0000891092-14-000195.txt : 20140109 0000891092-14-000195.hdr.sgml : 20140109 20140109125145 ACCESSION NUMBER: 0000891092-14-000195 CONFORMED SUBMISSION TYPE: N-CSR PUBLIC DOCUMENT COUNT: 9 CONFORMED PERIOD OF REPORT: 20131031 FILED AS OF DATE: 20140109 DATE AS OF CHANGE: 20140109 EFFECTIVENESS DATE: 20140109 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BBH Trust CENTRAL INDEX KEY: 0001342947 IRS NUMBER: 000000000 FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: N-CSR SEC ACT: 1940 Act SEC FILE NUMBER: 811-21829 FILM NUMBER: 14518167 BUSINESS ADDRESS: STREET 1: 40 WATER STREET CITY: BOSTON STATE: MA ZIP: 02109 BUSINESS PHONE: 617-423-0800 MAIL ADDRESS: STREET 1: 40 WATER STREET CITY: BOSTON STATE: MA ZIP: 02109 0001342947 S000015104 BBH Core Select C000041204 Class N Shares BBTEX C000092545 Retail Class Shares BBTRX 0001342947 S000015105 BBH International Equity Fund C000041205 Class N Shares BBHEX C000041206 Class I Shares BBHLX 0001342947 S000015110 BBH Limited Duration Fund C000041213 Class N Shares BBBMX C000041214 Class I Shares BBBIX 0001342947 S000039385 BBH Global Core Select C000121369 Class N Shares BBGNX C000121370 Retail Class Shares BBGRX N-CSR 1 e56674ncsr.htm ANNUAL REPORT

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM N-CSR

 

CERTIFIED SHAREHOLDER REPORT OF REGISTERED

MANAGEMENT INVESTMENT COMPANIES

 

Investment Company Act file number: 811-21829

 

BBH TRUST

On behalf of the following series:

BBH Limited Duration Fund

BBH Core Select

BBH Global Core Select

BBH International Equity Fund

 

(Exact name of registrant as specified in charter)

 

140 Broadway, New York, NY 10005

(Address of principal executive offices) (Zip Code)

 

Corporation Services Company

2711 Centerville Road, Suite 400, Wilmington, DE 19808

(Name and address of agent for service)

 

Registrant's telephone number, including area code: (800) 575-1265

 

Date of fiscal year end: October 31

 

Date of reporting period: October 31, 2013

 

 

 
 

Item 1. Report to Stockholders.

 

Annual Report

OCTOBER 31, 2013

BBH Core Select

 
 

BBH CORE SELECT
MANAGEMENT’S DISCUSSION OF FUND PERFORMANCE
October 31, 2013

 

BBH Core Select (the “Fund” or “Core Select”) rose by 23.78%, net of fees, during its fiscal year ended October 31, 2013. During the same twelve month period, the S&P 500 Index1 (“S&P 500”) returned 27.18%. For the five years ended October 31, 2013, Core Select has returned 15.95% per year while the S&P 500 has increased by 15.17%.

Core Select seeks to provide shareholders with long term growth of capital. Fundamental business analysis and a valuation framework that is based on intrinsic value2 are the key elements underlying each Core Select investment. We look for companies that offer all, or most, of the following business and financial attributes: (i) essential products and services, (ii) loyal customers, (iii) leadership in an attractive market niche or industry, (iv) sustainable competitive advantages, (v) high returns on invested capital, and (vi) strong free cash flow. We believe businesses possessing these traits are favorably positioned to protect and grow capital through varying economic and market environments. In addition, we seek to invest in companies whose managers have high levels of integrity, are excellent operators, and are good capital allocators. Pursuant to our goal of not losing money on any single investment, we explicitly identify key risks outside of company management’s control so that we can fully consider the range of potential outcomes for each business. When a company meets our investment criteria and desired risk profile, we will consider establishing a position if its market price reaches 75% or less of our intrinsic value estimate. We maintain a buy-and-own approach with holding periods often reaching 3-5 years or longer. We will typically sell an investment if it appreciates to a level near our estimate of intrinsic value.

Developed world equity markets performed strongly in fiscal 2013 driven by modest economic expansion, corporate earnings leverage and continued monetary accommodation by central banks. Based on our assessment of macroeconomic trends along with the steady flow of feedback we get from the management teams of our existing and prospective holdings, growth is still being suppressed by cautious behavior on the part of consumers and business decision-makers. In a broad sense, this seems consistent with what could be expected of a post-crisis period, in which de-leveraging and capital rebuilding are still important forces. In spite of this low growth setting, corporate earnings have improved disproportionately thanks to productivity gains, favorable trends on input costs, and very low interest rates. Share repurchases have also added incrementally to corporate earnings on a per-share basis.

 
1The S&P 500 Index is an unmanaged capitalization-weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries. Investments cannot be made in an index.
2We prepare proprietary financial models for each Core Select company in order to determine an estimate of intrinsic value. Discounted cash flow analysis is the primary quantitative model used in our research process. We supplement our discounted cash flow work with other quantitative analyses, such as economic profit models, internal rate of return models, and free cash flow multiples.
2
 

BBH CORE SELECT
MANAGEMENT’S DISCUSSION OF FUND PERFORMANCE (continued)
October 31, 2013

 

Despite this reasonably positive set of circumstances, central banks have continued to intervene heavily in financial markets in a concerted attempt to provide additional stimulus for growth, employment, capacity utilization and ‘benign’ inflation. We believe that aggressive monetary actions are significantly influencing the prices of financial assets and that certain equities are now trading at levels that are inconsistent with fundamentals. Accordingly, we are acting with a healthy degree of caution. Our consistent goal is to minimize both business risk and price risk by applying our demanding qualitative criteria and using an intrinsic value framework to maintain a margin of safety in our holdings.

During fiscal 2013, we added two new companies to the Core Select portfolio: Schlumberger, the global leader in providing energy services to exploration and production companies, and Bed, Bath & Beyond, the leading specialty retailer of home furnishings. While quite different in their operations, both of these companies share the common thread of being innovative, competitively advantaged businesses with attractive prospects and a large base of loyal customers. Led by capable and shareholder-oriented management teams, we believe both companies are well positioned to generate solid long-term growth in free cash flow and earn high returns on capital.

We exited several positions in fiscal 2013: Anheuser-Busch InBev, Dell, ADP and the small amount of Liberty Ventures tracking stock that was distributed to us via our position in Liberty Interactive. Anheuser-Busch and ADP were very successful investments for the Fund, having produced strong total returns during the period of our ownership. These companies will remain on our investment ‘wish list’ for potential re-investment at more attractive valuations. While we were pleased that some of the latent value we saw in Dell was realized via the recently completed leveraged buyout, it was clearly a disappointing investment for Core Select, as the heavy pressures from a structurally unattractive PC market were not adequately offset by more positive trends elsewhere in the business.

Our largest positive contributors in fiscal 2013 were Google, Berkshire Hathaway, Comcast, EOG Resources and Novartis. Google’s share price rose by more than 50% during fiscal 2013 driven by consistently strong growth in revenue and earnings along with lessened concern around the tradeoff between price and quantity in the company’s core search-advertising business. Berkshire Hathaway and Comcast, which have both been large positions in Core Select for several years, continued to benefit from strong business execution and favorable sentiment towards high quality, predictable companies that have owner-operator cultures. EOG Resources continued its remarkable run of oil production growth and reserve development and has now become one of the leading independent exploration & production companies in the U.S. Novartis has successfully navigated a recent management transition and has generated solid results despite challenging conditions in certain parts of the global healthcare market.

FINANCIAL STATEMENT OCTOBER 31, 2013 3
 

BBH CORE SELECT
MANAGEMENT’S DISCUSSION OF FUND PERFORMANCE (continued)
October 31, 2013

 

None of the 33 securities we held in Core Select during fiscal year 2013 had a negative contribution to returns. The smallest positive contributions came from Wal-Mart, Target and Southwestern Energy. Our two discount retailers have experienced headwinds related to cautious consumer behavior, price deflation in certain categories, e-commerce competition and challenges relating to international expansion. Despite these pressures, we are confident that their scale advantages, operating improvements and overall consumer value proposition will preserve their important roles in the retail landscape and provide a base for attractive long-term free cash flow growth. Southwestern Energy’s strong financial results and consistent operational excellence have been offset by flattish commodity prices and generally poor investor sentiment toward the natural gas industry. We continue to have a very constructive assessment of Southwestern’s core operations in gas production and transportation, and we believe its New Ventures activities hold some potential for additional upside.

As of October 31, 2013, the Core Select portfolio was trading at roughly 87% of our weighted average intrinsic value estimate. This level is at the high end of the historical range that we have observed, underscoring our view that certain equities are reaching valuation levels that may assume an overly robust outlook. Our elevated cash position in the Fund (13.2% at the fiscal year’s end, including cash equivalents) reflects actions we have taken this year to trim or sell positions that have achieved our intrinsic value estimates, as well as the fact that we have not made many new purchases since most of the companies that meet our qualitative criteria are trading above 75% of our intrinsic value estimates. We do not use cash as a hedge or an expression of a macro-economic perspective. Our distinct preference is to own the equities of high quality businesses at attractive valuations.

The Core Select team remains focused on the consistent application of our investment criteria and valuation discipline. We aspire to buy and own a portfolio of well positioned, cash-generative companies that exhibit both excellent resiliency in the context of challenges and the ability to participate during periods of stronger economic expansion.

4
 

BBH CORE SELECT
MANAGEMENT’S DISCUSSION OF FUND PERFORMANCE (continued)
October 31, 2013

 

Growth of $10,000 Invested in BBH Core Select

The graph below illustrates the hypothetical investment of $10,0001 in the Class N shares of the Fund over the ten years ended October 31, 2013 as compared to the S&P 500.

* net of fees and expenses

The annualized gross expense ratios as in the February 28, 2013 prospectus for Class N and Retail Class shares were 1.12% and 1.43%, respectively.

Performance data quoted represents no guarantee of future results. Investment return and principal value will fluctuate, so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Mutual fund performance changes over time and current performance may be lower or higher than what is stated. For current to the most recent month end performance and after tax returns, contact the Fund at 1-800-575-1265.

 
1The Fund’s performance assumes the reinvestment of all dividends and distributions. The S&P 500 has been adjusted to reflect reinvestment of dividends on securities. The S&P 500 is not adjusted to reflect sales charges, expenses or other fees that the Securities and Exchange Commission requires to be reflected in the Fund’s performance. The index is unmanaged. Investments cannot be made in an index.
FINANCIAL STATEMENT OCTOBER 31, 20135
 

BBH CORE SELECT

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Trustees of the BBH Trust and Shareholders of BBH Core Select:

We have audited the accompanying statement of assets and liabilities, including the portfolio of investments, of BBH Core Select (a series of BBH Trust) (the “Fund”) as of October 31, 2013, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the periods presented. These financial statements and financial highlights are the responsibility of the Fund’s management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. The Fund is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Fund’s internal control over financial reporting.

Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of October 31, 2013, by correspondence with the custodian and brokers; where replies were not received from brokers, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of BBH Core Select as of October 31, 2013, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the periods presented, in conformity with accounting principles generally accepted in the United States of America.

DELOITTE & TOUCHE LLP

Boston, Massachusetts
December 23, 2013

6
 

       
BBH CORE SELECT
PORTFOLIO ALLOCATION      
October 31, 2013      
 
SECTOR DIVERSIFICATION          
    U.S. $ Value     Percent of
Net Assets
Basic Materials  $238,645,607    4.0%
Communications   857,280,718    14.3 
Consumer Cyclical   468,298,026    7.8 
Consumer Non-Cyclical   1,186,739,329    19.7 
Energy   635,073,229    10.6 
Financials   1,244,027,859    20.7 
Industrials   193,935,999    3.2 
Technology   398,625,910    6.6 
Repurchase Agreements   320,000,000    5.3 
U.S. Treasury Bills   471,914,382    7.8 
Liabilities in Excess of Other Assets   (2,418,715)   (0.0)
NET ASSETS  $6,012,122,344    100.0%

 

All data as of October 31, 2013. The Fund’s sector diversification is expressed as a percentage of net assets and may vary over time.

The accompanying notes are an integral part of these financial statements.

FINANCIAL STATEMENT OCTOBER 31, 20137
 

       
BBH CORE SELECT
PORTFOLIO OF INVESTMENTS   
October 31, 2013   
 
 Shares       Value 
     COMMON STOCKS (86.9%)     
     BASIC MATERIALS (4.0%)     
 1,879,457   Celanese Corp. (Class A)  $105,268,387 
 1,069,499   Praxair, Inc.   133,377,220 
     Total Basic Materials   238,645,607 
           
     COMMUNICATIONS (14.3%)     
 6,550,911   Comcast Corp. (Class A)   311,692,345 
 1,367,531   eBay, Inc.1   72,082,559 
 281,467   Google, Inc. (Class A)1   290,074,261 
 6,803,841   Liberty Media Corp. (Class A)1   183,431,553 
     Total Communications   857,280,718 
           
     CONSUMER CYCLICAL (7.8%)     
 2,211,468   Bed, Bath & Beyond, Inc.1   170,990,705 
 2,995,682   Target Corp.   194,090,237 
 1,344,848   Wal-Mart Stores, Inc.   103,217,084 
     Total Consumer Cyclical   468,298,026 
           
     CONSUMER NON-CYCLICAL (19.7%)     
 2,956,211   Baxter International, Inc.   194,725,619 
 1,652,255   DENTSPLY International, Inc.   77,821,210 
 1,196,040   Diageo, Plc. ADR   152,602,744 
 564,249   Henry Schein, Inc.1   63,438,515 
 1,258,982   Johnson & Johnson   116,594,323 
 3,413,195   Nestle SA ADR   247,149,450 
 3,387,124   Novartis AG ADR   262,671,466 
 853,086   PepsiCo, Inc.   71,736,002 
     Total Consumer Non-Cyclical   1,186,739,329 
           
     ENERGY (10.6%)     
 1,062,870   EOG Resources, Inc.   189,616,008 
 1,602,818   Occidental Petroleum Corp.   153,998,753 
 1,712,369   Schlumberger, Ltd.   160,483,223 
 3,518,948   Southwestern Energy Co.1   130,975,245 
     Total Energy   635,073,229 

 

The accompanying notes are an integral part of these financial statements.

8
 

       
BBH CORE SELECT
PORTFOLIO OF INVESTMENTS (continued)   
October 31, 2013   
 
 Shares       Value 
     COMMON STOCKS (continued)     
     FINANCIALS (20.7%)     
 1,953   Berkshire Hathaway, Inc. (Class A)1  $337,858,844 
 2,386,288   Chubb Corp.   219,729,399 
 6,711,463   Progressive Corp.   174,296,694 
 7,285,341   US Bancorp   272,180,340 
 5,621,049   Wells Fargo & Co.   239,962,582 
     Total Financials   1,244,027,859 
           
     INDUSTRIALS (3.2%)     
 4,454,203   Waste Management, Inc.   193,935,999 
     Total Industrials   193,935,999 
           
     TECHNOLOGY (6.6%)     
 5,607,244   Microsoft Corp.   198,216,075 
 2,884,840   QUALCOMM, Inc.   200,409,835 
     Total Technology   398,625,910 
     Total Common Stocks (Identified cost $3,990,457,621)   5,222,626,677 

 

The accompanying notes are an integral part of these financial statements.

FINANCIAL STATEMENT OCTOBER 31, 20139
 

             
BBH CORE SELECT
PORTFOLIO OF INVESTMENTS (continued)         
October 31, 2013         
 
Principal      Maturity    Interest     
Amount      Date    Rate   Value 
   REPURCHASE AGREEMENTS (5.3%)               
$150,000,000  BNP Paribas SA (Agreement dated               
   10/31/13 collateralized by U.S. Treasury               
   Bond 0.875%, due 11/30/16, valued at               
   $153,000,000)   11/01/13    0.080%  $150,000,000 
170,000,000  Deutsche Bank AG (Agreement dated               
   10/31/13 collateralized by U.S. Treasury               
   Bond 0.750%, due 06/30/17, valued at               
   $173,400,000)   11/01/13    0.090    170,000,000 
   Total Repurchase Agreements               
   (Identified cost $320,000,000)             320,000,000 
                   
   U.S. TREASURY BILLS (7.8%)               
150,000,000  U.S. Treasury Bill2,3   01/02/14    0.050    149,992,950 
322,000,000  U.S. Treasury Bill2,3   04/03/14    0.040    321,921,432 
   Total U.S. Treasury Bills               
   (Identified cost $471,932,343)             471,914,382 
                   
TOTAL INVESTMENTS (Identified cost $4,782,389,964)4         100.0%  $6,014,541,059 
LIABILITIES IN EXCESS OF OTHER ASSETS         (0.0)%   (2,418,715)
NET ASSETS        100.0%  $6,012,122,344 

 

 
1Non-income producing security.
2Coupon represents a weighted average yield.
3Coupon represents a yield to maturity.
4The aggregate cost for federal income tax purposes is $4,783,414,285, the aggregate gross unrealized appreciation is $1,232,174,923 and the aggregate gross unrealized depreciation is $1,048,149, resulting in net unrealized appreciation of $1,231,126,774.

Abbreviations:

ADR – American Depositary Receipt

The accompanying notes are an integral part of these financial statements.

10
 

BBH CORE SELECT
PORTFOLIO OF INVESTMENTS (continued)
October 31, 2013

 

FAIR VALUE MEASUREMENTS

The Fund is required to disclose information regarding the fair value measurements of the Fund’s assets and liabilities. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The disclosure requirement established a three-tier hierarchy to maximize the use of observable market data and minimize the use of unobservable inputs and to establish classification of fair value measurements for disclosure purposes. Inputs refer broadly to the assumptions that market participants would use in pricing the asset or liability, including, for example, the risk inherent in a particular valuation technique used to measure fair value, including the model and/or the risk inherent in the inputs to the valuation technique. Inputs may be observable or unobservable. Observable inputs are inputs that reflect the assumptions market participants would use in pricing the asset or liability developed based on market data obtained from sources independent of the reporting entity. Unobservable inputs are inputs that reflect the Fund’s own considerations about the assumptions market participants would use in pricing the asset or liability developed based on the best information available in the circumstances.

The three levels defined by the fair value hierarchy are as follows:

Level 1 – unadjusted quoted prices in active markets for identical investments.
Level 2 – significant other observable inputs (including quoted prices for similar investments, interest rates, prepayment speeds, credit risk, etc.).
Level 3 – significant unobservable inputs (including the Fund’s own assumptions in determining the fair value of investments).

Inputs are used in applying the various valuation techniques and broadly refer to the assumptions that market participants use to make valuation decisions, including assumptions about risk. Inputs may include price information, specific and broad credit data, liquidity statistics, and other factors. A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. However, the determination of what constitutes “observable” requires significant judgment by the investment adviser. The investment adviser considers observable data to be that market data which is readily available, regularly distributed or updated, reliable and verifiable, not proprietary, and provided by independent sources that are actively involved in the relevant market. The categorization of a financial instrument within the hierarchy is based upon the pricing transparency of the instrument and does not necessarily correspond to the investment adviser’s perceived risk of that instrument.

Financial assets within level 1 are based on quoted market prices in active markets. The Fund does not adjust the quoted price for these instruments.

The accompanying notes are an integral part of these financial statements.

FINANCIAL STATEMENT OCTOBER 31, 201311
 

BBH CORE SELECT
PORTFOLIO OF INVESTMENTS (continued)
October 31, 2013

 

Financial instruments that trade in markets that are not considered to be active but are valued based on quoted market prices, dealer quotations or alternative pricing sources supported by observable inputs are classified within level 2. These include investment-grade corporate bonds, U.S. Treasury notes and bonds, and certain non-U.S. sovereign obligations and over-the-counter derivatives. As level 2 financial assets include positions that are not traded in active markets and/or are subject to transfer restrictions, valuations may be adjusted to reflect illiquidity and/or non-transferability, which are generally based on available market information.

Financial assets classified within level 3 have significant unobservable inputs, as they trade infrequently. Level 3 financial assets include private equity and certain corporate debt securities. As observable prices are not available for these securities, valuation techniques are used to derive fair value.

Because of the inherent uncertainties of valuation, the values reflected in the financial statements may materially differ from the value received upon the actual sale of those investments.

The following table summarizes the valuation of the Fund’s investments by the above fair value hierarchy levels as of October 31, 2013.

             
Investments, at value  Unadjusted
Quoted Prices in
Active Markets
for Identical
Investments
(Level 1)*
  Significant
Other
Observable
Inputs
(Level 2)*
  Significant
Unobservable
Inputs
(Level 3)*
  Balance as of
October 31, 2013
Basic Materials  $238,645,607   $—     $—     $238,645,607 
Communications   857,280,718    —      —      857,280,718 
Consumer Cyclical   468,298,026    —      —      468,298,026 
Consumer Non-Cyclical   1,186,739,329    —      —      1,186,739,329 
Energy   635,073,229    —      —      635,073,229 
Financials   1,244,027,859    —      —      1,244,027,859 
Industrials   193,935,999    —      —      193,935,999 
Technology   398,625,910    —      —      398,625,910 
Repurchase Agreements   —      320,000,000    —      320,000,000 
U.S. Treasury Bills   —      471,914,382    —      471,914,382 
Investments, at value  $5,222,626,677   $791,914,382   $—     $6,014,541,059 

 

 
*The Fund's policy is to disclose transfers between levels based on valuations at the end of the reporting period. There were no transfers between Levels 1, 2 or 3 as of October 31, 2013, based on the valuation input levels on October 31, 2012.

The accompanying notes are an integral part of these financial statements.

12
 

BBH CORE SELECT
STATEMENT OF ASSETS AND LIABILITIES  
October 31, 2013  
 
ASSETS:  
Investments in securities, at value (Identified cost $4,462,389,964) $5,694,541,059
Repurchase agreements (Identified cost $320,000,000) 320,000,000
Cash 2,289,314
Receivables for:  
Investments sold 6,240,079
Dividends 3,136,982
Shares sold 2,354,656
Investment advisory and administrative fees waiver reimbursement 466,837
Other assets 26,412
Total Assets 6,029,055,339
LIABILITIES:  
Payables for:  
Investments purchased 8,039,464
Investment advisory and administrative fees 4,014,566
Shares redeemed 3,015,362
Shareholder servicing fees 1,254,552
Distributors fees 85,559
Custody and fund accounting fees 54,852
Transfer agent fees 48,230
Professional fees 47,200
Board of Trustees’ fees 1,452
Other liabilities 371,758
Total Liabilities 16,932,995
NET ASSETS $6,012,122,344
Net Assets Consist of:  
Paid-in capital $4,634,466,566
Undistributed net investment income 22,616,601
Accumulated net realized gain on investments in securities 122,888,082
Net unrealized appreciation/(depreciation) on investments in securities 1,232,151,095
Net Assets $6,012,122,344
NET ASSET VALUE AND OFFERING PRICE PER SHARE  
CLASS N SHARES  
($5,644,769,975 ÷ 266,075,054 shares outstanding) $21.21
RETAIL CLASS SHARES  
($367,352,369 ÷ 26,257,123 shares outstanding) $13.99

 

The accompanying notes are an integral part of these financial statements.

FINANCIAL STATEMENT OCTOBER 31, 201313
 

    
BBH CORE SELECT
STATEMENT OF OPERATIONS   
For the Year Ended October 31, 2013   
 
NET INVESTMENT INCOME:     
Income:     
Dividends (net of foreign withholding taxes of $2,099,010)  $81,627,775 
Interest and other income   349,281 
Total Income   81,977,056 
Expenses:     
Investment advisory and administrative fees   39,672,712 
Shareholder servicing fees   12,397,722 
Distributors fees   928,927 
Transfer agent fees   551,739 
Custody and fund accounting fees   499,215 
Board of Trustees’ fees   96,835 
Professional fees   58,315 
Miscellaneous expenses   797,781 
Total Expenses   55,003,246 
Investment advisory and administrative fees waiver   (4,551,672)
Expense offset arrangement   (2,555)
Net Expenses   50,449,019 
Net Investment Income   31,528,037 
NET REALIZED AND UNREALIZED GAIN:     
Net realized gain on investments in securities   123,026,915 
Net change in unrealized appreciation/(depreciation)     
on investments in securities   889,161,832 
Net Realized and Unrealized Gain   1,012,188,747 
Net Increase in Net Assets Resulting from Operations  $1,043,716,784 

 

The accompanying notes are an integral part of these financial statements.

14
 

       
BBH CORE SELECT
STATEMENTS OF CHANGES IN NET ASSETS      
 
 
 
   For the years ended October 31,
   2013  2012
INCREASE IN NET ASSETS:          
Operations:          
Net investment income  $31,528,037   $11,697,682 
Net realized gain on investments in securities   123,026,915    49,028,320 
Net change in unrealized appreciation/(depreciation)          
on investments in securities   889,161,832    246,390,832 
Net increase in net assets resulting from operations   1,043,716,784    307,116,834 
Dividends and distributions declared:          
From net investment income:          
Class N   (18,092,926)   (4,275,899)
Retail Class   (1,134,306)   (1,053,704)
From net realized gains:          
Class N   (43,389,167)   (10,156,709)
Retail Class   (5,651,933)   (3,114,913)
Total dividends and distributions declared   (68,268,332)   (18,601,225)
Share transactions:          
Proceeds from sales of shares   2,402,011,647    2,758,236,879 
Net asset value of shares issued to shareholders for          
reinvestment of dividends and distributions   52,357,695    17,905,795 
Proceeds from short-term redemption fees   34,753    62,466 
Cost of shares redeemed   (734,404,450)   (742,113,834)
Net increase in net assets resulting from          
share transactions   1,719,999,645    2,034,091,306 
Total increase in net assets   2,695,448,097    2,322,606,915 
NET ASSETS:          
Beginning of year   3,316,674,247    994,067,332 
End of year (including undistributed net investment          
income of $22,616,601 and $10,315,796, respectively)  $6,012,122,344   $3,316,674,247 

 

The accompanying notes are an integral part of these financial statements.

FINANCIAL STATEMENT OCTOBER 31, 201315
 

BBH CORE SELECT
FINANCIAL HIGHLIGHTS
Selected per share data and ratios for a Class N share outstanding throughout each year.

 

                     
       For the years ended October 31,     
   2013   2012   2011   2010   2009 
Net asset value, beginning of year  $17.46   $15.07   $13.91   $11.93   $10.71 
Income from investment operations:                         
Net investment income1   0.13    0.10    0.12    0.07    0.06 
Net realized and unrealized gain   3.95    2.54    1.15    1.96    1.25 
Total income from investment operations   4.08    2.64    1.27    2.03    1.31 
Less dividends and distributions:                         
From net investment income   (0.10)   (0.07)   (0.07)   (0.05)   (0.02)
From net realized gains   (0.23)   (0.18)   (0.04)   —      (0.07)
Total dividends and distributions   (0.33)   (0.25)   (0.11)   (0.05)   (0.09)
Short-term redemption fees2   0.00    0.00    0.00    0.00    0.00 
Net asset value, end of year  $21.21   $17.46   $15.07   $13.91   $11.93 
Total return   23.78%   17.86%   9.19%   17.11%   12.44%
Ratios/Supplemental data:                         
Net assets, end of year (in millions)  $5,645   $3,049   $809   $362   $237 
Ratio of expenses to average net assets                         
before reductions   1.09%   1.12%   1.14%   1.18%   1.21%
Fee waiver   0.09%3   0.12%3   0.13%3   0.06%3   %
Expense offset arrangement   0.00%4   0.00%4   0.01%   0.01%   0.02%
Ratio of expenses to average net assets                         
after reductions   1.00%   1.00%   1.00%   1.11%   1.19%
Ratio of net investment income to average                         
net assets   0.65%   0.63%   0.85%   0.55%   0.61%
Portfolio turnover rate   12%   14%   17%   19%   15%

 

 
1Calculated using average shares outstanding for the year.
2Less than $0.01.
3The ratio of expenses to average net assets for the fiscal years ended October 31, 2013, 2012, 2011 and 2010, reflect fees reduced as result of a contractual operating expense limitation of the Fund to 1.00%. The agreement is effective for the period beginning on July 14, 2010 and will terminate on March 1, 2014, unless it is renewed by all parties to the agreement. For the fiscal years ended October 31, 2013, 2012, 2011 and 2010, the waived fees were $3,983,262, $1,853,202, $793,607 and $177,639, respectively.
4Less than 0.01%.

The accompanying notes are an integral part of these financial statements.

16
 

BBH CORE SELECT
FINANCIAL HIGHLIGHTS (continued)
Selected per share data and ratios for a Retail Class share outstanding throughout each period.

 

             
  


For the years ended
October 31,
   For the
period from
March 25, 2011
(commencement
of operations) to
October 31, 2011
 
   2013   2012    
Net asset value, beginning of year  $11.61   $10.11   $10.00 
Income from investment operations:               
Net investment income1   0.06    0.05    0.02 
Net realized and unrealized gain   2.60    1.69    0.09 
Total income from investment operations   2.66    1.74    0.11 
Less dividends and distributions:               
From net investment income   (0.05)   (0.06)   —   
From net realized gains   (0.23)   (0.18)   —   
Total dividends and distributions   (0.28)   (0.24)   —   
Short-term redemption fees2   0.00    0.00    0.00 
Net asset value, end of year  $13.99   $11.61   $10.11 
Total return   23.42%   17.64%   1.10%
Ratios/Supplemental data:               
Net assets, end of year (in millions)  $367   $267   $185 
Ratio of expenses to average net assets               
before reductions   1.42%   1.43%   1.59%3
Fee waiver   0.17%4   0.18%4   0.33%3,4
Expense offset arrangement   0.00%5   0.00%5   0.01%3
Ratio of expenses to average net assets               
after reductions   1.25%   1.25%   1.25%3
Ratio of net investment income to average               
net assets   0.44%   0.50%   0.37%3
Portfolio turnover rate   12%   14%   17%6

 

 
1Calculated using average shares outstanding for the year.
2Less than $0.01.
3Annualized.
4The ratio of expenses to average net assets for fiscal year ended October 31, 2013, 2012 and period ended October 31, 2011, reflect fees reduced as result of a contractual operating expense limitation of the Fund to 1.25%. The agreement is effective for the period beginning on July 14, 2010 and will terminate on March 1, 2014, unless it is renewed by all parties to the agreement. For the fiscal years ended October 31, 2013, 2012 and period ended October 31, 2011, the waived fees were $568,410, $633,118 and $133,178, respectively.
5Less than 0.01%.
6Represents Fund portfolio turnover for the twelve months ended October 31, 2011.

The accompanying notes are an integral part of these financial statements.

FINANCIAL STATEMENT OCTOBER 31, 201317
 

BBH CORE SELECT
NOTES TO FINANCIAL STATEMENTS
As of and for the year ended October 31, 2013

 

1.Organization. The Fund is a separate, non-diversified series of BBH Trust (the “Trust”), which is registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as an open-end management investment company. The Trust was originally organized under the laws of the State of Maryland on July 16, 1990 as BBH Fund, Inc. and re-organized as a Delaware statutory trust on June 12, 2007. The Fund commenced operations on November 2, 1998. On February 20, 2001, the Board of Trustees (“Board”) of the Trust reclassified the Fund’s outstanding shares as “Class N”. On October 1, 2010, the Board established a new class of shares designated as “Retail Class”, which commenced operations on March 25, 2011. Neither Class N shares nor Retail Class shares convert to any other share class of the Fund. Effective November 30, 2012, subject to certain exceptions, the Fund closed to new investors. See the Fund’s prospectus for details. As of October 31, 2013, there were five series of the Trust.
2.Significant Accounting Policies. The Fund’s financial statements are prepared in accordance with Generally Accepted Accounting Principles in the United States of America (“GAAP”). The following summarizes significant accounting policies of the Fund:
A.Valuation of Investments. (1) The value of investments listed on a securities exchange is based on the last sale price on that exchange prior to the time when assets are valued, or in the absence of recorded sales, at the average of readily available closing bid and asked prices on such exchange; (2) securities not traded on an exchange are valued at the average of the quoted bid and asked prices in the over-the counter market; (3) securities or other assets for which market quotations are not readily available are valued at fair value in accordance with procedures established by and under the general supervision and responsibility of the Board; (4) short-term investments, which mature in 60 days or less are valued at amortized cost if their original maturity was 60 days or less, or by amortizing their value on the 61st day prior to maturity, if their original maturity when acquired by the Fund was more than 60 days, unless the use of amortized cost is determined not to represent “fair value” by the Board.
B.Accounting for Investments and Income. Investment transactions are accounted for on the trade date. Realized gains and losses on investment transactions are determined based on the identified cost method. Dividend income and other distributions received from portfolio securities are recorded on the ex-dividend date. Non-cash dividends included in dividend income, if any, are recorded at the fair market value of securities received at ex-date. Distributions received on securities that represent a return of capital 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 any foreign taxes withheld where recovery of such tax is uncertain.
18
 

BBH CORE SELECT
NOTES TO FINANCIAL STATEMENTS (continued)
October 31, 2013

 

C.Fund Expenses. Most expenses of the Trust can be directly attributed to a specific fund. Expenses which cannot be directly attributed to a fund are apportioned amongst each fund in the Trust equally. Expense estimates are accrued in the period to which they relate and adjustments are made when actual amounts are known.
D.Repurchase Agreements. The Fund may enter into repurchase agreements. Repurchase agreements are transactions in which the Fund buys a security from a dealer or bank and agrees to sell the security back at a mutually agreed upon time and price. The repurchase price normally is in excess of the purchase price, reflecting an agreed upon interest rate. The rate is effective for the period of time that assets of the Fund are invested in the agreement and is not related to the coupon rate on the underlying security. The Fund will enter into repurchase agreements only with banks and other recognized financial institutions, such as securities dealers, deemed creditworthy by the investment adviser. The Fund’s custodian or sub-custodian will take possession of the securities subject to repurchase agreements. The investment adviser, custodian or sub-custodian will monitor the value of the underlying collateral each day to ensure that the value of the security always equals or exceeds the repurchase price. Repurchase agreements are subject to credit risks. Information regarding repurchase agreements held by the Fund is included in the Portfolio of Investments.
E.Federal Income Taxes. It is the Trust’s policy to comply with the requirements of the Internal Revenue Code (the “Code”) applicable to regulated investment companies and to distribute substantially all of its taxable income to its shareholders. Accordingly, no federal income tax provision is required. The Fund files a tax return annually using tax accounting methods required under provisions of the Code, which may differ from GAAP, which is the basis on which these financial statements are prepared. Accordingly, the amount of net investment income and net realized gain reported in these financial statements may differ from that reported on the Fund’s tax return, due to certain book-to-tax timing differences such as losses deferred due to “wash sale” transactions and utilization of capital loss carryforwards. These differences result in temporary over-distributions for financial statement purposes and are classified as distributions in excess of accumulated net realized gains or net investment income. These distributions do not constitute a return of capital. Permanent differences are reclassified in the Statement of Assets & Liabilities based upon their tax classification. As such, the character of distributions to shareholders reported in the Financial Highlights table may differ from that reported to shareholders on Form 1099-DIV.

The Fund is subject to the provisions of Accounting Standards Codification 740 Income Taxes (“ASC 740”). ASC 740 sets forth a minimum threshold for financial statement recognition of the benefit of a tax position taken or expected to be taken in a tax return. The Fund did not have any unrecognized tax benefits as of October 31, 2013, nor were there any increases or decreases in unrecognized tax benefits for the year then ended. The Fund recognizes interest and penalties, if any, related to unrecognized tax benefits as an income tax expense in the Statement of Operations. During the year

FINANCIAL STATEMENT OCTOBER 31, 201319
 

BBH CORE SELECT
NOTES TO FINANCIAL STATEMENTS (continued)
October 31, 2013

 

ended October 31, 2013, the Fund did not incur any such interest or penalties. The Fund is subject to examination by U.S. federal and state tax authorities for returns filed for the prior three fiscal years. The Fund is not aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will significantly change in the next twelve months.

F.Dividends and Distributions to Shareholders. Dividends and distributions to shareholders, if any, are paid annually and are recorded on the ex-dividend date. Distributions from net capital gains, if any, are generally declared and paid annually and are recorded on the ex-dividend date. The tax character of distributions paid during the fiscal years ended October 31, 2013 and 2012, respectively, were as follows:
                       
Distributions paid from:
      Ordinary
income
    Net
long-term
capital gain
    Total
taxable
distributions
    Tax return
of capital
    Total
distributions
paid
 
2013:  $19,227,232   $49,041,100   $68,268,332    —     $68,268,332 
2012:   6,132,108    12,469,117    18,601,225    —      18,601,225 

 

As of October 31, 2013 and 2012, respectively, the components of accumulated earnings/(deficit) on a tax basis were as follows:

                              
Components of accumulated earnings/(deficit): 
          Undistributed
ordinary
income
      Undistributed
long-term
capital gain
      Accumulated
earnings
      Accumulated
capital and
other losses
      Other
book/tax
temporary
differences
      Unrealized
appreciation/
(depreciation)
      Total
accumulated
earnings/
(deficit)
 
2013:     $ 51,311,687     $ 95,217,318     $ 146,529,005           $ (1,024,321 )   $ 1,232,151,095     $ 1,377,655,779  
2012:    10,315,796    49,024,436    59,340,232            342,867,094    402,207,326 
                                                             

 

The Fund did not have a net capital loss carry forward at October 31, 2013.

Under the Regulated Investment Company Modernization Act of 2010, the Fund is permitted to carry forward capital losses incurred in taxable years beginning after December 22, 2010, for an unlimited period and they will retain their character as either short-term or long-term capital losses rather than being considered all short-term capital losses.

Total distributions paid may differ from amounts reported in 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.

20
 

BBH CORE SELECT
NOTES TO FINANCIAL STATEMENTS (continued)
October 31, 2013

 

To the extent future capital gains are offset by capital loss carry forwards; such gains will not be distributed.

G.Use of Estimates. The preparation of the financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of income and expense during the reporting period. Actual results could differ from these estimates.
3.Recent Accounting Pronouncements. In January 2013, the Financial Accounting Standards Board (“FASB”) issued an Accounting Standards Update (“ASU”) No. 2013-01 “Clarifying the Scope of Disclosures about Offsetting Assets and Liabilities.” This update was issued to narrow the broad scope of ASU No. 2011-11 “Disclosures about Offsetting Assets and Liabilities,” which was issued in December 2011. This update requires an entity to disclose both gross and net information for derivatives and other financial instruments that are either offset in the statement of assets and liabilities or subject to an enforceable master netting arrangement or similar agreement. The required disclosures for both pronouncements are effective for annual reporting periods starting from January 1, 2013 and interim periods within those annual periods and apply retrospectively for all periods being reported. Management is assessing the impact of these new disclosure requirements.
4.Fees and Other Transactions with Affiliates.
A.Investment Advisory and Administrative Fees. Under a combined Investment Advisory and Administrative Services Agreement (“Agreement”) with the Trust, Brown Brothers Harriman & Co. (“BBH”) through a separately identifiable department (“SID” or “Investment Adviser”) provides investment advisory and portfolio management services to the Fund. BBH also provides administrative services to the Fund. The Fund pays a combined fee for investment advisory and administrative services calculated daily and paid monthly at an annual rate equivalent to 0.80% of the Fund’s average daily net assets. For the year ended October 31, 2013, the Fund incurred $39,672,712 under the Agreement.
B.Investment Advisory and Administrative Fee Waivers. Effective July 14, 2010, the Investment Adviser contractually agreed to limit the annual fund operating expenses (excluding interest, taxes, brokerage commissions, other expenditures that are capitalized in accordance with GAAP, other extraordinary expenses not incurred in the ordinary course of the Fund’s business and for Retail Class, amounts payable pursuant to any plan adopted in accordance with Rule 12b-1) of Class N and Retail Class to 1.00%. The agreement will terminate on March 1, 2014, unless it is renewed by all parties to the agreement. The agreement may only be terminated during its term with approval of the Fund’s Board of Trustees. For the year ended October 31, 2013, the Investment Adviser waived fees in the amount of $3,983,262 and $568,410 for Class N and Retail Class, respectively.
FINANCIAL STATEMENT OCTOBER 31, 201321
 

BBH CORE SELECT
NOTES TO FINANCIAL STATEMENTS (continued)
October 31, 2013

 

C.Shareholder Servicing Fees. The Trust has a shareholder servicing agreement with BBH. BBH receives a fee from the Fund calculated daily and paid monthly at an annual rate of 0.25% of Class N and Retail Class shares’ average daily net assets. For the year ended October 31, 2013, the Fund incurred shareholder servicing fees in the amount of $11,541,014 and $856,708 for Class N and Retail Class, respectively.
D.Distribution (12b-1) Fees. The Fund has adopted a distribution plan pursuant to Rule 12b-1 for Retail Class shares that allows the Fund to pay distribution and other fees for the sale of its shares and for services provided to shareholders. Because these fees are paid out of the Fund’s assets continuously, over time these fees will increase the cost of your investment and may cost you more than paying other types of sales charges. The maximum annual distribution fee for Retail Class shares is 0.25% of the average daily net assets of the Retail Class shares of the Fund. With this agreement, it is anticipated that total operating expenses for Retail Class shares will be 1.25% of the average daily net assets. For the year ended October 31, 2013, Retail Class shares of the Fund incurred $857,805 for Distribution (12b-1) Fees.
E.Custody and Fund Accounting Fees. BBH acts as a custodian and fund accountant and receives custody and fund accounting fees from the Fund calculated daily and incurred monthly. BBH holds all of the Fund’s cash and investments and calculates the Fund’s daily net asset value. The custody fee is an asset and transaction based fee. The fund accounting fee is an asset based fee calculated at 0.04% per annum on the first $100,000,000 of average daily net assets and 0.02% per annum on the next $400,000,000 of average daily net assets and 0.01% per annum on all average daily net assets over $500,000,000. Effective April 1, 2013, the custody and fund accounting fee schedule was revised to reflect reduced rates. The custody fee continues to be an asset and transaction based fee. The fund accounting fee was revised from a tiered fee schedule to a single rate of 0.004% of the Fund’s net asset value. For the year ended October 31, 2013, the Fund incurred $499,215 in custody and fund accounting fees. These fees for the Fund were reduced by $2,555 as a result of an expense offset arrangement with the Fund’s custodian. The credit amount (if any) is disclosed in the Statement of Operations as a reduction to the Fund’s expenses. In the event that the Fund is overdrawn, under the custody agreement with BBH, BBH will make overnight loans to the Fund to cover overdrafts. Pursuant to their agreement, the Fund will pay the Federal Funds overnight investment rate on the day of the overdraft. The total interest incurred by the Fund for the year ended October 31, 2013, was $257.
F.Board of Trustees’ Fees. Each Trustee who is not an “interested person” as defined under the 1940 Act receives an annual fee as well as reimbursement for reasonable out-of-pocket expenses from the Fund. For the year ended October 31, 2013, the Fund incurred $96,835 in non-interested Trustee compensation and reimbursements.
22
 

BBH CORE SELECT
NOTES TO FINANCIAL STATEMENTS (continued)
October 31, 2013

 

5.Investment Transactions. For the year ended October 31, 2013, the cost of purchases and the proceeds of sales of investment securities, other than short-term investments, were $1,701,866,683 and $504,888,772, respectively.
6.Shares of Beneficial Interest. The Trust is permitted to issue an unlimited number of Class N and Retail Class shares of beneficial interest at no par value. Transactions in Class N and Retail Class shares were as follows:
                 
   For the year ended
October 31, 2013
   For the year ended
October 31, 2012
 
   Shares   Dollars   Shares   Dollars 
Class N                    
Shares sold   120,400,382   $2,246,685,881    135,774,669   $2,254,711,799 
Shares issued in connection                    
with reinvestments                    
of dividends   2,639,087    45,602,628    952,018    13,747,144 
Proceeds from short-term                    
redemption fees   NA    26,513    NA    56,066 
Shares redeemed   (31,580,112)   (607,487,761)   (15,812,605)   (252,722,028)
Net increase   91,459,357   $1,684,827,261    120,914,082   $2,015,792,981 
Retail Class                    
Shares sold   12,517,484   $155,325,766    46,672,538   $503,525,080 
Shares issued in connection                    
with reinvestments                    
of dividends   591,512    6,755,067    432,292    4,158,651 
Proceeds from short-term                    
redemption fees   NA    8,240    NA    6,400 
Shares redeemed   (9,887,218)   (126,916,689)   (42,346,156)   (489,391,806)
Net increase   3,221,778   $35,172,384    4,758,674   $18,298,325 

 

7.Principal Risk Factors and Indemnifications.
A.Principal Risk Factors. Investing in the Fund may involve certain risks, as discussed in the Fund’s prospectus, including but not limited to, those described below:

A shareholder may lose money by investing in the Fund (investment risk). In the normal course of business, the Fund invests in securities and enters into transactions where risks exist due to assumption of large positions in securities of a small number of issuers (non-diversification risk), or

FINANCIAL STATEMENT OCTOBER 31, 201323
 

BBH CORE SELECT
NOTES TO FINANCIAL STATEMENTS (continued)
October 31, 2013

 

certain risks associated with investing in foreign securities not present in domestic investments (foreign investment risk). The value of securities held by the Fund may fall due to changing economic, political, regulatory or market conditions, or due to a company’s or issuer’s individual situation (market risk). The Fund is actively managed and the decisions by the Investment Adviser may cause the Fund to incur losses or miss profit opportunities (management risk). Price movements may occur due to factors affecting individual companies, such as the issuance of an unfavorable earnings report, or other events affecting particular industries or the equity markets as a whole (equity securities risk). The Fund’s Shareholders may be adversely impacted by asset allocation decisions made by an investment adviser whose discretionary clients make up a large percentage of the Fund’s shareholders (shareholder concentration risk). The extent of the Fund’s exposure to these risks in respect to these financial assets is included in their value as recorded in the Fund’s Statement of Assets and Liabilities.

Please refer to the Fund’s prospectus for a complete description of the principal risks of investing in the Fund.

B.Indemnifications. Under the Trust’s organizational documents, its officers and Trustees may be indemnified against certain liabilities and expenses arising out of the performance of their duties to the Fund, and shareholders are indemnified against personal liability for the obligations of the Trust. Additionally, in the normal course of business, the Fund enters into agreements with service providers that may contain indemnification clauses. The Fund’s maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Fund that have not yet occurred. The risk of material loss from such claims is considered remote.
8.Subsequent Events. Management has evaluated events and transactions that have occurred since October 31, 2013 through the date the financial statements were issued and determined that there were none that would require recognition or additional disclosure in the financial statements.
24
 

BBH CORE SELECT
DISCLOSURE OF FUND EXPENSES
October 31, 2013 (unaudited)

 

EXAMPLE

As a shareholder of the Fund, you may incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments, reinvested distributions, or other distributions; redemption fees; and exchange fees; and (2) ongoing costs, including management fees; distribution 12b-1 fees; and other Fund expenses. This Example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.

The Example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period (May 1, 2013 to October 31, 2013).

ACTUAL EXPENSES

The first line of the table below provides information about actual account values and actual expenses. You may use information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled “Expenses Paid During the Period” to estimate the expenses you paid on your account during the period.

HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES

The second line of the table below provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid during the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% Hypothetical Example with the 5% hypothetical examples that appear in the shareholder reports of other funds.

FINANCIAL STATEMENT OCTOBER 31, 201325
 

BBH CORE SELECT
DISCLOSURE OF FUND EXPENSES (continued)
October 31, 2013 (unaudited)

 

Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as redemption fees or exchange fees. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.

                
    Beginning
Account Value
May 1, 2013
    Ending
Account Value
October 31, 2013
    Expenses Paid
During Period
May 1, 2013 to
October 31, 20131
 
Class N               
Actual  $1,000   $1,089   $5.26 
Hypothetical2  $1,000   $1,020   $5.09 
                
           Expenses Paid 
   Beginning   Ending   During Period 
   Account Value   Account Value   May 1, 2013 to 
   May 1, 2013   October 31, 2013   October 31, 20131 
Retail Class               
Actual  $1,000   $1,088   $6.58 
Hypothetical2  $1,000   $1,019   $6.36 

 

 
1Expenses are equal to the Fund’s annualized expense ratio of 1.00% and 1.25% for Class N and Retail Class shares, respectively, multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period).
2Assumes a return of 5% before expenses. For the purposes of the calculation, the applicable annualized expenses ratio for each class of shares is subtracted from the assumed return before expenses.
26
 

BBH CORE SELECT
CONFLICTS OF INTEREST
October 31, 2013 (unaudited)

 

Conflicts of Interest

Certain conflicts of interest may arise in connection with a portfolio manager’s management of the Fund’s investments, on the one hand, and the investments of other accounts for which the portfolio manager is responsible, on the other. For example, it is possible that the various accounts managed could have different investment strategies that, at times, might conflict with one another to the possible detriment of the Fund. Alternatively, to the extent that the same investment opportunities might be desirable for more than one account, possible conflicts could arise in determining how to allocate them, For example, BBH may act as adviser to private funds with investment strategies similar to the Fund. Those private funds may pay BBH a performance fee in addition to the stated investment advisory fee. In such cases, BBH may have an incentive to allocate certain investment opportunities to the private fund rather than the Fund in order to increase the private fund’s performance and thus improve BBH’s chances of receiving the performance fee. However, BBH has implemented policies and procedures to assure that investment opportunities are allocated equitably between the Fund and other funds and accounts with similar investment strategies.

Other potential conflicts might include conflicts between the Fund and its affiliated and unaffiliated service providers (e.g. conflicting duties of loyalty). In addition to providing investment management services through the SID, BBH provides administrative, custody, shareholder servicing and fund accounting services to the Fund. BBH may have conflicting duties of loyalty while servicing the Fund and/or opportunities to further its own interest to the detriment of the Fund. For example, in negotiating fee arrangements with affiliated service providers, BBH may have an incentive to agree to higher fees than it would in the case of unaffiliated providers. Also, because its advisory fees are calculated by reference to a Fund’s net assets, the Investment Adviser and its affiliates may have an incentive to seek to overvalue certain assets.

Purchases and sales of securities for the Fund may be aggregated with orders for other BBH client accounts. BBH however is not required to aggregate orders if portfolio management decisions for different accounts are made separately, or if they determine that aggregating is not practicable, required or with cases involving client direction.

Prevailing trading activity frequently may make impossible the receipt of the same price or execution on the entire volume of securities purchased or sold. When this occurs, the various prices may be averaged, and the Fund will be charged or credited with the average price. Thus, the effect of the aggregation may operate on some occasions to the disadvantage of the Fund. In addition, under certain circumstances, the Fund will not be charged the same commission or commission equivalent rates in connection with an aggregated order.

FINANCIAL STATEMENT OCTOBER 31, 201327
 

BBH CORE SELECT
CONFLICTS OF INTEREST (continued)
October 31, 2013 (unaudited)

 

The Investment Adviser may direct brokerage transactions and/or payment of a portion of client commissions (“soft dollars”) to specific brokers or dealers or other providers to pay for research or other appropriate services which provide, in the Investment Adviser’s view, appropriate assistance to the Investment Adviser in the investment decision-making process (including with respect to futures, fixed-price offerings and over-the-counter transactions). The use of a broker that provides research and securities transaction services may result in a higher commission than that offered by a broker who does not provide such services. The Investment Adviser will determine in good faith whether the amount of commission is reasonable in relation to the value of research and services provided and whether the services provide lawful and appropriate assistance in its investment decision-making responsibilities.

Research or other services obtained in this manner may be used in servicing any or all of the Funds and other BBH client accounts, including in connection with BBH client accounts that do not pay commissions to the broker related to the research or other service arrangements. Such products and services may disproportionately benefit other BBH client accounts relative to the Fund based on the amount of brokerage commissions paid by the Fund and such other BBH client accounts. For example, research or other services that are paid for through one client’s commissions may not be used in managing that client’s account. In addition, other BBH client accounts may receive the benefit, including disproportionate benefits, of economies of scale or price discounts in connection with products and services that may be provided to the Fund and to such other BBH client accounts. To the extent that BBH uses soft dollars, it will not have to pay for those products and services itself.

BBH may receive research that is bundled with the trade execution, clearing, and/or settlement services provided by a particular broker-dealer. To the extent that BBH receives research on this basis, many of the same conflicts related to traditional soft dollars may exist. For example, the research effectively will be paid by client commissions that also will be used to pay for the execution, clearing, and settlement services provided by the broker-dealer and will not be paid by BBH.

BBH may endeavor to execute trades through brokers who, pursuant to such arrangements, provide research or other services in order to ensure the continued receipt of research or other services BBH believes are useful in its investment decision-making process. BBH may from time to time choose not to engage in the above described arrangements to varying degrees. BBH may also enter into commission sharing arrangements under which BBH may execute transactions through a broker-dealer, and request that the broker-dealer allocate a portion of the commissions or commission credits to another firm that provides research to BBH. To the extent that BBH engages in commission sharing arrangements, many of the same conflicts related to traditional soft dollars may exist.

28
 

BBH CORE SELECT
CONFLICTS OF INTEREST (continued)
October 31, 2013 (unaudited)

 

Arrangements regarding compensation and delegation of responsibility may create conflicts relating to selection of brokers or dealers to execute Fund portfolio trades and/or specific uses of commissions from Fund portfolio trades, administration of investment advice and valuation of securities.

From time to time BBH may invest a portion of the assets of its discretionary investment advisory clients in the Fund. That investment by BBH on behalf of its discretionary investment advisory clients in the Fund may be significant at times. Increasing the Fund’s assets may enhance investment flexibility and diversification and may contribute to economies of scale that tend to reduce the Fund’s expense ratio. BBH reserves the right to redeem at any time some or all of the shares of the Fund acquired for its discretionary investment advisory clients’ accounts. A large redemption of shares of the Fund by BBH on behalf of its discretionary investment advisory clients could significantly reduce the asset size of the Fund, which might have an adverse effect on the Fund’s investment flexibility, portfolio diversification and expense ratio.

BBH may enter into advisory and/or referral arrangements with third parties. Such arrangements may include compensation paid by BBH to the third party. BBH may pay a solicitation fee for referrals and/or advisory or incentive fees. BBH may benefit from increased amounts of assets under management.

When market quotations are not readily available or are believed by BBH to be unreliable, the Fund’s investments may be valued at fair value by BBH pursuant to procedures adopted by the Fund’s Board of Trustees. When determining an asset’s “fair value,” BBH seeks to determine the price that a Fund might reasonably expect to receive from the current sale of that asset in an arm’s-length transaction. The price generally may not be determined based on what the Fund might reasonably expect to receive for selling an asset at a later time or if it holds the asset to maturity. While fair value determinations will be based upon all available factors that BBH deems relevant at the time of the determination, and may be based on analytical values determined by BBH using proprietary or third party valuation models, fair value represents only a good faith approximation of the value of a security. The fair value of one or more securities may not, in retrospect, be the price at which those assets could have been sold during the period in which the particular fair values were used in determining the Fund’s net asset value. As a result, the Fund’s sale or redemption of its shares at net asset value, at a time when a holding or holdings are valued by BBH (pursuant to Board-adopted procedures) at fair value, may have the effect of diluting or increasing the economic interest of existing shareholders.

FINANCIAL STATEMENT OCTOBER 31, 201329
 

BBH CORE SELECT
CONFLICTS OF INTEREST (continued)
October 31, 2013 (unaudited)

 

BBH, including the Investment Adviser, seeks to meet its fiduciary obligation with respect to all clients including the Fund. BBH has adopted and implemented policies and procedures that seek to manage conflicts. The Investment Adviser monitors a variety of areas, including compliance with fund investment guidelines, review of allocation decisions, the investment in only those securities that have been approved for purchase by an oversight committee, and compliance with the Investment Adviser’s Code of Ethics. With respect to the allocation of investment opportunities, BBH has adopted and implemented policies designed to achieve fair and equitable allocation of investment opportunities among its clients over time. BBH has structured the portfolio managers’ compensation in a manner it believes is reasonably designed to safeguard the Fund from being negatively affected as a result of any such potential conflicts.

The Trust also manages these conflicts. For example, the Trust has designated a chief compliance officer and has adopted and implemented policies and procedures designed to manage the conflicts identified above and other conflicts that may arise in the course of the Fund’s operations in such a way as to safeguard the Fund from being negatively affected as a result of any such potential conflicts. The Trustees receive regular reports from the Investment Adviser and the Trust’s chief compliance officer on areas of potential conflict.

30
 

BBH CORE SELECT
ADDITIONAL FEDERAL TAX INFORMATION
October 31, 2013 (unaudited)

 

BBH Core Select (the “Fund”) hereby designates $49,041,100 as an approximate amount of capital gain dividend for the purpose of dividends paid deduction.

Under Section 854(b)(2) of the Internal Revenue Code (the “Code”), the Fund designates up to a maximum of $19,227,232 as qualified dividends for purposes of the maximum rate under Section 1(h)(11) of the Code for the fiscal year ended October 31, 2013. In January 2014, shareholders will receive Form 1099-DIV, which will include their share of qualified dividends distributed during the calendar year 2013. Shareholders are advised to check with their tax advisers for information on the treatment of these amounts on their individual income tax returns.

100% of the ordinary income dividends paid by the Fund during the year ended October 31, 2013 qualifies for the dividends received deduction available to corporate shareholders.

FINANCIAL STATEMENT OCTOBER 31, 201331
 

TRUSTEES AND OFFICERS OF BBH CORE SELECT
(unaudited)

 

Information pertaining to the Trustees of the BBH Trust (the “Trust”) and executive officers of the Trust is set forth below. The Statement of Additional Information for the BBH Core Select includes additional information about the Fund’s Trustees and is available upon request without charge by contacting the Fund at 1-800-575-1265.

Name and
Birth Date
Position(s)
Held with the
Trust
Term of
Office# and
Length of
Time
Served
Principal Occupation(s)
During Past 5 Years
Number of
Funds in
Fund
Complex
Overseen By
Trustee^
Other
Directorships
Held by
Trustee
During Past
5 Years
Independent Trustees

Joseph V. Shields Jr.

Birth Date:
March 17, 1938

Chairman of
the Board and
Trustee
Since 2007
1990-2007
with the
Predecessor
Trust
Managing Director and Chairman
of Wellington Shields & Co. LLC
(member of New York Stock
Exchange (“NYSE”)).
5 Chairman of
Capital
Management
Associates,
Inc. (registered
investment
adviser);
Director of
Flowers Foods,
Inc. (NYSE
listed
company).

David P. Feldman

Birth Date:
November 16, 1939

Trustee Since 2007
1990-2007
with the
Predecessor
Trust
Retired. 5 Director of
Dreyfus
Mutual Funds
(59 Funds).

Arthur D.
Miltenberger

Birth Date:
November 8, 1938

Trustee Since 2007
1992-2007
with the
Predecessor
Trust
Retired. 5 None.

H. Whitney Wagner

Birth Date:
March 3, 1956

Trustee Since 2007
2006-2007
with the
Predecessor
Trust
President, Clear Brook Advisors, a
registered investment advisor.
5 None.

Andrew S. Frazier

Birth Date:
April 8, 1948

Trustee Since 2010 Consultant to Western World
Insurance Group, Inc. (“WWIG”)
(January 2010 to January 2012)
CEO of WWIG (1992-2009).
5 Director of
WWIG.

 

32
 

TRUSTEES AND OFFICERS OF BBH CORE SELECT
(unaudited)
 
Name, Birth Date
and Address
Position(s)
Held with
Trust
Term of
Office# and
Length of
Time
Served
Principal Occupation(s)
During Past 5 Years
Number of
Funds in
Fund
Complex
Overseen by
Trustee^
Other
Directorships
Held by
Trustee
During Past
5 Years

Mark M. Collins

Birth Date:
November 8, 1956

Trustee Since 2011 Partner of Brown Investment
Advisory Incorporated, a
registered investment advisor.
5 Chairman of
Dillon Trust
Company;
Chairman of
Keswick
Management;
Director of
Domaine
Clarence
Dillon,
Bordeaux,
France; and
Director of
Pinnacle Care
International.
 
Interested Trustees

Susan C. Livingston+

Birth Date:
February 18, 1957

50 Post Office Square
Boston, MA 02110

Trustee Since 2011 Partner (since 1998) and Senior
Client Advocate (since 2010) for
BBH&Co., Director of BBH
Luxembourg S.C.A. (since 1992);
Director of BBH Trust Company
(Cayman) Ltd. (2007 to April
2011); and BBH Investor Services
(London) Ltd (2001 to April 2011).
5 None.

John A. Gehret+

140 Broadway
New York, NY 10005

Birth Date:
April 11, 1959

Trustee Since 2011 Limited Partner of BBH&Co.
(2012-present); Partner of
BBH&Co. (1998 to 2011);
President and Principal Executive
Officer of the Trust (2008-2011).
5 None.

 

FINANCIAL STATEMENT OCTOBER 31, 201333
 

TRUSTEES AND OFFICERS OF BBH CORE SELECT
(unaudited)
 
 
 
 
OFFICERS      
 
Name, Birth Date
and Address
Position(s)
Held with the
Trust
Term of
Office# and
Length of
Time
Served
Principal Occupation(s) During Past 5 Years

Radford W. Klotz

140 Broadway
New York, NY 10005

Birth Date:
December 1, 1955

President and
Principal
Executive
Officer
Since 2011 Joined BBH&Co. in 1977 and has been a Partner of the firm since
1995.

Charles H. Schreiber

140 Broadway
New York, NY 10005

Birth Date:
December 10, 1957

Treasurer and
Principal
Financial
Officer
Since 2007
2006-2007
with the
Predecessor
Trust
Senior Vice President of BBH&Co. since September 2001; joined
BBH&Co. in 1999.

Mark B. Nixon

140 Broadway
New York, NY 10005

Birth Date:
January 14, 1963

Assistant
Secretary
Since 2007
2006-2007
with the
Predecessor
Trust
Vice President of BBH&Co. since October 2006.

Mark A. Egert

140 Broadway
New York, NY 10005

Birth Date:
May 25, 1962

Chief
Compliance
Officer (“CCO”)
Since 2011 Senior Vice President of BBH&Co. since June 2011; Partner at
Crowell & Moring LLP (April 2010 to May 2011); and CCO of
Cowen and Company (January 2005 to April 2010).

Sue M. Rim-An

140 Broadway
New York, NY 10005

Birth Date:
September 10, 1970

Anti-Money
Laundering
Officer
Since 2008 Anti-Money Laundering (“AML”) Officer, Vice President of
BBH&Co. since September 2007.

Suzan Barron

50 Post Office Square Boston, MA 02110

Birth Date:
September 5, 1964

Secretary Since 2009 Senior Vice President and Senior Investor Services Counsel,
Corporate Secretary and Regulatory Support Practice of Fund
Administration, BBH&Co. since November 2005.

 

34
 

TRUSTEES AND OFFICERS OF BBH CORE SELECT
(unaudited)
 
 
 
 
Name, Birth Date and Address Position(s)
Held with the
Trust
Term of
Office# and
Length of
Time
Served
Principal Occupation(s) During Past 5 Years

Alexander Tikonoff

50 Post Office Square
Boston, MA 02110

Birth Date:
December 23, 1974

Assistant
Secretary
Since 2009 Vice President and Investor Services Counsel, BBH&Co. since
August 2006.

Rowena Rothman

140 Broadway
New York, NY 10005

Birth Date:
October 24, 1967

Assistant
Treasurer
Since 2011 Vice President of BBH&Co. since 2009; Finance and Accounting
Consultant at The Siegfried Group (2007-2009).
 
#All officers of the Trust hold office for one year and until their respective successors are chosen and qualified (subject to the ability of the Trustees to remove any officer in accordance with the Trust’s By-laws). Except for Ms. Livingston and Messrs. Collins, Frazier and Gehret, the Trustees previously served on the Board of Trustees of the Predecessor Trust.
+Ms. Livingston and Mr. Gehret are “interested persons” of the Trust as defined in the 1940 Act because of their positions as Partner and Limited Partner of BBH&Co., respectively.
^The Fund Complex consists of the Trust, which has five series, and each is counted as one “Portfolio” for purposes of this table.
FINANCIAL STATEMENT OCTOBER 31, 201335
 

ADMINISTRATOR INVESTMENT ADVISER
BROWN BROTHERS HARRIMAN & CO. BROWN BROTHERS HARRIMAN
140 BROADWAY MUTUAL FUND ADVISORY
NEW YORK, NY 10005 DEPARTMENT
  140 BROADWAY
DISTRIBUTOR NEW YORK, NY 10005
ALPS DISTRIBUTORS, INC.  
1290 BROADWAY, SUITE 1100  
DENVER, CO 80203  

 

SHAREHOLDER SERVICING AGENT
BROWN BROTHERS HARRIMAN
140 BROADWAY
NEW YORK, NY 10005
1-800-575-1265

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 Funds website at www.bbhfunds.com.

A summary of the Fund’s Proxy Voting Policy that the Fund uses to determine how to vote proxies, if any, relating to securities held in the Fund’s portfolio, as well as a record of how the Fund voted any such proxies during the most recent 12-month period ended June 30, is available upon request by calling the toll-free number listed above. This information is also available on the SEC’s website at www.sec.gov.

 
 

Annual Report

OCTOBER 31, 2013

BBH Global Core Select

 
 

BBH GLOBAL CORE SELECT
MANAGEMENT’S DISCUSSION OF FUND PERFORMANCE
October 31, 2013

 

BBH Global Core Select (“Global Core Select” or the “Fund”) launched on March 28, 2013 and we would like to thank all of the shareholders who have invested in the Fund during its first seven months of existence. Our focus is on compounding over many years the capital that has been entrusted to us. We seek to achieve this objective by owning high quality businesses that provide essential products and services to loyal customers; are leaders in attractive industries or market niches; and have strong and durable competitive advantages. Financially, we look for businesses that have strong balance sheets, generate ample free cash flow, and earn high returns on capital. We also seek to partner with managers who are honest, excellent operators, and intelligent capital allocators. Lastly, we seek to invest when companies that possess most of these characteristics are trading at 75% or less of our intrinsic value1 estimates and to exit as the share prices approach or reach intrinsic value. Our investment team believes that owning high quality businesses trading at discounts to intrinsic value is an effective way to protect against permanent capital losses due to economic and market downturns, while participating in market upturns.

During the seven months of fiscal 2013, the Fund generated a positive net return of 9.90%, while the MSCI World Index2 appreciated 13.13%. Note that we do not manage the Fund to mirror the performance of the MSCI World Index and the Fund’s holdings (both by industry and geography) differ materially from the comparable weights of that index. We invest with a multi-year time horizon and encourage shareholders to judge our investment performance over an extended time period that reflects both up and down markets.

At its launch in late March, the Fund owned 28 businesses and during the year we added four more companies (Schlumberger, Solera Holdings, Vermillion Energy, and Sally Beauty Holdings). We did not exit any positions during fiscal 2013, although we did trim a number of positions as they appreciated towards our intrinsic value estimates. As of October 31, 2013, the Fund’s top holdings were Nestle, Wells Fargo, Novartis, Google, and Qualcomm. These five businesses are good examples of the high quality businesses that we seek to own. We believe they are all competitively advantaged leaders in their respective industries with superb balance sheets and highly capable management teams.

 
1We prepare proprietary financial models for each Core Select company in order to determine an estimate of intrinsic value. Discounted cash flow analysis is the primary quantitative model used in our research process. We supplement our discounted cash flow work with other quantitative analyses, such as economic profit models, internal rate of return models, and free cash flow multiples.
2MSCI World is a stock market index of approximately 1,600 world stocks. It is maintained by MSCI Inc. and is often used as a common benchmark for ‘world’ or ‘global’ stock funds. The index is an unmanaged, market-weighted index and the returns of the index include net reinvested dividends but, unlike the Fund’s returns, do not reflect the payment of sales commissions or other expenses incurred in the purchase or sale of the securities included in the index. One cannot invest directly in an index.
2
 

BBH GLOBAL CORE SELECT
MANAGEMENT’S DISCUSSION OF FUND PERFORMANCE (continued)
October 31, 2013

 

Our leading positive contributors in fiscal 2013 were Google, JCDecaux, and Microsoft. Google demonstrated strong core operating performance driven by robust mobile and emerging markets advertising growth. Although now a very large company, Google’s revenues, operating income and cash flows continue to grow strongly due to a durable secular trend favoring online advertising over traditional media and Google’s sizable scale advantages in Internet search. JCDecaux is the global leader in outdoor advertising, which is an attractive advertising segment that we believe is largely protected from digital disintermediation. JCDecaux has a favorable asset base, the strongest balance sheet in its industry, and a superb reputation among customers and industry participants. The company continues to extend its franchise with new contract wins in attractive markets such as Russia, Brazil, and China. Lastly, Microsoft remains a technology powerhouse despite continued pressure in the consumer personal computer market and an ongoing transition away from an on-premise and perpetual license model towards cloud computing and subscription revenues. We believe Microsoft is maintaining its leadership position with enterprise customers and is executing well on its mobile and “devices and services” initiatives. Like most of our other holdings, Microsoft maintains a strong balance sheet, earns high returns on capital, and generates robust free cash flow.

Our leading detractors during fiscal 2013 were TGS Nopec Geophysical, a Norwegian-American multi-client seismic company, and Fuchs Petrolub, a German provider of industrial lubricants. TGS’s share price fell after the company reported lower prefunding levels for new seismic projects and permitting delays in Australia and the U.S. Despite the disappointing recent results, we remain confident in the long term outlook for increased upstream exploration activity and the resulting ongoing demand for seismic data. TGS has one of the most valuable seismic libraries in the world and has consistently earned attractive returns on its new seismic investments. In the case of Fuchs, the company experienced a relatively slow start to 2013 due to weakness in certain industrial markets in North and South America, as well as adverse changes in exchange rates. Nevertheless, most of Fuchs’ products are mission critical applications that customers need on a timely basis. Fuchs has also continued to report healthy growth in Asia, a critical market for future success. After their share prices fell, we added to our positions in both TGS and Fuchs. Importantly, both companies have financially astute management teams that are repurchasing shares at prices well below our intrinsic value estimates.

While we are very pleased with the Fund’s first seven months and the quality of the companies currently in the Global Core Select portfolio, we acknowledge that equity markets have rallied significantly in recent years. As a result, equity valuations are now relatively high and there are not many companies trading at wide discounts to our intrinsic value estimates. Accordingly, as we have trimmed certain positions that have approached our intrinsic value estimates, we have been patient about reinvesting our proceeds and the Fund’s cash position remains somewhat elevated (10.89% at October 31, 2013). We are certainly not afraid, though, of volatile or expensive markets. It is precisely in such market environments, that we believe our Global Core Select investment approach with its twin focus on business quality and a discount to intrinsic value is particularly well suited. We look forward to reporting to shareholders in our quarterly letters on the Fund’s future progress.

FINANCIAL STATEMENT OCTOBER 31, 20133
 

BBH GLOBAL CORE SELECT
MANAGEMENT’S DISCUSSION OF FUND PERFORMANCE (continued)
October 31, 2013

Growth of $10,000 Invested in BBH Global Core Select

The graph below illustrates the hypothetical investment of $10,0001 in the Class N shares of the Fund over the 7 month period ended October 31, 2013 as compared to the MSCI World Index.

* net of fees and expenses

The annualized gross expense ratios as in the March 28, 2013 prospectus for Class N and Retail Class shares were 1.26% and 1.51%, respectively.

Performance data quoted represents past performance which is no guarantee of future results. Investment return and principal value will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Fund performance changes over time and current performance may be lower or higher than what is stated. Fund shares redeemed within 30 days of purchase are subject to a redemption fee of 2.00%. For performance current to the most recent month-end please call 1-800-575-1265.

 
1The Fund’s performance assumes the reinvestment of all dividends and distributions. The MSCI World Index has been adjusted to reflect reinvestment of dividends on securities. The MSCI World Index is not adjusted to reflect sales charges, expenses or other fees that the Securities and Exchange Commission requires to be reflected in the Fund’s performance. The index is unmanaged. Investments cannot be made in an index.
4
 

BBH GLOBAL CORE SELECT
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

 

To the Trustees of the BBH Trust and Shareholders of BBH Global Core Select:

We have audited the accompanying statement of assets and liabilities, including the portfolio of investments, of BBH Global Core Select (a series of BBH Trust) (the “Fund”) as of October 31, 2013, and the related statement of operations and changes in net assets and the financial highlights for the period from March 28, 2013 (commencement of operations) to October 31, 2013. These financial statements and financial highlights are the responsibility of the Fund’s management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. The Fund is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Fund’s internal control over financial reporting.

Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of October 31, 2013, by correspondence with the custodian and brokers; where replies were not received from brokers, we performed other auditing procedures. We believe that our audit provide a reasonable basis for our opinion.

In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of BBH Global Core Select as of October 31, 2013, and the results of its operations, the changes in its net assets and the financial highlights for the period from March 28, 2013 (commencement of operations) to October 31, 2013, in conformity with accounting principles generally accepted in the United States of America.

DELOITTE & TOUCHE LLP

Boston, Massachusetts
December 23, 2013

FINANCIAL STATEMENT OCTOBER 31, 20135
 

BBH GLOBAL CORE SELECT
PORTFOLIO ALLOCATION
October 31, 2013

 

COUNTRY DIVERSIFICATION    

   U.S. $ Value   Percent of
Net Assets
 
Canada  $5,112,224    5.7%
France   5,766,178    6.4 
Germany   4,916,571    5.4 
Norway   2,608,203    2.9 
Sweden   1,870,030    2.1 
Switzerland   10,404,708    11.6 
United Kingdom   9,167,387    10.2 
United States   41,883,430    46.6 
Cash and Other Assets in Excess of Liabilities   8,197,955    9.1 
NET ASSETS  $89,926,686    100.0%

 

All data as of October 31, 2013. The Fund’s country diversification is expressed as a percentage of net assets and may vary over time.

The accompanying notes are an integral part of these financial statements.

6
 

BBH GLOBAL CORE SELECT
PORTFOLIO ALLOCATION (continued)
October 31, 2013
 
SECTOR DIVERSIFICATION
   U.S. $ Value   Percent of
Net Assets
 
Basic Materials  $7,114,755    7.9%
Communications   10,865,190    12.1 
Consumer Cyclical   8,300,619    9.2 
Consumer Non-Cyclical   23,650,498    26.3 
Energy   13,222,515    14.7 
Financials   8,428,380    9.4 
Technology   10,146,774    11.3 
Cash and Other Assets in Excess of Liabilities   8,197,955    9.1 
NET ASSETS  $89,926,686    100.0%

 

All data as of October 31, 2013. The Fund’s sector diversification is expressed as a percentage of net assets and may vary over time.

The accompanying notes are an integral part of these financial statements.

FINANCIAL STATEMENT OCTOBER 31, 20137
 

BBH GLOBAL CORE SELECT
PORTFOLIO OF INVESTMENTS
October 31, 2013

 

 
Shares     Value
    COMMON STOCKS (90.9%)  
    CANADA (5.7%)  
    ENERGY  
72,600   ARC Resources Ltd. $1,926,257
15,700   Vermilion Energy, Inc. 862,465
      2,788,722
    FINANCIALS  
37,275   Intact Financial Corp. 2,323,502
    Total Canada 5,112,224
       
    FRANCE (6.4%)  
    COMMUNICATIONS  
53,600   JCDecaux S.A. 2,155,413
    CONSUMER NON-CYCLICAL  
33,725   Sanofi 3,610,765
    Total France 5,766,178
       
    GERMANY (5.4%)  
    BASIC MATERIALS  
13,300   Brenntag AG 2,255,269
    ENERGY  
39,100   Fuchs Petrolub AG 2,661,302
    Total Germany 4,916,571
       
    NORWAY (2.9%)  
    ENERGY  
94,700   TGS Nopec Geophysical Co. ASA 2,608,203
    Total Norway 2,608,203
       
    SWEDEN (2.1%)  
    FINANCIALS  
41,200   Svenska Handelsbanken AB (Class A) 1,870,030
    Total Sweden 1,870,030

 

The accompanying notes are an integral part of these financial statements.

8
 

BBH GLOBAL CORE SELECT
PORTFOLIO OF INVESTMENTS (continued)
October 31, 2013

 

Shares     Value
    COMMON STOCKS (continued)  
    SWITZERLAND (11.6%)  
    CONSUMER NON-CYCLICAL  
63,325   Nestle SA $  4,581,032
56,575   Novartis AG 4,392,564
7,175   Straumann Holding AG 1,431,112
    Total Switzerland 10,404,708
 
    UNITED KINGDOM (10.2%)  
    COMMUNICATIONS  
115,600   Pearson, Plc 2,415,934
    CONSUMER NON-CYCLICAL  
68,900   Diageo, Plc 2,199,478
19,300   Reckitt Benckiser Group, Plc 1,500,614
522,750   Tesco, Plc 3,051,361
      6,751,453
    Total United Kingdom 9,167,387
 
    UNITED STATES (46.6%)  
    BASIC MATERIALS  
35,550   Celanese Corp. (Class A) 1,991,156
23,000   Praxair, Inc. 2,868,330
      4,859,486
    COMMUNICATIONS  
4,030   Google, Inc. (Class A)1 4,153,237
54,275   Nielsen Holdings NV 2,140,606
      6,293,843
    CONSUMER CYCLICAL  
33,950   Bed, Bath & Beyond, Inc.1 2,625,014
49,800   Sally Beauty Holdings, Inc.1 1,310,736
35,800   Target Corp. 2,319,482
26,650   Wal-Mart Stores, Inc. 2,045,387
      8,300,619

 

The accompanying notes are an integral part of these financial statements.

FINANCIAL STATEMENT OCTOBER 31, 20139
 

BBH GLOBAL CORE SELECT
PORTFOLIO OF INVESTMENTS (continued)
October 31, 2013

 

Shares         Value
    COMMON STOCKS (continued)      
    CONSUMER NON-CYCLICAL      
29,000   Baxter International, Inc.     $ 1,910,230
11,575   PepsiCo, Inc.     973,342
          2,883,572
    ENERGY      
28,925   Occidental Petroleum Corp.     2,779,114
25,450   Schlumberger, Ltd.     2,385,174
          5,164,288
    FINANCIALS      
99,200   Wells Fargo & Co.     4,234,848
    TECHNOLOGY      
102,625   Microsoft Corp.     3,627,794
54,225   QUALCOMM, Inc.     3,767,011
48,950   Solera Holdings, Inc.     2,751,969
          10,146,774
    Total United States     41,883,430
    TOTAL COMMON STOCKS (Identified cost $75,663,169)     81,728,731
           
TOTAL INVESTMENTS (Identified cost $75,663,169)2 90.9%   $81,728,731
CASH AND OTHER ASSETS IN EXCESS OF LIABILITIES 9.1%   8,197,955
NET ASSETS 100.0%   $89,926,686
 
1Non-income producing security.
2The aggregate cost for federal income tax purposes is $75,663,177, the aggregate gross unrealized appreciation is $6,648,976 and the aggregate gross unrealized depreciation is $583,422, resulting in net unrealized appreciation of $6,065,554.

The accompanying notes are an integral part of these financial statements.

10
 

BBH GLOBAL CORE SELECT
PORTFOLIO OF INVESTMENTS (continued)
October 31, 2013

 

FAIR VALUE MEASUREMENTS

The Fund is required to disclose information regarding the fair value measurements of the Fund’s assets and liabilities. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The disclosure requirement established a three-tier hierarchy to maximize the use of observable market data and minimize the use of unobservable inputs and to establish classification of fair value measurements for disclosure purposes. Inputs refer broadly to the assumptions that market participants would use in pricing the asset or liability, including, for example, the risk inherent in a particular valuation technique used to measure fair value, including the model and/or the risk inherent in the inputs to the valuation technique. Inputs may be observable or unobservable. Observable inputs are inputs that reflect the assumptions market participants would use in pricing the asset or liability developed based on market data obtained from sources independent of the reporting entity. Unobservable inputs are inputs that reflect the Fund’s own considerations about the assumptions market participants would use in pricing the asset or liability developed based on the best information available in the circumstances.

The three levels defined by the fair value hierarchy are as follows:

Level 1 – unadjusted quoted prices in active markets for identical investments.
Level 2 – significant other observable inputs (including quoted prices for similar investments, interest rates, prepayment speeds, credit risk, etc.).
Level 3 – significant unobservable inputs (including the Fund’s own assumptions in determining the fair value of investments).

Inputs are used in applying the various valuation techniques and broadly refer to the assumptions that market participants use to make valuation decisions, including assumptions about risk. Inputs may include price information, specific and broad credit data, liquidity statistics, and other factors. A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. However, the determination of what constitutes “observable” requires significant judgment by the investment adviser. The investment adviser considers observable data to be that market data which is readily available, regularly distributed or updated, reliable and verifiable, not proprietary, and provided by independent sources that are actively involved in the relevant market. The categorization of a financial instrument within the hierarchy is based upon the pricing transparency of the instrument and does not necessarily correspond to the investment adviser’s perceived risk of that instrument.

The accompanying notes are an integral part of these financial statements.

FINANCIAL STATEMENT OCTOBER 31, 201311
 

BBH GLOBAL CORE SELECT
PORTFOLIO OF INVESTMENTS (continued)
October 31, 2013

 

Financial assets within level 1 are based on quoted market prices in active markets. The Fund does not adjust the quoted price for these instruments.

Financial instruments that trade in markets that are not considered to be active but are valued based on quoted market prices, dealer quotations or alternative pricing sources supported by observable inputs are classified within level 2. These include investment-grade corporate bonds, U.S. Treasury notes and bonds, and certain non-U.S. sovereign obligations and over-the-counter derivatives and foreign equity securities whose values could be impacted by events occurring before the Fund’s pricing time, but after the close of the securities’ primary markets and are, therefore, Fair Valued according to procedures adopted by the Board of Trustees. As level 2 financial assets include positions that are not traded in active markets and/or are subject to transfer restrictions, valuations may be adjusted to reflect illiquidity and/or non-transferability, which are generally based on available market information.

Financial assets classified within level 3 have significant unobservable inputs, as they trade infrequently. Level 3 financial assets include private equity and certain corporate debt securities. As observable prices are not available for these securities, valuation techniques are used to derive fair value.

Because of the inherent uncertainties of valuation, the values reflected in the financial statements may materially differ from the value received upon the actual sale of those investments.

The following table summarizes the valuation of the Fund’s investments by the above fair value hierarchy levels as of October 31, 2013.

Investments, at value  (Unadjusted)
Quoted Prices in
Active Markets
for Identical
Investments
(Level 1)*
   Significant
Other
Observable
Inputs
(Level 2)*
   Significant
Unobservable
Inputs
(Level 3)*
   Balance as of
October 31, 2013
 
Basic Materials  $4,859,486   $2,255,269   $—     $7,114,755 
Communications   6,293,843    4,571,347    —      10,865,190 
Consumer Cyclical   8,300,619    —      —      8,300,619 
Consumer Non-Cyclical   2,883,572    20,766,926    —      23,650,498 
Energy   7,953,010    5,269,505    —      13,222,515 
Financials   6,558,350    1,870,030    —      8,428,380 
Technology   10,146,774    —      —      10,146,774 
Investments, at value  $46,995,654   $34,733,077   $—     $81,728,731 

 

 
*The Fund’s policy is to disclose transfers between levels based on valuations at the end of the reporting period. There were no transfers between Levels 1, 2 or 3 as of October 31, 2013, based on the valuation input levels on March 28, 2013.

The accompanying notes are an integral part of these financial statements.

12
 

BBH GLOBAL CORE SELECT
STATEMENT OF ASSETS AND LIABILITIES
October 31, 2013

 

ASSETS:  
Investments in securities, at value (Identified cost $75,663,169) $81,728,731
Cash 9,684,161
Foreign currency at value (Identified cost $108,692) 107,708
Receivables for:  
Dividends 72,262
Investment advisory and administrative fees waiver reimbursement 60,057
Shares sold 31,000
Investments sold 222
Prepaid assets 25,338
Total Assets 91,709,479
LIABILITIES:  
Payables for:  
Investments purchased 1,619,745
Investment advisory and administrative fees 63,824
Professional fees 46,800
Shareholder servicing fees 15,084
Custody and fund accounting fees 10,638
Transfer agent fees 2,087
Distributors fees 1,756
Board of Trustees’ fees 727
Accrued expenses and other liabilities 22,132
Total Liabilities 1,782,793
NET ASSETS $89,926,686
Net Assets Consist of:  
Paid-in capital $83,461,090
Undistributed net investment income 123,588
Accumulated net realized gain on investments in securities and foreign  
exchange transactions 277,430
Net unrealized appreciation/(depreciation) on investments in securities  
and foreign currency translations1 6,064,578
Net Assets $89,926,686
NET ASSET VALUE AND OFFERING PRICE PER SHARE  
CLASS N SHARES  
($88,204,028 ÷ 8,023,112 shares outstanding) $10.99
RETAIL CLASS SHARES  
($1,722,658 ÷ 156,951 shares outstanding) $10.98

 

 
1Includes unrealized appreciation from the investments carried forward on a cost basis in the tax-free transaction from the BBH Global Funds, LLC to BBH Global Core Select. (See Note 7).

The accompanying notes are an integral part of these financial statements.

FINANCIAL STATEMENT OCTOBER 31, 201313
 

BBH GLOBAL CORE SELECT
STATEMENT OF OPERATIONS
For the period from March 28, 2013 (commencement of operations) to October 31, 2013

 

NET INVESTMENT INCOME:  
Income:  
Dividends (net of foreign withholding taxes of $24,632) $ 444,043
Total Income 444,043
Expenses:  
Investment advisory and administrative fees 241,580
Professional fees 46,799
Board of Trustees’ fees 46,252
Shareholder servicing fees 38,145
Custody and fund accounting fees 37,429
Transfer agent fees 13,769
Distributors fees 11,575
Miscellaneous expenses 56,784
Total Expenses 492,333
Investment advisory and administrative fees waiver (170,841)
Expense offset arrangement (2,297)
Net Expenses 319,195
Net Investment Income 124,848
NET REALIZED AND UNREALIZED GAIN:  
Net realized gain on investments in securities 118,099
Net realized gain on foreign exchange transactions 158,071
Net realized gain on investments in securities and foreign exchange  
transactions and translations 276,170
Net change in unrealized appreciation/(depreciation) on investments  
in securities 4,610,480
Net change in unrealized appreciation/(depreciation) on foreign  
currency translations 1,174
Net change in unrealized appreciation/(depreciation) on investments  
in securities and foreign currency translations 4,611,654
Net Realized and Unrealized Gain 4,887,824
Net Increase in Net Assets Resulting from Operations $5,012,672

 

The accompanying notes are an integral part of these financial statements.

14
 

BBH GLOBAL CORE SELECT
STATEMENT OF CHANGES IN NET ASSETS
October 31, 2013

 

  For the period
from March 28,
2013
(commencement
of operations)
to October 31,
2013
INCREASE IN NET ASSETS:  
Operations:  
Net investment income $   124,848
Net realized gain on investments in securities and foreign exchange  
transactions and translations 276,170
Net change in unrealized appreciation/(depreciation) on investments  
in securities and foreign currency translations 4,611,654
Net increase in net assets resulting from operations 5,012,672
Share transactions:  
Shares issued in connection with the merger 15,389,487
Proceeds from sales of shares 70,121,983
Proceeds from short-term redemption fees 27
Cost of shares redeemed (597,483)
Net increase in net assets resulting from share transactions 84,914,014
Total increase in net assets 89,926,686
NET ASSETS:  
Beginning of period
End of period (including undistributed net investment income  
of $123,588) $89,926,686

 

The accompanying notes are an integral part of these financial statements.

FINANCIAL STATEMENT OCTOBER 31, 201315
 

BBH GLOBAL CORE SELECT
FINANCIAL HIGHLIGHTS
Selected per share data and ratios for a Class N share outstanding throughout each period.

 

   For the period
from March 28,
2013
(commencement
of operations)
to October 31,
2013
Net asset value, beginning of period  $10.00 
Income from investment operations:     
Net investment income1   0.03 
Net realized and unrealized gain   0.96 
Total income from investment operations   0.99 
Short-term redemption fees2   0.00 
Net asset value, end of period  $10.99 
Total return   9.90%
      
Ratios/Supplemental data:     
Net assets, end of period (in millions)  $88 
Ratio of expenses to average net assets before reductions   1.87%3
Fee waiver   0.61%3,4
Expense offset arrangement   0.01%3
Ratio of expenses to average net assets after reductions   1.25%3
Ratio of net investment income to average net assets   0.50%3
Portfolio turnover rate   6%5

 

 
1Calculated using average shares outstanding for the period.
2Less than $0.01.
3Annualized.
4The ratio of expenses to average net assets for the period ended October 31, 2013 reflect fees reduced as result of a contractual operating expense limitation of the Fund to 1.25%. The agreement is effective for the period beginning on March 28, 2013 through April 1, 2014. and has been renewed by all parties to the agreement through April 1, 2015. For the period ended October 31, 2013 the waived fees were $152,928.
5Represents Fund portfolio turnover for the period ended October 31, 2013.
   
   
   

 

The accompanying notes are an integral part of these financial statements.

16
 

BBH GLOBAL CORE SELECT
FINANCIAL HIGHLIGHTS (continued)
Selected per share data and ratios for a Retail Class share outstanding throughout each period.

 

   For the period
from April 2,
2013
(commencement
of operations)
to October 31,
2013
 
Net asset value, beginning of period  $10.00 
Income from investment operations:     
Net investment income1   0.002 
Net realized and unrealized gain   0.98 
Total income from investment operations   0.98 
Short-term redemption fees2   0.00 
Net asset value, end of period  $10.98 
Total return   9.80%
Ratios/Supplemental data:     
Net assets, end of period (in millions)  $2 
Ratio of expenses to average net assets before reductions   4.88%3
Fee waiver   3.37%3,4
Expense offset arrangement   0.01%3
Ratio of expenses to average net assets after reductions   1.50%3
Ratio of net investment income to average net assets   0.02%3
Portfolio turnover rate   6%5

 

 
1Calculated using average shares outstanding for the period.
2Less then $0.01.
3Annualized.
4The ratio of expenses to average net assets for the period ended October 31, 2013 reflect fees reduced as result of a contractual operating expense limitation of the Fund to 1.50%. The agreement is effective for the period beginning on March 28, 2013 through April 1, 2014. and has been renewed by all parties to the agreement through April 1, 2015. For the period ended October 31, 2013 the waived fees were $17,913.
5Represents Fund portfolio turnover for the period ended October 31, 2013.
   
   
   

The accompanying notes are an integral part of these financial statements.

FINANCIAL STATEMENT OCTOBER 31, 201317
 

BBH GLOBAL CORE SELECT
NOTES TO FINANCIAL STATEMENTS
As of and for the period ended October 31, 2013

 

1.Organization. The Fund is a separate, non-diversified series of BBH Trust (the “Trust”), which is registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as an open-end management investment company. The Trust was originally organized under the laws of the State of Maryland on July 16, 1990 as BBH Fund, Inc. and re-organized as a Delaware statutory trust on June 12, 2007. The Fund is the successor to the BBH private investment fund, BBH Global Funds, LLC —Global Core Select, which launched on April 2, 2012. The Fund commenced operations on March 28, 2013. The Fund offers both Class N shares and Retail Class shares. Neither Class N shares nor Retail Class shares convert to any other class of shares of the Fund. As of October 31, 2013, there were five series of the Trust.
2.Significant Accounting Policies. The Fund’s financial statements are prepared in accordance with Generally Accepted Accounting Principles in the United States of America (“GAAP”). The following summarizes significant accounting policies of the Fund:
A.Valuation of Investments. (1) The value of investments listed on a securities exchange is based on the last sale price on that exchange prior to the time when assets are valued, or in the absence of recorded sales, at the average of readily available closing bid and asked prices on such exchange; (2) securities not traded on an exchange are valued at the average of the quoted bid and asked prices in the over-the counter market; (3) securities or other assets for which market quotations are not readily available are valued at “fair value” in accordance with procedures established by and under the general supervision and responsibility of the Board of Trustees; (4) for securities traded on international exchanges, if events which may affect the value of the Fund’s securities occur after the close of the primary exchange on which such securities trade and before the Fund’s net asset value is next determined, then those securities will be fair valued as determined in good faith under supervision of the Board. The Fund currently uses a systematic fair value model provided by an independent third party to value international securities on a daily basis; (5) short-term investments, which mature in 60 days or less are valued at amortized cost if their original maturity was 60 days or less, or by amortizing their value on the 61st day prior to maturity, if their original maturity when acquired by the Fund was more than 60 days, unless the use of amortized cost is determined not to represent “fair value” by the Board.
B.Accounting for Investments and Income. Investment transactions are accounted for on the trade date. Realized gains and losses on investment transactions are determined based on the identified cost method. Dividend income and other distributions received from portfolio securities are recorded on the ex-dividend date. Non-cash dividends included in dividend income, if any, are recorded at the fair market value of securities received at ex-date. Distributions received on securities that represent a return of capital 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 any foreign taxes withheld where recovery of such tax is uncertain.
18
 

BBH GLOBAL CORE SELECT
NOTES TO FINANCIAL STATEMENTS (continued)
As of and for the period ended October 31, 2013

 

C.Fund Expenses. Most expenses of the Trust can be directly attributed to a specific fund. Expenses which cannot be directly attributed to a fund are apportioned amongst each fund in the Trust equally. Expense estimates are accrued in the period to which they relate and adjustments are made when actual amounts are known.
D.Repurchase Agreements. The Fund may enter into repurchase agreements. Repurchase agreements are transactions in which the Fund buys a security from a dealer or bank and agrees to sell the security back at a mutually agreed upon time and price. The repurchase price normally is in excess of the purchase price, reflecting an agreed upon interest rate. The rate is effective for the period of time that assets of the Fund are invested in the agreement and is not related to the coupon rate on the underlying security. The Fund will enter into repurchase agreements only with banks and other recognized financial institutions, such as securities dealers, deemed creditworthy by the investment adviser. The Fund’s custodian or sub-custodian will take possession of the securities subject to repurchase agreements. The investment adviser, custodian or sub-custodian will monitor the value of the underlying collateral each day to ensure that the value of the security always equals or exceeds the repurchase price. Repurchase agreements are subject to credit risks. Information regarding repurchase agreements held by the Fund is included in the Portfolio of Investments.
E.Federal Income Taxes. The Fund may be subject to foreign taxes on income, gains on investments or currency repatriation, a portion of which may be recoverable. The Fund will accrue such taxes and recoveries, as applicable, based upon its current interpretation of tax rules and regulations that exist in the markets in which it invests.

Realized gains in certain countries may be subject to foreign taxes at the Fund level, based on statutory rates. The Fund accrues for such foreign taxes on net realized and unrealized gains at the appropriate rate for each jurisdiction, as applicable. The amount, if any, is disclosed as a liability on the Statement of Assets and Liabilities.

It is the Trust’s policy to comply with the requirements of the Internal Revenue Code (the “Code”) applicable to regulated investment companies and to distribute substantially all of its taxable income to its shareholders. Accordingly, no federal income tax provision is required. The Fund files a tax return annually using tax accounting methods required under provisions of the Code, which may differ from GAAP, which is the basis on which these financial statements are prepared. Accordingly, the amount of net investment income and net realized gain reported in these financial statements may differ from that reported on the Fund’s tax return, due to certain book-to-tax timing differences such as losses deferred due to “wash sale” transactions and utilization of capital loss carryforwards. These differences result in temporary over-distributions for financial statement purposes and are classified as distributions in excess of accumulated net realized gains or net investment income. These distributions do not constitute a return of capital. Permanent differences

FINANCIAL STATEMENT OCTOBER 31, 201319
 

BBH GLOBAL CORE SELECT
NOTES TO FINANCIAL STATEMENTS (continued)
As of and for the period ended October 31, 2013

 

are reclassified in the Statement of Assets & Liabilities based upon their tax classification. As such, the character of distributions to shareholders reported in the Financial Highlights table may differ from that reported to shareholders on Form 1099-DIV.

The Fund is subject to the provisions of Accounting Standards Codification 740 Income Taxes (“ASC 740”). ASC 740 sets forth a minimum threshold for financial statement recognition of the benefit of a tax position taken or expected to be taken in a tax return. The Fund did not have any unrecognized tax benefits as of October 31, 2013, nor were there any increases or decreases in unrecognized tax benefits for the period then ended. The Fund recognizes interest and penalties, if any, related to unrecognized tax benefits as an income tax expense in the Statement of Operations. During the period ended October 31, 2013, the Fund did not incur any such interest or penalties. The Fund is subject to examination by U.S. federal and state tax authorities for returns filed for all open tax years. The Fund is not aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will significantly change in the next twelve months.

F.Foreign Currency Translations. The accounting records of the Fund are maintained in U.S dollars. Foreign currency amounts are translated into U.S. dollars at the current rate of exchange of such currency against the U.S. dollar to determine the value of investments, assets and liabilities. Purchases and sales of securities, and income and expenses are translated at the prevailing rate of exchange on the respective dates of such transactions. Upon the purchase or sale of a security denominated in foreign currency, the Fund may enter into forward foreign currency exchange contracts for the purchase or sale, for a fixed amount of U.S. dollars, of the amount of foreign currency involved in the underlying security transaction. Reported net realized gains and losses arise from the sales of portfolio securities, sales of foreign currencies, currency gains or losses realized between the trade and settlement dates on securities transactions, and the difference between the amounts of dividends, interest and foreign withholding taxes recorded on the Fund’s books and the U.S. dollar equivalent of the amounts actually received or paid. The effect of changes in foreign exchange rates on foreign denominated securities is reflected in the net realized and unrealized gain or loss on investments in securities. Net unrealized appreciation or depreciation on foreign currency translations arise from changes in the value of the assets and liabilities, excluding investments in securities, at period end, resulting from changes in the exchange rate.
G.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. Distributions from net capital gains, if any, are generally declared and paid annually and are recorded on the ex-dividend date. The Fund did not pay distributions during the period from March 28, 2013 (commencement of operations) to October 31, 2013.
20
 

BBH GLOBAL CORE SELECT
NOTES TO FINANCIAL STATEMENTS (continued)
As of and for the period ended October 31, 2013

 

As of October 31, 2013 the components of accumulated earnings/(deficit) on a tax basis were as follows:

Components of accumulated earnings/(deficit):
   Undistributed
ordinary
income
  Undistributed
long-term
capital gain
  Accumulated
earnings
  Accumulated
capital and
other losses
  Other
book/tax
temporary
differences
  Unrealized
appreciation/
(depreciation)
  Total
accumulated
earnings/
(deficit)
2013:  $370,647  $30,379  $401,026    $(8)  $6,064,578  $6,465,596

 

Under the Regulated Investment Company Modernization Act of 2010, the Fund is permitted to carry forward capital losses incurred in taxable years beginning after December 22, 2010, for an unlimited period and they will retain their character as either short-term or long-term capital losses rather than being considered all short-term capital losses.

Total distributions paid may differ from amounts reported in the Statement of Changes in Net Assets because, for tax purposes, dividends are recognized when actually paid.

The differences between book-basis and tax-basis unrealized appreciation/(depreciation) is attributable primarily to the tax deferral of losses on wash sales.

To the extent future capital gains are offset by capital loss carry forwards; such gains will not be distributed.

H.Use of Estimates. The preparation of the financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of income and expense during the reporting period. Actual results could differ from these estimates.
3.Recent Accounting Pronouncements. In January 2013, the Financial Accounting Standards Board (“FASB”) issued an Accounting Standards Update (“ASU”) No. 2013-01 “Clarifying the Scope of Disclosures about Offsetting Assets and Liabilities.” This update was issued to narrow the broad scope of ASU No. 2011-11 “Disclosures about Offsetting Assets and Liabilities,” which was issued in December 2011. This update requires an entity to disclose both gross and net information for derivatives and other financial instruments that are either offset in the statement of assets and liabilities or subject to an enforceable master netting arrangement or similar agreement. The required disclosures for both pronouncements are effective for annual reporting periods starting from January 1, 2013 and interim periods within those annual periods and apply retrospectively for all periods being reported. Management is assessing the impact of these new disclosure requirements.
FINANCIAL STATEMENT OCTOBER 31, 201321
 

BBH GLOBAL CORE SELECT
NOTES TO FINANCIAL STATEMENTS (continued)
As of and for the period ended October 31, 2013

 

4.Fees and Other Transactions with Affiliates.
A.Investment Advisory and Administrative Fees. Under a combined Investment Advisory and Administrative Services Agreement (“Agreement”) with the Trust, Brown Brothers Harriman & Co. (“BBH”) through a separately identifiable department (“SID” or “Investment Adviser”) provides investment advisory and portfolio management services to the Fund. BBH also provides administrative services to the Fund. The Fund pays a combined fee for investment advisory and administrative services calculated daily and paid monthly at an annual rate equivalent to 0.95% of the Fund’s average daily net assets. For the period ended October 31, 2013, the Fund incurred $241,580 under the Agreement.
B.Investment Advisory and Administrative Fee Waivers. Effective March 28, 2013 (commencement of operations), the SID contractually agreed to limit the annual fund operating expenses (excluding interest, taxes, brokerage commissions, other expenditures that are capitalized in accordance with GAAP, other extraordinary expenses not incurred in the ordinary course of the Fund’s business and for Retail Class, amounts payable pursuant to any plan adopted in accordance with Rule 12b-1) of Class N and Retail Class to 1.25%. The agreement will terminate on April 1, 2014, unless it is renewed by all parties to the agreement. The agreement may only be terminated during its term with approval of the Fund’s Board of Trustees. For the period ended October 31, 2013, the SID waived fees in the amount of $152,928 and $17,913 for Class N and Retail Class, respectively.
C.Shareholder Servicing Fees. The Trust has a shareholder servicing agreement with BBH. BBH receives a fee from the Fund calculated daily and paid monthly at an annual rate of 0.15% of Class N and Retail Class shares’ average daily net assets. For the period ended October 31, 2013, the Fund incurred shareholder servicing fees in the amount of $37,346 and $799 for Class N and Retail Class, respectively.
D.Distribution (12b-1) Fees. The Fund has adopted a distribution plan pursuant to Rule 12b-1 for Retail Class shares that allows the Fund to pay distribution and other fees for the sale of its shares and for services provided to shareholders. Because these fees are paid out of the Fund’s assets continuously, over time these fees will increase the cost of your investment and may cost you more than paying other types of sales charges. The maximum annual distribution fee for Retail Class shares is 0.25% of the average daily net assets of the Retail Class shares of the Fund. With this agreement, it is anticipated that total operating expenses for Retail Class shares will be 1.50% of the average daily net assets. For the period ended October 31, 2013, Retail Class shares of the Fund incurred $1,327 for Distribution (12b-1) Fees.
22
 

BBH GLOBAL CORE SELECT
NOTES TO FINANCIAL STATEMENTS (continued)
As of and for the period ended October 31, 2013

 

E.Custody and Fund Accounting Fees. BBH acts as a custodian and fund accountant and receives custody and fund accounting fees from the Fund calculated daily and incurred monthly. BBH holds all of the Fund’s cash and investments and calculates the Fund’s daily net asset value. The custody fee is an asset and transaction based fee. The fund accounting fee is an asset based fee calculated at 0.004% per annum of the fund’s net assets. For the period ended October 31, 2013, the Fund incurred $37,429 in custody and fund accounting fees. These fees for the Fund were reduced by $2,297 as a result of an expense offset arrangement with the Fund’s custodian. The credit amount is disclosed in the Statement of Operations as a reduction to the Fund’s expenses. In the event that the Fund is overdrawn, under the custody agreement with BBH, BBH will make overnight loans to the Fund to cover overdrafts. Pursuant to their agreement, the Fund will pay the Federal Funds overnight investment rate on the day of the overdraft. The total interest incurred by the Fund for the period ended October 31, 2013, was $0.
F.Board of Trustees’ Fees. Each Trustee who is not an “interested person” as defined under the 1940 Act receives an annual fee as well as reimbursement for reasonable out-of-pocket expenses from the Fund. For the period ended October 31, 2013, the Fund incurred $46,252 in non-interested Trustee compensation and reimbursements.
5.Investment Transactions. For the period ended October 31, 2013, the cost of purchases and the proceeds of sales of investment securities, other than short-term investments, were $66,279,237 and $2,670,824, respectively.

Transactions prior to the reorganization are excluded for purposes of calculating the Fund’s portfolio turnover rate. Cost of purchases and proceeds from sales of investment securities excluded were $11,777,610 and $0, respectively.

6.Shares of Beneficial Interest. The Trust is permitted to issue an unlimited number of Class N and Retail Class shares of beneficial interest at no par value. Transactions in Class N and Retail Class shares were as follows:
         
    10/31/2013* 
    Shares    Dollars 
Class N          
Shares issued in connection with the merger   1,538,949   $15,389,487 
Shares sold   6,505,378    68,120,976 
Shares redeemed   (21,215)   (221,696)
Net increase   8,023,112   $83,288,767 

 

FINANCIAL STATEMENT OCTOBER 31, 201323
 

BBH GLOBAL CORE SELECT
NOTES TO FINANCIAL STATEMENTS (continued)
As of and for the period ended October 31, 2013

 

         
    10/31/2013* 
    Shares    Dollars 
Retail Class          
Shares sold   192,744   $2,001,007 
Proceeds from short-term redemption fees   NA    27 
Shares redeemed   (35,793)   (375,787)
Net increase   156,951   $1,625,247 

 

 
*The period represented is from March 28, 2013 (commencement of operations) to October 31, 2013.
7.Acquisition of BBH Global Funds, LLC — Global Core Select Series. On March 28, 2013, the Fund acquired all of the net assets of BBH Global Funds, LLC — Global Core Select Series (the “Series”), a series of a multi-series limited liability company organized under the Delaware Limited Liability Company Act, pursuant to an Agreement and Plan of Reorganization and Exchange executed by BBH Trust and the Managing Member of BBH Global Funds, LLC. The purpose of the transaction was to combine two funds with like investment objectives and strategies under one registered investment adviser. The acquisition was accomplished by a tax-free exchange of 1,538,949 shares of the Fund, valued at $15,389,487, for all of the membership units of the Series outstanding on March 28, 2013. The investment portfolio of the Series, with a fair value of $13,231,593 and identified cost of $11,778,669 at March 28, 2013, was the principal asset acquired by the Fund. For financial reporting purposes, assets received by and shares issued by the Fund were recorded at fair value; however, the cost basis of the investments received from the Series was carried forward to align the ongoing reporting of the Fund’s realized and unrealized gains and losses with amounts distributable to shareholders for tax purposes. Immediately prior to the merger, the Fund had net assets of $0.
8.Principal Risk Factors and Indemnifications.
A.Principal Risk Factors. Investing in the Fund may involve certain risks, as discussed in the Fund’s prospectus, including but not limited to, those described below:

A shareholder may lose money by investing in the Fund (investment risk). The Fund is actively managed and the decisions by the Investment Adviser may cause the Fund to incur losses or miss profit opportunities (management risk). Capital controls imposed by foreign governments in response to economic or political events may impact the ability of the Fund to buy, sell or otherwise transfer securities or currency (capital controls risk), non-U.S. currencies invested in by the Fund depreciating against the U.S. dollar (currency exchange rate risk), risks from investing in securities of issuers based in developing countries (emerging markets risk), or price movements may occur due to factors affecting individual companies, such as the issuance of an unfavorable earnings report,

24
 

BBH GLOBAL CORE SELECT
NOTES TO FINANCIAL STATEMENTS (continued)
As of and for the period ended October 31, 2013

 

or other events affecting particular industries or the equity market as a whole (equity securities risk), or certain risks associated with investing in foreign securities not present in domestic investments (foreign investment risk). The value of securities held by the Fund may fall due to changing economic, political, regulatory or market conditions, or due to a company’s or issuer’s individual situation (market risk). Stocks of medium-sized companies tend to be more volatile and less liquid than stocks of large companies (medium-sized company risk). In the normal course of business, the Fund invests in securities and enters into transactions where risks exist due to assumption of large positions in securities of a small number of issuers (non-diversification risk). The Fund’s Shareholders may be adversely impacted by asset allocation decisions made by an investment adviser whose discretionary clients make up a large percentage of the Fund’s shareholders (shareholder concentration risk). The extent of the Fund’s exposure to these risks in respect to these financial assets is included in their value as recorded in the Fund’s Statement of Assets and Liabilities.

Please refer to the Fund’s prospectus for a complete description of the principal risks of investing in the Fund.

B.Indemnifications. Under the Trust’s organizational documents, its officers and Trustees may be indemnified against certain liabilities and expenses arising out of the performance of their duties to the Fund, and shareholders are indemnified against personal liability for the obligations of the Trust. Additionally, in the normal course of business, the Fund enters into agreements with service providers that may contain indemnification clauses. The Fund’s maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Fund that have not yet occurred. The risk of material loss from such claims is considered remote.
9.Subsequent Events. Management has evaluated events and transactions that have occurred since October 31, 2013 through the date the financial statements were issued and determined that there were none that would require recognition or additional disclosure in the financial statements.
FINANCIAL STATEMENT OCTOBER 31, 201325
 

BBH GLOBAL CORE SELECT
DISCLOSURE OF FUND EXPENSES
October 31, 2013 (unaudited)

 

EXAMPLE

As a shareholder of the Fund, you may incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments, reinvested distributions, or other distributions; redemption fees; and exchange fees; and (2) ongoing costs, including management fees; distribution 12b-1 fees; and other Fund expenses. This Example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.

The Example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period (May 1, 2013 to October 31, 2013).

ACTUAL EXPENSES

The first line of the table below provides information about actual account values and actual expenses. You may use information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled “Expenses Paid During the Period” to estimate the expenses you paid on your account during the period.

HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES

The second line of the table below provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid during the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% Hypothetical Example with the 5% hypothetical examples that appear in the shareholder reports of other funds.

26
 

BBH GLOBAL CORE SELECT
DISCLOSURE OF FUND EXPENSES (continued)
October 31, 2013 (unaudited)

 

Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as redemption fees or exchange fees. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.

             
           Expenses Paid 
   Beginning   Ending   During Period 
   Account Value   Account Value   May 1, 2013 to 
   May 1, 2013    October 31, 2013    October 31, 20131 
Class N               
Actual  $1,000   $1,072   $6.53 
Hypothetical2  $1,000   $1,019   $6.36 
                
           Expenses Paid 
   Beginning   Ending   During Period 
   Account Value   Account Value   May 1, 2013 to 
   May 1, 2013    October 31, 2013    October 31, 20131 
Retail Class               
Actual  $1,000   $1,071   $7.83 
Hypothetical2  $1,000   $1,018   $7.63 

 

 
1     

Expenses are equal to the Fund’s annualized expense ratio of 1.25% and 1.50% for Class N and Retail Class shares, respectively, multiplied by the average account value over the period, multiplied by 184/365 and 184/365 for Class N and Retail Class shares, respectively.

2     

Assumes a return of 5% before expenses. For the purposes of the calculation, the applicable annualized expenses ratio for each class of shares is subtracted from the assumed return before expenses.

FINANCIAL STATEMENT OCTOBER 31, 201327
 

BBH GLOBAL CORE SELECT
CONFLICTS OF INTEREST
October 31, 2013 (unaudited)

 

Conflicts of Interest

Certain conflicts of interest may arise in connection with a portfolio manager’s management of the Fund’s investments, on the one hand, and the investments of other accounts for which the portfolio manager is responsible, on the other. For example, it is possible that the various accounts managed could have different investment strategies that, at times, might conflict with one another to the possible detriment of the Fund. Alternatively, to the extent that the same investment opportunities might be desirable for more than one account, possible conflicts could arise in determining how to allocate them, For example, BBH may act as adviser to private funds with investment strategies similar to the Fund. Those private funds may pay BBH a performance fee in addition to the stated investment advisory fee. In such cases, BBH may have an incentive to allocate certain investment opportunities to the private fund rather than the Fund in order to increase the private fund’s performance and thus improve BBH’s chances of receiving the performance fee. However, BBH has implemented policies and procedures to assure that investment opportunities are allocated equitably between the Fund and other funds and accounts with similar investment strategies.

Other potential conflicts might include conflicts between the Fund and its affiliated and unaffiliated service providers (e.g. conflicting duties of loyalty). In addition to providing investment management services through the SID, BBH provides administrative, custody, shareholder servicing and fund accounting services to the Fund. BBH may have conflicting duties of loyalty while servicing the Fund and/or opportunities to further its own interest to the detriment of the Fund. For example, in negotiating fee arrangements with affiliated service providers, BBH may have an incentive to agree to higher fees than it would in the case of unaffiliated providers. Also, because its advisory fees are calculated by reference to a Fund’s net assets, the Investment Adviser and its affiliates may have an incentive to seek to overvalue certain assets.

Purchases and sales of securities for the Fund may be aggregated with orders for other BBH client accounts. BBH however is not required to aggregate orders if portfolio management decisions for different accounts are made separately, or if they determine that aggregating is not practicable, required or with cases involving client direction.

Prevailing trading activity frequently may make impossible the receipt of the same price or execution on the entire volume of securities purchased or sold. When this occurs, the various prices may be averaged, and the Fund will be charged or credited with the average price. Thus, the effect of the aggregation may operate on some occasions to the disadvantage of the Fund. In addition, under certain circumstances, the Fund will not be charged the same commission or commission equivalent rates in connection with an aggregated order.

The Investment Adviser may direct brokerage transactions and/or payment of a portion of client commissions (“soft dollars”) to specific brokers or dealers or other providers to pay for research or other appropriate services which provide, in the Investment Adviser’s view, appropriate assistance to the Investment Adviser in the investment decision-making process (including with respect to futures, fixed-price offerings and over-the-counter transactions). The use of a broker that provides research and securities transaction services may result in a higher commission than that offered by a broker who does

28
 

BBH GLOBAL CORE SELECT
CONFLICTS OF INTEREST (continued)
October 31, 2013 (unaudited)

 

not provide such services. The Investment Adviser will determine in good faith whether the amount of commission is reasonable in relation to the value of research and services provided and whether the services provide lawful and appropriate assistance in its investment decision-making responsibilities.

Research or other services obtained in this manner may be used in servicing any or all of the Funds and other BBH client accounts, including in connection with BBH client accounts that do not pay commissions to the broker related to the research or other service arrangements. Such products and services may disproportionately benefit other BBH client accounts relative to the Fund based on the amount of brokerage commissions paid by the Fund and such other BBH client accounts. For example, research or other services that are paid for through one client’s commissions may not be used in managing that client’s account. In addition, other BBH client accounts may receive the benefit, including disproportionate benefits, of economies of scale or price discounts in connection with products and services that may be provided to the Fund and to such other BBH client accounts. To the extent that BBH uses soft dollars, it will not have to pay for those products and services itself.

BBH may receive research that is bundled with the trade execution, clearing, and/or settlement services provided by a particular broker-dealer. To the extent that BBH receives research on this basis, many of the same conflicts related to traditional soft dollars may exist. For example, the research effectively will be paid by client commissions that also will be used to pay for the execution, clearing, and settlement services provided by the broker-dealer and will not be paid by BBH.

BBH may endeavor to execute trades through brokers who, pursuant to such arrangements, provide research or other services in order to ensure the continued receipt of research or other services BBH believes are useful in its investment decision-making process. BBH may from time to time choose not to engage in the above described arrangements to varying degrees. BBH may also enter into commission sharing arrangements under which BBH may execute transactions through a broker-dealer, and request that the broker-dealer allocate a portion of the commissions or commission credits to another firm that provides research to BBH. To the extent that BBH engages in commission sharing arrangements, many of the same conflicts related to traditional soft dollars may exist.

Arrangements regarding compensation and delegation of responsibility may create conflicts relating to selection of brokers or dealers to execute Fund portfolio trades and/or specific uses of commissions from Fund portfolio trades, administration of investment advice and valuation of securities.

From time to time BBH may invest a portion of the assets of its discretionary investment advisory clients in the Fund. That investment by BBH on behalf of its discretionary investment advisory clients in the Fund may be significant at times. Increasing the Fund’s assets may enhance investment flexibility and diversification and may contribute to economies of scale that tend to reduce the Fund’s expense ratio. BBH reserves the right to redeem at any time some or all of the shares of the Fund acquired for its discretionary investment advisory clients’ accounts. A large redemption of shares of the Fund by BBH on behalf of its discretionary investment advisory clients could significantly reduce the asset size of the Fund, which might have an adverse effect on the Fund’s investment flexibility, portfolio diversification and expense ratio.

FINANCIAL STATEMENT OCTOBER 31, 201329
 

BBH GLOBAL CORE SELECT
CONFLICTS OF INTEREST (continued)
October 31, 2013 (unaudited)

 

BBH may enter into advisory and/or referral arrangements with third parties. Such arrangements may include compensation paid by BBH to the third party. BBH may pay a solicitation fee for referrals and/or advisory or incentive fees. BBH may benefit from increased amounts of assets under management.

When market quotations are not readily available or are believed by BBH to be unreliable, the Fund’s investments may be valued at fair value by BBH pursuant to procedures adopted by the Fund’s Board of Trustees. When determining an asset’s “fair value,” BBH seeks to determine the price that a Fund might reasonably expect to receive from the current sale of that asset in an arm’s-length transaction. The price generally may not be determined based on what the Fund might reasonably expect to receive for selling an asset at a later time or if it holds the asset to maturity. While fair value determinations will be based upon all available factors that BBH deems relevant at the time of the determination, and may be based on analytical values determined by BBH using proprietary or third party valuation models, fair value represents only a good faith approximation of the value of a security. The fair value of one or more securities may not, in retrospect, be the price at which those assets could have been sold during the period in which the particular fair values were used in determining the Fund’s net asset value. As a result, the Fund’s sale or redemption of its shares at net asset value, at a time when a holding or holdings are valued by BBH (pursuant to Board-adopted procedures) at fair value, may have the effect of diluting or increasing the economic interest of existing shareholders.

BBH, including the Investment Adviser, seeks to meet its fiduciary obligation with respect to all clients including the Fund. BBH has adopted and implemented policies and procedures that seek to manage conflicts. The Investment Adviser monitors a variety of areas, including compliance with fund investment guidelines, review of allocation decisions, the investment in only those securities that have been approved for purchase by an oversight committee, and compliance with the Investment Adviser’s Code of Ethics. With respect to the allocation of investment opportunities, BBH has adopted and implemented policies designed to achieve fair and equitable allocation of investment opportunities among its clients over time. BBH has structured the portfolio managers’ compensation in a manner it believes is reasonably designed to safeguard the Fund from being negatively affected as a result of any such potential conflicts.

The Trust also manages these conflicts. For example, the Trust has designated a chief compliance officer and has adopted and implemented policies and procedures designed to manage the conflicts identified above and other conflicts that may arise in the course of the Fund’s operations in such a way as to safeguard the Fund from being negatively affected as a result of any such potential conflicts. The Trustees receive regular reports from the Investment Adviser and the Trust’s chief compliance officer on areas of potential conflict.

30
 

BBH GLOBAL CORE SELECT
ADDITIONAL FEDERAL TAX INFORMATION
October 31, 2013 (unaudited)

 

One hundred percent of the ordinary income dividends paid by the Fund during the period ended October 31, 2013 qualifies for the dividends received deduction available to corporate shareholders.

FINANCIAL STATEMENT OCTOBER 31, 201331
 

TRUSTEES AND OFFICERS OF BBH GLOBAL CORE SELECT
(unaudited)

 

Information pertaining to the Trustees of the BBH Trust (the “Trust”) and executive officers of the Trust is set forth below. The Statement of Additional Information for the BBH Global Core Select includes additional information about the Fund’s Trustees and is available upon request without charge by contacting the Fund at 1-800-575-1265.

Name and
Birth Date
Position(s)
Held with the
Trust
Term of
Office# and
Length of
Time
Served
Principal Occupation(s)
During Past 5 Years
Number of
Funds in
Fund
Complex
Overseen By
Trustee^
Other
Directorships
held by
Trustee
During Past
5 Years
Independent Trustees

Joseph V. Shields Jr.

Birth Date:
March 17, 1938

Chairman of
the Board and
Trustee
Since 2007
1990-2007
with the
Predecessor
Trust
Managing Director and Chairman
of Wellington Shields & Co. LLC
(member of New York Stock
Exchange (“NYSE”)).
5 Chairman of
Capital
Management
Associates,
Inc. (registered
investment
adviser);
Director of
Flowers Foods,
Inc. (NYSE
listed
company).

David P. Feldman

Birth Date:
November 16, 1939

Trustee Since 2007
1990-2007
with the
Predecessor
Trust
Retired. 5 Director of
Dreyfus
Mutual Funds
(59 Funds).

Arthur D.
Miltenberger

Birth Date:
November 8, 1938

Trustee Since 2007
1992-2007
with the
Predecessor
Trust
Retired. 5 None.

H. Whitney Wagner

Birth Date:
March 3, 1956

Trustee Since 2007
2006-2007
with the
Predecessor Trust
President, Clear Brook Advisors, a
registered investment advisor.
5 None.

Andrew S. Frazier

Birth Date:
April 8, 1948

Trustee Since 2010 Consultant to Western World
Insurance Group, Inc. (“WWIG”)
(January 2010 to January 2012)
CEO of WWIG (1992-2009).
5 Director of
WWIG.

 

32
 

TRUSTEES AND OFFICERS OF BBH GLOBAL CORE SELECT
(unaudited)

 

Name, Birth Date
and Address
Position(s)
Held with
Trust
Term of
Office# and
Length of
Time
Served
Principal Occupation(s)
During Past 5 Years
Number of
Funds in
Fund
Complex
Overseen by
Trustee^
Other
Directorships
Held by
Trustee
During Past
5 Years

Mark M. Collins

Birth Date:
November 8, 1956

Trustee Since 2011 Partner of Brown Investment
Advisory Incorporated, a
registered investment advisor.
5 Chairman of
Dillon Trust
Company;
Chairman of
Keswick
Management;
Director of
Domaine
Clarence
Dillon,
Bordeaux,
France; and
Director of
Pinnacle Care
International.
Interested Trustees

Susan C. Livingston+

50 Post Office Square
Boston, MA 02110

Birth Date:
February 18, 1957

Trustee Since 2011 Partner (since 1998) and Senior
Client Advocate (since 2010) for
BBH&Co., Director of BBH
Luxembourg S.C.A. (since 1992);
Director of BBH Trust Company
(Cayman) Ltd. (2007 to April
2011); and BBH Investor Services
(London) Ltd (2001 to April 2011).
5 None.

John A. Gehret+

140 Broadway
New York, NY 10005

Birth Date:
April 11, 1959

Trustee Since 2011 Limited Partner of BBH&Co.
(2012-present); Partner of
BBH&Co. (1998 to 2011);
President and Principal Executive
Officer of the Trust (2008-2011).
5 None.

 

FINANCIAL STATEMENT OCTOBER 31, 201333
 

TRUSTEES AND OFFICERS OF BBH GLOBAL CORE SELECT
(unaudited)

 

OFFICERS      
Name, Birth Date
and Address
Position(s)
Held with the
Trust
Term of
Office# and
Length of
Time
Served
Principal Occupation(s) During Past 5 Years

Radford W. Klotz

140 Broadway
New York, NY 10005

Birth Date:
December 1, 1955

President and
Principal
Executive
Officer
Since 2011 Joined BBH&Co. in 1977 and has been a Partner of the firm since
1995.

Charles H. Schreiber

140 Broadway
New York, NY 10005

Birth Date:
December 10, 1957

Treasurer and
Principal
Financial
Officer
Since 2007
2006-2007
with the
Predecessor
Trust
Senior Vice President of BBH&Co. since September 2001; joined
BBH&Co. in 1999.

Mark B. Nixon

140 Broadway
New York, NY 10005

Birth Date:
January 14, 1963

Assistant
Secretary
Since 2007
2006-2007
with the
Predecessor Trust
Vice President of BBH&Co. since October 2006.

Mark A. Egert

140 Broadway
New York, NY 10005

Birth Date:
May 25, 1962

Chief
Compliance
Officer (“CCO”)
Since 2011 Senior Vice President of BBH&Co. since June 2011; Partner at
Crowell & Moring LLP (April 2010 to May 2011); and CCO of
Cowen and Company (January 2005 to April 2010).

Sue M. Rim-An

140 Broadway
New York, NY 10005

Birth Date:
September 10, 1970

Anti-Money
Laundering
Officer
Since 2008 Anti-Money Laundering (“AML”) Officer, Vice President of
BBH&Co. since September 2007.

Suzan Barron

50 Post Office Square
Boston, MA 02110

Birth Date:
September 5, 1964

Secretary Since 2009 Senior Vice President and Senior Investor Services Counsel,
Corporate Secretary and Regulatory Support Practice of Fund
Administration, BBH&Co. since November 2005.

 

34
 

TRUSTEES AND OFFICERS OF BBH GLOBAL CORE SELECT
(unaudited)

 

Name, Birth Date
and Address
Position(s)
Held with the
Trust
Term of
Office# and
Length of
Time
Served
Principal Occupation(s) During Past 5 Years

Alexander Tikonoff

50 Post Office Square
Boston, MA 02110

Birth Date:
December 23, 1974

Assistant
Secretary
Since 2009 Vice President and Investor Services Counsel, BBH&Co. since
August 2006.

Rowena Rothman

140 Broadway
New York, NY 10005

Birth Date:
October 24, 1967

Assistant
Treasurer
Since 2011 Vice President of BBH&Co. since 2009; Finance and Accounting
Consultant at The Siegfried Group (2007-2009).

 

 
#All officers of the Trust hold office for one year and until their respective successors are chosen and qualified (subject to the ability of the Trustees to remove any officer in accordance with the Trust’s By-laws). Except for Ms. Livingston and Messrs. Collins, Frazier and Gehret, the Trustees previously served on the Board of Trustees of the Predecessor Trust.
+Ms. Livingston and Mr. Gehret are “interested persons” of the Trust as defined in the 1940 Act because of their positions as Partner and Limited Partner of BBH&Co., respectively.
^The Fund Complex consists of the Trust, which has five series, and each is counted as one “Portfolio” for purposes of this table.
FINANCIAL STATEMENT OCTOBER 31, 201335
 

ADMINISTRATOR INVESTMENT ADVISER
BROWN BROTHERS HARRIMAN & CO. BROWN BROTHERS HARRIMAN
140 BROADWAY MUTUAL FUND ADVISORY
NEW YORK, NY 10005 DEPARTMENT
  140 BROADWAY
DISTRIBUTOR NEW YORK, NY 10005
ALPS DISTRIBUTORS, INC.  
1290 BROADWAY, SUITE 1100  
DENVER, CO 80203  

 

SHAREHOLDER SERVICING AGENT
BROWN BROTHERS HARRIMAN
140 BROADWAY
NEW YORK, NY 10005
1-800-575-1265

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 Funds website at www.bbhfunds.com.

A summary of the Fund’s Proxy Voting Policy that the Fund uses to determine how to vote proxies, if any, relating to securities held in the Fund’s portfolio, as well as a record of how the Fund voted any such proxies during the most recent 12-month period ended October 31, is available upon request by calling the toll-free number listed above. This information is also available on the SEC’s website at www.sec.gov.

 
 

 

Annual Report

OCTOBER 31, 2013

BBH International Equity Fund

 
 

BBH INTERNATIONAL EQUITY FUND
MANAGEMENT’S DISCUSSION OF FUND PERFORMANCE
October 31, 2013

 

For the 12-month period ended October 31, 2013, the BBH International Equity Fund (the “Fund”) Class N Shares and Class I shares returned 20.27% and 20.64%, net of fees, respectively. The Fund’s benchmark, the MSCI Europe, Australasia Far East Index1 (the “EAFE”), returned 26.88% over the same period. The Fund continues to employ two sub-advisers who are monitored by the investment adviser. One sub-adviser, Mondrian Investment Partners Limited (“Mondrian”), employs a value strategy while the other, Walter Scott & Partners Limited (“Walter Scott”), employs a growth strategy. New assets continue to be allocated equally between both sub-advisers.

The Fund underperformed its benchmark during the year primarily due to sector positioning and challenging stock selection in certain countries. Mondrian benefited from solid stock picking in Consumer Cyclicals and Consumer Defensives. Mondrian’s defensive hedging of a weakening Australian dollar also added to performance during the year. However, Mondrian was hurt by an overweight to Healthcare and an underweight to Financials, the best performing sector, as fears around sovereign defaults has subsided. Walter Scott’s results were also hindered by a large underweight to the financial sector and an overweight to Energy. In addition, stock selection was challenged in Japan as both subadvisers positioning away from yen-sensitive stocks led to underperforming Japan’s significant rally.

Both managers continued to employ strategies focused on an objective of total return, primarily through capital appreciation, rather than focus on particular benchmarks. They invest in what they believe are quality businesses with clear plans for the future, competitive positions among peers and strong management teams dedicated to increasing shareholder value.

 
1MSCI Europe, Australasia and Far East Index (EAFE) is an unmanaged market capitalization-weight equity index comprising 20 of 48 countries in the MSCI universe and representing the developed world outside of North America. Each MSCI country index is created separately, then aggregated, without change, into regional MSCI indices. EAFE performance data is calculated in U.S. dollars and in local currency. Investments cannot be made in an index.
2
 

BBH INTERNATIONAL EQUITY FUND

MANAGEMENT’S DISCUSSION OF FUND PERFORMANCE (continued)

October 31, 2013

 

Growth of $10,000 Invested in BBH International Equity

The graph below illustrates the hypothetical investment of $10,0001 in the Class N shares of the Fund over the ten years ended October 31, 2013 as compared to the MSCI EAFE.

* net of fees and expenses

The annualized gross expense ratios as in the February 28, 2013 prospectus for Class N and Class I shares were 1.17% and 0.94%, respectively.

Performance data quoted represents past performance which is no guarantee of future results. Investment return and principal value will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Mutual fund performance changes over time and current performance may be lower or higher than what is stated. Returns do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. For current to the most recent month end performance and after tax returns, contact the Fund at 1-800-575-1265.

 
1The Fund’s performance assumes the reinvestment of all dividends and distributions. The EAFE has been adjusted to reflect reinvestment of dividends on securities in the index. The EAFE is not adjusted to reflect sales charges, expenses or other fees that the Securities and Exchange Commission requires to be reflected in the Fund’s performance.
FINANCIAL STATEMENT OCTOBER 31, 2013 3
 

BBH INTERNATIONAL EQUITY FUND
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

To the Trustees of the BBH Trust and Shareholders of BBH International Equity Fund:

We have audited the accompanying statement of assets and liabilities, including the portfolio of investments, of BBH International Equity Fund (a series of BBH Trust) (the “Fund”) as of October 31, 2013, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended. These financial statements and financial highlights are the responsibility of the Fund’s management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. The Fund is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Fund’s internal control over financial reporting.

Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of October 31, 2013, by correspondence with the custodian and brokers; where replies were not received from brokers, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of BBH International Equity Fund as of October 31, 2013, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended, in conformity with accounting principles generally accepted in the United States of America.

DELOITTE & TOUCHE LLP

Boston, Massachusetts
December 23, 2013

4
 

BBH INTERNATIONAL EQUITY FUND
PORTFOLIO ALLOCATION
October 31, 2013

       
COUNTRY DIVERSIFICATION      
   U.S. $ Value  Percent of
Net Assets
Australia  $47,850,220    6.2%
Belgium   7,388,063    1.0 
Brazil   5,449,816    0.7 
China   11,777,282    1.5 
Denmark   7,721,745    1.0 
Finland   5,849,340    0.8 
France   86,036,787    11.2 
Germany   45,247,421    5.9 
Hong Kong   41,696,648    5.4 
Israel   9,661,945    1.3 
Italy   9,728,647    1.3 
Japan   157,990,227    20.5 
Netherlands   24,808,627    3.2 
Singapore   21,951,999    2.8 
Spain   35,925,582    4.7 
Sweden   9,566,373    1.2 
Switzerland   74,689,829    9.7 
Taiwan   11,102,582    1.4 
United Kingdom   143,337,888    18.6 
Cash and Other Assets in Excess of Liabilities   12,427,966    1.6 
NET ASSETS  $770,208,987    100.0%

 

All data as of October 31, 2013. The Fund’s country diversification is expressed as a percentage of net assets and may vary over time.

The accompanying notes are an integral part of these financial statements.

FINANCIAL STATEMENT OCTOBER 31, 20135
 

BBH INTERNATIONAL EQUITY FUND
PORTFOLIO ALLOCATION (continued)
October 31, 2013

 

       
SECTOR DIVERSIFICATION      
   U.S. $ Value  Percent of
Net Assets
Basic Materials  $31,284,182    4.1%
Communications   54,454,451    7.1 
Consumer Cyclical   78,951,663    10.2 
Consumer Non-Cyclical   234,650,838    30.5 
Diversified   7,303,412    0.9 
Energy   88,503,981    11.5 
Financials   96,940,961    12.6 
Industrials   80,926,591    10.5 
Technology   38,649,018    5.0 
Utilities   46,115,924    6.0 
Cash and Other Assets in Excess of Liabilities   12,427,966    1.6 
NET ASSETS  $770,208,987    100.0%

 

All data as of October 31, 2013. The Fund’s sector diversification is expressed as a percentage of net assets and may vary over time.

The accompanying notes are an integral part of these financial statements.

6
 

BBH INTERNATIONAL EQUITY FUND
PORTFOLIO OF INVESTMENTS
October 31, 2013

 

Shares   Value
  COMMON STOCKS (98.4%)  
  AUSTRALIA (6.2%)  
  CONSUMER NON-CYCLICAL  
620,000 Coca-Cola Amatil, Ltd. $ 7,571,362
60,300 Cochlear, Ltd. 3,360,603
117,400 CSL, Ltd. 7,719,625
254,600 Woolworths, Ltd. 8,406,764
    27,058,354
  ENERGY  
223,000 Woodside Petroleum, Ltd. 8,189,717
     
  FINANCIALS  
1,105,489 AMP, Ltd. 4,957,538
347,732 QBE Insurance Group, Ltd. 4,872,317
    9,829,855
  INDUSTRIALS  
270,298 Amcor, Ltd. 2,772,294
  Total Australia 47,850,220
     
  BELGIUM (1.0%)  
  CONSUMER NON-CYCLICAL  
132,000 Colruyt SA 7,388,063
  UNITS  
5,618 Ageas1 0
  Total Belgium 7,388,063
     
  BRAZIL (0.7%)  
  ENERGY  
300,100 Petroleo Brasileiro SA (Class A) ADR 5,449,816
  Total Brazil 5,449,816
     
  CHINA (1.5%)  
  ENERGY  
1,120,000 China Shenhua Energy Co., Ltd. (Class H) 3,397,998
4,133,000 CNOOC, Ltd. 8,379,284
  Total China 11,777,282

 

The accompanying notes are an integral part of these financial statements.

FINANCIAL STATEMENT OCTOBER 31, 20137
 

BBH INTERNATIONAL EQUITY FUND
PORTFOLIO OF INVESTMENTS (continued)
October 31, 2013

 

Shares   Value
  COMMON STOCKS (continued)  
  DENMARK (1.0%)  
  CONSUMER NON-CYCLICAL  
46,300 Novo Nordisk AS (Class B) $ 7,721,745
  Total Denmark 7,721,745
 
  FINLAND (0.8%)  
  INDUSTRIALS  
66,200 Kone OYJ (Class B) 5,849,340
  Total Finland 5,849,340
 
  FRANCE (11.2%)  
  BASIC MATERIALS  
58,200 Air Liquide SA 7,926,879
648,573 Orange SA 8,926,849
  CONSUMER NON-CYCLICAL  
72,111 Carrefour SA 2,643,819
98,000 Danone 7,257,526
67,000 Essilor International SA 7,194,223
43,500 L’Oreal SA 7,453,824
106,628 Sanofi 11,416,119
    35,965,511
  ENERGY  
172,637 Total SA 10,601,697
  FINANCIALS  
65,130 Societe Generale SA 3,692,653
  INDUSTRIALS  
178,289 Cie de St-Gobain 9,373,568
54,893 Vallourec SA 3,269,294
97,801 Vinci SA 6,280,336
    18,923,198
  Total France 86,036,787
 
  GERMANY (5.9%)  
  COMMUNICATIONS  
704,511 Deutsche Telekom AG 11,115,159

 

The accompanying notes are an integral part of these financial statements.

8
 

BBH INTERNATIONAL EQUITY FUND
PORTFOLIO OF INVESTMENTS (continued)
October 31, 2013

 

Shares   Value
  COMMON STOCKS (continued)  
  GERMANY (continued)  
  CONSUMER CYCLICAL  
64,000 Adidas AG $ 7,313,359
60,330 Daimler AG (Class REGISTERED) 4,955,701
    12,269,060
  DIVERSIFIED  
89,178 GEA Group AG 3,883,883
  TECHNOLOGY  
173,060 SAP AG 13,611,480
  UTILITIES  
118,200 RWE AG 4,367,839
  Total Germany 45,247,421
     
  HONG KONG (5.4%)  
  COMMUNICATIONS  
1,244,500 China Mobile, Ltd. 12,942,932
  DIVERSIFIED  
62,800 Jardine Matheson Holdings, Ltd. 3,419,529
  FINANCIALS  
1,627,400 AIA Group, Ltd. 8,251,687
1,175,000 Hang Lung Properties, Ltd. 3,858,567
    12,110,254
  UTILITIES  
622,000 CLP Holdings, Ltd. 5,014,157
3,518,792 Hong Kong & China Gas Co., Ltd. 8,209,776
    13,223,933
  Total Hong Kong 41,696,648
     
  ISRAEL (1.3%)  
  CONSUMER NON-CYCLICAL  
260,500 Teva Pharmaceutical Industries, Ltd. ADR 9,661,945
  Total Israel 9,661,945
     
  ITALY (1.3%)  
  ENERGY  
383,175 ENI SpA 9,728,647
  Total Italy 9,728,647

 

The accompanying notes are an integral part of these financial statements.

FINANCIAL STATEMENT OCTOBER 31, 20139
 

BBH INTERNATIONAL EQUITY FUND
PORTFOLIO OF INVESTMENTS (continued)
October 31, 2013

 

Shares   Value
  COMMON STOCKS (continued)  
  JAPAN (20.5%)  
  BASIC MATERIALS  
122,300 Shin-Etsu Chemical Co., Ltd. $ 6,911,705
  CONSUMER CYCLICAL  
157,700 Denso Corp. 7,592,674
177,100 Honda Motor Co., Ltd. 7,098,385
171,700 Seven & I Holdings Co., Ltd. 6,361,293
49,300 Shimamura Co., Ltd. 5,556,546
28,300 Toyota Motor Corp. 1,839,305
    28,448,203
  CONSUMER NON-CYCLICAL  
112,100 Astellas Pharma, Inc. 6,259,854
329,700 Chugai Pharmaceutical Co., Ltd. 7,769,551
257,700 Kao Corp. 8,601,566
191,100 Takeda Pharmaceutical Co., Ltd. 9,102,067
    31,733,038
  ENERGY  
588,000 Inpex Corp. 6,792,766
  FINANCIALS  
191,620 Aeon Mall Co., Ltd. 5,459,580
84,200 Daito Trust Construction Co., Ltd. 8,608,968
109,000 Mitsubishi Estate Co., Ltd. 3,118,585
378,000 Tokio Marine Holdings, Inc. 12,413,817
    29,600,950
  INDUSTRIALS  
174,600 Daikin Industries, Ltd. 10,058,308
48,100 FANUC Corp. 7,728,331
180,200 Hoya Corp. 4,336,499
26,625 Keyence Corp. 11,425,051
320,300 Komatsu, Ltd. 7,020,421
    40,568,610
  TECHNOLOGY  
320,500 Canon, Inc. 10,118,087

 

The accompanying notes are an integral part of these financial statements.

10
 

BBH INTERNATIONAL EQUITY FUND
PORTFOLIO OF INVESTMENTS (continued)
October 31, 2013

 

Shares   Value
  COMMON STOCKS (continued)  
  JAPAN (continued)  
  TECHNOLOGY (continued)  
69,400 Tokyo Electron, Ltd. $ 3,816,868
    13,934,955
  Total Japan 157,990,227
     
  NETHERLANDS (3.2%)  
  COMMUNICATIONS  
318,685 Reed Elsevier NV 6,427,228
  CONSUMER NON-CYCLICAL  
570,076 Koninklijke Ahold NV 10,865,868
  ENERGY  
225,348 Royal Dutch Shell, Plc. (Class A) 7,515,531
  Total Netherlands 24,808,627
     
  SINGAPORE (2.8%)  
  COMMUNICATIONS  
1,681,000 Singapore Telecommunications, Ltd. 5,117,213
  FINANCIALS  
599,603 DBS Group Holdings, Ltd. 8,082,898
291,720 United Overseas Bank, Ltd. 4,894,799
    12,977,697
  INDUSTRIALS  
899,000 SembCorp Industries, Ltd. 3,857,089
  Total Singapore 21,951,999
     
  SPAIN (4.7%)  
  COMMUNICATIONS  
590,100 Telefonica SA1 10,390,007
  CONSUMER CYCLICAL  
56,300 Inditex SA 9,255,980
  FINANCIALS  
500,864 Banco Santander SA 4,441,137
  UTILITIES  
1,882,168 Iberdrola SA 11,838,458
  Total Spain 35,925,582

 

The accompanying notes are an integral part of these financial statements.

FINANCIAL STATEMENT OCTOBER 31, 201311
 

BBH INTERNATIONAL EQUITY FUND
PORTFOLIO OF INVESTMENTS (continued)
October 31, 2013

 

Shares   Value
  COMMON STOCKS (continued)  
  SWEDEN (1.2%)  
  CONSUMER CYCLICAL  
221,000 Hennes & Mauritz AB (Class B) $ 9,566,373
  Total Sweden 9,566,373
     
  SWITZERLAND (9.7%)  
  BASIC MATERIALS  
18,600 Syngenta AG 7,518,750
  CONSUMER CYCLICAL  
6,500 Swatch Group AG 4,170,293
  CONSUMER NON-CYCLICAL  
130,684 Nestle SA 9,453,890
244,444 Novartis AG 18,978,984
31,000 Roche Holding AG 8,579,579
3,350 SGS SA 7,869,295
    44,881,748
  FINANCIALS  
33,177 Zurich Insurance Group AG1 9,162,980
  INDUSTRIALS  
351,092 ABB, Ltd.1 8,956,058
  Total Switzerland 74,689,829
     
  TAIWAN (1.4%)  
  TECHNOLOGY  
866,000 Taiwan Semiconductor Manufacturing Co., Ltd. 3,197,328
429,400 Taiwan Semiconductor Manufacturing Co., Ltd. ADR 7,905,254
  Total Taiwan 11,102,582
     
  UNITED KINGDOM (18.6%)  
  COMMUNICATIONS  
2,293,742 Vodafone Group, Plc. 8,461,912
  CONSUMER CYCLICAL  
1,058,045 Compass Group, Plc. 15,241,754
    15,241,754

 

The accompanying notes are an integral part of these financial statements.

12
 

BBH INTERNATIONAL EQUITY FUND
PORTFOLIO OF INVESTMENTS (continued)
October 31, 2013

 

Shares     Value
  COMMON STOCKS (continued)    
  UNITED KINGDOM (continued)    
  CONSUMER NON-CYCLICAL    
1,215,444 G4S, Plc.   $ 5,099,079
367,620 GlaxoSmithKline, Plc.   9,695,651
105,200 Reckitt Benckiser Group, Plc.   8,179,511
640,000 Smith & Nephew, Plc.   8,178,977
3,134,142 Tesco, Plc.   18,294,404
244,639 Unilever, Plc.   9,926,943
      59,374,565
  ENERGY    
269,726 AMEC, Plc.   5,098,168
773,544 BG Group, Plc.   15,786,179
975,757 BP, Plc.   7,564,178
      28,448,525
  FINANCIALS    
711,000 HSBC Holdings, Plc.   7,806,410
304,000 Standard Chartered, Plc.   7,319,026
      15,125,436
  UTILITIES    
1,277,000 Centrica, Plc.   7,259,740
746,835 National Grid, Plc.   9,425,956
      16,685,696
  Total United Kingdom   143,337,888
  TOTAL COMMON STOCKS (Identified cost $557,679,723)   757,781,021
 
TOTAL INVESTMENTS (Identified cost $557,679,723)2   98.4%  $757,781,021 
CASH AND OTHER ASSETS IN EXCESS OF LIABILITIES   1.6    12,427,966 
NET ASSETS   100.0%  $770,208,987 

 

 
1Non-income producing security.
2The aggregate cost for federal income tax purposes is $563,148,308, the aggregate gross unrealized appreciation is $223,579,632 and the aggregate gross unrealized depreciation is $28,946,919, resulting in net unrealized appreciation of $194,632,713.

Abbreviations:

ADR – American Depositary Receipt

The accompanying notes are an integral part of these financial statements.

FINANCIAL STATEMENT OCTOBER 31, 201313
 

BBH INTERNATIONAL EQUITY FUND
PORTFOLIO OF INVESTMENTS (continued)
October 31, 2013

 

FAIR VALUE MEASUREMENTS

The Fund is required to disclose information regarding the fair value measurements of the Fund’s assets and liabilities. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The disclosure requirement established a three-tier hierarchy to maximize the use of observable market data and minimize the use of unobservable inputs and to establish classification of fair value measurements for disclosure purposes. Inputs refer broadly to the assumptions that market participants would use in pricing the asset or liability, including, for example, the risk inherent in a particular valuation technique used to measure fair value, including the model and/or the risk inherent in the inputs to the valuation technique. Inputs may be observable or unobservable. Observable inputs are inputs that reflect the assumptions market participants would use in pricing the asset or liability developed based on market data obtained from sources independent of the reporting entity. Unobservable inputs are inputs that reflect the Fund’s own considerations about the assumptions market participants would use in pricing the asset or liability developed based on the best information available in the circumstances.

The three levels defined by the fair value hierarchy are as follows:

Level 1 – unadjusted quoted prices in active markets for identical investments.
Level 2 – significant other observable inputs (including quoted prices for similar investments, interest rates, prepayment speeds, credit risk, etc.).
Level 3 – significant unobservable inputs (including the Fund’s own assumptions in determining the fair value of investments).

Inputs are used in applying the various valuation techniques and broadly refer to the assumptions that market participants use to make valuation decisions, including assumptions about risk. Inputs may include price information, specific and broad credit data, liquidity statistics, and other factors. A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. However, the determination of what constitutes “observable” requires significant judgment by the investment adviser. The investment adviser considers observable data to be that market data which is readily available, regularly distributed or updated, reliable and verifiable, not proprietary, and provided by independent sources that are actively involved in the relevant market. The categorization of a financial instrument within the hierarchy is based upon the pricing transparency of the instrument and does not necessarily correspond to the investment adviser’s perceived risk of that instrument.

The accompanying notes are an integral part of these financial statements.

14
 

BBH INTERNATIONAL EQUITY FUND
PORTFOLIO OF INVESTMENTS (continued)
October 31, 2013

 

Financial assets within level 1 are based on quoted market prices in active markets. The Fund does not adjust the quoted price for these instruments.

Financial instruments that trade in markets that are not considered to be active but are valued based on quoted market prices, dealer quotations or alternative pricing sources supported by observable inputs are classified within level 2. These include investment-grade corporate bonds, U.S. Treasury notes and bonds, and certain non-U.S. sovereign obligations and over-the-counter derivatives and foreign equity securities whose values could be impacted by events occurring before the Fund’s pricing time, but after the close of the securities’ primary markets and are, therefore, fair valued according to procedures adopted by the Board of Trustees. As level 2 financial assets include positions that are not traded in active markets and/or are subject to transfer restrictions, valuations may be adjusted to reflect illiquidity and/or non-transferability, which are generally based on available market information.

Financial assets classified within level 3 have significant unobservable inputs, as they trade infrequently. Level 3 financial assets include private equity and certain corporate debt securities. As observable prices are not available for these securities, valuation techniques are used to derive fair value.

Because of the inherent uncertainties of valuation, the values reflected in the financial statements may materially differ from the value received upon the actual sale of those investments.

The accompanying notes are an integral part of these financial statements.

FINANCIAL STATEMENT OCTOBER 31, 201315
 

BBH INTERNATIONAL EQUITY FUND
PORTFOLIO OF INVESTMENTS (continued)
October 31, 2013

 

The following table summarizes the valuation of the Fund’s investments by the above fair value hierarchy levels as of October 31, 2013.

             
Investments, at value  (Unadjusted)
Quoted Prices in
Active Markets
for Identical
Investments
(Level 1)*
  Significant
Other
Observable
Inputs
(Level 2)*
  Significant
Unobservable
Inputs
(Level 3)*
  Balance as of
October 31, 2013
Australia  $   $47,850,220   $   $47,850,220 
Belgium       7,388,063        7,388,063 
Brazil   5,449,816            5,449,816 
China       11,777,282        11,777,282 
Denmark       7,721,745        7,721,745 
Finland       5,849,340        5,849,340 
France       86,036,787        86,036,787 
Germany       45,247,421        45,247,421 
Hong Kong       41,696,648        41,696,648 
Israel   9,661,945            9,661,945 
Italy       9,728,647        9,728,647 
Japan       157,990,227        157,990,227 
Netherlands       24,808,627        24,808,627 
Singapore       21,951,999        21,951,999 
Spain       35,925,582        35,925,582 
Sweden       9,566,373        9,566,373 
Switzerland       74,689,829        74,689,829 
Taiwan   7,905,254    3,197,328        11,102,582 
United Kingdom       143,337,888        143,337,888 
Investments, at value  $23,017,015   $734,764,006   $   $757,781,021 
                
Other Financial Instruments, at fair value               
Forward Foreign Currency                    
Exchange Contracts  $   $47,556   $   $47,556 
Other Financial Instruments,                    
at fair value  $   $47,556   $   $47,556 

 

 
*The Fund’s policy is to disclose transfers between levels based on valuations at the end of the reporting period. There were no transfers between Levels 1, 2 or 3 as of October 31, 2013, based on the valuation input levels on October 31, 2012.

The accompanying notes are an integral part of these financial statements.

16
 

BBH INTERNATIONAL EQUITY FUND
STATEMENT OF ASSETS AND LIABILITIES
October 31, 2013

 

      
ASSETS:     
Investments in securities, at value (Identified cost $557,679,723)  $757,781,021 
Cash   14,006,541 
Foreign currency at value (Identified cost $44,075)   44,077 
Receivables for:     
Dividends   2,253,271 
Investments sold   1,020,261 
Unrealized appreciation of forward foreign currency exchange contracts   47,893 
Shares sold   33,892 
Prepaid assets   25,514 
Total Assets   775,212,470 
      
LIABILITIES:     
Payables for:     
Investments purchased   4,211,644 
Investment advisory and administrative fees   512,087 
Shareholder servicing fees   142,125 
Professional fees   62,375 
Custody and fund accounting fees   42,079 
Distributor fees   2,122 
Transfer agent fees   2,100 
Board of Trustees’ fees   1,127 
Unrealized depreciation of forward foreign currency exchange contracts   337 
Accrued expenses and other liabilities   27,487 
Total Liabilities   5,003,483 
      
NET ASSETS  $770,208,987 
Net Assets Consist of:     
Paid-in capital  $637,115,457 
Undistributed net investment income   12,564,693 
Accumulated net realized loss on investments in securities     
and foreign exchange transactions   (79,652,482)
Net unrealized appreciation/(depreciation) on investments     
in securities and foreign currency translations   200,181,319 
Net Assets  $770,208,987 
      
NET ASSET VALUE AND OFFERING PRICE PER SHARE     
CLASS N SHARES     
($695,467,210 ÷ 45,216,432 shares outstanding)  $15.38 
CLASS I SHARES     
($74,741,777 ÷ 4,845,258 shares outstanding)  $15.43 

 

The accompanying notes are an integral part of these financial statements.

FINANCIAL STATEMENT OCTOBER 31, 201317
 

BBH INTERNATIONAL EQUITY FUND
STATEMENT OF OPERATIONS
October 31, 2013

 

      
NET INVESTMENT INCOME:     
Income:     
Dividends (net of foreign withholding taxes of $939,133)  $19,527,136 
Interest and other income   4,273 
Total Income   19,531,409 
Expenses:     
Investment advisory and administrative fees   5,361,675 
Shareholder servicing fees   1,482,104 
Custody and fund accounting fees   313,974 
Board of Trustees’ fees   94,873 
Professional fees   76,772 
Transfer agent fees   26,372 
Distributor fees   19,397 
Miscellaneous expenses   63,835 
Total Expenses   7,439,002 
Expense offset arrangement   (16,856)
Net Expenses   7,422,146 
Net Investment Income   12,109,263 
      
NET REALIZED AND UNREALIZED GAIN:     
Net realized gain on investments in securities   6,611,992 
Net realized gain on foreign exchange transactions and translations   512,325 
Net realized gain on investments in securities and foreign     
exchange transactions and translations   7,124,317 
Net change in unrealized appreciation/(depreciation) on     
investments in securities   104,899,281 
Net change in unrealized appreciation/(depreciation) on     
foreign currency translations   139,853 
Net change in unrealized appreciation/(depreciation) on     
investments in securities and foreign currency translations   105,039,134 
Net Realized and Unrealized Gain   112,163,451 
Net Increase in Net Assets Resulting from Operations  $124,272,714 

 

The accompanying notes are an integral part of these financial statements.

18
 

BBH INTERNATIONAL EQUITY FUND
STATEMENTS OF CHANGES IN NET ASSETS

 

         
   For the years ended October 31, 
   2013   2012 
INCREASE IN NET ASSETS:          
Operations:          
Net investment income  $12,109,263   $12,454,964 
Net realized gain (loss) on investments in securities and          
foreign exchange transactions and translations   7,124,317    (15,101,035)
Net change in unrealized appreciation/(depreciation)          
on investments in securities and foreign currency          
translations   105,039,134    28,853,263 
Net increase in net assets resulting          
from operations   124,272,714    26,207,192 
Dividends and distributions declared:          
From net investment income:          
Class N   (10,629,842)   (12,639,676)
Class I   (1,622,915)   (2,317,229)
Total dividends and distributions declared   (12,252,757)   (14,956,905)
Share transactions:          
Proceeds from sales of shares   172,732,999    73,201,504 
Net asset value of shares issued to shareholders for          
reinvestment of dividends and distributions   12,203,623    14,655,112 
Proceeds from short-term redemption fees   23    3,071 
Cost of shares redeemed   (107,190,196)   (259,184,423)
Net increase (decrease) in net assets resulting          
from share transactions   77,746,449    (171,324,736)
Total increase (decrease) in net assets   189,766,406    (160,074,449)
NET ASSETS:          
Beginning of year   580,442,581    740,517,030 
End of year (including undistributed net investment          
income of $12,564,693 and $12,088,358, respectively)  $770,208,987   $580,442,581 

 

The accompanying notes are an integral part of these financial statements.

FINANCIAL STATEMENT OCTOBER 31, 201319
 

BBH INTERNATIONAL EQUITY FUND
FINANCIAL HIGHLIGHTS
Selected per share data and ratios for a Class N share outstanding throughout each year.

 

                     
   For the years ended October 31, 
    2013    2012    2011    2010    2009 
Net asset value, beginning of year  $13.05   $12.66   $13.05   $11.98   $10.73 
Income from investment operations:                         
Net investment income1   0.25    0.27    0.26    0.23    0.21 
Net realized and unrealized gain (loss)   2.35    0.45    (0.45)   1.03    1.74 
Total income (loss) from investment                         
operations   2.60    0.72    (0.19)   1.26    1.95 
Less dividends and distributions:                         
From net investment income   (0.27)   (0.33)   (0.20)   (0.19)   (0.37)
From net realized gains   —      —      —      —      (0.33)
Total dividends and distributions   (0.27)   (0.33)   (0.20)   (0.19)   (0.70)
Short-term redemption fees   0.002   0.002   0.002   —      —   
Net asset value, end of year  $15.38   $13.05   $12.66   $13.05   $11.98 
Total return   20.27%   6.05%   (1.49)%   10.61%   19.69%
                          
Ratios/Supplemental data:                         
Net assets, end of year (in millions)  $695   $510   $644   $573   $471 
Ratio of expenses to average net assets                         
before reductions   1.14%   1.17%   1.16%   1.17%   1.19%
Expense offset arrangement   0.00%3   0.00%3   0.00%3   0.00%3   0.01%
Ratio of expenses to average net assets                         
after reductions   1.14%   1.17%   1.16%   1.17%   1.18%
Ratio of net investment income to average                         
net assets   1.79%   2.18%   1.98%   1.85%   2.04%
Portfolio turnover rate   14%   12%   13%   11%   34%

 

 

1Calculated using average shares outstanding for the year.
2Less than $0.01
3Less than 0.01%

The accompanying notes are an integral part of these financial statements.

20
 

BBH INTERNATIONAL EQUITY FUND
FINANCIAL HIGHLIGHTS (continued)
Selected per share data and ratios for a Class I share outstanding throughout each year.

 

   For the years ended October 31, 
   2013   2012   2011   2010   2009 
Net asset value, beginning of year  $13.08   $12.70   $13.09   $12.01   $10.77 
Income from investment operations:                         
Net investment income1   0.28    0.30    0.29    0.24    0.24 
Net realized and unrealized gain (loss)   2.37    0.45    (0.45)   1.05    1.75 
Total income (loss) from investment                         
operations   2.65    0.75    (0.16)   1.29    1.99 
Less dividends and distributions:                         
From net investment income   (0.30)   (0.37)   (0.23)   (0.21)   (0.42)
From net realized gains   —      —      —      —      (0.33)
Total dividends and distributions   (0.30)   (0.37)   (0.23)   (0.21)   (0.75)
Short-term redemption fees   0.002   0.002   0.002   —      —   
Net asset value, end of year  $15.43   $13.08   $12.70   $13.09   $12.01 
Total return   20.64%   6.31%   (1.26)%   10.88%   20.01%
 
Ratios/Supplemental data:                         
Net assets, end of year (in millions)  $75   $70   $97   $82   $39 
Ratio of expenses to average net assets                         
before reductions   0.90%   0.94%   0.92%   0.93%   0.93%
Expense offset arrangement   0.00%3   0.00%3   0.01%   0.00%3   0.00%3
Ratio of expenses to average net assets                         
after reductions   0.90%   0.94%   0.91%   0.93%   0.93%
Ratio of net investment income to average                         
net assets   2.01%   2.42%   2.22%   1.96%   2.29%
Portfolio turnover rate   14%   12%   13%   11%   34%

 

 

1Calculated using average shares outstanding for the year.
2Less than $0.01
3Less than 0.01%

The accompanying notes are an integral part of these financial statements.

FINANCIAL STATEMENT OCTOBER 31, 201321
 

BBH INTERNATIONAL EQUITY FUND
NOTES TO FINANCIAL STATEMENTS
As of and for the year ended October 31, 2013

 

1.Organization. The Fund is a separate, non-diversified series of BBH Trust (the “Trust”), which is registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as an open-end management investment company. The Trust was originally organized under the laws of the State of Maryland on July 16, 1990 as BBH Fund, Inc. and re-organized as a Delaware statutory trust on June 12, 2007. The Fund commenced operations on June 6, 1997. On February 20, 2001, the Board of Trustees (“Board”) of the Trust 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 share class of the Fund. As of October 31, 2013, there were five series of the Trust.
2.Significant Accounting Policies. The Fund’s financial statements are prepared in accordance with Generally Accepted Accounting Principles in the United States of America (“GAAP”). The following summarizes significant accounting policies of the Fund:
A.Valuation of Investments. (1) The value of investments listed on a securities exchange is based on the last sale price on that exchange prior to the time when assets are valued, or in the absence of recorded sales, at the average of readily available closing bid and asked prices on such exchange; (2) Securities not traded on an exchange are valued at the average of the quoted bid and asked prices in the over-the counter market; (3) securities or other assets for which market quotations are not readily available are valued at “fair value” in accordance with procedures established by and under the general supervision and responsibility of the Board; (4) for securities traded on international exchanges, if events which may affect the value of the Fund’s securities occur after the close of the primary exchange on which securities trade and before the Fund’s net asset value is next determined, then those securities will be valued at fair value as determined in good faith under the supervision of the Board. The Fund currently uses a systematic fair value model provided by an independent third party to value international securities on a daily basis; (5) short-term investments, which mature in 60 days or less are valued at amortized cost if their original maturity was 60 days or less, or by amortizing their value on the 61st day prior to maturity, if their original maturity when acquired by the Fund was more than 60 days, unless the use of amortized cost is determined not to represent “fair value” by the Board.
B.Accounting for Investments and Income. Investment transactions are accounted for on the trade date. Realized gains and losses on investment transactions are determined based on the identified cost method. Dividend income and other distributions received from portfolio securities are recorded on the ex-dividend date. Non-cash dividends included in dividend income, if any, are recorded at the fair market value of securities received at ex-date. Distributions received on
22
 

BBH INTERNATIONAL EQUITY FUND
NOTES TO FINANCIAL STATEMENTS (continued)
As of and for the year ended October 31, 2013

 

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 any foreign taxes withheld where recovery of such tax is uncertain.

C.Fund Expenses. Most expenses of the Trust can be directly attributed to a specific fund. Expenses which cannot be directly attributed to a fund are apportioned amongst each fund in the Trust equally. Expense estimates are accrued in the period to which they relate and adjustments are made when actual amounts are known.
D.Forward Foreign Currency Exchange Contracts. The Fund may enter into forward foreign currency exchange contracts (“Contracts”) in connection with planned purchases or sales of securities, to hedge the U.S. dollar value of securities denominated in a particular currency, or to increase or shift its exposure to a currency other than U.S. dollars. The Fund has no specific limitation on the percentage of assets which may be committed to these types of Contracts. The Fund could be exposed to risks if the counterparties to the Contracts are unable to meet the terms of their Contracts or if the value of the foreign currency changes unfavorably. The U.S. dollar values of foreign currency underlying all contractual commitments held by the Fund are determined using forward foreign currency exchange rates supplied by a quotation service. As of October 31, 2013, the Fund held the following open forward foreign currency contracts including appreciation/(depreciation) as reported in the Statement of Assets and Liabilities and Notes to Financial Statements.
                    
  Foreign Currency  Local
Currency
  Base
Currency
USD
   Market
Counterparty
  Settlement
Date
  Unrealized
Gain/(Loss)
 
  Contracts to Sell USD:
  Australian Dollar  AUD 110,789   104,867   Northern Trust Corp.  November 1, 2013  $349 
  Australian Dollar  AUD 203,182   192,322   Barclays Bank, Plc.  November 4, 2013   649 
  Australian Dollar  AUD 240,695   227,796   Barclays Bank, Plc.  November 6, 2013   1,174 
  Australian Dollar  AUD 10,642,500   10,014,209   Northern Trust Corp.  January 31, 2014   45,721 
  Japanese Yen  JPY 32,294,652   329,035   State Street Bank & Trust Co.  November 5, 2013   (337)
                      
  Net Unrealized Gain on Open Forward Foreign Currency Exchange Contracts     $47,556 

 

During the year ended October 31, 2013, the average monthly notional amount of forward foreign currency exchange contracts was $11,959,683. The corresponding volumes for the year ranged from $10,169,947 to $14,108,704.

FINANCIAL STATEMENT OCTOBER 31, 201323
 

BBH INTERNATIONAL EQUITY FUND
NOTES TO FINANCIAL STATEMENTS (continued)
As of and for the year ended October 31, 2013

 

Fair Values of Derivative Instruments as of October 31, 2013

Derivatives not accounted for as hedging instruments under authoritative guidance for derivatives instruments and hedging activities:

       
    Asset Derivatives   Liability Derivatives
    Statement of
Assets and
Liabilities Location
  Fair Value   Statement of
Assets and
Liabilities Location
  Fair Value
  Forward Foreign Currency
     Exchange Contracts
Unrealized
appreciation
of forward foreign
currency exchange
contracts
  $47,893*   Unrealized
depreciation
of forward foreign
currency exchange
contracts
  $337*
  Total     $47,893        $337 

 

 

*     

Includes cumulative appreciation/depreciation of forward foreign exchange currency contracts as reported in the Statement of Assets and Liabilities and Notes to Financial Statements.

Effect of Forward Foreign Currency Exchange Contracts on the Statement of Operations

 
  Net Realized Gain on Foreign Exchange Transactions and Transactions $857,067
  Net Change in Unrealized Appreciation/(Depreciation) on Foreign  
  Currency Translations $ 72,125

 

The Fund may mitigate counterparty risk by procuring collateral and through netting provisions included within an International Swaps and Derivatives Association, Inc. master agreement (“ISDA Master Agreement”) implemented between the Fund and each of its respective counterparties. An ISDA Master Agreement allows the Fund to offset with each separate counterparty certain derivative financial instrument’s payables and/or receivables with collateral held. To the extent amounts due to the Fund from its counterparties are not fully collateralized contractually or otherwise, the Fund bears the risk of loss from counterparty non-performance. In addition, the Fund manages counterparty risk by entering into agreements only with counterparties that it believes have the financial resources to honor their obligations and by monitoring the financial stability of those counterparties.

Certain ISDA Master Agreements allow counterparties to OTC derivatives to terminate derivative contracts prior to maturity in the event the Fund’s net assets decline by a stated percentage or the Fund fails to meet the terms of its ISDA Master Agreements, which would cause the Fund to accelerate payment of any net liability owed to the counterparty.

24
 

BBH INTERNATIONAL EQUITY FUND
NOTES TO FINANCIAL STATEMENTS (continued)
As of and for the year ended October 31, 2013

 

E.Foreign Currency Translations. The accounting records of the Fund are maintained in U.S dollars. Foreign currency amounts are translated into U.S. dollars at the current rate of exchange of such currency against the U.S. dollar to determine the value of investments, assets and liabilities. Purchases and sales of securities, and income and expenses are translated at the prevailing rate of exchange on the respective dates of such transactions. Upon the purchase or sale of a security denominated in foreign currency, the Fund may enter into forward foreign currency exchange contracts for the purchase or sale, for a fixed amount of U.S. dollars, of the amount of foreign currency involved in the underlying security transaction. Reported net realized gains and losses arise from the sales of portfolio securities, sales of foreign currencies, currency gains or losses realized between the trade and settlement dates on securities transactions, and the difference between the amounts of dividends, interest and foreign withholding taxes recorded on the Fund’s books and the U.S. dollar equivalent of the amounts actually received or paid. The effect of changes in foreign exchange rates on foreign denominated securities is reflected in the net realized and unrealized gain or loss on investments in securities. Net unrealized appreciation or depreciation on foreign currency translations arise from changes in the value of the assets and liabilities, excluding investments in securities, at period end, resulting from changes in the exchange rate.
F.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.
G.Federal Income Taxes. It is the Trust’s policy to comply with the requirements of the Internal Revenue Code (the “Code”) applicable to regulated investment companies and to distribute substantially all of its taxable income to its shareholders. Accordingly, no federal income tax provision is required. The Fund files a tax return annually using tax accounting methods required under provisions of the Code, which may differ from GAAP, which is the basis on which these financial statements are prepared. Accordingly, the amount of net investment income and net realized gain reported in these financial statements may differ from that reported on the Fund’s tax return, due to certain book-to-tax timing differences such as losses deferred due to “wash sale” transactions and utilization of capital loss carryforwards. These differences 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 in 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.
FINANCIAL STATEMENT OCTOBER 31, 201325
 

BBH INTERNATIONAL EQUITY FUND
NOTES TO FINANCIAL STATEMENTS (continued)
As of and for the year ended October 31, 2013

 

The Fund is subject to the provisions of Accounting Standards Codification 740 Income Taxes (“ASC 740”). ASC 740 sets forth a minimum threshold for financial statement recognition of the benefit of a tax position taken or expected to be taken in a tax return. The Fund did not have any unrecognized tax benefits as of October 31, 2013, nor were there any increases or decreases in unrecognized tax benefits for the year then ended. The Fund recognizes interest and penalties, if any, related to unrecognized tax benefits as an income tax expense in the Statement of Operations. During the year ended October 31, 2013, the Fund did not incur any such interest or penalties. The Fund is subject to examination by U.S. federal and state tax authorities for returns filed for the prior three fiscal years. The Fund is not aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will significantly change in the next twelve months.

H.Dividends and Distributions to Shareholders. Dividends and distributions to shareholders, if any, are generally declared and paid annually and are recorded on the ex-dividend date. Distributions from net capital gains, if any, are generally declared and paid annually and are recorded on the ex-dividend date. The Fund declared dividends in the amounts of $10,629,842 and $1,622,915 to Class N shares and Class I shares, respectively, during the year ended October 31, 2013. The tax character of distributions paid during the fiscal years ended October 31, 2013 and 2012, respectively, were as follows:
  Distributions paid from:
     Ordinary
income
   Net
long-term
capital gain
   Total
taxable
distributions
   Tax return
of capital
   Total
distributions
paid
  2013:  $12,252,757    —     $12,252,757    —     $12,252,757 
  2012:   14,956,905    —      14,956,905    —      14,956,905 

 

As of October 31, 2013 and 2012, respectively, the components of accumulated earnings/(deficit) on a tax basis were as follows:

  Components of accumulated earnings/(deficit):
    Undistributed
ordinary
income
   Undistributed
long-term
capital gain
 Accumulated
earnings
 Accumulated
capital and
other losses
   Other
book/tax
temporary
differences
 Unrealized
appreciation/
(depreciation)
 Total
accumulated
earnings/
(deficit)
  2013:   $12,612,249    —     $12,612,249   $(74,183,898)  $(5,516,141)  $200,181,319   $133,093,529 
  2012:   12,063,789    —      12,063,789    (81,799,171)       90,808,954    21,073,572 

 

26
 

BBH INTERNATIONAL EQUITY FUND
NOTES TO FINANCIAL STATEMENTS (continued)
As of and for the year ended October 31, 2013

 

As of October 31, 2013, the Fund’s net capital loss carry forward expires as follows:

     Expiration Date  Amount 
  Pre-December 31, 2010 Capital Losses  10/31/2017  $62,728,716 
     10/31/2019   5,166,463 
  Post December 31, 2010 Capital Losses  No Expiration   6,288,719 
       Total capital loss carry forward     $74,183,898 

 

Under the Regulated Investment Company Modernization Act of 2010, the Fund is permitted to carry forward capital losses incurred in taxable years beginning after December 22, 2010, for an unlimited period and they will retain their character as either short-term or long-term capital losses rather than being considered all short-term capital losses.

Total distributions paid may differ from the amounts shown in the Statements of Changes in Net Assets because, for tax purposes, dividends are recognized when actually paid.

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 future capital loss carryforwards, such gains will not be distributed.

I.Use of Estimates. The preparation of the financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of income and expense during the reporting period. Actual results could differ from these estimates.
3.Recent Accounting Pronouncements. In January 2013, the Financial Accounting Standards Board (“FASB”) issued an Accounting Standards Update (“ASU”) No. 2013-01 “Clarifying the Scope of Disclosures about Offsetting Assets and Liabilities.” This update was issued to narrow the broad scope of ASU No. 2011-11 “Disclosures about Offsetting Assets and Liabilities,” which was issued in December 2011. This update requires an entity to disclose both gross and net information for derivatives and other financial instruments that are either offset in the statement of assets and liabilities or subject to an enforceable master netting arrangement or similar agreement. The required disclosures for both pronouncements are effective for annual reporting periods starting from January 1, 2013 and interim periods within those annual periods and apply retrospectively for all periods being reported. Management is assessing the impact of these new disclosure requirements.
FINANCIAL STATEMENT OCTOBER 31, 201327
 

BBH INTERNATIONAL EQUITY FUND
NOTES TO FINANCIAL STATEMENTS (continued)
As of and for the year ended October 31, 2013

 

4.Fees and Other Transactions with Affiliates.
A.Investment Advisory and Administrative Fees. Under a combined Investment Advisory and Administrative Services Agreement (“Agreement”) with the Trust, Brown Brothers Harriman & Co. (“BBH”) through a separately identifiable department (“SID” or “Investment Adviser”) provides investment advisory and portfolio management services to the Fund. BBH employs a “manager-of-managers” investment approach, whereby it allocates the Fund’s assets among the Fund’s sub-advisers, currently Mondrian Investment Partners Limited and Walter Scott & Partners Limited (together, “Sub-advisers”). The Sub-advisers are responsible for investing the assets of the Fund and the Investment Adviser oversees the Sub-advisers and evaluates their performance results. BBH also provides administrative services to the Fund. The Fund’s investment advisory and administrative services fee is calculated daily and paid monthly at an annual rate equivalent to at 0.80% per annum on the first $1,000,000,000 of average daily net assets and 0.70% per annum on all average daily net assets over $1,000,000,000. The Investment Adviser pays each Sub-adviser a percentage from its investment advisory and administrative fees. For the year ended October 31, 2013, the Fund incurred $5,361,675 for services under the Agreement.
B.Shareholder Servicing Fees. The Trust has a shareholder servicing agreement with BBH. BBH receives a fee from the Fund calculated daily and paid monthly at an annual rate of 0.25% of Class N shares’ average daily net assets. For the year ended October 31, 2013, Class N shares of the Fund incurred $1,482,104 in shareholder servicing fees.
C.Custody and Fund Accounting Fees. BBH acts as a custodian and fund accountant and receives custody and fund accounting fees from the Fund calculated daily and incurred monthly. BBH holds all of the Fund’s cash and investments and calculates the Fund’s daily net asset value. The custody fee is an asset and transaction based fee. The fund accounting fee is an asset based fee calculated at 0.04% per annum on the first $100,000,000 of average daily net assets, 0.02% per annum on the next $400,000,000 of average daily net assets and 0.01% per annum on all average daily net assets over $500,000,000. Effective April 1, 2013, the custody and fund accounting fee schedule was revised to reflect reduced rates. The custody fee continues to be an asset and transaction based fee. The fund accounting fee was revised from a tiered fee schedule to a single rate of 0.004% of the Fund’s net asset value. For the year ended October 31, 2013, the Fund incurred $313,974 in custody and fund accounting fees. These fees for the Fund were reduced by $16,856 as a result of an expense offset arrangement with the Fund’s custodian. The credit amount (if any) is disclosed in the Statement of Operations as a reduction to the Fund’s expenses. In the event that the Fund is overdrawn, under the custody agreement with BBH, BBH will make overnight loans to the Fund to cover overdrafts. Pursuant to their agreement, the Fund will pay the Federal Funds overnight investment rate on the day of the overdraft. The total interest incurred by the Fund for the year ended October 31, 2013, was $1,069.
28
 

BBH INTERNATIONAL EQUITY FUND
NOTES TO FINANCIAL STATEMENTS (continued)
As of and for the year ended October 31, 2013

 

D.Board of Trustees’ Fees. Each Trustee who is not an “interested person” as defined under the 1940 Act receives an annual fee as well as reimbursement for reasonable out-of-pocket expenses from the Fund. For the year ended October 31, 2013, the Fund incurred $94,873 in non-interested Trustee compensation and reimbursements.
5.Investment Transactions. For the year ended October 31, 2013, the cost of purchases and the proceeds of sales of investment securities, other than short-term investments, were $163,598,556 and $90,404,525, respectively.
6.Shares of Beneficial Interest. The Trust is permitted to issue an unlimited number of Class N shares and Class I shares of beneficial interest, at no par value. Transactions in Class N shares and Class I shares were as follows:
   For the year ended
October 31, 2013
   For the year ended
October 31, 2012
 
   Shares   Dollars   Shares   Dollars 
Class N                    
Shares sold   10,126,980   $143,135,611    5,805,191   $72,401,429 
Shares issued in connection                    
with reinvestments of                    
dividends   800,962    10,580,708    1,086,716    12,529,835 
Proceeds from short-term                    
redemption fees   N/A    23    N/A    3,071 
Shares redeemed   (4,796,253)   (67,115,997)   (18,659,675)   (228,179,517)
Net increase (decrease)   6,131,689   $86,600,345    (11,767,768)  $(143,245,182)
Class I                    
Shares sold   2,060,256   $29,597,388    61,403   $800,075 
Shares issued in connection                    
with reinvestments of                    
dividends   122,855    1,622,915    184,326    2,125,277 
Shares redeemed   (2,726,572)   (40,074,199)   (2,485,499)   (31,004,906)
Net decrease   (543,461)  $(8,853,896)   (2,239,770)  $(28,079,554)

 

FINANCIAL STATEMENT OCTOBER 31, 201329
 

BBH INTERNATIONAL EQUITY FUND
NOTES TO FINANCIAL STATEMENTS (continued)
As of and for the year ended October 31, 2013

 

7.Principal Risk Factors and Indemnifications.
A.Principal Risk Factors. Investing in the Fund may involve certain risks, as discussed in the Fund’s prospectus, including but not limited to, those described below:

A shareholder may lose money by investing in the Fund (investment risk). In the normal course of business, the Fund invests in securities and enters into transactions where risks exist due to the assumption of large positions in securities of a small number of issuers (non-diversification risk), prohibition of, or restrictions on, the ability to transfer currency, securities and other assets (capital controls risk), non-U.S. currencies invested in by the Fund depreciating against the U.S. dollar (currency exchange rate risk), risks from investing in securities of issuers based in developing countries (emerging markets risk), certain risks associated with investing in foreign securities not present in domestic investments (foreign investment risk), or investment styles of the Sub-advisers not complementing each other (multi-manager risk). The value of securities held by the Fund may fall due to changing economic, political, regulatory or market conditions, or due to a company’s or issuer’s individual situation (market risk). The Fund invests in equity securities whose prices rise and fall due to factors affecting individual companies, particular industries or the equity markets as a whole (equity securities risk). The Fund’s shareholders may be adversely impacted by asset allocation decisions made by an investment adviser whose discretionary clients make up a large percentage of the Fund’s shareholders (shareholder concentration risk). The extent of the Fund’s exposure to these risks in respect to these financial assets is included in their value as recorded in the Fund’s Statement of Assets and Liabilities.

Please refer to the Fund’s prospectus for a complete description of the principal risks of investing in the Fund.

B.Indemnifications. Under the Trust’s organizational documents, its officers and Trustees may be indemnified against certain liabilities and expenses arising out of the performance of their duties to the Fund, and shareholders are indemnified against personal liability for the obligations of the Trust. Additionally, in the normal course of business, the Fund enters into agreements with service providers that may contain indemnification clauses. The Fund’s maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Fund that have not yet occurred. The risk of material loss from such claims is considered remote.
8.Subsequent Events. Management has evaluated events and transactions that have occurred since October 31, 2013 through the date the financial statements were issued and determined that there were none that would require recognition or additional disclosure in the financial statements.
30
 

BBH INTERNATIONAL EQUITY FUND
DISCLOSURE OF FUND EXPENSES
October 31, 2013 (unaudited)

 

EXAMPLE

As a shareholder of the Fund, you may incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments, reinvested distributions, or other distributions; redemption fees; and exchange fees; and (2) ongoing costs, including management fees; distribution 12b-1 fees; and other Fund expenses. This Example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.

The Example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period (May 1, 2013 to October 31, 2013).

ACTUAL EXPENSES

The first line of the table provides information about actual account values and actual expenses. You may use information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled “Expenses Paid During the Period” to estimate the expenses you paid on your account during the period.

HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES

The second line of the table provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid during the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds.

FINANCIAL STATEMENT OCTOBER 31, 201331
 

BBH INTERNATIONAL EQUITY FUND
DISCLOSURE OF FUND EXPENSES (continued)
October 31, 2013 (unaudited)

 

Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as redemption fees or exchange fees. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.

   Beginning
Account Value
May 1, 2013
  Ending
Account Value
October 31, 2013
  Expenses Paid
During Period
May 1, 2013 to
October 31, 20131
Class N         
Actual  $1,000  $1,055  $5.80
Hypothetical2  $1,000  $1,020  $5.70
          
         Expenses Paid
   Beginning  Ending  During Period
   Account Value  Account Value  May 1, 2013 to
   May 1, 2013  October 31, 2013  October 31, 20131
Class I         
Actual  $1,000  $1,056  $4.56
Hypothetical2  $1,000  $1,021  $4.48

 

 

1Expenses are equal to the Fund’s annualized expense ratio of 1.12% and 0.88% for Class N and I shares, respectively, multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period).
2Assumes a return of 5% before expenses. For the purposes of the calculation, the applicable annualized expenses ratio for each class of shares is subtracted from the assumed return before expenses.
32
 

BBH INTERNATIONAL EQUITY FUND
CONFLICTS OF INTEREST
October 31, 2013 (unaudited)

 

Conflicts of Interest

Certain conflicts of interest may arise in connection with a portfolio manager’s management of the Fund’s investments, on the one hand, and the investments of other accounts for which the portfolio manager is responsible, on the other. For example, it is possible that the various accounts managed could have different investment strategies that, at times, might conflict with one another to the possible detriment of the Fund. Alternatively, to the extent that the same investment opportunities might be desirable for more than one account, possible conflicts could arise in determining how to allocate them, For example, BBH may act as adviser to private funds with investment strategies similar to the Fund. Those private funds may pay BBH a performance fee in addition to the stated investment advisory fee. In such cases, BBH may have an incentive to allocate certain investment opportunities to the private fund rather than the Fund in order to increase the private fund’s performance and thus improve BBH’s chances of receiving the performance fee. However, BBH has implemented policies and procedures to assure that investment opportunities are allocated equitably between the Fund and other funds and accounts with similar investment strategies.

Other potential conflicts might include conflicts between the Fund and its affiliated and unaffiliated service providers (e.g. conflicting duties of loyalty). In addition to providing investment management services through the SID, BBH provides administrative, custody, shareholder servicing and fund accounting services to the Fund. BBH may have conflicting duties of loyalty while servicing the Fund and/or opportunities to further its own interest to the detriment of the Fund. For example, in negotiating fee arrangements with affiliated service providers, BBH may have an incentive to agree to higher fees than it would in the case of unaffiliated providers. Also, because its advisory fees are calculated by reference to a Fund’s net assets, the Investment Adviser and its affiliates may have an incentive to seek to overvalue certain assets.

Arrangements regarding compensation and delegation of responsibility may create conflicts relating to selection of brokers or dealers to execute Fund portfolio trades and/or specific uses of commissions from Fund portfolio trades, administration of investment advice and valuation of securities.

From time to time BBH may invest a portion of the assets of its discretionary investment advisory clients in the Fund. That investment by BBH on behalf of its discretionary investment advisory clients in the Fund may be significant at times. Increasing the Fund’s assets may enhance investment flexibility and diversification and may contribute to economies of scale that tend to reduce the Fund’s expense ratio. BBH reserves the right to redeem at any time some or all of the shares of the Fund acquired for its discretionary investment advisory clients’ accounts. A large redemption of shares of the Fund by BBH on behalf of its discretionary investment advisory clients could significantly reduce the asset size of the Fund, which might have an adverse effect on the Fund’s investment flexibility, portfolio diversification and expense ratio.

FINANCIAL STATEMENT OCTOBER 31, 201333
 

BBH INTERNATIONAL EQUITY FUND
CONFLICTS OF INTEREST (continued)
October 31, 2013 (unaudited)

 

BBH may enter into advisory and/or referral arrangements with third parties. Such arrangements may include compensation paid by BBH to the third party. BBH may pay a solicitation fee for referrals and/or advisory or incentive fees. BBH may benefit from increased amounts of assets under management.

When market quotations are not readily available or are believed by BBH to be unreliable, the Fund’s investments may be valued at fair value by BBH pursuant to procedures adopted by the Fund’s Board of Trustees. When determining an asset’s “fair value,” BBH seeks to determine the price that a Fund might reasonably expect to receive from the current sale of that asset in an arm’s-length transaction. The price generally may not be determined based on what the Fund might reasonably expect to receive for selling an asset at a later time or if it holds the asset to maturity. While fair value determinations will be based upon all available factors that BBH deems relevant at the time of the determination, and may be based on analytical values determined by BBH using proprietary or third party valuation models, fair value represents only a good faith approximation of the value of a security. The fair value of one or more securities may not, in retrospect, be the price at which those assets could have been sold during the period in which the particular fair values were used in determining the Fund’s net asset value. As a result, the Fund’s sale or redemption of its shares at net asset value, at a time when a holding or holdings are valued by BBH (pursuant to Board-adopted procedures) at fair value, may have the effect of diluting or increasing the economic interest of existing shareholders.

BBH, including the Investment Adviser, seeks to meet its fiduciary obligation with respect to all clients including the Fund. BBH has adopted and implemented policies and procedures that seek to manage conflicts. The Investment Adviser monitors a variety of areas, including compliance with fund investment guidelines, review of allocation decisions, the investment in only those securities that have been approved for purchase by an oversight committee, and compliance with the Investment Adviser’s Code of Ethics. With respect to the allocation of investment opportunities, BBH has adopted and implemented policies designed to achieve fair and equitable allocation of investment opportunities among its clients over time. BBH has structured the portfolio managers’ compensation in a manner it believes is reasonably designed to safeguard the Fund from being negatively affected as a result of any such potential conflicts.

The Trust also manages these conflicts. For example, the Trust has designated a chief compliance officer and has adopted and implemented policies and procedures designed to manage the conflicts identified above and other conflicts that may arise in the course of the Fund’s operations in such a way as to safeguard the Fund from being negatively affected as a result of any such potential conflicts. The Trustees receive regular reports from the Investment Adviser and the Trust’s chief compliance officer on areas of potential conflict.

34
 

BBH INTERNATIONAL EQUITY FUND

ADDITIONAL FEDERAL TAX INFORMATION
October 31, 2013 (unaudited)

Under Section 854(b)(2) of the Code, the Fund designates up to a maximum of $12,252,757 as qualified dividends for purposes of the maximum rate under Section 1(h)(11) of the Code for the fiscal year ended October 31, 2013. In January 2014, shareholders will receive Form 1099-DIV, which will include their share of qualified dividends distributed during the calendar year 2013. Shareholders are advised to check with their personal tax advisers for information on the treatment of these amounts on their individual income tax returns. The amounts which represent income derived from sources within, and taxes paid to foreign countries or possessions of the United States are as follows:

Foreign
Source Income
  Foreign
Taxes Paid
$20,472,271   $939,133

 

FINANCIAL STATEMENT OCTOBER 31, 201335
 

TRUSTEES AND OFFICERS OF BBH INTERNATIONAL EQUITY FUND
(unaudited)

 

Information pertaining to the Trustees of the Trust and executive officers of the Trust is set forth below The Statement of Additional Information for the BBH International Equity Fund includes additional information about the Fund’s Trustees and is available upon request without charge by contacting the Fund at 1-800-575-1265.

Name and
Birth Date
Position(s)
Held
with the
Trust
Term of
Office# and
Length of
Time
Served
Principal Occupation(s)
During Past 5 Years
Number of
Funds in
Fund
Complex
Overseen
By Trustee^
Other
Directorships
Held by
Trustee
During Past
5 Years
Independent Trustees

Joseph V. Shields Jr.

Birth Date:
March 17, 1938

Chairman of
the Board and
Trustee
Since 2007
1990-2007
with the
Predecessor
Trust
Managing Director and Chairman
of Wellington Shields & Co. LLC
(member of New York Stock
Exchange (“NYSE”)).
5 Chairman of
Capital
Management
Associates,
Inc. (registered
investment
adviser);
Director of
Flowers Foods,
Inc. (NYSE
listed
company).

David P. Feldman

Birth Date:
November 16, 1939

Trustee Since 2007
1990-2007
with the
Predecessor
Trust
Retired. 5 Director of
Dreyfus
Mutual Funds
(59 Funds).

Arthur D.
Miltenberger

Birth Date:
November 8, 1938

Trustee Since 2007
1992-2007
with the
Predecessor
Trust
Retired. 5 None.

H. Whitney Wagner

Birth Date:
March 3, 1956

Trustee Since 2007
2006-2007
with the
Predecessor
Trust
President, Clear Brook Advisors, a
registered investment advisor.
5 None.

Andrew S. Frazier

Birth Date:
April 8, 1948

Trustee Since 2010 Consultant to Western World
Insurance Group, Inc. (“WWIG”)
(January 2010 to January 2012)
CEO of WWIG (1992-2009).
5 Director of
WWIG.

 

36
 

TRUSTEES AND OFFICERS OF BBH INTERNATIONAL EQUITY FUND
(unaudited)

 

Name, Birth Date
and Address
Position(s)
Held
with the
Trust
Term of
Office# and
Length of
Time
Served
Principal Occupation(s)
During Past 5 Years
Number of
Funds in
Fund
Complex
Overseen
By Trustee^
Other
Directorships
Held by
Trustee
During Past
5 Years
Mark M. Collins
Birth Date:
November 8, 1956
Trustee Since 2011 Partner of Brown Investment
Advisory Incorporated, a
registered investment advisor.
5 Chairman of
Dillon Trust
Company;
Chairman of
Keswick
Management;
Director of
Domaine
Clarence
Dillon,
Bordeaux,
France; and
Director of
Pinnacle Care
International.
Interested Trustees        
Susan C. Livingston+
50 Post Office Square
Boston, MA 02110
Birth Date:
February 18, 1957
Trustee Since 2011 Partner (since 1998) and Senior
Client Advocate (since 2010) for
BBH&Co., Director of BBH
Luxembourg S.C.A. (since 1992);
Director of BBH Trust Company
(Cayman) Ltd. (2007 to April
2011); and BBH Investor Services
(London) Ltd (2001 to April 2011).
5 None.
John A. Gehret+
140 Broadway
New York, NY 10005
Birth Date:
April 11, 1959
Trustee Since 2011 Limited Partner of BBH&Co.
(2012-present); Partner of
BBH&Co. (1998 to 2011);
President and Principal Executive
Officer of the Trust (2008-2011).
5 None.

 

FINANCIAL STATEMENT OCTOBER 31, 201337
 

TRUSTEES AND OFFICERS OF BBH INTERNATIONAL EQUITY FUND
(unaudited)
 
 
 
OFFICERS

 

Name, Birth Date
and Address
Position(s)
Held with the
Trust
Term of
Office# and
Length of
Time
Served
Principal Occupation(s)
During Past 5 Years

Radford W. Klotz

140 Broadway
New York, NY 10005

Birth Date:
December 1, 1955

President and
Principal
Executive
Officer
Since 2011 Joined BBH&Co. in 1977 and has been a Partner of the firm since
1995.

Charles H. Schreiber

140 Broadway
New York, NY 10005

Birth Date:
December 10, 1957

Treasurer and
Principal
Financial
Officer
Since 2007
2006-2007
with the
Predecessor
Trust
Senior Vice President of BBH&Co. since September 2001; joined
BBH&Co. in 1999.

Mark B. Nixon

140 Broadway
New York, NY 10005

Birth Date:
January 14, 1963

Assistant
Secretary
Since 2007
2006-2007
with the
Predecessor
Trust
Vice President of BBH&Co. since October 2006.

Mark A. Egert

140 Broadway
New York, NY 10005

Birth Date:
May 25, 1962

Chief
Compliance
Officer (“CCO”)
Since 2011 Senior Vice President of BBH&Co. since June 2011; Partner at
Crowell & Moring LLP (April 2010 to May 2011); and CCO of
Cowen and Company (January 2005 to April 2010).

Sue M. Rim-An

140 Broadway
New York, NY 10005

Birth Date:
September 10, 1970

Anti-Money
Laundering
Officer
Since 2008 Anti-Money Laundering (“AML”) Officer, Vice President of
BBH&Co. since September 2007.

Suzan Barron

50 Post Office Square
Boston, MA 02110

Birth Date:
September 5, 1964

Secretary Since 2009 Senior Vice President and Senior Investor Services Counsel,
Corporate Secretary and Regulatory Support Practice of Fund
Administration, BBH&Co. since November 2005.

 

38
 

TRUSTEES AND OFFICERS OF BBH INTERNATIONAL EQUITY FUND
(unaudited)

 

Name, Birth Date
and Address
Position(s)
Held with the
Trust
Term of
Office# and
Length of
Time
Served
Principal Occupation(s)
During Past 5 Years

Alexander Tikonoff

50 Post Office Square
Boston, MA 02110

Birth Date:
December 23, 1974

Assistant
Secretary
Since 2009 Vice President and Investor Services Counsel, BBH&Co. since
August 2006.

Rowena Rothman

140 Broadway
New York, NY 10005

Birth Date:
October 24, 1967

Assistant
Treasurer
Since 2011 Vice President of BBH&Co. since 2009; Finance and Accounting
Consultant at The Siegfried Group (2007-2009).

 

 

#All officers of the Trust hold office for one year and until their respective successors are chosen and qualified (subject to the ability of the Trustees to remove any officer in accordance with the Trust’s By-laws). Except for Ms. Livingston and Messrs. Collins, Frazier and Gehret, the Trustees previously served on the Board of Trustees of the Predecessor Trust.
+Ms. Livingston and Mr. Gehret are “interested persons” of the Trust as defined in the 1940 Act because of their positions as Partner and Limited Partner of BBH&Co., respectively.
^The Fund Complex consists of the Trust, which has five series, and each is counted as one “Portfolio” for purposes of this table.
FINANCIAL STATEMENT OCTOBER 31, 201339
 

ADMINISTRATOR INVESTMENT ADVISER
BROWN BROTHERS HARRIMAN BROWN BROTHERS HARRIMAN
140 BROADWAY MUTUAL FUND ADVISORY
NEW YORK, NY 10005    DEPARTMENT
  140 BROADWAY
DISTRIBUTOR NEW YORK, NY 10005
ALPS DISTRIBUTORS, INC.  
1290 BROADWAY, SUITE 1100  
DENVER, CO 80203  

 

SHAREHOLDER SERVICING AGENT
BROWN BROTHERS HARRIMAN & CO.
140 BROADWAY
NEW YORK, NY 10005
1-800-575-1265

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 Funds website at www.bbhfunds.com.

A summary of the Fund’s Proxy Voting Policy that the Fund uses to determine how to vote proxies, if any, relating to securities held in the Fund’s portfolio, as well as a record of how the Fund voted any such proxies during the most recent 12-month period ended June 30, is available upon request by calling the toll-free number listed above. This information is also available on the SEC’s website at www.sec.gov.

 
 

 

Annual Report

OCTOBER 31, 2013

BBH Limited Duration Fund

 
 

BBH LIMITED DURATION FUND
MANAGEMENT’S DISCUSSION OF FUND PERFORMANCE
October 31, 2013

 

Since our letter as of October 31, 2012, the BBH Limited Duration Fund (the “Fund”) has returned 1.01% (0.82% for class N shareholders), net of fees, compared to the Barclays Capital U.S. 1-3 year Treasury Bond Index1 at 0.53% or inflation (Consumer Price Index-all items) at 0.96%. This year, the Fund’s lower interest rate exposure worked to shareholders’ advantage, protecting capital while longer bond indexes produced negative returns. We are gratified by our ongoing success in achieving longer-term solid returns in excess of inflation with limited interest rate risk in such a low yield environment.

Our process can be summarized as follows: buy durable credits when they are available at attractive yields. 2013 delivered a mixed environment for credit and unsurprisingly, the bulk of the Fund’s returns were derived by credit exposure. The first quarter saw a substantial rally in credit, but when rates moved up in May, funds liquidated high quality instruments to meet moderate redemptions, causing market price declines in credit instruments. The Fund’s NAV decreased markedly from early May to late June, partly due to price changes and partly from dividend payouts, ending just shy of a negative return for the period. From that point, rate increases held, but credit recovered. As a result, the Fund’s return increased steadily, recovering all its May-June losses by the end of September and increasing steadily from there.

Because of the sell-off, returns for the last 12 months lag the yield of the Fund at the start of the period (as well as the current yield). We warned in this letter last year that this was a possibility. Subsequent to the credit recovery, we see credit valuations as expensive as they were at this time last year. Fortunately, even in the face of a fully-valued market we can still find idiosyncratically inexpensive securities. Today, the Fund owns a diverse array of asset-backed securities that have extremely strong collateral backing but trade at a discount to the market benchmark credit card and prime auto securities. We also saw opportunities in commercial mortgage-backed securities, where prices softened over the summer when investors faced a heavy calendar. Finally, we purchased some corporate bonds that offered exceptional value due to events we view as having little bearing on the long-term durability of the underlying credit. These included spin-offs, smaller issues that were overlooked or sold to make room for the blockbuster Verizon offering, and issuers that disappointed on quarterly earnings or took on leverage for acquisitions.

Financials have been the stand-out sector of the bond markets in 2013, outperforming comparable Treasuries by 2.7% through October, while investment grade bonds in general outperformed by 1.5% in the same period. We believe the historic opportunity in financial credit is more limited, and we reduced some positions accordingly.

 
1The Barclays Capital U.S. 1-3 Year Treasury Bond Index (“BCTSY”) measures the performance of U.S. Treasury securities that have a remaining maturity of at least one year and less than three years. The BCTSY is a short term index. Investments cannot be made in an index.
2
 
BBH LIMITED DURATION FUND
MANAGEMENT’S DISCUSSION OF FUND PERFORMANCE (continued)
October 31, 2013

 

As of October 31, we hold approximately 21 percent in cash and cash equivalents and U.S. Treasury and Agency obligations in the Limited Duration Fund, up very slightly from last year. Our holdings of A-rated securities, the rating of the majority of global banks, have decreased by more than nine percent of the Fund. The majority of the difference is invested in collateralized mortgage-backed securities (6.3% of the Fund, up from 2.5%) and bonds rated triple-B (BBB/Baa- approximately 15% of the Fund) and double-B (BB/Ba -approx. 3.4%). We made many of the additional investments in this category subsequent to the May-June pullback. We find more individual value opportunities within this part of the ratings spectrum, as they still pay meaningful spreads and we find nearly everything A-rated or higher to be rich.

Duration affected fixed income investors in 2013. We expect to maintain short durations as we believe yields don’t have too much room to go down, but the risk of a rate rise, while unpredictable, remains under-compensated in today’s bond market. While we do not forecast an immediate hike in rates, we find little value in longer instruments, unless we can lock in an attractive additional credit spread. We invest based on value, not directional forecasts and as such, expect the Fund to maintain an extremely short duration.

We are honored with your confidence and the privilege of managing your capital.

Thank you.

FINANCIAL STATEMENT OCTOBER 31, 20133
 

BBH LIMITED DURATION FUND
MANAGEMENT’S DISCUSSION OF FUND PERFORMANCE (continued)
October 31, 2013

 

Growth of $10,000 Invested in BBH Limited Duration

The graph below illustrates the hypothetical investment of $10,0001 in the Class N shares of the Fund over the ten years ended October 31, 2013 as compared to the BCTSY.

* net of fees and expenses

The annualized gross expense ratios as in the February 28, 2013 prospectus for Class N and Class I shares were 0.50% and 0.31%, respectively.

Performance data quoted represents past performance which is no guarantee of future results. Investment return and principal value will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Mutual fund performance changes over time and current performance may be lower or higher than what is stated. Returns do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. For current to the most recent month end performance and after tax returns, contact the Fund at 1-800-575-1265.

 
1The Fund’s performance assumes the reinvestment of all dividends and distributions. The Barclays Capital U.S. 1-3 Year Treasury Bond Index (“BCTSY”) has been adjusted to reflect reinvestment of dividends on securities in the index. The BCTSY is not adjusted to reflect sales charges, expenses or other fees that the Securities and Exchange Commission requires to be reflected in the Fund’s performance. The index is unmanaged. Investments cannot be made in the index.
4
 
BBH LIMITED DURATION FUND
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

 

To the Trustees of the BBH Trust and Shareholders of
BBH Limited Duration Fund:

We have audited the accompanying statement of assets and liabilities, including the portfolio of investments, of BBH Limited Duration Fund (a series of BBH Trust) (the “Fund”) as of October 31, 2013, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended. These financial statements and financial highlights are the responsibility of the Fund’s management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. The Fund is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Fund’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of October 31, 2013, by correspondence with the custodian and brokers; where replies were not received from brokers, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of BBH Limited Duration Fund as of October 31, 2013, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended, in conformity with accounting principles generally accepted in the United States of America.

DELOITTE & TOUCHE LLP

Boston, Massachusetts
December 23, 2013

FINANCIAL STATEMENT OCTOBER 31, 20135
 

BBH LIMITED DURATION FUND
PORTFOLIO ALLOCATION
October 31, 2013
 
BREAKDOWN BY SECURITY TYPE

 

   U.S. $ Value   Percent of
Net Assets
Asset Backed Securities  $1,389,733,634    38.4%
Collateralized Mortgage Backed Securities   229,028,827    6.3 
Corporate Bonds   1,128,917,860    31.2 
Municipal Bonds   125,475,570    3.5 
U.S. Government Agency Obligations   129,056,913    3.6 
U.S. Inflation Linked Debt   308,409,715    8.5 
Certificates of Deposit   242,500,669    6.7 
Commercial Paper   37,985,543    1.0 
U.S. Treasury Bills   17,547,876    0.5 
Cash and Other Assets in Excess of Liabilities   9,126,937    0.3 
NET ASSETS  $3,617,783,544    100.0%

 

All data as of October 31, 2013. The Fund’s sector diversification is expressed as a percentage of net assets and may vary over time.

The accompanying notes are an integral part of these financial statements.

6
 

BBH LIMITED DURATION FUND
PORTFOLIO OF INVESTMENTS
October 31, 2013

 

             
Principal
Amount
     Maturity
Date
  Interest
Rate
  Value
   ASSET BACKED SECURITIES (38.4%)         
$ 19,221,040  Aircraft Lease Securitisation, Ltd.         
   2007-1A1,2  05/10/32    0.434%  $     18,367,380
35,000,000  Ally Master Owner Trust 2010-22  04/15/17  4.250  36,553,545
12,690,000  Ally Master Owner Trust 2012-5  09/15/19  1.540  12,606,360
2,750,000  American Express Credit Account         
   Master Trust 2008-41  11/15/16  1.574  2,764,803
3,692,450  AmeriCredit Automobile Receivables         
   Trust 2011-3  01/08/16  1.170  3,695,279
4,575,825  AmeriCredit Automobile Receivables         
   Trust 2011-4  05/09/16  1.170  4,584,382
7,347,000  AmeriCredit Automobile Receivables         
   Trust 2012-2  10/10/17  2.640  7,507,833
12,290,000  AmeriCredit Automobile Receivables         
   Trust 2012-3  05/08/18  2.420  12,493,252
11,300,000  AmeriCredit Automobile Receivables         
   Trust 2013-3  06/10/19  2.380  11,279,163
4,640,782  ARI Fleet Lease Trust 2012-A1,2  03/15/20  0.724  4,650,462
13,296,861  Ascentium Equipment Receivables         
   LLC 2012-1A2  09/15/19  1.830  13,284,468
3,000,000  Avis Budget Rental Car Funding         
   AESOP LLC 2010-3A2  05/20/16  4.640  3,148,086
25,300,000  Avis Budget Rental Car Funding         
   AESOP LLC 2010-5A2  03/20/17  3.150  26,340,311
1,746,915  Axis Equipment Finance Receivables         
   LLC 2012-1A2  03/20/15  1.250  1,748,032
6,048,279  BMW Vehicle Owner Trust 2011-A  08/25/15  0.760  6,055,095
15,175,000  Cabela’s Master Credit Card         
   Trust 2010-2A1,2  09/17/18  0.874  15,289,799
16,610,000  Cabela’s Master Credit Card         
   Trust 2012-1A1,2  02/18/20  0.704  16,665,494
4,300,000  Capital Auto Receivables Asset         
   Trust 2013-1  10/22/18  1.740  4,248,043
8,030,000  Capital Auto Receivables Asset         
   Trust 2013-2  10/22/18  1.960  8,083,600

 

The accompanying notes are an integral part of these financial statements.

FINANCIAL STATEMENT OCTOBER 31, 20137
 

BBH LIMITED DURATION FUND
PORTFOLIO OF INVESTMENTS (continued)
October 31, 2013

 

Principal
Amount
     Maturity
Date
  Interest
Rate
  Value
   ASSET BACKED SECURITIES (continued)         
$   2,820,000  Capital Auto Receivables Asset         
   Trust 2013-2  04/22/19    2.660%  $       2,849,979
13,260,000  Capital Auto Receivables Asset         
   Trust 2013-3  10/22/18  2.790  13,421,838
10,100,377  CarMax Auto Owner Trust 2011-2  12/15/15  0.910  10,115,689
16,010,000  CCG Receivables Trust 2013-12  08/14/20  1.050  16,017,333
19,430,000  Chesapeake Funding LLC 2011-2A1,2  04/07/24  1.424  19,576,444
18,777,654  Chesapeake Funding LLC 2012-1A1,2  11/07/23  0.924  18,824,410
16,440,000  Chesapeake Funding LLC 2012-2A1,2  05/07/24  0.624  16,410,868
8,140,000  Credit Acceptance Auto Loan         
   Trust 2012-1A2  09/16/19  2.200  8,211,135
3,000,000  Credit Acceptance Auto Loan         
   Trust 2012-1A2  03/16/20  3.120  3,012,366
8,860,000  Credit Acceptance Auto Loan         
   Trust 2012-2A2  03/16/20  1.520  8,889,460
11,950,000  Credit Acceptance Auto Loan         
   Trust 2013-1A2  10/15/20  1.210  11,969,479
11,790,000  Credit Acceptance Auto Loan         
   Trust 2013-2A2  04/15/21  1.500  11,790,000
7,530,000  Credit Acceptance Auto Loan         
   Trust 2013-2A2  10/15/21  2.260  7,530,000
18,909,719  Direct Capital Funding IV LLC 2013-12  12/20/17  1.673  18,909,719
21,970,000  Direct Capital Funding IV LLC 2013-22  08/20/18  1.730  21,992,080
13,800,000  DSC Floorplan Master Owner         
   Trust 2011-12  03/15/16  3.910  13,871,429
24,950,000  Emerald Aviation Finance, Ltd. 2013-12  10/15/38  4.650  24,886,627
2,805,866  Enterprise Fleet Financing LLC 2011-22  10/20/16  1.430  2,807,462
5,499,621  Enterprise Fleet Financing LLC 2011-32  05/20/17  1.620  5,520,074
6,800,127  Enterprise Fleet Financing LLC 2012-12  11/20/17  1.140  6,812,272
6,967,407  Enterprise Fleet Financing LLC 2012-22  04/20/18  0.720  6,967,763
5,528,918  Exeter Automobile Receivables         
   Trust 2012-1A2  08/15/16  2.020  5,550,271
6,942,844  Exeter Automobile Receivables         
   Trust 2012-2A2  06/15/17  1.300  6,939,830

 

The accompanying notes are an integral part of these financial statements.

8
 

BBH LIMITED DURATION FUND
PORTFOLIO OF INVESTMENTS (continued)
October 31, 2013

 

Principal
Amount
     Maturity
Date
  Interest
Rate
  Value
   ASSET BACKED SECURITIES (continued)         
$ 15,470,106  Exeter Automobile Receivables         
   Trust 2013-1A2  10/16/17    1.290%  $     15,446,282
26,054,260  Exeter Automobile Receivables         
   Trust 2013-2A2  11/15/17  1.490  26,132,892
26,788,432  FNA Trust 2013-1A2  01/10/18  1.980  26,570,776
4,470,000  Ford Credit Auto Owner Trust 2012-B  02/15/18  2.080  4,558,721
4,000,000  Ford Credit Auto Owner Trust 2013-C  01/15/20  2.500  4,039,192
30,250,000  Ford Credit Floorplan Master Owner         
   Trust 2010-32  02/15/17  4.200  31,574,890
17,314,453  FRS LLC 2013-1A2  04/15/43  1.800  17,254,233
17,450,000  GE Dealer Floorplan Master Note         
   Trust 2012-21  04/22/19  0.923  17,576,792
34,850,000  Global Container Assets Ltd. 2013-1A2  11/05/28  2.200  34,668,593
23,415,000  Global SC Finance II SRL 2012-1A2  07/19/27  4.110  23,804,416
9,450,000  Hertz Vehicle Financing LLC 2010-1A2  02/25/17  3.740  9,963,853
32,660,000  Hertz Vehicle Financing LLC 2011-1A2  03/25/18  3.290  34,516,460
8,350,000  HLSS Servicer Advance Receivables         
   Backed Notes 2012-T22  10/15/45  1.990  8,393,420
10,350,000  HLSS Servicer Advance Receivables         
   Backed Notes 2013-T12  01/16/46  1.495  10,285,830
17,090,000  HLSS Servicer Advance Receivables         
   Backed Notes 2013-T32  05/15/46  1.793  16,833,650
14,550,000  HLSS Servicer Advance Receivables         
   Backed Notes 2013-T42  08/15/44  1.183  14,541,270
16,430,000  HLSS Servicer Advance Receivables         
   Backed Notes 2013-T62  09/15/44  1.287  16,438,215
14,473,183  Honda Auto Receivables Owner         
   Trust 2012-1  01/15/16  0.770  14,511,551
15,620,000  Huntington Auto Trust 2011-1A2  11/15/16  1.310  15,779,715
17,750,000  Hyundai Auto Receivables Trust 2013-B  02/15/19  1.710  17,759,408
12,270,000  Leaf II Receivables Funding LLC 2012-12  10/15/16  1.250  12,220,920
8,510,000  Leaf II Receivables Funding LLC 2013-12  10/15/16  1.330  8,517,978
8,972,000  Leaf II Receivables Funding LLC 2013-12  09/15/21  1.980  9,002,841
4,470,000  M&T Bank Auto Receivables         
   Trust 2013-1A2  03/15/19  2.160  4,527,878

 

The accompanying notes are an integral part of these financial statements.

FINANCIAL STATEMENT OCTOBER 31, 20139
 

BBH LIMITED DURATION FUND
PORTFOLIO OF INVESTMENTS (continued)
October 31, 2013

 

             
Principal
Amount
     Maturity
Date
  Interest
Rate
  Value
   ASSET BACKED SECURITIES (continued)         
$   6,985,029  MMAF Equipment Finance LLC 2009-AA2  01/15/30    3.510%  $       7,154,521
14,790,000  MMAF Equipment Finance LLC 2012-AA2  10/10/18  1.350  14,860,829
3,590,000  Motor, Plc. 12A2  02/25/20  1.286  3,605,453
21,167,223  Nations Equipment Finance Funding I         
   LLC 2013-1A2  11/20/16  1.697  21,167,223
3,140,000  Nationstar Agency Advance Funding         
   Trust 2013-T2A2  02/18/48  1.892  3,067,278
35,000,000  Nationstar Mortgage Advance         
   Receivables Trust 2013-T3A2  06/20/48  2.438  34,459,915
10,674,000  Navitas Equipment Receivables LLC         
   2013-12  11/15/16  1.950  10,673,860
23,602,011  New Mexico State Educational         
   Assistance Foundation1  01/02/25  0.880  23,249,633
17,640,000  New York City Tax Lien 2013-A2  11/10/26  1.190  17,640,000
17,300,000  Nordstrom Private Label Credit Card         
   Master Note Trust 2011-1A2  11/15/19  2.280  17,827,858
923,640  Santander Drive Auto Receivables         
   Trust 2010-1  11/17/14  1.840  926,076
11,750,000  Santander Drive Auto Receivables         
   Trust 2010-1  05/15/17  2.430  11,839,993
801,093  Santander Drive Auto Receivables         
   Trust 2011-3  04/15/15  1.230  801,309
8,650,000  Santander Drive Auto Receivables         
   Trust 2012-3  12/15/16  1.940  8,742,823
12,340,000  Santander Drive Auto Receivables         
   Trust 2013-2  03/15/19  1.950  12,372,787
5,990,000  Santander Drive Auto Receivables         
   Trust 2013-4  01/15/20  3.250  6,186,442
14,640,000  SMART Trust 2011-1USA2  11/14/16  2.520  14,817,539
1,135,103  SMART Trust 2011-2USA2  03/14/15  1.540  1,137,597
8,880,000  SMART Trust 2011-4USA1,2  08/14/17  1.524  8,920,013
13,690,000  SMART Trust 2012-1USA2  12/14/17  2.010  13,876,184
6,020,000  SMART Trust 2012-2USA2  10/14/16  1.590  6,076,906
3,050,000  SMART Trust 2012-4US  03/14/17  0.970  3,049,390
18,190,000  SMART Trust 2013-2US  01/14/17  0.830  18,137,249

 

The accompanying notes are an integral part of these financial statements.

10
 

BBH LIMITED DURATION FUND
PORTFOLIO OF INVESTMENTS (continued)
October 31, 2013

 

             
Principal
Amount
     Maturity
Date
  Interest
Rate
  Value
   ASSET BACKED SECURITIES (continued)         
$   3,630,000  SMART Trust 2013-2US  02/14/19    1.180%  $       3,593,337
11,909,345  SNAAC Auto Receivables Trust 2013-1A2  07/16/18  1.140  11,900,128
53,680,000  Springleaf Funding Trust 2013-AA2  09/15/21  2.580  53,399,415
17,988,234  STORE Master Funding LLC 2013-1A2  03/20/43  4.160  17,832,438
12,823,415  STORE Master Funding LLC 2013-2A2  07/20/43  4.370  13,008,565
29,569,583  TAL Advantage I LLC 2012-1A2  05/20/27  3.860  29,863,416
21,775,917  Triton Container Finance LLC 2012-1A2  05/14/27  4.210  22,063,729
16,120,000  Turquoise Card Backed Securities,         
   Plc. 2011-1A1,2  09/15/16  0.924  16,163,846
33,330,000  Turquoise Card Backed Securities,         
   Plc. 2012-1A1,2  06/17/19  0.974  33,464,987
2,981,484  United Auto Credit Securitization         
   Trust 2012-12  03/16/15  1.100  2,981,263
10,440,000  Utah State Board of Regents 2011-11  05/01/29  1.115  10,426,637
18,350,000  Volkswagen Credit Auto Master         
   Trust 2011-1A1,2  09/20/16  0.853  18,486,285
8,096,403  Westlake Automobile Receivables         
   Trust 2012-1A2  03/15/16  1.030  8,103,106
15,270,000  Westlake Automobile Receivables         
   Trust 2013-1A2  01/15/18  1.120  15,285,514
5,395,235  Wheels SPV LLC 2012-12  03/20/21  1.190  5,408,399
   Total Asset Backed Securities         
   (Identified cost $1,379,905,160)        1,389,733,634
             
   COLLATERALIZED MORTGAGE BACKED         
   SECURITIES (6.3%)         
31,807,000  BB-UBS Trust 2012-TFT1,2  06/05/30  3.584  30,853,649
14,860,000  Boca Hotel Portfolio Trust 2013-BOCA1,2  08/15/26  1.924  14,883,286
7,510,000  Citigroup Commercial Mortgage         
   Trust 2013-SMP2  01/12/30  2.435  7,526,184
2,085,000  Citigroup Commercial Mortgage         
   Trust 2013-SMP2  01/12/30  2.738  2,081,078
27,511,950  Commercial Mortgage Pass Through         
   Certificates 2013-GAM2  02/10/28  1.705  27,116,411
9,690,000  Commercial Mortgage Pass Through         
   Certificates 2013-GAM1,2  02/10/28  3.531  9,232,826

 

The accompanying notes are an integral part of these financial statements.

FINANCIAL STATEMENT OCTOBER 31, 201311
 

BBH LIMITED DURATION FUND
PORTFOLIO OF INVESTMENTS (continued)
October 31, 2013

 

             
Principal
Amount
     Maturity
Date
  Interest
Rate
  Value
   COLLATERALIZED MORTGAGE BACKED         
   SECURITIES (continued)         
$ 13,541,895  Commercial Mortgage Pass Through         
   Certificates 2013-SFS2  04/12/35    1.873%  $     13,147,623
17,740,000  GTP Acquisition Partners I LLC2  05/15/43  2.364  17,440,087
27,050,461  GTP Cellular Sites LLC2  03/15/42  3.721  27,783,555
5,780,000  JP Morgan Chase Commercial Mortgage         
   Securities Corp. 2011-PLSD2  11/13/44  3.364  6,079,317
14,860,000  SBA Tower Trust2  12/15/42  2.933  15,319,991
40,700,000  SBA Tower Trust2  04/15/43  2.240  40,364,795
15,700,000  Unison Ground Lease Funding LLC2  04/15/40  5.349  17,200,025
   Total Collateralized Mortgage         
   Backed Securities         
   (Identified cost $230,124,299)        229,028,827
             
   CORPORATE BONDS (31.2%)         
   AGRICULTURE (0.9%)         
14,915,000  Bunge Ltd. Finance Corp.  04/15/14  5.350  15,212,882
15,840,000  Bunge Ltd. Finance Corp.  06/15/17  3.200  16,492,640
            31,705,522
   AIRLINES (0.2%)         
7,260,000  British Airways, Plc.2  12/20/21  5.625  7,514,100
             
   AUTO MANUFACTURERS (0.8%)         
30,000,000  Daimler Finance North America LLC  11/15/13  6.500  30,050,910
             
   BANKS (7.3%)         
16,090,000  ANZ New Zealand Int’l, Ltd.2  03/24/16  1.125  16,085,173
7,229,000  Australia & New Zealand Banking         
   Group, Ltd.  10/06/17  1.875  7,303,936
11,125,000  Bank of Montreal  07/15/16  1.300  11,217,549
9,000,000  Bank of Nova Scotia  07/15/16  1.375  9,104,796
17,800,000  Canadian Imperial Bank of Commerce  07/18/16  1.350  17,981,738
5,511,000  Citigroup, Inc.  05/19/15  4.750  5,819,941
9,030,000  DNB Bank ASA2  04/03/17  3.200  9,483,306
3,945,087  FNBC 1993-A Pass Through Trust  01/05/18  8.080  4,340,475

 

The accompanying notes are an integral part of these financial statements.

12
 

BBH LIMITED DURATION FUND
PORTFOLIO OF INVESTMENTS (continued)
October 31, 2013

 

             
Principal
Amount
     Maturity
Date
  Interest
Rate
  Value
   CORPORATE BONDS (continued)         
   BANKS (continued)         
$   7,320,000  Goldman Sachs Group, Inc.  05/01/14    6.000%  $       7,517,054
20,945,000  Goldman Sachs Group, Inc.  01/22/18  2.375  21,065,350
14,915,000  ING Bank NV2  09/25/15  2.000  15,149,315
13,465,000  JPMorgan Chase & Co.  07/05/16  3.150  14,142,411
15,000,000  Morgan Stanley  02/25/16  1.750  15,147,180
13,000,000  Morgan Stanley  01/09/17  5.450  14,484,002
18,000,000  National Australia Bank, Ltd.  07/25/16  1.300  18,151,272
12,955,000  Royal Bank of Scotland, Plc.  03/16/16  4.375  13,880,415
43,620,000  Societe Generale SA2  01/15/14  2.500  43,753,521
19,980,000  Svenska Handelsbanken AB  04/04/17  2.875  20,870,708
            265,498,142
   COMMERCIAL SERVICES (2.1%)         
6,300,000  Alliance Data Systems Corp.2  12/01/17  5.250  6,496,875
5,000,000  Alliance Data Systems Corp.2  04/01/20  6.375  5,212,500
28,523,000  Experian Finance, Plc.2  06/15/17  2.375  28,409,079
8,755,000  Western Union Co.1  08/21/15  1.262  8,789,276
2,930,000  Western Union Co.  10/01/16  5.930  3,267,812
22,290,000  Western Union Co.  12/10/17  2.875  23,025,815
            75,201,357
   COMPUTERS (0.1%)         
5,038,000  Dell, Inc.  04/01/16  3.100  5,058,454
             
   COSMETICS / PERSONAL CARE (0.6%)         
19,745,000  Avon Products, Inc.  03/15/20  4.600  20,601,281
             
   DIVERSIFIED FINANCIAL SERVICES (6.2%)         
4,046,217  5400 Westheimer Court Depositor Corp.2  04/11/16  7.500  4,298,516
16,980,136  AA Aircraft Financing 2013-1 LLC2  11/01/19  3.596  16,980,136
11,106,612  Ahold Lease Series 2001-A-1 Pass         
   Through Trust  01/02/20  7.820  12,481,055
20,000,000  Air Lease Corp.  01/15/16  4.500  21,000,000
13,600,000  Air Lease Corp.  04/01/17  5.625  14,824,000
19,127,649  Blue Wing Asset Vehicle2  01/11/23  4.500  18,936,372
20,000,000  CIC Central America Card         
   Receivables, Ltd.2,7  11/05/20  4.500  19,648,500
28,730,000  Denali Borrower LLC2  10/15/20  5.625  28,442,700

 

The accompanying notes are an integral part of these financial statements.

FINANCIAL STATEMENT OCTOBER 31, 201313
 

BBH LIMITED DURATION FUND
PORTFOLIO OF INVESTMENTS (continued)
October 31, 2013

 

             
Principal
Amount
     Maturity
Date
  Interest
Rate
  Value
   CORPORATE BONDS (continued)         
   DIVERSIFIED FINANCIAL         
   SERVICES (continued)         
$ 13,660,000  Doric Nimrod Air Alpha 2013-1 Pass         
   Through Trust2  05/30/25    5.250%  $     13,660,000
7,456,819  Doric Nimrod Air Finance Alpha, Ltd.         
   2012-1 (Class A) Pass Through Trust2  11/30/24  5.125  7,475,461
17,620,000  General Motors Financial Co., Inc.2  05/15/16  2.750  17,752,150
7,554,006  LS Power Funding Corp.  12/30/16  8.080  8,141,965
21,000,000  Merrill Lynch & Co., Inc.  01/15/15  5.000  22,008,189
16,349,000  Murray Street Investment Trust I  03/09/17  4.647  17,775,123
            223,424,167
   ENGINEERING & CONSTRUCTION (0.3%)         
10,000,000  Odebrecht Offshore Drilling         
   Finance, Ltd.2  10/01/22  6.750  10,425,000
             
   FOOD (0.5%)         
16,805,000  Hawk Acquisition Sub, Inc.2  10/15/20  4.250  16,258,838
             
   GAS (0.3%)         
8,830,000  Sempra Energy  11/15/13  8.900  8,850,238
             
   HEALTHCARE-PRODUCTS (1.3%)         
15,800,000  Hospira, Inc.  03/30/17  6.050  17,432,977
28,495,000  Mallinckrodt International Finance SA2  04/15/18  3.500  28,446,958
            45,879,935
   INSURANCE (1.4%)         
25,097,000  ACE INA Holdings, Inc.  06/15/14  5.875  25,927,083
4,130,000  Everest Reinsurance Holdings, Inc.  10/15/14  5.400  4,298,459
10,000,000  MetLife, Inc.  02/06/14  2.375  10,051,060
11,050,000  Vitality Re IV, Ltd.1,2  01/09/17  2.750  11,272,105
            51,548,707
   INTERNET (1.0%)         
34,875,000  Expedia, Inc.  08/15/20  5.950  37,017,371
             
   MEDIA (0.3%)         
11,490,000  Gannett Co., Inc.2  10/15/19  5.125  11,892,150

 

The accompanying notes are an integral part of these financial statements.

14
 

BBH LIMITED DURATION FUND
PORTFOLIO OF INVESTMENTS (continued)
October 31, 2013

 

             
Principal
Amount
     Maturity
Date
  Interest
Rate
  Value
   CORPORATE BONDS (continued)         
   MINING (1.0%)         
$ 22,880,000  Anglo American Capital, Plc.2  04/08/14    9.375%  $     23,685,719
11,630,000  Freeport-McMoRan Copper & Gold, Inc.   03/15/18  2.375  11,598,274
            35,283,993
   OFFICE/BUSINESS EQUIPMENT (0.6%)         
20,835,000  Xerox Corp.  05/15/14  8.250  21,656,795
             
   OIL & GAS (1.2%)         
7,120,000  Korea National Oil Corp.2  04/03/17  3.125  7,346,836
10,480,250  Odebrecht Drilling Norbe VIII/IX, Ltd.2  06/30/21  6.350  11,030,463
18,280,000  Petrobras Global Finance BV  05/20/16  2.000  18,164,854
5,370,000  Petroleos Mexicanos  07/18/18  3.500  5,490,825
            42,032,978
   OIL & GAS SERVICES (0.3%)         
10,629,000  Weatherford International, Ltd.  03/15/18  6.000  11,987,407
             
   PHARMACEUTICALS (0.7%)         
26,765,000  Teva Pharmaceutical Finance Co. BV1  11/08/13  1.166  26,766,338
             
   PIPELINES (0.5%)         
18,283,000  Williams Partners LP  02/15/15  3.800  18,946,070
             
   REAL ESTATE (1.4%)         
36,395,000  Deutsche Annington Finance BV2  10/02/17  3.200  37,369,294
14,165,000  Prologis International Funding II2  02/15/20  4.875  14,461,474
            51,830,768
   REAL ESTATE INVESTMENT TRUSTS (2.2%)         
23,247,000  American Tower Corp.  04/01/15  4.625  24,454,542
22,518,000  HCP, Inc.  02/01/14  2.700  22,625,298
2,680,000  HCP, Inc.  01/30/18  6.700  3,142,482
17,375,000  ProLogis LP  08/15/17  4.500  18,887,338
10,205,000  Simon Property Group LP  05/15/14  6.750  10,377,679
            79,487,339
   Total Corporate Bonds         
   (Identified cost $1,112,931,116)        1,128,917,860

 

The accompanying notes are an integral part of these financial statements.

FINANCIAL STATEMENT OCTOBER 31, 201315
 

BBH LIMITED DURATION FUND
PORTFOLIO OF INVESTMENTS (continued)
October 31, 2013

 

             
Principal
Amount
     Maturity
Date
  Interest
Rate
  Value
   MUNICIPAL BONDS (3.5%)         
$   4,250,000  California Pollution Control Financing         
   Authority1  11/01/38    0.850%  $       4,251,870
4,250,000  Granite City, Illinois1  05/01/27  0.850  4,251,870
4,250,000  King George County Economic         
   Development Authority1  06/01/23  0.850  4,251,233
1,470,000  Minnesota State Tobacco Securitization         
   Authority  03/01/15  3.093  1,512,071
20,940,000  New Jersey State Economic         
   Development Authority3  02/15/17  2.630  19,427,713
28,005,000  New Jersey State Economic         
   Development Authority3  02/15/18  3.431  24,836,234
12,710,000  New Jersey State Turnpike Authority  01/01/16  4.252  13,130,447
17,300,000  Pennsylvania State Economic         
   Development Financing Authority1  07/01/41  2.625  17,508,292
27,090,000  State of Illinois  03/01/16  4.961  28,716,484
7,110,000  State of Illinois  03/01/18  5.200  7,589,356
   Total Municipal Bonds         
   (Identified cost $124,290,324)        125,475,570
             
   U.S. GOVERNMENT AGENCY         
   OBLIGATIONS (3.6%)         
56,500,000  Federal Home Loan Bank Discount         
   Notes3  11/27/13  0.035  56,499,209
14,000,000  Federal Home Loan Bank Discount         
   Notes3  12/04/13  0.045  13,999,622
275,380  Federal Home Loan Mortgage Corp.         
   (FHLMC) Non Gold Guaranteed1  04/01/36  2.655  293,638
128,493  Federal Home Loan Mortgage Corp.         
   (FHLMC) Non Gold Guaranteed1  12/01/36  2.240  135,389
111,528  Federal Home Loan Mortgage Corp.         
   (FHLMC) Non Gold Guaranteed1  01/01/37  2.620  119,174
220,601  Federal Home Loan Mortgage Corp.         
   (FHLMC) Non Gold Guaranteed1  02/01/37  2.717  236,582
24,632,398  Federal National Mortgage         
   Association (FNMA)  07/01/35  5.000  26,753,965

 

The accompanying notes are an integral part of these financial statements.

16
 

BBH LIMITED DURATION FUND
PORTFOLIO OF INVESTMENTS (continued)
October 31, 2013

 

             
Principal
Amount
     Maturity
Date
  Interest
Rate
  Value
   U.S. GOVERNMENT AGENCY         
   OBLIGATIONS (continued)         
$   1,780,926  Federal National Mortgage         
   Association (FNMA)  11/01/35    5.500%  $       1,939,547
134,473  Federal National Mortgage         
   Association (FNMA)1  07/01/36  2.736  143,341
250,942  Federal National Mortgage         
   Association (FNMA)1  09/01/36  2.405  267,328
233,930  Federal National Mortgage         
   Association (FNMA)1  01/01/37  2.783  250,448
1,554,505  Federal National Mortgage         
   Association (FNMA)  08/01/37  5.500  1,695,102
16,427,684  Federal National Mortgage         
   Association (FNMA)  08/01/37  5.500  17,933,705
7,919,224  Federal National Mortgage         
   Association (FNMA)  06/01/40  6.500  8,760,923
27,826  Government National Mortgage         
   Association (GNMA)1  08/20/29  1.625  28,940
   Total U.S. Government Agency Obligations         
   (Identified cost $129,141,421)        129,056,913
             
   U.S. INFLATION LINKED DEBT (8.5%)         
298,273,199  U.S. Treasury Inflation Indexed Note  04/15/17  0.125  308,409,715
   Total U.S. Inflation Linked Debt         
   (Identified cost $317,037,630)        308,409,715
             
   CERTIFICATES OF DEPOSIT (6.7%)         
35,000,000  Bank of Montreal  11/08/13  0.180  35,000,000
32,500,000  Bank of Nova Scotia  12/18/13  0.150  32,500,000
40,000,000  Bank of Tokyo-Mitsubishi UFJ, Ltd.  11/08/13  0.180  40,000,078
40,000,000  Bank of Tokyo-Mitsubishi UFJ, Ltd.  12/19/13  0.180  40,000,533
60,000,000  DNB Bank ASA  12/20/13  0.170  60,000,000
35,000,000  Svenska Handelsbanken  11/13/13  0.185  35,000,058
   Total Certificates of Deposit         
   (Identified cost $242,500,669)        242,500,669

 

The accompanying notes are an integral part of these financial statements.

FINANCIAL STATEMENT OCTOBER 31, 201317
 

BBH LIMITED DURATION FUND
PORTFOLIO OF INVESTMENTS (continued)
October 31, 2013

 

             
Principal
Amount
     Maturity
Date
  Interest
Rate
  Value
   COMMERCIAL PAPER (1.0%)         
$ 25,000,000  ING US Funding LLC3  02/10/14    0.290%  $     24,985,543
13,000,000  Societe Generale North America, Inc.3  11/01/13  0.080  13,000,000
   Total Commercial Paper         
   (Identified cost $37,979,660)        37,985,543
             
   U.S. TREASURY BILLS (0.5%)         
17,550,000  U.S. Treasury Bill3,4,5  02/06/14  0.062  17,547,876
   Total U.S. Treasury Bills         
   (Identified cost $17,547,073)        17,547,876
          
TOTAL INVESTMENTS (Identified cost $3,591,457,353)6        99.7%  $3,608,656,607
CASH AND OTHER ASSETS IN EXCESS OF LIABILITIES       0.3  9,126,937
NET ASSETS        100.0%  $3,617,783,544

 

 
1Variable rate instrument. Interest rates change on specific dates (such as coupon or interest payment date). The yield shown represents the October 31, 2013 coupon or interest rate.
2Security exempt from registration under Rule 144A of the Securities Act of 1933, as amended. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. Total market value of Rule 144A securities owned at October 31, 2013 was $1,792,772,342 or 50% of net assets. Unless otherwise noted, these securities are not considered illiquid.
3Coupon represents a yield to maturity.
4Coupon represents a weighted average yield.
5All or a portion of this security is held at the broker as collateral for open futures contracts.
6The aggregate cost for federal income tax purposes is $3,591,457,398, the aggregate gross unrealized appreciation is $33,306,627 and the aggregate gross unrealized depreciation is $16,107,418, resulting in net unrealized appreciation of $17,199,209.
7Illiquid security.

Abbreviations:

FHLMC – Federal Home Loan Mortgage Corporation.

FNMA – Federal National Mortgage Association.

GNMA – Government National Mortgage Association.

The accompanying notes are an integral part of these financial statements.

18
 

BBH LIMITED DURATION FUND
PORTFOLIO OF INVESTMENTS (continued)
October 31, 2013

 

FAIR VALUE MEASUREMENTS

The Fund is required to disclose information regarding the fair value measurements of the Fund’s assets and liabilities. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The disclosure requirement established a three-tier hierarchy to maximize the use of observable market data and minimize the use of unobservable inputs and to establish classification of fair value measurements for disclosure purposes. Inputs refer broadly to the assumptions that market participants would use in pricing the asset or liability, including, for example, the risk inherent in a particular valuation technique used to measure fair value, including the model and/or the risk inherent in the inputs to the valuation technique. Inputs may be observable or unobservable. Observable inputs are inputs that reflect the assumptions market participants would use in pricing the asset or liability developed based on market data obtained from sources independent of the reporting entity. Unobservable inputs are inputs that reflect the Fund’s own considerations about the assumptions market participants would use in pricing the asset or liability developed based on the best information available in the circumstances.

The three levels defined by the fair value hierarchy are as follows:

Level 1 – unadjusted quoted prices in active markets for identical investments.
Level 2 – significant other observable inputs (including quoted prices for similar investments, interest rates, prepayment speeds, credit risk, etc.).
Level 3 – significant unobservable inputs (including the Fund’s own assumptions in determining the fair value of investments).

Inputs are used in applying the various valuation techniques and broadly refer to the assumptions that market participants use to make valuation decisions, including assumptions about risk. Inputs may include price information, specific and broad credit data, liquidity statistics, and other factors. A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. However, the determination of what constitutes “observable” requires significant judgment by the investment adviser. The investment adviser considers observable data to be that market data which is readily available, regularly distributed or updated, reliable and verifiable, not proprietary, and provided by independent sources that are actively involved in the relevant market. The categorization of a financial instrument within the hierarchy is based upon the pricing transparency of the instrument and does not necessarily correspond to the investment adviser’s perceived risk of that instrument.

Financial assets within level 1 are based on quoted market prices in active markets. The Fund does not adjust the quoted price for these instruments.

The accompanying notes are an integral part of these financial statements.

FINANCIAL STATEMENT OCTOBER 31, 201319
 

BBH LIMITED DURATION FUND
PORTFOLIO OF INVESTMENTS (continued)
October 31, 2013

 

Financial instruments that trade in markets that are not considered to be active but are valued based on quoted market prices, dealer quotations or alternative pricing sources supported by observable inputs are classified within level 2. These include investment-grade corporate bonds, U.S. Treasury notes and bonds, and certain non-U.S. sovereign obligations and over-the-counter derivatives. As level 2 financial assets include positions that are not traded in active markets and/or are subject to transfer restrictions, valuations may be adjusted to reflect illiquidity and/or non-transferability, which are generally based on available market information.

Financial assets classified within level 3 have significant unobservable inputs, as they trade infrequently. Potential level 3 financial assets include private equity and certain corporate debt securities. As observable prices are not available for these securities, valuation techniques are used to derive fair value.

Because of the inherent uncertainties of valuation, the values reflected in the financial statements may materially differ from the value received upon the actual sale of those investments.

The following table summarizes the valuation of the Fund’s investments by the above fair value hierarchy levels as of October 31, 2013.

                 
Investments, at value  (Unadjusted)
Quoted Prices in
Active Markets
for Identical
Investments
(Level 1)*
   Significant
Other
Observable
Inputs
(Level 2)*
   Significant
Unobservable
Inputs
(Level 3)*
   Balance as of
October 31, 2013
 
Asset Backed Securities  $—     $1,389,733,634    —     $1,389,733,634 
Collateralized Mortgage                    
Backed Securities   —      229,028,827    —      229,028,827 
Corporate Bonds   —      1,128,917,860    —      1,128,917,860 
Municipal Bonds   —      125,475,570    —      125,475,570 
U.S. Government Agency                    
Obligations   —      129,056,913    —      129,056,913 
U.S. Inflation Linked Debt   —      308,409,715    —      308,409,715 
Certificates of Deposit   —      242,500,669    —      242,500,669 
Commercial Paper   —      37,985,543    —      37,985,543 
U.S. Treasury Bills   —      17,547,876    —      17,547,876 
Total Investments, at value  $—     $3,608,656,607    —     $3,608,656,607 
                     
Other Financial Instruments, at value                    
Financial Futures Contracts  $(20,482,879)  $—      —     $(20,482,879)
Other Financial Instruments,                    
at value  $(20,482,879)  $—      —     $(20,482,879)

 

 

*The Fund’s policy is to disclose transfers between levels based on valuations at the end of the reporting period. There were no transfers between Levels 1, 2 or 3 as of October 31, 2013, based on the valuation input levels on October 31, 2012.

The accompanying notes are an integral part of these financial statements.

20
 

BBH LIMITED DURATION FUND
STATEMENT OF ASSETS AND LIABILITIES
October 31, 2013

 

      
ASSETS:     
Investments in securities, at value (Identified cost $3,591,457,353)  $3,608,656,607 
Cash   3,924,465 
Receivables for:     
Interest   13,443,533 
Investments sold   6,166,189 
Shares sold   1,242,724 
Futures variation margin on open contracts   124,413 
Prepaid assets   25,624 
Total Assets   3,633,583,555 
LIABILITIES:     
Payables for:     
Investments purchased   10,673,860 
Shares redeemed   3,692,760 
Investment advisory and administrative fees   805,794 
Shareholder servicing fees   349,488 
Periodic distributions   54,546 
Professional fees   52,449 
Custody and fund accounting fees   44,429 
Distributor fees   4,020 
Board of Trustees’ fees   3,894 
Transfer agent fees   2,225 
Accrued expenses and other liabilities   116,546 
Total Liabilities   15,800,011 
NET ASSETS  $3,617,783,544 
Net Assets Consist of:     
Paid-in capital  $3,587,876,500 
Undistributed net investment income   521,437 
Accumulated net realized gain on investments in securities     
and futures contracts   32,669,277 
Net unrealized appreciation/(depreciation) on investments in securities     
and futures contracts   (3,283,670)
Net Assets  $3,617,783,544 
NET ASSET VALUE AND OFFERING PRICE PER SHARE     
CLASS N SHARES     
($2,169,596,730 ÷ 209,630,833 shares outstanding)  $10.35 
CLASS I SHARES     
($1,448,186,814 ÷ 139,970,488 shares outstanding)  $10.35 

 

The accompanying notes are an integral part of these financial statements.

FINANCIAL STATEMENT OCTOBER 31, 201321
 

BBH LIMITED DURATION FUND
STATEMENT OF OPERATIONS
For the Year Ended October 31, 2013

 

     
NET INVESTMENT INCOME:    
Income:    
Interest and other income (net of withholding taxes of $2,635)  $66,383,887 
Total Income   66,383,887 
Expenses:     
Investment advisory and administrative fees   9,135,487 
Shareholder servicing fees   3,927,293 
Custody and fund accounting fees   443,954 
Board of Trustees’ fees   97,733 
Professional fees   66,597 
Distributor fees   48,781 
Transfer agent fees   25,173 
Miscellaneous expenses   201,763 
Total Expenses   13,946,781 
Expense offset arrangement   (4,505)
Net Expenses   13,942,276 
Net Investment Income   52,441,611 
      
NET REALIZED AND UNREALIZED LOSS:     
Net realized gain on investments in securities   9,592,872 
Net realized gain on futures contracts   22,903,760 
Net realized gain on investments in securities and futures contracts   32,496,632 
Net change in unrealized appreciation/(depreciation) on investments     
in securities   (34,967,649)
Net change in unrealized appreciation/(depreciation)     
on futures contracts   (20,209,055)
Net change in unrealized appreciation/(depreciation) on investments     
in securities and futures contracts   (55,176,704)
Net Realized and Unrealized Loss   (22,680,072)
Net Increase in Net Assets Resulting from Operations  $29,761,539 

 

The accompanying notes are an integral part of these financial statements.

22
 

BBH LIMITED DURATION FUND
STATEMENTS OF CHANGES IN NET ASSETS

 

         
   For the years ended October 31, 
   2013   2012 
INCREASE IN NET ASSETS:          
Operations:          
Net investment income  $52,441,611   $46,811,903 
Net realized gain on investments in securities and          
futures contracts   32,496,632    8,863,649 
Net change in unrealized appreciation/(depreciation)          
on investments in securities and          
futures contracts   (55,176,704)   28,089,498 
Net increase in net assets resulting          
from operations   29,761,539    83,765,050 
Dividends and distributions declared:          
From net investment income:          
Class N   (28,079,044)   (26,785,809)
Class I   (24,177,010)   (19,931,298)
From net realized gains:          
Class N   (4,814,319)   (5,251,943)
Class I   (3,217,373)   (3,417,866)
Total dividends and distributions declared   (60,287,746)   (55,386,916)
Share transactions:          
Proceeds from sales of shares   2,962,279,559    1,910,196,236 
Net asset value of shares issued to shareholders for          
reinvestment of dividends and distributions   59,349,601    53,820,642 
Cost of shares redeemed   (2,313,993,533)   (1,212,529,172)
Net increase in net assets resulting from share          
transactions   707,635,627    751,487,706 
Total increase in net assets   677,109,420    779,865,840 
           
NET ASSETS:          
Beginning of year   2,940,674,124    2,160,808,284 
End of year (including undistributed net investment          
income of $521,437 and $237,280, respectively)  $3,617,783,544   $2,940,674,124 

 

The accompanying notes are an integral part of these financial statements.

FINANCIAL STATEMENT OCTOBER 31, 201323
 

BBH LIMITED DURATION FUND
FINANCIAL HIGHLIGHTS
Selected per share data and ratios for a Class N share outstanding throughout each year.

 

   For the years ended October 31, 
   2013   2012   2011   2010   2009 
Net asset value, beginning of year  $10.44   $10.34   $10.46   $10.24   $9.31 
Income from investment operations:                         
Net investment income1   0.15    0.18    0.17    0.25    0.30 
Net realized and unrealized gain (loss)   (0.06)   0.14    (0.12)   0.21    0.96 
Total income from investment operations   0.09    0.32    0.05    0.46    1.26 
Less dividends and distributions:                         
From net investment income   (0.15)   (0.18)   (0.17)   (0.24)   (0.33)
From net realized gains   (0.03)   (0.04)   —      —      —   
Total dividends and distributions   (0.18)   (0.22)   (0.17)   (0.24)   (0.33)
Short-term redemption fees   0.00    0.00    0.00    0.00    0.00 
Net asset value, end of year  $10.35   $10.44   $10.34   $10.46   $10.24 
Total return   0.82%   3.13%   0.52%   4.58%   13.63%
Ratios/Supplemental data:                         
Net assets, end of year (in millions)  $2,170   $1,776   $1,336   $1,287   $870 
Ratio of expenses to average net assets                         
before reductions   0.49%   0.50%   0.49%   0.49%   0.52%
Expense offset arrangement   0.00%2   0.00%2   0.00%2   0.00%2   0.00%2
Ratio of expenses to average net assets                         
after reductions   0.49%   0.50%   0.49%   0.49%   0.52%
Ratio of net investment income to average                         
net assets   1.44%   1.75%   1.66%   2.38%   2.96%
Portfolio turnover rate   48%   38%   28%   40%   125%

 

 

1Calculated using average shares outstanding for the year.
2Less than 0.01%

The accompanying notes are an integral part of these financial statements.

24
 

BBH LIMITED DURATION FUND

FINANCIAL HIGHLIGHTS (continued)

Selected per share data and ratios for a Class I share outstanding throughout each year.

   For the years ended October 31, 
   2013   2012   2011   2010   2009 
Net asset value, beginning of year  $10.44   $10.34   $10.46   $10.23   $9.31 
Income from investment operations:                         
Net investment income1   0.17    0.20    0.19    0.26    0.31 
Net realized and unrealized gain (loss)   (0.06)   0.14    (0.12)   0.23    0.95 
Total income from investment operations   0.11    0.34    0.07    0.49    1.26 
Less dividends and distributions:                         
From net investment income   (0.17)   (0.20)   (0.19)   (0.26)   (0.34)
From net realized gains   (0.03)   (0.04)   —      —      —   
Total dividends and distributions   (0.20)   (0.24)   (0.19)   (0.26)   (0.34)
Short-term redemption fees   0.00    0.00    0.00    0.00    0.00 
Net asset value, end of year  $10.35   $10.44   $10.34   $10.46   $10.23 
Total return   1.01%   3.31%   0.67%   4.83%   13.67%
Ratios/Supplemental data:                         
Net assets, end of year (in millions)  $1,448   $1,165   $825   $926   $455 
Ratio of expenses to average net assets                         
before reductions   0.29%   0.31%   0.33%   0.34%   0.37%
Expense offset arrangement   0.00%2   0.00%2   0.00%2   0.00%2   0.00%2
Ratio of expenses to average net assets                         
after reductions   0.29%   0.31%   0.33%   0.34%   0.37%
Ratio of net investment income to average                         
net assets   1.63%   1.93%   1.82%   2.52%   3.11%
Portfolio turnover rate   48%   38%   28%   40%   125%

 

 

1Calculated using average shares outstanding for the year.
2Less than 0.01%

The accompanying notes are an integral part of these financial statements.

FINANCIAL STATEMENT OCTOBER 31, 201325
 

BBH LIMITED DURATION FUND
NOTES TO FINANCIAL STATEMENTS
As of and for the year ended October 31, 2013

 

1.Organization. BBH Limited Duration Fund is a separate, diversified series of BBH Trust (the “Trust”), which is registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as an open-end management investment company. The Trust was originally organized under the laws of the State of Maryland on July 16, 1990 as BBH Fund, Inc. and re-organized as a Delaware statutory trust on June 12, 2007. The Fund commenced operations on December 22, 2000. On August 6, 2002, the Board of Trustees (“Board”) of the Trust 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 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 share class of the Fund. As of October 31, 2013, there were five series of the Trust.
2.Significant Accounting Policies. The Fund’s financial statements are prepared in accordance with Generally Accepted Accounting Principles in the United States of America (“GAAP”). The following summarizes significant accounting policies of the Fund:
A.Valuation of Investments. Bonds and other fixed income securities, including restricted securities (other than short-term obligations but including listed issues) are valued at their most recent bid prices (sales price if the principal market is an exchange) in the principal market in which such securities are normally traded, on the basis of valuations furnished by a pricing service, use of which has been approved by the Board. In making such valuations, the pricing service utilizes both dealer supplied valuations and electronic data processing techniques, which take into account appropriate factors such as institutional-size trading in similar groups of securities, yield, quality, coupon rate, maturity, type of issue, trading characteristics and other market data, without exclusive reliance upon quoted prices, or exchange or over-the-counter prices, since such valuations are believed to reflect more accurately the fair value of such securities. Futures contracts held by the Fund are valued daily at the official settlement price of the exchange on which it is trade.

Securities or other assets for which market quotations are not readily available are valued at fair value in accordance with procedures established by and under the general supervision and responsibility of the Board. Short-term investments, which mature in 60 days or less are valued at amortized cost if their original maturity was 60 days or less, or by amortizing their value on the 61st day prior to maturity, if their original maturity when acquired by the Fund was more than 60 days, unless this is determined not to represent fair value by the Board.

B.Accounting for Investments and Income. Investment transactions are accounted for on the trade date. Realized gains and losses on investment transactions are determined based on the identified cost method. Interest income is accrued daily and consists of interest accrued, discount earned (including, if any, both original issue and market discount) and premium amortization on the investments of the Fund. Investment income is recorded net of any foreign taxes withheld where
26
 

BBH LIMITED DURATION FUND
NOTES TO FINANCIAL STATEMENTS (continued)
As of and for the year ended October 31, 2013

 

recovery of such tax is uncertain. Debt obligations may be placed on non-accrual status and related interest income may be reduced by ceasing current accruals and writing off interest receivable when the collection of all or a portion of the interest has become doubtful based on consistently applied procedures. A debt obligation is removed from non-accrual status when the issuer resumes interest payments or when collectability of interest is reasonably assured.

C.Fund Expenses. Most expenses of the Trust can be directly attributed to a specific fund. Expenses which cannot be directly attributed to a fund are apportioned amongst each fund in the Trust equally. Expense estimates are accrued in the period to which they relate and adjustments are made when actual amounts are known.
D.Repurchase Agreements. The Fund may enter into repurchase agreements. Repurchase agreements are transactions in which the Fund buys a security from a dealer or bank and agrees to sell the security back at a mutually agreed upon time and price. The repurchase price normally is in excess of the purchase price, reflecting an agreed upon interest rate. The rate is effective for the period of time that assets of the Fund are invested in the agreement and is not related to the coupon rate on the underlying security. The Fund will enter into repurchase agreements only with banks and other recognized financial institutions, such as securities dealers, deemed creditworthy by the investment adviser. The Fund’s custodian or sub-custodian will take possession of the securities subject to repurchase agreements. The investment adviser, custodian or sub-custodian will monitor the 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. As of and for the year ended October 31, 2013, the Fund had no repurchase agreements.
E.Forward Foreign Currency Exchange Contracts. The Fund may enter into forward foreign currency exchange contracts (“Contracts”) in connection with planned purchases or sales of securities to hedge the U.S. dollar value of securities denominated in a particular currency, or to increase or shift its exposure to a currency other than U.S. dollars. The Fund has no specific limitation on the percentage of assets which may be committed to these types of Contracts. The Fund could be exposed to risks if the counterparties to the Contracts are unable to meet the terms of their Contracts or if the value of the foreign currency changes unfavorably. The U.S. dollar values of foreign currency underlying all contractual commitments held by the Fund are determined using forward foreign currency exchange rates supplied by a quotation service. As of and for the year ended October 31, 2013, the Fund had no open Contracts.
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 that are intended to be purchased at a later date for the Fund. The contractual amount of the futures contracts represents
FINANCIAL STATEMENT OCTOBER 31, 201327
 

BBH LIMITED DURATION FUND
NOTES TO FINANCIAL STATEMENTS (continued)
As of and for the year ended October 31, 2013

 

the investment the Fund has in a particular contract and does not necessarily represent the amounts potentially subject to risk of loss. Trading in futures contracts involves, to varying degrees, risk of loss in excess of any futures variation margin reflected in the Statement of Assets and Liabilities. The measurement of risk associated with futures contracts is meaningful only when all related and offsetting transactions are considered. Gains and losses are realized upon the expiration or closing of the futures contracts. The following futures contracts were open at October 31, 2013:

                      
  Description  Number of
Contracts
   Expiration Date  Market Value   Notional
Amount
   Unrealized
Gain (Loss)
 
  Contracts to Sell:                       
  U.S. Treasury                       
  2-Year Notes   2,775   December 2013  $611,670,717   $609,546,122   $(2,124,596)
  U.S. Treasury                       
  5-Year Notes   6,775   December 2013   824,432,813    811,175,781    (13,257,032)
  U.S. Treasury                       
  10-Year Notes   1,690   December 2013   215,238,352    210,136,101    (5,101,251)
                       $(20,482,879)

 

Risks related to the use of futures contracts include possible illiquidity of the futures markets, contract prices that can be highly volatile and imperfectly correlated to movements in hedged security values and/or interest rates, and potential losses in excess of the Fund’s initial investment.

For the year ended October 31, 2013, the average monthly number of open contracts was 8,586. The range of monthly notional values was $1,003,525,354 to $1,657,438,280.

Fair Values of Derivative Instruments as of October 31, 2013

Derivatives not accounted for as hedging instruments under authoritative guidance for derivatives instruments and hedging activities:

       
    Asset Derivatives   Liability Derivatives
    Statement of Assets
and Liabilities Location
  Fair Value   Statement of Assets
and Liabilities Location
  Fair Value
        $ —   Unrealized   $20,482,879*
            Depreciation    
            on Open    
            Futures Contracts    
  Total     $ —       $20,482,879 

 

 

*Includes cumulative appreciation/depreciation of futures contracts as reported in the Statement of Assets and Liabilities and Notes to Financial Statements. Only the current day’s variation margin is reported within the Statement of Assets and Liabilities.
28
 

BBH LIMITED DURATION FUND
NOTES TO FINANCIAL STATEMENTS (continued)
As of and for the year ended October 31, 2013

 

 
  Effect of Derivative Instruments on the Statement of Operations  
  Net Realized Gain/(Loss) on Derivatives  
  Futures Contracts $ 22,903,760 
  Net Change in Unrealized Appreciation/(Depreciation) on Derivatives  
  Futures Contracts $(20,209,055)

 

G.Rule 144A Securities. The Fund may purchase securities that are not registered under the Securities Act of 1933, as amended (“1933 Act”) but that can be sold to “qualified institutional buyers” in accordance with the requirements stated in Rule 144A under the 1933 Act (“Rule 144A Securities”). A Rule 144A Security may be considered illiquid and therefore subject to the 15% limitation on the purchase of illiquid securities, unless it is determined on an ongoing basis that an adequate trading market exists for the security, which is the case for the Fund. Guidelines have been adopted and the daily function of determining and monitoring liquidity of Rule 144A Securities has been delegated to the investment adviser. All relevant factors will be considered in determining the liquidity of Rule 144A Securities and all investments in Rule 144A Securities will be carefully monitored. Information regarding Rule 144A Securities is included at the end of the Portfolio of Investments.
H.Federal Income. Taxes It is the Trust’s policy to comply with the requirements of the Internal Revenue Code (the “Code”) applicable to regulated investment companies and to distribute substantially all of its taxable income to its shareholders. Accordingly, no federal income tax provision is required. The Fund files a tax return annually using tax accounting methods required under provisions of the Code, which may differ from GAAP, which is the basis on which these financial statements are prepared. Accordingly, the amount of net investment income and net realized gain reported in these financial statements may differ from that reported on the Fund’s tax return, due to certain book-to-tax timing differences such as losses deferred due to “wash sale” transactions and utilization of capital loss carryforwards. These differences result in temporary over-distributions for financial statement purposes and are classified as distributions in excess of accumulated net realized gains or net investment income. These distributions do not constitute a return of capital. Permanent differences are reclassified in the Statement of Assets & Liabilities based upon their tax classification. As such, the character of distributions to shareholders reported in the Financial Highlights table may differ from that reported to shareholders on Form 1099-DIV.

The Fund is subject to the provisions of Accounting Standards Codification Income Taxes 740 (“ASC 740”). ASC 740 sets forth a minimum threshold for financial statement recognition of the benefit of a tax position taken or expected to be taken in a tax return. The Fund did not have any unrecognized

FINANCIAL STATEMENT OCTOBER 31, 201329
 

BBH LIMITED DURATION FUND
NOTES TO FINANCIAL STATEMENTS (continued)
As of and for the year ended October 31, 2013

 

tax benefits as of October 31, 2013, nor were there any increases or decreases in unrecognized tax benefits for the year then ended. The Fund recognizes interest and penalties, if any, related to unrecognized tax benefits as an income tax expense in the Statement of Operations. During the year ended October 31, 2013, the Fund did not incur any such interest or penalties. The Fund is subject to examination by U.S. federal and state tax authorities for returns filed for the prior three fiscal years. The Fund is not aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will significantly change in the next twelve months.

I.Dividends and Distributions to Shareholders. Dividends and distributions to shareholders, if any, 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 Fund declared dividends in the amounts of $32,893,363 and $27,394,383 to Class N shares and Class I shareholders, respectively, during the year ended October 31, 2013. The tax character of distributions paid during the fiscal years ended October 31, 2013 and 2012, respectively, were as follows:
  Distributions paid from:
     Ordinary
income
   Net
long-term
capital gain
   Total
taxable
distributions
    Tax return
of capital
   Total
distributions
paid
 
  2013:  $58,884,439   $1,403,307   $60,287,746    —     $60,287,746 
  2012:   46,717,107    8,669,809    55,386,916    —      55,386,916 

 

As of October 31, 2013 and 2012, respectively, the components of accumulated earnings/(deficit) on a tax basis were as follows:

  Components of accumulated earnings/(deficit):
     Undistributed
ordinary
income
   Undistributed
long-term
capital gain
   Accumulated
earnings
 Accumulated
capital and
other losses
    Other
book/tax
temporary
differences
   Unrealized
appreciation/
(depreciation)
   Total
accumulated
earnings /
(deficit)
 2013:   $5,511,491   $7,196,390    —      —     $20,482,833   $(3,283,670)  $29,907,044
 2012:    7,491,232    1,391,177    —      —      (93,554)   51,644,396    60,433,251

 

The Fund did not have a net capital loss carry forward as of October 31, 2013.

Under the Regulated Investment Company Modernization Act of 2010, the Fund is permitted to carry forward capital losses incurred in taxable years beginning after December 22, 2010, for an unlimited period and they will retain their character as either short-term or long-term capital losses rather than being considered all short-term capital losses.

30
 

BBH LIMITED DURATION FUND
NOTES TO FINANCIAL STATEMENTS (continued)
As of and for the year ended October 31, 2013

 

Total distributions paid may differ from the amounts shown in the Statements of Changes in Net Assets because, for tax purposes, dividends are recognized when actually paid.

The differences between book-basis and tax-basis unrealized appreciation/(depreciation) is attributable primarily to the tax deferral of losses on wash sales.

To the extent future capital gains are offset by capital loss carry forwards, such gains will not be distributed.

J.Use of Estimates. The preparation of the financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of income and expense during the reporting period. Actual results could differ from these estimates.
3.Recent Accounting Pronouncements. In January 2013, the Financial Accounting Standards Board (“FASB”) issued an Accounting Standards Update (“ASU”) No. 2013-01 “Clarifying the Scope of Disclosures about Offsetting Assets and Liabilities.” This update was issued to narrow the broad scope of ASU No. 2011-11 “Disclosures about Offsetting Assets and Liabilities,” which was issued in December 2011. This update requires an entity to disclose both gross and net information for derivatives and other financial instruments that are either offset in the statement of assets and liabilities or subject to an enforceable master netting arrangement or similar agreement. The required disclosures for both pronouncements are effective for annual reporting periods starting from January 1, 2013 and interim periods within those annual periods and apply retrospectively for all periods being reported. Management is assessing the impact of these new disclosure requirements.
4.Fees and Other Transactions with Affiliates.
A.Investment Advisory and Administrative Fees. Under a combined Investment Advisory and Administrative Services Agreement (“Agreement”) with the Trust, Brown Brothers Harriman & Co. (“BBH”) through a separately identifiable department (“SID” or “Investment Adviser”) provides investment advisory and portfolio management services to the Fund. BBH also provides administrative services to the Fund. The Fund’s investment advisory fee is calculated daily and paid monthly at an annual rate equivalent to at 0.30% per annum on the first $1,000,000,000 of net assets and 0.25% per annum on all net assets over $1,000,000,000. For the year ended October 31, 2013, the Fund incurred $9,135,487 for services under the Agreement.
B.Shareholder Servicing Fees. The Trust has a shareholder servicing agreement with BBH. BBH receives a fee from the Fund calculated daily and paid monthly at an annual rate of 0.20% of Class N shares’ average daily net assets. For the year ended October 31, 2013, Class N shares of the Fund incurred $3,927,293 in shareholder servicing fees.
FINANCIAL STATEMENT OCTOBER 31, 201331
 

BBH LIMITED DURATION FUND
NOTES TO FINANCIAL STATEMENTS (continued)
As of and for the year ended October 31, 2013

 

C.Custody and Fund Accounting Fees. BBH acts as a custodian and fund accountant and receives custody and fund accounting fees from the Fund calculated daily and incurred monthly. BBH holds all of the Fund’s cash and investments and calculates the Fund’s daily net asset value. The custody fee is an asset and transaction based fee. The fund accounting fee is an asset based fee calculated at 0.04% per annum on the first $100,000,000 of net assets, 0.02% per annum on the next $400,000,000 of net assets and 0.01% per annum on all net assets over $500,000,000. Effective April 1, 2013, the custody and fund accounting fee schedule was revised to reflect reduced rates. The custody fee continues to be an asset and transaction based fee. The fund accounting fee was revised from a tiered fee schedule to a single rate of 0.004% of the Fund’s net asset value. For the year ended October 31, 2013, the Fund incurred $443,954 in custody and fund accounting fees. These fees for the Fund were reduced by $4,505 as a result of an expense offset arrangement with the Fund’s custodian. The credit amount is disclosed in the Statement of Operations as a reduction to the Fund’s expenses. In the event that the Fund is overdrawn, under the custody agreement with BBH, BBH will make overnight loans to the Fund to cover overdrafts. Pursuant to their agreement, the Fund will pay the Federal Funds overnight investment rate on the day of the overdraft. The total interest incurred by the Fund for the year ended October 31, 2013, was $0.
D.Board of Trustees’ Fees. Each Trustee who is not an “interested person” as defined under the 1940 Act receives an annual fee as well as reimbursement for reasonable out-of-pocket expenses from the Fund. For the year ended October 31, 2013, the Fund incurred $97,733 in non-interested Trustee compensation and reimbursements.
5.Investment Transactions. For the year ended October 31, 2013, the cost of purchases and the proceeds of sales of investment securities other than short-term investments were $2,128,561,592 and $1,306,479,529, respectively.
6.Shares of Beneficial Interest. The Trust is permitted to issue an unlimited number of Class N shares and Class I shares of beneficial interest, at no par value. Transactions in Class N and Class I shares were as follows:
   For the year ended
October 31, 2013
   For the year ended
October 31, 2012
 
   Shares   Dollars   Shares   Dollars 
Class N                    
Shares sold   147,396,362   $1,531,651,257    99,980,300   $1,034,853,352 
Shares issued in connection                    
with reinvestments of                    
dividends   3,130,065    32,490,008    3,006,866    31,081,416 
Shares redeemed   (110,929,603)   (1,152,579,545)   (62,165,887)   (643,467,469)
Net increase   39,596,824   $411,561,719    40,821,279   $422,467,299 

 

32
 

BBH LIMITED DURATION FUND
NOTES TO FINANCIAL STATEMENTS (continued)
As of and for the year ended October 31, 2013

 

   For the year ended
October 31, 2013
   For the year ended
October 31, 2012
 
   Shares   Dollars   Shares   Dollars 
Class I                    
Shares sold   137,647,649   $1,430,628,302    84,601,503   $875,342,884 
Shares issued in connection                    
with reinvestments of                    
dividends   2,588,515    26,859,593    2,200,828    22,739,226 
Shares redeemed   (111,889,034)   (1,161,413,988)   (54,939,360)   (569,061,703)
Net increase   28,347,130   $296,073,907    31,862,971   $329,020,407 

 

7.Principal Risk Factors and Indemnifications.
A.Principal Risk Factors. Investing in the Fund may involve certain risks, as discussed in the Fund’s prospectus, including but not limited to, those described below:

A shareholder may lose money by investing in the Fund (investment risk). In the normal course of business, the Fund invests in securities and enters into transactions where risks exist due to failure of a counterparty to a transaction to perform (credit risk), changes in interest rates (interest rate risk), higher volatility for securities with longer maturities (maturity risk), financial performance or leverage of the issuer (issuer risk), difficulty in being able to purchase or sell a security (liquidity risk), or certain risks associated with investing in foreign securities not present in domestic investments (foreign investment risk). The Fund’s use of derivatives creates risks that are different from, or possibly greater than, the risks associated with investing directly in securities as the Fund could lose more than the principal amount invested (derivatives risk). The Fund invests in asset-backed (asset-backed securities risk) and mortgage-backed securities (mortgage-backed securities risk) which are subject to the risk that borrowers may default on the obligations that underlie these securities. In addition, these securities may be paid off sooner or later than expected which may increase the volatility of securities during periods of fluctuating interest rates. The Fund may invest in bonds issued by foreign governments which may be unable or unwilling to make interest payments and/or repay the principal owed (sovereign debt risk). The Fund’s use of borrowing, in reverse repurchase agreements and investment in some derivatives, involves leverage. Leverage tends to exaggerate the effect of any increase or decrease in the value of the Fund’s securities and may cause the Fund to be more volatile (leverage risk). The value of securities held by the Fund may decline in response to certain events, including: those directly involving the companies or issuers whose securities are held by the Fund; conditions affecting the general economy; overall market changes; local, regional or political, social or economic instability; and currency and interest rate and price fluctuations (market risk). The Fund is actively managed and the decisions by the

FINANCIAL STATEMENT OCTOBER 31, 201333
 

BBH LIMITED DURATION FUND
NOTES TO FINANCIAL STATEMENTS (continued)
As of and for the year ended October 31, 2013

 

Investment Adviser may cause the Fund to incur losses or miss profit opportunities (management risk). The Fund’s shareholders may be adversely impacted by asset allocation decisions made by an investment adviser whose discretionary clients make up a large percentage of the Fund’s shareholders (shareholder concentration risk). The extent of the Fund’s exposure to these risks in respect to these financial assets is included in their value as recorded in the Fund’s Statement of Assets and Liabilities.

Please refer to the Fund’s prospectus for a complete description of the principal risks of investing in the Fund.

B.Indemnifications. Under the Trust’s organizational documents, its officers and Trustees may be indemnified against certain liabilities and expenses arising out of the performance of their duties to the Fund, and shareholders are indemnified against personal liability for the obligations of the Trust. Additionally, in the normal course of business, the Fund enters into agreements with service providers that may contain indemnification clauses. The Fund’s maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Fund that have not yet occurred. The risk of material loss from such claims is considered remote.
8.Subsequent Events. Management has evaluated events and transactions that have occurred since October 31, 2013 through the date the financial statements were issued and determined that there were none that would require recognition or additional disclosure in the financial statements.
34
 

BBH LIMITED DURATION FUND
DISCLOSURE OF FUND EXPENSES
October 31, 2013 (unaudited)

 

EXAMPLE

As a shareholder of the Fund, you may incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments, reinvested distributions, or other distributions; redemption fees; and exchange fees; and (2) ongoing costs, including management fees; distribution 12b-1 fees; and other Fund expenses. This Example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.

The Example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period (May 1, 2013 to October 31, 2013).

ACTUAL EXPENSES

The first line of the table provides information about actual account values and actual expenses. You may use information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled “Expenses Paid During the Period” to estimate the expenses you paid on your account during the period.

HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES

The second line of the table provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid during the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds.

FINANCIAL STATEMENT OCTOBER 31, 201335
 

BBH LIMITED DURATION FUND
DISCLOSURE OF FUND EXPENSES (continued)
October 31, 2013 (unaudited)

 

Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as redemption fees or exchange fees. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.

   Beginning
Account Value
May 1, 2013
  Ending
Account Value
October 31, 2013
  Expenses Paid
During Period
May 1, 2013 to
October 31, 20131
Class N         
Actual  $1,000  $1,002  $2.47
Hypothetical2  $1,000  $1,023  $2.50
          
   Beginning
Account Value
May 1, 2013
  Ending
Account Value
October 31, 2013
  Expenses Paid
During Period
May 1, 2013 to
October 31, 20131
Class I         
Actual  $1,000  $1,003  $1.46
Hypothetical2  $1,000  $1,024  $1.48

 

 

1Expenses are equal to the Fund’s annualized expense ratio of 0.49% and 0.29% for Class N and I shares, respectively, multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period).
2Assumes a return of 5% before expenses. For the purposes of the calculation, the applicable annualized expenses ratio for each class of shares is subtracted from the assumed return before expenses.
36
 

BBH LIMITED DURATION FUND
CONFLICTS OF INTEREST
October 31, 2013 (unaudited)

 

Conflicts of Interest

Certain conflicts of interest may arise in connection with a portfolio manager’s management of the Fund’s investments, on the one hand, and the investments of other accounts for which the portfolio manager is responsible, on the other. For example, it is possible that the various accounts managed could have different investment strategies that, at times, might conflict with one another to the possible detriment of the Fund. Alternatively, to the extent that the same investment opportunities might be desirable for more than one account, possible conflicts could arise in determining how to allocate them. For example, BBH may act as adviser to private funds with investment strategies similar to the Fund. Those private funds may pay BBH a performance fee in addition to the stated investment advisory fee. In such cases, BBH may have an incentive to allocate certain investment opportunities to the private fund rather than the Fund in order to increase the private fund’s performance and thus improve BBH’s chances of receiving the performance fee. However, BBH has implemented policies and procedures to assure that investment opportunities are allocated equitably between the Fund and other funds and accounts with similar investment strategies.

Other potential conflicts might include conflicts between the Fund and its affiliated and unaffiliated service providers (e.g. conflicting duties of loyalty). In addition to providing investment management services through the SID, BBH provides administrative, custody, shareholder servicing and fund accounting services to the Fund. BBH may have conflicting duties of loyalty while servicing the Fund and/or opportunities to further its own interest to the detriment of the Fund. For example, in negotiating fee arrangements with affiliated service providers, BBH may have an incentive to agree to higher fees than it would in the case of unaffiliated providers. Also, because its advisory fees are calculated by reference to a Fund’s net assets, the Investment Adviser and its affiliates may have an incentive to seek to overvalue certain assets.

Purchases and sales of securities for the Fund may be aggregated with orders for other BBH client accounts. BBH however is not required to aggregate orders if portfolio management decisions for different accounts are made separately, or if they determine that aggregating is not practicable, required or with cases involving client direction.

Prevailing trading activity frequently may make impossible the receipt of the same price or execution on the entire volume of securities purchased or sold. When this occurs, the various prices may be averaged, and the Fund will be charged or credited with the average price. Thus, the effect of the aggregation may operate on some occasions to the disadvantage of the Fund. In addition, under certain circumstances, the Fund will not be charged the same commission or commission equivalent rates in connection with an aggregated order.

FINANCIAL STATEMENT OCTOBER 31, 201337
 

BBH LIMITED DURATION FUND
CONFLICTS OF INTEREST (continued)
October 31, 2013 (unaudited)

 

Arrangements regarding compensation and delegation of responsibility may create conflicts relating to selection of brokers or dealers to execute Fund portfolio trades and/or specific uses of commissions from Fund portfolio trades, administration of investment advice and valuation of securities.

From time to time BBH may invest a portion of the assets of its discretionary investment advisory clients in the Fund. That investment by BBH on behalf of its discretionary investment advisory clients in the Fund may be significant at times. Increasing the Fund’s assets may enhance investment flexibility and diversification and may contribute to economies of scale that tend to reduce the Fund’s expense ratio. BBH reserves the right to redeem at any time some or all of the shares of the Fund acquired for its discretionary investment advisory clients’ accounts. A large redemption of shares of the Fund by BBH on behalf of its discretionary investment advisory clients could significantly reduce the asset size of the Fund, which might have an adverse effect on the Fund’s investment flexibility, portfolio diversification and expense ratio.

BBH may enter into advisory and/or referral arrangements with third parties. Such arrangements may include compensation paid by BBH to the third party. BBH may pay a solicitation fee for referrals and/or advisory or incentive fees. BBH may benefit from increased amounts of assets under management.

When market quotations are not readily available or are believed by BBH to be unreliable, the Fund’s investments may be valued at fair value by BBH pursuant to procedures adopted by the Fund’s Board of Trustees. When determining an asset’s “fair value,” BBH seeks to determine the price that a Fund might reasonably expect to receive from the current sale of that asset in an arm’s-length transaction. The price generally may not be determined based on what the Fund might reasonably expect to receive for selling an asset at a later time or if it holds the asset to maturity. While fair value determinations will be based upon all available factors that BBH deems relevant at the time of the determination, and may be based on analytical values determined by BBH using proprietary or third party valuation models, fair value represents only a good faith approximation of the value of a security. The fair value of one or more securities may not, in retrospect, be the price at which those assets could have been sold during the period in which the particular fair values were used in determining the Fund’s net asset value. As a result, the Fund’s sale or redemption of its shares at net asset value, at a time when a holding or holdings are valued by BBH (pursuant to Board-adopted procedures) at fair value, may have the effect of diluting or increasing the economic interest of existing shareholders.

BBH, including the Investment Adviser, seeks to meet its fiduciary obligation with respect to all clients including the Fund. BBH has adopted and implemented policies and procedures that seek to manage conflicts. The Investment Adviser monitors a variety of areas, including compliance with fund investment guidelines, review of allocation decisions, the investment in only those securities that have been approved for purchase by an oversight committee, and compliance with the Investment Adviser’s Code of Ethics.

38
 

BBH LIMITED DURATION FUND
CONFLICTS OF INTEREST (continued)
October 31, 2013 (unaudited)

 

 

With respect to the allocation of investment opportunities, BBH has adopted and implemented policies designed to achieve fair and equitable allocation of investment opportunities among its clients over time. BBH has structured the portfolio managers’ compensation in a manner it believes is reasonably designed to safeguard the Fund from being negatively affected as a result of any such potential conflicts.

The Trust also manages these conflicts. For example, the Trust has designated a chief compliance officer and has adopted and implemented policies and procedures designed to manage the conflicts identified above and other conflicts that may arise in the course of the Fund’s operations in such a way as to safeguard the Fund from being negatively affected as a result of any such potential conflicts. The Trustees receive regular reports from the Investment Adviser and the Trust’s chief compliance officer on areas of potential conflict.

FINANCIAL STATEMENT OCTOBER 31, 201339
 

BBH LIMITED DURATION FUND
ADDITIONAL FEDERAL TAX INFORMATION
October 31, 2013 (unaudited)

 

BBH Limited Duration hereby designates $1,403,307 as an approximate amount of capital gain dividend for the purpose of dividends paid deduction.

The qualified investment income (QII) percentage for the year ended October 31, 2013 was 72.25%. In January 2014, shareholders will receive Form 1099-DIV, which will include their share of qualified dividends distributed during the calendar year 2013. Shareholders are advised to check with their tax advisers for information on the treatment of these amounts on their individual income tax returns.

40
 

TRUSTEES AND OFFICERS OF BBH LIMITED DURATION FUND
(unaudited)

 

Information pertaining to the Trustees of the BBH Trust (the “Trust”) and executive officers of the Trust is set forth below. The Statement of Additional Information for the BBH Limited Duration Fund includes additional information about the Fund’s Trustees and is available upon request without charge by contacting the Fund at 1-800-575-1265.

Name and
Birth Date
Position(s)
Held with the
Trust
Term of
Office# and
Length of
Time
Served
Principal Occupation(s)
During Past 5 Years
Number of
Funds in
Fund
Complex
Overseen By
Trustee^
Other
Directorships
Held by
Trustee
During Past
5 Years
Independent Trustees        

Joseph V. Shields Jr.

Birth Date:
March 17, 1938

Chairman of
the Board and
Trustee
Since 2007
1990-2007
with the
Predecessor
Trust
Managing Director and Chairman
of Wellington Shields & Co. LLC
(member of New York Stock
Exchange (“NYSE”)).
5 Chairman of
Capital
Management
Associates,
Inc. (registered
investment
adviser);
Director of
Flowers Foods,
Inc. (NYSE
listed
company).
           

David P. Feldman

Birth Date:
November 16, 1939

Trustee Since 2007
1990-2007
with the
Predecessor
Trust
Retired. 5 Director of
Dreyfus
Mutual Funds
(59 Funds).
 

Arthur D.
Miltenberger

Birth Date:
November 8, 1938

Trustee Since 2007
1992-2007
with the
Predecessor
Trust
Retired. 5 None.
 

H. Whitney Wagner

Birth Date:
March 3, 1956

Trustee Since 2007
2006-2007
with the
Predecessor
Trust
President, Clear Brook Advisors, a
registered investment advisor.
5 None.
 

Andrew S. Frazier

Birth Date:
April 8, 1948

Trustee Since 2010 Consultant to Western World
Insurance Group, Inc. (“WWIG”)
(January 2010 to January 2012)
CEO of WWIG (1992-2009).
5 Director of
WWIG.

 

FINANCIAL STATEMENT OCTOBER 31, 201341
 

TRUSTEES AND OFFICERS OF BBH LIMITED DURATION FUND
(unaudited)

 

Name, Birth Date
and Address
Position(s)
Held with
Trust
Term of
Office# and
Length of
Time
Served
Principal Occupation(s)
During Past 5 Years
Number of
Funds in
Fund
Complex
Overseen by
Trustee^
Other
Directorships
Held by
Trustee During Past 5 Years

Mark M. Collins

Birth Date:
November 8, 1956

Trustee Since 2011 Partner of Brown Investment
Advisory Incorporated, a
registered investment advisor.
5 Chairman of
Dillon Trust
Company;
Chairman of
Keswick
Management;
Director of
Domaine
Clarence
Dillon,
Bordeaux,
France; and
Director of
Pinnacle Care
International.
 
Interested Trustees        

Susan C. Livingston+

50 Post Office Square
Boston, MA 02110

Birth Date:
February 18, 1957

Trustee Since 2011 Partner (since 1998) and Senior
Client Advocate (since 2010) for
BBH&Co., Director of BBH
Luxembourg S.C.A. (since 1992);
Director of BBH Trust Company
(Cayman) Ltd. (2007 to April
2011); and BBH Investor Services
(London) Ltd (2001 to April 2011).
5 None.

John A. Gehret+

140 Broadway
New York, NY 10005

Birth Date:
April 11, 1959

Trustee Since 2011 Limited Partner of BBH&Co.
(2012-present); Partner of
BBH&Co. (1998 to 2011);
President and Principal Executive
Officer of the Trust (2008-2011).
5 None.
         

 

42
 

TRUSTEES AND OFFICERS OF BBH LIMITED DURATION FUND
(unaudited)
 
 
OFFICERS

 

Name, Birth Date
and Address
Position(s)
Held with the
Trust
Term of
Office# and
Length of
Time
Served
Principal Occupation(s) During Past 5 Years

Radford W. Klotz

140 Broadway
New York, NY 10005

Birth Date:
December 1, 1955

President and
Principal
Executive
Officer
Since 2011 Joined BBH&Co. in 1977 and has been a Partner of the firm since
1995.
     

Charles H. Schreiber

140 Broadway
New York, NY 10005

Birth Date:
December 10, 1957

Treasurer and
Principal
Financial
Officer
Since 2007
2006-2007
with the
Predecessor
Trust
Senior Vice President of BBH&Co. since September 2001; joined
BBH&Co. in 1999.
       

Mark B. Nixon

140 Broadway
New York, NY 10005

Birth Date:
January 14, 1963

Assistant
Secretary
Since 2007
2006-2007
with the
Predecessor
Trust
Vice President of BBH&Co. since October 2006.
 

Mark A. Egert

140 Broadway
New York, NY 10005

Birth Date:
May 25, 1962

Chief
Compliance
Officer (“CCO”)
Since 2011 Senior Vice President of BBH&Co. since June 2011; Partner at
Crowell & Moring LLP (April 2010 to May 2011); and CCO of
Cowen and Company (January 2005 to April 2010).
       

Sue M. Rim-An

140 Broadway
New York, NY 10005

Birth Date:
September 10, 1970

Anti-Money
Laundering
Officer
Since 2008 Anti-Money Laundering (“AML”) Officer, Vice President of
BBH&Co. since September 2007.
 

Suzan Barron

50 Post Office Square
Boston, MA 02110

Birth Date:
September 5, 1964

Secretary Since 2009 Senior Vice President and Senior Investor Services Counsel,
Corporate Secretary and Regulatory Support Practice of Fund
Administration, BBH&Co. since November 2005.

 

FINANCIAL STATEMENT OCTOBER 31, 201343
 

TRUSTEES AND OFFICERS OF BBH LIMITED DURATION FUND
(unaudited)

 

Name, Birth Date
and Address
Position(s)
Held with the
Trust
Term of
Office# and
Length of
Time
Served
Principal Occupation(s) During Past 5 Years

Alexander Tikonoff

50 Post Office Square
Boston, MA 02110

Birth Date:
December 23, 1974

Assistant
Secretary
Since 2009 Vice President and Investor Services Counsel, BBH&Co. since
August 2006.

Rowena Rothman

140 Broadway
New York, NY 10005

Birth Date:
October 24, 1967

Assistant
Treasurer
Since 2011 Vice President of BBH&Co. since 2009; Finance and Accounting
Consultant at The Siegfried Group (2007-2009).

 

 

#All officers of the Trust hold office for one year and until their respective successors are chosen and qualified (subject to the ability of the Trustees to remove any officer in accordance with the Trust’s By-laws). Except for Ms. Livingston and Messrs. Collins, Frazier and Gehret, the Trustees previously served on the Board of Trustees of the Predecessor Trust.
+Ms. Livingston and Mr. Gehret are “interested persons” of the Trust as defined in the 1940 Act because of their positions as Partner and Limited Partner of BBH&Co., respectively.
^The Fund Complex consists of the Trust, which has five series, and each is counted as one “Portfolio” for purposes of this table.
44
 

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ADMINISTRATOR INVESTMENT ADVISER
BROWN BROTHERS HARRIMAN & CO. BROWN BROTHERS HARRIMAN
140 BROADWAY MUTUAL FUND ADVISORY
NEW YORK, NY 10005     DEPARTMENT
  140 BROADWAY
DISTRIBUTOR NEW YORK, NY 10005
ALPS DISTRIBUTORS, INC.  
1290 BROADWAY, SUITE 1100  
DENVER, CO 80203  

 

SHAREHOLDER SERVICING AGENT
BROWN BROTHERS HARRIMAN
140 BROADWAY
NEW YORK, NY 10005
1-800-575-1265

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 Funds website at www.bbhfunds.com.

A summary of the Fund’s Proxy Voting Policy that the Fund uses to determine how to vote proxies, if any, relating to securities held in the Fund’s portfolio, as well as a record of how the Fund voted any such proxies during the most recent 12-month period ended October 31, is available upon request by calling the toll-free number listed above. This information is also available on the SEC’s website at www.sec.gov.


 
 

 

Item 2. Code of Ethics.

 

  As of the period ended October 31, 2013 (the “Reporting Period”), the Registrant has adopted a code of ethics that applies to the Registrant’s principal executive officer and principal financial officer, principal accounting officer or controller or persons performing similar functions.  During the Reporting Period, there have been no changes to, amendments to or waivers from, any provision of the code of ethics. A copy of this code of ethics can be obtained upon request, free of charge, by calling (800) 575-1265.

 

Item 3. Audit Committee Financial Expert.

 

  The Board of Trustees of the Registrant has determined that Arthur D. Miltenberger, David P. Feldman and Andrew S. Frazier possess the attributes identified in Instruction (b) of Item 3 to Form N-CSR to each qualify as an “audit committee financial expert,” and has designated Arthur D. Miltenberger, David P. Feldman and Andrew S. Frazier as the Registrant’s audit committee financial experts.  Messrs. Arthur D. Miltenberger, David P. Feldman and Andrew S. Frazier are “independent” Trustees pursuant to paragraph (a)(2) of Item 3 to Form N-CSR.

 

Item 4. Principal Accountant Fees and Services.

 

(a)

Audit Fees

The aggregate fees billed for each of the last two fiscal years for professional services rendered by the principal accountant for the audit of the Registrant’s annual financial statements or services that are normally provided by the accountant in connection with statutory and regulatory filings or engagements for those fiscal years were $114,000 for 2013 and $84,500 for 2012.

 

(b)

Audit Related Fees

The aggregate fees billed in each of the last two fiscal years for assurance and related services rendered to the Registrant by the principal accountant that are reasonably related to the performance of the audit of the Registrant’s financial statements and are not reported under paragraph (a) of this Item were $0 for 2013 and $0 for 2012.

 

(c)

Tax Fees

The aggregate fees billed in each of the last two fiscal years for professional services rendered to the Registrant by the principal accountant for tax compliance, tax advice and tax planning were $29,000 for 2013 and $13,050 for 2012.  These services consisted of (i) review or preparation of U.S. federal, state, local and excise tax returns; (ii) U.S. federal, state and local entity tax planning, advice and assistance regarding statutory, regulatory or administrative developments, and (iii) tax advice regarding tax qualification.

 

(d)

All Other Fees

The aggregate fees billed in each of the last two fiscal years for products and services provided by the principal accountant, other than the services reported in paragraphs (a) through (c) of this Item were $47,494 for 2013 and $20,700 for 2012.

 

 
 

  The other services provided to the Registrant consisted of examinations pursuant to Rule 17f-2 of the Investment Company Act of 1940, as amended and filings of Form N-17f-2 “Certificate of Accounting of Securities and Similar Investments in the Custody of Management Investment Companies” with the U.S. Securities and Exchange Commission (“17f-2 Services”) in addition to audit services, tax services and 17f-2 Services provided to other series of the Registrant.
(e)(1)

Pursuant to the Registrant’s Audit Committee Charter that has been adopted by the audit committee, the audit committee shall approve all audit and permissible non-audit services to be provided to the Registrant and all permissible non-audit services to be provided to its investment adviser or any entity controlling, controlled by or under common control with the investment adviser that provides ongoing services to the Registrant if the engagement relates directly to the operations and financial reporting of the Registrant. The audit committee has delegated to its Chairman the approval of such services subject to reports to the full audit committee at its next subsequent meeting.

 

(e)(2)

The percentage of services described in each of paragraphs (b) through (d) of this Item that were approved by the audit committee pursuant to paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X, with respect to: Audit-Related Fees were 0%; Tax Fees were 0%; and Other Fees were 0%.

 

(f)

Not applicable.

 

(g)

The aggregate non-audit fees billed by the Registrant's accountant for services rendered to the Registrant, and rendered to the Registrant's investment adviser (not  including  any  sub-adviser whose  role  is primarily portfolio management and is subcontracted with or overseen by another investment adviser), and any entity controlling, controlled by, or under common control with the investment adviser that provides ongoing services to the Registrant for each of the last two fiscal years of the Registrant were $215,032 for 2013 and $739,348 for 2012.

 

(h) The Registrant’s audit committee has considered whether the provision of non-audit services that were rendered to the Registrant’s investment adviser (not including any subadviser whose role is primarily portfolio management and is subcontracted with or overseen by another investment adviser), and any entity controlling, controlled by, or under common control with the investment adviser that provides ongoing services to the Registrant that were not pre-approved pursuant to paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X is compatible with maintaining the principal accountant’s independence.

 

Item 5. Audit Committee of Listed Registrants.

 

  Not Applicable

 

Item 6. Investments.

 

(a)

A Schedule of Investments in securities of unaffiliated issuers as of the close of the Reporting Period is included as part of the report to shareholders filed under Item 1 of this Form N-CSR.

 

(b) Not applicable.

 

 
 

Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies.

 

  Not applicable.

 

Item 8. Portfolio Managers of Closed-End Management Investment Companies.

 

  Not applicable.

 

Item 9. Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers.

 

  Not applicable.

 

Item 10. Submission of Matters to a Vote of Security Holders.

 

  Not applicable.

 

Item 11. Controls and Procedures.

 

(a)

The Registrant’s principal executive and financial officers have concluded that the Registrant’s disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940, as amended (the “1940 Act”)) are effective, as of a date within 90 days of the filing date of this Form N-CSR, based on their evaluation of these controls and procedures required by Rule 30a-3(b) under the 1940 Act and Rules 13a-15(b) or 15d-15(b) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”).

 

(b) There were no changes in the Registrant's internal control over financial reporting (as defined in Rule 30a-3(d) under the 1940 Act) that occurred during the Registrant's second fiscal quarter of the period covered by this Form N-CSR, that have materially affected, or are reasonably likely to materially affect, the Registrant's internal control over financial reporting.

 

Item 12. Exhibits.

 

(a)(1)

Not applicable.

 

(a)(2)

Certifications required by Rule 30a-2(a) under the 1940 Act and Section 302 of the Sarbanes-Oxley Act of 2002 are filed as Exhibit 12(a)(2) to this Form N-CSR.

 

(a)(3) Not applicable.

 

(b) Certifications required by Rule 30a-2(b) under the 1940 Act and Section 906 of the Sarbanes-Oxley Act of 2002 are furnished as Exhibit 12(b) to this Form N-CSR.

 

 
 

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

(Registrant) BBH Trust

 

By: (Signature and Title)

 

 

/s/Radford W. Klotz
Radford W. Klotz
Title: President (Principal Executive Officer)
Date: January 9, 2014

 

 

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/Radford W. Klotz
Radford W. Klotz
Title: President (Principal Executive Officer)
Date: January 9, 2014
   

 

 

By: (Signature and Title)

 

 

/s/Charles H.Schreiber
Charles H. Schreiber
Title: Treasurer (Principal Financial Officer)
Date: January 9, 2014

 

 

EX-12.(A).(2) 2 e56674ex12a2.htm CERTIFICATION

Exhibit 12(a)(2)

 

CERTIFICATION PURSUANT TO RULE 30A-2(A) UNDER THE 1940 ACT

AND SECTION 302 OF THE SARBANES-OXLEY ACT

 

I, Radford W. Klotz, certify that:

 

1.I have reviewed this report on Form N-CSR of BBH Trust on behalf of the BBH Limited Duration Fund, BBH Core Select, BBH Global Core Select and BBH International Equity Fund;

 

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(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) and internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) for the registrant and have:

 

(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

(b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

(c)Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and

 

(d)Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

 

5.The registrant's other certifying officer(s) 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 internal control over financial reporting.

 

 

Date: January 9, 2014 /s/ Radford W. Klotz
  Radford W. Klotz, President
  (Principal Executive Officer)

 

 
 

Exhibit 12(a)(2)

 

CERTIFICATION PURSUANT TO RULE 30A-2(A) UNDER THE 1940 ACT

AND SECTION 302 OF THE SARBANES-OXLEY ACT

 

I, Charles H. Schreiber, certify that:

 

1.I have reviewed this report on Form N-CSR of BBH Trust on behalf of the BBH Limited Duration Fund, BBH Core Select, BBH Global Core Select and BBH International Equity Fund;

 

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(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) and internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) for the registrant and have:

 

(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

(b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

(c)Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and

 

(d)Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

 

5.The registrant's other certifying officer(s) 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 internal control over financial reporting.

 

 

 

Date: January 9, 2014 /s/ Charles H. Schreiber
  Charles H. Schreiber, Treasurer
  (Principal Financial Officer)

 

 

EX-12.(B) 3 e5667412b.htm CERTIFICATION

Exhibit 12(b)

 

CERTIFICATION PURSUANT TO RULE 30A-2(B) UNDER THE 1940 ACT AND SECTION 906 OF THE SARBANES-OXLEY ACT

 

I, Radford W. Klotz, President (Principal Executive Officer) of BBH Trust (the “Registrant”), certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:

1. The Form N-CSR of the Registrant on behalf of the BBH Limited Duration Fund, BBH Core Select, BBH Global Core Select and BBH International Equity Fund for the annual period ended October 31, 2013 (the “Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant.

 

 

 

Date:  January 9, 2014 /s/ Radford W. Klotz
  Radford W. Klotz, President
  (Principal Executive Officer)

 

 
 

Exhibit 12(b)

 

CERTIFICATION PURSUANT TO RULE 30A-2(B) UNDER THE 1940 ACT AND SECTION 906 OF THE SARBANES-OXLEY ACT

 

I, Charles H. Schreiber, Treasurer (Principal Financial Officer) of BBH Trust (the “Registrant”), certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:

1. The Form N-CSR of the Registrant on behalf of the BBH Limited Duration Fund, BBH Core Select, BBH Global Core Select and BBH International Equity Fund for the annual period ended October 31, 2013 (the “Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant.

 

 

 

Date:  January 9, 2014 /s/ Charles H. Schreiber
  Charles H. Schreiber, Treasurer
  (Principal Financial Officer)

 

 

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