 |
| ||||
| 33,915,000 | U.S. Treasury Note | 02/15/34 | 4.000 |
|
| 32,113,265 |
| ||||
| Total U.S. Treasury Bonds and Notes |
|
| 158,697,253 |
| |||||||
|
|
|
| |||||||||
| TOTAL INVESTMENTS (Cost $1,040,972,710)8 | 100.9 | % | $ | 1,008,089,355 |
| ||||||
| LIABILITIES IN EXCESS OF CASH AND OTHER ASSETS | (0.9 | )% |
| (9,245,402 | ) | ||||||
| NET ASSETS | 100.0 | % | $ | 998,843,953 |
|
____________
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 April 30, 2024 was $456,708,487 or 45.7% of net assets.
2 Security that used significant unobservable inputs to determine fair value.
3 Variable rate instrument. Interest rates change on specific dates (such as coupon or interest payment date). The yield shown represents the April 30, 2024 coupon or interest rate.
The accompanying notes are an integral part of these financial statements.
14 |
BBH INCOME FUND |
PORTFOLIO OF INVESTMENTS (continued) April 30, 2024 (unaudited) |
4 This variable rate security is based on a predetermined schedule and the rate at period end also represents the reference rate at period end.
5 Security issued with zero coupon. Income is recognized through accretion of discount.
6 Security is perpetual in nature and has no stated maturity date.
7 All or a portion of this security is held at the broker as collateral for open futures contracts.
8 The aggregate cost of investments and derivatives for federal income tax purposes is $1,040,972,710, the aggregate gross unrealized appreciation is $6,744,262 and the aggregate gross unrealized depreciation is $46,334,165, resulting in net unrealized depreciation of $39,589,903.
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.
F I N A N C I A L S T A T E M E N T S A P R I L 3 0, 2 0 2 4 | 15 |
BBH INCOME FUND |
PORTFOLIO OF INVESTMENTS (continued) April 30, 2024 (unaudited) |
FINANCIAL FUTURES CONTRACTS
The following futures contracts were open at April 30, 2024:
Description | Number of | Expiration | Notional | Market | Unrealized | |||||||||
Contracts to Buy: |
|
|
|
| ||||||||||
U.S. Treasury 10-Year Notes | 770 | June 2024 | $ | 84,784,031 | $ | 82,726,875 | $ | (2,057,156 | ) | |||||
U.S. Treasury 10-Year Ultra Bond | 935 | June 2024 |
| 105,750,842 |
| 103,054,531 |
| (2,696,311 | ) | |||||
U.S. Long Bond | 340 | June 2024 |
| 40,146,050 |
| 38,696,250 |
| (1,449,800 | ) | |||||
U.S. Ultra Bond | 220 | June 2024 |
| 27,697,656 |
| 26,303,750 |
| (1,393,906 | ) | |||||
|
| $ | (7,597,173) |
| ||||||||||
Contracts to Sell: |
|
|
|
| ||||||||||
U.S. Treasury 5-Year Notes | 456 | June 2024 | $ | 48,653,063 | $ | 47,762,438 | $ | 890,625 |
| |||||
Net Unrealized (Loss) on Open Futures Contracts |
|
| $ | (6,706,548) |
|
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.
16 |
BBH INCOME FUND |
PORTFOLIO OF INVESTMENTS (continued) April 30, 2024 (unaudited) |
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.
F I N A N C I A L S T A T E M E N T S A P R I L 3 0, 2 0 2 4 | 17 |
BBH INCOME FUND |
PORTFOLIO OF INVESTMENTS (continued) April 30, 2024 (unaudited) |
The following table summarizes the valuation of the Fund’s investments by the above fair value hierarchy levels as of April 30, 2024.
Investments, at value | Unadjusted | Significant | Significant | Balance as of | ||||||||||
Asset Backed Securities | $ | — |
| $ | 195,048,598 | $ | 5,908,306 | $ | 200,956,904 |
| ||||
Commercial Mortgage Backed Securities |
| — |
|
| 56,947,396 |
| 8,077,541 |
| 65,024,937 |
| ||||
Corporate Bonds |
| — |
|
| 410,641,780 |
| 8,571,864 |
| 419,213,644 |
| ||||
Loan Participations and Assignments |
| — |
|
| 117,144,904 |
| — |
| 117,144,904 |
| ||||
Municipal Bonds |
| — |
|
| 1,086,280 |
| — |
| 1,086,280 |
| ||||
Preferred Securities |
| 25,651,914 |
|
| — |
| — |
| 25,651,914 |
| ||||
Residential Mortgage Backed Securities |
| — |
|
| 793,137 |
| — |
| 793,137 |
| ||||
U.S. Government Agency Obligations |
| — |
|
| 15,200,000 |
| — |
| 15,200,000 |
| ||||
U.S. Treasury Bills |
| — |
|
| 4,320,382 |
| — |
| 4,320,382 |
| ||||
U.S. Treasury Bonds and Notes |
| — |
|
| 158,697,253 |
| — |
| 158,697,253 |
| ||||
Total Investments, at value | $ | 25,651,914 |
| $ | 959,879,730 | $ | 22,557,711 | $ | 1,008,089,355 |
| ||||
Other Financial Instruments, at value |
|
|
|
|
|
| ||||||||
Financial Futures Contracts | $ | (6,706,548 | ) | $ | — | $ | — | $ | (6,706,548 | ) | ||||
Other Financial Instruments, at value | $ | (6,706,548 | ) | $ | — | $ | — | $ | (6,706,548 | ) |
The accompanying notes are an integral part of these financial statements.
18 |
BBH INCOME FUND |
PORTFOLIO OF INVESTMENTS (continued) April 30, 2024 (unaudited) |
The following is a reconciliation of assets for which significant unobservable inputs (Level 3) were used in determining fair value during the period ended April 30, 2024:
Asset Backed Securities | Commercial Mortgage Backed Securities | Corporate Bonds | Total | ||||||||||||
Balance as of October 31, 2023 | $ | 6,126,472 |
| $ | 1,583,531 |
| $ | 8,507,034 | $ | 16,217,037 |
| ||||
Purchases |
| — |
|
| 7,346,812 |
|
| — |
| 7,346,812 |
| ||||
Sales/Paydowns |
| (426,868 | ) |
| (899,761 | ) |
| — |
| (1,326,629 | ) | ||||
Realized gains/(losses) |
| — |
|
| 124 |
|
| — |
| 124 |
| ||||
Change in unrealized appreciation/(depreciation) |
| 208,702 |
|
| (359,490 | ) |
| 64,830 |
| (85,958 | ) | ||||
Amortization |
| — |
|
| 406,325 |
|
| — |
| 406,325 |
| ||||
Transfers from Level 3 |
| — |
|
| — |
|
| — |
| — |
| ||||
Transfers to Level 3 |
| — |
|
| — |
|
| — |
| — |
| ||||
Balance as of April 30, 2024 | $ | 5,908,306 |
| $ | 8,077,541 |
| $ | 8,571,864 | $ | 22,557,711 |
|
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 April 30, 2024, $7,822,967 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 A P R I L 3 0, 2 0 2 4 | 19 |
BBH INCOME FUND |
STATEMENT OF ASSETS AND LIABILITIES April 30, 2024 (unaudited) |
ASSETS: |
|
| ||
Investments in securities, at value (Cost $1,040,972,710) | $ | 1,008,089,355 |
| |
Cash |
| 480,614 |
| |
Foreign currency at value (Cost $226) |
| 246 |
| |
Receivables for: |
|
| ||
Interest |
| 8,302,213 |
| |
Investments sold |
| 6,120,298 |
| |
Shares sold |
| 731,403 |
| |
Interest from Custodian |
| 2,128 |
| |
Prepaid expenses |
| 5,728 |
| |
Total Assets |
| 1,023,731,985 |
| |
|
| |||
LIABILITIES: |
|
| ||
Payables for: |
|
| ||
Investments purchased |
| 22,907,050 |
| |
Futures variation margin on open contracts |
| 1,313,591 |
| |
Investment advisory and administrative fees |
| 326,097 |
| |
Dividends declared |
| 140,985 |
| |
Custody and fund accounting fees |
| 67,194 |
| |
Professional fees |
| 55,525 |
| |
Shares redeemed |
| 52,833 |
| |
Transfer agent fees |
| 6,615 |
| |
Board of Trustees’ fees |
| 582 |
| |
Accrued expenses and other liabilities |
| 17,560 |
| |
Total Liabilities |
| 24,888,032 |
| |
NET ASSETS | $ | 998,843,953 |
| |
|
| |||
Net Assets Consist of: |
|
| ||
Paid-in capital | $ | 1,105,522,788 |
| |
Accumulated deficit |
| (106,678,835 | ) | |
Net Assets | $ | 998,843,953 |
| |
|
| |||
NET ASSET VALUE AND OFFERING PRICE PER SHARE |
|
| ||
CLASS I SHARES |
|
| ||
($998,843,953 ÷ 115,552,739 shares outstanding) | $ | 8.64 |
|
The accompanying notes are an integral part of these financial statements.
20 |
BBH INCOME FUND |
STATEMENT OF OPERATIONS For the six months ended April 30, 2024 (unaudited) |
NET INVESTMENT INCOME: |
|
| ||
Income: |
|
| ||
Dividends | $ | 71,372 |
| |
Interest income |
| 27,272,393 |
| |
Interest income from Custodian |
| 16,711 |
| |
Other income |
| 315,879 |
| |
Total Income |
| 27,676,355 |
| |
|
| |||
Expenses: |
|
| ||
Investment advisory and administrative fees |
| 1,799,917 |
| |
Custody and fund accounting fees |
| 65,370 |
| |
Professional fees |
| 51,553 |
| |
Board of Trustees’ fees |
| 42,711 |
| |
Transfer agent fees |
| 20,167 |
| |
Miscellaneous expenses |
| 34,323 |
| |
Total Expenses |
| 2,014,041 |
| |
Net Investment Income |
| 25,662,314 |
| |
|
| |||
NET REALIZED AND UNREALIZED GAIN: |
|
| ||
Net realized loss on investments in securities |
| (4,303,872 | ) | |
Net realized loss on futures contracts |
| (2,264,218 | ) | |
Net realized loss on investments in securities and futures contracts |
| (6,568,090 | ) | |
|
| |||
Net change in unrealized appreciation/(depreciation) on investments in securities |
| 29,726,130 |
| |
Net change in unrealized appreciation/(depreciation) on futures contracts |
| 5,643,900 |
| |
Net change in unrealized appreciation/(depreciation) on foreign currency translations |
| 2 |
| |
Net change in unrealized appreciation/(depreciation) on investments in securities, futures contracts and foreign currency translations |
| 35,370,032 |
| |
Net Realized and Unrealized Gain |
| 28,801,942 |
| |
Net Increase in Net Assets Resulting from Operations | $ | 54,464,256 |
|
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 A P R I L 3 0, 2 0 2 4 | 21 |
BBH INCOME FUND |
STATEMENTS OF CHANGES IN NET ASSETS
|
For the | For the | |||||||
INCREASE/(DECREASE) IN NET ASSETS FROM: |
|
|
|
| ||||
Operations: |
|
|
|
| ||||
Net investment income | $ | 25,662,314 |
| $ | 37,598,057 |
| ||
Net realized loss on investments in securities and futures contracts |
| (6,568,090 | ) |
| (25,305,935 | ) | ||
Net change in unrealized appreciation/(depreciation) on investments in securities, futures contracts and foreign currency translations |
| 35,370,032 |
|
| (307,171 | ) | ||
Net increase in net assets resulting from operations |
| 54,464,256 |
|
| 11,984,951 |
| ||
|
|
|
| |||||
Dividends and distributions declared: |
|
|
|
| ||||
Class I |
| (25,711,027 | ) |
| (37,555,733 | ) | ||
|
|
|
| |||||
Share transactions: |
|
|
|
| ||||
Proceeds from sales of shares |
| 251,482,861 |
|
| 377,670,836 |
| ||
Net asset value of shares issued to shareholders for reinvestment of dividends and distributions |
| 4,083,495 |
|
| 4,877,819 |
| ||
Proceeds from short-term redemption fees |
| 2,793 |
|
| 7,073 |
| ||
Cost of shares redeemed |
| (58,109,450 | ) |
| (131,621,537 | ) | ||
Net increase in net assets resulting from share transactions |
| 197,459,699 |
|
| 250,934,191 |
| ||
Total increase in net assets |
| 226,212,928 |
|
| 225,363,409 |
| ||
|
|
|
| |||||
NET ASSETS: |
|
|
|
| ||||
Beginning of period/year |
| 772,631,025 |
|
| 547,267,616 |
| ||
End of period/year | $ | 998,843,953 |
| $ | 772,631,025 |
|
The accompanying notes are an integral part of these financial statements.
22 |
BBH INCOME FUND |
FINANCIAL HIGHLIGHTS Selected per share data and ratios for a Class I share outstanding throughout each period/year. |
For the |
| |||||||||||||||||||||||
2023 | 2022 | 2021 | 2020 | 2019 | ||||||||||||||||||||
Net asset value, beginning of period/year | $ | 8.30 |
| $ | 8.49 |
| $ | 10.49 |
| $ | 10.77 |
| $ | 10.61 |
| $ | 9.83 |
| ||||||
Income from investment operations: |
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
Net investment income1 |
| 0.25 |
|
| 0.47 |
|
| 0.36 |
|
| 0.34 |
|
| 0.34 |
|
| 0.36 |
| ||||||
Net realized and unrealized gain/(loss) |
| 0.34 |
|
| (0.20 | ) |
| (2.00 | ) |
| 0.15 |
|
| 0.46 |
|
| 0.78 |
| ||||||
Total income/(loss) from investment operations |
| 0.59 |
|
| 0.27 |
|
| (1.64 | ) |
| 0.49 |
|
| 0.80 |
|
| 1.14 |
| ||||||
Dividends and distributions to shareholders: |
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
From net investment income |
| (0.25 | ) |
| (0.46 | ) |
| (0.36 | ) |
| (0.33 | ) |
| (0.34 | ) |
| (0.36 | ) | ||||||
From net realized gains |
| — |
|
| — |
|
| — |
|
| (0.44 | ) |
| (0.30 | ) |
| — |
| ||||||
Total dividends and distributions to shareholders |
| (0.25 | ) |
| (0.46 | ) |
| (0.36 | ) |
| (0.77 | ) |
| (0.64 | ) |
| (0.36 | ) | ||||||
Short-term redemption fees1 |
| 0.002 |
|
| 0.002 |
|
| 0.002 |
|
| 0.002 |
|
| 0.002 |
|
| 0.002 |
| ||||||
Net asset value, end of period/year | $ | 8.64 |
| $ | 8.30 |
| $ | 8.49 |
| $ | 10.49 |
| $ | 10.77 |
| $ | 10.61 |
| ||||||
Total return3 |
| 7.07 | %4 |
| 3.10 | % |
| (15.93 | )% |
| 4.64 | % |
| 7.87 | % |
| 11.76 | % | ||||||
Ratios/Supplemental data: |
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
Net assets, end of period/year (in millions) | $ | 999 |
| $ | 773 |
| $ | 547 |
| $ | 612 |
| $ | 468 |
| $ | 406 |
| ||||||
Ratio of expenses to average net assets before reductions |
| 0.45 | %5 |
| 0.46 | % |
| 0.47 | % |
| 0.47 | % |
| 0.48 | % |
| 0.52 | % | ||||||
Fee waiver6 |
| — | % |
| — | % |
| — | % |
| — | % |
| — | % |
| (0.02 | )% | ||||||
Ratio of expenses to average net assets after reductions |
| 0.45 | %5 |
| 0.46 | % |
| 0.47 | % |
| 0.47 | % |
| 0.48 | % |
| 0.50 | % | ||||||
Ratio of net investment income to average net assets |
| 5.70 | %5 |
| 5.36 | % |
| 3.77 | % |
| 3.19 | % |
| 3.24 | % |
| 3.49 | % | ||||||
Portfolio turnover rate |
| 21 | %4 |
| 56 | % |
| 56 | % |
| 69 | % |
| 116 | % |
| 77 | % |
____________
1 Calculated using average shares outstanding for the period/year.
2 Less than $0.01.
3 Assumes the reinvestment of distributions.
4 Not annualized.
5 Annualized.
6 The ratio of expenses to average net assets for the six months ended April 30, 2024, the years ended October 31, 2023, 2022, 2021, 2020 and 2019 reflects fees reduced as result of a contractual operating expense limitation of the share class to 0.50%. The agreement is effective through March 1, 2025 and may only be terminated during its term with approval of the Fund’s Board of Trustees. For the six months ended April 30, 2024 and the years ended October 31, 2023, 2022, 2021, 2020 and 2019, the waived fees were $–, $–, $–, $–, $– and $55,757, 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 A P R I L 3 0, 2 0 2 4 | 23 |
BBH INCOME FUND |
NOTES TO FINANCIAL STATEMENTS April 30, 2024 (unaudited) |
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 April 30, 2024, 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 April 30, 2024, 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 the supervision and oversight of the determination of 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
24 |
BBH INCOME FUND |
NOTES TO FINANCIAL STATEMENTS (continued) April 30, 2024 (unaudited) |
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. 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 April 30, 2024, are listed in the Portfolio of Investments.
F I N A N C I A L S T A T E M E N T S A P R I L 3 0, 2 0 2 4 | 25 |
BBH INCOME FUND |
NOTES TO FINANCIAL STATEMENTS (continued) April 30, 2024 (unaudited) |
For the six months ended April 30, 2024, the average monthly notional amount of open futures contracts was $276,887,934. The range of monthly notional amounts was $239,375,198 to $307,031,642.
Fair Values of Derivative Instruments as of April 30, 2024
Derivatives not accounted for as economically hedging instruments under authoritative guidance for derivatives instruments and hedging activities:
Risk | Asset Derivatives | Liability Derivatives | ||||||||||
Statement of Assets | Fair Value | Statement of Assets | Fair Value | |||||||||
Interest Rate Risk | Net unrealized | $890,625 | * | Net unrealized | $(7,597,173 | )* | ||||||
|
|
|
| |||||||||
Total | $ 890,625 |
| $(7,597,173 | ) |
____________
* Includes cumulative appreciation/(depreciation) of futures contracts as reported in the Statement of Assets and Liabilities and Notes to Financial Statements. Only the current day’s variation margin is reported within the Statement of Assets and Liabilities.
Effect of Derivative Instruments on the Statement of Operations | ||||||
Interest Rate Risk | ||||||
Net Realized Loss on Derivatives |
|
| ||||
Futures Contracts | $ | (2,264,218 | ) | |||
|
| |||||
Net Change in Unrealized Appreciation/(Depreciation) on Derivatives |
|
| ||||
Futures Contracts | $ | 5,643,900 |
|
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
26 |
BBH INCOME FUND |
NOTES TO FINANCIAL STATEMENTS (continued) April 30, 2024 (unaudited) |
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. 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.
F I N A N C I A L S T A T E M E N T S A P R I L 3 0, 2 0 2 4 | 27 |
BBH INCOME FUND |
NOTES TO FINANCIAL STATEMENTS (continued) April 30, 2024 (unaudited) |
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 six months ended April 30, 2024, 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 $25,711,027 to Class I shareholders during the six months ended April 30, 2024.
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.
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.
28 |
BBH INCOME FUND |
NOTES TO FINANCIAL STATEMENTS (continued) April 30, 2024 (unaudited) |
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 six months ended April 30, 2024, the Fund incurred $1,799,917 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, 2025, 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 six months ended April 30, 2024, the Investment Adviser waived fees in the amount of $0 for Class I.
C. Custody and Fund Accounting Fees. BBH acts as a custodian and fund accountant and receives custody and fund accounting fees from the Fund calculated daily and 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 based partially on asset values and partially on individual fund transactions. The fund accounting fee is primarily an asset-based fee calculated at 0.325 basis points per annum of the Fund’s net asset value. For the six months ended April 30, 2024, the Fund incurred $65,370 in custody and
F I N A N C I A L S T A T E M E N T S A P R I L 3 0, 2 0 2 4 | 29 |
BBH INCOME FUND |
NOTES TO FINANCIAL STATEMENTS (continued) April 30, 2024 (unaudited) |
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 six months ended April 30, 2024 was $16,711. 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 six months ended April 30, 2024. 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 six months ended April 30, 2024, the Fund incurred $42,711 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 six months ended April 30, 2024, the cost of purchases and the proceeds of sales of investment securities, other than short-term investments, were $385,965,081 and $185,587,883, 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 six months ended | For the year ended | |||||||||||||||
Shares | Dollars | Shares | Dollars | |||||||||||||
Class I |
|
|
|
|
|
| ||||||||||
Shares sold | 28,617,730 |
| $ | 251,482,861 |
| 43,293,311 |
| $ | 377,670,836 |
| ||||||
Shares issued in connection with reinvestments of dividends | 463,872 |
|
| 4,083,495 |
| 561,634 |
|
| 4,877,819 |
| ||||||
Proceeds from short-term redemption fees | N/A |
|
| 2,793 |
| N/A |
|
| 7,073 |
| ||||||
Shares redeemed | (6,652,870 | ) |
| (58,109,450 | ) | (15,212,056 | ) |
| (131,621,537 | ) | ||||||
Net increase | 22,428,732 |
| $ | 197,459,699 |
| 28,642,889 |
| $ | 250,934,191 |
|
30 |
BBH INCOME FUND |
NOTES TO FINANCIAL STATEMENTS (continued) April 30, 2024 (unaudited) |
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
F I N A N C I A L S T A T E M E N T S A P R I L 3 0, 2 0 2 4 | 31 |
BBH INCOME FUND |
NOTES TO FINANCIAL STATEMENTS (continued) April 30, 2024 (unaudited) |
market changes; local, regional or political, social or economic instability; and currency and interest rate and price fluctuations. Natural disasters, the spread of infectious illness and other public health emergencies, recession, terrorism and other unforeseeable events may lead to increased market volatility and may have adverse effects on world economies and markets generally (market risk). A significant investment of Fund assets within one or more sectors, industries, securities and/or durations may increase the Fund’s sensitivity to adverse economic, business, political, or other, risks associated with such sector, industry, security or duration (sector risk). The Fund’s shareholders may be adversely impacted by asset allocation decisions made by an investment adviser whose discretionary clients make up a large percentage of the Fund’s shareholders (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.
32 |
BBH INCOME FUND |
NOTES TO FINANCIAL STATEMENTS (continued) April 30, 2024 (unaudited) |
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 April 30, 2024 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 A P R I L 3 0, 2 0 2 4 | 33 |
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DISCLOSURE OF FUND EXPENSES April 30, 2024 (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 (November 1, 2023, to April 30, 2024).
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.
34 |
BBH INCOME FUND |
DISCLOSURE OF FUND EXPENSES (continued) April 30, 2024 (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 | $1,071 | $2.32 | |||
Hypothetical2 | $1,000 | $1,023 | $2.26 |
____________
1 Expenses are equal to the Fund’s annualized net expense ratio of 0.45% for Class I shares, multiplied by the average account value over the period and multiplied by 182/366 (to reflect the one-half year period).
2 Assumes a return of 5% before expenses. For the purposes of the calculation, the applicable annualized expenses ratio for each class of shares is subtracted from the assumed return before expenses.
F I N A N C I A L S T A T E M E N T S A P R I L 3 0, 2 0 2 4 | 35 |
BBH INCOME FUND |
DISCLOSURE OF ADVISOR SELECTION April 30, 2024 (unaudited) |
Investment Advisory and Administrative Services Agreement Approval
The 1940 Act requires that a fund’s investment advisory agreements must be approved both by a fund’s board of trustees and by a majority of the trustees who are not parties to the investment advisory agreements or “interested persons” of any party (“Independent Trustees”), cast in person at a meeting called for the purpose of voting on such approval.
The Board, a majority of which is comprised of Independent Trustees, held a telephonic meeting on November 16, 2023 and an in-person meeting on December 12, 2023, in reliance on the Exemptive Relief, to consider whether to renew the combined Amended and Restated Investment Advisory and Administrative Services Agreement (the “Agreement”) between the Trust and the Investment Adviser with respect to the existing funds in the Trust, including the Fund. At the December 12, 2023 meeting, the Board voted to approve the renewal of the Agreement with respect to the Fund for an additional one-year term. In doing so, the Board determined that the terms of the Agreement were fair and reasonable and in the best interest of the Fund and its shareholders, and that it had received sufficient information to make an informed business decision with respect to the continuation of the Agreement.
Both in the meetings specifically held to address the continuance of the Agreement and at other meetings over the course of the year, the Board requested, received and assessed a variety of materials provided by the Investment Adviser and BBH, including, among other things, information about the nature, extent and quality of the services provided to the Fund by the Investment Adviser and BBH, including investment management, administrative and shareholder services, the oversight of Fund service providers, marketing, risk oversight, compliance, and the ability to meet applicable legal and regulatory requirements. The Board also received third-party comparative performance and fee and expense information for the Fund prepared by Broadridge Financial Solutions, Inc. (“Broadridge”) using data from Lipper Inc., an independent provider of investment company data (“Lipper Report”). The Board reviewed this report with Broadridge, counsel to the Trust (“Fund Counsel”) and BBH. The Board received from, and discussed with, Fund Counsel a memorandum regarding the responsibilities of trustees for the approval of investment advisory agreements under the 1940 Act, as well as the guidance provided in 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.
In approving the continuation of the Agreement, the Board considered: (a) the nature, extent and quality of services provided by the Investment Adviser; (b) the investment performance of the Fund; (c) the advisory fee and the cost of the services and profits to be realized by the Investment Adviser from its relationship with the Fund; (d) the Fund’s costs to investors compared to the costs of comparative funds; (e) the sharing of potential economies of scale; (f) fall-out benefits to the Investment Adviser as a result of its relationship with the Fund; and (g) other factors deemed relevant by the Board. The following is a summary of certain factors the Board considered in making its determination to approve the continuance of the Agreement. No single factor reviewed by the Board was identified as the principal factor in determining whether to approve the Agreement, and individual Trustees may have given different weight to various factors. The
36 |
BBH INCOME FUND |
DISCLOSURE OF ADVISOR SELECTION (continued) April 30, 2024 (unaudited) |
Board reviewed these factors with Fund Counsel. The Board concluded that the fees paid by the Fund to the Investment Adviser were reasonable based on the expense information, the cost of the services provided, and the profits realized by the Investment Adviser.
Nature, Extent and Quality of Services
The Board noted that, under the Agreement and with respect to the Fund, the Investment Adviser, subject to the supervision of the Board, is responsible for providing a continuous investment program and making purchases and sales of portfolio securities consistent with the Fund’s investment objective and policies. The Board further noted that, as a combined investment advisory and administration agreement, the Agreement also contemplates the provision of administrative services by the Investment Adviser to the Fund within the same fee structure. The Board received and considered information during the December 12, 2023 meeting, and over the course of the previous year, regarding the nature, extent and quality of services provided to the Trust and the Fund by the Investment Adviser including: portfolio management, the supervision of operations and compliance, preparation of regulatory filings, disclosures to Fund shareholders, general oversight of service providers, organizing Board meetings and preparing the materials for such Board meetings, assistance to the Board (including the Independent Trustees in their capacity as Trustees), legal and Chief Compliance Officer services for the Trust, and other services necessary for the operation of the Fund. The Board considered the resources of the Investment Adviser and BBH, as a whole, dedicated to the Fund noting that, pursuant to separate agreements, BBH also provides custody, shareholder servicing, and fund accounting services to the Fund. The Board considered the depth and range of services provided pursuant to the Agreement, noting that the Investment Adviser also coordinates the provision of services to the Fund by affiliated and nonaffiliated service providers.
The Board considered the scope and quality of services provided by the Investment Adviser under the Agreement. The Board reviewed the qualifications of the key investment personnel primarily responsible for the day-to-day portfolio management of the Fund. The Board also considered the policies and practices followed by BBH and the Investment Adviser. The Board noted that during the course of its regular meetings, it received reports on each of the foregoing topics. The Board concluded that, overall, it was satisfied with the nature, extent and quality of the investment advisory and administrative services provided, and expected to be provided, to the Fund pursuant to the Agreement.
Fund Performance
At the November 16, 2023 and December 12, 2023 meetings, and throughout the year, the Board received and considered performance information for the Fund provided by BBH. The Board also considered the Fund’s performance relative to a peer category of other mutual funds in a report compiled by Broadridge. As part of this review, the Trustees considered the composition of the peer category, selection criteria and reputation of Broadridge who prepared the peer category analysis. The Board reviewed and discussed
F I N A N C I A L S T A T E M E N T S A P R I L 3 0, 2 0 2 4 | 37 |
BBH INCOME FUND |
DISCLOSURE OF ADVISOR SELECTION (continued) April 30, 2024 (unaudited) |
with both BBH and Broadridge the report’s findings and discussed the positioning of the Fund relative to its selected peer category. The Board considered investment performance for the Fund over the 1-, 2-, 3-, 4- and 5-year periods ended September 30, 2023 as compared to a its peer category, noting the Fund’s below average performance during the 1- and 2- year periods, and its above average performance in the 3-, 4- and 5-year periods. In evaluating the performance of the Fund, the Board considered the risk expectations for the Fund as well as the relevant market conditions for the Fund’s investments and investment strategy. Based on this information, and in light of the Fund’s investment style, the Board concluded that it was satisfied with the Fund’s investment results.
Costs of Services Provided and Profitability
The Board considered the fee rates paid by the Fund to the Investment Adviser in light of the nature, extent and quality of the services provided to the Fund. The Board also considered and reviewed the fee waiver arrangement that was in place for the Fund and considered the actual fee rates after taking into account the contractual fee waiver. The Board noted that they had previously received and considered information comparing the Fund’s combined investment advisory and administration fee and the Fund’s net operating expenses with those of other comparable mutual funds, such peer category and comparisons having been selected and calculated by Broadridge. The Board recognized that it is difficult to make comparisons of the fee rate, or of combined advisory and administration fees, because there are variations in the services that are included in the fees paid by other funds. The Board concluded that the advisory and administration fee appeared to be both reasonable in light of the services rendered and the result of arm’s length negotiations.
With regard to profitability, the Trustees considered the compensation and benefits flowing to the Investment Adviser and BBH, directly or indirectly. The Board reviewed profitability data for the Fund using data from October 1, 2022 through September 30, 2023, for both the Investment Adviser and BBH. The data also included the effect of revenue generated by the shareholder servicing, custody and fund accounting fees paid by the Fund to BBH and corresponding expenses. The Board conducted a detailed review of the expense allocation methods used in preparing the profitability data. The Board focused on profitability of the Investment Adviser and BBH’s relationships with the Fund before taxes and distribution expenses. The Board concluded that the Investment Adviser’s and BBH’s profitability was not excessive in light of the nature, extent and quality of services provided to the Fund.
The Board also considered the effect of fall-out benefits to the Investment Adviser and BBH such as the increased visibility of BBH’s investment management business due to the distribution of the Trust’s funds. The Board considered other benefits received by BBH and the Investment Adviser as a result of their relationships with the Fund. These other benefits include fees received for being the Fund’s administrator, custodian, fund accounting and shareholder servicing agent. In light of the costs of providing services pursuant to the Agreement as well as the Investment Adviser and BBH’s commitment to the Fund, the ancillary benefits that the Investment Adviser and BBH received were considered reasonable.
38 |
BBH INCOME FUND |
DISCLOSURE OF ADVISOR SELECTION (continued) April 30, 2024 (unaudited) |
Economies of Scale
The Board also considered the existence of any economies of scale and whether those economies are passed along to the Fund’s shareholders through a graduated investment advisory fee schedule or other means, including any fee waivers by the Investment Adviser and BBH. The Board considered the fee schedule for the Fund on the information they had been provided over many years, the Board observed that in the mutual fund industry as a whole, as well as among funds similar to the Fund, there appeared to be no uniformity or pattern in the fees and asset levels at which breakpoints apply. In light of the Fund’s current size and expense structure, the Board concluded that the current breakpoints for the Fund were reasonable. Board concluded that the fees paid by the Fund to the Investment Adviser were reasonable based on the comparative performance, expense information, the cost of the services provided and the profits realized by the Investment Adviser.
F I N A N C I A L S T A T E M E N T S A P R I L 3 0, 2 0 2 4 | 39 |
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CONFLICTS OF INTEREST April 30, 2024 (unaudited) |
BBH&Co., 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&Co., 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&Co. for which they will pay to BBH&Co. customary fees and expenses that will not be shared with the Funds.
The Investment Adviser and the Sub-advisers have adopted and implemented policies and procedures that seek to manage conflicts of interest. Pursuant to such policies and procedures, the Investment Adviser and each Sub-adviser monitor a variety of areas, including compliance with fund investment guidelines, the investment in only those securities that have been approved for purchase, and compliance with their respective Code of Ethics.
The Trust also manages these conflicts of interest. For example, the Trust has designated a CCO and has adopted and implemented policies and procedures designed to manage the conflicts identified below and other conflicts that may arise in the course of the Funds’ operations in such a way as to safeguard the Funds from being negatively affected as a result of any such potential conflicts. From time to time, the Trustees receive reports from the Investment Adviser, the Sub-advisers 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&Co., the Investment Adviser and Sub-advisers can face in the operation of their respective investment management services. This section is not, and is not intended to be, a complete enumeration or explanation of all of the potential conflicts of interest that may arise. The Investment Adviser, the Sub-advisers 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&Co., the Investment Adviser, and the Sub-advisers manage funds and accounts of clients other than the Funds (“Other Clients”). In general, BBH&Co., the Investment Adviser, and the Sub-advisers face conflicts of interest when they render investment advisory services to different clients and, from time to time, provide dissimilar investment advice to different clients. Investment decisions will not necessarily be made in parallel among the Funds and Other Clients. Investments made by the Funds do not, and are not intended to, replicate the investments, or the investment methods and strategies, of Other Clients. Accordingly, such Other Clients 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
40 |
BBH INCOME FUND |
CONFLICTS OF INTEREST (continued) April 30, 2024 (unaudited) |
manager is responsible, on the other. For example, it is possible that the various funds or accounts managed by the Investment Adviser or Sub-advisers could have different investment strategies that, at times, might conflict with one another to the possible detriment of the Funds. From time to time, the Investment Adviser and Sub-advisers, sponsor and with other investment pools and accounts which engage in the same or similar businesses as the Funds using the same or similar investment strategies. To the extent that the same investment opportunities might be desirable for more than one account or fund, possible conflicts could arise in determining how to allocate them because the Investment Adviser or Sub-advisers may have an incentive to allocate investment opportunities to certain accounts or funds. However, BBH&Co. 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&Co. provides administrative, custody, shareholder servicing and fund accounting services to the Funds. BBH&Co. 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&Co. may have an incentive to agree to higher fees than it would in the case of unaffiliated providers. BBH&Co. acting in its capacity as the Funds’ administrator is the primary valuation agent of the Funds. BBH&Co. 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&Co. and its affiliates may have an incentive to seek to overvalue certain assets.
Aggregation. Potential conflicts of interest also arise with the aggregation of trade orders. Purchases and sales of securities for the Funds may be aggregated with orders for other client accounts managed by the Sub-advisers. The Sub-advisers, 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
F I N A N C I A L S T A T E M E N T S A P R I L 3 0, 2 0 2 4 | 41 |
BBH INCOME FUND |
CONFLICTS OF INTEREST (continued) April 30, 2024 (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&Co., the Investment Adviser may (but is not required to) effect purchases and sales between BBH&Co., the Investment Adviser clients (“cross trades”), including the Funds, if BBH&Co., the Investment Adviser or a Fund’s Sub-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&Co., the Investment Adviser and/or a Fund’s Sub-adviser may have a potentially conflicting division of loyalties and responsibilities to the parties in such transactions.
Soft Dollars. The Investment Adviser may direct brokerage transactions and/or payment of a portion of client commissions (“soft dollars”) to specific brokers or dealers or other providers to pay for research or other appropriate services which provide, in the Investment Adviser’s view, appropriate assistance in the investment decision-making process (including with respect to futures, fixed price offerings and over-the-counter transactions). The use of a broker that provides research and securities transaction services may result in a higher commission than that offered by a broker who does not provide such services. The Investment Adviser will determine in good faith whether the amount of commission is reasonable in relation to the value of research and services provided and whether the services provide lawful and appropriate assistance in its investment decision-making responsibilities.
Research or other services obtained in this manner may be used in servicing any or all of the Funds and other accounts managed by the Investment Adviser, including in connection with accounts that do not pay commissions to the broker related to the research or other service arrangements. Such products and services may disproportionately benefit other client accounts relative to the Funds based on the amount of brokerage commissions paid by the Funds and such other accounts. To the extent that a Sub-adviser uses soft dollars, it will not have to pay for those products and services itself.
BBH&Co. may receive research that is bundled with the trade execution, clearing, and/or settlement services provided by a particular broker-dealer. To the extent that a Sub-adviser receives research on this basis, many of the same conflicts related to traditional soft dollars may exist. For example, the research effectively will be paid by client commissions that also will be used to pay for the execution, clearing, and settlement services provided by the broker-dealer and will not be paid by the Sub-adviser.
Arrangements regarding compensation and delegation of responsibility may create conflicts relating to selection of brokers or dealers to execute Fund portfolio trades and/or specific uses of commissions from Fund portfolio trades, administration of investment advice and valuation of securities.
42 |
BBH INCOME FUND |
CONFLICTS OF INTEREST (continued) April 30, 2024 (unaudited) |
Investments in BBH Funds. From time to time BBH&Co. may invest a portion of the assets of its discretionary investment advisory clients in the Funds. That investment by BBH&Co. 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&Co. may limit its selection to funds managed by BBH&Co. or the Investment Adviser. BBH&Co. 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&Co., 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&Co. 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&Co. 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&Co. to be unreliable, the Funds’ investments will be valued at fair value by BBH&Co. pursuant to procedures adopted by the Funds’ Board. When determining an asset’s “fair value,” BBH&Co. 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&Co. deems relevant at the time of the determination and may be based on analytical values determined by BBH&Co. 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&Co. (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&Co. may enter into advisory and/or referral arrangements with third parties. Such arrangements may include compensation paid by BBH&Co. to the third party. BBH&Co. may pay a solicitation fee for referrals and/or advisory or incentive fees. BBH&Co. 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 A P R I L 3 0, 2 0 2 4 | 43 |
BBH INCOME FUND |
CONFLICTS OF INTEREST (continued) April 30, 2024 (unaudited) |
Personal Trading. BBH&Co., 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&Co. Partners and employees. The policy and procedures are intended to prevent BBH&Co. Partners and employees from trading in the same securities as the Funds. However, BBH&Co., including the Investment Adviser, has implemented policies and procedures concerning personal trading by BBH&Co. Partners and employees. The policies and procedures are intended to prevent BBH&Co. 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&Co., 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&Co., 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&Co. Partners and employees. BBH&Co., including the Investment Adviser, has implemented policies and procedures concerning gifts and entertainment to mitigate any impact on the judgment of BBH&Co. Partners and employees.
44 |
BBH INCOME FUND |
OPERATION AND EFFECTIVENESS OF THE FUND’S LIQUIDITY RISK MANAGEMENT PROGRAM April 30, 2024 (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 each Fund’s liquidity risk management program (the “Program”). The Board met on March 6, 2024 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, 2023 through January 31, 2024 (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 Funds classified each of their 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 each Fund’s investments based on criteria in each Fund’s Program. During the Reporting Period, no Fund held 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 no Fund has approached the 50% threshold, has made the determination that it is not necessary to assign a Highly Liquid Investment Minimum to any of the Funds 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 each Fund’s investment strategy is appropriate for an open-end fund structure with a focus on Funds with more significant and consistent holdings of less liquid and illiquid assets and factored a Fund’s concentration in an issuer into the liquidity classification methodology by taking issuer position sizes into account.
Short-term and long-term cash flow projections during normal and reasonably foreseeable stressed market conditions. During the Reporting Period, the Program Administrator reviewed historical redemption activity and used this information as a component to establish each Fund’s reasonably
F I N A N C I A L S T A T E M E N T S A P R I L 3 0, 2 0 2 4 | 45 |
BBH INCOME FUND |
OPERATION AND EFFECTIVENESS OF THE FUND’S LIQUIDITY RISK MANAGEMENT PROGRAM (continued) April 30, 2024 (unaudited) |
anticipated trading size. The Program Administrator also took into consideration other factors such as shareholder ownership concentration, applicable distribution channels and the degree of certainty associated with a Fund’s short-term and long-term cash flow projections.
Holdings of cash and cash equivalents. The Program Administrator considered the degree to which each Fund held cash and cash equivalents as a component of each Fund’s ability to meet redemption requests.
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.
46 |
BBH INCOME FUND |
PORTFOLIO ALLOCATION April 30, 2024 (unaudited) |
Administrator Distributor Shareholder Servicing Agent To obtain information or make shareholder inquiries: | Investment Adviser |
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 |
Semi-Annual Report
APRIL 30, 2024
BBH Select Series — Large Cap Fund
BBH SELECT SERIES – LARGE CAP FUND |
PORTFOLIO ALLOCATION April 30, 2024 (unaudited) |
SECTOR DIVERSIFICATION
U.S. $ Value | Percent of | |||||
Common Stock: |
|
| ||||
Basic Materials | $ | 24,044,226 | 5.5 | % | ||
Communications |
| 62,133,979 | 14.2 |
| ||
Consumer Cyclical |
| 35,335,234 | 8.1 |
| ||
Consumer Non-Cyclical |
| 93,955,565 | 21.4 |
| ||
Financials |
| 90,255,348 | 20.6 |
| ||
Industrials |
| 19,512,692 | 4.4 |
| ||
Technology |
| 86,257,380 | 19.7 |
| ||
Cash and Other Assets in Excess of Liabilities |
| 26,603,754 | 6.1 |
| ||
NET ASSETS | $ | 438,098,178 | 100.0 | % |
All data as of April 30, 2024. The BBH Select Series - Large Cap Fund’s (the “Fund”) sector diversification is expressed as a percentage of net assets and may vary over time.
The accompanying notes are an integral part of these financial statements.
2 |
BBH SELECT SERIES – LARGE CAP FUND |
PORTFOLIO OF INVESTMENTS April 30, 2024 (unaudited) All investments in the United States, except as noted. |
Shares | Value | ||||||
COMMON STOCK (93.9%) |
| ||||||
BASIC MATERIALS (5.5%) |
| ||||||
54,527 | Linde, Plc. (Ireland) | $ | 24,044,226 | ||||
Total Basic Materials |
| 24,044,226 | |||||
| |||||||
COMMUNICATIONS (14.2%) |
| ||||||
191,389 | Alphabet, Inc. (Class C) |
| 31,510,285 | ||||
89,540 | Amazon.com, Inc.1 |
| 15,669,500 | ||||
4,332 | Booking Holdings, Inc. |
| 14,954,194 | ||||
Total Communications |
| 62,133,979 | |||||
| |||||||
CONSUMER CYCLICAL (8.1%) |
| ||||||
169,524 | Copart, Inc.1 |
| 9,206,848 | ||||
22,835 | Costco Wholesale Corp. |
| 16,507,421 | ||||
104,281 | NIKE, Inc. (Class B) |
| 9,620,965 | ||||
Total Consumer Cyclical |
| 35,335,234 | |||||
| |||||||
CONSUMER NON-CYCLICAL (21.4%) |
| ||||||
115,731 | Abbott Laboratories |
| 12,264,014 | ||||
199,086 | Alcon, Inc. (Switzerland) |
| 15,445,092 | ||||
22,982 | Automatic Data Processing, Inc. |
| 5,559,116 | ||||
46,508 | Diageo, Plc. ADR (United Kingdom) |
| 6,425,545 | ||||
55,213 | Nestle S.A. ADR (Switzerland) |
| 5,554,428 | ||||
28,982 | S&P Global, Inc. |
| 12,051,585 | ||||
26,669 | Thermo Fisher Scientific, Inc. |
| 15,167,194 | ||||
17,460 | UnitedHealth Group, Inc. |
| 8,445,402 | ||||
81,909 | Zoetis, Inc. (Class A) |
| 13,043,189 | ||||
Total Consumer Non-Cyclical |
| 93,955,565 | |||||
| |||||||
FINANCIALS (20.6%) |
| ||||||
70,842 | Arthur J Gallagher & Co. |
| 16,625,909 | ||||
47 | Berkshire Hathaway, Inc. (Class A)1 |
| 28,176,500 | ||||
52,263 | Mastercard, Inc. (Class A) |
| 23,581,066 | ||||
105,027 | Progressive Corp. |
| 21,871,873 | ||||
Total Financials |
| 90,255,348 | |||||
| |||||||
INDUSTRIALS (4.4%) |
| ||||||
93,802 | Waste Management, Inc. |
| 19,512,692 | ||||
Total Industrials |
| 19,512,692 |
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 A P R I L 3 0, 2 0 2 4 | 3 |
BBH SELECT SERIES – LARGE CAP FUND |
PORTFOLIO OF INVESTMENTS (continued) April 30, 2024 (unaudited) All investments in the United States, except as noted. |
Shares | Value | ||||||
COMMON STOCK (continued) |
| ||||||
TECHNOLOGY (19.7%) |
| ||||||
19,165 | Adobe, Inc.1 | $ | 8,870,137 | ||||
33,782 | KLA Corp. |
| 23,285,595 | ||||
63,609 | Microsoft Corp. |
| 24,764,892 | ||||
161,246 | Oracle Corp. |
| 18,341,732 | ||||
62,323 | Texas Instruments, Inc. |
| 10,995,024 | ||||
Total Technology |
| 86,257,380 | |||||
Total Common Stock |
| ||||||
(Cost $251,748,056) |
| 411,494,424 | |||||
| |||||||
TOTAL INVESTMENTS (Cost $251,748,056)2 | 93.9% | $ | 411,494,424 | ||||
CASH AND OTHER ASSETS IN EXCESS OF LIABILITIES | 6.1% |
| 26,603,754 | ||||
NET ASSETS | 100.00% | $ | 438,098,178 |
____________
1 Non-income producing security.
2 The aggregate cost for federal income tax purposes is $251,748,056, the aggregate gross unrealized appreciation is $162,398,892 and the aggregate gross unrealized depreciation is $2,652,524, resulting in net unrealized appreciation of $159,746,368.
Abbreviation:
ADR − American Depositary Receipt.
The accompanying notes are an integral part of these financial statements.
4 |
BBH SELECT SERIES – LARGE CAP FUND |
PORTFOLIO OF INVESTMENTS (continued) April 30, 2024 (unaudited) |
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.
F I N A N C I A L S T A T E M E N T S A P R I L 3 0, 2 0 2 4 | 5 |
BBH SELECT SERIES – LARGE CAP FUND |
PORTFOLIO OF INVESTMENTS (continued) April 30, 2024 (unaudited) |
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 April 30, 2024.
Investments, at value | Unadjusted | Significant | Significant | Balance as of | ||||||||
Common Stock: |
|
|
|
| ||||||||
Basic Materials | $ | 24,044,226 | $ | — | $ | — | $ | 24,044,226 | ||||
Communications |
| 62,133,979 |
| — |
| — |
| 62,133,979 | ||||
Consumer Cyclical |
| 35,335,234 |
| — |
| — |
| 35,335,234 | ||||
Consumer Non-Cyclical |
| 93,955,565 |
| — |
| — |
| 93,955,565 | ||||
Financials |
| 90,255,348 |
| — |
| — |
| 90,255,348 | ||||
Industrials |
| 19,512,692 |
| — |
| — |
| 19,512,692 | ||||
Technology |
| 86,257,380 |
| — |
| — |
| 86,257,380 | ||||
Total Investments, at value | $ | 411,494,424 | $ | — | $ | — | $ | 411,494,424 |
The accompanying notes are an integral part of these financial statements.
6 |
BBH SELECT SERIES – LARGE CAP FUND |
STATEMENT OF ASSETS AND LIABILITIES April 30, 2024 (unaudited) |
ASSETS: |
| ||
Investments in securities, at value (Cost $251,748,056) | $ | 411,494,424 | |
Cash |
| 26,775,545 | |
Receivables for: |
| ||
Dividends |
| 427,077 | |
Shares sold |
| 120,757 | |
Interest from Custodian |
| 31,662 | |
Prepaid expenses |
| 1,902 | |
Total Assets |
| 438,851,367 | |
LIABILITIES: |
| ||
Payables for: |
| ||
Shares redeemed |
| 447,565 | |
Investment advisory and administrative fees |
| 237,216 | |
Professional fees |
| 40,087 | |
Custody and fund accounting fees |
| 13,769 | |
Transfer agent fees |
| 2,988 | |
Board of Trustees’ fees |
| 431 | |
Accrued expenses and other liabilities |
| 11,133 | |
Total Liabilities |
| 753,189 | |
NET ASSETS | $ | 438,098,178 | |
Net Assets Consist of: |
| ||
Paid-in capital | $ | 268,012,392 | |
Retained earnings |
| 170,085,786 | |
Net Assets | $ | 438,098,178 | |
NET ASSET VALUE AND OFFERING PRICE PER SHARE |
| ||
CLASS I SHARES |
| ||
($438,098,178 ÷ 30,062,314 shares outstanding) |
| $14.57 |
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 A P R I L 3 0, 2 0 2 4 | 7 |
BBH SELECT SERIES – LARGE CAP FUND |
STATEMENT OF OPERATIONS For the six months ended April 30, 2024 |
NET INVESTMENT INCOME: |
|
| ||
Income: |
|
| ||
Dividends (net of foreign withholding taxes of $31,536) | $ | 2,111,819 |
| |
Interest income |
| 98 |
| |
Interest income from Custodian |
| 331,966 |
| |
Total Income |
| 2,443,883 |
| |
Expenses: |
|
| ||
Investment advisory and administrative fees |
| 1,399,685 |
| |
Board of Trustees’ fees |
| 40,204 |
| |
Professional fees |
| 34,614 |
| |
Transfer agent fees |
| 18,086 |
| |
Custody and fund accounting fees |
| 12,658 |
| |
Distribution fees |
| 319 |
| |
Miscellaneous expenses |
| 32,616 |
| |
Total Expenses |
| 1,538,182 |
| |
Investment advisory and administrative fee waiver |
| (4,935 | ) | |
Net Expenses |
| 1,533,247 |
| |
Net Investment Income |
| 910,636 |
| |
NET REALIZED AND UNREALIZED GAIN: |
|
| ||
Net realized gain on investments in securities |
| 12,122,046 |
| |
Net change in unrealized appreciation/(depreciation) on investments in securities |
| 51,599,642 |
| |
Net Realized and Unrealized Gain |
| 63,721,688 |
| |
Net Increase in Net Assets Resulting from Operations | $ | 64,632,324 |
|
The accompanying notes are an integral part of these financial statements.
8 |
BBH SELECT SERIES – LARGE CAP FUND |
STATEMENTS OF CHANGES IN NET ASSETS
|
For the | For the | |||||||||||||||
INCREASE/(DECREASE) IN NET ASSETS FROM: |
|
|
|
|
|
|
|
| ||||||||
Operations: |
|
|
|
| ||||||||||||
Net investment income | $ | 910,636 |
| $ | 1,206,418 |
| ||||||||||
Net realized gain/(loss) on investments in securities |
| 12,122,046 |
|
| (2,691,557 | ) | ||||||||||
Net change in unrealized appreciation/(depreciation) on investments in securities |
| 51,599,642 |
|
| 54,377,097 |
| ||||||||||
Net increase in net assets resulting from operations |
| 64,632,324 |
|
| 52,891,958 |
| ||||||||||
|
|
|
| |||||||||||||
Dividends and distributions declared: |
|
|
|
| ||||||||||||
Class I |
| (1,204,965 | ) |
| (5,421,653 | ) | ||||||||||
Retail Class1 |
| — |
|
| (10,209 | ) | ||||||||||
Total dividends and distributions declared |
| (1,204,965 | ) |
| (5,431,862 | ) | ||||||||||
|
|
|
| |||||||||||||
Share transactions: |
|
|
|
| ||||||||||||
Proceeds from sales of shares2 |
| 22,144,304 |
|
| 32,816,223 |
| ||||||||||
Net asset value of shares issued to shareholders for reinvestment of dividends and distributions |
| 158,657 |
|
| 778,348 |
| ||||||||||
Proceeds from short-term redemption fees |
| — |
|
| 655 |
| ||||||||||
Cost of shares redeemed2 |
| (37,734,243 | ) |
| (62,786,493 | ) | ||||||||||
Net decrease in net assets resulting from share |
| (15,431,282 | ) |
| (29,191,267 | ) | ||||||||||
Total increase in net assets |
| 47,996,077 |
|
| 18,268,829 |
| ||||||||||
|
|
|
| |||||||||||||
NET ASSETS: |
|
|
|
| ||||||||||||
Beginning of period/year |
| 390,102,101 |
|
| 371,833,272 |
| ||||||||||
End of period/year | $ | 438,098,178 |
| $ | 390,102,101 |
|
____________
1 Effective December 22, 2023, the Fund’s Retail Class was converted to the Fund’s Class I.
2 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 A P R I L 3 0, 2 0 2 4 | 9 |
BBH SELECT SERIES – LARGE CAP FUND |
FINANCIAL HIGHLIGHTS Selected per share data and ratios for a Class I share outstanding throughout each period/year. |
For the |
| For the period from | ||||||||||||||||||||||||||||||
2023 | 2022 | 2021 | 2020 | |||||||||||||||||||||||||||||
Net asset value, beginning of period/year |
| $ | 12.52 |
|
|
| $ | 11.08 |
|
|
| $ | 14.12 |
|
|
| $ | 10.30 |
|
|
| $ | 10.12 |
|
|
| $ | 10.00 |
|
| ||
Income from investment operations: |
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||
Net investment income1 |
| 0.03 |
|
| 0.04 |
|
| 0.03 |
|
| 0.04 |
|
| 0.03 |
|
| 0.01 |
| ||||||||||||||
Net realized and unrealized gain/(loss) |
| 2.06 |
|
| 1.56 |
|
| (2.60 | ) |
| 3.82 |
|
| 0.15 |
|
| 0.11 |
| ||||||||||||||
Total income/(loss) from investment operations |
| 2.09 |
|
| 1.60 |
|
| (2.57 | ) |
| 3.86 |
|
| 0.18 |
|
| 0.12 |
| ||||||||||||||
Dividends and distributions to shareholders: |
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||
From net investment |
| (0.04 | ) |
| (0.02 | ) |
| (0.04 | ) |
| (0.04 | ) |
| (0.00 | )2 |
| — |
| ||||||||||||||
From net realized gains |
| — |
|
| (0.14 | ) |
| (0.43 | ) |
| — |
|
| — |
|
| — |
| ||||||||||||||
Total dividends and distributions to shareholders |
| (0.04 | ) |
| (0.16 | ) |
| (0.47 | ) |
| (0.04 | ) |
| (0.00 | )2 |
| — |
| ||||||||||||||
Short-term redemption fees1 |
| — |
|
| 0.002 |
|
| — |
|
| 0.002 |
|
| 0.002 |
|
| — |
| ||||||||||||||
Net asset value, end of period/year | $ | 14.57 |
| $ | 12.52 |
| $ | 11.08 |
| $ | 14.12 |
| $ | 10.30 |
| $ | 10.12 |
| ||||||||||||||
Total return3 |
| 16.71 | %4 |
| 14.63 | % |
| (18.93 | )% |
| 37.56 | % |
| 1.82 | % |
| 1.20 | %4 | ||||||||||||||
Ratios/Supplemental data: |
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||
Net assets, end of period/year (in millions) | $ | 438 |
| $ | 389 |
| $ | 371 |
| $ | 467 |
| $ | 387 |
| $ | 397 |
| ||||||||||||||
Ratio of expenses to average net assets before reductions |
| 0.71 | %5 |
| 0.72 | % |
| 0.71 | % |
| 0.70 | % |
| 0.74 | % |
| 0.75 | %6 | ||||||||||||||
Fee waiver7 |
| (0.00 | )%5,8 |
| — | % |
| — | % |
| — | % |
| — | % |
| (0.01 | )%6 | ||||||||||||||
Ratio of expenses to average net assets after reductions |
| 0.71 | %5 |
| 0.72 | % |
| 0.71 | % |
| 0.70 | % |
| 0.74 | % |
| 0.74 | %6 | ||||||||||||||
Ratio of net investment income to average net assets |
| 0.42 | %5 |
| 0.31 | % |
| 0.20 | % |
| 0.29 | % |
| 0.34 | % |
| 0.52 | %6 | ||||||||||||||
Portfolio turnover rate |
| 2 | %4 |
| 9 | % |
| 26 | % |
| 18 | % |
| 38 | % |
| 0 | %4 |
____________
* Effective December 22, 2023, the Fund’s Retail Class was converted to the Fund’s Class I.
1 Calculated using average shares outstanding for the period/year.
2 Less than $0.01.
The accompanying notes are an integral part of these financial statements.
10 |
BBH SELECT SERIES – LARGE CAP FUND |
FINANCIAL HIGHLIGHTS (continued) Selected per share data and ratios for a Class I share outstanding throughout each period/year. |
3 Assumes the reinvestment of distributions.
4 Not annualized.
5 Annualized.
6 Annualized with the exception of audit fees, legal fees and registration fees.
7 The ratio of expenses to average net assets for the six months ended April 30, 2024, the years ended October 31, 2023, 2022, 2021, 2020 and the period ended October 31, 2019, reflects fees reduced as result of a contractual operating expense limitation of the share class to 0.80%. The Agreement is effective through March 1, 2025 and may only be terminated during its term with approval of the Fund’s Board of Trustees. For the six months ended April 30, 2024, the years ended October 31, 2023, 2022, 2021, 2020 and the period from September 9, 2019 to October 31, 2019, the waived fees were $4,935, $0, $0, $0, $0 and $27,976, respectively.
8 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 A P R I L 3 0, 2 0 2 4 | 11 |
BBH SELECT SERIES – LARGE CAP FUND |
NOTES TO FINANCIAL STATEMENTS April 30, 2024 (unaudited) |
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 April 30, 2024, there were eight series of the Trust. The Fund commenced operations on September 9, 2019. As of the close of business on December 22, 2023, shares of the Fund’s Retail Class were converted to the Fund’s Class I. The Retail Class ceased operation at this time. The Fund currently offers one class of shares designated as Class I. 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 the supervision and oversight of the determination of 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
12 |
BBH SELECT SERIES – LARGE CAP FUND |
NOTES TO FINANCIAL STATEMENTS (continued) April 30, 2024 (unaudited) |
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 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.
F I N A N C I A L S T A T E M E N T S A P R I L 3 0, 2 0 2 4 | 13 |
BBH SELECT SERIES – LARGE CAP FUND |
NOTES TO FINANCIAL STATEMENTS (continued) April 30, 2024 (unaudited) |
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 April 30, 2024, 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 six months ended April 30, 2024, the Fund did not incur any such interest or penalties. The Fund is subject to examination by U.S. federal and state tax authorities for returns filed for open tax period since September 9, 2019 (commencement of operations). The Fund is not aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will significantly change in the next twelve months.
E. Dividends and Distributions to Shareholders. Dividends and distributions from net investment income to shareholders, if any, are paid annually and are recorded on the ex-dividend date. Distributions from net capital gains, if any, are generally declared and paid annually and are recorded on the ex-dividend date. The Fund declared dividends and distributions in the amount of $1,204,965 and $0 to Class I and Retail Class shareholders, respectively, during the six months ended April 30, 2024, 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 | 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 |
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.
14 |
BBH SELECT SERIES – LARGE CAP FUND |
NOTES TO FINANCIAL STATEMENTS (continued) April 30, 2024 (unaudited) |
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 the six months ended April 30, 2024, the Fund incurred $1,399,685 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, 2025, 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 six months ended April 30, 2024, the Investment Adviser waived fees in the amount of $4,935 for Class I and from November 1, 2023 to December 21, 2023 (last day of operation of Retail Class), the Investment Adviser waived fees in the amount of $0 for Retail Class.
C. Distribution (12b-1) Fees. During the period from September 9, 2019 (commencement of operations) through December 21, 2023 (last day of operation of Retail Class), the Fund 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
F I N A N C I A L S T A T E M E N T S A P R I L 3 0, 2 0 2 4 | 15 |
BBH SELECT SERIES – LARGE CAP FUND |
NOTES TO FINANCIAL STATEMENTS (continued) April 30, 2024 (unaudited) |
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 was 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 was anticipated that total operating expenses for Retail Class shares were no greater than 1.05% of the average daily net assets. For the period from November 1, 2023 through December 21, 2023, Retail Class shares of the Fund incurred $319 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 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 based partially on asset values and partially on individual fund transactions. The fund accounting fee is primarily an asset-based fee calculated at 0.325 basis points per annum of the Fund’s net asset value. For the six months ended April 30, 2024, the Fund incurred $12,658 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 six months ended April 30, 2024 was $331,966. 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 six months ended April 30, 2024. 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 six months ended April 30, 2024, the Fund incurred $40,204 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 six months ended April 30, 2024, the cost of purchases and the proceeds of sales of investment securities, other than short-term investments, were $9,086,152 and $29,831,573, respectively.
16 |
BBH SELECT SERIES – LARGE CAP FUND |
NOTES TO FINANCIAL STATEMENTS (continued) April 30, 2024 (unaudited) |
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. Effective December 22, 2023, the Fund’s Retail Class was converted to the Fund’s Class I. Transactions in Class I and Retail Class shares were as follows:
For the six months ended | For the year ended | ||||||||||||
Shares | Dollars | Shares | Dollars | ||||||||||
Class I |
|
|
|
|
| ||||||||
Shares sold | 1,549,851 |
| $ 22,142,404 |
| 2,715,842 |
|
| $ 32,782,805 |
| ||||
Shares issued in connection with reinvestments of dividends | 11,589 |
| 158,657 |
| 67,204 |
|
| 768,139 |
| ||||
Proceeds from short-term redemption fees | N/A |
| N/A |
| N/A |
|
| 655 |
| ||||
Shares redeemed | (2,591,869 | ) | (36,766,651 | ) | (5,163,596 | ) |
| (62,702,974 | ) | ||||
Net decrease | (1,030,429 | ) | $ (14,465,590 | ) | (2,380,550 | ) |
| $ (29,151,375 | ) | ||||
Retail Class |
|
|
|
|
| ||||||||
Shares sold | 140 |
| $ 1,900 |
| 2,603 |
|
| $ 33,418 |
| ||||
Shares issued in connection with reinvestments of dividends | N/A |
| N/A |
| 904 |
|
| 10,209 |
| ||||
Shares redeemed | (70,792 | ) | (967,592 | ) | (6,729 | ) |
| (83,519 | ) | ||||
Net decrease | (70,652 | ) | $ (965,692 | ) | (3,222 | ) | $ | (39,892 | ) |
Included in Shares Sold and Shares Redeemed are shareholder exchanges during the six months ended April 30, 2024 and the year ended October 31, 2023. Specifically:
During the six months ended April 30, 2024, 69,150 shares of Retail Class were exchanged for 68,499 shares of Class I valued at $946,662.
During the year ended October 31, 2023, 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
F I N A N C I A L S T A T E M E N T S A P R I L 3 0, 2 0 2 4 | 17 |
BBH SELECT SERIES – LARGE CAP FUND |
NOTES TO FINANCIAL STATEMENTS (continued) April 30, 2024 (unaudited) |
infectious illness and other public health emergencies, recession, terrorism and other unforeseeable events may lead to increased market volatility and may have adverse effects on world economies and markets generally (market risk). In the normal course of business, the Fund invests in securities and enters into transactions where risks exist due to assumption of large positions in securities of a small number of issuers (non-diversification risk). There are certain risks associated with investing in 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’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 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. Management has evaluated events and transactions that have occurred since April 30, 2024 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.
18 |
BBH SELECT SERIES – LARGE CAP FUND |
DISCLOSURE OF FUND EXPENSES April 30, 2024 (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 (November 1, 2023 to April 30, 2024).
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 A P R I L 3 0, 2 0 2 4 | 19 |
BBH SELECT SERIES – LARGE CAP FUND |
DISCLOSURE OF FUND EXPENSES (continued) April 30, 2024 (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 | $1,167 | $3.83 | |||
Hypothetical2 | $1,000 | $1,021 | $3.57 |
____________
1 Expenses are equal to the Fund’s annualized net expense ratio of 0.71% for Class I shares, multiplied by the average account value over the period, multiplied by 182/366 (to reflect the one-half year period).
2 Assumes a return of 5% before expenses. For the purposes of the calculation, the applicable annualized expense ratio for each class of shares is subtracted from the assumed return before expenses.
20 |
BBH SELECT SERIES – LARGE CAP FUND |
DISCLOSURE OF ADVISOR SELECTION April 30, 2024 (unaudited) |
Investment Advisory and Administrative Services Agreement Approval
The 1940 Act requires that a fund’s investment advisory agreements must be approved both by a fund’s board of trustees and by a majority of the trustees who are not parties to the investment advisory agreements or “interested persons” of any party (“Independent Trustees”), cast in person at a meeting called for the purpose of voting on such approval.
The Board, a majority of which is comprised of Independent Trustees, held a telephonic meeting on November 16, 2023 and an in-person meeting on December 12, 2023, to consider whether to renew the combined Amended and Restated Investment Advisory and Administrative Services Agreement (the “Advisory Agreement”) between the Trust and the Investment Adviser with respect to the existing funds in the Trust, including the Fund. At the December 12, 2023 meeting, the Board voted to approve the renewal of the Agreement with respect to the Fund for an additional one-year term. In doing so, the Board determined that the terms of the Agreement were fair and reasonable and in the best interest of the Fund and its shareholders and that it had received sufficient information throughout the year to make an informed business decision with respect to the continuation of the Agreement.
Both in the meetings specifically held to address the continuance of the Agreement and at other meetings over the course of the year, the Board requested, received and assessed a variety of materials provided by the Investment Adviser and BBH, including, among other things, information about the nature, extent and quality of the services provided to the Trust and the Fund by the Investment Adviser and BBH, including investment management and administrative, the oversight of Fund service providers, marketing, risk oversight, compliance, and the ability to meet applicable legal and regulatory requirements. The Board also received and reviewed third-party comparative fee and expense information for the Fund prepared by Broadridge Financial Solutions, Inc. (“Broadridge”) using data from Lipper Inc., an independent provider of investment company data (“Lipper Report”). The Board reviewed this report with Broadridge, counsel to the Trust (“Fund Counsel”) and BBH. The Board received from, and discussed with, Fund Counsel a memorandum regarding the responsibilities of trustees for the approval of investment advisory agreements under the 1940 Act, as well as the guidance provided in 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.
In approving the continuation of the Agreement, the Board considered: (a) the nature, extent and quality of services provided by the Investment Adviser; (b) the investment performance of the Fund; (c) the advisory fee and the cost of the services and profits to be realized by the Investment Adviser from its relationship with the Fund; (d) the Fund’s costs to investors compared to the costs of comparative funds; (e) the sharing of potential economies of scale; (f) fall-out benefits to the Investment Adviser as a result of its relationship with the Fund; and (g) other factors deemed relevant by the Board. The following is a summary of certain factors the Board considered in making its determination to approve the continuance of the Agreement. No single factor reviewed by the Board was identified as the principal factor in determining whether to approve the Agreement, and individual Trustees may have given different weight to various factors. The Board reviewed these factors with Fund Counsel. The Board concluded that the fees paid by the Fund to the Investment Adviser were reasonable based on the expense information, the cost of the services provided, and the profits realized by the Investment Adviser.
F I N A N C I A L S T A T E M E N T S A P R I L 3 0, 2 0 2 4 | 21 |
BBH SELECT SERIES – LARGE CAP FUND |
DISCLOSURE OF ADVISOR SELECTION (continued) April 30, 2024 (unaudited) |
Nature, Extent and Quality of Services
The Board noted that, under the Agreement and with respect to the Fund, the Investment Adviser, subject to the supervision of the Board, is responsible for providing a continuous investment program and making purchases and sales of portfolio securities consistent with the Fund’s investment objective and policies. The Board further noted that, as a combined investment advisory and administration agreement, the Agreement also contemplates the provision of administrative services by the Investment Adviser to the Fund within the same fee structure.
The Board received and considered information during the December 12, 2023 meeting, and over the course of the previous year, regarding the nature, extent and quality of services provided to the Trust and the Fund by the Investment Adviser including: portfolio management, the supervision of operations and compliance, preparation of regulatory filings, disclosures to Fund shareholders, general oversight of service providers, organizing Board meetings and preparing the materials for such Board meetings, assistance to the Board (including the Independent Trustees in their capacity as Trustees), legal and Chief Compliance Officer services for the Trust, and other services necessary for the operation of the Fund.
The Board considered the resources of the Investment Adviser and BBH, as a whole, dedicated to the Fund noting that, pursuant to separate agreements, BBH also provides custody and fund accounting services to the Fund. The Board considered the depth and range of services provided pursuant to the Agreement, noting that the Investment Adviser also coordinates the provision of services to the Fund by affiliated and nonaffiliated service providers.
The Board considered the scope and quality of services provided by the Investment Adviser under the Agreement. The Board reviewed the qualifications of the key investment personnel primarily responsible for the day-to-day portfolio management of the Fund. The Board also considered the policies and practices followed by BBH and the Investment Adviser. The Board noted that during the course of its regular meetings, it received reports on each of the foregoing topics. The Board concluded that, overall, it was satisfied with the nature, extent and quality of the investment advisory and administrative services provided, and expected to be provided, to the Fund pursuant to the Agreement.
Fund Performance
At the November 16, 2023 and December 12, 2023 meetings, and throughout the year, the Board received and considered performance information for the Fund provided by BBH. The Board also considered the Fund’s performance relative to a peer category of other mutual funds in a report compiled by Broadridge. As part of this review, the Trustees considered the composition of the peer category, selection criteria and reputation of Broadridge who prepared the peer category analysis. The Board reviewed and discussed with both BBH and Broadridge the report’s findings and discussed the positioning of the Fund relative to its selected peer category. The Board considered investment performance for the Fund over the 1-, 2-, 3- and 4-year periods of time, noting the Fund had above average performance in the 1- and 2- year periods, average performance in the 3- year period and below average performance in the 4-year period, each ended September 30, 2023. In evaluating the performance of the Fund, the Board considered the risk expectations for the Fund as well as the level of Fund performance in the context of Fund expenses and the Investment Adviser’s profitability. The Board also noted relevant market conditions for the Fund after September 30, 2023. Based on this information, the Board concluded that it was satisfied with the Fund’s investment results.
22 |
BBH SELECT SERIES – LARGE CAP FUND |
DISCLOSURE OF ADVISOR SELECTION (continued) April 30, 2024 (unaudited) |
Costs of Services Provided and Profitability
The Board considered the fee rates paid by the Fund to the Investment Adviser and BBH in light of the nature, extent and quality of the services provided to the Fund. The Board also considered and reviewed the fee waiver arrangement that was in place for the Fund and considered the actual fee rates after taking into account the contractual fee waiver. The Board noted that they had previously received and considered information comparing the Fund’s combined investment advisory and administration fee and the Fund’s net operating expenses with those of other comparable mutual funds, such peer category and comparisons having been selected and calculated by Broadridge. The Board recognized that it is difficult to make comparisons of the fee rate, or of combined advisory and administration fees, because there are variations in the services that are included in the fees paid by other funds. The Board concluded that the advisory and administration fee appeared to be both reasonable in light of the services rendered and the result of arm’s length negotiations.
With regard to profitability, the Trustees considered the compensation and benefits flowing to the Investment Adviser and BBH, directly or indirectly. The Board reviewed profitability data for the Fund using data from October 1, 2022 through September 30, 2023, for both the Investment Adviser and BBH. The data also included the effect of revenue generated by the custody and fund accounting fees paid by the Fund to BBH and corresponding expenses. The Board conducted a detailed review of the expense allocation methods used in preparing the profitability data. The Board focused on profitability of the Investment Adviser and BBH’s relationships with the Fund before taxes and distribution expenses. The Board concluded that the Investment Adviser’s and BBH’s profitability was not excessive in light of the nature, extent and quality of services provided to the Fund.
The Board also considered the effect of fall-out benefits to the Investment Adviser and BBH such as the increased visibility of BBH’s investment management business due to the distribution of the Trust’s funds. The Board considered other benefits received by BBH and the Investment Adviser as a result of their relationships with the Fund. These other benefits include fees received for being the Fund’s administrator, custodian, fund accounting agent. In light of the costs of providing services pursuant to the Agreement as well as the Investment Adviser and BBH’s commitment to the Fund, the ancillary benefits that the Investment Adviser and BBH received were considered reasonable.
Economies of Scale
The Board also considered the existence of any economies of scale and whether those economies are passed along to the Fund’s shareholders through a graduated investment advisory fee schedule or other means, including any fee waivers by the Investment Adviser and BBH. The Board considered the fee schedule for the Fund on the information they had been provided over many years, the Board observed that in the mutual fund industry as a whole, as well as among funds similar to the Fund, there appeared to be no uniformity or pattern in the fees and asset levels at which breakpoints apply. In light of the Fund’s current size and expense structure, the Board concluded that the current breakpoints for the Fund were reasonable. The Board concluded that the fees paid by the Fund to the Investment Adviser were reasonable based on the comparative expense information, the cost of the services provided by the Investment Adviser.
F I N A N C I A L S T A T E M E N T S A P R I L 3 0, 2 0 2 4 | 23 |
BBH SELECT SERIES – LARGE CAP FUND |
CONFLICTS OF INTEREST April 30, 2024 (unaudited) |
BBH&Co., 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&Co., 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&Co. for which they will pay to BBH&Co. customary fees and expenses that will not be shared with the Funds.
The Investment Adviser and the Sub-advisers have adopted and implemented policies and procedures that seek to manage conflicts of interest. Pursuant to such policies and procedures, the Investment Adviser and each Sub-adviser monitor a variety of areas, including compliance with fund investment guidelines, the investment in only those securities that have been approved for purchase, and compliance with their respective Code of Ethics.
The Trust also manages these conflicts of interest. For example, the Trust has designated a CCO and has adopted and implemented policies and procedures designed to manage the conflicts identified below and other conflicts that may arise in the course of the Funds’ operations in such a way as to safeguard the Funds from being negatively affected as a result of any such potential conflicts. From time to time, the Trustees receive reports from the Investment Adviser, the Sub-advisers 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&Co., the Investment Adviser and Sub-advisers can face in the operation of their respective investment management services. This section is not, and is not intended to be, a complete enumeration or explanation of all of the potential conflicts of interest that may arise. The Investment Adviser, the Sub-advisers 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&Co., the Investment Adviser, and the Sub-advisers manage funds and accounts of clients other than the Funds (“Other Clients”). In general, BBH&Co., the Investment Adviser, and the Sub-advisers face conflicts of interest when they render investment advisory services to different clients and, from time to time, provide dissimilar investment advice to different clients. Investment decisions will not necessarily be made in parallel among the Funds and Other Clients. Investments made by the Funds do not, and are not intended to, replicate the investments, or the investment methods and strategies, of Other Clients. Accordingly, such Other Clients 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
24 |
BBH SELECT SERIES – LARGE CAP FUND |
CONFLICTS OF INTEREST (continued) April 30, 2024 (unaudited) |
manager is responsible, on the other. For example, it is possible that the various funds or accounts managed by the Investment Adviser or Sub-advisers could have different investment strategies that, at times, might conflict with one another to the possible detriment of the Funds. From time to time, the Investment Adviser and Sub-advisers, sponsor and with other investment pools and accounts which engage in the same or similar businesses as the Funds using the same or similar investment strategies. To the extent that the same investment opportunities might be desirable for more than one account or fund, possible conflicts could arise in determining how to allocate them because the Investment Adviser or Sub-advisers may have an incentive to allocate investment opportunities to certain accounts or funds. However, BBH&Co. 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&Co. provides administrative, custody, shareholder servicing and fund accounting services to the Funds. BBH&Co. 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&Co. may have an incentive to agree to higher fees than it would in the case of unaffiliated providers. BBH&Co. acting in its capacity as the Funds’ administrator is the primary valuation agent of the Funds. BBH&Co. 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&Co. and its affiliates may have an incentive to seek to overvalue certain assets.
Aggregation. Potential conflicts of interest also arise with the aggregation of trade orders. Purchases and sales of securities for the Funds may be aggregated with orders for other client accounts managed by the Sub-advisers. The Sub-advisers, 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
F I N A N C I A L S T A T E M E N T S A P R I L 3 0, 2 0 2 4 | 25 |
BBH SELECT SERIES – LARGE CAP FUND |
CONFLICTS OF INTEREST (continued) April 30, 2024 (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&Co., the Investment Adviser may (but is not required to) effect purchases and sales between BBH&Co., the Investment Adviser clients (“cross trades”), including the Funds, if BBH&Co., the Investment Adviser or a Fund’s Sub-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&Co., the Investment Adviser and/or a Fund’s Sub-adviser may have a potentially conflicting division of loyalties and responsibilities to the parties in such transactions.
Soft Dollars. The Investment Adviser may direct brokerage transactions and/or payment of a portion of client commissions (“soft dollars”) to specific brokers or dealers or other providers to pay for research or other appropriate services which provide, in the Investment Adviser’s view, appropriate assistance in the investment decision-making process (including with respect to futures, fixed price offerings and over-the-counter transactions). The use of a broker that provides research and securities transaction services may result in a higher commission than that offered by a broker who does not provide such services. The Investment Adviser will determine in good faith whether the amount of commission is reasonable in relation to the value of research and services provided and whether the services provide lawful and appropriate assistance in its investment decision-making responsibilities.
Research or other services obtained in this manner may be used in servicing any or all of the Funds and other accounts managed by the Investment Adviser, including in connection with accounts that do not pay commissions to the broker related to the research or other service arrangements. Such products and services may disproportionately benefit other client accounts relative to the Funds based on the amount of brokerage commissions paid by the Funds and such other accounts. To the extent that a Sub-adviser uses soft dollars, it will not have to pay for those products and services itself.
BBH&Co. may receive research that is bundled with the trade execution, clearing, and/or settlement services provided by a particular broker-dealer. To the extent that a Sub-adviser receives research on this basis, many of the same conflicts related to traditional soft dollars may exist. For example, the research effectively will be paid by client commissions that also will be used to pay for the execution, clearing, and settlement services provided by the broker-dealer and will not be paid by the Sub-adviser.
Arrangements regarding compensation and delegation of responsibility may create conflicts relating to selection of brokers or dealers to execute Fund portfolio trades and/or specific uses of commissions from Fund portfolio trades, administration of investment advice and valuation of securities.
26 |
BBH SELECT SERIES – LARGE CAP FUND |
CONFLICTS OF INTEREST (continued) April 30, 2024 (unaudited) |
Investments in BBH Funds. From time to time BBH&Co. may invest a portion of the assets of its discretionary investment advisory clients in the Funds. That investment by BBH&Co. 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&Co. may limit its selection to funds managed by BBH&Co. or the Investment Adviser. BBH&Co. 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&Co., 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&Co. 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&Co. 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&Co. to be unreliable, the Funds’ investments will be valued at fair value by BBH&Co. pursuant to procedures adopted by the Funds’ Board. When determining an asset’s “fair value,” BBH&Co. 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&Co. deems relevant at the time of the determination and may be based on analytical values determined by BBH&Co. 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&Co. (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&Co. may enter into advisory and/or referral arrangements with third parties. Such arrangements may include compensation paid by BBH&Co. to the third party. BBH&Co. may pay a solicitation fee for referrals and/or advisory or incentive fees. BBH&Co. may benefit from increased amounts of assets under management.
Personal Trading. BBH&Co., 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
F I N A N C I A L S T A T E M E N T S A P R I L 3 0, 2 0 2 4 | 27 |
BBH SELECT SERIES – LARGE CAP FUND |
CONFLICTS OF INTEREST (continued) April 30, 2024 (unaudited) |
implemented policies and procedures concerning personal trading by BBH&Co. Partners and employees. The policy and procedures are intended to prevent BBH&Co. Partners and employees from trading in the same securities as the Funds. However, BBH&Co., including the Investment Adviser, has implemented policies and procedures concerning personal trading by BBH&Co. Partners and employees. The policies and procedures are intended to prevent BBH&Co. 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&Co., 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&Co., 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&Co. Partners and employees. BBH&Co., including the Investment Adviser, has implemented policies and procedures concerning gifts and entertainment to mitigate any impact on the judgment of BBH&Co. Partners and employees.
28 |
BBH SELECT SERIES – LARGE CAP FUND |
OPERATION AND EFFECTIVENESS OF THE FUND’S LIQUIDITY RISK MANAGEMENT PROGRAM April 30, 2024 (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 each Fund’s liquidity risk management program (the “Program”). The Board met on March 6, 2024 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, 2023 through January 31, 2024 (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 Funds classified each of their 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 each Fund’s investments based on criteria in each Fund’s Program. During the Reporting Period, no Fund held 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 no Fund has approached the 50% threshold, has made the determination that it is not necessary to assign a Highly Liquid Investment Minimum to any of the Funds 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 each Fund’s investment strategy is appropriate for an open-end fund structure with a focus on Funds with more significant and consistent holdings of less liquid and illiquid assets and factored a Fund’s concentration in an issuer into the liquidity classification methodology by taking issuer position sizes into account.
Short-term and long-term cash flow projections during normal and reasonably foreseeable stressed market conditions. During the Reporting Period, the Program Administrator reviewed historical redemption activity and used this information as a component to establish each Fund’s reasonably
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BBH SELECT SERIES – LARGE CAP FUND |
OPERATION AND EFFECTIVENESS OF THE FUND’S LIQUIDITY RISK MANAGEMENT PROGRAM (continued) April 30, 2024 (unaudited) |
anticipated trading size. The Program Administrator also took into consideration other factors such as shareholder ownership concentration, applicable distribution channels and the degree of certainty associated with a Fund’s short-term and long-term cash flow projections.
Holdings of cash and cash equivalents. The Program Administrator considered the degree to which each Fund held cash and cash equivalents as a component of each Fund’s ability to meet redemption requests.
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.
30 |
Administrator Distributor Shareholder Servicing Agent To obtain information or make shareholder inquiries: | Investment Adviser | |
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 |
Semi-Annual Report
APRIL 30, 2024
BBH Intermediate Municipal Bond Fund
BBH INTERMEDIATE MUNICIPAL BOND FUND |
PORTFOLIO ALLOCATION April 30, 2024 (unaudited) |
BREAKDOWN BY SECURITY TYPE
U.S. $ Value | Percent of | ||||||
Municipal Bonds | $ | 1,011,852,444 |
| 103.9 | % | ||
Short-term Municipal Bonds |
| 1,470,401 |
| 0.2 |
| ||
Liabilities in Excess of Cash and Other Assets |
| (39,803,275 | ) | (4.1 | ) | ||
NET ASSETS | $ | 973,519,570 |
| 100.0 | % |
All data as of April 30, 2024. The BBH Intermediate Municipal Bond Fund’s (the “Fund”) breakdown by security type is expressed as a percentage of net assets and may vary over time.
CREDIT QUALITY
U.S. $ Value | Percent of | |||||
AAA | $ | 174,168,198 | 17.2 | % | ||
AA |
| 514,377,582 | 50.8 |
| ||
A |
| 276,956,668 | 27.3 |
| ||
BBB |
| 46,349,996 | 4.6 |
| ||
Not rated |
| 1,470,401 | 0.1 |
| ||
TOTAL INVESTMENTS | $ | 1,013,322,845 | 100.0 | % |
All data as of April 30, 2024. 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.
2 |
BBH INTERMEDIATE MUNICIPAL BOND FUND |
PORTFOLIO OF INVESTMENTS April 30, 2024 (unaudited) |
Principal | Maturity | Interest | Value | |||||||||
MUNICIPAL BONDS (103.9%) |
|
| ||||||||||
Alabama (1.1%) |
|
| ||||||||||
$2,220,000 | Black Belt Energy Gas District, Revenue Bonds1,2 | 06/01/49 | 5.500 | % | $ | 2,343,452 | ||||||
5,000,000 | Black Belt Energy Gas District, Revenue Bonds (SIFMA Municipal Swap Index Yield + 0.650%)2 | 04/01/53 | 4.420 |
|
| 4,885,314 | ||||||
3,375,000 | Industrial Development Board of the City of Mobile Alabama, Revenue Bonds1,2 | 06/01/34 | 3.920 |
|
| 3,366,981 | ||||||
Total Alabama |
|
| 10,595,747 | |||||||||
|
| |||||||||||
Arizona (2.9%) |
|
| ||||||||||
4,555,000 | Chandler Industrial Development Authority, Revenue Bonds1,2 | 12/01/37 | 4.100 |
|
| 4,545,437 | ||||||
3,000,000 | County of Yavapai Industrial Development Authority, Revenue Bonds | 06/01/27 | 1.300 |
|
| 2,719,423 | ||||||
3,800,000 | Salt Verde Financial Corp., Revenue Bonds | 12/01/28 | 5.250 |
|
| 3,951,760 | ||||||
4,745,000 | Salt Verde Financial Corp., Revenue Bonds | 12/01/32 | 5.000 |
|
| 4,989,407 | ||||||
11,000,000 | Salt Verde Financial Corp., Revenue Bonds | 12/01/37 | 5.000 |
|
| 11,687,976 | ||||||
Total Arizona |
|
| 27,894,003 | |||||||||
|
| |||||||||||
Arkansas (0.3%) |
|
| ||||||||||
1,000,000 | County of Pulaski, Revenue Bonds | 03/01/40 | 5.000 |
|
| 1,072,751 | ||||||
1,000,000 | County of Pulaski, Revenue Bonds | 03/01/41 | 5.000 |
|
| 1,067,817 | ||||||
1,000,000 | County of Pulaski, Revenue Bonds | 03/01/42 | 5.000 |
|
| 1,062,138 | ||||||
Total Arkansas |
|
| 3,202,706 | |||||||||
|
| |||||||||||
California (11.2%) |
|
| ||||||||||
10,050,000 | Allan Hancock Joint Community College District, General Obligation Bonds3 | 08/01/42 | 0.000 |
|
| 8,165,605 | ||||||
3,500,000 | Anaheim Public Financing Authority, Revenue Bonds, AGM3 | 09/01/31 | 0.000 |
|
| 2,751,293 | ||||||
1,000,000 | Antelope Valley Community College District, General Obligation Bonds3 | 08/01/34 | 0.000 |
|
| 686,804 | ||||||
1,000,000 | Antelope Valley Community College District, General Obligation Bonds3 | 08/01/36 | 0.000 |
|
| 608,313 | ||||||
1,000,000 | Antelope Valley Community College District, General Obligation Bonds3 | 08/01/38 | 0.000 |
|
| 535,317 | ||||||
9,200,000 | California Infrastructure & Economic Development Bank, Revenue Bonds | 08/01/29 | 3.250 |
|
| 9,129,069 | ||||||
4,825,000 | California Municipal Finance Authority, Revenue Bonds, HUD1,2 | 09/01/45 | 3.200 |
|
| 4,733,377 | ||||||
1,000,000 | Chaffey Joint Union High School District, General Obligation Bonds3 | 08/01/39 | 0.000 |
|
| 517,211 | ||||||
1,500,000 | Chaffey Joint Union High School District, General Obligation Bonds3 | 08/01/40 | 0.000 |
|
| 731,940 |
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 A P R I L 3 0, 2 0 2 4 | 3 |
BBH INTERMEDIATE MUNICIPAL BOND FUND |
PORTFOLIO OF INVESTMENTS (continued) April 30, 2024 (unaudited) |
Principal | Maturity | Interest | Value | |||||||||
MUNICIPAL BONDS (continued) |
|
| ||||||||||
California (continued) |
|
| ||||||||||
$ 1,000,000 | Chaffey Joint Union High School District, General Obligation Bonds3 | 08/01/42 | 0.000 | % | $ | 439,280 | ||||||
1,785,000 | Chaffey Joint Union High School District, General Obligation Bonds3 | 08/01/43 | 0.000 |
|
| 741,522 | ||||||
1,000,000 | Chaffey Joint Union High School District, General Obligation Bonds3 | 08/01/44 | 0.000 |
|
| 392,785 | ||||||
1,450,000 | Chino Valley Unified School District, General Obligation Bonds3 | 08/01/34 | 0.000 |
|
| 991,248 | ||||||
2,200,000 | Chino Valley Unified School District, General Obligation Bonds3 | 08/01/35 | 0.000 |
|
| 1,431,701 | ||||||
1,000,000 | Chino Valley Unified School District, General Obligation Bonds3 | 08/01/38 | 0.000 |
|
| 556,124 | ||||||
1,800,000 | Chino Valley Unified School District, General Obligation Bonds3 | 08/01/39 | 0.000 |
|
| 945,949 | ||||||
1,500,000 | Chino Valley Unified School District, General Obligation Bonds3 | 08/01/42 | 0.000 |
|
| 663,550 | ||||||
3,500,000 | Dry Creek Joint Elementary School District, General Obligation Bonds3 | 08/01/35 | 0.000 |
|
| 2,298,654 | ||||||
5,710,000 | Lake Tahoe Unified School District, General Obligation Bonds, AGM3 | 08/01/45 | 0.000 |
|
| 4,632,500 | ||||||
3,245,000 | Lakeside Union School District/San Diego County, General Obligation Bonds3 | 08/01/35 | 0.000 |
|
| 2,131,181 | ||||||
1,000,000 | Long Beach Bond Finance Authority, Revenue Bonds (3-Month CME Term SOFR + 1.450%)2 | 11/15/27 | 5.181 |
|
| 1,004,101 | ||||||
2,000,000 | Los Alamitos Unified School District, Certificate Participation3 | 08/01/42 | 0.000 |
|
| 2,204,618 | ||||||
12,100,000 | Modesto Irrigation District, Revenue Bonds, NPFG (3-Month CME Term SOFR + 0.630%)2 | 09/01/37 | 4.384 |
|
| 11,409,922 | ||||||
7,240,000 | Mount San Antonio Community College District, General Obligation Bonds3 | 08/01/43 | 0.000 |
|
| 6,930,404 | ||||||
10,000,000 | Northern California Energy Authority, Revenue Bonds1,2 | 12/01/54 | 5.000 |
|
| 10,585,643 | ||||||
7,030,000 | Northern California Gas Authority No 1, Revenue Bonds (3-Month CME Term SOFR + 0.720%)2 | 07/01/27 | 4.448 |
|
| 6,992,988 | ||||||
1,200,000 | Rialto Unified School District, General Obligation Bonds, BAM3 | 08/01/40 | 0.000 |
|
| 580,558 | ||||||
1,430,000 | Rialto Unified School District, General Obligation Bonds, BAM3 | 08/01/42 | 0.000 |
|
| 616,932 | ||||||
6,300,000 | Rio Hondo Community College District, General Obligation Bonds3 | 08/01/36 | 0.000 |
|
| 3,991,704 | ||||||
13,000,000 | Rio Hondo Community College District, General Obligation Bonds3 | 08/01/43 | 0.000 |
|
| 5,247,451 |
The accompanying notes are an integral part of these financial statements.
4 |
BBH INTERMEDIATE MUNICIPAL BOND FUND |
PORTFOLIO OF INVESTMENTS (continued) April 30, 2024 (unaudited) |
Principal | Maturity | Interest | Value | |||||||||
MUNICIPAL BONDS (continued) |
|
| ||||||||||
California (continued) |
|
| ||||||||||
$ 4,350,000 | Rio Hondo Community College District, General Obligation Bonds3 | 08/01/44 | 0.000 | % | $ | 1,659,897 | ||||||
1,035,000 | Roseville Joint Union High School District, General Obligation Bonds3 | 08/01/33 | 0.000 |
|
| 721,939 | ||||||
6,375,000 | Sacramento County Water Financing Authority, Revenue Bonds, NPFG (3-Month CME Term SOFR + 0.570%)2 | 06/01/39 | 4.324 |
|
| 5,740,547 | ||||||
3,850,000 | San Diego County Regional Airport Authority, Revenue Bonds | 07/01/36 | 5.250 |
|
| 4,312,977 | ||||||
3,510,000 | San Mateo Union High School District, General Obligation Bonds3 | 09/01/41 | 0.000 |
|
| 3,544,022 | ||||||
1,040,000 | Windsor Unified School District, General Obligation Bonds3 | 08/01/33 | 0.000 |
|
| 737,292 | ||||||
Total California |
|
| 109,364,418 | |||||||||
Colorado (2.2%) |
|
| ||||||||||
3,275,000 | City & County of Denver Airport System Revenue, Revenue Bonds | 11/15/34 | 5.250 |
|
| 3,738,940 | ||||||
2,000,000 | City & County of Denver Airport System Revenue, Revenue Bonds | 11/15/35 | 5.250 |
|
| 2,272,280 | ||||||
790,000 | City & County of Denver Airport System Revenue, Revenue Bonds | 11/15/36 | 5.250 |
|
| 889,404 | ||||||
3,000,000 | City & County of Denver Airport System Revenue, Revenue Bonds | 11/15/36 | 5.750 |
|
| 3,604,443 | ||||||
650,000 | City & County of Denver Airport System Revenue, Revenue Bonds | 11/15/37 | 5.500 |
|
| 737,698 | ||||||
519,683 | Colorado Housing & Finance Authority, Revenue Bonds, GNMA | 11/01/48 | 4.200 |
|
| 507,038 | ||||||
3,700,000 | E-470 Public Highway Authority, Revenue Bonds, NPFG3 | 09/01/35 | 0.000 |
|
| 2,155,055 | ||||||
1,450,000 | E-470 Public Highway Authority, Revenue Bonds (SOFR + 0.350%)2 | 09/01/39 | 3.914 |
|
| 1,447,733 | ||||||
6,125,000 | University of Colorado Hospital Authority, Revenue Bonds2,4 | 05/07/24 | 3.800 |
|
| 6,125,000 | ||||||
Total Colorado |
|
| 21,477,591 | |||||||||
|
| |||||||||||
Connecticut (2.9%) |
|
| ||||||||||
165,000 | Connecticut Housing Finance Authority, Revenue Bonds | 05/15/30 | 2.000 |
|
| 143,735 | ||||||
450,000 | Connecticut Housing Finance Authority, Revenue Bonds | 11/15/30 | 2.050 |
|
| 392,680 | ||||||
400,000 | Connecticut Housing Finance Authority, Revenue Bonds | 05/15/31 | 2.100 |
|
| 331,874 |
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 A P R I L 3 0, 2 0 2 4 | 5 |
BBH INTERMEDIATE MUNICIPAL BOND FUND |
PORTFOLIO OF INVESTMENTS (continued) April 30, 2024 (unaudited) |
Principal | Maturity | Interest | Value | |||||||||
MUNICIPAL BONDS (continued) |
|
| ||||||||||
Connecticut (continued) |
|
| ||||||||||
$ 1,865,000 | Connecticut Housing Finance Authority, Revenue Bonds, FHLMC, FNMA, GNMA | 05/15/42 | 4.250 | % | $ | 1,852,792 | ||||||
3,500,000 | Connecticut Housing Finance Authority, Revenue Bonds | 05/15/54 | 6.250 |
|
| 3,770,132 | ||||||
5,000,000 | Connecticut Housing Finance Authority, Revenue Bonds, FHLMC, FNMA, GNMA | 11/15/54 | 6.000 |
|
| 5,393,294 | ||||||
3,800,000 | Connecticut State Health & Educational Facilities Authority, Revenue Bonds1,2 | 07/01/35 | 0.375 |
|
| 3,763,356 | ||||||
1,200,000 | Connecticut State Health & Educational Facilities Authority, Revenue Bonds2,4 | 05/01/24 | 3.700 |
|
| 1,200,000 | ||||||
10,700,000 | Connecticut State Health & Educational Facilities Authority, Revenue Bonds1,2 | 07/01/49 | 1.100 |
|
| 10,429,812 | ||||||
1,375,000 | Connecticut State Health & Educational Facilities Authority, Revenue Bonds1,2 | 07/01/49 | 1.800 |
|
| 1,367,723 | ||||||
Total Connecticut |
|
| 28,645,398 | |||||||||
|
| |||||||||||
District of Columbia (1.9%) |
|
| ||||||||||
5,665,000 | District of Columbia, Revenue Bonds | 07/15/40 | 5.000 |
|
| 5,739,155 | ||||||
5,840,000 | Metropolitan Washington Airports Authority Aviation Revenue, Revenue Bonds | 10/01/30 | 5.000 |
|
| 5,855,259 | ||||||
2,840,000 | Metropolitan Washington Airports Authority Aviation Revenue, Revenue Bonds | 10/01/31 | 5.000 |
|
| 2,909,325 | ||||||
1,170,000 | Metropolitan Washington Airports Authority Aviation Revenue, Revenue Bonds | 10/01/34 | 5.000 |
|
| 1,248,279 | ||||||
2,085,000 | Metropolitan Washington Airports Authority Aviation Revenue, Revenue Bonds | 10/01/37 | 5.000 |
|
| 2,253,419 | ||||||
Total District of Columbia |
|
| 18,005,437 | |||||||||
|
| |||||||||||
Florida (3.2%) |
|
| ||||||||||
7,500,000 | City of South Miami Health Facilities Authority, Inc., Revenue Bonds | 08/15/42 | 5.000 |
|
| 7,612,294 | ||||||
1,845,000 | County of Broward Airport System Revenue, Revenue Bonds | 10/01/27 | 5.000 |
|
| 1,919,781 | ||||||
3,050,000 | County of Broward Airport System Revenue, Revenue Bonds | 10/01/31 | 5.000 |
|
| 3,244,568 | ||||||
2,965,000 | Florida Housing Finance Corp., Revenue Bonds, FHLMC, FNMA, GNMA | 01/01/54 | 5.500 |
|
| 3,059,444 | ||||||
1,920,000 | Greater Orlando Aviation Authority, Revenue Bonds | 10/01/32 | 5.000 |
|
| 2,100,596 | ||||||
2,500,000 | Greater Orlando Aviation Authority, Revenue Bonds | 10/01/36 | 5.000 |
|
| 2,642,207 | ||||||
6,565,000 | Greater Orlando Aviation Authority, Revenue Bonds | 10/01/36 | 5.000 |
|
| 6,781,631 | ||||||
3,275,000 | Greater Orlando Aviation Authority, Revenue Bonds | 10/01/38 | 5.000 |
|
| 3,424,103 | ||||||
Total Florida |
|
| 30,784,624 |
The accompanying notes are an integral part of these financial statements.
6 |
BBH INTERMEDIATE MUNICIPAL BOND FUND |
PORTFOLIO OF INVESTMENTS (continued) April 30, 2024 (unaudited) |
Principal | Maturity | Interest | Value | |||||||||
MUNICIPAL BONDS (continued) |
|
| ||||||||||
Georgia (2.5%) |
|
| ||||||||||
$ 5,060,000 | Development Authority of Burke County, Revenue Bonds1,2 | 01/01/40 | 1.500 | % | $ | 4,892,941 | ||||||
2,800,000 | Development Authority of Burke County, Revenue Bonds1,2 | 11/01/45 | 3.250 |
|
| 2,763,517 | ||||||
780,000 | Development Authority of Burke County, Revenue Bonds1,2 | 12/01/49 | 1.700 |
|
| 771,055 | ||||||
7,500,000 | Main Street Natural Gas, Inc., Revenue Bonds1,2 | 12/01/53 | 5.000 |
|
| 7,920,026 | ||||||
1,750,000 | Monroe County Development Authority, Revenue Bonds | 07/01/25 | 2.250 |
|
| 1,692,540 | ||||||
3,935,000 | Monroe County Development Authority, Revenue Bonds1,2 | 01/01/39 | 1.500 |
|
| 3,805,083 | ||||||
2,000,000 | State of Georgia, General Obligation Bonds | 07/01/24 | 4.000 |
|
| 2,000,489 | ||||||
Total Georgia |
|
| 23,845,651 | |||||||||
|
| |||||||||||
Idaho (1.4%) |
|
| ||||||||||
8,600,000 | Idaho Health Facilities Authority, Revenue Bonds2,4 | 05/01/24 | 3.700 |
|
| 8,600,000 | ||||||
5,000,000 | Idaho Housing & Finance Association, Revenue Bonds, FHLMC, FNMA, GNMA | 07/01/54 | 6.000 |
|
| 5,465,116 | ||||||
Total Idaho |
|
| 14,065,116 | |||||||||
|
| |||||||||||
Illinois (5.3%) |
|
| ||||||||||
10,000,000 | Illinois Finance Authority, Revenue Bonds2,4 | 05/07/24 | 3.750 |
|
| 10,000,000 | ||||||
4,625,000 | Illinois Finance Authority, Revenue Bonds | 02/15/36 | 5.000 |
|
| 4,753,322 | ||||||
3,470,000 | Illinois Finance Authority, Revenue Bonds | 08/15/36 | 4.000 |
|
| 3,511,629 | ||||||
10,000,000 | Illinois Finance Authority, Revenue Bonds2,4 | 05/01/24 | 3.750 |
|
| 10,000,000 | ||||||
1,915,000 | Illinois Housing Development Authority, Revenue Bonds, FHLMC, FNMA, GNMA | 10/01/52 | 5.250 |
|
| 1,980,566 | ||||||
2,925,000 | Illinois Housing Development Authority, Revenue Bonds, FHLMC, FNMA, GNMA | 10/01/52 | 6.250 |
|
| 3,109,749 | ||||||
5,715,000 | Illinois Housing Development Authority, Revenue Bonds, FHLMC, FNMA, GNMA | 04/01/53 | 5.250 |
|
| 5,956,586 | ||||||
4,940,000 | Illinois Housing Development Authority, Revenue Bonds, FHLMC, FNMA, GNMA | 10/01/53 | 6.250 |
|
| 5,440,391 | ||||||
5,925,000 | Illinois Housing Development Authority, Revenue Bonds, FHLMC, FNMA, GNMA | 04/01/54 | 6.250 |
|
| 6,535,470 | ||||||
Total Illinois |
|
| 51,287,713 | |||||||||
|
| |||||||||||
Indiana (1.0%) |
|
| ||||||||||
3,000,000 | Indiana Finance Authority, Revenue Bonds | 11/01/43 | 5.000 |
|
| 3,095,887 | ||||||
6,650,000 | Indiana Housing & Community Development Authority, Revenue Bonds, FHLMC, FNMA, GNMA | 07/01/52 | 4.750 |
|
| 6,714,516 | ||||||
Total Indiana |
|
| 9,810,403 |
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 A P R I L 3 0, 2 0 2 4 | 7 |
BBH INTERMEDIATE MUNICIPAL BOND FUND |
PORTFOLIO OF INVESTMENTS (continued) April 30, 2024 (unaudited) |
Principal | Maturity | Interest | Value | |||||||||
MUNICIPAL BONDS (continued) |
|
| ||||||||||
Iowa (1.5%) |
|
| ||||||||||
$ 8,200,000 | Iowa Finance Authority, Revenue Bonds2,4 | 05/01/24 | 3.700 | % | $ | 8,200,000 | ||||||
120,000 | Iowa Finance Authority, Revenue Bonds, FHLMC, FNMA, GNMA | 07/01/46 | 4.000 |
|
| 119,438 | ||||||
570,000 | Iowa Finance Authority, Revenue Bonds, FHLMC, FNMA, GNMA | 01/01/49 | 3.500 |
|
| 556,005 | ||||||
5,105,000 | Iowa Finance Authority, Revenue Bonds, FHLMC, FNMA, GNMA | 07/01/53 | 6.250 |
|
| 5,506,065 | ||||||
Total Iowa |
|
| 14,381,508 | |||||||||
|
| |||||||||||
Kentucky (3.1%) |
|
| ||||||||||
5,000,000 | County of Trimble, Revenue Bonds | 11/01/27 | 1.350 |
|
| 4,468,282 | ||||||
3,725,000 | County of Trimble, Revenue Bonds1,2 | 06/01/54 | 4.700 |
|
| 3,728,455 | ||||||
5,000,000 | Kentucky Housing Corp., Revenue Bonds, FHLMC, FNMA, GNMA | 07/01/54 | 6.250 |
|
| 5,517,084 | ||||||
3,455,000 | Kentucky Public Energy Authority, Revenue Bonds1,2 | 12/01/49 | 4.000 |
|
| 3,454,111 | ||||||
12,100,000 | Kentucky Public Energy Authority, Revenue Bonds (SOFR + 1.200%)2 | 08/01/52 | 4.764 |
|
| 11,825,721 | ||||||
1,265,000 | Louisville/Jefferson County Metropolitan Government, Revenue Bonds1,2 | 10/01/47 | 5.000 |
|
| 1,346,090 | ||||||
Total Kentucky |
|
| 30,339,743 | |||||||||
|
| |||||||||||
Louisiana (0.5%) |
|
| ||||||||||
5,180,000 | Louisiana Public Facilities Authority, Revenue Bonds, NPFG (3-Month CME Term SOFR + 0.700%)2 | 02/15/36 | 4.431 |
|
| 4,911,737 | ||||||
Total Louisiana |
|
| 4,911,737 | |||||||||
|
| |||||||||||
Maryland (0.2%) |
|
| ||||||||||
1,980,000 | County of Baltimore, General Obligation Bonds | 08/01/24 | 5.000 |
|
| 1,985,544 | ||||||
Total Maryland |
|
| 1,985,544 | |||||||||
|
| |||||||||||
Massachusetts (0.1%) |
|
| ||||||||||
370,000 | Massachusetts Housing Finance Agency, Revenue Bonds | 06/01/34 | 3.300 |
|
| 351,304 | ||||||
485,000 | Massachusetts Housing Finance Agency, Revenue Bonds | 12/01/36 | 3.450 |
|
| 454,687 | ||||||
Total Massachusetts |
|
| 805,991 | |||||||||
|
| |||||||||||
Michigan (0.9%) |
|
| ||||||||||
40,000 | Detroit City School District, General Obligation Bonds, BHAC, FGIC | 05/01/25 | 5.250 |
|
| 40,322 | ||||||
3,185,000 | Detroit City School District, General Obligation Bonds, AGM | 05/01/29 | 6.000 |
|
| 3,386,201 | ||||||
5,000,000 | Michigan Finance Authority, Revenue Bonds | 08/01/24 | 5.000 |
|
| 5,011,446 | ||||||
Total Michigan |
|
| 8,437,969 |
The accompanying notes are an integral part of these financial statements.
8 |
BBH INTERMEDIATE MUNICIPAL BOND FUND |
PORTFOLIO OF INVESTMENTS (continued) April 30, 2024 (unaudited) |
Principal | Maturity | Interest | Value | |||||||||
MUNICIPAL BONDS (continued) |
|
| ||||||||||
Minnesota (2.7%) |
|
| ||||||||||
$ 1,300,000 | Duluth Independent School District No 709, General Obligation Bonds3 | 02/01/31 | 0.000 | % | $ | 953,600 | ||||||
1,050,000 | Duluth Independent School District No 709, General Obligation Bonds3 | 02/01/32 | 0.000 |
|
| 732,686 | ||||||
1,035,000 | Duluth Independent School District No 709, General Obligation Bonds3 | 02/01/33 | 0.000 |
|
| 686,030 | ||||||
1,000,000 | Minnesota Housing Finance Agency, Revenue Bonds, FHLMC, FNMA, GNMA | 07/01/36 | 5.350 |
|
| 1,041,386 | ||||||
614,511 | Minnesota Housing Finance Agency, Revenue Bonds, FHLMC, FNMA, GNMA | 03/01/47 | 2.930 |
|
| 544,631 | ||||||
526,489 | Minnesota Housing Finance Agency, Revenue Bonds, FHA, FHLMC, FNMA, GNMA | 01/01/49 | 3.600 |
|
| 485,518 | ||||||
1,730,000 | Minnesota Housing Finance Agency, Revenue Bonds, FHLMC, FNMA, GNMA | 01/01/49 | 4.250 |
|
| 1,718,672 | ||||||
1,373,725 | Minnesota Housing Finance Agency, Revenue Bonds, FHLMC, FNMA, GNMA | 03/01/49 | 3.450 |
|
| 1,257,539 | ||||||
595,532 | Minnesota Housing Finance Agency, Revenue Bonds, FHLMC, FNMA, GNMA | 06/01/49 | 3.150 |
|
| 532,298 | ||||||
3,063,665 | Minnesota Housing Finance Agency, Revenue Bonds, FHLMC, FNMA, GNMA | 01/01/50 | 2.470 |
|
| 2,632,562 | ||||||
3,320,000 | Minnesota Housing Finance Agency, Revenue Bonds, FHLMC, FNMA, GNMA | 07/01/53 | 5.000 |
|
| 3,374,680 | ||||||
6,500,000 | Minnesota Housing Finance Agency, Revenue Bonds, FHLMC, FNMA, GNMA | 07/01/54 | 6.250 |
|
| 7,006,484 | ||||||
5,000,000 | Minnesota Housing Finance Agency, Revenue Bonds, FHLMC, FNMA, GNMA5 | 07/01/54 | 6.500 |
|
| 5,517,292 | ||||||
Total Minnesota |
|
| 26,483,378 | |||||||||
|
| |||||||||||
Mississippi (0.8%) |
|
| ||||||||||
1,000,000 | Mississippi Business Finance Corp., Revenue Bonds1,2 | 03/01/27 | 2.200 |
|
| 998,035 | ||||||
1,090,000 | Mississippi State University Educational Building Corp., Revenue Bonds5 | 08/01/36 | 5.000 |
|
| 1,252,647 | ||||||
1,145,000 | Mississippi State University Educational Building Corp., Revenue Bonds5 | 08/01/37 | 5.000 |
|
| 1,301,531 | ||||||
1,000,000 | Mississippi State University Educational Building Corp., Revenue Bonds5 | 08/01/38 | 5.000 |
|
| 1,127,099 | ||||||
1,265,000 | Mississippi State University Educational Building Corp., Revenue Bonds5 | 08/01/39 | 5.000 |
|
| 1,419,061 | ||||||
1,325,000 | Mississippi State University Educational Building Corp., Revenue Bonds5 | 08/01/40 | 5.000 |
|
| 1,475,433 | ||||||
Total Mississippi |
|
| 7,573,806 |
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 A P R I L 3 0, 2 0 2 4 | 9 |
BBH INTERMEDIATE MUNICIPAL BOND FUND |
PORTFOLIO OF INVESTMENTS (continued) April 30, 2024 (unaudited) |
Principal | Maturity | Interest | Value | |||||||||
MUNICIPAL BONDS (continued) |
|
| ||||||||||
Missouri (0.9%) |
|
| ||||||||||
$ 2,755,000 | Missouri Housing Development Commission, Revenue Bonds, FHLMC, FNMA, GNMA | 11/01/52 | 4.750 | % | $ | 2,776,553 | ||||||
5,635,000 | Missouri Housing Development Commission, Revenue Bonds, FHLMC, FNMA, GNMA | 05/01/53 | 5.750 |
|
| 5,920,694 | ||||||
Total Missouri |
|
| 8,697,247 | |||||||||
|
| |||||||||||
Montana (0.2%) |
|
| ||||||||||
580,000 | Montana Board of Housing, Revenue Bonds | 12/01/43 | 4.000 |
|
| 573,819 | ||||||
1,570,000 | Montana Board of Housing, Revenue Bonds | 12/01/52 | 5.000 |
|
| 1,596,643 | ||||||
Total Montana |
|
| 2,170,462 | |||||||||
|
| |||||||||||
Nebraska (1.8%) |
|
| ||||||||||
14,300,000 | Central Plains Energy Project, Revenue Bonds1,2 | 05/01/53 | 5.000 |
|
| 14,923,225 | ||||||
1,190,000 | Nebraska Investment Finance Authority, Revenue Bonds, FHLMC, FNMA, GNMA | 09/01/49 | 3.750 |
|
| 1,166,760 | ||||||
1,515,000 | Nebraska Investment Finance Authority, Revenue Bonds, FHLMC, FNMA, GNMA | 09/01/49 | 4.000 |
|
| 1,485,578 | ||||||
Total Nebraska |
|
| 17,575,563 | |||||||||
|
| |||||||||||
Nevada (1.1%) |
|
| ||||||||||
2,000,000 | County of Clark, Revenue Bonds1,2 | 01/01/36 | 3.750 |
|
| 1,977,070 | ||||||
2,500,000 | County of Washoe, Revenue Bonds1,2 | 03/01/36 | 4.125 |
|
| 2,501,562 | ||||||
6,250,000 | County of Washoe, Revenue Bonds1,2 | 03/01/36 | 4.125 |
|
| 6,253,904 | ||||||
Total Nevada |
|
| 10,732,536 | |||||||||
|
| |||||||||||
New Hampshire (0.1%) |
|
| ||||||||||
1,000,000 | New Hampshire Business Finance Authority, Revenue Bonds | 08/01/24 | 3.125 |
|
| 996,797 | ||||||
Total New Hampshire |
|
| 996,797 | |||||||||
|
| |||||||||||
New Jersey (4.0%) |
|
| ||||||||||
4,000,000 | New Jersey Economic Development Authority, Revenue Bonds | 06/15/34 | 5.000 |
|
| 4,587,387 | ||||||
6,330,000 | New Jersey Economic Development Authority, Revenue Bonds | 06/15/35 | 5.000 |
|
| 7,210,747 | ||||||
2,250,000 | New Jersey Economic Development Authority, Revenue Bonds | 06/15/36 | 5.250 |
|
| 2,596,059 | ||||||
10,625,000 | New Jersey Transportation Trust Fund Authority, Revenue Bonds3 | 12/15/31 | 0.000 |
|
| 7,994,554 | ||||||
3,535,000 | New Jersey Transportation Trust Fund Authority, Revenue Bonds, AGM3 | 12/15/33 | 0.000 |
|
| 2,481,515 | ||||||
1,565,000 | New Jersey Transportation Trust Fund Authority, Revenue Bonds3 | 12/15/34 | 0.000 |
|
| 1,042,585 |
The accompanying notes are an integral part of these financial statements.
10 |
BBH INTERMEDIATE MUNICIPAL BOND FUND |
PORTFOLIO OF INVESTMENTS (continued) April 30, 2024 (unaudited) |
Principal | Maturity | Interest | Value | |||||||||
MUNICIPAL BONDS (continued) |
|
| ||||||||||
New Jersey (continued) |
|
| ||||||||||
$ 5,120,000 | New Jersey Transportation Trust Fund Authority, Revenue Bonds3 | 12/15/34 | 0.000 | % | $ | 3,410,885 | ||||||
7,750,000 | New Jersey Turnpike Authority, Revenue Bonds5 | 01/01/35 | 4.000 |
|
| 8,204,889 | ||||||
1,750,000 | Township of Ewing, General Obligation Bonds | 08/01/29 | 2.000 |
|
| 1,569,690 | ||||||
Total New Jersey |
|
| 39,098,311 | |||||||||
|
| |||||||||||
New Mexico (2.5%) |
|
| ||||||||||
8,600,000 | City of Farmington, Revenue Bonds | 04/01/29 | 1.800 |
|
| 7,493,759 | ||||||
830,000 | New Mexico Mortgage Finance Authority, Revenue Bonds, FHLMC, FNMA, GNMA | 01/01/49 | 4.000 |
|
| 820,853 | ||||||
7,000,000 | New Mexico Mortgage Finance Authority, Revenue Bonds, FHLMC, FNMA, GNMA | 09/01/54 | 6.500 |
|
| 7,685,585 | ||||||
3,000,000 | New Mexico Mortgage Finance Authority, Revenue Bonds, FHLMC, FNMA, GNMA | 03/01/55 | 5.750 |
|
| 3,193,090 | ||||||
5,000,000 | New Mexico Mortgage Finance Authority, Revenue Bonds, FHLMC, FNMA, GNMA5 | 03/01/55 | 6.000 |
|
| 5,450,298 | ||||||
Total New Mexico |
|
| 24,643,585 | |||||||||
|
| |||||||||||
New York (7.3%) |
|
| ||||||||||
2,055,000 | Metropolitan Transportation Authority, Revenue Bonds | 11/15/32 | 5.000 |
|
| 2,096,019 | ||||||
4,395,000 | Metropolitan Transportation Authority, Revenue Bonds3 | 11/15/33 | 0.000 |
|
| 3,043,122 | ||||||
3,165,000 | Metropolitan Transportation Authority, Revenue Bonds | 11/15/37 | 5.000 |
|
| 3,253,182 | ||||||
8,225,000 | Metropolitan Transportation Authority, Revenue Bonds1,2 | 11/15/45 | 5.000 |
|
| 8,812,809 | ||||||
5,995,000 | New York City Municipal Water Finance Authority, Revenue Bonds | 06/15/36 | 5.000 |
|
| 7,095,847 | ||||||
5,000,000 | New York City Municipal Water Finance Authority, Revenue Bonds | 06/15/44 | 5.000 |
|
| 5,005,643 | ||||||
2,565,000 | New York State Dormitory Authority, Revenue Bonds | 07/01/38 | 4.000 |
|
| 2,632,879 | ||||||
1,425,000 | New York State Dormitory Authority, Revenue Bonds | 03/15/39 | 5.000 |
|
| 1,426,735 | ||||||
8,000,000 | Port Authority of New York & New Jersey, Revenue Bonds | 07/15/26 | 5.000 |
|
| 8,004,393 | ||||||
5,000,000 | Port Authority of New York & New Jersey, Revenue Bonds | 09/01/30 | 5.000 |
|
| 5,016,083 | ||||||
5,655,000 | Port Authority of New York & New Jersey, Revenue Bonds | 10/15/32 | 5.000 |
|
| 5,680,155 |
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 A P R I L 3 0, 2 0 2 4 | 11 |
BBH INTERMEDIATE MUNICIPAL BOND FUND |
PORTFOLIO OF INVESTMENTS (continued) April 30, 2024 (unaudited) |
Principal | Maturity | Interest | Value | |||||||||
MUNICIPAL BONDS (continued) |
|
| ||||||||||
New York (continued) |
|
| ||||||||||
$ 1,320,000 | Port Authority of New York & New Jersey, Revenue Bonds | 10/15/34 | 5.000 | % | $ | 1,434,288 | ||||||
1,500,000 | Port Authority of New York & New Jersey, Revenue Bonds | 07/15/35 | 5.000 |
|
| 1,610,413 | ||||||
1,395,000 | Port Authority of New York & New Jersey, Revenue Bonds | 08/01/36 | 5.000 |
|
| 1,515,434 | ||||||
2,750,000 | Triborough Bridge & Tunnel Authority, Revenue Bonds (SOFR + 1.050%)2 | 04/01/26 | 4.614 |
|
| 2,755,101 | ||||||
1,165,000 | Triborough Bridge & Tunnel Authority, Revenue Bonds3 | 11/15/35 | 0.000 |
|
| 721,816 | ||||||
6,500,000 | Triborough Bridge & Tunnel Authority, Revenue Bonds3 | 11/15/36 | 0.000 |
|
| 3,807,265 | ||||||
6,875,000 | Triborough Bridge & Tunnel Authority, Revenue Bonds1,2 | 05/15/45 | 2.000 |
|
| 6,869,903 | ||||||
Total New York |
|
| 70,781,087 | |||||||||
|
| |||||||||||
North Carolina (4.1%) |
|
| ||||||||||
17,200,000 | Charlotte-Mecklenburg Hospital Authority, Revenue Bonds2,4 | 05/01/24 | 3.700 |
|
| 17,200,000 | ||||||
1,380,000 | North Carolina Housing Finance Agency, Revenue Bonds | 07/01/47 | 4.000 |
|
| 1,365,776 | ||||||
5,970,000 | North Carolina Housing Finance Agency, Revenue Bonds, FHLMC, FNMA, GNMA | 01/01/54 | 5.500 |
|
| 6,334,486 | ||||||
5,000,000 | North Carolina Housing Finance Agency, Revenue Bonds, FHLMC, FNMA, GNMA | 01/01/55 | 6.250 |
|
| 5,438,128 | ||||||
8,850,000 | North Carolina Housing Finance Agency, Revenue Bonds, FHLMC, FNMA, GNMA | 01/01/55 | 6.250 |
|
| 9,536,099 | ||||||
Total North Carolina |
|
| 39,874,489 | |||||||||
|
| |||||||||||
North Dakota (1.4%) |
|
| ||||||||||
775,000 | North Dakota Housing Finance Agency, Revenue Bonds | 01/01/49 | 4.250 |
|
| 768,844 | ||||||
2,820,000 | North Dakota Housing Finance Agency, Revenue Bonds | 07/01/49 | 4.250 |
|
| 2,801,417 | ||||||
3,795,000 | North Dakota Housing Finance Agency, Revenue Bonds | 01/01/53 | 4.000 |
|
| 3,749,852 | ||||||
6,145,000 | North Dakota Housing Finance Agency, Revenue Bonds | 07/01/53 | 5.750 |
|
| 6,453,411 | ||||||
Total North Dakota |
|
| 13,773,524 | |||||||||
|
|
The accompanying notes are an integral part of these financial statements.
12 |
BBH INTERMEDIATE MUNICIPAL BOND FUND |
PORTFOLIO OF INVESTMENTS (continued) April 30, 2024 (unaudited) |
Principal | Maturity | Interest | Value | |||||||||
MUNICIPAL BONDS (continued) |
|
| ||||||||||
Ohio (0.8%) |
|
| ||||||||||
$ 7,155,000 | Ohio Housing Finance Agency, Revenue Bonds, FHLMC, FNMA, GNMA | 03/01/54 | 5.750 | % | $ | 7,493,205 | ||||||
Total Ohio |
|
| 7,493,205 | |||||||||
|
| |||||||||||
Oklahoma (0.3%) |
|
| ||||||||||
2,990,000 | Oklahoma Housing Finance Agency, Revenue Bonds, FHLMC, FNMA, GNMA | 03/01/54 | 6.000 |
|
| 3,251,472 | ||||||
Total Oklahoma |
|
| 3,251,472 | |||||||||
|
| |||||||||||
Oregon (5.2%) |
|
| ||||||||||
3,150,000 | Clackamas & Washington Counties School District No 3, General Obligation Bonds3 | 06/15/36 | 0.000 |
|
| 1,892,511 | ||||||
3,250,000 | Clackamas County School District No 12 North Clackamas, General Obligation Bonds3 | 06/15/34 | 0.000 |
|
| 2,126,080 | ||||||
1,500,000 | Lane County School District No 40 Creswell, General Obligation Bonds3 | 06/15/43 | 0.000 |
|
| 584,035 | ||||||
1,445,000 | Multnomah & Clackamas Counties School District No 10JT Gresham-Barlow, General Obligation Bonds3 | 06/15/32 | 0.000 |
|
| 1,029,338 | ||||||
6,000,000 | Multnomah & Clackamas Counties School District No 10JT Gresham-Barlow, General Obligation Bonds3 | 06/15/36 | 0.000 |
|
| 3,509,758 | ||||||
2,250,000 | Multnomah County School District No 40, General Obligation Bonds3 | 06/15/38 | 0.000 |
|
| 1,214,721 | ||||||
21,000,000 | Multnomah County School District No 40, General Obligation Bonds3 | 06/15/43 | 0.000 |
|
| 8,490,027 | ||||||
12,000,000 | Multnomah County School District No 7 Reynolds, General Obligation Bonds3 | 06/15/35 | 0.000 |
|
| 7,241,730 | ||||||
2,000,000 | Port of Portland Airport Revenue, Revenue Bonds | 07/01/36 | 5.000 |
|
| 2,200,302 | ||||||
1,045,000 | Salem-Keizer School District No 24J, General Obligation Bonds3 | 06/15/35 | 0.000 |
|
| 637,528 | ||||||
1,905,000 | Tillamook Bay Community College District, General Obligation Bonds3 | 06/15/38 | 0.000 |
|
| 1,009,575 | ||||||
3,750,000 | Washington & Multnomah Counties School District No 48J Beaverton, General Obligation Bonds3 | 06/15/31 | 0.000 |
|
| 2,841,390 | ||||||
3,250,000 | Washington & Multnomah Counties School District No 48J Beaverton, General Obligation Bonds3 | 06/15/34 | 0.000 |
|
| 2,151,713 | ||||||
6,000,000 | Washington & Multnomah Counties School District No 48J Beaverton, General Obligation Bonds3 | 06/15/37 | 0.000 |
|
| 3,380,398 | ||||||
1,800,000 | Washington & Multnomah Counties School District No 48J Beaverton, General Obligation Bonds3 | 06/15/41 | 0.000 |
|
| 799,346 | ||||||
1,500,000 | Washington Clackamas & Yamhill Counties School District No 88J, General Obligation Bonds3 | 06/15/31 | 0.000 |
|
| 1,139,735 |
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 A P R I L 3 0, 2 0 2 4 | 13 |
BBH INTERMEDIATE MUNICIPAL BOND FUND |
PORTFOLIO OF INVESTMENTS (continued) April 30, 2024 (unaudited) |
Principal | Maturity | Interest | Value | |||||||||
MUNICIPAL BONDS (continued) |
|
| ||||||||||
Oregon (continued) |
|
| ||||||||||
$ 1,055,000 | Washington Clackamas & Yamhill Counties School District No 88J, General Obligation Bonds3 | 06/15/33 | 0.000 | % | $ | 734,534 | ||||||
3,330,000 | Washington Clackamas & Yamhill Counties School District No 88J, General Obligation Bonds3 | 06/15/37 | 0.000 |
|
| 1,865,881 | ||||||
6,000,000 | Washington Clackamas & Yamhill Counties School District No 88J, General Obligation Bonds3 | 06/15/39 | 0.000 |
|
| 3,008,492 | ||||||
4,800,000 | Washington Clackamas & Yamhill Counties School District No 88J, General Obligation Bonds3 | 06/15/40 | 0.000 |
|
| 2,255,993 | ||||||
5,000,000 | Washington Clackamas & Yamhill Counties School District No 88J, General Obligation Bonds3 | 06/15/41 | 0.000 |
|
| 2,220,404 | ||||||
Total Oregon |
|
| 50,333,491 | |||||||||
|
| |||||||||||
Pennsylvania (3.0%) |
|
| ||||||||||
1,980,000 | Allegheny County Airport Authority, Revenue Bonds, AGM | 01/01/35 | 5.000 |
|
| 2,188,690 | ||||||
1,000,000 | Allegheny County Airport Authority, Revenue Bonds, AGM | 01/01/36 | 5.250 |
|
| 1,119,787 | ||||||
1,000,000 | Allegheny County Airport Authority, Revenue Bonds, AGM | 01/01/37 | 5.250 |
|
| 1,109,922 | ||||||
5,555,000 | Bethlehem Area School District Authority, Revenue Bonds (SOFR + 0.350%)2 | 07/01/31 | 3.914 |
|
| 5,474,829 | ||||||
4,855,000 | Butler County General Authority, Revenue Bonds, AGM (3–Month CME Term SOFR + 0.700%)2 | 10/01/34 | 4.428 |
|
| 4,685,836 | ||||||
10,700,000 | Pennsylvania Economic Development Financing Authority, Revenue Bonds1,2 | 08/01/37 | 0.580 |
|
| 10,598,571 | ||||||
2,500,000 | School District of Philadelphia, General Obligation Bonds | 09/01/34 | 5.000 |
|
| 2,545,097 | ||||||
1,470,000 | School District of Philadelphia, General Obligation Bonds | 09/01/36 | 4.000 |
|
| 1,487,946 | ||||||
Total Pennsylvania |
|
| 29,210,678 | |||||||||
|
| |||||||||||
South Carolina (0.5%) |
|
| ||||||||||
2,950,000 | South Carolina State Housing Finance & Development Authority, Revenue Bonds | 01/01/54 | 5.750 |
|
| 3,148,186 | ||||||
1,995,000 | South Carolina State Housing Finance & Development Authority, Revenue Bonds | 01/01/54 | 6.000 |
|
| 2,169,461 | ||||||
Total South Carolina |
|
| 5,317,647 | |||||||||
|
| |||||||||||
South Dakota (1.7%) |
|
| ||||||||||
705,000 | South Dakota Housing Development Authority, Revenue Bonds | 11/01/45 | 4.000 |
|
| 701,614 | ||||||
1,710,000 | South Dakota Housing Development Authority, Revenue Bonds | 11/01/46 | 3.500 |
|
| 1,693,950 |
The accompanying notes are an integral part of these financial statements.
14 |
BBH INTERMEDIATE MUNICIPAL BOND FUND |
PORTFOLIO OF INVESTMENTS (continued) April 30, 2024 (unaudited) |
Principal | Maturity | Interest | Value | |||||||||
MUNICIPAL BONDS (continued) |
|
| ||||||||||
South Dakota (continued) |
|
| ||||||||||
$ 1,475,000 | South Dakota Housing Development Authority, Revenue Bonds | 11/01/48 | 4.500 | % | $ | 1,471,272 | ||||||
2,240,000 | South Dakota Housing Development Authority, Revenue Bonds | 11/01/49 | 4.000 |
|
| 2,213,722 | ||||||
4,820,000 | South Dakota Housing Development Authority, Revenue Bonds | 05/01/53 | 5.000 |
|
| 4,893,207 | ||||||
5,580,000 | South Dakota Housing Development Authority, Revenue Bonds, FHLMC, FNMA, GNMA | 05/01/54 | 6.000 |
|
| 5,883,848 | ||||||
Total South Dakota |
|
| 16,857,613 | |||||||||
|
| |||||||||||
Tennessee (2.6%) |
|
| ||||||||||
1,200,000 | Metropolitan Nashville Airport Authority, Revenue Bonds | 07/01/34 | 5.250 |
|
| 1,349,743 | ||||||
1,125,000 | Metropolitan Nashville Airport Authority, Revenue Bonds | 07/01/35 | 5.250 |
|
| 1,262,089 | ||||||
5,575,000 | New Memphis Arena Public Building Authority, Revenue Bonds3 | 04/01/29 | 0.000 |
|
| 5,065,875 | ||||||
3,090,000 | New Memphis Arena Public Building Authority, Revenue Bonds3 | 04/01/33 | 0.000 |
|
| 2,139,167 | ||||||
3,000,000 | New Memphis Arena Public Building Authority, Revenue Bonds3 | 04/01/35 | 0.000 |
|
| 1,885,722 | ||||||
2,000,000 | Tennessee Energy Acquisition Corp., Revenue Bonds1,2 | 05/01/52 | 5.000 |
|
| 2,101,664 | ||||||
1,030,000 | Tennessee Housing Development Agency, Revenue Bonds | 01/01/43 | 4.000 |
|
| 1,018,095 | ||||||
895,000 | Tennessee Housing Development Agency, Revenue Bonds | 07/01/48 | 4.000 |
|
| 885,316 | ||||||
1,620,000 | Tennessee Housing Development Agency, Revenue Bonds | 07/01/49 | 4.250 |
|
| 1,606,942 | ||||||
2,920,000 | Tennessee Housing Development Agency, Revenue Bonds | 01/01/53 | 5.000 |
|
| 2,981,161 | ||||||
5,000,000 | Tennessee Housing Development Agency, Revenue Bonds | 01/01/54 | 6.250 |
|
| 5,384,432 | ||||||
Total Tennessee |
|
| 25,680,206 | |||||||||
|
| |||||||||||
Texas (12.3%) |
|
| ||||||||||
1,800,000 | City of Austin Airport System Revenue, Revenue Bonds | 11/15/36 | 5.000 |
|
| 1,948,848 | ||||||
1,120,000 | City of Houston Airport System Revenue, Revenue Bonds | 07/01/24 | 5.000 |
|
| 1,120,858 | ||||||
1,170,000 | City of Houston Airport System Revenue, Revenue Bonds | 07/01/25 | 5.000 |
|
| 1,182,323 |
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 A P R I L 3 0, 2 0 2 4 | 15 |
BBH INTERMEDIATE MUNICIPAL BOND FUND |
PORTFOLIO OF INVESTMENTS (continued) April 30, 2024 (unaudited) |
Principal | Maturity | Interest | Value | |||||||||
MUNICIPAL BONDS (continued) |
|
| ||||||||||
Texas (continued) |
|
| ||||||||||
$ 2,000,000 | City of Houston Airport System Revenue, Revenue Bonds | 07/01/31 | 5.000 | % | $ | 2,145,764 | ||||||
3,355,000 | City of Houston Airport System Revenue, Revenue Bonds, AGM | 07/01/36 | 5.000 |
|
| 3,691,007 | ||||||
3,640,000 | Fort Bend Independent School District, General Obligation Bonds1,2 | 08/01/51 | 0.720 |
|
| 3,333,785 | ||||||
1,750,000 | Goose Creek Consolidated Independent School District, General Obligation Bonds1,2 | 02/15/35 | 0.600 |
|
| 1,633,196 | ||||||
4,265,000 | La Porte Independent School District, General Obligation Bonds5 | 02/15/33 | 5.000 |
|
| 4,909,563 | ||||||
555,000 | Little Elm Independent School District, General Obligation Bonds1,2 | 08/15/48 | 0.680 |
|
| 532,873 | ||||||
1,025,000 | Love Field Airport Modernization Corp., Revenue Bonds | 11/01/25 | 5.000 |
|
| 1,039,802 | ||||||
2,500,000 | Love Field Airport Modernization Corp., Revenue Bonds | 11/01/30 | 5.000 |
|
| 2,687,915 | ||||||
1,500,000 | Love Field Airport Modernization Corp., Revenue Bonds | 11/01/34 | 5.000 |
|
| 1,536,050 | ||||||
1,000,000 | Love Field Airport Modernization Corp., Revenue Bonds | 11/01/35 | 5.000 |
|
| 1,022,582 | ||||||
4,260,000 | Medina Valley Independent School District, General Obligation Bonds1,2 | 02/15/51 | 0.820 |
|
| 3,983,210 | ||||||
10,000,000 | Northside Independent School District, General Obligation Bonds1,2,5 | 08/01/54 | 3.450 |
|
| 9,987,623 | ||||||
3,850,000 | State of Texas, General Obligation Bonds | 08/01/30 | 4.125 |
|
| 3,849,098 | ||||||
6,040,000 | State of Texas, General Obligation Bonds | 08/01/34 | 5.000 |
|
| 6,719,813 | ||||||
520,000 | Texas Department of Housing & Community Affairs, Revenue Bonds, GNMA | 09/01/35 | 2.150 |
|
| 425,796 | ||||||
2,220,000 | Texas Department of Housing & Community Affairs, Revenue Bonds, GNMA | 07/01/37 | 2.150 |
|
| 1,730,478 | ||||||
4,100,000 | Texas Department of Housing & Community Affairs, Revenue Bonds, GNMA | 01/01/39 | 4.000 |
|
| 3,911,924 | ||||||
8,610,386 | Texas Department of Housing & Community Affairs, Revenue Bonds, FHLMC, FNMA, GNMA | 09/01/47 | 2.835 |
|
| 7,237,815 | ||||||
1,585,000 | Texas Department of Housing & Community Affairs, Revenue Bonds, GNMA | 03/01/50 | 4.000 |
|
| 1,565,987 | ||||||
3,410,000 | Texas Department of Housing & Community Affairs, Revenue Bonds, GNMA | 01/01/53 | 5.750 |
|
| 3,596,719 | ||||||
3,415,000 | Texas Department of Housing & Community Affairs, Revenue Bonds, GNMA | 03/01/53 | 6.000 |
|
| 3,681,313 | ||||||
3,875,000 | Texas Department of Housing & Community Affairs, Revenue Bonds, GNMA | 03/01/54 | 6.000 |
|
| 4,229,997 |
The accompanying notes are an integral part of these financial statements.
16 |
BBH INTERMEDIATE MUNICIPAL BOND FUND |
PORTFOLIO OF INVESTMENTS (continued) April 30, 2024 (unaudited) |
Principal | Maturity | Interest | Value | |||||||||
MUNICIPAL BONDS (continued) |
|
| ||||||||||
Texas (continued) |
|
| ||||||||||
$ 9,135,000 | Texas Municipal Gas Acquisition & Supply Corp. I, Revenue Bonds (3-Month CME Term SOFR + 0.700%)2 | 12/15/26 | 4.446 | % | $ | 9,099,954 | ||||||
9,145,000 | Texas Municipal Gas Acquisition & Supply Corp. I, Revenue Bonds | 12/15/26 | 6.250 |
|
| 9,432,266 | ||||||
2,790,000 | Texas Municipal Gas Acquisition & Supply Corp. II, Revenue Bonds (SIFMA Municipal Swap Index Yield + 0.550%)2 | 09/15/27 | 4.320 |
|
| 2,732,713 | ||||||
10,925,000 | Texas Municipal Gas Acquisition & Supply Corp. II, Revenue Bonds (3-Month CME Term SOFR + 0.863%)2 | 09/15/27 | 4.380 |
|
| 10,898,026 | ||||||
9,975,000 | Texas Municipal Gas Acquisition & Supply Corp. II, Revenue Bonds (3-Month CME Term SOFR + 1.045%)2 | 09/15/27 | 4.616 |
|
| 9,992,785 | ||||||
Total Texas |
|
| 119,860,083 | |||||||||
|
| |||||||||||
Virginia (2.5%) |
|
| ||||||||||
10,000,000 | Albemarle County Economic Development Authority, Revenue Bonds2,4 | 05/07/24 | 3.750 |
|
| 10,000,000 | ||||||
2,750,000 | Amelia County Industrial Development Authority, Revenue Bonds | 04/01/27 | 1.450 |
|
| 2,516,944 | ||||||
8,700,000 | Wise County Industrial Development Authority, Revenue Bonds1,2 | 10/01/40 | 0.750 |
|
| 8,134,609 | ||||||
3,700,000 | York County Economic Development Authority, Revenue Bonds1,2 | 05/01/33 | 3.650 |
|
| 3,661,108 | ||||||
Total Virginia |
|
| 24,312,661 | |||||||||
|
| |||||||||||
Washington (2.6%) |
|
| ||||||||||
6,400,000 | Chelan County Public Utility District No 1, Revenue Bonds2,4 | 05/07/24 | 3.800 |
|
| 6,400,000 | ||||||
1,590,000 | Port of Seattle, Revenue Bonds | 06/01/25 | 3.450 |
|
| 1,573,621 | ||||||
1,500,000 | Port of Seattle, Revenue Bonds | 06/01/26 | 3.600 |
|
| 1,473,162 | ||||||
3,750,000 | Port of Seattle, Revenue Bonds | 04/01/27 | 5.000 |
|
| 3,760,199 | ||||||
425,000 | Port of Seattle, Revenue Bonds | 06/01/27 | 3.750 |
|
| 417,084 | ||||||
5,050,000 | Port of Seattle, Revenue Bonds | 08/01/34 | 5.000 |
|
| 5,473,447 | ||||||
1,415,000 | Port of Seattle, Revenue Bonds | 08/01/35 | 5.000 |
|
| 1,529,303 | ||||||
3,000,000 | Port of Seattle, Revenue Bonds | 04/01/39 | 5.000 |
|
| 3,102,355 | ||||||
1,940,000 | Washington Health Care Facilities Authority, Revenue Bonds1,2 | 10/01/42 | 4.000 |
|
| 1,904,842 | ||||||
45,000 | Washington State Housing Finance Commission, Revenue Bonds, FHLMC, FNMA, GNMA | 12/01/47 | 4.000 |
|
| 44,950 | ||||||
Total Washington |
|
| 25,678,963 | |||||||||
|
|
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 A P R I L 3 0, 2 0 2 4 | 17 |
BBH INTERMEDIATE MUNICIPAL BOND FUND |
PORTFOLIO OF INVESTMENTS (continued) April 30, 2024 (unaudited) |
Principal | Maturity | Interest | Value | ||||||||||
MUNICIPAL BONDS (continued) |
|
|
| ||||||||||
Wisconsin (2.7%) |
|
|
| ||||||||||
$ 4,025,000 | County of Milwaukee Airport Revenue, Revenue Bonds | 12/01/30 | 5.000 | % | $ | 4,127,791 |
| ||||||
2,060,000 | County of Milwaukee Airport Revenue, Revenue Bonds | 12/01/31 | 5.000 |
|
| 2,112,528 |
| ||||||
5,345,000 | Public Finance Authority, Revenue Bonds1,2 | 10/01/46 | 3.700 |
|
| 5,281,493 |
| ||||||
4,000,000 | State of Wisconsin, General Obligation Bonds5 | 05/01/33 | 5.000 |
|
| 4,468,875 |
| ||||||
2,250,000 | State of Wisconsin, General Obligation Bonds5 | 05/01/34 | 5.000 |
|
| 2,540,099 |
| ||||||
1,300,000 | State of Wisconsin, General Obligation Bonds5 | 05/01/35 | 5.000 |
|
| 1,478,283 |
| ||||||
1,000,000 | State of Wisconsin, General Obligation Bonds5 | 05/01/36 | 5.000 |
|
| 1,128,488 |
| ||||||
4,950,000 | Wisconsin Health & Educational Facilities Authority, Revenue Bonds | 11/15/43 | 4.000 |
|
| 4,702,152 |
| ||||||
Total Wisconsin |
|
| 25,839,709 |
| |||||||||
|
|
| |||||||||||
Wyoming (0.6%) |
|
|
| ||||||||||
2,395,000 | Wyoming Community Development Authority, Revenue Bonds | 12/01/34 | 3.500 |
|
| 2,308,932 |
| ||||||
1,545,000 | Wyoming Community Development Authority, Revenue Bonds | 12/01/48 | 4.000 |
|
| 1,528,160 |
| ||||||
875,000 | Wyoming Community Development Authority, Revenue Bonds | 12/01/49 | 3.750 |
|
| 864,981 |
| ||||||
1,105,000 | Wyoming Community Development Authority, Revenue Bonds, FHLMC, FNMA, GNMA | 06/01/50 | 3.000 |
|
| 1,072,559 |
| ||||||
Total Wyoming |
|
| 5,774,632 |
| |||||||||
Total Municipal Bonds |
|
| 1,011,852,444 |
| |||||||||
|
|
| |||||||||||
SHORT-TERM MUNICIPAL BONDS (0.2%) |
|
|
| ||||||||||
New York (0.2%) |
|
|
| ||||||||||
1,470,000 | Averill Park Central School District, General Obligation Bonds | 06/21/24 | 4.500 |
|
| 1,470,401 |
| ||||||
Total New York |
|
| 1,470,401 |
| |||||||||
Total Short-term Municipal Bonds |
|
| 1,470,401 |
| |||||||||
|
|
| |||||||||||
TOTAL INVESTMENTS (Identified cost $1,017,471,924)6 | 104.1 | % | $ | 1,013,322,845 |
| ||||||||
LIABILITIES IN EXCESS OF CASH AND OTHER ASSETS | (4.1 | )% |
| (39,803,275 | ) | ||||||||
NET ASSETS | 100.00 | % | $ | 973,519,570 |
|
____________
1 This variable rate security is based on a predetermined schedule and the rate at period end also represents the reference rate at period end.
2 Variable rate instrument. Interest rates change on specific dates (such as coupon or interest payment date). The yield shown represents the April 30, 2024 coupon or interest rate.
The accompanying notes are an integral part of these financial statements.
18 |
BBH INTERMEDIATE MUNICIPAL BOND FUND |
PORTFOLIO OF INVESTMENTS (continued) April 30, 2024 (unaudited) |
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 April 30, 2024.
5 Represent a security purchased on a when-issued basis.
6 The aggregate cost for federal income tax purposes is $1,017,471,924, the aggregate gross unrealized appreciation is $9,844,798 and the aggregate gross unrealized depreciation is $13,993,877, resulting in net unrealized depreciation of $4,149,079.
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. |
HUD − Housing Choice Voucher Program. |
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.
F I N A N C I A L S T A T E M E N T S A P R I L 3 0, 2 0 2 4 | 19 |
BBH INTERMEDIATE MUNICIPAL BOND FUND |
PORTFOLIO OF INVESTMENTS (continued) April 30, 2024 (unaudited) |
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
The accompanying notes are an integral part of these financial statements.
20 |
BBH INTERMEDIATE MUNICIPAL BOND FUND |
PORTFOLIO OF INVESTMENTS (continued) April 30, 2024 (unaudited) |
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 April 30, 2024.
Investments, at value | Unadjusted | Significant | Significant | Balance as of | ||||||||||||||
Municipal Bonds* | $ | — | $ | 1,011,852,444 | $ | — | $ | 1,011,852,444 | ||||||||||
Short-term Municipal Bonds |
| — |
| 1,470,401 |
| — |
| 1,470,401 | ||||||||||
Total Investment, at value | $ | — | $ | 1,013,322,845 | $ | — | $ | 1,013,322,845 |
____________
* For geographical breakdown of municipal bond investments, refer to the Portfolio of 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 A P R I L 3 0, 2 0 2 4 | 21 |
BBH INTERMEDIATE MUNICIPAL BOND FUND |
STATEMENT OF ASSETS AND LIABILITIES April 30, 2024 (unaudited) |
ASSETS: |
|
| ||
Investments in securities, at value (Cost $1,017,471,924) | $ | 1,013,322,845 |
| |
Cash |
| 66,634 |
| |
Receivables for: |
|
| ||
Interest |
| 8,488,284 |
| |
Shares sold |
| 3,327,292 |
| |
Interest from Custodian |
| 2,707 |
| |
Prepaid expenses |
| 5,458 |
| |
Total Assets |
| 1,025,213,220 |
| |
|
| |||
LIABILITIES: |
|
| ||
Payables for: |
|
| ||
Investments purchased |
| 50,632,346 |
| |
Shares redeemed |
| 525,902 |
| |
Net investment advisory and administrative fees |
| 313,231 |
| |
Dividends declared |
| 95,609 |
| |
Custody and fund accounting fees |
| 58,266 |
| |
Professional fees |
| 48,485 |
| |
Shareholder servicing fees |
| 8,463 |
| |
Transfer agent fees |
| 7,825 |
| |
Board of Trustees’ fees |
| 433 |
| |
Accrued expenses and other liabilities |
| 3,090 |
| |
Total Liabilities |
| 51,693,650 |
| |
|
| |||
NET ASSETS | $ | 973,519,570 |
| |
Net Assets Consist of: |
|
| ||
Paid-in capital | $ | 1,005,097,690 |
| |
Accumulated deficit |
| (31,578,120 | ) | |
Net Assets | $ | 973,519,570 |
| |
|
| |||
NET ASSET VALUE AND OFFERING PRICE PER SHARE |
|
| ||
CLASS N SHARES |
|
| ||
($51,541,914 ÷ 5,050,429 shares outstanding) | $ | 10.21 |
| |
CLASS I SHARES |
|
| ||
($921,977,656 ÷ 90,455,080 shares outstanding) | $ | 10.19 |
|
The accompanying notes are an integral part of these financial statements.
22 |
BBH INTERMEDIATE MUNICIPAL BOND FUND |
STATEMENT OF OPERATIONS For the six months ended April 30, 2024 (unaudited) |
NET INVESTMENT INCOME: |
|
| ||
Income: |
|
| ||
Interest income | $ | 17,414,451 |
| |
Interest income from Custodian |
| 22,903 |
| |
Total Income |
| 17,437,354 |
| |
|
| |||
Expenses: |
|
| ||
Investment advisory and administrative fees |
| 1,718,140 |
| |
Custody and fund accounting fees |
| 62,950 |
| |
Shareholder servicing fees |
| 50,585 |
| |
Professional fees |
| 44,512 |
| |
Board of Trustees’ fees |
| 42,381 |
| |
Transfer agent fees |
| 24,318 |
| |
Miscellaneous expenses |
| 62,320 |
| |
Total Expenses |
| 2,005,206 |
| |
Investment advisory and administrative fee waiver |
| (14,363 | ) | |
Net Expenses |
| 1,990,843 |
| |
Net Investment Income |
| 15,446,511 |
| |
|
| |||
NET REALIZED AND UNREALIZED GAIN: |
|
| ||
Net realized loss on investments in securities |
| (2,320,178 | ) | |
Net change in unrealized appreciation/(depreciation) on investments in securities |
| 35,990,079 |
| |
Net Realized and Unrealized Gain |
| 33,669,901 |
| |
Net Increase in Net Assets Resulting from Operations | $ | 49,116,412 |
|
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 A P R I L 3 0, 2 0 2 4 | 23 |
BBH INTERMEDIATE MUNICIPAL BOND FUND |
STATEMENTS OF CHANGES IN NET ASSETS |
For the | For the | |||||||
INCREASE/(DECREASE) IN NET ASSETS FROM: |
|
|
|
| ||||
Operations: |
|
|
|
| ||||
Net investment income | $ | 15,446,511 |
| $ | 21,951,080 |
| ||
Net realized loss on investments in securities |
| (2,320,178 | ) |
| (14,828,253 | ) | ||
Net change in unrealized appreciation/(depreciation) on investments in securities |
| 35,990,079 |
|
| 15,410,196 |
| ||
Net increase in net assets resulting from operations |
| 49,116,412 |
|
| 22,533,023 |
| ||
|
|
|
| |||||
Dividends and distributions declared: |
|
|
|
| ||||
Class N |
| (860,705 | ) |
| (1,317,041 | ) | ||
Class I |
| (14,591,893 | ) |
| (20,635,433 | ) | ||
Total dividends and distributions declared |
| (15,452,598 | ) |
| (21,952,474 | ) | ||
|
|
|
| |||||
Share transactions: |
|
|
|
| ||||
Proceeds from sales of shares |
| 260,508,694 |
|
| 281,950,065 |
| ||
Net asset value of shares issued to shareholders for reinvestment of dividends and distributions |
| 4,735,744 |
|
| 7,391,738 |
| ||
Proceeds from short-term redemption fees |
| 756 |
|
| 10,858 |
| ||
Cost of shares redeemed |
| (71,239,514 | ) |
| (195,992,872 | ) | ||
Net increase in net assets resulting from share transactions |
| 194,005,680 |
|
| 93,359,789 |
| ||
Total increase in net assets |
| 227,669,494 |
|
| 93,940,338 |
| ||
|
|
|
| |||||
NET ASSETS: |
|
|
|
| ||||
Beginning of period/year |
| 745,850,076 |
|
| 651,909,738 |
| ||
End of period/year | $ | 973,519,570 |
| $ | 745,850,076 |
|
The accompanying notes are an integral part of these financial statements.
24 |
BBH INTERMEDIATE MUNICIPAL BOND FUND |
FINANCIAL HIGHLIGHTS Selected per share data and ratios for a Class N share outstanding throughout each period/year. |
For the |
| |||||||||||||||||||||||||||||||
2023 | 2022 | 2021 | 2020 | 2019 | ||||||||||||||||||||||||||||
Net asset value, beginning of period/year |
| $ | 9.74 |
|
|
| $ | 9.69 |
|
|
| $ | 10.93 |
|
|
| $ | 10.96 |
|
| $ | 10.76 |
| $ | 10.15 |
| ||||||
Income from investment operations: |
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||
Net investment income1 |
| 0.17 |
|
| 0.29 |
|
| 0.15 |
|
| 0.13 |
|
| 0.17 |
|
| 0.21 |
| ||||||||||||||
Net realized and unrealized gain/(loss) |
| 0.47 |
|
| 0.05 |
|
| (1.22 | ) |
| (0.02) |
|
| 0.25 |
|
| 0.62 |
| ||||||||||||||
Total income/(loss) from investment operations |
| 0.64 |
|
| 0.34 |
|
| (1.07) |
|
| 0.11 |
|
| 0.42 |
|
| 0.83 |
| ||||||||||||||
Dividends and distributions to shareholders: |
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||
From net investment income |
| (0.17 | ) |
| (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 |
| (0.17 | ) |
| (0.29 | ) |
| (0.17 | ) |
| (0.14 | ) |
| (0.22 | ) |
| (0.22 | ) | ||||||||||||||
Short-term redemption fees1 |
| 0.002 |
|
| 0.002 |
|
| 0.002 |
|
| 0.002 |
|
| 0.002 |
|
| 0.002 |
| ||||||||||||||
Net asset value, end of period/year | $ | 10.21 |
| $ | 9.74 |
| $ | 9.69 |
| $ | 10.93 |
| $ | 10.96 |
| $ | 10.76 |
| ||||||||||||||
Total return3 |
| 6.60 | %4 |
| 3.39 | % |
| (9.91 | )% |
| 1.01 | % |
| 4.00 | % |
| 8.21 | % | ||||||||||||||
Ratios/Supplemental data: |
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||
Net assets, end of period/year (in millions) | $ | 52 |
| $ | 47 |
| $ | 55 |
| $ | 82 |
| $ | 92 |
| $ | 54 |
| ||||||||||||||
Ratio of expenses to average net assets before reductions |
| 0.71 | %5 |
| 0.72 | % |
| 0.70 | % |
| 0.69 | % |
| 0.71 | % |
| 0.77 | % | ||||||||||||||
Fee waiver6 |
| (0.06 | )%5 |
| (0.07 | )% |
| (0.05 | )% |
| (0.04 | )% |
| (0.06 | )% |
| (0.12 | )% | ||||||||||||||
Expense offset arrangement. |
| — | % |
| — | % |
| — | % |
| — | % |
| — | % |
| (0.00 | )%7 | ||||||||||||||
Ratio of expenses to average net assets after reductions |
| 0.65 | %5 |
| 0.65 | % |
| 0.65 | % |
| 0.65 | % |
| 0.65 | % |
| 0.65 | % | ||||||||||||||
Ratio of net investment income to average net assets |
| 3.40 | %5 |
| 2.83 | % |
| 1.46 | % |
| 1.18 | % |
| 1.58 | % |
| 2.01 | % | ||||||||||||||
Portfolio turnover rate |
| 93 | %4 |
| 164 | % |
| 135 | % |
| 45 | % |
| 32 | % |
| 104 | % | ||||||||||||||
Portfolio turnover rate8 |
| 14 | %4 |
| 63 | % |
| 73 | % |
| 23 | % |
| 19 | % |
| 32 | % |
____________
1 Calculated using average shares outstanding for the period/year.
2 Less than $0.01.
3 Assumes reinvestment of distributions.
4 Not annualized.
5 Annualized.
6 The ratio of expenses to average net assets for the six months ended April 30, 2024, the years ended October 31, 2023, 2022, 2021, 2020 and 2019, reflects fees reduced as result of a contractual operating expense limitation of the share class to 0.65%. The Agreement is effective through March 1, 2025 and may only be terminated during its term with approval of the Fund’s Board of Trustees. For the six months ended April 30, 2024 and the years ended October 31, 2023, 2022, 2021, 2020 and 2019, the waived fees were $14,363, $33,916, $31,643, $35,002 and $41,531, respectively.
7 Less than 0.01%.
8 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 A P R I L 3 0, 2 0 2 4 | 25 |
BBH INTERMEDIATE MUNICIPAL BOND FUND |
FINANCIAL HIGHLIGHTS (continued) Selected per share data and ratios for a Class I share outstanding throughout each period/year. |
For the |
| |||||||||||||||||||||||||||||||
2023 | 2022 | 2021 | 2020 | 2019 | ||||||||||||||||||||||||||||
Net asset value, beginning of period/year |
| $ | 9.73 |
|
|
| $ | 9.68 |
|
|
| $ | 10.92 |
|
|
| $ | 10.95 |
|
|
| $ | 10.75 |
|
|
| $ | 10.14 |
|
| ||
Income from investment operations: |
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||
Net investment income1 |
| 0.18 |
|
| 0.31 |
|
| 0.18 |
|
| 0.15 |
|
| 0.19 |
|
| 0.23 |
| ||||||||||||||
Net realized and unrealized gain/(loss) |
| 0.46 |
|
| 0.04 |
|
| (1.23 | ) |
| (0.02) |
|
| 0.25 |
|
| 0.61 |
| ||||||||||||||
Total income/(loss) from investment operations |
| 0.64 |
|
| 0.35 |
|
| (1.05) |
|
| 0.13 |
|
| 0.44 |
|
| 0.84 |
| ||||||||||||||
Dividends and distributions to shareholders: |
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||
From net investment income |
| (0.18 | ) |
| (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 |
| (0.18 | ) |
| (0.30 | ) |
| (0.19 | ) |
| (0.16 | ) |
| (0.24 | ) |
| (0.23 | ) | ||||||||||||||
Short-term redemption fees1 |
| 0.002 |
|
| 0.002 |
|
| 0.002 |
|
| 0.002 |
|
| 0.002 |
|
| 0.002 |
| ||||||||||||||
Net asset value, end of period/year | $ | 10.19 |
| $ | 9.73 |
| $ | 9.68 |
| $ | 10.92 |
| $ | 10.95 |
| $ | 10.75 |
| ||||||||||||||
Total return3 |
| 6.61 | %4 |
| 3.60 | % |
| (9.74 | )% |
| 1.21 | % |
| 4.18 | % |
| 8.38 | % | ||||||||||||||
Ratios/Supplemental data: |
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||
Net assets, end of period/year (in millions) | $ | 922 |
| $ | 699 |
| $ | 597 |
| $ | 788 |
| $ | 656 |
| $ | 334 |
| ||||||||||||||
Ratio of expenses to average net assets before reductions |
| 0.45 | %5 |
| 0.45 | % |
| 0.46 | % |
| 0.45 | % |
| 0.47 | % |
| 0.50 | % | ||||||||||||||
Fee waiver6 |
| — | % |
| — | % |
| — | % |
| — | % |
| — | % |
| (0.00 | )% | ||||||||||||||
Expense offset arrangement |
| — | % |
| — | % |
| — | % |
| — | % |
| — | % |
| (0.00 | )%7 | ||||||||||||||
Ratio of expenses to average net assets after reductions |
| 0.45 | %5 |
| 0.45 | % |
| 0.46 | % |
| 0.45 | % |
| 0.47 | % |
| 0.50 | % | ||||||||||||||
Ratio of net investment income to average net assets |
| 3.61 | %5 |
| 3.03 | % |
| 1.69 | % |
| 1.38 | % |
| 1.75 | % |
| 2.17 | % | ||||||||||||||
Portfolio turnover rate |
| 93 | %4 |
| 164 | % |
| 135 | % |
| 45 | % |
| 32 | % |
| 104 | % | ||||||||||||||
Portfolio turnover rate8 |
| 14 | %4 |
| 63 | % |
| 73 | % |
| 23 | % |
| 19 | % |
| 32 | % |
____________
1 Calculated using average shares outstanding for the period/year.
2 Less than $0.01.
3 Assumes the reinvestment of distributions.
4 Not annualized.
5 Annualized.
6 The ratio of expenses to average net assets for the six months ended April 30, 2024, the years ended October 31, 2023, 2022, 2021, 2020, and 2019, reflects fees reduced as result of a contractual operating expense limitation of the share class to 0.50%. The Agreement is effective through March 1, 2025 and may only be terminated during its term with approval of the Fund’s Board of Trustees. For the six months ended April 30, 2024 and the years ended October 31, 2023, 2022, 2021, 2020, and 2019, the waived fees were $-, $-, $-, $-, $- and $6,608, respectively.
7 Less than 0.01%.
8 The portfolio turnover rate excludes variable rate demand notes.
The accompanying notes are an integral part of these financial statements.
26 |
BBH INTERMEDIATE MUNICIPAL BOND FUND |
NOTES TO FINANCIAL STATEMENTS April 30, 2024 (unaudited) |
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 April 30, 2024, 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 the supervision and oversight of the determination of 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
F I N A N C I A L S T A T E M E N T S A P R I L 3 0, 2 0 2 4 | 27 |
BBH INTERMEDIATE MUNICIPAL BOND FUND |
NOTES TO FINANCIAL STATEMENTS (continued) April 30, 2024 (unaudited) |
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.
28 |
BBH INTERMEDIATE MUNICIPAL BOND FUND |
NOTES TO FINANCIAL STATEMENTS (continued) April 30, 2024 (unaudited) |
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 six months ended April 30, 2024, 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 $860,705 and $14,591,893 to Class N and Class I shareholders, respectively, during the six months ended April 30, 2024, and in the amount of $1,317,041 and $20,635,433 to Class N and Class I shareholders, respecively, during the year ended October 31, 2023. 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) 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 | ) |
F I N A N C I A L S T A T E M E N T S A P R I L 3 0, 2 0 2 4 | 29 |
BBH INTERMEDIATE MUNICIPAL BOND FUND |
NOTES TO FINANCIAL STATEMENTS (continued) April 30, 2024 (unaudited) |
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.
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 six months ended April 30, 2024, the Fund incurred $1,718,140 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, 2025, 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 six months ended April 30, 2024, the Investment Adviser waived fees in the amount of $14,363 and $– for Class N and Class I, respectively.
30 |
BBH INTERMEDIATE MUNICIPAL BOND FUND |
NOTES TO FINANCIAL STATEMENTS (continued) April 30, 2024 (unaudited) |
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 six months ended April 30, 2024, Class N shares of the Fund incurred $50,585 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 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 based partially on asset values and partially on individual fund transactions. The fund accounting fee is primarily an asset-based fee calculated at 0.325 basis points per annum of the Fund’s net asset value. For the six months ended April 30, 2024, the Fund incurred $62,950 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 six months ended April 30, 2024 was $22,903. 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 six months ended April 30, 2024 was $6,344. 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 six months ended April 30, 2024, the Fund incurred $42,381 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 six months ended April 30, 2024, the cost of purchases and the proceeds of sales of investment securities, other than short-term investments, was $1,016,131,440 and $819,344,588, respectively.
F I N A N C I A L S T A T E M E N T S A P R I L 3 0, 2 0 2 4 | 31 |
BBH INTERMEDIATE MUNICIPAL BOND FUND |
NOTES TO FINANCIAL STATEMENTS (continued) April 30, 2024 (unaudited) |
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 six months ended | For the year ended | |||||||||||||||
Shares | Dollars | Shares | Dollars | |||||||||||||
Class N |
|
|
|
|
|
| ||||||||||
Shares sold | 619,562 |
| $ | 6,336,678 |
| 2,755,041 |
| $ | 27,945,104 |
| ||||||
Shares issued in connection with reinvestments of dividends | 83,529 |
|
| 858,799 |
| 130,330 |
|
| 1,313,338 |
| ||||||
Proceeds from short-term redemption fees | N/A |
|
| 128 |
| N/A |
|
| 17 |
| ||||||
Shares redeemed | (482,078 | ) |
| (4,935,587 | ) | (3,693,972 | ) |
| (37,075,353 | ) | ||||||
Net increase/(decrease) | 221,013 |
| $ | 2,260,018 |
| (808,601 | ) | $ | (7,816,894 | ) | ||||||
|
|
|
|
|
| |||||||||||
Class I |
|
|
|
|
|
| ||||||||||
Shares sold | 24,759,469 |
| $ | 254,172,016 |
| 25,379,215 |
| $ | 254,004,961 |
| ||||||
Shares issued in connection with reinvestments of dividends | 377,666 |
|
| 3,876,945 |
| 603,868 |
|
| 6,078,400 |
| ||||||
Proceeds from short-term redemption fees | N/A |
|
| 628 |
| N/A |
|
| 10,841 |
| ||||||
Shares redeemed | (6,502,329 | ) |
| (66,303,927 | ) | (15,840,151 | ) |
| (158,917,519 | ) | ||||||
Net increase | 18,634,806 |
| $ | 191,745,662 |
| 10,142,932 |
| $ | 101,176,683 |
|
Included in Shares Sold and Shares Redeemed are shareholder exchanges during the six months ended April 30, 2024 and the year ended October 31, 2023. Specifically:
During the six months ended April 30, 2024, there were no shareholder exchanges.
During the year ended October 31, 2023, 10,018 shares of Class I were exchanged for 10,008 shares of Class N valued at $102,417.
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
32 |
BBH INTERMEDIATE MUNICIPAL BOND FUND |
NOTES TO FINANCIAL STATEMENTS (continued) April 30, 2024 (unaudited) |
by the issuer before maturity (call risk), failure of a counterparty to a transaction to perform (credit risk), changes in interest rates, higher volatility for securities with longer maturities (interest rate risk), difficulty in being able to purchase or sell a security (liquidity risk) and a significant position in municipal securities in a particular state (geographic risk). Political, legislative and economic events may affect a municipal security’s value, interest payments, repayments of principal and the Fund’s ability to sell it (municipal issuer risk). Additionally, as the Fund’s exposure to similar municipal revenue sectors increases, the Fund will become more sensitive to adverse economic, business or political developments relevant to these sectors (municipal revenue sector risk). The Fund 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 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.
F I N A N C I A L S T A T E M E N T S A P R I L 3 0, 2 0 2 4 | 33 |
BBH INTERMEDIATE MUNICIPAL BOND FUND |
NOTES TO FINANCIAL STATEMENTS (continued) April 30, 2024 (unaudited) |
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 April 30, 2024 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.
34 |
BBH INTERMEDIATE MUNICIPAL BOND FUND |
DISCLOSURE OF FUND EXPENSES April 30, 2024 (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 (November 1, 2023 to April 30, 2024).
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 A P R I L 3 0, 2 0 2 4 | 35 |
BBH INTERMEDIATE MUNICIPAL BOND FUND |
DISCLOSURE OF FUND EXPENSES (continued) April 30, 2024 (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 | $1,066 | $3.34 | |||
Hypothetical2 | $1,000 | $1,022 | $3.27 |
Beginning | Ending | Expenses Paid | ||||
Class I | ||||||
Actual | $1,000 | $1,066 | $2.31 | |||
Hypothetical2 | $1,000 | $1,023 | $2.26 |
____________
1 Expenses are equal to the Fund’s annualized net 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 182/366 (to reflect the one-half year period).
2 Assumes a return of 5% before expenses. For the purposes of the calculation, the applicable annualized expenses ratio for each class of shares is subtracted from the assumed return before expenses.
36 |
BBH INTERMEDIATE MUNICIPAL BOND FUND |
DISCLOSURE OF ADVISOR SELECTION April 30, 2024 (unaudited) |
Investment Advisory and Administrative Services Agreement Approval
The 1940 Act requires that a fund’s investment advisory agreements be approved annually by the fund’s board of trustees, including 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.
The Board, a majority of which is comprised of Independent Trustees, held a telephonic meeting on November 16, 2023 and an in person meeting on December 12, 2023, to consider whether to renew the combined Amended and Restated Investment Advisory and Administrative Services Agreement (the “Agreement”) between the Trust and the Investment Adviser with respect to the existing funds in the Trust, including the Fund. At the December 12, 2023 meeting, the Board voted to approve the renewal of the Agreement with respect to the Fund for an additional one-year term. In doing so, the Board determined that the terms of the Agreement were fair and reasonable and in the best interest of the Fund and its shareholders, and that it had received sufficient information to make an informed business decision with respect to the continuation of the Agreement.
Both in the meetings specifically held to address the continuance of the Agreement and at other meetings over the course of the year, the Board requested, received and assessed a variety of materials provided by the Investment Adviser and BBH, including, among other things, information about the nature, extent and quality of the services provided to the Fund by the Investment Adviser and BBH, including investment management, administrative and shareholder services, the oversight of Fund service providers, marketing, risk oversight, compliance, and the ability to meet applicable legal and regulatory requirements. The Board also received comparative performance and fee and expense information for the Fund prepared by Broadridge Financial Solutions, Inc. (“Broadridge”) using data from Lipper Inc., an independent provider of investment company data (“Lipper Report”). The Board reviewed this report with Broadridge, Fund Counsel and BBH. 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.
In approving the continuation of the Agreement, the Board considered: (a) the nature, extent and quality of services provided by the Investment Adviser; (b) the investment performance of the Fund; (c) the advisory fee and the cost of the services and profits to be realized by the Investment Adviser from its relationship with the Fund; (d) the Fund’s costs to investors compared to the costs of comparative funds and performance compared to the relevant performance of comparative funds; (e) the sharing of potential economies of scale; (f) fall-out benefits to the Investment Adviser as a result of its relationship with the Fund; and (g) other factors deemed relevant by the Board. The following is a summary of the factors the Board considered in making its determination to approve the continuance of the Agreement. No single factor reviewed by the Board was identified as the principal factor in determining whether to approve the Agreement, and individual Trustees may have given different weight to various factors. The Board
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BBH INTERMEDIATE MUNICIPAL BOND FUND |
DISCLOSURE OF ADVISOR SELECTION (continued) April 30, 2024 (unaudited) |
reviewed these factors with Fund Counsel. The Board concluded that the fees paid by the Fund to the Investment Adviser were reasonable based on the comparative performance, expense information, the cost of the services provided, and the profits realized by the Investment Adviser.
Nature, Extent and Quality of Services
The Board noted that, under the Agreement and with respect to the Fund, the Investment Adviser, subject to the supervision of the Board, is responsible for providing a continuous investment program and making purchases and sales of portfolio securities consistent with the Fund’s investment objective and policies. The Board further noted that, as a combined investment advisory and administration agreement, the Agreement also contemplates the provision of administrative services by the Investment Adviser to the Fund within the same fee structure.
The Board received and considered information, during December 12, 2023 meeting, and over the course of the previous year, regarding the nature, extent and quality of services provided to the Fund by the Investment Adviser including: portfolio management, supervision of operations and compliance, preparation of regulatory filings, disclosures to Fund shareholders, general oversight of service providers, organizing Board meetings and preparing the materials for such Board meetings, assistance to the Board (including the Independent Trustees in their capacity as Trustees), legal and Chief Compliance Officer services for the Trust, and other services necessary for the operation of the Fund.
The Board considered the resources of the Investment Adviser and BBH, as a whole, dedicated to the Fund noting that, pursuant to separate agreements, BBH also provides custody, shareholder servicing, and fund accounting services to the Fund. The Board considered the depth and range of services provided pursuant to the Agreement, noting that the Investment Adviser also coordinates the provision of services to the Fund by affiliated and nonaffiliated service providers.
The Board considered the scope and quality of services provided by the Investment Adviser under the Agreement. The Board reviewed the qualifications of the key investment personnel primarily responsible for the day-to-day portfolio management of the Fund. The Board also considered the policies and practices followed by BBH and the Investment Adviser. The Board noted that during the course of its regular meetings, it received reports on each of the foregoing topics. The Board concluded that, overall, they were satisfied with the nature, extent and quality of the investment advisory and administrative services provided, and expected to be provided, to the Fund pursuant to the Agreement.
Fund Performance
At the November 16, 2023 and December 12, 2023 meetings, and throughout the year, the Board received and considered performance information for the Fund provided by BBH. The Board also considered the Fund’s performance relative to a peer category of other mutual funds in a report compiled by Broadridge. As part of this review, the Trustees considered the composition of the peer category, selection criteria and reputation of Broadridge who prepared the peer category analysis. The Board reviewed with representatives of Broadridge who compiled the comparative report the report’s findings and discussed
38 |
BBH INTERMEDIATE MUNICIPAL BOND FUND |
DISCLOSURE OF ADVISOR SELECTION (continued) April 30, 2024 (unaudited) |
the positioning of the Fund relative to its selected peer category. The Board considered short-term and long-term investment performance for the Fund over various periods of time noting the Fund had above average performance compared to its peer category for the 1-, 2-, 4- and 5-year periods, and had average performance for the 3-year period ended September 30, 2023. In evaluating the performance of the Fund, the Board considered the risk expectations for the Fund as well as the level of Fund performance in the context of Fund expenses and the Investment Adviser’s profitability. Based on this information, the Board concluded that it was satisfied with the Fund’s investment results.
Costs of Services Provided and Profitability
The Board considered the fee rates paid by the Fund to the Investment Adviser in light of the nature, extent and quality of the services provided to the Fund. The Board also considered and reviewed the fee waiver arrangement that was in place for the Fund and considered the actual fee rates, after taking into account the waiver. The Board received and considered information comparing the Fund’s combined investment advisory and administration fee and the Fund’s net operating expenses with those of other comparable mutual funds, such peer category and comparisons having been selected and calculated by Broadridge, noting that the Fund was very well placed, as compared to its selected peer category. The Board recognized that it is difficult to make comparisons of the fee rate, or of combined advisory and administration fees, because there are variations in the services that are included in the fees paid by other funds. The Board concluded that the advisory and administration fee appeared to be both reasonable in light of the services rendered and the result of arm’s length negotiations.
With regard to profitability, the Trustees considered the compensation and benefits flowing to the Investment Adviser and BBH, directly or indirectly. The Board reviewed profitability data for the Fund using data for the period October 1, 2022 through September 30, 2023, for both the Investment Adviser and BBH. The data also included the effect of revenue generated by the shareholder servicing, custody and fund accounting fees paid by the Fund to BBH and corresponding expenses. The Board conducted a detailed review of the expense allocation methods used in preparing the profitability data. The Board focused on profitability of the Investment Adviser and BBH’s relationships with the Fund before taxes and distribution expenses. The Board concluded that the Investment Adviser’s and BBH’s profitability was not excessive in light of the nature, extent and quality of services provided to the Fund.
The Board also considered the effect of fall-out benefits to the Investment Adviser and BBH such as the increased visibility of BBH’s investment management business due to the distribution of the Trust’s funds. The Board considered other benefits received by BBH and the Investment Adviser as a result of their relationships with the Fund. These other benefits include fees received for being the Fund’s administrator, custodian, fund accounting and shareholder servicing agent. In light of the costs of providing services pursuant to the Agreement as well as the Investment Adviser and BBH’s commitment to the Fund, the ancillary benefits that the Investment Adviser and BBH received were considered reasonable.
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BBH INTERMEDIATE MUNICIPAL BOND FUND |
DISCLOSURE OF ADVISOR SELECTION (continued) April 30, 2024 (unaudited) |
Economies of Scale
The Board also considered the existence of economies of scale and whether those economies are passed along to the Fund’s shareholders through a graduated investment advisory fee schedule or other means, including any fee waivers by the Investment Adviser. The Board noted that the fee schedule for the Fund does not contain breakpoints. The Board considered the fee schedule for the Fund on the information they had been provided over many years, the Board observed that in the mutual fund industry as a whole, as well as among funds similar to the Fund, there appeared to be no uniformity or pattern in the fees and asset levels at which breakpoints apply. In light of the Fund’s size and expense structure, the Board concluded that it was unnecessary at this time to consider breakpoints with respect to the Fund. The Board concluded that the fees paid by the Fund to the Investment Adviser were reasonable based on the comparative performance, expense information, the cost of the services provided and the profits realized by the Investment Adviser.
40 |
BBH INTERMEDIATE MUNICIPAL BOND FUND |
CONFLICTS OF INTEREST April 30, 2024 (unaudited) |
BBH&Co., 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&Co., 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&Co. for which they will pay to BBH&Co. customary fees and expenses that will not be shared with the Funds.
The Investment Adviser and the Sub-advisers have adopted and implemented policies and procedures that seek to manage conflicts of interest. Pursuant to such policies and procedures, the Investment Adviser and each Sub-adviser monitor a variety of areas, including compliance with fund investment guidelines, the investment in only those securities that have been approved for purchase, and compliance with their respective Code of Ethics.
The Trust also manages these conflicts of interest. For example, the Trust has designated a CCO and has adopted and implemented policies and procedures designed to manage the conflicts identified below and other conflicts that may arise in the course of the Funds’ operations in such a way as to safeguard the Funds from being negatively affected as a result of any such potential conflicts. From time to time, the Trustees receive reports from the Investment Adviser, the Sub-advisers 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&Co., the Investment Adviser and Sub-advisers can face in the operation of their respective investment management services. This section is not, and is not intended to be, a complete enumeration or explanation of all of the potential conflicts of interest that may arise. The Investment Adviser, the Sub-advisers 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&Co., the Investment Adviser, and the Sub-advisers manage funds and accounts of clients other than the Funds (“Other Clients”). In general, BBH&Co., the Investment Adviser, and the Sub-advisers face conflicts of interest when they render investment advisory services to different clients and, from time to time, provide dissimilar investment advice to different clients. Investment decisions will not necessarily be made in parallel among the Funds and Other Clients. Investments made by the Funds do not, and are not intended to, replicate the investments, or the investment methods and strategies, of Other Clients. Accordingly, such Other Clients 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
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BBH INTERMEDIATE MUNICIPAL BOND FUND |
CONFLICTS OF INTEREST (continued) April 30, 2024 (unaudited) |
manager is responsible, on the other. For example, it is possible that the various funds or accounts managed by the Investment Adviser or Sub-advisers could have different investment strategies that, at times, might conflict with one another to the possible detriment of the Funds. From time to time, the Investment Adviser and Sub-advisers, sponsor and with other investment pools and accounts which engage in the same or similar businesses as the Funds using the same or similar investment strategies. To the extent that the same investment opportunities might be desirable for more than one account or fund, possible conflicts could arise in determining how to allocate them because the Investment Adviser or Sub-advisers may have an incentive to allocate investment opportunities to certain accounts or funds. However, BBH&Co. 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&Co. provides administrative, custody, shareholder servicing and fund accounting services to the Funds. BBH&Co. 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&Co. may have an incentive to agree to higher fees than it would in the case of unaffiliated providers. BBH&Co. acting in its capacity as the Funds’ administrator is the primary valuation agent of the Funds. BBH&Co. 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&Co. and its affiliates may have an incentive to seek to overvalue certain assets.
Aggregation. Potential conflicts of interest also arise with the aggregation of trade orders. Purchases and sales of securities for the Funds may be aggregated with orders for other client accounts managed by the Sub-advisers. The Sub-advisers, 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
42 |
BBH INTERMEDIATE MUNICIPAL BOND FUND |
CONFLICTS OF INTEREST (continued) April 30, 2024 (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&Co., the Investment Adviser may (but is not required to) effect purchases and sales between BBH&Co., the Investment Adviser clients (“cross trades”), including the Funds, if BBH&Co., the Investment Adviser or a Fund’s Sub-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&Co., the Investment Adviser and/or a Fund’s Sub-adviser may have a potentially conflicting division of loyalties and responsibilities to the parties in such transactions.
Soft Dollars. The Investment Adviser may direct brokerage transactions and/or payment of a portion of client commissions (“soft dollars”) to specific brokers or dealers or other providers to pay for research or other appropriate services which provide, in the Investment Adviser’s view, appropriate assistance in the investment decision-making process (including with respect to futures, fixed price offerings and over-the-counter transactions). The use of a broker that provides research and securities transaction services may result in a higher commission than that offered by a broker who does not provide such services. The Investment Adviser will determine in good faith whether the amount of commission is reasonable in relation to the value of research and services provided and whether the services provide lawful and appropriate assistance in its investment decision-making responsibilities.
Research or other services obtained in this manner may be used in servicing any or all of the Funds and other accounts managed by the Investment Adviser, including in connection with accounts that do not pay commissions to the broker related to the research or other service arrangements. Such products and services may disproportionately benefit other client accounts relative to the Funds based on the amount of brokerage commissions paid by the Funds and such other accounts. To the extent that a Sub-adviser uses soft dollars, it will not have to pay for those products and services itself.
BBH&Co. may receive research that is bundled with the trade execution, clearing, and/or settlement services provided by a particular broker-dealer. To the extent that a Sub-adviser receives research on this basis, many of the same conflicts related to traditional soft dollars may exist. For example, the research effectively will be paid by client commissions that also will be used to pay for the execution, clearing, and settlement services provided by the broker-dealer and will not be paid by the Sub-adviser.
Arrangements regarding compensation and delegation of responsibility may create conflicts relating to selection of brokers or dealers to execute Fund portfolio trades and/or specific uses of commissions from Fund portfolio trades, administration of investment advice and valuation of securities.
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BBH INTERMEDIATE MUNICIPAL BOND FUND |
CONFLICTS OF INTEREST (continued) April 30, 2024 (unaudited) |
Investments in BBH Funds. From time to time BBH&Co. may invest a portion of the assets of its discretionary investment advisory clients in the Funds. That investment by BBH&Co. 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&Co. may limit its selection to funds managed by BBH&Co. or the Investment Adviser. BBH&Co. 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&Co., 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&Co. 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&Co. 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&Co. to be unreliable, the Funds’ investments will be valued at fair value by BBH&Co. pursuant to procedures adopted by the Funds’ Board. When determining an asset’s “fair value,” BBH&Co. 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&Co. deems relevant at the time of the determination and may be based on analytical values determined by BBH&Co. 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&Co. (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&Co. may enter into advisory and/or referral arrangements with third parties. Such arrangements may include compensation paid by BBH&Co. to the third party. BBH&Co. may pay a solicitation fee for referrals and/or advisory or incentive fees. BBH&Co. may benefit from increased amounts of assets under management.
Personal Trading. BBH&Co., 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
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BBH INTERMEDIATE MUNICIPAL BOND FUND |
CONFLICTS OF INTEREST (continued) April 30, 2024 (unaudited) |
implemented policies and procedures concerning personal trading by BBH&Co. Partners and employees. The policy and procedures are intended to prevent BBH&Co. Partners and employees from trading in the same securities as the Funds. However, BBH&Co., including the Investment Adviser, has implemented policies and procedures concerning personal trading by BBH&Co. Partners and employees. The policies and procedures are intended to prevent BBH&Co. 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&Co., 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&Co., 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&Co. Partners and employees. BBH&Co., including the Investment Adviser, has implemented policies and procedures concerning gifts and entertainment to mitigate any impact on the judgment of BBH&Co. Partners and employees.
F I N A N C I A L S T A T E M E N T S A P R I L 3 0, 2 0 2 4 | 45 |
BBH INTERMEDIATE MUNICIPAL BOND FUND |
OPERATION AND EFFECTIVENESS OF THE FUND’S LIQUIDITY RISK MANAGEMENT PROGRAM April 30, 2024 (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 each Fund’s liquidity risk management program (the “Program”). The Board met on March 6, 2024 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, 2023 through January 31, 2024 (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 Funds classified each of their 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 each Fund’s investments based on criteria in each Fund’s Program. During the Reporting Period, no Fund held 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 no Fund has approached the 50% threshold, has made the determination that it is not necessary to assign a Highly Liquid Investment Minimum to any of the Funds 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 each Fund’s investment strategy is appropriate for an open-end fund structure with a focus on Funds with more significant and consistent holdings of less liquid and illiquid assets and factored a Fund’s concentration in an issuer into the liquidity classification methodology by taking issuer position sizes into account.
46 |
BBH INTERMEDIATE MUNICIPAL BOND FUND |
OPERATION AND EFFECTIVENESS OF THE FUND’S LIQUIDITY RISK MANAGEMENT PROGRAM (continued) April 30, 2024 (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 each Fund’s reasonably anticipated trading size. The Program Administrator also took into consideration other factors such as shareholder ownership concentration, applicable distribution channels and the degree of certainty associated with a Fund’s short-term and long-term cash flow projections.
Holdings of cash and cash equivalents. The Program Administrator considered the degree to which each Fund held cash and cash equivalents as a component of each Fund’s ability to meet redemption requests.
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 A P R I L 3 0, 2 0 2 4 | 47 |
Administrator Distributor Shareholder Servicing Agent To obtain information or make shareholder inquiries: | Investment Adviser | |
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 |
Semi-Annual Report
APRIL 30, 2024
BBH U.S. Government Money Market Fund
BBH U.S. GOVERNMENT MONEY MARKET FUND |
PORTFOLIO ALLOCATION April 30, 2024 (unaudited) |
BREAKDOWN BY SECURITY TYPE
U.S. $ Value | Percent of | ||||||
U.S. Government Agency Obligations | $ | 275,000,000 |
| 4.0 | % | ||
U.S. Treasury Bills |
| 5,275,362,449 |
| 77.5 |
| ||
Repurchase Agreements |
| 1,262,000,000 |
| 18.5 |
| ||
Liabilities in Excess of Cash and Other Assets |
| (403,972 | ) | 0.0 |
| ||
NET ASSETS | $ | 6,811,958,477 |
| 100.0% |
|
All data as of April 30, 2024. The BBH U.S. Government Money Market Fund’s (the “Fund”) 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.
2 |
BBH U.S. GOVERNMENT MONEY MARKET FUND |
PORTFOLIO OF INVESTMENTS April 30, 2024 (unaudited) |
Principal | Maturity | Interest | Value | |||||||
U.S. GOVERNMENT AGENCY |
|
| ||||||||
$ 275,000,000 | Federal Home Loan Bank Discount Notes1 | 05/01/24 | 5.271 | % | $ | 275,000,000 | ||||
Total U.S. Government Agency Obligations |
|
| 275,000,000 | |||||||
|
| |||||||||
U.S. TREASURY BILLS (77.5%) |
|
| ||||||||
305,000,000 | U.S. Treasury Bill1,2 | 05/02/24 | 5.314 |
|
| 304,955,649 | ||||
320,000,000 | U.S. Treasury Bill1,2 | 05/07/24 | 5.289 |
|
| 319,721,291 | ||||
225,000,000 | U.S. Treasury Bill1,2 | 05/09/24 | 5.297 |
|
| 224,738,294 | ||||
300,000,000 | U.S. Treasury Bill1,2 | 05/14/24 | 5.289 |
|
| 299,433,993 | ||||
250,000,000 | U.S. Treasury Bill1,2 | 05/16/24 | 5.287 |
|
| 249,456,104 | ||||
270,000,000 | U.S. Treasury Bill1,2 | 05/21/24 | 5.311 |
|
| 269,209,895 | ||||
200,000,000 | U.S. Treasury Bill1,2 | 05/23/24 | 5.242 |
|
| 199,370,835 | ||||
205,000,000 | U.S. Treasury Bill1,2 | 05/30/24 | 5.283 |
|
| 204,142,886 | ||||
230,000,000 | U.S. Treasury Bill1,2 | 06/04/24 | 5.304 |
|
| 228,856,514 | ||||
340,000,000 | U.S. Treasury Bill1,2 | 06/06/24 | 5.291 |
|
| 338,229,676 | ||||
205,000,000 | U.S. Treasury Bill1,2 | 06/11/24 | 5.313 |
|
| 203,769,288 | ||||
150,000,000 | U.S. Treasury Bill1 | 06/13/24 | 5.313 |
|
| 149,060,719 | ||||
300,000,000 | U.S. Treasury Bill1,2 | 06/18/24 | 5.316 |
|
| 297,890,933 | ||||
250,000,000 | U.S. Treasury Bill1,2 | 06/20/24 | 5.292 |
|
| 248,185,884 | ||||
300,000,000 | U.S. Treasury Bill1,2 | 06/25/24 | 5.303 |
|
| 297,602,229 | ||||
285,000,000 | U.S. Treasury Bill1,2 | 07/05/24 | 5.295 |
|
| 282,307,357 | ||||
175,000,000 | U.S. Treasury Bill1,2 | 07/11/24 | 5.311 |
|
| 173,191,152 | ||||
150,000,000 | U.S. Treasury Bill1,2 | 07/16/24 | 5.299 |
|
| 148,347,855 | ||||
200,000,000 | U.S. Treasury Bill1,2 | 07/18/24 | 5.211 |
|
| 197,787,099 | ||||
100,000,000 | U.S. Treasury Bill1 | 07/23/24 | 5.290 |
|
| 98,801,111 | ||||
170,000,000 | U.S. Treasury Bill1,2 | 08/06/24 | 5.316 |
|
| 167,603,588 | ||||
140,000,000 | U.S. Treasury Bill1,2 | 08/20/24 | 5.329 |
|
| 137,738,622 | ||||
140,000,000 | U.S. Treasury Bill1,2 | 09/19/24 | 5.291 |
|
| 137,166,135 | ||||
100,000,000 | U.S. Treasury Bill1 | 10/03/24 | 5.254 |
|
| 97,795,340 | ||||
Total U.S. Treasury Bills |
|
| 5,275,362,449 | |||||||
|
|
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 A P R I L 3 0, 2 0 2 4 | 3 |
BBH U.S. GOVERNMENT MONEY MARKET FUND |
PORTFOLIO OF INVESTMENTS (continued) April 30, 2024 (unaudited) |
Principal | Maturity | Interest | Value | ||||||||
REPURCHASE AGREEMENTS (18.5%) |
|
|
| ||||||||
$ 375,000,000 | BNP Paribas (Agreement dated 04/30/24 collateralized by FCSB 2.310%-2.930%, due 07/14/36-02/03/42, original par $6,410,000, value $4,647,240, FHLB 3.375%, due 03/12/38, original par $370,000, value $306,207, FHLMC 2.000%-7.327%, due 07/01/33-04/01/54, original par $144,863,589, value $60,926,292, FNMA 1.829%-7.000%, due 06/01/29-03/01/54, original par $219,698,959, value $91,395,348, GNMA 2.500%-6.500%, due 11/15/31-03/15/59, original par $330,186,730, value $207,615,128, U.S. Treasury Securities 0.000%-4.625%, due 07/15/24-11/15/28, original par $14,154,300, value $17,609,785) | 05/01/24 | 5.270 | % | $ | 375,000,000 |
| ||||
375,000,000 | National Australia Bank Ltd. (Agreement dated 04/30/24 collateralized by U.S. Treasury Notes 2.875%, due 05/15/28, original par $404,620,000, value $382,500,000) | 05/01/24 | 5.250 |
|
| 375,000,000 |
| ||||
137,000,000 | Royal Bank of Canada (Agreement dated 04/30/24 collateralized by U.S. Treasury Notes 2.875%, due 05/15/32, original par $156,415,000, value $139,795,906) | 05/01/24 | 5.270 |
|
| 137,000,000 |
| ||||
375,000,000 | Societe Generale (Agreement dated 04/30/24 collateralized by U.S. Treasury Securities 1.375%-4.250%, due 03/15/27-10/31/28, original par $397,625,700, value $382,500,081) | 05/01/24 | 5.270 |
|
| 375,000,000 |
| ||||
Total Repurchase Agreements |
|
| 1,262,000,000 |
| |||||||
|
|
| |||||||||
TOTAL INVESTMENTS (Cost $6,812,362,449)3 | 100.0 | % | $ | 6,812,362,449 |
| ||||||
LIABILITIES IN EXCESS OF CASH AND OTHER ASSETS | 0.0 | % |
| (403,972 | ) | ||||||
NET ASSETS | 100.0 | % | $ | 6,811,958,477 |
|
____________
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.
FHLB – Federal Home Loan Banks.
FHLMC – Federal Home Loan Mortgage Corporation.
FNMA – Federal National Mortgage Association.
GNMA – Government National Mortgage Association.
The accompanying notes are an integral part of these financial statements.
4 |
BBH U.S. GOVERNMENT MONEY MARKET FUND |
PORTFOLIO OF INVESTMENTS (continued) April 30, 2024 (unaudited) |
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
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 A P R I L 3 0, 2 0 2 4 | 5 |
BBH U.S. GOVERNMENT MONEY MARKET FUND |
PORTFOLIO OF INVESTMENTS (continued) April 30, 2024 (unaudited) |
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 April 30, 2024, 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 April 30, 2024.
Investments, at value | Unadjusted | Significant | Significant | Balance as of | ||||||||
U.S. Government Agency Obligations | $ | — | $ | 275,000,000 | $ | — | $ | 275,000,000 | ||||
U.S. Treasury Bills |
| — |
| 5,275,362,449 |
| — |
| 5,275,362,449 | ||||
Repurchase Agreements |
| — |
| 1,262,000,000 |
| — |
| 1,262,000,000 | ||||
Total Investments, at value | $ | — | $ | 6,812,362,449 | $ | — | $ | 6,812,362,449 |
The accompanying notes are an integral part of these financial statements.
6 |
BBH U.S. GOVERNMENT MONEY MARKET FUND |
STATEMENT OF ASSETS AND LIABILITIES April 30, 2024 (unaudited) |
ASSETS: | ||||
Investments in securities, at amortized cost which approximates fair value | $ | 5,550,362,449 |
| |
Repurchase agreements (Cost $1,262,000,000) |
| 1,262,000,000 |
| |
Cash |
| 1,630,714 |
| |
Receivables for: |
|
| ||
Interest |
| 184,534 |
| |
Interest from Custodian |
| 77,740 |
| |
Prepaid expenses |
| 47,581 |
| |
Total Assets |
| 6,814,303,018 |
| |
LIABILITIES: |
|
| ||
Payables for: |
|
| ||
Investment advisory and administrative fees |
| 1,166,581 |
| |
Dividends declared |
| 950,807 |
| |
Custody and fund accounting fees |
| 177,832 |
| |
Professional fees |
| 34,148 |
| |
Transfer agent fees |
| 5,180 |
| |
Board of Trustees’ fees |
| 424 |
| |
Accrued expenses and other liabilities |
| 9,569 |
| |
Total Liabilities |
| 2,344,541 |
| |
NET ASSETS | $ | 6,811,958,477 |
| |
|
| |||
Net Assets Consist of: |
|
| ||
Paid-in capital | $ | 6,811,968,890 |
| |
Distributions in excess of net investment income |
| (10,413 | ) | |
Net Assets | $ | 6,811,958,477 |
| |
|
| |||
NET ASSET VALUE AND OFFERING PRICE PER SHARE |
|
| ||
INSTITUTIONAL SHARES |
|
| ||
($6,811,958,477 ÷ 6,811,974,908 shares outstanding) | $ | 1.00 |
|
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 A P R I L 3 0, 2 0 2 4 | 7 |
BBH U.S. GOVERNMENT MONEY MARKET FUND |
STATEMENT OF OPERATIONS For the six months ended April 30, 2024 (unaudited) |
NET INVESTMENT INCOME: |
|
| ||
Income: |
|
| ||
Interest income | $ | 180,259,757 |
| |
Interest income from Custodian |
| 581,329 |
| |
Total Income |
| 180,841,086 |
| |
|
| |||
Expenses: |
|
| ||
Investment advisory and administrative fees |
| 6,975,324 |
| |
Custody and fund accounting fees |
| 302,326 |
| |
Board of Trustees’ fees |
| 73,302 |
| |
Professional fees |
| 31,645 |
| |
Transfer agent fees |
| 17,065 |
| |
Miscellaneous expenses |
| 63,216 |
| |
Total Expenses |
| 7,462,878 |
| |
Net Investment Income |
| 173,378,208 |
| |
|
| |||
NET REALIZED LOSS: |
|
| ||
Net realized loss on investments |
| (291 | ) | |
Net Increase in Net Assets Resulting from Operations | $ | 173,377,917 |
|
The accompanying notes are an integral part of these financial statements.
8 |
BBH U.S. GOVERNMENT MONEY MARKET FUND |
STATEMENTS OF CHANGES IN NET ASSETS |
For the | For the | |||||||
INCREASE/(DECREASE) IN NET ASSETS FROM: |
|
|
|
| ||||
Operations: |
|
|
|
| ||||
Net investment income | $ | 173,378,208 |
| $ | 243,682,841 |
| ||
Net realized loss on investments |
| (291 | ) |
| (477,212 | ) | ||
Net increase in net assets resulting from operations |
| 173,377,917 |
|
| 243,205,629 |
| ||
|
|
|
| |||||
Dividends and distributions declared: |
|
|
|
| ||||
Institutional Shares |
| (173,386,896 | ) |
| (243,205,629 | ) | ||
|
|
|
| |||||
Share transactions: |
|
|
|
| ||||
Fund shares sold and fund shares issued in connection with reinvestments of dividends |
| 4,508,724,367 |
|
| 7,328,113,029 |
| ||
Fund shares repurchased |
| (3,595,723,192 | ) |
| (6,224,168,203 | ) | ||
Net increase in net assets resulting from fund share transactions |
| 913,001,175 |
|
| 1,103,944,826 |
| ||
Total increase in net assets |
| 912,992,196 |
|
| 1,103,944,826 |
| ||
|
|
|
| |||||
NET ASSETS: |
|
|
|
| ||||
Beginning of period/year |
| 5,898,966,281 |
|
| 4,795,021,455 |
| ||
End of period/year | $ | 6,811,958,477 |
| $ | 5,898,966,281 |
|
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 A P R I L 3 0, 2 0 2 4 | 9 |
BBH U.S. GOVERNMENT MONEY MARKET FUND |
FINANCIAL HIGHLIGHTS Selected per share data and ratios for a class Institutional share outstanding throughout each period/year. |
For the |
| For the |
| |||||||||||||||||||||||||
2023 | 2022 | 2021 | 2020 | |||||||||||||||||||||||||
Net asset value, beginning of | $ | 1.00 |
| $ | 1.00 |
| $ | 1.00 |
| $ | 1.00 |
| $ | 1.00 |
| $ | 1.00 |
| $ | 1.00 |
| |||||||
Income from investment operations: |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||
Net investment income1 |
| 0.03 |
|
| 0.05 |
|
| 0.01 |
|
| 0.002 |
|
| 0.01 |
|
| 0.01 |
|
| 0.02 |
| |||||||
Net realized and unrealized gain/(loss) |
| (0.00 | )2 |
| (0.01 | ) |
| 0.002 |
|
| (0.00 | )2 |
| 0.002 |
|
| 0.002 |
|
| 0.002 |
| |||||||
Total income from investment operations |
| 0.03 |
|
| 0.04 |
|
| 0.01 |
|
| 0.002 |
|
| 0.01 |
|
| 0.01 |
|
| 0.02 |
| |||||||
Dividends and distributions to shareholders: |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||
From net investment income |
| (0.03 | ) |
| (0.04 | ) |
| (0.01 | ) |
| (0.00 | )2 |
| (0.01 | ) |
| (0.01 | ) |
| (0.02 | ) | |||||||
Total dividends and distributions to shareholders |
| (0.03 | ) |
| (0.04 | ) |
| (0.01 | ) |
| (0.00 | )2 |
| (0.01 | ) |
| (0.01 | ) |
| (0.02 | ) | |||||||
Net asset value, end of period/year | $ | 1.00 |
| $ | 1.00 |
| $ | 1.00 |
| $ | 1.00 |
| $ | 1.00 |
| $ | 1.00 |
| $ | 1.00 |
| |||||||
Total return3 |
| 2.60 | %4 |
| 4.59 | % |
| 0.75 | % |
| 0.01 | % |
| 0.59 | % |
| 0.63 | %4 |
| 2.02 | % | |||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Ratios/Supplemental data: |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||
Net assets, end of period/year (in millions) | $ | 6,812 |
| $ | 5,899 |
| $ | 4,795 |
| $ | 4,227 |
| $ | 3,475 |
| $ | 2,040 |
| $ | 2,126 |
| |||||||
Ratio of expenses to average net assets before reductions |
| 0.22 | %5 |
| 0.23 | % |
| 0.23 | % |
| 0.23 | % |
| 0.24 | % |
| 0.24 | %6 |
| 0.24 | % | |||||||
Expense reimbursement7 |
| — | % |
| — | % |
| (0.08 | )% |
| (0.19 | )% |
| (0.05 | )% |
| — | % |
| — | % | |||||||
Expense offset arrangement |
| — | % |
| — | % |
| — | % |
| — | % |
| — | % |
| — | % |
| (0.01 | )% | |||||||
Ratio of expenses to average net assets after reductions |
| 0.22 | %5 |
| 0.23 | % |
| 0.15 | % |
| 0.04 | % |
| 0.19 | % |
| 0.24 | %6 |
| 0.23 | % | |||||||
Ratio of net investment income to average net assets |
| 5.15 | %5 |
| 4.52 | % |
| 0.73 | % |
| 0.01 | % |
| 0.48 | % |
| 1.86 | %6 |
| 2.02 | % |
____________
1 Calculated using average shares outstanding for the period/year.
2 Less than $0.01 per share.
3 Assumes the reinvestment of distributions.
4 Not annualized.
5 Annualized.
6 Annualized with the exception of audit fees.
7 During the six months ended April 30, 2024, 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.
10 |
BBH U.S. GOVERNMENT MONEY MARKET FUND |
NOTES TO FINANCIAL STATEMENTS April 30, 2024 (unaudited) |
1. Organization. The Fund is a separate series of BBH Trust (the “Trust”), which is registered under the 1940 Act, as an open-end management investment company. The Trust was originally organized as a Massachusetts business trust on June 7, 1983 and re-organized as a Delaware statutory trust on June 12, 2007. As of April 30, 2024, 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 the supervision and oversight of the determination of 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.
F I N A N C I A L S T A T E M E N T S A P R I L 3 0, 2 0 2 4 | 11 |
BBH U.S. GOVERNMENT MONEY MARKET FUND |
NOTES TO FINANCIAL STATEMENTS (continued) April 30, 2024 (unaudited) |
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 earnings/(accumulated
12 |
BBH U.S. GOVERNMENT MONEY MARKET FUND |
NOTES TO FINANCIAL STATEMENTS (continued) April 30, 2024 (unaudited) |
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 six months ended April 30, 2024, the Fund did not incur any such interest or penalties. The Fund is subject to examination by U.S. federal and state tax authorities for returns filed for the prior three years. The Fund is not aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will significantly change in the next twelve months.
F. Dividends and Distributions to Shareholders. Dividends and distributions from net investment income to shareholders are declared daily and paid monthly to shareholders. Distributions from net capital gains, if any, are generally declared and paid annually and are recorded on the ex-dividend date. The Fund declared dividends in the amounts of $173,386,896 to Institutional shareholders, during the six months ended April 30, 2024.
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 | ) |
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.
F I N A N C I A L S T A T E M E N T S A P R I L 3 0, 2 0 2 4 | 13 |
BBH U.S. GOVERNMENT MONEY MARKET FUND |
NOTES TO FINANCIAL STATEMENTS (continued) April 30, 2024 (unaudited) |
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 six months ended April 30, 2024, the Fund incurred $6,975,324 for services under the Agreement.
B. Investment Advisory and Administrative Fee Waiver. BBH may from time to time voluntarily waive all or a portion of its advisory and administration fee from the Fund. For the six months ended April 30, 2024, BBH waived fees in the amount of $0 for Institutional Shares.
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 based partially on asset values and partially on individual fund transactions. The fund accounting fee is primarily an asset-based fee calculated at 0.325 basis points per annum of the Fund’s net asset value. For the six months ended April 30, 2024, the Fund incurred $302,326 in custody and fund accounting fees. As per agreement with the Fund’s custodian, the Fund receives interest income on
14 |
BBH U.S. GOVERNMENT MONEY MARKET FUND |
NOTES TO FINANCIAL STATEMENTS (continued) April 30, 2024 (unaudited) |
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 six months ended April 30, 2024 was $581,329. 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 six months ended April 30, 2024 was $51,293. 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 six months ended April 30, 2024, the Fund incurred $73,302 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 six months ended | For the year ended | |||||||||||||
Shares | Dollars | Shares | Dollars | |||||||||||
Institutional Shares |
|
|
|
|
|
| ||||||||
Shares sold | 4,508,710,719 |
| $ | 4,508,710,719 |
| 7,328,089,995 |
| $ | 7,328,089,995 |
| ||||
Shares issued in connection with reinvestments of dividends | 13,648 |
|
| 13,648 |
| 23,034 |
|
| 23,034 |
| ||||
Shares redeemed | (3,595,723,192 | ) |
| (3,595,723,192 | ) | (6,224,168,203 | ) |
| (6,224,168,203 | ) | ||||
Net increase | 913,001,175 |
| $ | 913,001,175 |
| 1,103,944,826 |
| $ | 1,103,944,826 |
|
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
F I N A N C I A L S T A T E M E N T S A P R I L 3 0, 2 0 2 4 | 15 |
BBH U.S. GOVERNMENT MONEY MARKET FUND |
NOTES TO FINANCIAL STATEMENTS (continued) April 30, 2024 (unaudited) |
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.
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
16 |
BBH U.S. GOVERNMENT MONEY MARKET FUND |
NOTES TO FINANCIAL STATEMENTS (continued) April 30, 2024 (unaudited) |
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 April 30, 2024 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 A P R I L 3 0, 2 0 2 4 | 17 |
BBH U.S. GOVERNMENT MONEY MARKET FUND |
DISCLOSURE OF FUND EXPENSES April 30, 2024 (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-months period and held for the entire period (November 1, 2023 to April 30, 2024).
ACTUAL EXPENSES
The first line of the table below provides information about actual account values and actual expenses. You may use information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled “Expenses Paid During the Period” to estimate the expenses you paid on your account during the period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The second line of the table below provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid during the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% Hypothetical Example with the 5% hypothetical examples that appear in the shareholder reports of other funds.
18 |
BBH U.S. GOVERNMENT MONEY MARKET FUND |
DISCLOSURE OF FUND EXPENSES (continued) April 30, 2024 (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 | ||||
Institutional Shares | ||||||
Actual | $1,000 | $1,026 | $1.11 | |||
Hypothetical2 | $1,000 | $1,024 | $1.11 |
____________
1 Expenses are equal to the Fund’s annualized net expense ratio of 0.22% for Institutional Shares, multiplied by 182/366 (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 A P R I L 3 0, 2 0 2 4 | 19 |
BBH U.S. GOVERNMENT MONEY MARKET FUND |
DISCLOSURE OF ADVISOR SELECTION April 30, 2024 (unaudited) |
Investment Advisory and Administrative Services Agreement Approval
The 1940 Act requires that a fund’s investment advisory agreements be approved annually by the fund’s board of trustees, including 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.
The Board, a majority of which is comprised of Independent Trustees, held a telephonic meeting on November 16, 2023 and an in-person meeting on December 12, 2023, to consider whether to renew the combined Amended and Restated Investment Advisory and Administrative Services Agreement (the “Agreement”) between the Trust and the Investment Adviser with respect to the existing funds in the Trust, including the Fund. At the December 12, 2023 meeting, the Board voted to approve the renewal of the Agreement with respect to the Fund for an additional one-year term. In doing so, the Board determined that the terms of the Agreement were fair and reasonable and in the best interest of the Fund and its shareholders, and that it had received sufficient information to make an informed business decision with respect to the continuation of the Agreement.
Both in the meetings specifically held to address the continuance of the Agreement and at other meetings over the course of the year, the Board requested, received and assessed a variety of materials provided by the Investment Adviser and BBH, including, among other things, information about the nature, extent and quality of the services provided to the Fund by the Investment Adviser and BBH, including investment management, administrative and shareholder services, the oversight of Fund service providers, marketing, risk oversight, compliance, and the ability to meet applicable legal and regulatory requirements.
The Board also received comparative performance and fee and expense information for the Fund prepared by Broadridge Financial Solutions, Inc. using data from Lipper Inc. (“Lipper”), an independent provider of investment company data (“Lipper Report”). The Board reviewed this report with both counsel to the Trust (“Fund Counsel”) and BBH. The Board received from, and discussed with, Fund Counsel a memorandum regarding the responsibilities of trustees for the approval of investment advisory agreements under the 1940 Act, as well as the guidance provided in 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 continuance of the Agreement. No single factor reviewed by the Board was identified as the principal factor in determining whether to approve the Agreement, and individual Trustees may have given different weight to various factors. The Board reviewed these factors with Fund Counsel. The Board concluded that the fees paid by the Fund to the Investment Adviser were reasonable based on the comparative performance, expense information, the cost of the services provided and the profits realized by the Investment Adviser.
20 |
BBH U.S. GOVERNMENT MONEY MARKET FUND |
DISCLOSURE OF ADVISOR SELECTION (continued) April 30, 2024 (unaudited) |
Nature, Extent and Quality of Services
The Board noted that, under the Agreement and with respect to the Fund, the Investment Adviser, subject to the supervision of the Board, is responsible for providing a continuous investment program and making purchases and sales of portfolio securities consistent with the Fund’s investment objective and policies. The Board further noted that, as a combined investment advisory and administration agreement, the Agreement also contemplates the provision of administrative services by the Investment Adviser to the Fund within the same fee structure. The Board received and considered information, during the December 12, 2023 meeting, and over the course of the previous year, regarding the nature, extent and quality of services provided to the Fund by BBH Investment Adviser including: portfolio management, supervision of operations and compliance, preparation of regulatory filings, disclosures to Fund shareholders, general oversight of service providers, organizing Board meetings and preparing the materials for such Board meetings, assistance to the Board, including the Independent Trustees in their capacity as Trustees, legal and Chief Compliance Officer services for the Trust, and other services necessary for the operation of the Fund. The Board considered the resources of the Investment Adviser and BBH, as a whole, dedicated to the Fund noting that, pursuant to separate agreements, BBH also provides custody, shareholder servicing, and fund accounting services to the Fund. The Board considered the depth and range of services provided pursuant to the Agreement, noting that the Investment Adviser also coordinates the provision of services to the Fund by affiliated and nonaffiliated service providers.
The Board considered the scope and quality of services provided by the Investment Adviser under the Agreement. The Board reviewed the qualifications of the key investment personnel primarily responsible for the day-to-day portfolio management of the Fund. The Board also considered the policies and practices followed by BBH and the Investment Adviser. The Board noted that, during the course of its regular meetings, it received reports on each of the foregoing topics. The Board concluded that, overall, they were satisfied with the nature, extent and quality of investment advisory and administrative services provided, and expected to be provided, to the Fund pursuant to the Agreement.
Fund Performance
At the November 16, 2032 and December 12, 2023 meetings, and throughout the year, the Board received and reviewed detailed performance information for the Fund. As part of this review, the Trustees considered the composition of the peer category, selection criteria and the reputation of Broadridge, who prepared the peer category analysis. The Board reviewed and discussed, with both BBH and Broadridge, the report’s findings and discussed the positioning of the Fund relative to its peer category. The Board considered short-term and long-term investment performance for the Fund over various periods of time as compared to a selection of peer funds, noting the Fund’s below average performance as compared to its peer category for the 1- and 2-year periods and average performance in the 3-, 4-, 5- and 10-year periods. In evaluating the performance of the Fund, the Board considered risk expectations for the Fund in light of relevant regulatory and market factors and in the context of Fund expenses and the Investment Adviser’s profitability.
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BBH U.S. GOVERNMENT MONEY MARKET FUND |
DISCLOSURE OF ADVISOR SELECTION (continued) April 30, 2024 (unaudited) |
Costs of Services Provided and Profitability
The Board considered the fee rates paid by the Fund to the Investment Adviser in light of the nature, extent and quality of the services provided to the Fund. The Board also considered and reviewed the voluntary fee waiver arrangement that was in place for the Fund and considered the actual fee rates, after taking into account the waiver. The Board received and considered information comparing the Fund’s combined investment advisory and administration fee and the Fund’s net operating expenses with those of other comparable mutual funds, such peer group and comparisons having been selected and calculated by Broadridge. The Board recognized that it was difficult to make comparisons of fee rates, or of combined advisory and administration fees, because there are variations in the services that are included in the fees paid by other funds, as well as the timing of other funds’ transitions from prime money market funds to a government money market fund. The Board concluded that the advisory and administration fee appeared to be both reasonable in light of the services rendered and the result of arm’s length negotiations.
With regard to profitability, the Trustees considered the compensation and benefits flowing to the Adviser and BBH, directly or indirectly. The Board reviewed profitability data for the Fund using data from October 1, 2022 through September 30, 2023, for both the Investment Adviser and BBH and corresponding expenses. The data also included the effect of revenue generated by the shareholder servicing, custody and fund accounting fees paid by the Fund to BBH. The Board also reviewed the expense allocation methods used in preparing the profitability data. The Board focused on profitability of the Investment Adviser and BBH’s relationships with the Fund before taxes and distribution expenses. The Board concluded that the Investment Adviser and BBH’s profitability were not excessive in light of the nature, extent and quality of services provided to the Fund.
The Board also considered the effect of fall-out benefits to the Investment Adviser and BBH such as the increased visibility of BBH’s investment management business due to the distribution of the Trust’s funds. The Board considered other benefits received by BBH and the Investment Adviser as a result of their relationships with the Fund. These other benefits include fees received for being the Fund’s administrator, custodian, fund accounting and shareholder servicing agent. In light of the costs of providing services pursuant to the Agreement as well as the Investment Adviser and BBH’s commitment to the Fund, the ancillary benefits that the Investment Adviser and BBH received were considered reasonable.
Economies of Scale
The Board also considered the existence of economies of scale and whether those economies are passed along to the Fund’s shareholders through a graduated investment advisory fee schedule or other means, including any fee waivers by the Investment Adviser and BBH. The Board considered the fee schedule for the Fund, noting the existence of a graduated investment advisory fee and the voluntary fee waiver. Based on information they had been provided over many years, the Board observed that in the mutual fund industry as a whole, as well as among funds similar to the Fund, there appeared to be no uniformity or pattern in the fees and asset levels at which breakpoints apply. In light of the Fund’s current size and expense structure, the Board concluded that the current breakpoints for the Fund were reasonable. The Board concluded that the fees paid by the Fund to the Investment Adviser were reasonable based on the comparative performance, expense information, the cost of the services provided and the profits to be realized by the Investment Adviser.
22 |
BBH U.S. GOVERNMENT MONEY MARKET FUND |
CONFLICTS OF INTEREST April 30, 2024 (unaudited) |
BBH&Co., 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&Co., 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&Co. for which they will pay to BBH&Co. customary fees and expenses that will not be shared with the Funds.
The Investment Adviser and the Sub-advisers have adopted and implemented policies and procedures that seek to manage conflicts of interest. Pursuant to such policies and procedures, the Investment Adviser and each Sub-adviser monitor a variety of areas, including compliance with fund investment guidelines, the investment in only those securities that have been approved for purchase, and compliance with their respective Code of Ethics.
The Trust also manages these conflicts of interest. For example, the Trust has designated a CCO and has adopted and implemented policies and procedures designed to manage the conflicts identified below and other conflicts that may arise in the course of the Funds’ operations in such a way as to safeguard the Funds from being negatively affected as a result of any such potential conflicts. From time to time, the Trustees receive reports from the Investment Adviser, the Sub-advisers 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&Co., the Investment Adviser and Sub-advisers can face in the operation of their respective investment management services. This section is not, and is not intended to be, a complete enumeration or explanation of all of the potential conflicts of interest that may arise. The Investment Adviser, the Sub-advisers 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&Co., the Investment Adviser, and the Sub-advisers manage funds and accounts of clients other than the Funds (“Other Clients”). In general, BBH&Co., the Investment Adviser, and the Sub-advisers face conflicts of interest when they render investment advisory services to different clients and, from time to time, provide dissimilar investment advice to different clients. Investment decisions will not necessarily be made in parallel among the Funds and Other Clients. Investments made by the Funds do not, and are not intended to, replicate the investments, or the investment methods and strategies, of Other Clients. Accordingly, such Other Clients 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
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BBH U.S. GOVERNMENT MONEY MARKET FUND |
CONFLICTS OF INTEREST (continued) April 30, 2024 (unaudited) |
manager is responsible, on the other. For example, it is possible that the various funds or accounts managed by the Investment Adviser or Sub-advisers could have different investment strategies that, at times, might conflict with one another to the possible detriment of the Funds. From time to time, the Investment Adviser and Sub-advisers, sponsor and with other investment pools and accounts which engage in the same or similar businesses as the Funds using the same or similar investment strategies. To the extent that the same investment opportunities might be desirable for more than one account or fund, possible conflicts could arise in determining how to allocate them because the Investment Adviser or Sub-advisers may have an incentive to allocate investment opportunities to certain accounts or funds. However, BBH&Co. 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&Co. provides administrative, custody, shareholder servicing and fund accounting services to the Funds. BBH&Co. 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&Co. may have an incentive to agree to higher fees than it would in the case of unaffiliated providers. BBH&Co. acting in its capacity as the Funds’ administrator is the primary valuation agent of the Funds. BBH&Co. 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&Co. and its affiliates may have an incentive to seek to overvalue certain assets.
Aggregation. Potential conflicts of interest also arise with the aggregation of trade orders. Purchases and sales of securities for the Funds may be aggregated with orders for other client accounts managed by the Sub-advisers. The Sub-advisers, 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 U.S. GOVERNMENT MONEY MARKET FUND |
CONFLICTS OF INTEREST (continued) April 30, 2024 (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&Co., the Investment Adviser may (but is not required to) effect purchases and sales between BBH&Co., the Investment Adviser clients (“cross trades”), including the Funds, if BBH&Co., the Investment Adviser or a Fund’s Sub-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&Co., the Investment Adviser and/or a Fund’s Sub-adviser may have a potentially conflicting division of loyalties and responsibilities to the parties in such transactions.
Soft Dollars. The Investment Adviser may direct brokerage transactions and/or payment of a portion of client commissions (“soft dollars”) to specific brokers or dealers or other providers to pay for research or other appropriate services which provide, in the Investment Adviser’s view, appropriate assistance in the investment decision-making process (including with respect to futures, fixed price offerings and over-the-counter transactions). The use of a broker that provides research and securities transaction services may result in a higher commission than that offered by a broker who does not provide such services. The Investment Adviser will determine in good faith whether the amount of commission is reasonable in relation to the value of research and services provided and whether the services provide lawful and appropriate assistance in its investment decision-making responsibilities.
Research or other services obtained in this manner may be used in servicing any or all of the Funds and other accounts managed by the Investment Adviser, including in connection with accounts that do not pay commissions to the broker related to the research or other service arrangements. Such products and services may disproportionately benefit other client accounts relative to the Funds based on the amount of brokerage commissions paid by the Funds and such other accounts. To the extent that a Sub-adviser uses soft dollars, it will not have to pay for those products and services itself.
BBH&Co. may receive research that is bundled with the trade execution, clearing, and/or settlement services provided by a particular broker-dealer. To the extent that a Sub-adviser receives research on this basis, many of the same conflicts related to traditional soft dollars may exist. For example, the research effectively will be paid by client commissions that also will be used to pay for the execution, clearing, and settlement services provided by the broker-dealer and will not be paid by the Sub-adviser.
Arrangements regarding compensation and delegation of responsibility may create conflicts relating to selection of brokers or dealers to execute Fund portfolio trades and/or specific uses of commissions from Fund portfolio trades, administration of investment advice and valuation of securities.
Investments in BBH Funds. From time to time BBH&Co. may invest a portion of the assets of its discretionary investment advisory clients in the Funds. That investment by BBH&Co. on behalf of its discretionary investment advisory clients in the Funds may be significant at times.
F I N A N C I A L S T A T E M E N T S A P R I L 3 0, 2 0 2 4 | 25 |
BBH U.S. GOVERNMENT MONEY MARKET FUND |
CONFLICTS OF INTEREST (continued) April 30, 2024 (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&Co. may limit its selection to funds managed by BBH&Co. or the Investment Adviser. BBH&Co. 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&Co., 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&Co. 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&Co. 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&Co. to be unreliable, the Funds’ investments will be valued at fair value by BBH&Co. pursuant to procedures adopted by the Funds’ Board. When determining an asset’s “fair value,” BBH&Co. 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&Co. deems relevant at the time of the determination and may be based on analytical values determined by BBH&Co. 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&Co. (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&Co. may enter into advisory and/or referral arrangements with third parties. Such arrangements may include compensation paid by BBH&Co. to the third party. BBH&Co. may pay a solicitation fee for referrals and/or advisory or incentive fees. BBH&Co. may benefit from increased amounts of assets under management.
Personal Trading. BBH&Co., 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&Co. Partners and employees. The policy and procedures are intended to prevent BBH&Co. Partners and employees from trading in the same securities as the Funds. However, BBH&Co., including the Investment Adviser, has implemented
26 |
BBH U.S. GOVERNMENT MONEY MARKET FUND |
CONFLICTS OF INTEREST (continued) April 30, 2024 (unaudited) |
policies and procedures concerning personal trading by BBH&Co. Partners and employees. The policies and procedures are intended to prevent BBH&Co. 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&Co., 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&Co., 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&Co. Partners and employees. BBH&Co., including the Investment Adviser, has implemented policies and procedures concerning gifts and entertainment to mitigate any impact on the judgment of BBH&Co. Partners and employees.
F I N A N C I A L S T A T E M E N T S A P R I L 3 0, 2 0 2 4 | 27 |
Administrator Distributor Shareholder Servicing Agent To obtain information or make shareholder inquiries: | Investment Adviser | |
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.
Not required for this semi-annual report on Form N-CSR.
Item 3. Audit Committee Financial Expert.
Not required for this semi-annual report on Form N-CSR.
Item 4. Principal Accountant Fees and Services.
Not required for this semi-annual report on Form N-CSR.
Item 5. Audit Committee of Listed Registrants.
Not required for this semi-annual report on Form N-CSR.
Item 6. Investments.
(a) A Schedule of Investments 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 to open-end investment companies.
Item 8. Portfolio Managers of Closed-End Management Investment Companies.
Not applicable to open-end investment companies.
Item 9. Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers.
Not applicable to open-end investment companies.
Item 10. Submission of Matters to a Vote of Security Holders.
Registrant does not have procedures by which shareholders may recommend nominees to its board of trustees.
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 to open-end investment companies.
Item 13. Exhibits.
(a)(1) | Not applicable. | |
(a)(2) | ||
(a)(3) | Not applicable to open-end investment companies. | |
(a)(4) | There was no change in the Registrant’s independent public accountant for the period covered by this report. | |
(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: June 24, 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: June 24, 2024 |
By: | (Signature and Title) | |||
/s/ Charles H. Schreiber | ||||
Charles H. Schreiber | ||||
Title: Treasurer (Principal Financial Officer) | ||||
Date: June 24, 2024 |