-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, V/eX/rRTzERB2g3hyPL8psSgFITm+VHsZM+WY1DPbIRzGPwMsKuNqcH2fp0frE4V HHAQO86lBc3EQ9FZ0eVWpQ== 0001003715-07-000235.txt : 20070709 0001003715-07-000235.hdr.sgml : 20070709 20070709160231 ACCESSION NUMBER: 0001003715-07-000235 CONFORMED SUBMISSION TYPE: N-CSR/A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20070430 FILED AS OF DATE: 20070709 DATE AS OF CHANGE: 20070709 EFFECTIVENESS DATE: 20070709 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BBH FUND INC CENTRAL INDEX KEY: 0000865898 IRS NUMBER: 043516205 STATE OF INCORPORATION: MD FISCAL YEAR END: 1031 FILING VALUES: FORM TYPE: N-CSR/A SEC ACT: 1940 Act SEC FILE NUMBER: 811-06139 FILM NUMBER: 07969637 BUSINESS ADDRESS: STREET 1: 40 WATER STREET STREET 2: 40 WATER STREET CITY: BOSTON STATE: MA ZIP: 02109 BUSINESS PHONE: 8006255759 FORMER COMPANY: FORMER CONFORMED NAME: 59 WALL STREET FUND INC DATE OF NAME CHANGE: 19920703 0000865898 S000006340 BBH International Equity Fund C000017431 Class I Shares C000017432 Class N Shares 0000865898 S000006341 BBH Broad Market Fund C000017433 Class I Shares C000017434 Class N Shares 0000865898 S000006342 BBH Real Return Fund C000017435 Class A Shares C000017436 Class I Shares C000017437 Class N Shares 0000865898 S000006343 BBH Core Select C000017438 Class I Shares C000017439 Class N Shares N-CSR/A 1 bbhfundinc043007ncsr.txt BBH FUND INC 04-30-07 NCSR - W/ DATED CERTS UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM N-CSR CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES Investment Company Act file number: 811-06139 BBH Fund, Inc. BBH Real Return Fund BBH International Equity Fund BBH Core Select BBH Broad Market Fund (Exact name of Registrant as specified in charter) 40 Water Street Boston MA., 02109-3661 (Address of principal executive offices) Charles H. Schreiber III, Principal Financial Officer, BBH Fund, Inc., 40 Water Street, Boston, MA, 01915. Mailing address: 140 Broadway, New York, NY, 10005 (Name and address of agent for service) Registrant's telephone number, including area code: (212) 593-7237 Date of fiscal year end: OCTOBER 31 Date of reporting period: APRIL 30, 2007 Form N-CSR is to be used by management investment companies to file reports with the Commission not later than 10 days after the transmission to stockholders of any report that is required to be transmitted to stockholders under Rule 30e-1 under the Investment Company Act of 1940 (17 CFR 270.30e-1). The Commission may use the information provided on Form N-CSR in its regulatory, disclosure review, inspection, and policymaking roles. A Registrant is required to disclose the information specified by Form N-CSR, and the Commission will make this information public. A Registrant is not required to respond to the collection of information contained in Form N-CSR unless the Form displays a currently valid Office of Management and Budget ("OMB") control number. Please direct comments concerning the accuracy of the information collection burden estimate and any suggestions for reducing the burden to Secretary, Securities and Exchange Commission, 450 Fifth Street, NW, Washington, DC 20549-0609. The OMB has reviewed this collection of information under the clearance requirements of 44 U.S.C. Section 3507. ITEM 1. REPORTS TO STOCKHOLDERS. BROWN [LOGO] BROTHERS HARRIMAN Semi-Annual Report APRIL 30, 2007 BBH REAL RETURN FUND (Formerly, BBH Inflation-Indexed Securities Fund) BBH REAL RETURN FUND - -------------------------------------------------------------------------------- PORTFOLIO ALLOCATION April 30, 2007 (unaudited) BREAKDOWN BY SECURITY TYPE Percent of U.S. $ Value Net Assets ------------ ---------- Asset Backed Securities ..................... $ 23,460,258 6.6% Corporate Bonds ............................. 52,055,824 14.6 Foreign Government Bonds .................... 15,030,359 4.2 U.S. Treasury Notes and Bonds ............... 343,212,736 96.0 Short-Term Investment ....................... 400,000 0.1 Liabilities in Excess of Cash and Other Assets .............................. (76,778,489) (21.5) ------------- ----- NET ASSETS .................................. $ 357,380,688 100.0% ============= ===== All data as of April 30, 2007. The Fund's breakdown by security type is expressed as a percentage of net assets and may vary over time. The accompanying notes are an integral part of these financial statements. 2 BBH REAL RETURN FUND - -------------------------------------------------------------------------------- PORTFOLIO OF INVESTMENTS APRIL 30, 2007 (unaudited)
Principal Amount Value --------- ------------ U.S. TREASURY NOTES AND BONDS (96.0%) $ 20,782,125 1.625%, 01/15/2015(1)................................. $ 19,982,491 15,511,860 1.875%, 07/15/2013(1)................................. 15,331,891 46,943,891 1.875%, 07/15/2015(1)................................. 45,937,180 14,344,954 2.000%, 01/15/2014(1)................................. 14,223,351 23,718,592 2.000%, 07/15/2014(1)................................. 23,518,455 28,723,780 2.000%, 01/15/2026(1)................................. 27,270,017 47,161,500 2.375%, 04/15/2011(1)................................. 47,809,971 24,042,469 2.375%, 01/15/2025(1)................................. 24,169,245 19,410,039 2.375%, 01/15/2027(1)................................. 19,553,343 67,200,845 2.500%, 07/15/2016(1)................................. 69,001,627 11,575,377 3.500%, 01/15/2011(1)................................. 12,219,632 2,519,260 3.625%, 01/15/2008(1)................................. 2,551,340 1,861,275 3.875%, 01/15/2009(1),(2)............................. 1,923,585 15,566,341 3.875%, 04/15/2029(1)................................. 19,720,608 ------------ Total U.S. Treasury Notes and Bonds .................. (Identified cost $338,204,541)........................ 343,212,736 ------------ ASSET BACKED SECURITIES (6.6%) 750,000 Accredited Mortgage Loan Trust 2007-1 5.670%, 02/25/2037(3)................................ 736,479 2,900,000 Advanta Business Card Master Trust 2005-C1 5.830%, 08/22/2011(3)................................ 2,911,831 2,660,000 Advanta Business Card Master Trust 2006-C1 5.800%, 10/20/2014(3)................................ 2,679,437 3,000,000 Bank of America Credit Card Trust 2006-C5 5.720%, 01/15/2016(3)................................ 3,003,159 3,000,000 Citibank Credit Card Issuance Trust 2001-C1 6.436%, 01/15/2008(3)................................ 3,017,892 3,686,163 Credit-Based Asset Servicing and Securitization CBO, Ltd. 6.170%, 06/25/2032(3),(4)....................... 3,695,379 170,000 Credit-Based Asset Servicing and Securitization LLC 2007-CB4 5.690%, 04/25/2037(3)....................... 170,000 325,000 Credit-Based Asset Servicing and Securitization LLC 2007-CB4 5.770%, 04/25/2037(3)....................... 325,000 160,000 Credit-Based Asset Servicing and Securitization LLC 2007-CB4 6.020%, 04/25/2037(3)....................... 160,000 788,030 Federated CBO II, Ltd. 8.630%, 07/10/2012(4)........... 797,486 1,523,901 Greenpoint Mortgage Funding Trust 2006-HE1 5.490%, 03/12/2037(3)................................ 1,523,093
The accompanying notes are an integral part of these financial statements. FINANCIAL STATEMENT APRIL 30, 2007 3 BBH REAL RETURN FUND - -------------------------------------------------------------------------------- PORTFOLIO OF INVESTMENTS (continued) APRIL 30, 2007 (unaudited)
Principal Amount Value --------- ------------ ASSET BACKED SECURITIES (continued) $ 3,750,000 MBNA Credit Card Master Note Trust 2005-C1 5.730%, 10/15/2012(3)................................ $ 3,775,502 315,000 Morgan Stanley ABS Capital I 2007-HE5 5.740%, 03/25/2037(3)................................ 315,000 185,000 Morgan Stanley ABS Capital I 2007-HE5 5.790%, 03/25/2037(3)................................ 185,000 165,000 Morgan Stanley ABS Capital I 2007-HE5 5.970%, 03/25/2037(3)................................ 165,000 ------------ Total Asset Backed Securities (Identified cost $23,425,770).......................... 23,460,258 ------------ CORPORATE BONDS (14.6%) AUTOMOTIVE (1.3%) 2,500,000 DaimlerChrysler NA Holding Corp. 4.875%, 06/15/2010.... 2,476,580 2,360,000 Toyota Motor Credit Corp. 4.330%, 02/05/2016(3)........ 2,245,611 ------------ 4,722,191 ------------ BEVERAGE (0.6%) 1,917,000 Coors Brewing Co. 6.375%, 05/15/2012................... 1,996,661 ------------ BUILDING MATERIALS (0.6%) 2,000,000 Lennar Corp. 6.100%, 03/19/2009(3)..................... 2,001,978 ------------ ENTERTAINMENT (0.4%) 1,000,000 Carnival Plc. 4.250%, 11/27/2013....................... 1,334,693 ------------ FINANCE (3.9%) 2,500,000 iStar Financial, Inc. 5.695%, 09/15/2009(3)............ 2,502,920 ------------ 1,890,000 Merrill Lynch & Co., Inc. 3.236%, 03/02/2009(3)........ 1,821,317 500,000 Redwood Capital IX, Ltd. 7.750%, 01/09/2008(3),(4)..... 501,650 9,157,000 SLM Corp. 4.200%, 01/31/2014(3)........................ 7,790,684 1,360,000 Vita Capital, Ltd. 6.749%, 01/01/2010(3),(4)........... 1,365,399 ------------ 13,981,970 ------------ FOREST PRODUCTS & PAPER (0.2%) 608,000 International Paper Co. 5.850%, 10/30/2012............. 617,966 ------------ INDUSTRIAL (1.1%) 1,250,000 Embraer Overseas, Ltd. 6.375%, 01/24/2017(4)........... 1,267,188 2,500,000 Masco Corp. 7.125%, 08/15/2013......................... 2,663,300 ------------ 3,930,488 ------------
The accompanying notes are an integral part of these financial statements. 4 BBH REAL RETURN FUND - -------------------------------------------------------------------------------- PORTFOLIO OF INVESTMENTS (continued) APRIL 30, 2007 (unaudited)
Principal Amount Value --------- ------------ CORPORATE BONDS (continued) INSURANCE (0.5%) $ 1,950,000 Allstate Life Global Funding Trust 3.130%, 03/01/2010(3) ....................................... $ 1,843,725 ------------ MEDIA (0.9%) 2,500,000 COX Communications, Inc. 7.125%, 10/01/2012............ 2,699,865 555,000 Time Warner Cable, Inc. 5.850%, 05/01/2017(4).......... 558,334 ------------ 3,258,199 ------------ OIL & GAS (1.5%) 1,250,000 GAZ Capital 6.212%, 11/22/2016(4)...................... 1,266,250 4,000,000 Pemex Project Funding Master Trust 6.655%, 06/15/2010(3),(4) ................................... 4,116,000 ------------ 5,382,250 ------------ TELECOMMUNICATIONS (2.2%) 2,500,000 Sprint Capital Corp. 7.625%, 01/30/2011................ 2,682,730 2,500,000 Telecom Italia Capital SA 6.200%, 07/18/2011........... 2,579,265 2,500,000 Time Warner, Inc. 6.875%, 05/01/2012................... 2,662,240 ------------ 7,924,235 ------------ UTILITIES (1.4%) 2,500,000 Dominion Resources, Inc. 4.750%, 12/15/2010............ 2,464,498 2,500,000 PPL Energy Supply LLC 6.400%, 11/01/2011............... 2,596,970 ------------ 5,061,468 ------------ Total Corporate Bonds (Identified cost $53,144,644).......................... 52,055,824 ------------ FOREIGN GOVERNMENT BONDS (4.2%) (euro) l5,090,050 Deutsche Bundesrepublik Inflation Linked 1.500%, 04/15/2016..................................... 6,657,296 PLN 16,000,000 Government of Poland 4.250%, 05/24/2011................ 5,606,858 (euro) l2,036,020 Italy Buoni Poliennali Del Tesoro 2.100%, 09/15/2017. ......................................... 2,766,205 ------------ Total Foreign Government Bonds (Identified cost $14,294,431).......................... 15,030,359 ------------
The accompanying notes are an integral part of these financial statements. FINANCIAL STATEMENT APRIL 30, 2007 5 BBH REAL RETURN FUND - -------------------------------------------------------------------------------- PORTFOLIO OF INVESTMENTS (continued) APRIL 30, 2007 (unaudited)
Principal Amount Value --------- ------------ SHORT-TERM INVESTMENT (0.1%) $ 400,000 BP Capital Markets Plc. 5.291%, 05/01/2007............. $ 400,000 ------------ Total Short-Term Investment (Identified cost $400,000)............................. 400,000 ------------ TOTAL INVESTMENTS (Identified cost $429,469,386)(5)........................ 121.5% $434,159,177 LIABILITIES IN EXCESS OF OTHER ASSETS...................................... (21.5) (76,778,489) ----- ------------ NET ASSETS................................................................. 100.0% $357,380,688 ===== ============
- ---------- (1) Inflation Protected Security. (2) Security held as collateral on futures contracts. (3) Variable rate instrument. Interest rates change on specific dates (such as coupon or interest payment date). The yield shown represents the April 30, 2007 coupon rate. (4) Securities exempt from registration under Rule 144A of the Security Act of 1933. These securities may be resold. In transactions exempt from registration, normally to qualified institutional buyers. Total market value of 144A securities owned at April 30, 2007 was $13,567,686 or 3.80% of net assets. (5) The aggregate cost for federal income tax purposes is $429,469,386, the aggregate gross unrealized appreciation is $7,191,566, and the aggregate gross unrealized depreciation is $2,501,775, resulting in net unrealized appreciation of $4,689,791. Securities with an aggregate market value of $83,360,578 have been segregated with primary dealers of U.S. Government Obligations as designated by the Federal Reserve Bank of New York in association with reverse repurchase agreements:
Repurchase Counter-Party Rate Date Security Value - ------------- ---- ---------- -------- ----- Barclays 5.24% 05/25/2007 U.S. Treasury Notes TIPS 2.500%, 07/15/2016 $41,550,000 Barclays 5.25% 06/08/2007 U.S. Treasury Notes TIPS 2.375%, 04/15/2011 $41,810,578
A summary of obligations under open forward foreign currency exchange contracts outstanding at April 30, 2007 is as follows:
Unrealized Notional Market Appreciation/ Description Value Value (Depreciation) - ----------- -------- ------ -------------- Buy Contracts: Euro settling 05/30/07 9,713,611 9,713,611 $ 9,713,611 Polish Zloty settling 05/30/07 5,597,967 5,597,967 5,597,967 Sell Contracts: Euro settling 05/30/07 (7,123,400) (9,741,589) (9,741,589) Polish Zloty settling 05/30/07 (15,561,900) (5,619,333) (5,619,333) ------------ $ (49,344) ===========
The accompanying notes are an integral part of these financial statements. 6 BBH REAL RETURN FUND - -------------------------------------------------------------------------------- PORTFOLIO OF INVESTMENTS (continued) APRIL 30, 2007 (UNAUDITED) A SUMMARY OF OBLIGATIONS UNDER OPEN FUTURES CONTRACTS AT APRIL 30, 2007 IS AS FOLLOWS:
Unrealized Expiration Base Contract Appreciation/ Position Date Contracts Note/Bond Value (Depreciation) -------- ---------- --------- --------- ------------- -------------- Long 06/2007 50 90 Day Sterling $ 11,774,339 $ (7,500) Long 09/2007 50 90 Day Sterling $ 11,761,838 $ (13,751) Long 12/2007 50 90 Day Sterling $ 11,763,088 $ (16,251) Long 03/2008 50 90 Day Sterling $ 11,770,588 $ (15,001) Long 12/2008 100 90 Day Euro$ $ 23,845,000 $ 45,000 Long 03/2009 110 90 Day Euro$ $ 26,224,000 $ 46,750 Short 06/2007 (30) Long Gilt $ (6,430,521) $ 45,602 Short 06/2007 (100) U.S. Long Bond $(11,175,000) $ (68,750) Short 06/2007 (140) U.S. 2Yr Treasury Note $(28,660,626) $ (31,718) Short 06/2007 (700) U.S. 5Yr Treasury Note $(74,079,691) $(437,500) Short 06/2007 (500) U.S. 10Yr Treasury Note $(54,164,065) $(148,435) --------- $(601,554) =========
As of April 30, 2007, the Fund had segregated sufficient cash and/or securities to cover the initial margin requirements on open futures contracts. At April 30, 2007, the Fund had the following open swap agreements:
Amount Due Notional from (to) Broker Amount Description at Value ------------ ----------- ----------------- 7,760,000 Agreement with JP Morgan terminating 03/13/17 to pay a fixed rate of 5.170% interest and receive the 6 months LIBOR paid semi-annually. $ 330,865 1,320,700,000 Agreement with JP Morgan terminating 03/13/12 to pay a fixed rate of 1.295% interest and receive the 6 months Yen LIBOR paid semi-annually. (8,161) 132,500,000 Agreement with Goldman Sachs terminating 03/13/12 to pay a fixed rate of 4.1175% interest and receive the 3 months STIBOR paid quarterly. (286,361) 55,500,000 Agreement with JP Morgan to receive 0.350% interest in exchange for providing protection against default on an index of 125 North American Investment Grade Corporate Entities. 93,807 4,300,000 Agreement with Lehman Brothers FSB terminating 06/20/12 to pay a fixed rate of 0.370% interest and receive the 3 months U.S. Treasury rate paid quarterly. 13,415 115,000,000 Agreement with Lehman Brothers terminating 10/19/11 to pay a fixed rate of 5.176% interest and receive the 3 months U.S. Treasury rate paid quarterly. 912,947 8,000,000 Agreement with Goldman Sachs to pay 2.120% interest in exchange for receiving protection against default on a bond from SLM Corp. (11,981) 10,000,000 Agreement with Goldman Sachs terminating 08/04/16 to pay a fixed rate of 3.017% interest and to receive the United Kingdom Retail Price Index. (211,392)
The accompanying notes are an integral part of these financial statements. FINANCIAL STATEMENT APRIL 30, 2007 7 BBH REAL RETURN FUND - -------------------------------------------------------------------------------- PORTFOLIO OF INVESTMENTS (continued) APRIL 30, 2007 (UNAUDITED)
Amount Due Notional from (to) Broker Amount Description at Value ------------ ----------- ----------------- 40,000,000 Agreement with Barclays terminating 09/22/08 to pay 2.930% interest and to receive the United Kingdom Retail Price Index. $ 689,786 50,000,000 Agreement with Lehman Brothers terminating 08/31/07 to pay the change in the Lehman CMBS Investment Grade 8.5 year+ index on maturity date. (130,302) 25,000,000 Agreement with Goldman Sachs terminating 02/05/12 to pay a fixed rate of 2.625% interest and receive the 3 months U.S. Treasury rate paid quarterly. 207,647 5,350,000 Agreement with Lehman Brothers to pay 0.160% interest in exchange for receiving protection against default on a bond issued by Bank of America. (10,615) 5,350,000 Agreement with Lehman Brothers to pay 0.155% interest in exchange for receiving protection against default on a bond issued by Citigroup. (9,367) 5,350,000 Agreement with Lehman Brothers to pay 0.165% interest in exchange for receiving protection against default on a bond issued by American Express. (2,107) 5,350,000 Agreement with Lehman Brothers to pay 0.160% interest in exchange for receiving protection against default on a bond issued by Wachovia Bank. (8,177) 4,300,000 Agreement with Lehman Brothers to receive 0.640% interest in exchange for providing protection against default on a bond issued by Countrywide Financial Corp. (4,929) 4,300,000 Agreement with Lehman Brothers to receive 0.280% interest in exchange for providing protection against default on a bond issued by Goldman Sachs. 5,124 4,300,000 Agreement with Lehman Brothers to receive 0.390% interest in exchange for providing protection against default on a bond issued by Bear Stearns Cos. 17,288 4,300,000 Agreement with Lehman Brothers to receive 0.470% interest in exchange for providing protection against default on a bond issued by Washington Mutual. 11,755 ---------- $1,599,242 ==========
LIBOR - London Interbank Offered Rate STIBOR - Stockholm Interbank Offered Rate As of April 30, 2007, the Fund had segregated sufficient cash to cover any accrued but unpaid net amounts owed to a swap counterparty. Currency Abbreviations: (euro) - Euro PLN - Polish Zloty The accompanying notes are an integral part of these financial statements. 8 BBH REAL RETURN FUND - -------------------------------------------------------------------------------- STATEMENT OF ASSETS AND LIABILITIES April 30, 2007 (unaudited) ASSETS: Investments in securities, at value (identified cost $429,469,386) ......................... $ 434,159,177 Cash ..................................................... 197,168 Foreign currency at value (identified cost $18,076) ...... 18,167 Segregated cash .......................................... 300,000 Receivables for: Interest and other receivables ......................... 29,165,801 Unrealized appreciation of forward foreign exchange currency contract ........................... 15,311,578 Swap Agreements ........................................ 1,599,242 Capital stock sold ..................................... 80,408 ------------- Total Assets ......................................... 480,831,541 ------------- LIABILITIES: Reverse repurchase agreements, at fair value ............. 83,360,578 Payables for: Investments purchased .................................. 18,248,075 Unrealized depreciation of forward foreign exchange currency contract ........................... 15,360,922 Capital stock redeemed ................................. 5,529,583 Variation margin on futures contracts .................. 605,885 Investment advisory fees ............................... 160,064 Shareholder servicing fees ............................. 116,386 Administrative fees .................................... 64,025 Professional fees ...................................... 46,762 Distribution fees ...................................... 3,468 Board of Directors' fees ............................... 683 Dividend distribution .................................. 281 Custody and accounting fees ............................ (108,434) Accrued expenses and other liabilities ................. 62,575 ------------- Total Liabilities .................................... 123,450,853 ------------- NET ASSETS .................................................. $ 357,380,688 ============= Net Assets Consist of: Par value ................................................ $ 34,116 Paid-in capital .......................................... 380,066,915 Undistributed net investment income ...................... 4,228,017 Accumulated net realized loss on investments, foreign exchange transactions and futures contracts ...................................... (32,012,735) Net unrealized appreciation on investments, foreign currency translations and futures contracts .............................................. 5,064,375 ------------- Net Assets .................................................. $ 357,380,688 ============= CLASS N SHARES NET ASSET VALUE ($252,992,523 / 24,177,868 shares outstanding) ........... $10.46 ====== CLASS I SHARES NET ASSET VALUE ($104,387,485 / 9,938,528 shares outstanding) ............ $10.50 ====== The accompanying notes are an integral part of these financial statements. FINANCIAL STATEMENT APRIL 30, 2007 9 BBH REAL RETURN FUND - -------------------------------------------------------------------------------- STATEMENT OF OPERATIONS For the six months ended April 30, 2007 (unaudited) NET INVESTMENT INCOME: Income: Interest and other income (net of withholding taxes of $43,601). ................................... $ 7,082,446 ------------- Total Income ......................................... 7,082,446 ------------- Expenses: Investment advisory fees ................................. 521,827 Shareholder servicing fees ............................... 383,991 Administrative fees ...................................... 208,731 Custody and accounting fees .............................. 83,899 Professional fees ........................................ 31,016 Board of Directors' fees ................................. 24,307 Distribution fees ........................................ 8,365 Miscellaneous expenses ................................... 172,868 ------------- Total Expenses ......................................... 1,435,004 Expense offset arrangement ............................. (3,604) ------------- Net Expenses ........................................... 1,431,400 ------------- Net Investment Income ....................................... 5,651,046 ------------- NET REALIZED AND UNREALIZED LOSS: Net realized loss on investments, futures contracts and swap agreements .......................... (3,316,864) Net realized loss on foreign exchange transactions ....... (771,285) ------------- Net realized loss ........................................ (4,088,149) ------------- Net change in unrealized appreciation (depreciation) on investments and futures contracts ................... 2,252,284 Net change in unrealized appreciation (depreciation) on foreign currency translations ....................... 835,228 ------------- Net change in unrealized appreciation (depreciation) ..... 3,087,512 ------------- Net Realized and Unrealized Loss ......................... (1,000,637) ------------- Net Increase in Net Assets Resulting from Operations ..... $ 4,650,409 ============= The accompanying notes are an integral part of these financial statements. 10 BBH REAL RETURN FUND - -------------------------------------------------------------------------------- STATEMENTS OF CHANGES IN NET ASSETS
For the six months ended For the April 30, 2007 year ended (unaudited) October 31, 2006 -------------- ---------------- INCREASE (DECREASE) IN NET ASSETS: Operations: Net investment income ....................................................... $ 5,651,046 $ 27,824,113 Net realized loss on investments, foreign exchange transactions, futures contracts and swap agreements ................................................................ (4,088,149) (24,821,985) Net change in unrealized appreciation (depreciation) on investments, foreign currency translations and futures contracts ........................................ 3,087,512 6,010,214 ------------- ------------- Net increase in net assets resulting from operations ........................ 4,650,409 9,012,342 ------------- ------------- Dividends and distributions declared: From net investment income: Class N ..................................................................... (1,484,676) (20,521,653) Class I ..................................................................... (647,686) (5,398,134) Class A ..................................................................... (2,183) (426,749) From net realized gains Class N ..................................................................... -- (13,272,455) Class I ..................................................................... -- (2,627,706) Class A ..................................................................... -- (256,379) ------------- ------------- Total dividends and distributions declared ................................ (2,134,545) (42,503,076) ------------- ------------- Capital stock transactions: Net proceeds from sales of capital stock .................................... 19,671,051 109,930,850 Net asset value of capital stock issued to shareholders for reinvestment of dividends and distributions ............................................................. 1,857,418 38,146,957 Net cost of capital stock redeemed .......................................... (150,290,574) (226,179,019) ------------- ------------- Net decrease in net assets resulting from capital stock transactions ........................................................ (128,762,105) (78,101,212) ------------- ------------- Total decrease in net assets ............................................ (126,246,241) (111,591,946) NET ASSETS: Beginning of year ............................................................. 483,626,929 595,218,875 ------------- ------------- End of period (including undistributed net investment income of $4,228,017 and $711,516, respectively) ............................ $ 357,380,688 $ 483,626,929 ============= =============
The accompanying notes are an integral part of these financial statements. FINANCIAL STATEMENT APRIL 30, 2007 11 BBH REAL RETURN FUND - -------------------------------------------------------------------------------- STATEMENT OF CASH FLOWS(1) For the six months ended April 30, 2007 (unaudited) INCREASE (DECREASE) IN CASH Cash flows from operating activities: Net increase in net assets from operations ............. $ 4,650,409 Adjustments: Purchase of portfolio investments ........................ (2,241,208,749) Sales of portfolio investments ........................... 2,356,506,607 Increase in foreign currency at value .................... 1,179 Decrease in receivable for capital stock sold ............ 95,278 Increase in receivable for swap agreements ............... (885,222) Increase in interest and other receivables ............... (25,912,279) Decrease in appreciation of forward foreign exchange currency contracts ..................................... 4,672,926 Increase in reverse repo ................................. 17,466,828 Increase in payable for investments purchased ............ 10,582,222 Increase in payable for capital stock redeemed ........... 4,411,455 Increase in dividends payable ............................ 45 Decrease in variation margin payable ..................... (417,195) Decrease in accrued expenses and other liabilities ....... (75,607) Decrease in depreciation of forward foreign exchange currency contracts ..................................... (4,715,086) Net realized loss on investments, futures contracts and swap agreements .................................... 3,316,864 Net realized loss on foreign exchange transactions ....... 771,285 Net change in unrealized appreciation (depreciation) of investments and foreign currency denominated assets and liabilities ................................. (3,087,512) Accretion of bond discount and amortization of bond premium ........................................... (219,784) ------------- Net decrease in cash from operating activities ........... 125,953,664 ------------- Financing Activities:(2) Proceeds from shares sold ................................ 19,671,051 Payment on shares redeemed ............................... (150,290,574) Cash dividends paid ...................................... (277,127) Effect of exchange rate on cash .......................... 4,533,236 ------------- Net decrease in cash from financing activities ........... (126,363,414) ------------- Net decrease in cash ..................................... (409,750) ------------- Cash at the beginning of the period: ..................... $ 606,918 ------------- Ending balance ........................................... $ 197,168 ============= - ---------- (1) This statement of cash flows is presented as the Fund's investment in reverse repurchase agreements is 13.33% of average net assets for the six months ended April 30, 2007. Reverse repurchase agreements constitute debt in accordance with accounting principles generally accepted in the United States of America. For discussion of reverse repurchase agreements, see footnote D on page 16. (2) Non-cash financing activities included herein consist of reinvestment of distributions of $1,857,418 12 BBH REAL RETURN FUND - -------------------------------------------------------------------------------- FINANCIAL HIGHLIGHTS Selected per share data and ratios for a Class N share outstanding throughout each period
For the six months ended For the years ended October 31, April 30, 2007 ----------------------------------------------------------------- (unaudited) 2006 2005 2004 2003 2002 -------------- ---- ---- ---- ---- ---- Net asset value, beginning of year ... $10.39 $11.00 $11.32 $11.32 $10.89 $10.50 Income from investment operations: Net investment income.............. 0.11(1) 0.52(1) 0.46(1) 0.38(1) 0.35(1) 0.37 Net realized and unrealized gain (loss)...................... 0.02 (0.31) (0.14) 0.45 0.71 0.52 ------ ------ ------ ------ ------ ------ Total income from investment operations.......... 0.13 0.21 0.32 0.83 1.06 0.89 ------ ------ ------ ------ ------ ------ Less dividends and distributions: From net investment income ........ (0.06) (0.52) (0.45) (0.40) (0.33) (0.38) From net realized gains............ -- (0.30) (0.19) (0.43) (0.30) (0.12) ------ ------ ------ ------ ------ ------ Total dividends and distributions.................. (0.06) (0.82) (0.64) (0.83) (0.63) (0.50) ------ ------ ------ ------ ------ ------ Net asset value, end of period ....... $10.46 $10.39 $11.00 $11.32 $11.32 $10.89 ====== ====== ====== ====== ====== ====== Total return.......................... 1.26% 1.91% 2.91% 7.77% 10.05% 8.77% Ratios/Supplemental data: Net assets, end of period (in millions).................... $253 $357 $489 $373 $380 $229 Expenses as a percentage of average net assets............... 0.75%(2),(3) 0.71%(2) 0.71%(2) 0.72%(2) 0.67%(2),(4) 0.65%(2),(4) Ratio of net investment income to average net assets............ 2.11%(3) 4.97% 4.10% 3.43% 3.43% 3.88% Portfolio turnover rate............ 274%(3) 485% 572% 553% 393% 458%
- ---------- (1) Calculated using average shares outstanding for the year. (2) The ratio of expenses to average net assets for the six months ended April 30, 2007 and the years ended October 31, 2006, 2005, 2004, 2003 and 2002 reflect fees reduced as a result of an expense offset arrangement with the Fund's custodian. Had this arrangement not been in place, this ratio would have been 0.75%, 0.71%, 0.71%, 0.72%, 0.67 and N/A, respectively. (3) Annualized. (4) Had the expense payment agreement which terminated on July 31, 2003 not been in place, the ratio of expenses to average net assets would have been as follows:
N/A N/A N/A N/A 0.72% 0.80%
The accompanying notes are an integral part of these financial statements. FINANCIAL STATEMENT APRIL 30, 2007 13 BBH REAL RETURN FUND - -------------------------------------------------------------------------------- FINANCIAL HIGHLIGHTS (continued) Selected per share data and ratios for a Class I share outstanding throughout each period
For the six months ended For the years ended October 31, April 30, 2007 ----------------------------------------------------------------- (unaudited) 2006 2005 2004 2003 2002 -------------- ---- ---- ---- ---- ---- Net asset value, beginning of year ... $10.42 $11.03 $11.33 $11.34 $10.90 $10.50 Income from investment operations: Net investment income.............. 0.13(1) 0.56(1) 0.49(1) 0.43(1) 0.38(1) 0.42 Net realized and unrealized gain (loss)...................... 0.02 (0.34) (0.12) 0.41 0.72 0.49 ------ ------ ------ ------ ------ ------ Total income from investment operations.......... 0.15 0.22 0.37 0.84 1.10 0.91 ------ ------ ------ ------ ------ ------ Less dividends and distributions: From net investment income ........ (0.07) (0.53) (0.48) (0.42) (0.36) (0.39) From net realized gains............ -- (0.30) (0.19) (0.43) (0.30) (0.12) ------ ------ ------ ------ ------ ------ Total dividends and distributions.................. (0.07) (0.83) (0.67) (0.85) (0.66) (0.51) ------ ------ ------ ------ ------ ------ Net asset value, end of period ....... $10.50 $10.42 $11.03 $11.33 $11.34 $10.90 ====== ====== ====== ====== ====== ====== Total return.......................... 1.40% 2.11% 3.30% 7.99% 10.27% 9.09% Ratios/Supplemental data: Net assets, end of period (in millions).................... $104 $120 $96 $83 $55 $41 Expenses as a percentage of average net assets............... 0.50%(2),(3) 0.46%(2) 0.46%(2) 0.47%(2) 0.42%(2),(4) 0.40%(2),(4) Ratio of net investment income to average net assets............ 2.54%(3) 5.36% 4.33% 3.78% 3.16% 4.29% Portfolio turnover rate............... 274%(3) 485% 572% 553% 393% 458%
- ---------- (1) Calculated using average shares outstanding for the year. (2) The ratio of expenses to average net assets for the six months ended April 30, 2007 and years ended October 31, 2006, 2005, 2004, 2003 and 2002 reflect fees reduced as a result of an expense offset arrangement with the Fund's custodian. Had this arrangement not been in place, this ratio would have been 0.50%. 0.45%, 0.46%, 0.46%, 0.42% and N/A, respectively. (3) Annualized. (4) Had the expense payment agreement which terminated on July 31, 2003 not been in place, the ratio of expenses to average net assets would have been as follows:
N/A N/A N/A N/A 0.47% 0.55%
The accompanying notes are an integral part of these financial statements. 14 BBH REAL RETURN FUND - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS April 30, 2007 (Unaudited) 1. Organization and Significant Accounting Policies. BBH Real Return Fund (the "Fund") (formerly BBH Inflation-Indexed Securities Fund) is a separate, diversified series of BBH Fund, Inc. (The "Corporation"), which is registered under the Investment Company Act of 1940, as amended. The Corporation is an open-end management investment company organized under the laws of the State of Maryland on July 16, 1990. The Fund commenced operations on July 23, 1992. On February 20, 2001, the Corporation's Board of Directors reclassified the Fund's outstanding shares as "Class N", and established a new class of shares designated as "Class I". Class I commenced operations on August 16, 2001. On November 8, 2002, the Corporation's Board of Directors authorized a new class of shares designated as "Class A". Class A commenced operations on March 7, 2003. Class A shares are sold with a front end sales charge of up to 3.0% For purchases not exceeding $50,000. A contingent deferred sales charge of 0.75% May be applied to Class A shares redeemed up to 24 months after purchase, where an investment professional received an advance payment of the transaction. Class N, class I and Class A shares have different operating expenses. Class N, Class I and Class A shares do not convert to any other class of the Fund. All shares of Class A redeemed on April 2, 2007 and the Class was closed. The Fund's financial statements are prepared in accordance with accounting principles generally accepted in the United States of America, which require management to make certain estimates and assumptions at the date of the financial statements and are based, in part, on the following accounting policies. Actual results could differ from those estimates. A. Valuation of Investments. Bonds and other fixed income securities, including restricted securities (other than short-term obligations but including listed issues) are valued at their most recent bid prices (sales price if the principal market is an exchange) in the principal market in which such securities are normally traded, on the basis of valuations furnished by a pricing service, use of which has been approved by the Corporation's Board of Directors. In making such valuations, the pricing service utilizes both dealer-supplied valuations and electronic data processing techniques which take into account appropriate factors such as institutional-size trading in similar groups of securities, yield, quality, coupon rate, maturity, type of issue, trading characteristics and other market data, without exclusive reliance upon quoted prices or exchange or over-the-counter prices, since such valuations are believed to reflect more accurately the fair value of such securities. Securities or other assets for which market quotations are not readily available are valued at fair value in accordance with procedures established by and under the general supervision and responsibility of the Corporation's Board of Directors. Short-term investments which mature in 60 days or less are valued at amortized cost if their original maturity was 60 days or less, or by amortizing their value on the 61st day prior to maturity, if their original maturity when acquired by the Fund was more than 60 days, unless this is determined not to represent fair value by the Corporation's Board of Directors. B. Accounting for Investments and Income. Investment transactions are accounted for on the trade date. Realized gains and losses, if any, from investment transactions are determined on the basis of identified cost. Interest income is accrued daily and consists of interest accrued, discount earned (including both original issue and market discount) and premium amortization on the investments of the Fund. Investment income is recorded net of foreign taxes withheld where 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 FINANCIAL STATEMENT APRIL 30, 2007 15 BBH REAL RETURN FUND - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS (continued) April 30, 2007 (unaudited) a portion of interest has become doubtful based on constantly applied procedures. A debt obligation is removed from non-accrual status when the issuer resumes interest payments or when collectibility of interest is reasonable assured. C. Repurchase Agreements. The Fund may enter into repurchase agreements with primary dealers of U.S. Government Obligations as designated by the Federal Reserve Bank of New York. Repurchase agreements are transactions in which the Fund buys a security from a dealer or bank and agrees to sell the security back at a mutually agreed upon time and price. The repurchase price exceeds the sale price, reflecting the Fund's return on the transaction or effectively the interest rate paid by the dealer to the Fund. This return is unrelated to the interest rate on the underlying security. The Fund will enter into repurchase agreements only with banks and other recognized financial institutions, such as securities dealers, deemed creditworthy by the Investment Adviser. The Fund's custodian or sub-custodian will take possession of the securities subject to repurchase agreements. The Investment Adviser or sub-custodian will monitor the value of the underlying security each day to ensure that the value of the security always equals or exceeds the repurchase price. Repurchase agreements are subject to credit risks. At April 30, 2007, the Fund had no open repurchase agreements. D. Reverse Repurchase Agreements: The Fund may enter into reverse repurchase agreements with primary dealers of U.S. Government Obligations as designated by the Federal Reserve Bank of New York. Interest on the value of reverse repurchase agreements issued and outstanding is based upon competitive market rates at the time of issuance. At the time the Fund enters into a reverse repurchase agreement, it establishes and maintains a segregated account with the lender containing liquid high grade securities having a value not less than the repurchase price, including accrued interest, of the reverse repurchase agreement. Information regarding reverse repurchase agreements is included in the Portfolio of Investments. Reverse repurchase agreements constitute debt. For the six months ended April 30, 2007, the ratio of the Fund's average debt outstanding (including reverse repurchase agreements) to average net assets was 13.52%. E. Forward Foreign Currency Exchange Contracts. The Fund may enter into forward foreign currency exchange contracts ("Contracts") in connection with planned purchases or sales of securities or to hedge the U.S. dollar value of portfolio securities denominated in a particular currency. The Fund has to hedge the U.S. dollar value of portfolio securities denominated in a particular currency. The Fund has no specific limitation on the percentage of assets which may be committed to these types of Contracts. The Fund could be exposed to risks if the counterparties to the Contracts are unable to meet the terms of their Contracts or if the value of the foreign currency changes unfavorably. The U.S. dollar values of foreign currency underlying all contractual commitments held by the Fund are determined using forward currency exchange rates supplied by a quotation service. Information regarding forward currency exchange contracts is included at the end of the Portfolio of Investments. F. Swap Agreements. The Fund may enter into swap agreements. A swap is an exchange of cash payments based on a notional principal amount between the Fund and another party which is based on a specific financial index. These transactions are entered into in an attempt to obtain a particular return when it is considered desirable to do so, possibly at a lower cost to the Fund than if the Fund had invested directly in an instrument that yielded that desired return. Cash payments are BBH REAL RETURN FUND - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS (continued) April 30, 2007 (unaudited) exchanged at specified intervals and recorded in the Statement of Operations as realized gains and losses. The expected income or expense is recorded on an accrual basis. The value of the swap is adjusted daily and the change in value is recorded as unrealized appreciation or depreciation. Risks may arise upon entering into these agreements from the potential inability of counter parties to meet the terms of their contract and from unanticipated changes in the value of the financial index on which the swap agreement is based. Risks may exceed amounts recognized on the Statement of Assets and Liabilities. The Fund may use swaps for both hedging and non-hedging purposes. For hedging purposes, the Fund may use swaps to reduce its exposure to interest and foreign exchange rate fluctuations. For non-hedging purposes, the Fund may use swaps to take a position on anticipated changes in the underlying financial index. Information regarding swap agreements is included at the end of the Portfolio of Investments. G. Financial Futures Contracts. The Fund may enter into open futures contracts in order to hedge against anticipated future changes in interest rates which otherwise might either adversely affect the value of securities held for the Fund or adversely affect the prices of securities which are intended to be purchased at a later date for the Fund. The contractual amount of the futures contracts represents the investment the Fund has in a particular contract and does not necessarily represent the amounts potentially subject to risk. Trading in futures contracts involves, to varying degrees, risk of loss in excess of any futures variation margin reflected in the Statement of Assets and Liabilities. The measurement of risk associated with futures contracts is meaningful only when all related and offsetting transactions are considered. Gains and losses are realized upon the expiration or closing of the futures contracts. Futures contracts held by the Fund are valued daily at the official settlement price of the exchange on which it is traded. Information regarding futures contracts is included at the end of the Portfolio of Investments. H. Rule 144A Securities. The Fund may purchase securities that are not registered under the 1933 Act, but that can be sold to "qualified institutional buyers" in accordance with the requirements stated in Rule 144A under the 1933 Act (Rule 144A Securities). A Rule 144A Security may be considered illiquid and therefore subject to the 15% limitation on the purchase of illiquid securities, unless it is determined on an ongoing basis that an adequate trading market exists for the security. 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. I. Inflation-Adjusted Debt Securities. The Fund generally invests in inflation-adjusted debt securities issued by the U.S. Treasury. The Fund may also invest in inflation-adjusted debt securities issued by U.S. Government agencies and instrumentalities other than the U.S. Treasury and by other entities such as U.S. and foreign corporations and foreign governments. The principal value of these debt securities is adjusted by references to changes in the Consumer Price Index or another general price wage index. These debt securities typically pay a fixed rate of interest, but this fixed rate is applied to the inflation-adjusted principal amount. The principal paid at maturity of the debt security is typically equal to the inflation-adjusted principal amount, or the security's original par value, whichever is greater. Other types inflation-adjusted securities may use other methods to adjust for other measures of inflation. FINANCIAL STATEMENT APRIL 30, 2007 17 BBH REAL RETURN FUND - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS (continued) April 30, 2007 (unaudited) J. Securities Lending. The Fund may lend its portfolio securities to broker-dealers, qualified banks and certain institutional investors. The loans are secured by collateral in an amount equal to at least the market value at all times of the loaned securities plus any accrued interest and dividends. During the time the securities are on loan, the Fund will continue to receive the interest and dividends or amounts equivalent thereto, on the loaned securities while receiving a fee from the borrower or earning interest on the investment of the cash collateral. Loans are subject to termination at the option of the borrower or the Fund. Upon termination of the loan, the borrower will return to the lender securities identical to the loaned securities. The Fund may pay reasonable finders', administrative and custodial fees in connection with a loan of its securities and may share the interest earned on the collateral with the borrower. The Fund bears the risk of delay in recovery of, or even loss of rights in, the securities loaned should the borrower of the securities fail financially. There were no securities on loan as of April 30, 2007. K. Federal Income Taxes. It is the Corporation's policy to comply with the requirements of the Internal Revenue Code (the "Code") applicable to regulated investment companies and to distribute all of its taxable income to its shareholders. Accordingly, no federal income tax provision is required. The Fund files a tax return annually using tax accounting methods required under provisions of the Code which may differ from accounting principles generally accepted in the United States of America, the basis on which these financial statements are prepared. Accordingly, the amount of net investment income and net realized gain reported on these financial statements may differ from that reported on the Fund's tax return due to certain book-to-tax differences such as losses deferred due to "wash sale" transactions and utilization of capital loss carryforwards. These differences may result in temporary over-distributions for financial statement purposes and are classified as distributions in excess of accumulated net investment income or net realized gains. These distributions do not constitute a return of capital. Permanent differences are reclassified on the statement of assets and liabilities based upon their tax classification. As such, the character of distributions to shareholders reported in the Financial Highlights table may differ from that reported to shareholders on Form 1099-DIV. L. Dividends and Distributions to Shareholders. Dividends to shareholders from net investment income are declared and paid monthly and are recorded on the ex-dividend date. Distributions from net capital gains, if any, are generally paid and declared annually and are recorded on the ex-dividend date. The tax character of distributions paid during the fiscal years ended October 31, 2006 and 2005, respectively, were as follows: Distribution paid from: - -------------------------------------------------------------------------------- Net Total Total Ordinary long term taxable Tax return distributions Income capital gain distributions of capital paid -------- ------------ ------------- ---------- ------------- 2006: $34,781,656 $7,721,420 $42,503,076 -- $42,503,076 2005: 26,015,083 4,941,902 30,956,985 -- 30,956,985 18 BBH REAL RETURN FUND - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS (continued) April 30, 2007 (unaudited) As of October 31, 2006 and 2005, respectively, the components of accumulated earnings/(deficit) on a tax basis were as follows:
Components of accumulated earnings/(deficit): ---------------------------------------------------------------------------------------------------------------------- Total Undistributed Undistributed Accumulated Unrealized accumulated ordinary long-term Accumulated capital and appreciation/ earnings/ income capital gains earnings other losses (depreciation) (deficit) ------------- ------------- ----------- ------------ -------------- ----------- 2006: $ 620,012 $ -- $ 620,012 $(26,897,710) $ 1,041,491 $(25,236,207) 2005: 9,181,978 7,721,574 16,903,552 -- (8,649,025) 8,254,527
The Fund had a net capital loss carryforward of approximately $26,897,710 which will expire on October 31, 2014. Total distributions paid may differ from the Statement of Changes in Net Assets because, for tax purposes, dividends are recognized when actually paid. The differences between book-basis and tax-basis unrealized appreciation/(depreciation) is attributable primarily to the tax deferral of losses on wash sales, forward currency contracts marked to market and futures marked to market. To the extent future capital gains are offset by capital loss carryforwards, such gains will not be distributed. M. Accounting Developments. In June 2006, Financial Accounting Standards Board Interpretation No. 48, Accounting for Uncertainty in Income Taxes - an interpretation of FASB Statement 109 (FIN 48) was issued and is effective for fiscal years beginning after December 15, 2006. FIN 48 sets forth a threshold for financial statement recognition, measurement and disclosure of a tax position taken or expected to be taken on a tax return. While not expected to have a material impact on the Fund's financial statements, management will be evaluating the impact, if any, the adoption of FIN 48 will have on the Funds' net assets and results of operations. In September 2006, Statement of Financial Accounting Standards No. 157, Fair Value Measurements (SFAS 157), was issued and is effective for fiscal years beginning after November 15, 2007. SFAS 157 defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements. Management is currently evaluating the implication of SFAS 157. At this time its impact on the Fund's financial statements has not yet been determined. 2. Transactions with Affiliates. Investment Advisory Fees. The Corporation has an investment advisory agreement with Brown Brothers Harriman ("BBH") for which BBH receives a fee from the Fund calculated daily and paid monthly at an annual rate of 0.25% of the Fund's average daily net assets. For the six months ended April 30, 2007, the Fund incurred $521,827 for advisory services. FINANCIAL STATEMENT APRIL 30, 2007 19 BBH REAL RETURN FUND - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS (continued) April 30, 2007 (unaudited) Administrative Fees. The Corporation has an administrative agreement with Brown Brothers Harriman Trust Company, LLC ("BBHTC") for which BBHTC receives a fee from the Fund calculated daily and paid monthly at an annual rate of 0.10% of the Fund's average daily net assets. BBHTC has a sub-administration services agreement with Federated Services Company ("FSC") for which FSC receives compensation paid by BBHTC. For the six months ended April 30, 2007, the Fund incurred $208,731 for administrative services. Shareholder Servicing Fees. The Corporation has a shareholder servicing agreement with BBH for which BBH receives a fee from the Fund calculated daily and paid monthly at an annual rate of 0.25% of Class N shares' and Class A shares' average daily net assets. For the six months ended April 30, 2007, the Fund incurred $383,991 for shareholder servicing fees. Custody and Accounting Fees. BBH acts as a custodian and shall receive a custody and accounting fee from the Fund calculated daily and paid monthly. BBH holds all cash and investments and calculates the daily net asset value. The custody fee is a transaction based fee with an annual minimum of $30,000, and the accounting fee is calculated at 0.04% per annum on the first $100 million of net assets, 0.02% per annum on the next $400 million of net assets and 0.01% per annum on all net assets over $500 million. For the six months ended April 30, 2007, the Fund incurred $83,899 for custody and accounting services. These fees were reduced by $3,604 as a result of an expense offset arrangement with the Fund's custodian. In the event that the Fund is overdrawn, under the custody agreement with BBH, BBH will make overnight loans to the Fund to cover overdrafts. Pursuant to their agreement the Fund will pay the Federal Funds overnight investment rate on the day of overdraft. The total interest paid by the Fund for the six months ended April 30, 2007 was $100,595. Securities Lending Fees. The Corporation has a security lending agreement with BBH for which BBH receives a fee from the Fund for each security loaned. For the six months ended April 30, 2007, the Fund paid no fees to BBH for security lending services. Board of Directors' Fees. Each Director receives an annual fee as well as reimbursement for reasonable out-of-pocket expenses from the Fund. For the six months ended April 30, 2007, the Fund incurred $24,307 for these fees. 3. Distribution Plan. The Fund has adopted a distribution plan effective November 8, 2002, pursuant to Rule 12b-1 under the Investment Company Act of 1940, under which the Fund may pay selected financial intermediaries a fee calculated daily and paid monthly at an annual rate equivalent to 0.30% of Class A shares' average daily net assets. For the six months ended April 30, 2007, the Fund incurred $8,365 for distribution fees. All shares of Class A redeemed on April 2, 2007 and the Class was closed. For the six months ended April 30, 2007, the Fund paid no front-end sales loads from the sales of Class A shares were retained by Lincoln Financial Advisors Corp., an affiliated broker-dealer of the Fund. 4. Investment Transactions. For the six months ended April 30, 2007, the cost of purchases and the proceeds of sales of investment securities other than short-term investments were $671,128,509 and $758,984,257, respectively. 20 BBH REAL RETURN FUND - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS (continued) April 30, 2007 (unaudited) 5. Capital Stock. The Corporation is permitted to issue 2,500,000,000 shares of capital stock, par value $.001 per share, of which 277,777,778 shares have been classified as Class N shares of the Fund, 277,777,778 shares have been classified as Class I shares of the Fund and 277,777,777 shares have been classified as Class A shares of the Fund. Transactions in shares of capital stock were as follows:
SHARES AMOUNT For the six For the six months ended For the months ended For the April 30, 2007 year ended April 30, 2007 year ended (unaudited) October 31, 2006 (unaudited) October 31, 2006 -------------- ---------------- -------------- ---------------- Class N Capital stock sold ................................. 1,366,636 6,288,489 $ 14,199,107 $ 66,929,780 Capital stock issued in connection with re-investment of dividends ...................... 132,332 3,053,382 1,380,327 32,308,931 Capital stock redeemed ............................. (11,726,694) (19,387,653) (121,622,401) (203,551,461) ----------- ----------- ------------- ------------- Net decrease ....................................... (10,227,726) (10,045,782) $(106,042,967) $(104,312,750) =========== =========== ============= ============= Class I Capital stock sold ................................. 517,921 3,997,872 $ 5,372,542 $ 41,931,489 Capital stock issued in connection with re-investment of dividends ....................................... 45,383 492,954 475,263 5,217,311 Capital stock redeemed ............................. (2,082,919) (1,760,812) (21,596,409) (18,390,572) ----------- ----------- ------------- ------------- Net increase (decrease) ............................ (1,519,615) 2,730,014 $ (15,748,604) $ 28,758,228 =========== =========== ============= ============= Class A Capital stock sold ................................. 9,721 101,141 $ 99,402 $ 1,069,581 Capital stock issued in connection with re-investment of dividends ...................... 174 58,627 1,828 620,715 Capital stock redeemed ............................. (675,171) (402,225) (7,071,764) (4,236,986) ----------- ----------- ------------- ------------- Net decrease ....................................... (665,276) (242,457) $ (6,970,534) $ (2,546,690) =========== =========== ============= =============
6. Subsequent Event. On May 23, 2007 at a special meeting of the shareholders of BBH Fund, Inc. (the "Corporation") the shareholders approved the transfer of all assets of each series of the Corporation (each a "Predecessor Fund") to a corresponding series of BBH Trust, a newly organized Delaware statutory trust, (each a "Successor Fund") in exchange for shares of each Successor Fund having an aggregate value equal to the assets and liabilities of each Predecessor Fund and the assumption by each Successor Fund of all liabilities of each Predecessor Fund. FINANCIAL STATEMENT APRIL 30, 2007 21 BBH REAL RETURN FUND - -------------------------------------------------------------------------------- DISCLOSURE OF FUND EXPENSES April 30, 2007 (unaudited) EXAMPLE As a shareholder of BBH Real Return Fund (the "Fund"), you may incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments, reinvested dividends, or other distributions; redemption fees; and exchange fees; and (2) ongoing costs, including management fees; 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, 2006 to April 30, 2007). ACTUAL EXPENSES The first line of the table below provides information about actual account values and actual expenses. You may use information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled "Expenses Paid During the Period" to estimate the expenses you paid on your account during the period. HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES The second line of the table below provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid during the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds. 22 BBH REAL RETURN FUND~ - -------------------------------------------------------------------------------- DISCLOSURE OF FUND EXPENSES (continued) April 30, 2007 (unaudited) Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads), redemption fees, or exchange fees. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
Expenses Paid Beginning Ending During Period Account Value Account Value November 1, 2006 November 1, 2006 April 30, 2007 to April 30, 2007(1) ---------------- -------------- -------------------- Class N Actual ............................................. $1,000 $1,012.60 3.74 Hypothetical(2) .................................... $1,000 $1,021.08 3.76
Expenses Paid Beginning Ending During Period Account Value Account Value November 1, 2006 November 1, 2006 April 30, 2007 to April 30, 2007(1) ---------------- -------------- -------------------- Class I Actual ............................................. $1,000 $1,014.00 2.50 Hypothetical(2) .............................. $1,000 $1,022.32 2.51
- ---------- (1) Expenses are equal to the Fund's annualized expense ratio of 0.75% and 0.50% for Class N and I shares, respectively, multiplied by the average account value over the period, multiplied by 181/365 (to reflect the one-half year period). (2) Assumes a return of 5% before expenses. For the purpose of the calculation, the applicable annualized expense ratio for each class of shares is subtracted from the assumed return before expenses. FINANCIAL STATEMENT APRIL 30, 2007 23 BBH REAL RETURN FUND - -------------------------------------------------------------------------------- DISCLOSURE OF ADVISOR SELECTION April 30, 2007 (unaudited) Approval of Continuation of Investment Advisory Agreement At a meeting held on December 11, 2006, the Board of Directors (the "Board") of BBH Fund, Inc. (the "Corporation") unanimously approved the renewal of the Investment Advisory Agreement (the "IA Agreement") between the Corporation and Brown Brothers Harriman & Co. ("BBH") for an additional one-year term. The following is a summary of the factors the Board took into consideration in making its determination to approve the renewal of the IA Agreement. Nature, Extent and Quality of Services Provided by BBH The Board noted that, under the IA Agreement in respect of each Fund, BBH, subject to the supervision of the Board, is responsible for providing a continuous investment program and, for each Fund other than the International Fund, makes purchases and sales of portfolio securities consistent with the Fund's investment objective and policies. The Board considered the scope and quality of services provided by BBH under the IA Agreement and noted that the scope of services provided had expanded over time, primarily, as a result of regulatory developments. The Board noted that, for example, BBH is responsible for maintaining and monitoring its own and, to varying degrees, the Funds' compliance program, and these compliance programs have recently been refined and enhanced in light of new regulatory requirements. The Board considered the quality of the investment research capabilities of BBH and the other resources it has dedicated to performing services for the Funds. The Board concluded that, overall, they were satisfied with the nature, extent and quality of services provided (and expected to be provided) to each of the Funds under the IA Agreement. Costs of Services Provided and Profitability to BBH At the request of the Board, BBH provided information concerning the profitability of BBH's investment company, advisory fees and other fees and its statement of condition for the recent period and as of December 31, 2006, respectively. The Board also reviewed BBH's profitability data for each Fund, which also included the effect of revenue generated by the shareholder servicing, administration, custody and other fees paid by a Fund. The Board noted that most beneficial owners of the Funds' shares are holding these shares in the context of an overall investment management program for which BBH is the adviser and for which BBH charges an investment management fee. Since BBH excludes the assets in the Funds when calculating its advisory fees for its clients, the Board agreed that it is appropriate in an analysis of Fund profitability to reduce the advisory fees for the Funds by the advisory fees that otherwise would have been earned by BBH on the assets involved. The Board discussed the difficulty of making comparisons of profitability from fund advisory contracts because comparative information is not generally publicly available and is affected by numerous factors, including the structure of the particular adviser, the types of funds it manages, its business mix, numerous 24 BBH REAL RETURN FUND - -------------------------------------------------------------------------------- DISCLOSURE OF ADVISOR SELECTION (continued) April 30, 2007 (unaudited) assumptions regarding allocations and the adviser's capital structure and cost of capital. In considering profitability information, the Board considered the effect of fall-out benefits on BBH's expenses, as well as the "revenue sharing" arrangements BBH has entered into with certain entities that distribute shares of the Funds. The Board focused on profitability of BBH's relationships with the Funds before taxes and distribution expenses. The Board concluded that it was satisfied that BBH's level of profitability from its relationship with each Fund was not excessive. The Board also considered the advisory fees of each Fund in comparison to the fees of comparable funds. The Board recognized that the expense ratios for the Funds potentially reflected on BBH's provision of services, as BBH is directly the provider of substantial services and coordinates services provided to the Fund by others. The Board took note of situations in which BBH waived its management fee or reimbursed a Fund's expenses. Fall-Out Benefits The Board considered that BBH did not allocate the Funds' portfolio transactions for third party research, although it did benefit from proprietary research received from brokers that execute the Funds' purchases and sales of securities. The Board recognized that the aggregate amount of commissions generated by Fund transactions was unlikely to result in the Funds receiving from full service broker dealers substantial discounts on commission rates. The Board received and reviewed information concerning BBH's policies with respect to allocating portfolio brokerage. The Board also considered that BBH receives shareholder servicing fees from certain funds, and is the Funds' administrator, custodian and securities lending agent. The Board noted that BBH retained no portion of the 12b-1 fees paid by the Fund that operated with a plan. The Board recognized that BBH's profitability would be somewhat lower if it did not receive proprietary research for commissions or, if it did not receive the other benefits described above. The Board recognized that most Fund shareholders were also BBH clients, and that substantial assets are invested in the Funds as a result of an overall investment management program for the shareholder. The Board noted that the Funds also derive reputational and other benefits from their association with BBH and their use of the BBH name, which is licensed to the Funds by BBH. Thus, the Board did not believe that BBH revenues associated with its clients should be fairly regarded as "fallout" benefit from the Funds. Economies of Scale The Board noted that the Funds' advisory fee schedules do not contain breakpoints. As a result, if assets increase, the fee rates would not be reduced on the incremental assets. There may be other economies of scale because many expenses did not rise (and fall) proportionally to increases (and decreases) in total net assets. The Board noted that BBH had priced the advisory services in recognition of the fact that it FINANCIAL STATEMENT APRIL 30, 2007 25 BBH REAL RETURN FUND - -------------------------------------------------------------------------------- DISCLOSURE OF ADVISOR SELECTION (continued) April 30, 2007 (unaudited) was largely its own clients who were shareholders and, accordingly, sought to assure that the cost of advisory service and total expenses for each Fund were fair and reasonable. Consequently, the advisory fees are in the range of institutional separate account fees, which is to say substantially below, even taking into account the BBH administration fees, typical mutual fund fees. In addition, the Board noted that BBH had supported and continued to support certain Funds through fee waivers and expense reimbursements. Based on information they had been provided over many years, the Board observed that in the mutual fund industry as a whole, as well as among funds similar to the Funds, there appeared to be no uniformity or pattern in the fees and asset levels at which breakpoints (if any) apply. In light of the Fund's current size and expense structure, the Board concluded that it was unnecessary at this time to consider breakpoints. Investment Results The Board considered the investment results of each of the Funds as compared to investment companies with its peers and with one or more selected securities indices. In addition to the information received by the Board for the meeting, the Board received detailed performance information for each Fund at each regular Board meeting during the year. At the meeting, the Board reviewed information showing performance of each Fund compared to the peers generally over the 1-, 3-, 5- and since inception periods ended October 31, 2006 and compared to one or more securities indices over comparable periods. Advisory Fee Rate The Board considered the advisory fee rate paid by each Fund to BBH. The Board recognized that it is difficult to make comparisons of these fees, and combined advisory and administration fees, because there are variations in the services that are included in the fees paid by other funds. BBH also manages accounts for institutional clients with investment objectives similar to those of certain Funds. The fee rates payable by the BBH's institutional clients are generally comparable although occasionally lower, than the rates paid by the Funds. BBH reviewed with the Board the significant differences in the scope of services that BBH provides to institutional clients and to the Funds through both the IA and Administration Agreements (the "Admin. Agreements"). For example, BBH provides, among other things, officers (including the Funds' Chief Compliance Officer and officers to provide required certifications) and administrative services, such as shareholder communications, and tax compliance, with the attendant costs and exposure to liability. BBH also coordinates the provision of services to the Funds by nonaffiliated service providers. These services normally are not provided to non investment company clients, and fees charged to the Funds reflect the costs and risks of the additional obligations. The Board also noted that since the Funds are constantly issuing and redeeming their shares, they are more difficult to manage than an institutional account, where the assets are relatively stable. Accordingly, the Board did not place significant weight on these fee comparisons. 26 BBH REAL RETURN FUND - -------------------------------------------------------------------------------- DISCLOSURE OF ADVISOR SELECTION (continued) April 30, 2007 (unaudited) The following factors specific to BBH Real Return Fund also were noted and considered by the Board in deciding to approve the continuation of the IA Agreements: The Board reviewed the information showing performance of the Real Return Fund's Class N shares and Class I shares compared to the Citibank Inflation-Indexed Securities Index since March 31, 1997, which was the date that the Real Return Fund had completed its conversion to a TIPS benchmark. Both classes of the Real Return Fund on a pre-fee basis outperformed the benchmark by a meaningful amount over all relevant periods and on an after-fee basis performed roughly in line with the benchmark over all relevant periods. The Board viewed with favor this performance and noted the benchmark has no fees. The Board also noted the expense ratio for both share classes was in line with or lower than many funds of similar size and investment mandate. Taking into account these comparisons and the other factors considered, the Board concluded that the Real Return Fund's investment results over time and its total expense ratio had been satisfactory. FINANCIAL STATEMENT APRIL 30, 2007 27 INVESTMENT ADVISER AND ADMINISTRATOR BROWN BROTHERS HARRIMAN 140 BROADWAY NEW YORK, NY 10005 DISTRIBUTOR EDGEWOOD SERVICES, INC. 5800 CORPORATE DRIVE PITTSBURGH, PA 15237-7000 SHAREHOLDER SERVICING AGENT BROWN BROTHERS HARRIMAN 140 BROADWAY NEW YORK, NY 10005 (800) 625-5759 To obtain information or make shareholder inquiries: By telephone: Call 1-800-575-1265 By E-mail send your request to: bbhfunds@bbh.com On the internet: www.bbhfunds.com This report is submitted for the general information of shareholders and is not authorized for distribution to prospective investors unless preceded or accompanied by an effective prospectus. Nothing herein contained is to be considered an offer of sale or a solicitation of an offer to buy shares of the Fund. Such offering is made only by the prospectus, which includes details as to offering price and other material information. The Fund files with the SEC a complete schedule of its portfolio holdings, as of the close of the first and third quarters of its fiscal year, on "Form N-Q." Information on Form N-Q is available without charge and upon request by calling the Funds at the toll-free number listed above. A text only version can be viewed online or downloaded from the SEC's website at http://www.sec.gov; and may be reviewed and copied at the SEC's Public Reference Room in Washington, DC (call 1-800-SEC-0330 for information on the operation of the Public Reference Room). You may also access this information from the BBH website at BBH.com by clicking on "BBH Mutual Funds" and selecting "Online Documents/Holdings Information." A copy of the Fund's Proxy Voting Policy is available upon request by calling the toll-free number listed above. A text-only version of the policy can be viewed online or downloaded from the SEC at www.sec.gov. BROWN [LOGO] BROTHERS HARRIMAN BROWN [LOGO] BROTHERS HARRIMAN Semi-Annual Report APRIL 30, 2007 BBH INTERNATIONAL EQUITY FUND BBH INTERNATIONAL EQUITY FUND - -------------------------------------------------------------------------------- PORTFOLIO ALLOCATION April 30, 2007 (unaudited) COUNTRY DIVERSIFICATION Percent of U.S. $ Value Net Assets ------------ ---------- Australia ..................................... $ 51,024,214 7.7% Belgium ....................................... 7,557,647 1.1 Finland ....................................... 9,985,705 1.5 France ........................................ 78,602,266 11.8 Germany ....................................... 22,655,826 3.4 Hong Kong ..................................... 36,692,353 5.5 Italy ......................................... 20,144,015 3.0 Japan ......................................... 183,130,048 27.6 Netherlands ................................... 22,999,235 3.5 New Zealand ................................... 3,815,551 0.6 Singapore ..................................... 10,910,999 1.6 South Africa .................................. 3,478,566 0.5 Spain ......................................... 30,771,709 4.7 Sweden ........................................ 11,434,239 1.8 Switzerland ................................... 16,477,325 2.5 Taiwan ........................................ 5,508,295 0.8 United Kingdom ................................ 133,354,110 20.1 Short-Term Investments ........................ 75,784,038 11.4 Liabilities in Excess of Other Assets ......... (60,598,496) (9.1) ------------ ------ NET ASSETS .................................... $663,727,645 100.0% ============ ====== All data as of April 30, 2007. The Fund's country diversification is expressed as a percentage of net assets and may vary over time. 2 BBH INTERNATIONAL EQUITY FUND - -------------------------------------------------------------------------------- PORTFOLIO ALLOCATION April 30, 2007 (unaudited) SECTOR DIVERSIFICATION Percent of U.S. $ Value Net Assets ------------ ---------- Consumer Discretionary ........................ $ 57,642,769 8.7% Consumer Staples .............................. 81,627,995 12.3 Diversified Operations ........................ 12,632,048 1.9 Electronics ................................... 1,595,756 0.2 Energy ........................................ 74,176,598 11.2 Finance ....................................... 146,007,926 22.0 Health Care ................................... 54,813,511 8.3 Industrials ................................... 50,250,798 7.6 Information Technology ........................ 22,086,212 3.3 Materials ..................................... 34,108,576 5.1 Media ......................................... 6,142,779 0.9 Telecommunication Services .................... 66,959,838 10.1 Utilities ..................................... 40,497,297 6.1 Short-Term Investments ........................ 75,784,038 11.4 Liabilities in Excess of Other Assets ......... (60,598,496) (9.1) ------------ ------ NET ASSETS .................................... $663,727,645 100.0% ============ ====== All data as of April 30, 2007. The Fund's sector diversification is expressed as a percentage of net assets and may vary over time. FINANCIAL STATEMENT APRIL 30, 2007 3 BBH INTERNATIONAL EQUITY FUND - -------------------------------------------------------------------------------- PORTFOLIO OF INVESTMENTS April 30, 2007 (unaudited) Shares Value --------- ------------ COMMON STOCKS (97.7%) AUSTRALIA (7.7%) CONSUMER STAPLES 1,438,965 Foster's Group, Ltd................................ $ 7,607,336 ------------ ENERGY 302,000 Woodside Petroleum, Ltd............................ 9,847,597 ------------ FINANCE 370,000 Lend Lease Corp., Ltd.............................. 6,107,302 291,032 National Australia Bank, Ltd....................... 10,372,964 ------------ 16,480,266 ------------ INDUSTRIALS 107,312 Wesfarmers, Ltd.................................... 3,481,259 ------------ MATERIALS 565,251 Amcor, Ltd......................................... 3,487,812 ------------ TELECOMMUNICATION SERVICES 2,614,649 Telstra Corp....................................... 10,119,944 ------------ Total Australia.................................... 51,024,214 ------------ BELGIUM (1.1%) FINANCE 168,566 Fortis............................................. 7,557,647 ------------ Total Belgium...................................... 7,557,647 ------------ FINLAND (1.5%) MATERIALS 210,045 UPM-Kymmene Oyj.................................... 5,178,182 ------------ TELECOMMUNICATION SERVICES 190,000 Nokia Oyj.......................................... 4,807,523 ------------ Total Finland...................................... 9,985,705 ------------ FRANCE (11.8%) CONSUMER DISCRETIONARY 80,386 Renault SA......................................... 10,438,557 ------------ CONSUMER STAPLES 85,485 Carrefour SA1...................................... 6,556,277 62,000 L'Oreal SA1........................................ 7,437,267 ------------ 13,993,544 ------------ The accompanying notes are an integral part of these financial statements. 4 BBH INTERNATIONAL EQUITY FUND - -------------------------------------------------------------------------------- PORTFOLIO OF INVESTMENTS (continued) April 30, 2007 (unaudited) Shares Value --------- ------------ COMMON STOCKS (continued) FRANCE (continued) DIVERSIFIED OPERATIONS 58,000 LVMH Moet Hennessy Louis Vuitton SA................ $ 6,759,795 ------------ ENERGY 226,563 Total SA........................................... 16,742,832 ------------ FINANCE 49,556 Societe Generale................................... 10,498,500 ------------ INDUSTRIALS 70,119 Compagnie de Saint-Gobain.......................... 7,465,410 ------------ MEDIA 179,000 Societe Television Francaise1...................... 6,142,779 ------------ TELECOMMUNICATION SERVICES 224,855 France Telecom SA.................................. 6,560,849 ------------ Total France....................................... 78,602,266 ------------ GERMANY (3.4%) MATERIALS 126,709 Bayer AG1.......................................... 8,690,883 ------------ TELECOMMUNICATION SERVICES 254,474 Deutsche Telekom AG................................ 4,641,976 ------------ UTILITIES 88,101 RWE AG1............................................ 9,322,967 ------------ Total Germany...................................... 22,655,826 ------------ HONG KONG (5.5%) DIVERSIFIED OPERATIONS 610,000 Hutchison Whampoa, Ltd............................. 5,872,253 ------------ ENERGY 9,000,000 CNOOC, Ltd. ....................................... 7,740,680 ------------ FINANCE 948,000 Wharf Holdings, Ltd................................ 3,493,120 ------------ TELECOMMUNICATION SERVICES 360,000 China Mobile, Ltd.................................. 3,245,257 ------------ The accompanying notes are an integral part of these financial statements. FINANCIAL STATEMENT APRIL 30, 2007 5 BBH INTERNATIONAL EQUITY FUND - -------------------------------------------------------------------------------- PORTFOLIO OF INVESTMENTS (continued) April 30, 2007 (unaudited) Shares Value --------- ------------ COMMON STOCKS (continued) HONG KONG (continued) UTILITIES 820,000 CLP Holdings, Ltd.................................. $ 5,979,930 2,520,000 Hong Kong & China Gas Co........................... 5,979,432 875,000 HongKong Electric Holdings......................... 4,381,681 ------------ 16,341,043 ------------ Total Hong Kong.................................... 36,692,353 ------------ ITALY (3.0%) FINANCE 1,515,326 Intesa Sanpaolo SpA................................ 12,687,425 725,292 UniCredito Italiano SpA............................ 7,456,590 ------------ 20,144,015 ------------ Total Italy........................................ 20,144,015 ------------ JAPAN (27.6%) CONSUMER DISCRETIONARY 121,000 Denso Corp......................................... 4,278,157 144,000 Honda Motor Co., Ltd............................... 4,957,397 111,400 Toyota Motor Corp.................................. 6,788,605 ------------ 16,024,159 ------------ CONSUMER STAPLES 138,000 Hoya Corp.......................................... 4,237,042 144,000 Ito En, Ltd.1...................................... 4,799,762 342,000 Kao Corp........................................... 9,393,195 43,000 Shimamura Co., Ltd. ............................... 4,701,913 ------------ 23,131,912 ------------ FINANCE 135,000 Daito Trust Construction Co., Ltd.................. 6,205,405 336,400 Millea Holdings, Inc............................... 12,459,716 220,000 Mitsubishi Estate Co., Ltd......................... 6,812,299 550 Mitsubishi UFJ Financial Group, Inc................ 5,751,495 ------------ 31,228,915 ------------ The accompanying notes are an integral part of these financial statements. 6 BBH INTERNATIONAL EQUITY FUND - -------------------------------------------------------------------------------- PORTFOLIO OF INVESTMENTS (continued) April 30, 2007 (unaudited) Shares Value --------- ------------ COMMON STOCKS (continued) JAPAN (continued) HEALTH CARE 215,600 Astellas Pharma, Inc............................... $ 9,410,864 107,000 Eisai Co., Ltd. ................................... 5,086,460 210,500 Takeda Pharmaceutical Co., Ltd. ................... 13,648,591 ------------ 28,145,915 ------------ INDUSTRIALS 93,000 Advantest Corp..................................... 4,131,087 160,000 Daikin Industries, Ltd............................. 5,410,645 72,000 Fanuc, Ltd......................................... 7,047,386 35,600 Hirose Electric Co., Ltd. ......................... 4,332,640 27,250 Keyence Corp....................................... 6,066,354 65,000 Murata Manufacturing Co., Ltd...................... 4,792,684 101,000 Secom Co., Ltd. ................................... 4,572,317 652 West Japan Railway Co. ............................ 2,951,016 ------------ 39,304,129 ------------ INFORMATION TECHNOLOGY 292,700 Canon, Inc......................................... 16,369,102 63,500 Rohm Co., Ltd. .................................... 5,717,110 ------------ 22,086,212 ------------ MATERIALS 91,500 Nitto Denko Corp. ................................. 4,032,236 91,000 Shin-Etsu Chemical Co., Ltd........................ 5,890,188 ------------ 9,922,424 ------------ TELECOMMUNICATION SERVICES 661 KDDI Corp. ........................................ 5,190,589 495 Nippon Telegraph & Telephone Corp.................. 2,464,009 3,300 NTT DoCoMo, Inc.................................... 5,631,784 ------------ 13,286,382 ------------ Total Japan........................................ 183,130,048 ------------ NETHERLANDS (3.5%) CONSUMER DISCRETIONARY 374,988 Reed Elsevier NV................................... 7,042,149 ------------ The accompanying notes are an integral part of these financial statements. FINANCIAL STATEMENT APRIL 30, 2007 7 BBH INTERNATIONAL EQUITY FUND - -------------------------------------------------------------------------------- PORTFOLIO OF INVESTMENTS (continued) April 30, 2007 (unaudited) Shares Value --------- ------------ COMMON STOCKS (continued) NETHERLANDS (continued) CONSUMER STAPLES 134,000 Heineken Holding NV................................ $ 6,208,191 ------------ FINANCE 214,560 ING Groep NV....................................... 9,748,895 ------------ Total Netherlands.................................. 22,999,235 ------------ NEW ZEALAND (0.6%) TELECOMMUNICATION SERVICES 1,070,914 Telecom Corp. of New Zealand, Ltd.1................ 3,815,551 ------------ Total New Zealand.................................. 3,815,551 ------------ SINGAPORE (1.6%) FINANCE 400,000 DBS Group Holdings, Ltd. .......................... 5,542,280 90,000 Jardine Matheson Holdings, Ltd..................... 2,090,129 559,200 Oversea-Chinese Banking Corp., Ltd. ............... 3,278,590 ------------ 10,910,999 ------------ Total Singapore.................................... 10,910,999 ------------ SOUTH AFRICA (0.5%) ENERGY 101,037 Sasol, Ltd......................................... 3,478,566 ------------ Total South Africa................................. 3,478,566 ------------ SPAIN (4.7%) CONSUMER DISCRETIONARY 90,000 Inditex SA......................................... 5,522,070 ------------ FINANCE 364,819 Banco Santander Central Hispano SA................. 6,509,299 ------------ TELECOMMUNICATION SERVICES 520,160 Telefonica SA...................................... 11,613,336 ------------ UTILITIES 144,059 Iberdrola SA....................................... 7,127,004 ------------ Total Spain........................................ 30,771,709 ------------ The accompanying notes are an integral part of these financial statements. 8 BBH INTERNATIONAL EQUITY FUND - -------------------------------------------------------------------------------- PORTFOLIO OF INVESTMENTS (continued) April 30, 2007 (unaudited) Shares Value --------- ------------ COMMON STOCKS (continued) SWEDEN (1.8%) CONSUMER DISCRETIONARY 98,000 Hennes & Mauritz AB................................ $ 6,477,758 ------------ TELECOMMUNICATION SERVICES 1,300,000 Telefonaktiebolaget LM Ericsson.................... 4,956,481 ------------ Total Sweden....................................... 11,434,239 ------------ SWITZERLAND (2.5%) CONSUMER STAPLES 17,100 Nestle SA1......................................... 6,781,950 ------------ HEALTH CARE 166,367 Novartis AG........................................ 9,695,375 ------------ Total Switzerland.................................. 16,477,325 ------------ TAIWAN (0.8%) ELECTRONICS 54,100 Taiwan Semiconductor Manufacturing Co., Ltd........ 570,214 97,300 Taiwan Semiconductor Manufacturing Co., Ltd........ 1,025,542 ------------ 1,595,756 ------------ TELECOMMUNICATION SERVICES 196,610 Chunghwa Telecom Co., Ltd. ADR................... 3,912,539 ------------ Total Taiwan....................................... 5,508,295 ------------ UNITED KINGDOM (20.1%) CONSUMER DISCRETIONARY 444,362 Compass Group, Plc................................. 3,215,705 499,590 GKN, Plc........................................... 3,841,304 940,000 Kingfisher, Plc.................................... 5,081,067 ------------ 12,138,076 ------------ CONSUMER STAPLES 96,663 Alliance Boots, Plc................................ 2,159,285 134,000 Reckitt Benckiser, Plc............................. 7,344,227 321,630 Unilever, Plc. .................................... 10,068,269 710,000 WM Morrison Supermarkets, Plc. .................... 4,333,281 ------------ 23,905,062 ------------ The accompanying notes are an integral part of these financial statements. FINANCIAL STATEMENT APRIL 30, 2007 9 BBH INTERNATIONAL EQUITY FUND - -------------------------------------------------------------------------------- PORTFOLIO OF INVESTMENTS (continued) April 30, 2007 (unaudited) Shares Value --------- ------------ COMMON STOCKS (continued) UNITED KINGDOM (continued) ENERGY 1,050,762 BG Group, Plc...................................... $ 15,167,682 1,236,629 BP, Plc............................................ 13,897,234 208,581 Royal Dutch Shell, Plc............................. 7,302,007 ------------ 36,366,923 ------------ FINANCE 210,391 Aviva, Plc......................................... 3,301,533 492,841 HBOS, Plc.......................................... 10,580,586 642,858 Lloyds TSB Group, Plc.............................. 7,414,505 212,660 Royal Bank of Scotland Group, Plc.................. 8,139,646 ------------ 29,436,270 ------------ HEALTH CARE 586,474 GlaxoSmithKline, Plc............................... 16,972,221 ------------ MATERIALS 112,000 Rio Tinto, Plc..................................... 6,829,275 ------------ UTILITIES 1,000,000 Centrica, Plc...................................... 7,706,283 ------------ Total United Kingdom............................... 133,354,110 ------------ TOTAL COMMON STOCKS (Identified cost $459,001,586).................................... 648,542,103 ------------ Principal Amount - ---------- SHORT-TERM INVESTMENTS (11.4%) $60,384,038 Brown Brothers Investment Trust Securities Lending Fund(2).................................. 60,384,038 15,400,000 HSBC Bank USA 5.125%, 5/01/07...................... 15,400,000 ------------ TOTAL SHORT-TERM INVESTMENTS (Identified cost $75,784,038)...................... 75,784,038 ------------ TOTAL INVESTMENTS (Identified cost $534,785,624)3........ 109.1% $724,326,141 LIABILITIES IN EXCESS OF OTHER ASSETS.................... (9.1) (60,598,496) ------ ------------ NET ASSETS ............................................ 100.0% $663,727,645 ====== ============ - ---------- 1 Security, or a portion thereof, on loan. 2 Affiliated Issuer. (footnotes continued on next page) The accompanying notes are an integral part of these financial statements. 10 BBH INTERNATIONAL EQUITY FUND - -------------------------------------------------------------------------------- PORTFOLIO OF INVESTMENTS (continued) April 30, 2007 (unaudited) 3 The aggregate cost of federal income tax purposes is $534,785,624, the aggregate gross unrealized appreciation is $203,700,812, and the aggregate gross unrealized depreciation is $14,160,295, resulting in net unrealized appreciation of $189,540,517. A summary of obligations under open forward foreign currency exchange contracts outstanding at April 30, 2007 is as follows: Unrealized Notional Market Appreciation/ Description Value Value (Depreciation) - ----------- -------- ------ -------------- Buy Contract GBP British Pound settling 7/31/07 21,790,886 21,790,886 $ 21,790,886 Sell Contract: GBP British Pound settling 7/31/07 (10,915,500) (21,816,863) $(21,816,863) ------------ $ (25,977) ============ ADR - American Depositary Receipt. The accompanying notes are an integral part of these financial statements. FINANCIAL STATEMENT APRIL 30, 2007 11 BBH INTERNATIONAL EQUITY FUND - -------------------------------------------------------------------------------- STATEMENT OF ASSETS AND LIABILITIES April 30, 2007 (unaudited) ASSETS: Investments in securities, at value (identified cost $534,785,624) ....................................... $724,326,141 Cash ....................................................... 130,834 Receivables for: Unrealized appreciation of forward foreign exchange currency contracts ..................................... 21,790,886 Dividends and other receivables .......................... 3,384,803 Capital stock sold ....................................... 964,510 ------------ Total Assets ........................................... 750,597,174 ------------ LIABILITIES: Due to bank (identified cost $128,288) ..................... 128,154 Payable upon return of securities loaned ................... 60,384,038 Payables for: Unrealized depreciation of forward foreign exchange currency contracts ............................ 21,816,863 Investments purchased .................................... 2,873,558 Investment advisory fees ................................. 683,623 Capital stock redeemed ................................... 420,784 Shareholder servicing fees ............................... 268,302 Administrative fees ...................................... 157,759 Custody and accounting fees .............................. 128,758 Professional fees ........................................ 1,197 Accrued expenses and other liabilities ................... 6,493 ------------ Total Liabilities ........................................ 86,869,529 ------------ NET ASSETS .................................................... $663,727,645 ============ Net Assets Consist of: Par value .................................................. $ 39,224 Paid-in capital ............................................ 460,683,647 Undistributed net investment income ........................ 2,006,265 Accumulated net realized gain on investments and foreign exchange transactions ............................ 11,459,201 Net unrealized appreciation on investments and foreign currency translations ............................ 189,539,308 ------------ Net Assets .................................................... $663,727,645 ============ NET ASSET VALUE AND OFFERING PRICE PER SHARE CLASS N SHARES ($619,769,883 / 36,631,362 shares outstanding) ................ $16.92 ====== CLASS I SHARES ($43,957,762 / 2,593,256 shares outstanding) .................. $16.95 ====== The accompanying notes are an integral part of these financial statements. 12 BBH INTERNATIONAL EQUITY FUND - -------------------------------------------------------------------------------- STATEMENT OF OPERATIONS For the six months ended April 30, 2007 (unaudited) NET INVESTMENT INCOME: Income: Dividends and other income (net of foreign withholding taxes of $442,094) ..................................... $ 6,850,926 Securities lending income ................................ 57,535 Interest and other income ................................ 307,234 ------------ Total Income ........................................... 7,215,695 ------------ EXPENSES: Investment advisory fees ................................. 1,955,933 Shareholder servicing fees ............................... 707,792 Administrative fees ...................................... 451,369 Custody and accounting fees .............................. 201,812 Professional fees ........................................ 29,629 Board of Directors' fees ................................. 18,492 Miscellaneous expenses ................................... 35,285 ------------ Total Expenses ......................................... 3,400,312 Expense offset arrangement ............................. (6,687) ------------ Net Expenses ........................................... 3,393,625 ------------ Net Investment Income ...................................... 3,822,070 ------------ NET REALIZED AND UNREALIZED GAIN: Net realized gain on investments ........................... 13,768,414 Net realized loss on foreign exchange transactions ......... (896,038) ------------ Net realized gain on investments and foreign exchange transactions ........................................... 12,872,376 Net change in unrealized appreciation on investments and foreign currency translations ............................ 44,284,099 ------------ Net Realized and Unrealized Gain ......................... 57,156,475 ------------ Net Increase in Net Assets Resulting from Operations ....... $ 60,978,545 ============ The accompanying notes are an integral part of these financial statements. FINANCIAL STATEMENT APRIL 30, 2007 13 BBH INTERNATIONAL EQUITY FUND - -------------------------------------------------------------------------------- STATEMENTS OF CHANGES IN NET ASSETS
For the six For the months ended year ended April 30, 2007 October 31, (unaudited) 2006 -------------- ----------- INCREASE IN NET ASSETS: Operations: Net investment income ................................. $ 3,822,070 $ 8,716,371 Net realized gain on investments and foreign exchange transactions ............................... 12,872,376 15,555,811 Net change in unrealized appreciation on investments and foreign currency translations ....... 44,284,099 87,430,410 ------------ ------------ Net increase in net assets resulting from operations .. 60,978,545 111,702,592 ------------ ------------ Dividends and distributions declared: From net investment income: Class N ............................................... (8,234,635) (5,726,229) Class I ............................................... (723,263) (610,520) From net realized gains: Class N ............................................... (5,732,846) -- Class I ............................................... (440,337) -- ------------ ------------ Total dividends and distributions declared .......... (15,131,081) (6,336,749) ------------ ------------ Capital stock transactions: Net proceeds from sales of capital stock .............. 64,387,528 133,213,687 Net asset value of capital stock issued to shareholders for reinvestment of dividends and distributions ..... 11,353,798 4,128,239 Net cost of capital stock redeemed .................... (21,491,161) (69,153,240) ------------ ------------ Net increase in net assets resulting from capital stock transactions ........................ 54,250,165 68,188,686 ------------ ------------ Total increase in net assets ........................ 100,097,629 173,554,529 NET ASSETS: Beginning of year ....................................... 563,630,016 390,075,487 ------------ ------------ End of period (including undistributed net investment income of $2,006,265 and $7,142,093, respectively) .... $663,727,645 $563,630,016 ============ ============
The accompanying notes are an integral part of these financial statements. 14 BBH INTERNATIONAL EQUITY FUND - -------------------------------------------------------------------------------- FINANCIAL HIGHLIGHTS Selected per share data and ratios for a Class N share outstanding throughout each period
For the six months ended For the years ended October 31, April 30, 2007 ---------------------------------------------------- (unaudited) 2006 2005 2004 2003 2002 -------------- ------ ------ ----- ----- ----- Net asset value, beginning of year ...... $15.71 $12.59 $10.96 $ 9.28 $8.03 $9.34 ------ ------ ------ ------ ----- ----- Income from investment operations: Net investment income1 ................ 0.10 0.25 0.18 0.14 0.08 0.03 Net realized and unrealized gain (loss) 1.52 3.07 1.54 1.64 1.19 (1.34 ------ ------ ------ ------ ----- ----- Total income (loss) from investment operations ........................ 1.62 3.32 1.72 1.78 1.27 (1.31) ------ ------ ------ ------ ----- ----- Less dividends and distributions: From net investment income ............ (0.24) (0.20) (0.09) (0.10) (0.02) -- From net realized gains ............... (0.17) -- -- -- -- -- Total dividends and distributions ... (0.41) (0.20) (0.09) (0.10) (0.02) -- ------ ------ ------ ------ ----- ----- Net asset value, end of period .......... $16.92 $15.71 $12.59 $10.96 $9.28 $8.03 ====== ====== ====== ====== ===== ===== Total return ............................ 10.50% 26.62% 15.77% 19.29% 15.87% (14.03)% Ratios/Supplemental data: Net assets, end of period (in millions) $620 $524 $356 $211 $ 98 $98 Ratio of expenses to average net assets 1.15%2,3 1.11%3 1.23% 1.30% 1.28% 1.34%4 Ratio of net investment income to average net assets .................. 1.26%2 1.76% 1.49% 1.34% 0.98% 0.34% Portfolio turnover rate ............... 16%2 10% 5% 81% 74% 36%5
- ---------- 1 Calculated using average shares outstanding for the year. 2 Annualized. 3 The ratio of expenses to average net assets for the six months ended April 30, 2007 and year ended October 31, 2006 reflect fees reduced as a result of an expense offset arrangement with the Fund's custodian. Had this arrangement not been in place, this ratio would have been 1.15% and 1.17%, respectively. 4 Includes the Fund's share of expenses paid by the International Equity Fund (the "Portfolio") and includes the impact of the Portfolio's expense offset arrangement. Excluding the Fund's share of the expense offset arrangement increases the Fund's ratio to average net assets to 1.35% for the year ended October 31, 2002. 5 Portfolio turnover rate is that of the Portfolio in which the Fund invested through October 30, 2002. FINANCIAL HIGHLIGHTS (continued) Selected per share data and ratios for a Class I share outstanding throughout each period The accompanying notes are an integral part of these financial statements. FINANCIAL STATEMENT APRIL 30, 2007 15 BBH INTERNATIONAL EQUITY FUND - -------------------------------------------------------------------------------- FINANCIAL HIGHLIGHTS (continued) Selected per share data and ratios for a Class N share outstanding throughout each period
For the period from October 30, 2002 For the six For the years ended (commencement months ended October 31, of operations) April 30, 2007 ------------------------------------ through (unaudited) 2006 2005 2004 2003 October 31, 2002 -------------- ------ ------ ------ ----- -------------------- Net asset value, beginning of period $15.76 $12.62 $10.98 $ 9.30 $8.03 $7.95 Income from investment operations: Net investment income............... 0.121 0.291 0.211 0.141 0.111 0.002 Net realized and unrealized gain 1.52 3.07 1.54 1.66 1.18 0.08 ------ ------ ------ ------ ----- ----- Total income from investment operations...................... 1.64 3.36 1.75 1.80 1.29 0.08 ------ ------ ------ ------ ----- ----- Less dividends and distributions: From net investment income.......... (0.28) (0.22) (0.11) (0.12) (0.02) -- From net realized gains............. (0.17) -- -- -- -- -- ------ ------ ------ ------ ----- ----- Total dividends and distributions (0.45) (0.22) (0.11) (0.12) (0.02) -- ------ ------ ------ ------ ----- ----- Net asset value, end of period $16.95 $15.76 $12.62 $10.98 $9.30 $8.03 ====== ====== ====== ====== ===== ===== Total return........................... 10.58% 26.98% 16.05% 19.54% 16.18% 1.01% Ratios/Supplemental data: Net assets, end of period (in millions)..................... $44 $40 $34 $27 $58 $16 Ratio of expenses to average net assets........................ 0.89%3,4 0.87%4 0.98% 1.05% 1.05% 1.08%3 Ratio of net investment income to average net assets................ 1.47%3 2.02% 1.73% 1.33% 1.34% 1.34%3 Portfolio turnover rate............. 16%3 10% 5% 81% 74% 36%3,5
- ---------- 1 Calculated using average shares outstanding for the year. 2 Less than $0.01 per share. 3 Annualized 4 The ratio of expenses to average net assets for the six months ended April 30, 2007 and the year ended October 31, 2006 reflect fees reduced as a result of an expense offset arrangement with the Fund's custodian. Had this arrangement not been in place, this ratio would have been 0.90% and 0.94%, respectively. 5 Portfolio turnover rate is that of the Portfolio in which the Fund invested through October 30, 2002. The accompanying notes are an integral part of these financial statements. 14 BBH INTERNATIONAL EQUITY FUND - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS April 30, 2007 (unaudited) 1. Organization and Significant Accounting Policies. BBH International Equity Fund (the "Fund") is a separate diversified series of BBH Fund, Inc. (the "Corporation"), which is registered under the Investment Company Act of 1940, as amended. The Corporation is an open-end management investment company organized under the laws of the State of Maryland on July 16, 1990. The Fund commenced operations on June 6, 1997. On February 20, 2001, the Corporation's Board of Directors reclassified the Fund's outstanding shares as "Class N," and established a new class of shares designated as "Class I". Class I commenced operations on October 30, 2002. Class N and Class I shares have different operating expenses. Neither Class N shares nor Class I shares convert to any other class of the Fund. The Fund's financial statements are prepared in accordance with accounting principles generally accepted in the United States of America, which require management to make certain estimates and assumptions at the date of the financial statements and are based, in part, on the following accounting policies. Actual results could differ from those estimates. A. Valuation of Investments. (1) The value of investments listed on either a domestic or foreign securities exchange is based on the last sale price on that exchange prior to the time when assets are valued, or in the absence of recorded sales, at the average of readily available closing bid and asked prices on such exchange; (2) unlisted securities are valued at the average of the quoted bid and asked prices in the over-the-counter market; (3) securities or other assets for which market quotations are not readily available are valued at fair value in accordance with procedures established by and under the general supervision and responsibility of the Corporation's Board of Directors; (4) all assets and liabilities initially expressed in foreign currencies will be converted into U.S. dollars at the prevailing rates of exchange available at the time of valuation; and (5) trading in securities on most foreign exchanges and over-the-counter markets is normally completed before the close of the New York Stock Exchange and may also take place on days on which the New York Stock Exchange is closed. If events materially affecting the value of the foreign securities occur between the time when the exchange on which they are traded closes and the time when the Fund's net assets are calculated, such securities will be valued at fair value in accordance with procedures established by and under the general supervision of the Corporation's Board of Directors. B. Accounting for Investments and Income. Security transactions are accounted for on the trade date. Realized gains and losses on security transactions are determined on the identified cost method. Dividend income and other distributions from portfolio securities are recorded on the ex-dividend date. Non-cash dividends included in dividend income, if any, are recorded at the fair market value of securities received. Distributions received on securities that represent a return of capital or a capital gain are recorded as a reduction of cost of investments and/or as a realized gain. Interest income is accrued daily. Investment income is recorded net of foreign taxes withheld where recovery of such tax is uncertain. C. Forward Foreign Currency Exchange Contracts. The Fund may enter into forward foreign currency exchange contracts ("Contracts") in connection with planned purchases or sales of securities, to hedge the U.S. dollar value of portfolio securities denominated in a particular currency, or to increase or shift its exposure to a currency other than U.S. dollars. The Fund has no specific limitation on the percentage of assets which may be committed to these types of Contracts. The Fund could be exposed to risks if the counterparties to the Contracts are unable to meet the terms of their contracts or if the value of the foreign currency changes unfavorably. The U.S. dollar values of FINANCIAL STATEMENT APRIL 30, 2007 17 BBH INTERNATIONAL EQUITY FUND - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS (continued) April 30, 2007 (unaudited) foreign currency underlying all contractual commitments held by the Fund are determined using forward currency exchange rates supplied by a quotation service. Information regarding forward foreign currency exchange Contracts is included at the end of the Portfolio of Investments. D. Foreign Currency Translations. The accounting records of the Fund are maintained in U.S. dollars. Foreign currency amounts are translated into U.S. dollars at the current rate of exchange of such currency against the U.S. dollar to determine the value of investments, assets and liabilities. Purchases and sales of securities, and income and expenses are translated at the prevailing rate of exchange on the respective dates of such transactions. Upon the purchase or sale of a security denominated in foreign currency, the Fund may enter into forward currency exchange contracts for the purchase or sale, for a fixed amount of U.S. dollars of the amount of foreign currency involved in the underlying security transaction. Reported net realized gains and losses arise from the sales of portfolio securities, sales of foreign currencies, currency gains or losses realized between the trade and settlement dates on securities transactions, and the difference between the amounts of dividends, interest and foreign withholding taxes recorded on the Fund's books and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized appreciation or depreciation on foreign currency translations arise from changes in the value of the assets and liabilities, excluding investments in securities, at fiscal year end, arising from changes in the exchange rate. E. Restricted Securities. The Fund may invest in securities that are subject to legal or contractual restrictions on resale. These securities generally may be resold in transactions exempt from registration or to the public if the securities are registered. Disposal of these securities may involve time-consuming negotiations and expense, and prompt sale at an acceptable price may be difficult. Information regarding restricted securities is included at the end of the Portfolio of Investments. F. Securities Lending. The Fund may lend its portfolio securities to broker-dealers, qualified banks and certain institutional investors. The loans are secured by collateral in an amount equal to at least the market value at all times of the loaned securities plus any accrued interest and dividends. During the time the securities are on loan, the Fund will continue to receive the interest and dividends or amounts equivalent thereto, on the loaned securities while receiving a fee from the borrower or earning interest on the investment of the cash collateral. Loans are subject to termination at the option of the borrower or the Fund. Upon termination of the loan, the borrower will return to the lender securities identical to the loaned securities. The Fund may pay reasonable finders', administrative and custodial fees in connection with a loan of its securities and may share the interest earned on the collateral with the borrower. The Fund bears the risk of delay in recovery of, or even loss of rights in, the securities loaned should the borrower of the securities fail financially. Information regarding securities lending is included at the end of the Portfolio of Investments. G. Federal Income Taxes. It is the Corporation's policy to comply with the requirements of the Internal Revenue Code (the "Code") applicable to regulated investment companies and to distribute all of its taxable income to its shareholders. Accordingly, no federal income tax provision is required. The Fund files a tax return annually using tax accounting methods required under provisions of the Code which may differ from accounting principles generally accepted in the United States of America, the basis on which these financial statements are prepared. Accordingly, the amount of net investment income and net realized gain reported on these financial statements may differ from that reported on the Fund's tax return due to certain book-to-tax timing differences such as losses deferred due to "wash sale" transactions and utilization of capital loss carryforwards and the recognition of unrealized gains or losses on open forward foreign currency exchange contracts and passive foreign invest- 18 BBH INTERNATIONAL EQUITY FUND - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS (continued) April 30, 2007 (unaudited) ment companies at year end. These differences result in temporary over-distributions for financial statement purposes and are classified as distributions in excess of accumulated net realized gains or net investment income. These distributions do not constitute a return of capital. Permanent differences are reclassified on the Statement of Assets & Liabilities based upon their tax classification. As such, the character of distributions to shareholders reported in the Financial Highlights table may differ from that reported to shareholders on Form 1099-DIV. H. Dividends and Distributions to Shareholders. Dividends and distributions to shareholders, if any, are generally declared and paid annually and are recorded on the ex-dividend date. The tax character of distributions paid during the fiscal years ended October 31, 2006 and 2005, respectively, were as follows: Distribution paid from: - -------------------------------------------------------------------------------- Net Total Total Ordinary long term taxable Tax return distributions Income capital gain distributions of capital paid -------- ------------ ------------- ---------- ------------- 2006: $6,336,749 -- $6,336,749 -- $6,336,749 2005: 2,114,695 -- 2,114,695 -- 2,114,695 As of October 31, 2006 and 2005, respectively, the components of accumulated earnings/(deficit) on a tax basis were as follows:
Components of accumulated earnings/(deficit): - -------------------------------------------------------------------------------------------------- Total Undistributed Undistributed Accumulated Unrealized accumulated ordinary long-term Accumulated capital and appreciation/ earnings/ income capital gains earnings other losses (depreciation) (deficit) ------------- ------------- ----------- ------------ -------------- ----------- 2006: $8,612,204 $6,171,571 $14,783,775 -- $142,373,535 $157,157,310 2005: 6,092,349 -- 6,092,349 (9,865,713) 55,564,831 51,791,467
Total distributions paid may differ from the Statement of Changes in Net Assets because, for tax purposes, dividends are recognized when actually paid. The differences between book-basis and tax-basis unrealized appreciation/(depreciation) is attributable primarily to the tax deferral of losses on wash sales, PFICs marked to market and forward currency marked to market. I. Accounting Developments. In June 2006, Financial Accounting Standards Board Interpretation No. 48, Accounting for Uncertainty in Income Taxes - an interpretation of FASB Statement 109 (FIN 48) was issued and is effective for fiscal years beginning after December 15, 2006. FIN 48 sets forth a threshold for financial statement recognition, measurement and disclosure of a tax position taken or expected to be taken on a tax return. While not expected to have a material impact on the Fund's financial statements, management will be evaluating the impact, if any, the adoption of FIN 48 will have on the Funds' net assets and results of operations. FINANCIAL STATEMENT APRIL 30, 2007 19 BBH INTERNATIONAL EQUITY FUND - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS (continued) April 30, 2007 (unaudited) In September 2006, Statement of Financial Accounting Standards No. 157, Fair Value Measurements (SFAS 157), was issued and is effective for fiscal years beginning after November 15, 2007. SFAS 157 defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements. Management is currently evaluating the implication of SFAS 157. At this time its impact on the Fund's financial statements has not yet been determined. 2. Transactions with Affiliates. Investment Advisory Fees. The Corporation has an investment advisory agreement with Brown Brothers Harriman ("BBH") for which BBH receives a fee from the Fund calculated daily and paid monthly at an annual rate of 0.65% of the Fund's average daily net assets. BBH has a sub-advisory agreement with Walter Scott & Partners Limited ("Walter Scott"), and Mondrian Investment Partners Limited ("Mondrian"), for which Walter Scott and Mondrian receive compensation paid by BBH. For the six months ended April 30, 2007, the Fund incurred $1,955,933 for advisory services. Administrative Fees. The Corporation has an administration agreement with Brown Brothers Harriman Trust Company, LLC ("BBHTC"). BBHTC receives a fee from the Fund for administrative services calculated daily and paid monthly at an annual rate of 0.15% of the Funds average daily net assets. BBHTC has a sub-administration services agreement with Federated Service Company ("FSC") for which FSC receives compensation paid by BBHTC. For the six months ended April 30, 2007, the Fund incurred $451,369 for administrative services. Shareholder Servicing Fees. The Corporation has a shareholder servicing agreement with BBH for which BBH receives a fee from the Fund calculated daily and paid monthly at an annual rate of 0.25% of Class N shares' average daily net assets. For the six months ended April 30, 2007, the Fund incurred $707,792 for shareholder servicing services. Custody and Accounting Fees. BBH acts as a custodian and shall receive a custody and accounting fee from the Fund calculated daily and paid monthly. BBH holds all cash and investments and calculates the daily net asset value. The custody fee is a transaction based fee with an annual minimum of $30,000, and the accounting fee is calculated at 0.04% per annum on the first $100 million of net assets, 0.02% per annum on the next $400 million of net assets and 0.01% per annum on all net assets over $500 million. For the six months ended April 30, 2007, the Fund incurred $201,812 for custody and accounting services. These fees were reduced by $6,687 as a result of an expense offset arrangement with the Fund's custodian. In the event that the Fund is overdrawn, under the custody agreement with BBH, BBH will make overnight loans to the Fund to cover overdrafts. Pursuant to their agreement the Fund will pay the Federal Funds overnight investment rate on the day of overdraft. The total interest paid by the Fund for the six months ended April 30, 2007 was $4,154. Securities Lending Fees. The Corporation has a security lending agreement with BBH for which BBH receives a fee from the Fund for each security loaned. For the six months ended April 30, 2007, the Fund paid $9,877 to BBH for security lending services. Board of Directors' Fees. Each Director receives an annual fee as well as reimbursement for reasonable out-of-pocket expenses from the Fund. For the six months ended April 30, 2007, the Fund incurred $18,492 for these fees. 3. Investment Transactions. For the six months ended April 30, 2007, the cost of purchases and the proceeds of sales of investment securities other than short-term investments were $86,814,202 and $47,638,774, respectively. There were no purchases or sales of U.S. government obligations during the period. 20 BBH INTERNATIONAL EQUITY FUND - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS (continued) April 30, 2007 (unaudited) 4. Securities on Loan. As of April 30, 2007, the Fund had securities on loan with an aggregate market value of $57,448,888. The Fund received $60,384,038 in cash as collateral for securities on loan which was used to purchase highly liquid short-term investments in accordance with the Fund's security lending procedures. 5. Capital Stock. The Corporation is permitted to issue 2,500,000,000 shares of capital stock, par value $.001 per share, of which 277,777,778 shares have been classified as Class N shares of the Fund and 277,777,778 shares have been classified as Class I shares of the Fund. Transactions in shares of capital stock were as follows:
SHARES AMOUNT ---------------------------------- ---------------------------------- .. For the six For the six months ended For the months ended For the April 30, 2007 year ended April 30, 2007 year ended (unaudited) October 31, 2006 (unaudited) October 31, 2006 -------------- ---------------- -------------- ---------------- Class N Capital stock sold ........ 3,916,011 8,890,682 $ 63,387,528 $124,803,674 Capital stock issued in connection with reinvestment of dividends 712,731 262,778 11,353,798 4,128,239 Capital stock redeemed .... (1,328,383) (4,075,747) (21,490,960) (57,703,226) --------- --------- ------------ ------------ Net increase .............. 3,300,359 5,077,713 $ 53,250,366 $ 71,228,687 ========= ========= ============ ============
SHARES AMOUNT ---------------------------------- ---------------------------------- .. For the six For the six months ended For the months ended For the April 30, 2007 year ended April 30, 2007 year ended (unaudited) October 31, 2006 (unaudited) October 31, 2006 -------------- ---------------- -------------- ---------------- Class I Capital stock sold........ 63,171 611,641 $ 1,000,000 $ 8,410,013 Capital stock issued in connection with reinvestment of dividends -- -- -- -- Capital stock redeemed.... (12) (811,953) (201) (11,450,014) ------ -------- --------- ------------ Net increase (decrease)... 63,159 (200,312) $ 999,799 $ (3,040,001) ====== ======== ========= ============
6. Subsequent Event. On May 23, 2007 at a special meeting of the shareholders of BBH Fund, Inc. (the "Corporation"), the shareholders approved the transfer of all assets of each series of the Corporation (each a "Predecessor Fund") to a corresponding series of BBH Trust, a newly organized Delaware statutory trust, (each a "Successor Fund"), in exchange for shares of each Successor Fund having an aggregate value equal to the assets and liabilities of each Predecessor Fund and the assumption by each Successor Fund of all liabilities of each Predecessor Fund. FINANCIAL STATEMENT APRIL 30, 2007 21 BBH INTERNATIONAL EQUITY FUND - -------------------------------------------------------------------------------- DISCLOSURE OF FUND EXPENSES April 30, 2007 (unaudited) EXAMPLE As a shareholder of BBH International Equity Fund (the "Fund"), you may incur two types of costs: (1) transaction costs on purchase payments, reinvested dividends, or other distributions; redemption fees; and exchange fees; and (2) ongoing costs, including management fees; and other Fund expenses. This Example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. The Example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period (November 1, 2006 to April 30, 2007). 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. The accompanying notes are an integral part of these financial statements. 22 BBH INTERNATIONAL EQUITY FUND - -------------------------------------------------------------------------------- DISCLOSURE OF FUND EXPENSES (continued) April 30, 2007 (unaudited) Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as redemption fees or exchange fees. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher. Expenses Paid Beginning Ending During Period Account Value Account Value November 1, 2006 November 1, 2006 April 30, 2007 to April 30, 2007(1) ---------------- -------------- -------------------- Class N Actual................ $1,000 $1,105.00 $6.00 Hypothetical2......... $1,000 $1,019.09 $5.76 Expenses Paid Beginning Ending During Period Account Value Account Value November 1, 2006 November 1, 2006 April 30, 2007 to April 30, 2007(1) ---------------- -------------- -------------------- Class I Actual................ $1,000 $1,105.80 $4.65 Hypothetical2......... $1,000 $1,020.38 $4.46 - ---------- 1 Expenses are equal to the Fund's annualized expense ratio of 1.15% and 0.89% for Class N and I shares, respectively, multiplied by the average account value over the period, multiplied by 181/365 (to reflect the one-half year period). 2 Assumes a return of 5% before expenses. For the purpose of the calculation, the applicable annualized expense ratio for each class of shares is subtracted from the assumed return before expenses. FINANCIAL STATEMENT APRIL 30, 2007 23 BBH INTERNATIONAL EQUITY FUND - -------------------------------------------------------------------------------- DISCLOSURE OF ADVISOR SELECTION April 30, 2007 (unaudited) APPROVAL OF CONTINUATION OF INVESTMENT ADVISORY AGREEMENT At a meeting held on December 11, 2006, the Board of Directors (the "Board") of BBH Fund, Inc. (the "Corporation") unanimously approved the renewal of the Investment Advisory Agreement (the "IA Agreement") between the Corporation and Brown Brothers Harriman & Co. ("BBH") for an additional one-year term. The following is a summary of the factors the Board took into consideration in making its determination to approve the renewal of the IA Agreement. NATURE, EXTENT AND QUALITY OF SERVICES PROVIDED BY BBH The Board noted that, under the IA Agreement in respect of each Fund, BBH, subject to the supervision of the Board, is responsible for providing a continuous investment program and, for each Fund other than the International Equity Fund, makes purchases and sales of portfolio securities consistent with the Fund's investment objective and policies. For the International Equity Fund, BBH has entered into Subadvisory Agreements with Walter Scott and Mondrian (the "Subadvisers") pursuant to which the Subadvisers provide such investment management services; that BBH continues to have responsibility for investment management services provided under the Subadvisory Agreements; and that, in the event a Subadviser ceases to provide services to the International Fund, the services will be provided by BBH or, subject to necessary approvals, by the other Subadviser or another firm selected by the Board and approved by shareholders. The Board considered the scope and quality of services provided by BBH under the IA Agreement and noted that the scope of services provided had expanded over time, primarily, as a result of regulatory developments. The Board noted that, for example, BBH is responsible for maintaining and monitoring its own and, to varying degrees, the Funds' compliance program, and these compliance programs have recently been refined and enhanced in light of new regulatory requirements. The Board considered the quality of the investment research capabilities of BBH and the other resources it has dedicated to performing services for the Funds. The Board concluded that, overall, they were satisfied with the nature, extent and quality of services provided (and expected to be provided) to each of the Funds under the IA Agreement. COSTS OF SERVICES PROVIDED AND PROFITABILITY TO BBH At the request of the Board, BBH provided information concerning the profitability of BBH's investment company, advisory fees and other fees and its statement of condition for the recent period and as of December 31, 2006, respectively. The Board also reviewed BBH's profitability data for each Fund, which also included the effect of revenue generated by the shareholder servicing, administration, custody and other fees paid by a Fund. The Board noted that most beneficial owners of the Funds' shares are holding these shares in the context of an overall investment management program for which BBH is the adviser and for which BBH charges an investment management fee. Since BBH excludes the assets in the Funds 24 BBH INTERNATIONAL EQUITY FUND - -------------------------------------------------------------------------------- DISCLOSURE OF ADVISOR SELECTION (continued) April 30, 2007 (unaudited) when calculating its advisory fees for its clients, the Board agreed that it is appropriate in an analysis of Fund profitability to reduce the advisory fees for the Funds by the advisory fees that otherwise would have been earned by BBH on the assets involved. The Board discussed the difficulty of making comparisons of profitability from fund advisory contracts because comparative information is not generally publicly available and is affected by numerous factors, including the structure of the particular adviser, the types of funds it manages, its business mix, numerous assumptions regarding allocations and the adviser's capital structure and cost of capital. In considering profitability information, the Board considered the effect of fall-out benefits on BBH's expenses, as well as the "revenue sharing" arrangements BBH has entered into with certain entities that distribute shares of the Funds. The Board focused on profitability of BBH's relationships with the Funds before taxes and distribution expenses. The Board concluded that it was satisfied that BBH's level of profitability from its relationship with each Fund was not excessive. The Board also considered the advisory fees of each Fund in comparison to the fees of comparable funds. The Board recognized that the expense ratios for the Funds potentially reflected on BBH's provision of services, as BBH is directly the provider of substantial services and coordinates services provided to the Fund by others. The Board took note of situations in which BBH waived its management fee or reimbursed a Fund's expenses. FALL-OUT BENEFITS The Board considered that BBH did not allocate the Funds' portfolio transactions for third party research, although it did benefit from proprietary research received from brokers that execute the Funds' purchases and sales of securities. The Board recognized that the aggregate amount of commissions generated by Fund transactions was unlikely to result in the Funds receiving from full service broker dealers substantial discounts on commission rates. The Board received and reviewed information concerning BBH's policies with respect to allocating portfolio brokerage. The Board also considered that BBH receives shareholder servicing fees from certain funds, and is the Funds' administrator, custodian and securities lending agent. The Board noted that BBH retained no portion of the 12b-1 fees paid by the Fund that operated with a plan. The Board recognized that BBH's profitability would be somewhat lower if it did not receive proprietary research for commissions or, if it did not receive the other benefits described above. The Board recognized that most Fund shareholders were also BBH clients, and that substantial assets are invested in the Funds as a result of an overall investment management program for the shareholder. The Board noted that the Funds also derive reputational and other benefits from their association with BBH and their use of the BBH name, which is licensed to the Funds by BBH. Thus, the Board did not believe that BBH revenues associated with its clients should be fairly regarded as "fallout" benefit from the Funds. FINANCIAL STATEMENT APRIL 30, 2007 25 BBH INTERNATIONAL EQUITY FUND - -------------------------------------------------------------------------------- DISCLOSURE OF ADVISOR SELECTION (continued) April 30, 2007 (unaudited) ECONOMIES OF SCALE The Board noted that the Funds' advisory fee schedules do not contain breakpoints. As a result, if assets increase, the fee rates would not be reduced on the incremental assets. There may be other economies of scale because many expenses did not rise (and fall) proportionally to increases (and decreases) in total net assets. The Board noted that BBH had priced the advisory services in recognition of the fact that it was largely its own clients who were shareholders and, accordingly, sought to assure that the cost of advisory service and total expenses for each Fund were fair and reasonable. Consequently, the advisory fees are in the range of institutional separate account fees, which is to say substantially below, even taking into account the BBH administration fees, typical mutual fund fees. In addition, the Board noted that BBH had supported and continued to support certain Funds through fee waivers and expense reimbursements. Based on information they had been provided over many years, the Board observed that in the mutual fund industry as a whole, as well as among funds similar to the Funds, there appeared to be no uniformity or pattern in the fees and asset levels at which breakpoints (if any) apply. In light of the Fund's current size and expense structure, the Board concluded that it was unnecessary at this time to consider breakpoints. INVESTMENT RESULTS The Board considered the investment results of each of the Funds as compared to investment companies with its peers and with one or more selected securities indices. In addition to the information received by the Board for the meeting, the Board received detailed performance information for each Fund at each regular Board meeting during the year. At the meeting, the Board reviewed information showing performance of each Fund compared to the peers generally over the 1-, 3-, 5- and since inception periods ended October 31, 2006 and compared to one or more securities indices over comparable periods. ADVISORY FEE RATE The Board considered the advisory fee rate paid by each Fund to BBH. The Board recognized that it is difficult to make comparisons of these fees, and combined advisory and administration fees, because there are variations in the services that are included in the fees paid by other funds. BBH also manages accounts for institutional clients with investment objectives similar to those of certain Funds. The fee rates payable by the BBH's institutional clients are generally comparable although occasionally lower, than the rates paid by the Funds. BBH reviewed with the Board the significant differences in the scope of services that BBH provides to institutional clients and to the Funds through both the IA and Administration Agreements (the "Admin. Agreements"). For example, BBH provides, among other things, officers (including the Funds' Chief Compliance Officer and officers to provide required certifications) and administrative services, such as shareholder communications, and tax compliance, with the attendant costs and exposure to liability. BBH also coordinates the provision of services to the Funds by nonaffiliated service providers. These services normally are not provided to non investment company clients, and fees charged to the Funds reflect the costs and risks of the additional obligations. The Board also noted 26 BBH INTERNATIONAL EQUITY FUND - -------------------------------------------------------------------------------- DISCLOSURE OF ADVISOR SELECTION (continued) April 30, 2007 (unaudited) that since the Funds are constantly issuing and redeeming their shares, they are more difficult to manage than an institutional account, where the assets are relatively stable. Accordingly, the Board did not place significant weight on these fee comparisons. The following factors specific to BBH International Equity Fund also were noted and considered by the Board in deciding to approve the continuation of the IA Agreements: The Board reviewed the performance of the International Equity Fund's Class N shares and Class I shares versus the MSCI Europe, Australia and Far East Index (the "Index"). The Board considered the performance of the International Equity Fund and each sub-advisor since adopting a multi-manager approach and employing two sub-advisors in January 2004. The Board recognized that divergence from the Index, particularly during periods of significant market movements, was to be expected because each of the managers has a clearly defined fundamental investment style with only modest concern for tracking error to the Index. The Board reviewed the overall investments of the International Equity Fund and concluded that the portfolio was broadly diversified in terms of country exposure, sector exposure and specific company risk. The Board noted that the performance of both share classes after all expenses was better than the Index since January 31, 2004, but concurred that the multi-manager approach and the two sub-advisors will need to be judged over a three to five year time frame. The Board also noted the expense ratio for both share classes was in line with many funds of similar size and investment mandate. Taking into account these comparisons and the other factors considered, the Board concluded that the International Equity Fund's recent investment results and its total expense ratio had been satisfactory. FINANCIAL STATEMENT APRIL 30, 2007 27 INVESTMENT ADVISER AND ADMINISTRATOR BROWN BROTHERS HARRIMAN 140 BROADWAY NEW YORK, NY 10005 DISTRIBUTOR EDGEWOOD SERVICES, INC. 5800 CORPORATE DRIVE PITTSBURGH, PA 15237-7000 SHAREHOLDER SERVICING AGENT BROWN BROTHERS HARRIMAN 140 BROADWAY NEW YORK, NY 10005 (800) 625-5759 To obtain information or make shareholder inquiries: By telephone: Call 1-800-575-1265 By E-mail send your request to: bbhfunds@bbh.com On the internet: www.bbhfunds.com This report is submitted for the general information of shareholders and is not authorized for distribution to prospective investors unless preceded or accompanied by an effective prospectus. Nothing herein contained is to be considered an offer of sale or a solicitation of an offer to buy shares of the Fund. Such offering is made only by the prospectus, which includes details as to offering price and other material information. The Fund files with the SEC a complete schedule of its portfolio holdings, as of the close of the first and third quarters of its fiscal year, on "Form N-Q." Information on Form N-Q is available without charge and upon request by calling the Funds at the toll-free number listed above. A text only version can be viewed online or downloaded from the SEC's website at http://www.sec.gov; and may be reviewed and copied at the SEC's Public Reference Room in Washington, DC (call 1-800-SEC-0330 for information on the operation of the Public Reference Room). You may also access this information from the BBH website at BBH.com by clicking on "BBH Mutual Funds" and selecting "Online Documents/Holdings Information." A copy of the Fund's Proxy Voting Policy is available upon request by calling the toll-free number listed above. A text-only version of the policy can be viewed online or downloaded from the SEC at www.sec.gov. BROWN [LOGO] BROTHERS HARRIMAN BROWN [LOGO] BROTHERS HARRIMAN Semi-Annual Report APRIL 30, 2007 BBH CORE SELECT (Formerly, BBH Tax-Efficient Equity Fund) BBH CORE SELECT - -------------------------------------------------------------------------------- PORTFOLIO ALLOCATION April 30, 2007 (unaudited) SECTOR DIVERSIFICATION Percent of Net U.S. $ Value Assets ------------ -------- Consumer Discretionary ............................ $16,468,604 16.9% Consumer Staples .................................. 19,614,106 20.1 Energy ............................................ 8,436,475 8.6 Financials ........................................ 12,729,203 13.0 Health Care ....................................... 6,241,638 6.4 Industrials ....................................... 4,382,582 4.5 Information Technology ............................ 20,246,643 20.7 Materials ......................................... 3,484,086 3.6 Short-Term Investment ............................. 5,893,244 6.0 Cash and Other Assets in Excess of Liabilities .... 191,183 0.2 ----------- ----- NET ASSETS ........................................ $97,687,764 100.0% =========== ===== All data as of April 30, 2007. The Fund's sector breakdown is expressed as a percentage of net assets and may vary over time. The accompanying notes are an integral part of these financial statements. 2 BBH CORE SELECT - -------------------------------------------------------------------------------- PORTFOLIO OF INVESTMENTS April 30, 2007 (unaudited) Shares Value - ---------- ----------- COMMON STOCKS (93.8%) CONSUMER DISCRETIONARY (16.9%) 43,800 Bed, Bath & Beyond, Inc.(1) .................. $ 1,784,412 202,175 Liberty Global, Inc. (Series C)(1) ........... 6,754,667 250,625 ServiceMaster Co. ............................ 3,857,119 98,725 Viacom, Inc. (Class B)(1) .................... 4,072,406 ----------- Total Consumer Discretionary 16,468,604 ----------- CONSUMER STAPLES (20.1%) 85,000 Cadbury Schweppes, Plc. ADR .................. 4,509,250 29,325 Coca-Cola Co. ................................ 1,530,472 51,265 Costco Wholesale Corp. ....................... 2,746,266 46,675 Nestle SA ADR ................................ 4,639,168 29,400 PepsiCo, Inc. ................................ 1,943,046 88,604 Wal-Mart Stores, Inc. ........................ 4,245,904 ----------- Total Consumer Staples 19,614,106 ----------- ENERGY (8.6%) 73,875 Occidental Petroleum Corp. ................... 3,745,462 34,425 Suncor Energy, Inc. .......................... 2,771,212 35,375 XTO Energy, Inc. ............................. 1,919,801 ----------- Total Energy 8,436,475 ----------- FINANCIALS (13.0%) 73,300 AFLAC, Inc. .................................. 3,763,222 59 Berkshire Hathaway, Inc. (Class A)(1) ........ 6,442,800 38,950 Freddie Mac .................................. 2,523,181 ----------- Total Financials 12,729,203 ----------- HEALTH CARE (6.4%) 41,025 Amgen, Inc.(1) ............................... 2,631,344 62,150 Novartis AG ADR .............................. 3,610,294 ----------- Total Health Care 6,241,638 ----------- INDUSTRIALS (4.5%) 117,150 Waste Management, Inc. ....................... 4,382,582 ----------- Total Industrials 4,382,582 ----------- The accompanying notes are an integral part of these financial statements. FINANCIAL STATEMENT APRIL 30, 2007 3 BBH CORE SELECT - -------------------------------------------------------------------------------- PORTFOLIO OF INVESTMENTS (continued) April 30, 2007 (unaudited) Shares Value - ---------- ----------- INFORMATION TECHNOLOGY (20.7%) 160,415 Dell, Inc.(1) ................................ $ 4,044,062 148,125 First Data Corp. ............................. 4,799,250 34,400 Fiserv, Inc.(1) .............................. 1,829,048 185,513 Microsoft Corp. .............................. 5,554,259 190,975 Western Union Co. ............................ 4,020,024 ----------- Total Information Technology 20,246,643 ----------- MATERIALS (3.6%) 53,975 Praxair, Inc. ................................ 3,484,086 ----------- Total Materials 3,484,086 ----------- TOTAL COMMON STOCKS (Identified cost $75,892,484) ................................. 91,603,337 ----------- Principal Amount - ---------- SHORT-TERM INVESTMENT (6.0%) $5,900,000 U.S. Treasury Bill 4.909% 05/10/07 ........... 5,893,244 ----------- TOTAL SHORT-TERM INVESTMENT (Identified cost $5,892,787) .................................. 5,893,244 ----------- TOTAL INVESTMENTS (Identified cost $81,785,271)(2)... 99.8% $97,496,581 CASH AND OTHER AS ................................... 0.2 191,183 ----- ----------- NET ASSETS .......................................... 100.0% $97,687,764 ===== =========== - ---------- (1) Non-income producing security. (2) The aggregate cost for federal income tax purposes is $81,785,271, the aggregate gross unrealized appreciation is $16,344,983, and the aggregate gross unrealized depreciation is $633,673, resulting in net unrealized appreciation of $15,711,310. ADR - American Depositary Receipt. The accompanying notes are an integral part of these financial statements. 4 BBH CORE SELECT - -------------------------------------------------------------------------------- STATEMENT OF ASSETS AND LIABILITIES April 30, 2007 (unaudited) ASSETS: Investments in securities, at value (identified cost $81,785,271) ........................................... $97,496,581 Cash .......................................................... 527,728 Receivables for: Capital stock sold .......................................... 801,618 Dividends ................................................... 158,278 ----------- Total Assets .............................................. 98,984,205 ----------- LIABILITIES: Payables for: Capital stock redeemed ...................................... 1,061,775 Investment advisory fees .................................... 102,886 Shareholder servicing fees .................................. 39,571 Custody and accounting fees ................................. 24,864 Administrative fees ......................................... 23,743 Professional fees ........................................... 21,034 Board of Directors Board of Directors' fees .................................... 1,000 Accrued expenses and other liabilities ...................... 21,568 ----------- Total Liabilities ......................................... 1,296,441 ----------- NET ASSETS ...................................................... $97,687,764 =========== Net Assets Consist of: Par value ..................................................... $ 7,716 Par value ..................................................... $ 7,716 Paid-in capital ............................................... 87,065,833 Undistributed net investment income ........................... 163,600 Accumulated net realized loss on investments .................. (5,260,695) Net unrealized appreciation on investments .................... 15,711,310 ----------- Net Assets ...................................................... $97,687,764 =========== NET ASSET VALUE AND OFFERING PRICE PER CLASS N SHARE ($97,687,764 / 7,715,821 shares outstanding) .................. $12.66 ====== The accompanying notes are an integral part of these financial statements. FINANCIAL STATEMENT APRIL 30, 2007 5 BBH CORE SELECT - -------------------------------------------------------------------------------- STATEMENT OF OPERATIONS For the six months ended April 30, 2007 (unaudited) NET INVESTMENT INCOME: Income: Dividends and other income (net of withholding tax $25,926) . $ 579,303 Interest .................................................... 154,101 Other income ................................................ 12,009 ---------- Total Income .............................................. 745,413 ---------- Expenses: Investment advisory fees .................................... 295,007 Shareholder servicing fees .................................. 113,464 Administrative fees ......................................... 68,079 Custody and accounting fees ................................. 35,980 Professional fees ........................................... 14,355 Board of Directors Board of Directors' fees .................................... 5,787 Miscellaneous expenses ...................................... 29,929 ---------- Total Expenses ............................................ 562,601 Expense offset arrangement ................................ (15,243) ---------- Net Expenses .............................................. 547,358 ---------- Net Investment Income ......................................... 198,055 ---------- NET REALIZED AND UNREALIZED GAIN: Net realized gain on investments .............................. 787,763 Net change in unrealized appreciation on investments .......... 6,409,922 ---------- Net Realized and Unrealized Gain ............................ 7,197,685 ---------- Net Increase in Net Assets Resulting from Operations .......... $7,395,740 ========== The accompanying notes are an integral part of these financial statements. 6 BBH CORE SELECT - -------------------------------------------------------------------------------- STATEMENTS OF CHANGES IN NET ASSETS
For the six months ended For the April 30, 2007 year ended (unaudited) October 31, 2006 -------------- ---------------- INCREASE IN NET ASSETS: Operations: Net investment income ................................... $ 198,055 $ 335,861 Net realized gain on investments ........................ 787,763 4,424,368 Net change in unrealized appreciation on investments .... 6,409,922 5,591,321 ------------ ------------ Net increase in net assets resulting from operations .. 7,395,740 10,351,550 ------------ ------------ Dividends and distributions to Class N shareholders declared from net investment income: .................... (350,622) (48,978) ------------ ------------ Capital stock transactions: Net proceeds from sales of capital stock ................ 20,212,974 27,811,128 Net asset value of capital stock issued to shareholders for reinvestment of distributions ..................... 229,100 41,362 Net cost of capital stock redeemed ...................... (12,781,660) (17,154,390) ------------ ------------ Net increase in net assets resulting from capital stock transactions .......................... 7,660,414 10,698,100 ------------ ------------ Total increase in net assets ...................... 14,705,532 21,000,672 NET ASSETS: Beginning of year ......................................... 82,982,232 61,981,560 ------------ ------------ End of period (including undistributed net investment income of $163,600 and $316,167, respectively) .......... $ 97,687,764 $ 82,982,232 ============ ============
The accompanying notes are an integral part of these financial statements. FINANCIAL STATEMENT APRIL 30, 2007 7 BBH CORE SELECT - -------------------------------------------------------------------------------- FINANCIAL HIGHLIGHTS Selected per share data and ratios for a Class N share outstanding throughout each period
For the six months ended For the years ended October 31, April 30, 2007 ---------------------------------------------------------------- (unaudited) 2006 2005 2004 2003 2002 -------------- ---- ---- ---- ---- ---- Net asset value, beginning of year $11.74 $10.20 $ 9.30 $ 8.94 $ 7.79 $ 9.46 Income from investment operations: Net investment income .......... 0.02 0.04 0.05 0.02 0.04 0.01 Net realized and unrealized gain (loss) .................. 0.95 1.51 0.91 0.38 1.12 (1.68) ------ ------ ------ ------ ------ ------- Total income (loss) from investment operations ...... 0.97 1.55 0.96 0.40 1.16 (1.67) ------ ------ ------ ------ ------ ------- Less dividends and distributions: From net investment income ..... (0.05) (0.01) (0.06) (0.04) (0.01) -- ------ ------ ------ ------ ------ ------- Net asset value, end of period ... $12.66 $11.74 $10.20 $ 9.30 $ 8.94 $ 7.79 ====== ====== ====== ====== ====== ======= Total return ..................... 8.27% 15.18% 10.31% 4.46% 14.34% (17.65)% Ratios/Supplemental data: Net assets, end of period (in millions) ................ $ 98 $ 83 $ 62 $ 48 $ 47 $ 83 Expenses as a percentage of average net assets ........... 1.21%(1),(2) 1.19%(1) 1.22%(1),(3) 1.20%(3) 1.20%(3) 1.20%(3) Ratio of net investment income to average net assets ........ 0.44%(2) 0.45% 0.47% 0.23% 0.42% 0.17% Portfolio turnover rate ........ 8%(2) 53% 59% 57% 44% 33%
- ---------- (1) For the six months ended April 30, 2007 and the years ended October 31, 2006 and 2005, the fund For the six months ended April 30, 2007 and the years ended October 31, 2006 and 2005, the fund's expenses were reduced through an expense offset arrangement with the fund's custodian, had the arrangement not been in place, the actual expense ratio of the fund would have been 1.24%, 1.24% and 1.27%, respectively. (2) Annualized. (3) Had the expense reimbursement agreement, which terminated on December 31, 2004, not been in place, the ratio of expenses to average net assets would have been as follows: N/A N/A 1.24% 1.32% 1.36% 1.43% The accompanying notes are an integral part of these financial statements. 8 BBH CORE SELECT - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS April 30, 2007 (unaudited) 1. Organization and Significant Accounting Policies. BBH Core Select (the BBH Core Select (the "Fund") (formerly BBH Tax-Efficient Equity Fund) is a separate, diversified series of BBH Fund, Inc. (the "Corporation"), which is registered under the Investment Company Act of 1940, as amended. The Corporation is an open-end management investment company organized under the laws of the State of Maryland on July 16, 1990. The Fund commenced operations on November 2, 1998. On February 20, 2001, the Corporation's Board of Directors reclassified the Fund's outstanding shares as "Class N", and established a new class of shares designated as "Class I". As of April 30, 2007, there were no Class I shares outstanding. The Fund's financial statements are prepared in accordance with accounting principles generally accepted in the United States of America, which require management to make certain estimates and assumptions at the date of the financial statements and are based, in part, on the following accounting policies. Actual results could differ from those estimates. A. Valuation of Investments. (1) The value of investments listed on a securities exchange is based on the last sale price on that exchange prior to the time when assets are valued, or in the absence of recorded sales, at the average of readily available closing bid and asked prices on such exchange; (2) unlisted securities are valued at the average of the quoted bid and asked prices in the over-the-counter market; (3) securities or other assets for which market quotations are not readily available are valued at fair value in accordance with procedures established by and under the general supervision and responsibility of the Corporation dance with procedures established by and under the general supervision and responsibility of the Corporation's Board of Directors; (4) short-term investments which mature in 60 days or less are valued at amortized cost if their original maturity was 60 days or less, or by amortizing their value on the 61st day prior to maturity, if their original maturity when acquired by the Fund was more than 60 days, unless this is determined not to represent fair value by the Corporation's Board of Directors. B. Accounting for Investments and Income. Security transactions are accounted for on the trade date. Realized gains and losses on security transactions are determined on the identified cost method. Dividend income and other distributions from portfolio securities are recorded on the ex-dividend date. Non-cash dividends included in dividend income, if any, are recorded at the fair market value of securities received. Distributions received on securities that represent a return of capital or a capital gain are recorded as a reduction of cost of investments and/or as a realized gain. Interest income is accrued daily. Investment income is recorded net of foreign taxes withheld where recovery of such tax is uncertain. C. Securities Lending. The Fund may lend its portfolio securities to broker-dealers, qualified banks and certain institutional investors. The loans are secured by collateral in an amount equal to at least the market value at all times of the loaned securities plus any accrued interest and dividends. During the time the securities are on loan, the Fund will continue to receive the interest and dividends or amounts equivalent thereto, on the loaned securities while receiving a fee from the borrower or earning interest on the investment of the cash collateral. Loans are subject to termination at the option of the borrower or the Fund. Upon termination of the loan, the borrower will return to the lender securities identical to the loaned securities. The Fund may pay reasonable finders finders', administrative and custodial fees in connection with a loan of its securities and may share the interest earned on the collateral with the borrower. The Fund bears the risk of delay in recovery of, or even loss of rights in, the securities loaned should the borrower of the securities fail financially. There were no securities on loan as of April 30, 2007. FINANCIAL STATEMENT APRIL 30, 2007 9 BBH CORE SELECT - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS (continued) April 30, 2007 (unaudited) D. Federal Income Taxes. It is the Corporation's policy to comply with the requirements of the Internal Revenue Code (the "Code") applicable to regulated investment companies and to distribute all of its taxable income to its shareholders. Accordingly, no federal income tax pro vision is required. The Fund files a tax return annually using tax accounting methods required under provisions of the Code which may differ from accounting principles generally accepted in the United States of America, the basis on which these financial statements are prepared. Accordingly, the amount of net investment income and net realized gain reported on these financial statements may differ from that reported on the Fund statements are prepared. Accordingly, the amount of net investment income and net realized gain reported on these financial statements may differ from that reported on the Fund's tax return due to certain book-to-tax differences such as losses deferred due to "wash sale" transactions and utilization of capital loss 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 on the Statement of Assets and Liabilities based upon their tax classification. As such, the character of distributions to shareholders reported in the Financial Highlights table may differ from that reported to shareholders on Form 1099-DIV. E. Dividends and Distributions to Shareholders. Dividends and distributions to shareholders, if any, are paid annually and are recorded on the ex-dividend date. The tax character of distributions paid during the fiscal years ended October 31, 2006 and 2005, respectively, were as follows: Distribution paid from: - -------------------------------------------------------------------------------- Net Total Total Ordinary long term taxable Tax return distributions Income capital gain distributions of capital paid -------- ------------ ------------- ---------- ------------- 2006: $48,978 -- $48,978 -- $48,978 2005: 283,472 -- 283,472 -- 283,472 As of October 31, 2006 and 2005, respectively, the components of accumulated earnings/(deficit) on a tax basis were as follows:
Components of accumulated earnings/(deficit): - -------------------------------------------------------------------------------------------------- Total Undistributed Undistributed Accumulated Unrealized accumulated ordinary long-term Accumulated capital and appreciation/ earnings/ income capital gains earnings other losses (depreciation) (deficit) ------------- ------------- ----------- ------------ -------------- ----------- 2006: $316,167 -- $316,167 $(6,039,537) $9,292,467 $ 3,569,097 2005: 32,982 -- 32,982 (10,442,611) 3,676,154 $(6,733,475)
The Fund had net capital loss carryforwards of approximately $6,039,537 which expires as follows: Capital loss Expiration carryforward date ------------ ---------- $1,679,329 10/31/2010 4,270,319 10/31/2011 89,889 10/31/2012 10 BBH CORE SELECT - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS (continued) April 30, 2007 (unaudited) Total distributions paid differ from the Statement of Changes in Net Assets because, for tax purposes, dividends are recognized when actually paid. The differences between book-basis and tax-basis unrealized appreciation/ (depreciation) is attributable primarily to the tax deferral of losses on wash sales. To the extent future capital gains are offset by capital loss carryforwards, such gains will not be distributed. F. Accounting Developments. In June 2006, Financial Accounting Standards Board Interpretation No. 48, Accounting for Uncertainty in Income Taxes In June 2006, Financial Accounting Standards Board Interpretation No. 48, Accounting for Uncertainty in Income Taxes -- an interpretation of FASB Statement 109 (FIN 48) was issued and is effective for fiscal years beginning after December 15, 2006. FIN 48 sets forth a threshold for financial statement recognition, measurement and disclosure of a tax position taken or expected to be taken on a tax return. While not expected to have a material impact on the Fund's financial statements, management will be evaluating the impact, if any, the adoption of FIN 48 will have on the Funds' net assets and results of operations. In September 2006, Statement of Financial Accounting Standards No. 157, Fair Value Measurements (SFAS 157), was issued and is effective for fiscal years beginning after November 15, 2007. SFAS 157 defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements. Management is currently evaluating the implication of SFAS 157. At this time its impact on the Fund's financial statements has not yet been determined. 2. Transactions with Affiliates. Investment Advisory Fees. The Corporation has an investment advisory agreement with Brown Brothers Harriman ( The Corporation has an investment advisory agreement with Brown Brothers Harriman ("BBH") for which BBH receives a fee from the Fund calculated daily and paid monthly at an annual rate of 0.65% of the Fund's average daily net assets. BBH has established a separately identifiable department (SID) to provide investment advice to mutual funds. The SID is registered with the Securities and Exchange Commission under the Investment Advisors Act of 1940. For the six months ended April 30, 2007, the Fund incurred $295,007 for investment advisory services. Administrative Fees. The Corporation has an administration agreement with Brown Brothers Harriman Trust Company, LLC ( The Corporation has an administration agreement with Brown Brothers Harriman Trust Company, LLC ("BBHTC") for which BBHTC receives a fee from the Fund calculated daily and paid monthly at an annual rate of 0.15% of the Fund's average daily net assets. BBHTC has a sub-administration services agreement with Federated Services Company ("FSC") for which FSC receives compensation paid by BBHTC. For the six months ended April 30, 2007, the Fund incurred $68,079 for administrative services. Shareholder Servicing Fees. The Corporation has a shareholder servicing agreement with BBH for which BBH receives a fee from the Fund calculated daily and paid monthly at an annual rate of 0.25% of Class N shares The Corporation has a shareholder servicing agreement with BBH for which BBH receives a fee from the Fund calculated daily and paid monthly at an annual rate of 0.25% of Class N shares' average daily net assets. For the six months ended April 30, 2007, the Fund incurred $113,464 for shareholder servicing services. FINANCIAL STATEMENT APRIL 30, 2007 11 BBH CORE SELECT - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS (continued) April 30, 2007 (unaudited) Custody and Accounting Fees. BBH acts as a custodian and shall receive a custody and accounting fee from the Fund calculated daily and paid monthly. BBH holds all cash and investments and calculates the daily net asset value. The custody fee is a transaction based fee with an annual minimum of $30,000, and the accounting fee is calculated at 0.04% per annum on the first $100 million of net assets, 0.02% per annum on the next $400 million of net assets and 0.01% per annum on all net assets over $500 million. Custody and accounting fees were reduced by $15,243 as a result of an expense offset arrangement with the Fund fees were reduced by $15,243 as a result of an expense offset arrangement with the Fund's custodian. For the six months ended April 30, 2007, the Fund incurred $35,980 for custody and accounting services. In the event that the Fund is overdrawn, under the custody agreement with BBH, BBH will make overnight loans to the Fund to cover overdrafts. Pursuant to their agreement the Fund will pay the Federal Funds overnight investment rate on the day of overdraft. The total interest paid by the Fund for the six months ended April 30, 2007 was $196. Securities Lending Fees. The Corporation has a security lending agreement with BBH for which BBH receives a fee from the Fund for each security loaned. For six months ended April 30, 2007, the Fund incurred no security lending fees. Board of Directors' Fees. Each Director receives an annual fee as well as reimbursement for reasonable out-of-pocket expenses from the Fund. For the six months ended April 30, 2007, the Fund incurred $5,787 for these fees. 3. Investment Transactions. For the six months ended April 30, 2007, the cost of purchases and the proceeds of sales of investment securities other than short-term investments were $9,348,124 and $3,526,701, respectively. 4. Capital Stock. The Corporation is permitted to issue 2,500,000,000 shares of capital stock, par value $.001 per share, of which 277,777,778 shares have been classified as Class N shares of the Fund and 277,777,778 shares have been classified as Class I shares of the Fund. There have been no transactions in Class I shares of capital stock as of April 30, 2007. Transactions in Class N shares of capital stock were as follows: SHARES ---------------------------------- For the six months ended For the April 30, 2007 year ended (unaudited) October 31, 2006 -------------- ---------------- Capital stock sold ......................... 1,682,401 2,550,601 Capital stock issued in connection with reinvestment of distributions ............ 19,155 3,844 Capital stock redeemed ..................... (1,055,024) (1,562,704) ---------- ---------- Net increase ............................... 646,532 991,741 ========== ========== 5. Subsequent Event. On May 23, 2007 at a special meeting of the shareholders of BBH Fund, Inc. (the On May 23, 2007 at a special meeting of the shareholders of BBH Fund, Inc. (the "Corporation") the shareholders approved the transfer of all assets of each series of the Corporation (each a "Predecessor Fund") to a corresponding series of BBH Trust, a newly organized Delaware statutory trust, (each a "Successor Fund") in exchange for shares of each Successor Fund having an aggregate value equal to the assets and liabilities of each Predecessor Fund and the assumption by each Successor Fund of all liabilities of each Predecessor Fund. 12 BBH CORE SELECT - -------------------------------------------------------------------------------- DISCLOSURE OF FUND EXPENSES April 30, 2007 (unaudited) EXAMPLE As a shareholder of BBH Core Select, you may incur two types of costs: (1) transaction costs on purchase payments, reinvested dividends, or other distributions; redemption fees; and exchange fees; and (2) ongoing costs, including management fees; and other Fund expenses. This Example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. The Example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period (November 1, 2006 to April 30, 2007). 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 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 The second line of the table below provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid during the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds. FINANCIAL STATEMENT APRIL 30, 2007 13 BBH CORE SELECT - -------------------------------------------------------------------------------- DISCLOSURE OF FUND EXPENSES (continued) April 30, 2007 (unaudited) Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as redemption fees or exchange fees. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher. Expenses Paid Beginning Ending During Period Account Value Account Value November 1, 2006 November 1, 2006 April 30, 2007 to April 30, 2007(1) ---------------- -------------- -------------------- Class N Actual .............. $1,000 $1,082.70 6.25 Hypothetical(2) ..... $1,000 $1,018.79 6.06 - ---------- (1) Expenses are equal to the Fund Expenses are equal to the Fund's annualized expense ratio of 1.21% for Class N shares, multiplied by the average account value over the period, multiplied by 181/365 (to reflect the one-half year period). (2) Assumes a return of 5% before expenses. For the purpose of the calculation, the applicable annualized expense ratio is subtracted from the assumed return before expenses. 14 BBH CORE SELECT - -------------------------------------------------------------------------------- DISCLOSURE OF ADVISOR SELECTION April 30, 2007 (unaudited) Approval of Continuation of Investment Advisory Agreement At a meeting held on December 11, 2006, the Board of Directors (the At a meeting held on December 11, 2006, the Board of Directors (the "Board") of BBH Fund, Inc. (the "Corporation") unanimously approved the renewal of the Investment Advisory Agreement (the "IA Agreement") between the Corporation and Brown Brothers Harriman & Co. ("BBH") for an additional one-year term. The following is a summary of the factors the Board took into consideration in making its determination to approve the renewal of the IA Agreement. Nature, Extent and Quality of Services Provided by BBH The Board noted that, under the IA Agreement in respect of each Fund, BBH, subject to the supervision of the Board, is responsible for providing a continuous investment program and, for each Fund other than the International Fund, makes purchases and sales of portfolio securities consistent with the Fund es of portfolio securities consistent with the Fund's investment objective and policies. The Board considered the scope and quality of services provided by BBH under the IA Agreement and noted that the scope of services provided had expanded over time, primarily, as a result of regulatory developments. The Board noted that, for example, BBH is responsible for maintaining and monitoring its own and, to varying degrees, the Funds is responsible for maintaining and monitoring its own and, to varying degrees, the Funds' compliance program, and these compliance programs have recently been refined and enhanced in light of new regulatory requirements. The Board considered the quality of the investment research capabilities of BBH and the other resources it has dedicated to performing services for the Funds. The Board concluded that, overall, they were satisfied with the nature, extent and quality of services provided (and expected to be provided) to each of the Funds under the IA Agreement. Costs of Services Provided and Profitability to BBH At the request of the Board, BBH provided information concerning the profitability of BBH At the request of the Board, BBH provided information concerning the profitability of BBH's investment company, advisory fees and other fees and its statement of condition for the recent period and as of December 31, 2006, respectively. The Board also reviewed BBH, respectively. The Board also reviewed BBH's profitability data for each Fund, which also included the effect of revenue generated by the shareholder servicing, administration, custody and other fees paid by a Fund. The Board noted that most beneficial owners of the Funds' shares are holding these shares in the context of an overall investment management program for which BBH is the adviser and for which BBH charges an investment management fee. Since BBH excludes the assets in the Funds when calculating its advisory fees for its clients, the Board agreed that it is appropriate in an analysis of Fund profitability to reduce the advisory fees for the Funds by the advisory fees that otherwise would have been earned by BBH on the assets involved. FINANCIAL STATEMENT APRIL 30, 2007 15 BBH CORE SELECT - -------------------------------------------------------------------------------- DISCLOSURE OF ADVISOR SELECTION (continued) April 30, 2007 (unaudited) The Board discussed the difficulty of making comparisons of profitability from fund advisory contracts because comparative information is not generally publicly available and is affected by numerous factors, including the structure of the particular adviser, the types of funds it manages, its business mix, numerous assumptions regarding allocations and the adviser, the types of funds it manages, its business mix, numerous assumptions regarding allocations and the adviser's capital structure and cost of capital. In considering profitability information, the Board considered the effect of fall-out benefits on BBH's expenses, as well as the "revenue sharing" arrangements BBH has entered into with certain entities that distribute shares of the Funds. The Board focused on profitability of BBH's relationships with the Funds before taxes and distribution expenses. The Board concluded that it was satisfied that BBH's level of profitability from its relationship with each Fund was not excessive. The Board also considered the advisory fees of each Fund in comparison to the fees of comparable funds. The Board recognized that the expense ratios for the Funds potentially reflected on BBH's provision of services, as BBH is directly the provider of substantial services and coordinates services provided to the Fund by others. The Board took note of situations in which BBH waived its management fee or reimbursed a Fund's expenses. Fall-Out Benefits The Board considered that BBH did not allocate the Funds The Board considered that BBH did not allocate the Funds' portfolio transactions for third party research, although it did benefit from proprietary research received from brokers that execute the Funds' purchases and sales of securities. The Board recognized that the aggregate amount of commissions generated by Fund transactions was unlikely to result in the Funds receiving from full service broker dealers substantial discounts on commission rates. The Board received and reviewed information concerning BBH's policies with respect to allocating portfolio brokerage. The Board also considered that BBH receives shareholder servicing fees from certain funds, and is the Funds' administrator, custodian and securities lending agent. The Board noted that BBH retained no portion of the 12b-1 fees paid by the Fund that operated with a plan. The Board recognized that BBH's profitability would be somewhat lower if it did not receive proprietary research for commissions or, if it did not receive the other benefits described above. The Board recognized that most Fund shareholders were also BBH clients, and that substantial assets are invested in the Funds as a result of an overall investment management program for the shareholder. The Board noted that the Funds also derive reputational and other benefits from their association with BBH and their use of the BBH name, which is licensed to the Funds by BBH. Thus, the Board did not believe that BBH revenues associated with its clients should be fairly regarded as "fallout" benefit from the Funds. 16 BBH CORE SELECT - -------------------------------------------------------------------------------- DISCLOSURE OF ADVISOR SELECTION (continued) April 30, 2007 (unaudited) Economies of Scale The Board noted that the Funds The Board noted that the Funds' advisory fee schedules do not contain breakpoints. As a result, if assets increase, the fee rates would not be reduced on the incremental assets. There may be other economies of scale because many expenses did not rise (and fall) proportionally to increases (and decreases) in total net assets. The Board noted that BBH had priced the advisory services in recognition of the fact that it was largely its own clients who were shareholders and, accordingly, sought to assure that the cost of advisory service and total expenses for each Fund were fair and reasonable. Consequently, the advisory fees are in the range of institutional separate account fees, which is to say substantially below, even taking into account the BBH administration fees, typical mutual fund fees. In addition, the Board noted that BBH had supported and continued to support certain Funds through fee waivers and expense reimbursements. Based on information they had been provided over many years, the Board observed that in the mutual fund industry as a whole, as well as among funds similar to the Funds, there appeared to be no uniformity or pattern in the fees and asset levels at which breakpoints (if any) apply. In light of the Fund's current size and expense structure, the Board concluded that it was unnecessary at this time to consider breakpoints. Investment Results The Board considered the investment results of each of the Funds as compared to investment companies with its peers and with one or more selected securities indices. In addition to the information received by the Board for the meeting, the Board received detailed performance information for each Fund at each regular Board meeting during the year. At the meeting, the Board reviewed information showing performance of each Fund compared to the peers generally over the 1-, 3-, 5- and since inception periods ended October 31, 2006 and compared to one or more securities indices over comparable periods. Advisory Fee Rate The Board considered the advisory fee rate paid by each Fund to BBH. The Board recognized that it is difficult to make comparisons of these fees, and combined advisory and administration fees, because there are variations in the services that are included in the fees paid by other funds. BBH also manages accounts for institutional clients with investment objectives similar to those of certain Funds. The fee rates payable by the BBH's institutional clients are generally comparable although occasionally lower, than the rates paid by the Funds. BBH reviewed with the Board the significant differences in the scope of services that BBH provides to institutional clients and to the Funds through both the IA and Administration Agreements (the "Admin. Agreements"). For example, BBH provides, among other things, officers (including the Funds' Chief Compliance Officer and officers to provide required certifications) and administrative services, such as shareholder communications, and tax compliance, with the attendant costs and exposure to liability. BBH also coordinates the provision of services to the Funds by non affiliated service providers. These services normally are not provided to non investment company clients, and FINANCIAL STATEMENT APRIL 30, 2007 17 BBH CORE SELECT - -------------------------------------------------------------------------------- DISCLOSURE OF ADVISOR SELECTION (continued) April 30, 2007 (unaudited) fees charged to the Funds reflect the costs and risks of the additional obligations. The Board also noted that since the Funds are constantly issuing and redeeming their shares, they are more difficult to manage than an institutional account, where the assets are relatively stable. Accordingly, the Board did not place significant weight on these fee comparisons. The following factors specific to BBH Core Select also were noted and considered by the Board in deciding to approve the continuation of the IA Agreements: The Board reviewed the comparative performance of the Core Select versus the Russell 1000 Index. The Board viewed favorably management The Board reviewed the comparative performance of the Core Select versus the Russell 1000 Index. The Board viewed favorably management's decision to implement a new portfolio construction methodology in the second quarter of 2004, a methodology which puts greater emphasis on fundamental valuation considerations and less emphasis on tracking error to a broad market index such as the Russell 1000 Index. The Board recognized that divergence from the benchmark, particularly during periods of significant market movements, was to be expected because of the manager ket movements, was to be expected because of the manager's clearly defined fundamental investment style with only modest concern for tracking error to the Russell 1000 Index. The Board spent considerable time in reviewing the Core Select investments and confirming that those investments were consistent with the new investment methodology. The Board noted that the Core Select performance after all expenses was within 50 basis points of the Russell 1000's total return since June 30, 2004, but concurred that the new portfolio construction methodology and its implementation will need to judged over a three to five year time frame. The Board also noted the Core Select expense ratio was in line with many funds of similar size and investment mandate. Taking into account all of the factors considered, the Board concluded that the Core Select recent investment results and its total expense ratio were acceptable and that they retained confidence in the manager to achieve the Core Select investment objective. 18 INVESTMENT ADVISER AND ADMINISTRATOR BROWN BROTHERS HARRIMAN 140 BROADWAY NEW YORK, NY 10005 DISTRIBUTOR EDGEWOOD SERVICES, INC. 5800 CORPORATE DRIVE PITTSBURGH, PA 15237-7000 SHAREHOLDER SERVICING AGENT BROWN BROTHERS HARRIMAN 140 BROADWAY NEW YORK, NY 10005 (800) 625-5759 To obtain information or make shareholder inquiries: By telephone: Call 1-800-575-1265 By E-mail send your request to: bbhfunds@bbh.com On the internet: www.bbhfunds.com This report is submitted for the general information of shareholders and is not authorized for distribution to prospective investors unless preceded or accompanied by an effective prospectus. Nothing herein contained is to be considered an offer of sale or a solicitation of an offer to buy shares of the Fund. Such offering is made only by the prospectus, which includes details as to offering price and other material information. The Fund files with the SEC a complete schedule of its portfolio holdings, as of the close of the first and third quarters of its fiscal year, on The Fund files with the SEC a complete schedule of its portfolio holdings, as of the close of the first and third quarters of its fiscal year, on "Form N-Q." Information on Form N-Q is available without charge and upon request by calling the Funds at the toll-free number listed above. A text only version can be viewed online or downloaded from the SEC's website at http://www.sec.gov; and may be reviewed and copied at the SEC's Public Reference Room in Washington, DC (call 1-800-SEC-0330 for information on the operation of the Public Reference Room). You may also access this information from the BBH website at BBH.com by clicking on "BBH Mutual Funds" and selecting "Online Documents/Holdings Information." A copy of the Fund's Proxy Voting Policy is available upon request by calling the toll-free number listed above. A text-only version of the policy can be viewed online or downloaded from the SEC at www.sec.gov. BROWN [LOGO] BROTHERS HARRIMAN BROWN [LOGO] BROTHERS HARRIMAN Semi-Annual Report APRIL 30, 2007 BBH BROAD MARKET FUND (Formerly, BBH Broad Market Fixed Income Fund) BBH BROAD MARKET FUND - -------------------------------------------------------------------------------- PORTFOLIO ALLOCATION April 30, 2007 (unaudited) BREAKDOWN BY SECURITY TYPE Percent of U.S. $ Value Net Assets ------------ ---------- Asset Backed Securities............................ $ 48,985,950 18.6% Collateralized Mortgage Backed Securities.......... 15,000,173 5.7 Corporate Bonds.................................... 101,765,641 38.6 Foreign Government Bonds........................... 7,819,827 2.9 U.S. Government Agency Obligations................. 48,187,044 18.3 U.S. Treasury Notes and Bonds...................... 23,317,641 8.8 Commercial Paper................................... 44,508,693 16.9 Short-Term Investment.............................. 1,191,723 0.4 Liabilities in Excess of Cash and Other Assets..... (26,849,187) (10.2) ------------ ------ NET ASSETS......................................... $263,927,505 100.0% ============ ====== All data as of April 30, 2007. The Fund's breakdown by security type is expressed as a percentage of net assets and may vary over time. The accompanying notes are an integral part of these financial statements. 2 BBH BROAD MARKET FUND - -------------------------------------------------------------------------------- PORTFOLIO OF INVESTMENTS April 30, 2007 (unaudited) (expressed in U.S. dollars) Principal Maturity Interest Amount Date Rate Value --------- -------- -------- ----- ASSET BACKED SECURITIES (18.6%) $ 530,000 Accredited Mortgage Loan Trust 2007-1(1)................. 02/25/37 5.670% $ 520,445 2,220,000 Advanta Business Card Master Trust 2005-C1(1)................ 08/22/11 5.830 2,229,057 1,370,000 Advanta Business Card Master Trust 2006-C1(1)................ 10/20/14 5.800 1,380,011 650,000 Advanta Business Card Master Trust 2007-D1A(1),(2)........... 01/22/13 6.720 649,991 2,500,000 Banc of America Securities Auto Trust 2006-G1................... 12/20/10 5.170 2,507,867 128,346 Capital Auto Receivables Asset Trust 2003-3.................... 01/15/08 2.960 128,224 850,000 Capital One Auto Finance Trust 2005-BSS.................. 12/15/10 4.480 842,336 1,275,000 Capital One Auto Finance Trust 2006-A ......................... 11/15/10 5.330 1,275,772 1,030,000 Capital One Multi-Asset Execution Trust 2003-B5................... 10/15/10 4.790 1,021,794 1,500,000 Capital One Multi-Asset Execution Trust 2006-A6................... 02/18/14 5.300 1,520,593 3,000,000 Capital One Multi-Asset Execution Trust 2006-A7(1)................ 03/17/14 5.350 3,002,177 2,500,000 Chase Issuance Trust 2005-A5(1).... 02/15/12 5.340 2,499,983 1,020,000 Citibank Credit Card Issuance Trust 2002-C2................... 02/18/14 6.950 1,086,305 2,400,000 Citibank Credit Card Issuance Trust 2006-A4................... 05/10/13 5.450 2,441,609 298,184 Countrywide Asset-Backed Certificates 2004-S1............ 03/25/20 3.872 293,409 183,444 Countrywide Asset-Backed Certificates 2004-12(1)......... 12/25/30 4.022 182,672 265,298 Countrywide Asset-Backed Certificates 2004-13(1)......... 02/25/31 3.989 263,201 104,332 Countrywide Home Equity Loan Trust 2004-N(1)................. 02/15/34 5.600 104,448 217,582 Countrywide Home Equity Loan Trust 2004-O(1)................. 02/15/34 5.600% 217,890 The accompanying notes are an integral part of these financial statements. FINANCIAL STATEMENT APRIL 30, 2007 3 BBH BROAD MARKET FUND - -------------------------------------------------------------------------------- PORTFOLIO OF INVESTMENTS (continued) April 30, 2007 (unaudited) (expressed in U.S. dollars) Principal Maturity Interest Amount Date Rate Value --------- -------- -------- ----- ASSET BACKED SECURITIES (continued) $ 134,788 Countrywide Home Equity Loan Trust 2004-Q(1)................. 12/15/33 5.620 $ 135,016 1,585,050 Credit-Based Asset Servicing and Securitization CBO, Ltd.(2)..... 06/25/32 6.080 1,589,013 273,982 Credit-Based Asset Servicing and Securitization LLC 2003-CB3..... 12/25/32 2.879 266,184 652,638 Credit-Based Asset Servicing and Securitization LLC 2006-CB3(1).. 03/25/36 5.380 652,666 120,000 Credit-Based Asset Servicing and Securitization LLC 2007-CB4(1).. 04/25/37 5.690 120,000 115,000 Credit-Based Asset Servicing and Securitization LLC 2007-CB4(1).. 04/25/37 6.020 115,000 225,000 Credit-Based Asset Servicing and Securitization LLC 2007-CB4(1).. 04/25/37 5.770 225,000 689,725 Daimler Chrysler Auto Trust 2003-B. 03/09/09 2.860 687,060 315,212 Federated CBO II, Ltd.(2).......... 07/10/12 8.630 318,994 761,950 Greenpoint Mortgage Funding Trust 2006-HE1(1)............... 03/12/37 5.490 761,546 487,092 Household Automotive Trust 2003-1.. 11/17/09 2.220 486,407 361,650 Marriott Vacation Club Owner Trust 2006-2A(2)................ 10/20/28 5.362 359,760 2,800,000 MBNA Credit Card Master Note Trust 2005-A1................... 09/15/10 4.200 2,774,409 2,000,000 MBNA Credit Card Master Note Trust 2006-C3(1)................ 10/15/13 5.610 2,000,710 220,000 Morgan Stanley ABS Capital I 2007-HE5(1)..................... 03/25/37 5.740 220,000 130,000 Morgan Stanley ABS Capital I 2007-HE5(1)..................... 03/25/37 5.790 130,000 115,000 Morgan Stanley ABS Capital I 2007-HE5(1)..................... 03/25/37 5.970 115,000 226,410 Morgan Stanley Auto Loan Trust 2004-HB1........................ 10/15/11 2.880 225,643 1,123,031 Navistar Financial Corp. Owner Trust 2003-A.................... 11/15/09 2.240 1,121,574 The accompanying notes are an integral part of these financial statements. 4 BBH BROAD MARKET FUND - -------------------------------------------------------------------------------- PORTFOLIO OF INVESTMENTS (continued) April 30, 2007 (unaudited) (expressed in U.S. dollars) Principal Maturity Interest Amount Date Rate Value --------- -------- -------- ----- ASSET BACKED SECURITIES (continued) $ 731,340 Navistar Financial Corp. Owner Trust 2004-A.................... 03/15/11 2.590% $ 719,192 1,400,000 Nissan Auto Receivables Owner Trust 2006-B.................... 11/15/11 5.220 1,407,759 1,133,509 Residential Asset Securities Corp. 2006-EMX4(1).................... 06/25/36 5.360 1,133,555 1,003,367 Structured Asset Investment Loan Trust 2005-8(1)............ 10/25/35 5.450 1,003,459 861,672 Triad Auto Receivables Owner Trust 2004-A.................... 09/13/10 2.500 843,874 2,400,000 UPFC Auto Receivables Trust 2006-A. 05/15/12 5.490 2,413,057 5,900,000 USAA Auto Owner Trust 2005-1....... 11/15/11 4.130 5,826,031 1,110,000 Washington Mutual Master Note Trust 2006-M1A(1),(2)........... 08/15/13 5.410 1,110,000 57,334 WFS Financial Owner Trust 2003-2... 12/20/10 3.050 57,257 ------------ Total Asset Backed Securities (Identified cost $48,845,418)...... 48,985,950 ------------ COLLATERALIZED MORTGAGE BACKED SECURITIES (5.7%) 1,350,000 Bear Stearns Commercial Mortgage Securities 2006-PW11(1)......... 03/11/39 5.577 1,364,142 910,000 Bear Stearns Commercial Mortgage Securities 2006-PW14............ 12/11/38 5.201 896,801 1,500,000 Bear Stearns Commercial Mortgage Securities 2006-T22(1).......... 04/12/38 5.633 1,517,881 2,300,000 Credit Suisse Mortgage Capital Certificates 2006-C5............ 12/15/39 5.311 2,282,239 1,730,000 JP Morgan Chase Commercial Mortgage Securities Corp. 2006-CB17...... 12/12/43 5.429 1,733,363 2,100,000 Merrill Lynch Mortgage Trust 2006-C1(1) ..................... 05/12/39 5.798 2,135,302 943,005 Morgan Stanley Capital I 2006-HQ8.. 03/12/44 5.124 939,665 1,400,000 Morgan Stanley Capital I 2006-T21.. 10/12/52 5.090 1,396,236 1,889 Residential Asset Mortgage Products, Inc. 2004-RS4......... 01/25/30 4.003% 1,878 The accompanying notes are an integral part of these financial statements. FINANCIAL STATEMENT APRIL 30, 2007 5 BBH BROAD MARKET FUND - -------------------------------------------------------------------------------- PORTFOLIO OF INVESTMENTS (continued) April 30, 2007 (unaudited) (expressed in U.S. dollars) Principal Maturity Interest Amount Date Rate Value --------- -------- -------- ----- COLLATERALIZED MORTGAGE BACKED SECURITIES (continued) $ 325,173 Residential Asset Mortgage Products, Inc. 2004-RS7......... 07/25/28 4.450 $ 323,136 175,508 Residential Asset Securities Corp. 2004-KS11(1).............. 12/25/34 5.590 175,573 2,200,000 Wachovia Bank Commercial Mortgage Trust 2006-C25(1)............... 05/15/43 5.684 2,233,957 ------------ Total Collateralized Mortgage Backed Securities (Identified cost $15,005,215)...... 15,000,173 ------------ CORPORATE BONDS (38.6%) AGRICULTURE (0.3%) 210,000 Altria Group, Inc.................. 07/01/08 7.650 215,374 550,000 Reynolds American, Inc............. 07/15/15 7.300 587,269 ------------ 802,643 ------------ APPAREL (0.1%) 250,000 Quiksilver, Inc.................... 04/15/15 6.875 243,750 ------------ AUTO MANUFACTURERS (0.8%) 1,090,000 DaimlerChrysler NA Holding Corp.... 01/15/08 4.750 1,084,784 845,000 DaimlerChrysler NA Holding Corp.... 06/15/10 4.875 837,084 100,000 DaimlerChrysler NA Holding Corp.... 11/15/13 6.500 105,271 ------------ 2,027,139 ------------ BANKING (0.4%) 600,000 Korea Development Bank............. 03/02/09 3.875 586,775 585,000 Popular North America, Inc......... 10/01/08 3.875 573,044 ------------ 1,159,819 ------------ BEVERAGES (1.6%) 1,000,000 Cia Brasileira de Bebidas.......... 09/15/13 8.750 1,167,500 380,000 Coors Brewing Co................... 05/15/12 6.375 395,791 1,470,000 Diageo Finance BV.................. 04/01/13 5.500 1,478,811 1,275,000 Molson Coors Capital Finance ULC... 09/22/10 4.850 1,258,211 ------------ 4,300,313 ------------ The accompanying notes are an integral part of these financial statements. 6 BBH BROAD MARKET FUND - -------------------------------------------------------------------------------- PORTFOLIO OF INVESTMENTS (continued) April 30, 2007 (unaudited) (expressed in U.S. dollars) Principal Maturity Interest Amount Date Rate Value --------- -------- -------- ----- CORPORATE BONDS (continued) COMMERCIAL SERVICES (1.2%) $ 350,000 Aramark Corp.(2)................... 02/01/15 8.500% $ 366,187 500,000 Avis Budget Car Rental LLC(2)...... 05/15/16 7.750 511,250 740,000 Centex Corp........................ 02/01/11 7.875 780,608 450,000 Corrections Corp. of America....... 05/01/11 7.500 466,875 980,000 Western Union Co................... 11/17/11 5.400 980,365 ------------ 3,105,285 ------------ COSMETICS / PERSONAL CARE (0.6%) 435,000 Estee Lauder Cos., Inc............. 05/15/17 5.550 436,337 1,275,000 Procter & Gamble Co................ 03/05/37 5.550 1,256,606 ------------ 1,692,943 ------------ DIVERSIFIED FINANCIAL SERVICES (13.2%) 965,000 Associates Corp. of North America.. 11/01/08 6.250 980,399 760,000 AXA Financial, Inc................. 08/01/10 7.750 819,105 890,000 Bear Stearns Co., Inc.............. 08/15/11 5.500 899,883 1,470,000 Bear Stearns Co., Inc.............. 02/01/12 5.350 1,476,511 650,000 Bear Stearns Co., Inc.............. 01/22/17 5.550 644,298 250,000 Calabash Re, Ltd.(1),(2)........... 01/08/10 13.755 254,325 250,000 Capital One Bank................... 06/15/09 5.000 249,267 775,000 Cascadia, Ltd.(1),(2).............. 06/13/08 8.465 773,070 935,000 CIT Group, Inc..................... 02/01/10 4.250 914,552 1,525,000 CIT Group, Inc..................... 07/28/11 5.800 1,548,453 800,000 Countrywide Home Loans, Inc........ 12/19/07 4.250 793,562 2,540,000 Countrywide Home Loans, Inc........ 09/15/09 4.125 2,472,685 275,000 E*Trade Financial Corp............. 06/15/11 8.000 289,094 250,000 East Lane Re, Ltd.(1),(2).......... 05/06/11 11.355 250,000 500,000 Fhu-Jin, Ltd.(1),(2)............... 08/10/11 9.260 510,935 1,415,000 FIA Card Services NA............... 06/15/12 6.625 1,507,315 1,575,000 General Electric Capital Corp...... 03/04/08 4.125 1,560,129 2,195,000 Goldman Sachs Group, Inc........... 01/15/12 6.600 2,317,738 2,460,000 HSBC Finance Corp.................. 11/27/12 6.375 2,583,499 2,425,000 International Lease Finance Corp... 09/01/10 4.875 2,409,320 970,000 Lehman Brothers Holdings, Inc...... 02/06/12 5.250 970,119 The accompanying notes are an integral part of these financial statements. FINANCIAL STATEMENT APRIL 30, 2007 7 BBH BROAD MARKET FUND - -------------------------------------------------------------------------------- PORTFOLIO OF INVESTMENTS (continued) April 30, 2007 (unaudited) (expressed in U.S. dollars) Principal Maturity Interest Amount Date Rate Value --------- -------- -------- ----- CORPORATE BONDS (continued) DIVERSIFIED FINANCIAL SERVICES (continued) $ 250,000 Longpoint Re, Ltd.(1),(2).......... 05/08/10 10.609% $ 250,000 2,400,000 Merrill Lynch & Co., Inc........... 07/25/11 5.770 2,459,213 1,920,000 Morgan Stanley..................... 04/01/14 4.750 1,838,425 250,000 Mystic Re, Ltd.(1),(2)............. 12/05/08 11.660 250,400 150,000 Petroplus Finance, Ltd.(2)......... 05/01/14 6.750 150,750 150,000 Petroplus Finance, Ltd.(2)......... 05/01/17 7.000 151,312 250,000 Pinnacle Foods Finance LLC(2)...... 04/01/15 9.250 250,000 500,000 Redwood Capital IX, Ltd.(1),(2).... 01/09/08 12.100 504,950 500,000 Successor Euro Wind, Ltd.(1),(2)... 12/06/08 11.096 514,850 250,000 TAM Capital, Inc.(2)............... 04/25/17 7.375 243,750 2,285,000 Textron Financial Corp............. 02/03/11 5.125 2,288,018 1,115,000 Unilever Capital Corp.............. 11/01/10 7.125 1,183,727 640,000 Vita Capital, Ltd.(1),(2).......... 01/01/10 6.749 642,541 ------------ 34,952,195 ------------ ELECTRIC (0.2%) 450,000 NRG Energy, Inc.................... 02/01/16 7.375 467,437 ------------ (euro) ENTERTAINMENT (0.8%) 1,000,000 Carnival Plc....................... 11/27/13 4.250 1,334,693 $ 600,000 Pinnacle Entertainment, Inc........ 10/01/13 8.750 633,000 ------------ 1,967,693 ------------ FINANCE (1.5%) 760,000 Capital One Financial Corp......... 02/21/12 4.800 738,636 750,000 iStar Financial, Inc.(1)........... 09/15/09 5.695 750,876 3,000,000 SLM Corp.(1)....................... 01/31/14 4.200 2,552,370 ------------ 4,041,882 ------------ FOOD (0.6%) 270,000 Hershey Co......................... 09/01/11 5.300 272,575 1,270,000 Safeway, Inc....................... 11/01/08 4.125 1,249,768 ------------ 1,522,343 ------------ The accompanying notes are an integral part of these financial statements. 8 BBH BROAD MARKET FUND - -------------------------------------------------------------------------------- PORTFOLIO OF INVESTMENTS (continued) April 30, 2007 (unaudited) (expressed in U.S. dollars) Principal Maturity Interest Amount Date Rate Value --------- -------- -------- ----- CORPORATE BONDS (continued) FOREST PRODUCTS & PAPER (0.7%) $ 600,000 Bowater, Inc.(1)................... 03/15/10 8.355% $ 603,000 450,000 Georgia-Pacific Corp.(2)........... 01/15/15 7.000 452,250 127,000 International Paper Co............. 10/30/12 5.850 129,082 550,000 Verso Paper Holdings LLC(2)........ 08/01/14 9.125 578,875 ------------ 1,763,207 ------------ GAS (0.3%) 660,000 Sempra Energy...................... 02/01/13 6.000 682,230 ------------ HEALTHCARE PRODUCTS (0.2%) 250,000 Advanced Medical Optics, Inc.(2)... 05/01/17 7.500 257,500 300,000 PTS Acquisition Corp.(2)........... 04/15/15 9.500 306,750 ------------ 564,250 ------------ HEALTHCARE SERVICES (0.4%) 1,142,000 WellPoint, Inc..................... 09/01/07 3.500 1,134,264 ------------ HOUSEHOLD PRODUCTS/WARES (0.2%) 605,000 Fortune Brands, Inc................ 01/15/11 5.125 599,383 ------------ INDUSTRIAL (1.5%) 550,000 Ahern Rentals, Inc................. 08/15/13 9.250 573,375 550,000 Allied Waste North America, Inc.... 05/15/16 7.125 563,750 75,000 Clarke American Corp.(2)........... 05/15/15 9.500 75,656 600,000 Embraer Overseas, Ltd.(2).......... 01/24/17 6.375 608,250 415,000 Honeywell International, Inc....... 03/15/16 5.400 414,104 1,090,000 Masco Corp......................... 10/03/16 6.125 1,098,846 550,000 WCA Waste Corp..................... 06/15/14 9.250 585,750 ------------ 3,919,731 ------------ INSURANCE (1.4%) 480,000 Commerce Group, Inc................ 12/09/13 5.950 485,425 700,000 Everest Reinsurance Holdings, Inc.. 10/15/14 5.400 691,774 480,000 Hartford Financial Services Group, Inc. ..................... 10/15/16 5.500 483,362 1,240,000 MetLife, Inc....................... 12/01/11 6.125 1,290,762 760,000 XL Capital, Ltd.................... 09/15/14 5.250 746,300 ------------ 3,697,623 ------------ The accompanying notes are an integral part of these financial statements. FINANCIAL STATEMENT APRIL 30, 2007 9 BBH BROAD MARKET FUND - -------------------------------------------------------------------------------- PORTFOLIO OF INVESTMENTS (continued) April 30, 2007 (unaudited) (expressed in U.S. dollars) Principal Maturity Interest Amount Date Rate Value --------- -------- -------- ----- CORPORATE BONDS (continued) LODGING (0.8%) $ 525,000 Boyd Gaming Corp................... 12/15/12 7.750% $ 546,000 550,000 MGM Mirage......................... 02/01/11 8.375 583,687 427,000 Riviera Holdings Corp.............. 06/15/10 11.000 445,147 600,000 Wynn Las Vegas LLC................. 12/01/14 6.625 601,500 ------------ 2,176,334 ------------ MEDIA (1.9%) 1,240,000 Comcast Corp....................... 03/15/11 5.500 1,255,997 850,000 COX Communications, Inc............ 10/01/12 7.125 917,954 450,000 Echostar DBS Corp.................. 02/01/16 7.125 468,562 335,000 Time Warner Cable, Inc.(2)......... 05/01/17 5.850 337,013 1,830,000 Time Warner, Inc................... 04/15/11 6.750 1,926,315 ------------ 4,905,841 ------------ OIL & GAS (1.6%) 600,000 GAZ Capital(2)..................... 11/22/16 6.212 607,800 1,250,000 Halliburton Co..................... 10/15/10 5.500 1,265,629 1,250,000 Pemex Project Funding Master Trust. 02/01/09 7.875 1,303,750 255,000 Pemex Project Funding Master Trust. 12/15/14 7.375 285,090 625,000 Petronas Capital, Ltd.(2).......... 05/22/12 7.000 676,246 ------------ 4,138,515 ------------ PACKAGING & CONTAINERS (0.2%) 525,000 Berry Plastics Holding Corp........ 09/15/14 8.875 540,750 ------------ PHARMACEUTICALS (0.7%) 680,000 Abbott Laboratories................ 05/15/11 5.600 693,480 1,110,000 WYETH.............................. 03/15/11 6.950 1,180,653 ------------ 1,874,133 ------------ REAL ESTATE (0.3%) 680,000 Brookfield Asset Management, Inc... 06/15/12 7.125 728,144 ------------ The accompanying notes are an integral part of these financial statements. 10 BBH BROAD MARKET FUND - -------------------------------------------------------------------------------- PORTFOLIO OF INVESTMENTS (continued) April 30, 2007 (unaudited) (expressed in U.S. dollars) Principal Maturity Interest Amount Date Rate Value --------- -------- -------- ----- CORPORATE BONDS (continued) REITS (0.8%) $ 350,000 Felcor Lodging LP.................. 06/01/11 8.500% $ 375,375 550,000 Host Marriott LP................... 11/01/13 7.125 566,500 650,000 Simon Property Group LP............ 06/15/08 7.000 662,118 455,000 Simon Property Group LP............ 09/01/11 5.600 462,288 ------------ 2,066,281 ------------ RETAIL (0.1%) 315,000 Lowe's Companies, Inc.............. 10/15/16 5.400 313,273 ------------ SAVINGS & LOANS (0.4%) 1,100,000 Washington Mutual, Inc............. 01/15/09 4.000 1,077,718 ------------ SEMICONDUCTORS (0.2%) 475,000 Freescale Semiconductor, Inc.(2)... 12/15/16 10.125 479,750 ------------ TELECOMMUNICATIONS (4.5%) 345,000 America Movil SAB de CV Series L... 03/01/09 4.125 339,009 555,000 AT&T, Inc.......................... 09/15/09 4.125 542,882 1,500,000 AT&T, Inc.......................... 03/15/11 6.250 1,556,220 400,000 AT&T, Inc.......................... 09/15/14 5.100 392,759 1,300,000 Deutsche Telekom International Finance BV...................... 06/15/10 8.000 1,406,716 450,000 Digicel, Ltd.(2)................... 09/01/12 9.250 478,125 355,000 France Telecom SA.................. 03/01/11 7.750 386,710 305,000 GTE California, Inc................ 05/01/08 7.000 309,961 1,025,000 GTE California, Inc................ 01/15/09 5.500 1,028,220 575,000 KT Corp.(2)........................ 07/15/15 4.875 551,856 96,000 Motorola, Inc...................... 11/15/10 7.625 102,734 1,120,000 New Cingular Wireless Services, Inc. ............................ 03/01/11 7.875 1,226,885 575,000 Qwest Communications International, Inc.(1).......... 02/15/09 8.860 580,750 500,000 Rogers Wireless, Inc.(1)........... 12/15/10 8.480 510,000 1,100,000 Sprint Capital Corp................ 01/30/11 7.625 1,180,401 480,000 Telecom Italia Capital SA.......... 01/15/10 4.000 465,469 375,000 True Move Co., Ltd.(2)............. 12/16/13 10.750 393,750 510,000 Verizon Communications, Inc........ 04/01/17 5.500 507,664 ------------ 11,960,111 ------------ The accompanying notes are an integral part of these financial statements. FINANCIAL STATEMENT APRIL 30, 2007 11 BBH BROAD MARKET FUND - -------------------------------------------------------------------------------- PORTFOLIO OF INVESTMENTS (continued) April 30, 2007 (unaudited) (expressed in U.S. dollars) Principal Maturity Interest Amount Date Rate Value --------- -------- -------- ----- CORPORATE BONDS (continued) TRANSPORTATION (0.6%) $ 1,000,000 FedEx Corp......................... 04/01/09 3.500% $ 969,830 535,000 MISC Capital Ltd.(2)............... 07/01/09 5.000 533,352 ------------ 1,503,182 ------------ UTILITIES (0.5%) 455,000 Dominion Resources, Inc............ 12/15/10 4.750 448,539 875,000 PPL Energy Supply LLC.............. 11/01/11 6.400 908,940 ------------ 1,357,479 ------------ Total Corporate Bonds (Identified cost $101,177,088)..... 101,765,641 ------------ FOREIGN GOVERNMENT BONDS (2.9%) 850,000 Colombia Government International Bond.............. 01/27/17 7.375 934,575 PLN16,000,000 Government of Poland............... 05/24/11 4.250 5,606,858 $ 480,000 Mexico Government International Bond 01/16/13 6.375 507,120 250,000 Oriental Republic of Uruguay....... 03/21/36 7.625 279,375 400,000 Republic of Indonesia.............. 10/12/35 8.500 491,899 ------------ Total Foreign Government Bonds (Identified cost $7,051,867)....... 7,819,827 ------------ U.S. GOVERNMENT AGENCY OBLIGATIONS (18.3%) 250,000 Federal National Mortgage Assoc.... 05/01/08 3.720 247,101 66,912 Federal National Mortgage Assoc.... 08/15/13 4.000 66,183 190,000 Federal National Mortgage Assoc.... 08/15/13 4.500 188,622 62,397 Federal National Mortgage Assoc.... 04/01/17 6.500 63,941 173,908 Federal National Mortgage Assoc.... 03/01/20 4.500 168,411 157,553 Federal National Mortgage Assoc.... 10/25/21 6.000 159,892 175,000 Federal National Mortgage Assoc.... 05/15/28 5.500 176,153 7,757 Federal National Mortgage Assoc.... 12/01/28 7.500 8,139 180,000 Federal National Mortgage Assoc.... 01/15/29 5.500 181,412 4,678 Federal National Mortgage Assoc.... 04/01/29 7.500 4,909 5,628 Federal National Mortgage Assoc.... 04/01/29 7.500 5,905 The accompanying notes are an integral part of these financial statements. 12 BBH BROAD MARKET FUND - -------------------------------------------------------------------------------- PORTFOLIO OF INVESTMENTS (continued) April 30, 2007 (unaudited) (expressed in U.S. dollars) Principal Maturity Interest Amount Date Rate Value --------- -------- -------- ----- U.S. GOVERNMENT AGENCY OBLIGATIONS (continued) $ 17,001 Federal National Mortgage Assoc.... 12/01/30 7.500% $ 17,834 1,342,885 Federal National Mortgage Assoc.... 01/25/31 6.000 1,342,813 270,000 Federal National Mortgage Assoc.... 03/25/31 5.500 271,021 245,297 Federal National Mortgage Assoc.... 07/01/32 7.000 256,379 135,678 Federal National Mortgage Assoc.... 10/01/33 6.000 137,316 97,088 Federal National Mortgage Assoc.... 11/25/33 5.500 96,563 134,015 Federal National Mortgage Assoc.... 03/01/34 4.500 126,256 105,000 Federal National Mortgage Assoc.... 10/15/34 5.500 104,722 618,258 Federal National Mortgage Assoc.(1) 07/01/36 5.738 623,685 1,090,864 Federal National Mortgage Assoc.(1) 09/01/36 5.820 1,100,968 1,498,132 Federal National Mortgage Assoc.(1) 01/01/37 5.540 1,509,134 124,785 Federal National Mortgage Assoc.... 02/25/44 5.950 124,591 13,850,000 Federal National Mortgage Assoc. (TBA 30YR)...................... 05/01/37 5.500 13,694,188 5,300,000 Federal National Mortgage Assoc. (TBA 30YR)...................... 05/01/37 6.500 5,410,971 10,000,000 Federal National Mortgage Assoc. (TBA 30YR)...................... 05/01/37 5.000 9,659,380 3,207,113 FHLMC Gold Guaranteed.............. 02/01/20 4.000 3,035,405 183,599 FHLMC Gold Guaranteed.............. 11/01/35 5.000 177,609 138,582 FHLMC Gold Guaranteed.............. 12/01/35 5.000 134,060 105,470 FHLMC Gold Guaranteed.............. 12/01/35 5.000 102,029 1,698,872 FHLMC Non Gold Guaranteed(1)....... 04/01/36 5.411 1,704,667 369,955 FHLMC Non Gold Guaranteed(1)....... 12/01/36 5.451 372,125 704,609 FHLMC Non Gold Guaranteed(1)....... 01/01/37 5.498 707,550 1,177,482 FHLMC Non Gold Guaranteed(1)....... 02/01/37 5.579 1,183,171 591,956 Freddie Mac Gold Pool.............. 05/01/19 4.000 560,262 1,947,173 Freddie Mac Gold Pool.............. 05/01/19 4.000 1,842,921 1,088,356 Freddie Mac Gold Pool.............. 12/01/19 4.000 1,030,086 1,515,512 Freddie Mac Gold Pool.............. 10/01/34 5.500 1,502,335 87,204 General National Mortgage Assoc.(1) 08/20/29 5.500 88,335 ------------ Total U.S. Government Agency Obligations (Identified cost $48,382,774)...... 48,187,044 ------------ The accompanying notes are an integral part of these financial statements. FINANCIAL STATEMENT APRIL 30, 2007 13 BBH BROAD MARKET FUND - -------------------------------------------------------------------------------- PORTFOLIO OF INVESTMENTS (continued) April 30, 2007 (unaudited) (expressed in U.S. dollars) Principal Maturity Interest Amount Date Rate Value --------- -------- -------- ----- BBH BROAD MARKET Fund U.S. TREASURY NOTES AND BONDS (8.8%) $ 1,000,000 U.S. Treasury Bonds................ 02/15/26 6.000% $ 1,135,391 7,185,000 U.S. Treasury Bonds................ 02/15/31 5.375 7,695,810 3,000,000 U.S. Treasury Notes................ 11/15/16 4.625 2,998,125 3,222,540 United States Treasury Inflation Indexed Bonds(3)................ 04/15/10 0.875 3,120,073 8,701,849 United States Treasury Inflation Indexed Bonds................... 01/15/15 1.625 8,368,242 ------------ Total U.S. Treasury Notes and Bonds (Identified cost $23,248,453)...... 23,317,641 ------------ COMMERCIAL PAPER (16.9%) 5,000,000 BP Capital Markets Plc............. 05/01/07 5.291 5,000,000 5,000,000 Buckingham CDO LLC................. 05/23/07 5.301 4,983,867 1,000,000 ConocoPhillips..................... 05/01/07 5.320 1,000,000 1,000,000 CVS Caremark Corp.................. 05/02/07 5.342 999,852 1,000,000 Diageo Capital Plc................. 06/07/07 5.350 994,542 4,000,000 Dover Corp......................... 05/01/07 5.301 4,000,000 5,000,000 Kittyhawk Funding Corp............. 06/29/07 5.300 4,957,143 2,500,000 Kraft Foods, Inc................... 05/01/07 5.311 2,500,000 2,500,000 Kroger Co.......................... 05/01/07 5.601 2,500,000 6,800,000 Rabobank USA....................... 05/01/07 5.291 6,800,000 6,800,000 Societe Generale................... 05/01/07 5.301 6,800,000 2,000,000 Unicredito Italiano Bank (Ireland) Plc. .................. 07/31/07 5.296 1,973,585 1,000,000 Weyerhauser Co..................... 05/02/07 5.336 999,852 1,000,000 Whirlpool Corp..................... 05/02/07 5.352 999,852 ------------ Total Commercial Paper (Identified cost $44,508,693)...... 44,508,693 ------------ SHORT-TERM INVESTMENT (0.4%) EGP 6,900,000 Egypt Treasury Bills............... 07/10/07 9.899 1,191,723 ------------ Total Short-Term Investment (Identified cost $1,187,082)....... 1,191,723 ------------ TOTAL INVESTMENTS (Identified cost $289,406,590)........... 110.2% $290,776,692 LIABILITIES IN EXCESS OF CASH AND OTHER ASSETS............. (10.2) (26,849,187) ------ ------------ NET ASSETS................................................. 100.0% $263,927,505 ====== ============ The accompanying notes are an integral part of these financial statements. 14 BBH BROAD MARKET FUND - -------------------------------------------------------------------------------- PORTFOLIO OF INVESTMENTS (continued) April 30, 2007 (unaudited) (expressed in U.S. dollars) (1) Variable rate instrument. Interest rates change on specific dates (such as a coupon or interest payment date). The yield shown represents the April 30, 2007 coupon rate. (2) Security exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. Total market value of 144A securities owned at April 30, 2007 was $15,989,251, or 6.1% of net assets (5) Security held as collateral on futures contracts. (6) The aggregate cost for federal income tax purposes is $289,406,590, the aggregate gross unrealized appreciation is $2,695,189, and the aggregate gross unrealized depreciation is $1,325,087, resulting in net unrealized appreciation of $1,370,102. A summary of obligations under open forward foreign currency exchange contracts outstanding at April 30, 2007 is as follows: Unrealized Notional Market Appreciation/ Description Value Value (Depreciation) - ----------- -------- ------ -------------- Buy Contracts: Australian Dollars, settling 05/30/07 1,409,300 1,172,532 $ 8,094 Brazilian Reals settling 05/30/07 5,364,100 2,626,885 (9,035) Canadian Dollars, settling 05/30/07 1,413,900 1,278,269 18,432 China Renminbi settling 05/30/07 18,876,000 2,504,954 (64,083) Euro settling 05/30/07 499,600 683,227 329 GPB British Pound settling 05/30/07 517,200 1,034,309 (1,147) Indonesian Rupiah settling 05/30/07 7,817,983,400 857,282 (2,309) Japanese Yen settling 05/30/07 31,514,600 264,871 (2,245) Mexican Peso settling 05/30/07 9,435,300 861,766 5,257 New Turkish Lira settling 05/30/07 1,188,400 856,877 (21,078) New Zealand Dollar settling 05/30/07 1,570,600 1,164,239 (850) New Zealand Dollar settling 05/30/07 288,800 213,420 132 Swedish Krona settling 05/30/07 12,772,900 1,909,673 16,018 Swedish Krona settling 05/30/07 4,633,600 692,768 (350) Swiss Franc settling 05/30/07 714,200 593,621 (1,729) Swiss Franc settling 05/30/07 1,056,500 878,130 911 South African Rand settling 05/30/07 6,186,100 876,4110 (864) The accompanying notes are an integral part of these financial statements. FINANCIAL STATEMENT APRIL 30, 2007 15 BBH BROAD MARKET FUND - -------------------------------------------------------------------------------- PORTFOLIO OF INVESTMENTS (continued) April 30, 2007 (unaudited) (expressed in U.S. dollars) Unrealized Notional Market Appreciation/ Description Value Value (Depreciation) - ----------- -------- ------ -------------- Sell Contracts: Canadian Dollars, settling 05/30/07 (1,877,000) (1,696,946) $ (15,487) Chilean Peso settling 05/30/07 (460,923,600) (877,699) (4,986) Czech Koruna settling 05/30/07 (18,082,600) (875,756) (934) Euro settling 05/30/07 (1,800,500) (2,462,269) (9,971) GPB British Pound settling 05/30/07 (38,200) (76,393) 113 GPB British Pound settling 05/30/07 (676,300) (1,352,481) (37) Japanese Yen settling 05/30/07 (2,417,700) (20,320) 167 Japanese Yen settling 05/30/07 (165,834,600) (1,393,789) (1,765) New Turkish Lira settling 05/30/07 (1,188,400) (856,877) 2,477 New Zealand Dollar settling 05/30/07 (267,900) (198,441) (195) Norwegian Krone settling 05/30/07 (11,628,000) (1,957,777) (2,960) Polish Zloty settling 05/30/07 (15,464,600) (5,584,198) (21,233) Swedish Krona settling 05/30/07 (20,212,000) (3,021,891) (24,012) Swiss Franc settling 05/30/07 (415,500) (345,351) 1,041 Taiwan Dollar settling 05/30/07 (28,367,800) (854,027) 3,524 South African Rand settling 05/30/07 (6,186,100) (876,411) (4,576) --------- $(133,351) ========= A summary of obligations under open futures contracts at April 30, 2007 is as follows: Unrealized Expiration Base Contract Appreciation/ Position Date Contracts Note/Bond Value (Depreciation) - -------- ---------- --------- --------- ------------- -------------- Long 06/2007 35 90 Day Sterling $ 8,242,037 $ (5,250) Long 09/2007 35 90 Day Sterling $ 8,233,287 $ (9,625) Long 12/2007 35 90 Day Sterling $ 8,234,162 $ (11,376) Long 03/2008 35 90 Day Sterling $ 8,239,412 $ (10,501) Long 12/2008 125 90 Day Euro$ $ 29,797,705 $ 88,768 Long 06/2009 130 90 Day Euro$ $ 30,975,750 $ 17,875 Long 06/2007 75 U.S. 10Yr $ 8,124,610 $ 62,110 Treasury Note Short 06/2007 (20) Long Gilt $ (2,143,400) $ 30,402 Short 06/2007 (175) U.S. 2Yr $(35,825,783) $(106,642) Treasury Note Short 06/2007 (320) U.S. 5Yr $(33,865,002) $ (15,002) Treasury Note --------- $ 40,759 ========= The accompanying notes are an integral part of these financial statements. 16 BBH BROAD MARKET FUND - -------------------------------------------------------------------------------- PORTFOLIO OF INVESTMENTS (continued) April 30, 2007 (unaudited) (expressed in U.S. dollars) As of April 30, 2007, the Fund had segregated sufficient cash and/or securities to cover the initial margin requirements on open futures contracts. At April 30, 2007, the Fund had the following open swap agreements: Amount Due from (to) Notional Broker at Amount Description Value -------- ----------- ---------- 5,600,000 Agreement with JP Morgan terminating 03/13/17 to pay a fixed rate of 5.170% interest and receive the 6 months LIBOR paid semi-annually. $ 238,768 950,900,000 Agreement with JP Morgan terminating 03/13/12 to pay a fixed rate of 1.295% interest and receive the 6 months Yen LIBOR paid semi-annually. (5,876) 95,500,000 Agreement with Goldman Sachs terminating 03/13/12 to pay a fixed rate of 4.1175% interest and receive the 3 months STIBOR paid quarterly. (206,075) 25,000,000 Agreement with Morgan Stanley terminating 03/14/11 to pay a fixed rate of 5.254% interest and receive the 3 months U.S. Treasury rate paid quarterly. 250,159 30,000,000 Agreement with Citigroup terminating 05/11/11 to pay a fixed rate of 5.488% interest and receive the 3 months U.S. Treasury rate paid quarterly. 992,119 10,000,000 Agreement with Goldman Sachs terminating 05/16/16 to pay a fixed rate of 5.703% interest and receive the 3 months U.S. Treasury rate paid quarterly 563,033 26,500,000 Agreement with JP Morgan to receive 0.350% interest in exchange for providing protection against default on an index of 125 North American Investment Grade Corporate Entities. 44,791 750,000 Agreement with JP Morgan to receive 1.850% interest in exchange for providing protection against default on a government bond from the Republic of Argentina. (1,442) 2,600,000 Agreement with JP Morgan to receive 0.370% interest in exchange for providing protection against default on a government bond from Lehman Brothers FSB. 8,111 25,000,000 Agreement with Goldman Sachs terminating 09/11/2011 to pay a fixed rate of 5.205% interest and receive the 3 months U.S. Treasury rate paid quarterly. 218,803 25,000,000 Agreement with Lehman Brothers to receive 3.250% interest in exchange for providing protection against the default of an index of the bonds of 100 non investment grade entities based in North America. 200,311 13,000,000 Agreement with Goldman Sachs to pay 3.250% interest in exchange for receiving protection against the default of an index of the bonds of 100 non investment grade entities based in North America. (228,042) 1,500,000 Agreement with JP Morgan to pay 0.690% interest in exchange for receiving protection against default on a government bond from the Federative Republic of Brazil. (494) 2,600,000 Agreement with Goldman Sachs to pay 2.030% interest in exchange for receiving protection against default on a bond from SLM Corp. 9,212 17,000,000 Agreement with Lehman Brothers to receive 3.250% interest in exchange for receiving protection against the default of an index of the bonds of 100 non investment grade entities based in North America. (276,958) The accompanying notes are an integral part of these financial statements. FINANCIAL STATEMENT APRIL 30, 2007 17 BBH BROAD MARKET Fund PORTFOLIO OF INVESTMENTS (continued) April 30, 2007 (unaudited) (expressed in U.S. dollars) Amount Due from (to) Notional Broker at Amount Description Value -------- ----------- ---------- 5,000,000 Agreement with Goldman Sachs terminating 08/22/2016 to pay 3.095% interest and to receive the United Kingdom Retail Price Index. $ (43,858) 10,000,000 Agreement with Barclays terminating 09/22/2008 to pay 2.930% interest and to receive the United Kingdom Retail Price Index. 172,447 25,000,000 Agreement with Lehman terminating 05/31/2007 to pay the change in the Lehman CMBS Investment Grade 8.5 year+ the change in the Lehman CMBS Investment Grade 8.5 year+ index on maturity date. (65,151) 3,650,000 Agreement with Lehman Brothers to pay 0.160% interest in exchange for receiving protection against default on a bond issued by Bank of America. (7,242) 3,650,000 Agreement with Lehman Brothers to pay 0.155% interest in exchange for receiving protection against default on a bond issued by Citigroup. (6,390) 3,650,000 Agreement with Lehman Brothers to pay 0.165% interest in exchange for receiving protection against default on a bond issued by American Express. (1,437) 3,650,000 Agreement with Lehman Brothers to pay 0.160% interest in exchange for receiving protection against default on a bond issued by Wachovia Bank. (5,579) 1,600,000 Agreement with Lehman Brothers to receive 0.640% interest in exchange for providing protection against default on a bond issued by Countrywide Financial Corp. (1,834) 2,600,000 Agreement with Lehman Brothers to receive 0.280% interest in exchange for providing protection against default on a bond issued by Goldman Sachs. 3,098 2,900,000 Agreement with Lehman Brothers to receive 0.470% interest in exchange for providing protection against default on a bond issued by Washington Mutual. interest paid quarterly. 7,928 ---------- $1,858,402 ========== LIBOR - London Interbank Offered Rate STIBOR - Stockholm Interbank Offered Rate As of April 30, 2007, the Fund had segregated sufficient cash to cover any accrued but unpaid net amounts owed to a swap counterparty. Currency Abbreviations: (euro) - Euro PLN - Polish Zloty EGP - Egyptian Pound The accompanying notes are an integral part of these financial statements. 18 BBH BROAD MARKET FUND - ----------------------------------------------------------------- STATEMENT OF ASSETS AND LIABILITIES April 30, 2007 (unaudited) ASSETS: Investments in securities, at value (identified cost $289,406,590) ...................................... $290,776,692 Foreign currency, at value (identified cost $2,215) ....... 2,223 Segregated cash ........................................... 650,014 Receivables for: Interest and other receivables .......................... 2,833,138 Swap agreements ......................................... 1,858,402 Investments sold ........................................ 738,076 Capital stock sold ...................................... 344,149 Unrealized appreciation of forward foreign exchange currency contracts ...................................... 56,495 Variation margin .......................................... 40,758 Other assets .............................................. 242,133 ------------ Total Assets .......................................... 297,542,080 ------------ LIABILITIES: Due to bank ............................................... 8,741 Payables for: Investments purchased ................................... 32,629,367 Capital stock redeemed .................................. 534,267 Unrealized depreciation of forward foreign exchange currency contracts .................................... 189,846 Investment advisory fees ................................ 86,193 Administrative fees ..................................... 43,097 Custody and accounting fees ............................. 40,781 Shareholder servicing fees .............................. 37,925 Professional fees ....................................... 27,132 Board of Directors' fees ................................ 206 Accrued expenses and other liabilities .................. 17,020 ------------ Total Liabilities ..................................... 33,614,575 ------------ NET ASSETS ................................................... $263,927,505 ============ Net Assets Consist of: Par value ................................................. $ 26,025 Paid-in capital ........................................... 266,854,306 Undistributed net investment income ....................... 2,874,705 Accumulated net realized loss on investments and futures contracts ....................................... (8,363,212) Net unrealized appreciation on investments and foreign currency translations ................................... 2,535,681 ------------ Net Assets ................................................... $263,927,505 ============ NET ASSET VALUE AND OFFERING PRICE PER SHARE CLASS N SHARES NET ASSET VALUE ($155,628,916 / 15,343,360 shares outstanding) ............ $10.14 ====== CLASS I SHARES NET ASSET VALUE ($108,298,589 / 10,681,605 shares outstanding) ............ $10.14 ====== The accompanying notes are an integral part of these financial statements. FINANCIAL STATEMENT APRIL 30, 2007 19 BBH BROAD MARKET FUND - -----------------------===============------------------------------------------ STATEMENT OF OPERATIONS For the six months ended April 30, 2007 (unaudited) NET INVESTMENT INCOME: Income: Interest and other income (net of withholding taxes of $10,502) ............................................ $ 9,117,904 Securities lending income ................................. 1,969 ----------- Total Income ............................................ 9,119,873 ----------- EXPENSES: Investment advisory fees .................................... 250,817 Administrative fees ......................................... 125,409 Shareholder servicing fees .................................. 112,155 Custody and accounting fees ................................. 72,335 Professional fees ........................................... 22,614 Board of Directors' fees .................................... 11,303 Miscellaneous expenses ...................................... 38,452 ----------- Total Expenses .......................................... 633,085 Expense offset arrangement .............................. (4,477) ----------- Net Expenses ............................................ 628,608 ----------- Net Investment Income ....................................... 8,491,265 ----------- NET REALIZED AND UNREALIZED LOSS: Net realized loss on investments, futures contracts and swap agreements ........................................... (2,279,547) Net change in unrealized appreciation (depreciation) on investments and foreign currency translations ............. 874,863 ----------- Net Realized and Unrealized Loss ........................ (1,404,684) ----------- Net Increase in Net Assets Resulting from Operations ........ $ 7,086,581 =========== The accompanying notes are an integral part of these financial statements. 20 BBH BROAD MARKET FUND - -------------------------------------------------------------------------------- STATEMENTS OF CHANGES IN NET ASSETS
For the six months ended For the April 30, 2007 year ended (unaudited) October 31, 2006 -------------- ---------------- INCREASE (DECREASE) IN NET ASSETS: Operations: Net investment income ................................. $ 8,491,265 $ 11,967,371 Net realized loss on investments, futures contracts and swap agreements ................................. (2,279,547) (5,694,292) Net change in unrealized appreciation (depreciation) on investments and foreign currency translations .... 874,863 4,454,640 ------------- ------------- Net increase in net assets resulting from operations .. 7,086,581 10,727,719 ------------- ------------- Dividends and distributions declared: From net investment income: Class N ............................................... (3,640,183) (6,782,672) Class I ............................................... (2,542,486) (4,787,636) From net realized gains Class N ............................................... -- (1,150,107) Class I ............................................... -- (767,109) ------------- ------------- Total dividends and distributions declared .......... (6,182,669) (13,487,524) ------------- ------------- Capital stock transactions: Net proceeds from sales of capital stock .............. 27,860,883 42,339,515 Net asset value of capital stock issued to shareholders for reinvestment of dividends and distributions ..... 3,007,009 6,856,683 Net cost of capital stock redeemed .................... (8,656,515) (48,899,732) ------------- ------------- Net increase in net assets resulting from capital stock transactions .................................. 22,211,377 296,466 ------------- ------------- Total increase (decrease) in net assets ............. 23,115,289 (2,463,339) NET ASSETS: Beginning of year ....................................... 240,812,216 243,275,555 ------------- ------------- End of period (including undistributed net investment income of $2,874,705 and $566,109, respectively) ..... $ 263,927,505 $ 240,812,216 ============= =============
The accompanying notes are an integral part of these financial statements. FINANCIAL STATEMENT APRIL 30, 2007 21 BBH BROAD MARKET FUND - -------------------------------------------------------------------------------- FINANCIAL HIGHLIGHTS Selected per share data and ratios for a Class N share outstanding throughout each period
For the six months ended For the years ended October 31, April 30, 2007 ---------------------------------------------------------------- (unaudited) 2006 2005 2004 2003 2002 -------------- ---- ---- ---- ---- ---- Net asset value, beginning of year........................ $10.10 $10.19 $10.57 $10.57 $10.25 $10.43 ------ ------ ------ ------ ------ ------ Income from investment operations: Net investment income.......... 0.34(1) 0.48(1) 0.42(1) 0.43(1) 0.59(1) 0.46 Net realized and unrealized gain (loss).................. (0.06) (0.03) (0.27) 0.17 0.33 (0.19) ------ ------ ------ ------ ------ ------ Total income from investment operations 0.28 0.45 0.15 0.60 0.92 0.27 ------ ------ ------ ------ ------ ------ Less dividends and distributions: From net investment income..... (0.24) (0.46) (0.41) (0.44) (0.60) (0.45) From net realized gains........ -- (0.08) (0.12) (0.16) -- -- ------ ------ ------ ------ ------ ------ Total dividends and distributions.............. (0.24) (0.54) (0.53) (0.60) (0.60) (0.45) ------ ------ ------ ------ ------ ------ Net asset value, end of period.... $10.14 $10.10 $10.19 $10.57 $10.57 $10.25 ====== ====== ====== ====== ====== ====== Total return...................... 2.74% 4.64% 1.49% 5.77% 9.33% 2.39% Ratios/Supplemental data: Net assets, end of period (in millions)................ $156 $147 $149 $110 $115 $94 Expenses as a percentage of average net assets........... 0.56%(2),(3) 0.55%(2) 0.57%(2) 0.55%(4) 0.55%(4) 0.55%(4) Ratio of net investment income to average net assets 6.70%(3) 4.75% 4.06% 4.14% 5.55% 4.30% Portfolio turnover rate........ 334%(3) 325% 211% 210% 249%(5) 416%(5)
- ---------- (1) Calculated using average shares outstanding for the year. (2) The ratio of expenses to average net assets for the six months ended April 30, 2007 and years ended October 31, 2006 and 2005 reflect fees reduced as a result of an expense offset arrangement with the Fund's custodian. Had this arrangement not been in place, this ratio would have been 0.56%, 0.56% and 0.58%, respectively. (3) Annualized. (4) Had the expense payment agreement, which terminated on December 31, 2004, not been in place, the ratio of expenses to average net assets would have been as follows: N/A N/A N/A 0.61% 0.62% 0.70% (5) Portfolio turnover rate is a weighted average of the Fund's portfolio turnover and that of the Broad Market Fund (the "Portfolio") in which the Fund invested through December 3, 2002. The accompanying notes are an integral part of these financial statements. 22 BBH BROAD MARKET FUND - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS (continued) April 30, 2007 (unaudited) FINANCIAL HIGHLIGHTS (continued) Selected per share data and ratios for a Class I share outstanding throughout each period
For the period from For the six For the years ended December 3, 2002 months ended October 31, (commencement April 30, 2007 --------------------------- of operations) to (unaudited) 2006 2005 2004 October 31, 2002 -------------- ------ ------ ------ -------------------- Net asset value, beginning of period .................... $10.10 $10.19 $10.57 $10.57 $10.22 ------ ------ ------ ------ ------ Income from investment operations: Net investment income(1) ..... 0.35 0.50 0.44 0.46 0.53 Net realized and unrealized gain (loss) ................ (0.04) (0.04) (0.27) 0.15 0.34 ------ ------ ------ ------ ------ Total income from investment operations .... 0.31 0.46 0.17 0.61 0.87 ------ ------ ------ ------ ------ Less dividends and distributions: From net investment income ..................... (0.27) (0.47) (0.43) (0.45) (0.52) From net realized gains ...... -- (0.08) (0.12) (0.16) -- ------ ------ ------ ------ ------ Total dividends and distributions ............ (0.27) (0.55) (0.55) (0.61) (0.52) ------ ------ ------ ------ ------ Net asset value, end of period .................... $10.14 $10.10 $10.19 $10.57 $10.57 ====== ====== ====== ====== ====== Total return .................... 2.82% 4.79% 1.64% 5.91% 9.48% Ratios/Supplemental Data: Net assets, end of period (in millions) .............. $108 $94 $94 $91 $87 Expenses as a percentage of average net assets ...... 0.41%(2),(3) 0.40%(2) 0.42%(2) 0.40%(4) 0.40%(3),(4) Ratio of net investment income to average net assets ................. 6.88%(3) 4.92% 4.21% 4.36% 5.42%(3) Portfolio turnover rate ...... 334%(3) 325% 211% 210% 249%(3),(5)
- ---------- (1) Calculated using average shares outstanding for the year. (2) The ratio of expenses to average net assets for the six months ended April 30, 2007 and years ended October 31, 2006 and 2005 reflect fees reduced as a result of an expense offset arrangement with the Fund's custodian. Had this arrangement not been in place, this ratio would have been 0.41%, 0.41%, and 0.44%, respectively. (3) Annualized. (4) Had the expense payment agreement, which terminated on December 31, 2004, not been in place, the ratio of expenses to average net assets would have been as follows: N/A N/A N/A 0.45% 0.46%(3) (5) Portfolio turnover rate is a weighted average of the Fund's portfolio turnover and that of the Portfolio in which the Fund invested through December 3, 2002. The accompanying notes are an integral part of these financial statements. FINANCIAL STATEMENT APRIL 30, 2007 23 BBH BROAD MARKET FUND - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS April 30, 2007 (unaudited) 1. Organization and Significant Accounting Policies. BBH Broad Market Fund (the "Fund") (formerly BBH Broad Market Fixed Income Fund) is a separate diversified series of BBH Fund, Inc. (the "Corporation"), which is registered under the Investment Company Act of 1940, as amended. The Corporation is an open-end management investment company organized under the laws of the State of Maryland on July 16, 1990. The Fund commenced operations on December 22, 2000. On August 6, 2002, the Corporation's Board of Directors reclassified the Fund's outstanding shares as "Class N", and established a new class of shares designated as "Class I". Class I commenced on December 3, 2002. Class N and Class I shares have different operating expenses. Neither Class N shares nor Class I shares convert to any other class of the Fund. The Fund's financial statements are prepared in accordance with accounting principles generally accepted in the United States of America, which require management to make certain estimates and assumptions at the date of the financial statements and are based, in part, on the following accounting policies. Actual results could differ from those estimates. A. Valuation of Investments. Bonds and other fixed income securities, including restricted securities' (other than short-term obligations but including listed issues) are valued at their most recent bid prices (sales price if the principal market is an exchange) in the principal market in which such securities are normally traded, on the basis of valuations furnished by a pricing service, use of which has been approved by the Corporation's Board of Directors. In making such valuations, the pricing service utilizes both dealer-supplied valuations and electronic data processing techniques which take into account appropriate factors such as institutional-size trading in similar groups of securities, yield, quality, coupon rate, maturity, type of issue, trading characteristics and other market data, without exclusive reliance upon quoted prices or exchange or over-the-counter prices, since such valuations are believed to reflect more accurately the fair value of such securities. Securities or other assets for which market quotations are not readily available are valued at fair value in accordance with procedures established by and under the general supervision and responsibility of the Corporation's Board of Directors. Short-term investments which mature in 60 days or less are valued at amortized cost if their original maturity was 60 days or less, or by amortizing their value on the 61st day prior to maturity, if their original maturity when acquired by the Fund was more than 60 days, unless this is determined not to represent fair value by the Corporation's Board of Directors. B. Accounting for Investments and Income. Investment transactions are accounted for on the trade date. Realized gains and losses, if any, from investment transactions are determined on the basis of identified cost. Interest income is accrued daily and consists of interest accrued, discount earned (including both original issue and market discount) and premium amortization on the investments of the Fund. Investment income is recorded net of foreign taxes withheld where recovery of such tax is uncertain. Debt obligations may be placed on non-accrual status and related interest income may be reduced by ceasing current accruals and writing off interest receivable when the collection of all or a portion of interest has become doubtful based on consistently applied procedures. A debt obligation is removed from non-accrual status when the issuer resumes interest payments or when collectibility of interest is reasonable assured. 24 BBH BROAD MARKET FUND - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS (continued) April 30, 2007 (unaudited) a portion of interest has become doubtful based on consistently applied procedures. A debt obligation is removed from non-accrual status when the issuer resumes interest payments or when collectibility of interest is reasonable assured. C. Repurchase Agreements. The Fund may enter into repurchase agreements with primary dealers of U.S. Government Obligations as designated by the Federal Reserve Bank of New York. Repurchase agreements are transactions in which the Fund buys a security from a dealer or bank and agrees to sell the security back at a mutually agreed upon time and price. The repurchase price exceeds the sale price, reflecting the Fund's return on the transaction or effectively the interest rate paid by the dealer to the Fund. This return is unrelated to the interest rate on the underlying security. The Fund will enter into repurchase agreements only with banks and other recognized financial institutions, such as securities dealers, deemed creditworthy by the Investment Adviser. The Fund's custodian or sub-custodian will take possession of the securities subject to repurchase agreements. The Investment Adviser or sub-custodian will monitor the value of the underlying security each day to ensure that the value of the security always equals or exceeds the repurchase price. Repurchase agreements are subject to credit risks. At April 30, 2007, the Fund had no open repurchase agreements. D. Forward Foreign Currency Exchange Contracts. The Fund may enter into forward foreign currency exchange contracts ("contracts") in connection with planned purchases or sales of securities, to hedge the U.S. dollar value of Fund securities denominated in a particular currency, or to increase or shift its exposure to a currency other than U.S. dollars. The Fund has no specific limitation on the percentage of assets which may be committed to these types of contracts. The Fund could be exposed to risks if the counterparties to the contracts are unable to meet the terms of their contracts or if the value of the foreign currency changes unfavorably. The U.S. dollar values of foreign currency underlying all contractual commitments held by the Fund are determined using forward currency exchange rates supplied by a quotation service. Information regarding forward foreign exchange contracts is included at the end of the Portfolio of Investments. E. Swap Agreements. The Fund may enter into swap agreements. A swap is an exchange of cash payments based on a notional principal amount between the Fund and another party which is based on a specific financial index. These transactions are entered into in an attempt to obtain a particular return when it is considered desirable to do so, possibly at a lower cost to the Fund than if the Fund had invested directly in an instrument that yielded that desired return. Cash payments are exchanged at specified intervals and recorded in the Statement of Operations as realized gains and losses. The expected income or expense is recorded on an accrual basis. The value of the swap is adjusted daily and the change in value is recorded as unrealized appreciation or depreciation. Risks may arise upon entering into these agreements from the potential inability of counter parties to meet the terms of their contract and from unanticipated changes in the value of the financial index on which the swap agreement is based. Risks may exceed amounts recognized on the Statement of Assets and Liabilities. The Fund may use swaps for both hedging and non-hedging purposes. For hedging purposes, the Fund may use swaps to reduce its exposure to interest and foreign exchange rate fluctuations. For non-hedging purposes, the Fund may use swaps to take a position on anticipated changes in the underlying financial index. Information regarding swap agreements is included at the end of the Portfolio of Investments. F. Financial Futures Contracts. The Fund may enter into open futures contracts in order to hedge against anticipated future changes in interest rates which otherwise might either adversely affect the value of securities held for the Fund or adversely affect the prices of securities which are intended to be purchased at a later date for the Fund. The contractual amount of the futures contracts represents the investment the Fund has in a particular contract and does not necessarily FINANCIAL STATEMENT APRIL 30, 2007 25 BBH BROAD MARKET FUND - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS (continued) April 30, 2007 (unaudited) represent the amounts potentially subject to risk. Trading in futures contracts involves, to varying degrees, risk of loss in excess of any futures variation margin reflected in the Statement of Assets and Liabilities. The measurement of risk associated with futures contracts is meaningful only when all related and offsetting transactions are considered. Gains and losses are realized upon the expiration or closing of the futures contracts. Futures contracts held by the Fund are valued daily at the official settlement price of the exchange on which it is traded. Information regarding financial futures contracts is included at the end of the Portfolio of Investments. G. Rule 144A Securities. The Fund may purchase securities that are not registered under the 1933 Act, but that can be sold to "qualified institutional buyers" in accordance with the requirements stated in Rule 144A under the 1933 Act (Rule 144A Securities). A Rule 144A Security may be considered illiquid and therefore subject to the 15% limitation on the purchase of illiquid securities, unless it is determined on an ongoing basis that an adequate trading market exists for the security. Guidelines have been adopted and the daily function of determining and monitoring liquidity of Rule 144A Securities has been delegated to the Investment Adviser. All relevant factors will be considered in determining the liquidity of Rule 144A Securities and all investments in Rule 144A Securities will be carefully monitored. Information regarding Rule 144A securities is included at the end of the Portfolio of Investments. H. Securities Lending. The Fund may lend its portfolio securities to broker-dealers, qualified banks and certain institutional investors. The loans are secured by collateral in an amount equal to at least the market value at all times of the loaned securities plus any accrued interest and dividends. During the time the securities are on loan, the Fund will continue to receive the interest and dividends or amounts equivalent thereto, on the loaned securities while receiving a fee from the borrower or earning interest on the investment of the cash collateral. Loans are subject to termination at the option of the borrower or the Fund. Upon termination of the loan, the borrower will return to the lender securities identical to the loaned securities. The Fund may pay reasonable finders', administrative and custodial fees in connection with a loan of its securities and may share the interest earned on the collateral with the borrower. The Fund bears the risk of delay in recovery of, or even loss of rights in, the securities loaned should the borrower of the securities fail financially. At April 30, 2007, the Fund had no open securities lending. I. Federal Income Taxes. It is the Corporation's policy to comply with the requirements of the Internal Revenue Code (the "Code") applicable to regulated investment companies and to distribute all of its taxable income to its shareholders. Accordingly, no federal income tax provision is required. The Fund files a tax return annually using tax accounting methods required under provisions of the Code which may differ from accounting principles generally accepted in the United States of America, the basis on which these financial statements are prepared. Accordingly, the amount of net investment income and net realized gain reported on these financial statements may differ from that reported on the Fund's tax return due to certain book-to-tax timing differences such as losses deferred due to "wash sale" transactions and utilization of capital loss carryforwards. These differences result in temporary over-distributions for financial statement purposes and are classified as distributions in excess of accumulated net realized gains or net investment income. These distributions do not constitute a return of capital. Permanent differences are reclassified on the Statement of Assets & Liabilities based upon their tax classification. As such, the character of distributions to shareholders reported in the Financial Highlights table may differ from that reported to shareholders on Form 1099-DIV. 26 BBH BROAD MARKET FUND - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS (continued) April 30, 2007 (unaudited) J. Dividends and Distributions to Shareholders. Dividends to shareholders are generally declared and paid monthly and are recorded on the ex-dividend date. Distributions from net capital gains, if any, are generally declared and paid annually and are recorded on the ex-dividend date. The tax character of distributions paid during the fiscal years ended October 31, 2006 and 2005, respectively, were as follows: Distribution paid from: - -------------------------------------------------------------------------------- Net Total Total Ordinary long term taxable Tax return distributions Income capital gain distributions of capital paid -------- ------------ ------------- ---------- ------------- 2006: $12,915,003 $ 572,521 $13,487,524 -- $13,487,524 2005: 9,581,114 1,752,855 11,333,969 -- 11,333,969 As of October 31, 2006 and 2005, respectively, the components of accumulated earnings/(deficit) on a tax basis were as follows:
Components of accumulated earnings/(deficit): - -------------------------------------------------------------------------------------------------- Total Undistributed Undistributed Accumulated Unrealized accumulated ordinary long-term Accumulated capital and appreciation/ earnings/ income capital gains earnings other losses (depreciation) (deficit) ------------- ------------- ----------- ------------ -------------- ----------- 2006: $ 530,515 $ -- $ 530,515 $(5,783,575) $ 1,612,752 $(3,640,308) 2005: 1,846,645 572,504 2,419,149 -- (3,516,082) (1,096,933)
Total distributions paid differ from the Statement of Changes in Net Assets because for tax purposes dividends are recognized when actually paid. The differences between book-basis and tax-basis unrealized appreciation/ (depreciation) is attributable primarily to the tax deferral of losses on wash sales, forward currency contracts marked to market and futures marked to market. To the extent future capital gains are offset by capital loss carryforwards, such gains will not be distributed. K. Accounting Developments. In June 2006, Financial Accounting Standards Board Interpretation No. 48, Accounting for Uncertainty in Income Taxes - an interpretation of FASB Statement 109 (FIN 48) was issued and is effective for fiscal years beginning after December 15, 2006. FIN 48 sets forth a threshold for financial statement recognition, measurement and disclosure of a tax position taken or expected to be taken on a tax return. While not expected to have a material impact on the Fund's financial statements, management will be evaluating the impact, if any, the adoption of FIN 48 will have on the Funds' net assets and results of operations. FINANCIAL STATEMENT APRIL 30, 2007 27 BBH BROAD MARKET FUND - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS (continued) April 30, 2007 (unaudited) In September 2006, Statement of Financial Accounting Standards No. 157, Fair Value Measurements (SFAS 157), was issued and is effective for fiscal years beginning after November 15, 2007. SFAS 157 defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements. Management is currently evaluating the implication of SFAS 157. At this time its impact on the Fund's financial statements has not yet been determined. 2. Transactions with Affiliates. Investment Advisory Fees. The Fund has an investment advisory agreement with Brown Brothers Harriman ("BBH") for which BBH receives a fee from the Fund calculated daily and paid monthly at an annual rate of 0.20% of the Fund's average daily net assets. For the six months ended April 30, 2007, the Fund incurred $250,817 for investment advisory services. Administrative Fees. The Corporation has an administrative agreement with Brown Brothers Harriman Trust Company, LLC ("BBHTC"). BBHTC receives a fee from the Fund for administration services calculated daily and paid monthly at an annual rate of 0.10% of the Fund's average daily net assets. BBHTC has a sub-administration services agreement with Federated Service Company ("FSC") for which FSC receives compensation paid by BBHTC. For the six months ended April 30, 2007, the Fund incurred $125,409 for administrative services. Shareholder Servicing Fees. The Corporation has a shareholder servicing agreement with BBH. BBH receives a fee from the Fund for such services calculated daily and paid monthly at an annual rate of 0.15% of Class N shares' average daily net assets. For the six months ended April 30, 2007, the Fund incurred $112,155 for shareholder servicing services. Custody and Accounting Fees. BBH acts as a custodian and receive a custody and accounting fee from the Fund calculated daily and paid monthly. BBH holds all cash and investments and calculates the daily net asset value. The custody fee is a transaction based fee with an annual minimum of $30,000, and the accounting fee is calculated at 0.04% per annum on the first $100 million of net assets, 0.02% per annum on the next $400 million of net assets and 0.01% per annum on all net assets over $500 million. For the six months ended April 30, 2007, the Fund incurred $72,335 for custody and accounting services. These fees for the Fund were reduced by $4,477 as a result of an expense offset arrangement with the Fund's custodian. In the event that the Fund is overdrawn, under the custody agreement with BBH, BBH will make overnight loans to the Fund to cover overdrafts. Pursuant to their agreement the Fund will pay the Federal Funds overnight investment rate on the day of overdraft. The total interest paid by the Fund for the six months ended April 30, 2007 was $553. Securities Lending Fees. The Corporation has a security lending agreement with BBH for which BBH receives a fee from the Fund for each security loaned. For the six months ended April 30, 2007, the Fund paid $104 to BBH for security lending services. Board of Directors' Fees. Each Director receives an annual fee as well as reimbursement for reasonable out-of-pocket expenses from the Fund. For the six months ended April 30, 2007, the Fund incurred $11,303 for these fees. 28 BBH BROAD MARKET FUND - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS (continued) April 30, 2007 (unaudited) 3. Investment Transactions. For the six months ended April 30, 2007, the cost of purchases and the proceeds of sales of investment securities other than short-term investments were $412,667,547 and $389,763,730, respectively. 4. Securities on Loan. As of April 30, 2007, the Fund had no securities on loan. 5. Capital Stock. The Corporation is permitted to issue 2,500,000,000 shares of capital stock, par value $.001 per share, of which 277,777,778 shares have been classified as Class N shares of the Fund and 277,777,778 have been classified as Class I shares of the Fund. Transactions in shares of capital stock were as follows:
SHARES AMOUNT For the six For the six months ended For the months ended For the April 30, 2007 year ended April 30, 2007 year ended (unaudited) October 31, 2006 (unaudited) October 31, 2006 -------------- ---------------- -------------- ---------------- Class N Capital stock sold ..... 1,223,648 2,691,831 $15,448,405 $27,155,668 Capital stock issued in connection with reinvestment of dividends ............ 427,016 343,925 1,431,961 3,454,818 Capital stock redeemed . (839,166) (3,167,700) (8,501,391) (31,750,476) --------- ---------- ----------- ----------- Net increase (decrease) 811,498 (131,944) $8,378,975 $(1,139,990) ========= ========== =========== =========== Class I Capital stock sold ..... 1,229,447 1,487,919 $12,412,478 $15,183,847 Capital stock issued in connection with reinvestment of dividends ............ 155,956 338,884 1,575,048 3,401,865 Capital stock redeemed . (15,344) (1,727,757) (155,124) (17,149,256) --------- ---------- ----------- ----------- Net increase ........... 1,370,059 99,046 $13,832,402 $ 1,436,456 ========= ========== =========== ===========
6. Subsequent Event. On May 23, 2007 at a special meeting of the shareholders of BBH Fund, Inc. (the "Corporation") the shareholders approved the transfer of all assets of each series of the Corporation (each a "Predecessor Fund") to a corresponding series of BBH Trust, a newly organized Delaware statutory trust, (each a "Successor Fund") in exchange for shares of each Successor Fund having an aggregate value equal to the assets and liabilities of each Predecessor Fund and the assumption by each Successor Fund of all liabilities of each Predecessor Fund. FINANCIAL STATEMENT APRIL 30, 2007 29 BBH BROAD MARKET FUND - -------------------------------------------------------------------------------- DISCLOSURE OF FUND EXPENSES April 30, 2007 (unaudited) EXAMPLE As a shareholder of BBH Broad Market Fund (the "Fund"), you may incur two types of costs: (1) transaction costs on purchase payments, reinvested dividends, or other distributions; redemption fees; and exchange fees; and (2) ongoing costs, including management fees; and other Fund expenses. This Example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. The Example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period (November 1, 2006 to April 30, 2007). ACTUAL EXPENSES The first line of the table below provides information about actual account values and actual expenses. You may use information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled "Expenses Paid During the Period" to estimate the expenses you paid on your account during the period. HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES The second line of the table below provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid during the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds. 30 1 BBH BROAD MARKET FUND - -------------------------------------------------------------------------------- DISCLOSURE OF FUND EXPENSES (continued) April 30, 2007 (unaudited) Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as redemption fees or exchange fees. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher. Expenses Paid Beginning Ending During Period Account Value Account Value November 1, 2006 November 1, 2006 April 30, 2007 to April 30, 2007(1) ---------------- -------------- -------------------- Class N Actual................ $1,000 $1,027.40 2.82 Hypothetical(2)....... $1,000 $1,022.02 2.81 Expenses Paid Expenses Paid Beginning Ending During Period Account Value Account Value November 1, 2006 November 1, 2006 April 30, 2007 to April 30, 2007(1) ---------------- -------------- -------------------- Class I Actual................ $1,000 $1,028.20 2.06 Hypothetical(2)....... $1,000 $1,022.76 2.06 (1) Expenses are equal to the Fund's annualized expense ratio of 0.56% and 0.41% for Class N and I shares, respectively, multiplied by the average account value over the period, multiplied by 181/365 (to reflect the one-half year period). (2) Assumes a return of 5% before expenses. For the purpose of the calculation, the applicable annualized expense ratio for each class of shares is subtracted from the assumed return before expenses. FINANCIAL STATEMENT APRIL 30, 2007 31 BBH BROAD MARKET FUND - -------------------------------------------------------------------------------- DISCLOSURE OF ADVISOR SELECTION April 30, 2007 (unaudited) Approval of Continuation of Investment Advisory Agreement At a meeting held on December 11, 2006, the Board of Directors (the "Board") of BBH Fund, Inc. (the "Corporation") unanimously approved the renewal of the Investment Advisory Agreement (the "IA Agreement") between the Corporation and Brown Brothers Harriman & Co. ("BBH") for an additional one-year term. The following is a summary of the factors the Board took into consideration in making its determination to approve the renewal of the IA Agreement. Nature, Extent and Quality of Services Provided by BBH The Board noted that, under the IA Agreement in respect of each Fund, BBH, subject to the supervision of the Board, is responsible for providing a continuous investment program and, for each Fund other than the International Fund, makes purchases and sales of portfolio securities consistent with the Fund's investment objective and policies. The Board considered the scope and quality of services provided by BBH under the IA Agreement and noted that the scope of services provided had expanded over time, primarily, as a result of regulatory developments. The Board noted that, for example, BBH is responsible for maintaining and monitoring its own and, to varying degrees, the Funds' compliance program, and these compliance programs have recently been refined and enhanced in light of new regulatory requirements. The Board considered the quality of the investment research capabilities of BBH and the other resources it has dedicated to performing services for the Funds. The Board concluded that, overall, they were satisfied with the nature, extent and quality of services provided (and expected to be provided) to each of the Funds under the IA Agreement. Costs of Services Provided and Profitability to BBH At the request of the Board, BBH provided information concerning the profitability of BBH's investment company, advisory fees and other fees and its statement of condition for the recent period and as of December 31, 2006, respectively. The Board also reviewed BBH's profitability data for each Fund, which also included the effect of revenue generated by the shareholder servicing, administration, custody and other fees paid by a Fund. The Board noted that most beneficial owners of the Funds' shares are holding these shares in the context of an overall investment management program for which BBH is the adviser and for which BBH charges an investment management fee. Since BBH excludes the assets in the Funds when calculating its advisory fees for its clients, the Board agreed that it is appropriate in an analysis of Fund profitability to reduce the advisory fees for the Funds by the advisory fees that otherwise would have been earned by BBH on the assets involved. The Board discussed the difficulty of making comparisons of profitability from fund advisory contracts because comparative information is not generally publicly available and is affected by numerous factors, including the structure of the particular adviser, the types of funds it manages, its business mix, numer- 32 BBH BROAD MARKET FUND - -------------------------------------------------------------------------------- DISCLOSURE OF ADVISOR SELECTION (continued) April 30, 2007 (unaudited) ous assumptions regarding allocations and the adviser's capital structure and cost of capital. In considering profitability information, the Board considered the effect of fall-out benefits on BBH's expenses, as well as the "revenue sharing" arrangements BBH has entered into with certain entities that distribute shares of the Funds. The Board focused on profitability of BBH's relationships with the Funds before taxes and distribution expenses. The Board concluded that it was satisfied that BBH's level of profitability from its relationship with each Fund was not excessive. The Board also considered the advisory fees of each Fund in comparison to the fees of comparable funds. The Board recognized that the expense ratios for the Funds potentially reflected on BBH's provision of services, as BBH is directly the provider of substantial services and coordinates services provided to the Fund by others. The Board took note of situations in which BBH waived its management fee or reimbursed a Fund's expenses. Fall-Out Benefits The Board considered that BBH did not allocate the Funds' portfolio transactions for third party research, although it did benefit from proprietary research received from brokers that execute the Funds' purchases and sales of securities. The Board recognized that the aggregate amount of commissions generated by Fund transactions was unlikely to result in the Funds receiving from full service broker dealers substantial discounts on commission rates. The Board received and reviewed information concerning BBH's policies with respect to allocating portfolio brokerage. The Board also considered that BBH receives shareholder servicing fees from certain funds, and is the Funds' administrator, custodian and securities lending agent. The Board noted that BBH retained no portion of the 12b-1 fees paid by the Fund that operated with a plan. The Board recognized that BBH's profitability would be somewhat lower if it did not receive proprietary research for commissions or, if it did not receive the other benefits described above. The Board recognized that most Fund shareholders were also BBH clients, and that substantial assets are invested in the Funds as a result of an overall investment management program for the shareholder. The Board noted that the Funds also derive reputational and other benefits from their association with BBH and their use of the BBH name, which is licensed to the Funds by BBH. Thus, the Board did not believe that BBH revenues associated with its clients should be fairly regarded as "fallout" benefit from the Funds. Economies of Scale The Board noted that the Funds' advisory fee schedules do not contain breakpoints. As a result, if assets increase, the fee rates would not be reduced on the incremental assets. There may be other economies of scale because many expenses did not rise (and fall) proportionally to increases (and decreases) in total net assets. The Board noted that BBH had priced the advisory services in recognition of the fact that it FINANCIAL STATEMENT APRIL 30, 2007 33 BBH BROAD MARKET FUND - -------------------------------------------------------------------------------- DISCLOSURE OF ADVISOR SELECTION (continued) April 30, 2007 (unaudited) was largely its own clients who were shareholders and, accordingly, sought to assure that the cost of advisory service and total expenses for each Fund were fair and reasonable. Consequently, the advisory fees are in the range of institutional separate account fees, which is to say substantially below, even taking into account the BBH administration fees, typical mutual fund fees. In addition, the Board noted that BBH had supported and continued to support certain Funds through fee waivers and expense reimbursements. Based on information they had been provided over many years, the Board observed that in the mutual fund industry as a whole, as well as among funds similar to the Funds, there appeared to be no uniformity or pattern in the fees and asset levels at which breakpoints (if any) apply. In light of the Fund's current size and expense structure, the Board concluded that it was unnecessary at this time to consider breakpoints. Investment Results The Board considered the investment results of each of the Funds as compared to investment companies with its peers and with one or more selected securities indices. In addition to the information received by the Board for the meeting, the Board received detailed performance information for each Fund at each regular Board meeting during the year. At the meeting, the Board reviewed information showing performance of each Fund compared to the peers generally over the 1-, 3-, 5- and since inception periods ended October 31, 2006 and compared to one or more securities indices over comparable periods. Advisory Fee Rate The Board considered the advisory fee rate paid by each Fund to BBH. The Board recognized that it is difficult to make comparisons of these fees, and combined advisory and administration fees, because there are variations in the services that are included in the fees paid by other funds. BBH also manages accounts for institutional clients with investment objectives similar to those of certain Funds. The fee rates payable by the BBH's institutional clients are generally comparable although occasionally lower, than the rates paid by the Funds. BBH reviewed with the Board the significant differences in the scope of services that BBH provides to institutional clients and to the Funds through both the IA and Administration Agreements (the "Admin. Agreements"). For example, BBH provides, among other things, officers (including the Funds' Chief Compliance Officer and officers to provide required certifications) and administrative services, such as shareholder communications, and tax compliance, with the attendant costs and exposure to liability. BBH also coordinates the provision of services to the Funds by nonaffiliated service providers. These services normally are not provided to non investment company clients, and fees charged to the Funds reflect the costs and risks of the additional obligations. The Board also noted that since the Funds are constantly issuing and redeeming their shares, they are more difficult to manage than an institutional account, where the assets are relatively stable. Accordingly, the Board did not place significant weight on these fee comparisons. 34 BBH BROAD MARKET FUND - -------------------------------------------------------------------------------- DISCLOSURE OF ADVISOR SELECTION (continued) April 30, 2007 (unaudited) The following factors specific to BBH Broad Market Fund also were noted and considered by the Board in deciding to approve the continuation of the IA Agreements: The Board reviewed the information showing performance of the Broad Market Fund's Class N shares and Class I shares compared to the Lehman Brothers Aggregate Bond Index. Both classes of the Broad Market Fund on a pre-fee basis outperformed the benchmark by a meaningful amount over all relevant periods and on an after-fee basis performed roughly in line with or modestly exceeded the benchmark over all relevant periods. The Board viewed with favor this performance and noted the benchmark has no fees. The Board also noted the expense ratio for both share classes was in line with or lower than many funds of similar size and investment mandate. Taking into account these comparisons and the other factors considered, the Board concluded that the Broad Market Fund's investment results over time and its total expense ratio had been satisfactory. FINANCIAL STATEMENT APRIL 30, 2007 35 INVESTMENT ADVISER AND ADMINISTRATOR BROWN BROTHERS HARRIMAN 140 BROADWAY NEW YORK, NY 10005 DISTRIBUTOR EDGEWOOD SERVICES, INC. 5800 CORPORATE DRIVE PITTSBURGH, PA 15237-7000 SHAREHOLDER SERVICING AGENT BROWN BROTHERS HARRIMAN 140 BROADWAY NEW YORK, NY 10005 (800) 625-5759 To obtain information or make shareholder inquiries: By telephone: Call 1-800-575-1265 By E-mail send your request to: bbhfunds@bbh.com On the internet: www.bbhfunds.com This report is submitted for the general information of shareholders and is not authorized for distribution to prospective investors unless preceded or accompanied by an effective prospectus. Nothing herein contained is to be considered an offer of sale or a solicitation of an offer to buy shares of the Fund. Such offering is made only by the prospectus, which includes details as to offering price and other material information. The Fund files with the SEC a complete schedule of its portfolio holdings, as of the close of the first and third quarters of its fiscal year, on "Form N-Q." Information on Form N-Q is available without charge and upon request by calling the Funds at the toll-free number listed above. A text only version can be viewed online or downloaded from the SEC's website at http://www.sec.gov; and may be reviewed and copied at the SEC's Public Reference Room in Washington, DC (call 1-800-SEC-0330 for information on the operation of the Public Reference Room). You may also access this information from the BBH website at BBH.com by clicking on "BBH Mutual Funds" and selecting "Online Documents/Holdings Information." A copy of the Fund's Proxy Voting Policy is available upon request by calling the toll-free number listed above. A text-only version of the policy can be viewed online or downloaded from the SEC at www.sec.gov. BROWN [LOGO] BROTHERS HARRIMAN ITEM 2. CODE OF ETHICS. (a) The Registrant has adopted a code of ethics that applies to the Registrant's principal executive officer, principal financial officer, principal accounting officer or controller or persons performing similar functions. (b) No answer required. (c) Not applicable. (d) Not applicable. (e) Not applicable. (f) (1) A copy of the code of ethics referenced in Item 2(a) of this Form N-CSR is available and can be mailed, free of charge, to anyone by calling (800) 575-1265. (2) Not applicable. (3) Not applicable. ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT. (a)(1) The Registrant's Board of Trustees has designated two members of the audit committee as financial experts. (2) The following Trustees have been designated as audit committee financial experts by the Board of Trustees: independent audit committee members Arthur Miltenberger and David Feldman are the designated audit committee financial experts. (3) Not applicable. (b) No answer required. (c) No answer required. (d) No answer required. ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES. NOT APPLICABLE FOR SEMI-ANNUAL REPORT ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS. (a) The Trust has a separately designated audit committee. The members of the audit committee are: Joseph V. Shields, David P. Feldman, Samuel Pryor, Auther D. Miltenberger, Eugene P. Beard, Alan G. Lowy, H. Whitney Wagner. (b) Not applicable. ITEM 6. SCHEDULE OF INVESTMENTS Not applicable. ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES. Not applicable. ITEM 8. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT COMPANY AND AFFILIATED PURCHASERS Not applicable. ITEM 9. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. Not applicable. ITEM 10. CONTROLS AND PROCEDURES. (a) Based upon their evaluation of the Registrant's disclosure controls and procedures as conducted within 90 days of the filing date of this Form N-CSR, the Registrant's principal financial officer and principal executive officer have concluded that those disclosure controls and procedures provide reasonable assurance that the material information required to be disclosed by the Registrant on this report is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms. (b) There were no significant changes in the Registrant's internal controls or in other factors that could significantly affect these controls subsequent to the date of their evaluation. ITEM 11. EXHIBITS. (a)(1) The Registrant?s code of ethics that is the subject of the disclosure required by Item 2 is filed as Exhibit 11(a) (1) (a)(2) A separate certification for each principal executive officer and principal financial officer of the Registrant as required by Rule 30a-2(a) under the Act (17 CFR 270.30a-2) is filed as Exhibit 11(a) (2). (a)(3) Not applicable (b) The certifications required by Rule 30a-2(b) under the Act and Section 1350 of Chapter 63 of Title 18 of the United States Code are attached as exhibit 11(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 FUND, INC. ------------------------------------- By (Signature and Title)* /s/ John A. Nielsen ------------------------------ John A. Nielsen, President (Principle Executive Officer) Date: 07-09-07 ------------------ Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated. By (Signature and Title)* /s/ Charles H. Schreiber III --------------------------- Charles H. Schreiber III (Principal Financial Officer) Date: 07-09-07 ------------------ - - Print name and title of each signing officer under his or her signature. EXHIBIT 11(a) (1) A copy of the code of ethics is available and can be mailed, free of charge, to anyone by calling (800) 575-1265. EXHIBIT 11(a) (2) SECTION 302 CERTIFICATION OF PRINCIPLE EXECUTIVE OFFICER. I, John Nielsen, certify that: 1. I have reviewed this report on Form N-CSR of BBH Fund, Inc. on behalf of: BBH Real Return Fund, BBH International Equity Fund, BBH Core Select, and BBH Broad Market Fund, ("Registrant"); 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the Registrant as of, and for, the periods presented in this report; 4. The Registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in rule 30a-3(c) under the Investment Company Act of 1940) and internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) for the Registrant and have: a.) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b.) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; c.) evaluated the effectiveness of the Registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; d.) disclosed in this report any change in the Registrant's internal control over financial reporting that occurred during the second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the Registrant's internal control over financial reporting; and 5. The Registrant's other certifying officer and I have disclosed to the Registrant's auditors and the audit committee of the Registrant's board of directors (or persons performing the equivalent functions): a.) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant's ability to record, process, summarize, and report financial information; and b.) any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant's internal control over financial reporting. Date: 07-09-07 /s/ John A. Nielsen ======================= John A. Nielsen President - Principal Executive Officer EXHIBIT 11(a) (2) SECTION 302 CERTIFICATION OF PRINCIPLE FINANCIAL OFFICER. I, Charles H. Schreiber III, certify that: 1. I have reviewed this report on Form N-CSR of BBH Fund, Inc. on behalf of: BBH Real Return Fund, BBH International Equity Fund, BBH Core Select, and BBH Broad Market Fund, ("Registrant"); 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the Registrant as of, and for, the periods presented in this report; 4. The Registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in rule 30a-3(c) under the Investment Company Act of 1940) and internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) for the Registrant and have: a.) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b.) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; c.)evaluated the effectiveness of the Registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; d.) disclosed in this report any change in the Registrant's internal control over financial reporting that occurred during the second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the Registrant's internal control over financial reporting; and 5. The Registrant's other certifying officer and I have disclosed to the Registrant's auditors and the audit committee of the Registrant's board of directors (or persons performing the equivalent functions): a.) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Registrant's ability to record, process, summarize, and report financial information; and b.) any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant's internal control over financial reporting. 6. The Registrant's other certifying officer and I have indicated in this report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: 07-09-07 /s/ Charles H. Schreiber III ========================== Charles H. Schreiber III Treasurer - Principal Financial Officer EXHIBIT 11(b) SECTION 906 CERTIFICATIONS Pursuant to 18 U.S.C.ss. 1350, the undersigned officers of BBH Fund, Inc. ("Registrant"), hereby certify, to the best of our knowledge, that the Registrant's Report on Form N-CSR for the period ended April 30, 2007 (the "Report") fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities and Exchange Act of 1934 and that the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant. Date: 07-09-07 ------------------ /s/ John A. Nielsen ======================= John A. Nielsen President - Principal Executive Officer Date: 07-09-07 ------------------ /s/ Charles H. Schreiber III ======================= Charles H. Schreiber III Treasurer - Principal Financial Officer This certification is being furnished solely pursuant to 18 U.S.C.ss. 1350 and is not being filed as part of the Report or as a separate disclosure document. BBH Fund, Inc. April 30, 2007 NCSR page 161 of 171 pages -----END PRIVACY-ENHANCED MESSAGE-----