<PAGE>
BBH BROAD MARKET FIXED INCOME PORTFOLIO
PORTFOLIO OF INVESTMENTS
October 31, 2000
<TABLE>
<CAPTION>
Principal Maturity
Amount Date Interest Rate Value
----------- -------- ------------- ------------
<S> <C> <C> <C> <C>
Corporate Bonds (78.2%)
$ 500,000 Abbey National Plc. 10/26/29 7.950% $ 503,612
3,500,000 Advanta Credit Card Master Trust* 02/01/04 6.815 3,500,735
535,000 Amerada Hess Corp. 10/01/29 7.875 536,026
2,953,000 Americredit Automobile Receivables Trust 02/12/05 7.050 2,966,663
400,000 Anheuser-Busch Co., Inc. 09/15/08 5.650 363,521
500,000 AXA Financial, Inc. 08/01/10 7.750 506,983
1,100,000 Bear Stearns Co., Inc. 03/02/04 6.150 1,061,921
2,000,000 Boeing Capital Corp. 09/27/10 7.375 2,015,722
4,000,000 California Infastructure 09/25/05 6.280 3,965,200
1,188,000 California Infastructure 09/25/08 6.310 1,161,483
363,000 Chase Funding Mortgage Loan 08/25/15 7.166 362,076
1,995,981 Chase Funding Mortgage Loan* 10/25/30 6.840 1,994,700
500,000 Chase Manhattan Bank-First Union National 07/15/09 7.439 509,136
500,000 Citicorp 06/15/07 7.200 496,020
500,000 Citigroup, Inc. 03/15/04 5.800 483,427
900,000 Coca-Cola Enterprises 09/30/09 7.125 889,158
750,000 Conoco, Inc. 04/15/04 5.900 723,171
580,000 Conoco, Inc. 04/15/29 6.950 539,224
569,617 Contimortgage Home Equity Loan Trust 06/15/11 7.250 568,315
205,000 CSXT Trade Receivables Master Trust 06/25/03 6.000 200,668
1,425,000 Discover Card Master Trust 07/15/07 6.850 1,423,979
500,000 Discover Card Master Trust 08/18/08 6.050 481,690
1,100,000 Donaldson Lufkin Jenrett 03/01/05 8.000 1,121,978
4,000,000 First Chicago Master Trust* 12/15/03 6.860 4,011,039
426,906 First Security Automobile Owner Trust 06/16/03 5.580 424,973
4,000,000 First USA Credit Card Master Trust* 08/15/03 6.995 4,006,320
1,800,000 Ford Motor Credit Co.* 04/15/04 6.570 1,802,578
750,000 Ford Motor Credit Co. 03/15/05 7.500 751,959
250,000 General Electric Capital Corp. 12/01/06 7.875 261,238
1,500,000 General Motors Acceptance Corp. 01/22/03 5.875 1,464,848
3,000,000 General Motors Acceptance Corp.* 07/25/13 6.620 3,000,000
682,000 Goldman Sachs Group, Inc. 05/15/09 6.650 640,037
425,000 GTE Southwest, Inc. 12/01/05 6.540 414,746
750,000 JP Morgan & Co., Inc. 02/25/04 5.750 720,409
1,000,000 JP Morgan & Co., Inc. 01/15/09 6.000 899,788
856,342 Key Automobile Finance Trust 04/15/04 6.400 854,595
253,000 Lowe's Co., Inc. 06/01/10 8.250 262,425
5,000,000 MBNA Master Credit Card Trust* 10/15/03 6.881 5,009,900
1,550,000 MBNA Master Credit Card Trust 02/15/12 7.000 1,556,742
1,230,000 Merrill Lynch & Co. 02/12/03 6.000 1,205,808
500,000 Money Store (The) 04/15/04 8.375 519,603
1,175,000 Morgan Stanley Dean Witter 01/15/03 7.125 1,181,904
750,000 Nations Bank Corp. 07/15/04 6.125 724,651
185,000 Northern States Power 12/01/26 7.375 171,115
</TABLE>
<PAGE>
BBH BROAD MARKET FIXED INCOME PORTFOLIO
PORTFOLIO OF INVESTMENTS
October 31, 2000
<TABLE>
<CAPTION>
Principal Maturity
Amount Date Interest Rate Value
----------- -------- ------------- ------------
<S> <C> <C> <C> <C>
$ 1,500,000 Peco Energy Transition Trust 03/01/10 7.650% $ 1,537,087
287,000 PNC Funding Corp. 09/01/02 6.950 286,622
220,000 Potomac Electric Power 09/15/25 7.375 202,519
1,477,000 PP&L Transition Bond Co. 06/25/09 7.050 1,485,567
650,000 Qwest Communications International, Inc. 11/01/08 7.500 642,587
350,000 Residential Asset Securities Corp. 10/25/25 7.710 354,232
2,981,511 Residential Asset Securities Corp.* 09/25/31 6.850 2,979,322
680,000 Royal Bank of Scotland 02/01/11 6.375 605,310
500,000 Salomon Brothers Mortgage Securities 12/18/09 7.520 510,711
265,000 Sante Fe Pacific Corp. 11/01/04 8.625 279,186
500,000 Smithkline Beecham Corp. 10/01/05 6.625 491,379
2,400,000 Standard Credit Card Trust 01/07/07 8.250 2,521,200
430,000 Texaco Capital, Inc. 10/01/06 8.250 460,843
230,000 Texas Utilities Electric Co. 04/01/24 7.875 222,865
250,000 Time Warner Entertainment Co. 09/01/08 7.250 248,288
967,000 Toyota Motor Credit 12/15/08 5.500 876,322
1,000,000 United Technology Corp. 11/15/04 6.625 993,932
740,000 Verizon Communications 04/15/06 6.360 711,769
1,000,000 Wal-Mart Stores 08/10/04 6.550 990,937
740,000 West Penn Funding, LLC 12/26/05 6.630 741,517
750,000 Worldcom, Inc. 08/15/05 6.400 721,259
1,000,000 Worldcom, Inc. 05/15/06 8.000 1,025,107
------------
75,148,647
------------
Sovereign Governments (0.8%)
380,000 Saskatchewan (Providence of) 07/15/04 8.000 391,926
400,000 Saskatchewan (Providence of) 07/15/13 7.375 407,668
------------
799,594
------------
Government Agency (45.5%)
367,456 Federal Home Loan Mortgage Corp. 03/01/13 7.500 371,723
1,753,027 Federal Home Loan Mortgage Corp. 09/01/15 7.000 1,743,675
753,260 Federal Home Loan Mortgage Corp. 02/15/26 6.250 735,234
1,355,000 Federal Home Loan Mortgage Corp. 07/30/30 6.000 1,272,218
392,891 Federal Home Loan Mortgage Corp.* 08/15/08 9.000 402,073
61,931 Federal National Mortgage Assoc. 02/01/04 6.500 61,170
76,213 Federal National Mortgage Assoc. 09/01/12 9.500 79,702
768,802 Federal National Mortgage Assoc. 07/01/13 6.500 754,299
108,401 Federal National Mortgage Assoc. 01/01/17 9.000 112,457
400,000 Federal National Mortgage Assoc. 10/25/19 7.500 398,670
23,958 Federal National Mortgage Assoc. 03/25/21 7.500 23,831
4,465,000 Federal National Mortgage Assoc. 03/16/27 7.000 4,378,490
226,884 Federal National Mortgage Assoc. 09/01/27 8.500 232,445
827,777 Federal National Mortgage Assoc. 12/25/27 6.500 806,254
7,400,000 Federal National Mortgage Assoc. 04/06/28 8.000 7,494,813
1,500,000 Federal National Mortgage Assoc. 06/01/28 8.500 1,533,281
1,500,000 Federal National Mortgage Assoc. 12/31/28 6.000 1,443,750
</TABLE>
<PAGE>
BBH BROAD MARKET FIXED INCOME PORTFOLIO
PORTFOLIO OF INVESTMENTS
October 31, 2000
<TABLE>
<CAPTION>
Principal Maturity
Amount Date Interest Rate Value
----------- -------- ------------- ------------
<S> <C> <C> <C> <C>
$ 1,925,000 Federal National Mortgage Assoc. 02/01/29 6.500% $ 1,851,008
2,760,000 Federal National Mortgage Assoc. 03/01/29 6.000 2,589,225
1,929,360 Federal National Mortgage Assoc. 09/01/29 6.500 1,855,480
2,834,374 Federal National Mortgage Assoc. 11/01/29 6.500 2,725,840
749,578 Federal National Mortgage Assoc. 01/01/30 7.500 748,922
500,000 Federal National Mortgage Assoc. 05/15/30 7.250 528,471
1,024,238 Federal National Mortgage Assoc. 09/01/30 7.500 1,022,814
128,671 Government National Mortgage Assoc. 08/15/07 7.500 130,978
4,301 Government National Mortgage Assoc. 11/15/09 10.000 4,536
62,722 Government National Mortgage Assoc. 05/15/20 9.000 65,552
73,228 Government National Mortgage Assoc. 09/15/20 9.500 76,878
230,048 Government National Mortgage Assoc. 06/15/23 7.000 227,838
1,365,000 Government National Mortgage Assoc. 04/07/28 8.000 1,387,608
2,820,000 Government National Mortgage Assoc. 06/01/28 7.500 2,829,694
5,400,000 U.S. Treasury Bill** 12/21/00 6.158 5,352,226
500,000 U.S. Treasury Bill**+ 03/15/01 6.160 489,079
5,389 U.S. Treasury Tips 07/15/02 3.625 5,399
------------
43,735,633
------------
TOTAL INVESTMENTS (identified cost $119,232,532) (a) ........................... 124.5% 119,683,874
CASH AND OTHER ASSETS IN EXCESS OF LIABILITIES ................................. (24.5) (23,521,199)
--------------------------
NET ASSETS ..................................................................... 100.0% $ 96,162,675
==========================
</TABLE>
----------
(a) The aggregate cost for federal income tax purposes is $119,232,532, the
aggregate gross unrealized appreciation is $533,747, and the aggregate
gross unrealized depreciation is $82,405, resulting in net unrealized
appreciation of $451,342.
* Variable Rate Instrument. Interest rates change on a specific date (such
as a coupon or interest payment date). The interest rate shown represents
the October 31, 2000 coupon rate.
** Rate shown is the yield to maturity at the time of purchase.
+ Security held as collateral on futures contracts.
The accompanying notes are an integral part of these financial statements.
<PAGE>
BBH BROAD MARKET FIXED INCOME PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
October 31, 2000
ASSETS:
Investments in securities, at value (identified
cost $119,232,532) ...................................... $119,683,874
Cash ...................................................... 869,661
Receivables for:
Investments sold ........................................ 7,987,499
Interest ................................................ 889,542
Swap agreement .......................................... 16,333
------------
Total Assets ......................................... 129,446,909
------------
LIABILITIES:
Payables for:
Investments purchased ................................... 32,699,659
Withdrawals ............................................. 500,000
Unrealized loss on swap ................................. 25,000
Expense payment fee ..................................... 54,182
Administration fee ...................................... 5,393
------------
Total Liabilities .................................... 33,284,234
------------
NET ASSETS .................................................. $ 96,162,675
============
The accompanying notes are an integral part of these financial statements.
<PAGE>
BBH BROAD MARKET FIXED INCOME PORTFOLIO
STATEMENT OF OPERATIONS
For the period from July 20, 2000 (Commencement of Operations)
to October 31, 2000
NET INVESTMENT INCOME:
Income:
Interest (Net of foreign withholding tax of $5,679) ......... $1,234,661
Swap agreement .............................................. 16,333
Other ....................................................... 185,966
----------
Income ................................................... 1,436,960
----------
Expenses:
Expense payment fee ......................................... 75,947
Administrative fee .......................................... 9,301
----------
Total Expenses ........................................... 85,248
----------
Net Investment Income .................................... 1,351,712
----------
NET REALIZED AND UNREALIZED GAIN:
Net realized gain on investments ................................ 219,233
Net change in unrealized appreciation on investments,
futures contracts and swap agreement .......................... 433,998
----------
Net Realized and Unrealized Gain .............................. 653,231
----------
Net Increase in Net Assets Resulting from Operations ............ $2,004,943
==========
The accompanying notes are an integral part of these financial statements.
<PAGE>
BBH BROAD MARKET FIXED INCOME PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
For the period from
July 20, 2000
(Commencement of
Operations) to
October 31, 2000
-------------------
INCREASE IN NET ASSETS:
Operations:
Net investment income ................................ $ 1,351,712
Net realized gain on investments ..................... 219,233
Net change in unrealized appreciation on
investments, futures contracts and
swap agreement ..................................... 433,998
------------
Net increase in net assets resulting
from operations .................................. 2,004,943
------------
Capital Transactions:
Proceeds from contributions .......................... 97,614,732
Fair value of withdrawals ............................ (3,457,000)
------------
Net increase in net assets resulting from
capital transactions ............................. 94,157,732
------------
Total increase in net assets ..................... 96,162,675
NET ASSETS:
Beginning of period .................................... --
------------
End of period .......................................... $ 96,162,675
============
The accompanying notes are an integral part of these financial statements.
<PAGE>
BBH BROAD MARKET FIXED INCOME PORTFOLIO
FINANCIAL HIGHLIGHTS
For the period from
July 20, 2000
(Commencement of
Operations) to
October 31, 2000
-------------------
Total Return ............................................... 2.68%
Ratios/Supplemental Data:
Net assets, end of period (000's omitted) ................ $ 96,163
Expenses as a percentage of average net assets(2) ........ 0.40%(1)
Ratio of net investment income to average net assets ..... 6.19%(1)
Portfolio turnover rate .................................. 209%
----------
(1) Annualized.
(2) Had the expense payment agreement not been in place, the ratio of expenses
to average net assets and total return would have been as follows:
Ratio of expenses to average net assets ............ 0.57%(1)
Total Return ....................................... 2.51%
The accompanying notes are an integral part of these financial statements.
<PAGE>
BBH BROAD MARKET FIXED INCOME PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
1. Organization and Significant Accounting Policies. BBH Broad Market
Fixed Income Portfolio (the "Portfolio") is registered under the Investment
Company Act of 1940, as amended, as an open-end management investment company
which was organized as a trust under the laws of the State of New York on August
15, 1994. The Portfolio commenced operations on July 20, 2000. The Declaration
of Trust permits the Trustees to create an unlimited number of beneficial
interests in the Portfolio.
The Portfolio's financial statements are prepared in accordance with
accounting principles generally accepted in the United States of America, which
require management to make certain estimates and assumptions at the date of the
financial statements and are based, in part, on the following accounting
policies. Actual results could differ from those estimates.
A. Valuation of Investments. Bonds and other fixed income securities
(other than short-term obligations but including listed issues) are valued
on the basis of valuations furnished by a pricing service, use of which
has been approved by the Board of Trustees. In making such valuations, the
pricing service utilizes both dealer-supplied valuations and electronic
data processing techniques which take into account appropriate factors
such as institutional-size trading in similar groups of securities, yield,
quality, coupon rate, maturity, type of issue, trading characteristics and
other market data, without exclusive reliance upon quoted prices or
exchange or over-the-counter prices, since such valuations are believed to
reflect more accurately the fair value of such securities.
Securities or other assets for which market quotations are not
readily available are valued at fair value in accordance with procedures
established by and under the general supervision and responsibility of the
Portfolio's Board of Trustees. Such procedures include the use of
independent pricing services, which use prices based upon yields or prices
of securities of comparable quality, coupon, maturity and type;
indications as to the value from dealers; and general market conditions.
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 Portfolio was more than 60 days,
unless this is determined not to represent fair value by the Board of
Trustees.
B. Accounting for Investments. Investment transactions are accounted
for on the trade date. Realized gains and losses, if any, from investment
transactions are determined on the basis of identified cost. Interest
income is accrued daily and consists of interest accrued, discount earned
(including both original issue and market discount) and premium
amortization on the investments of the Portfolio.
C. Federal Income Taxes. The Portfolio is treated as a partnership
for Federal Income tax purposes and its operations are conducted in such a
way that it is not to be considered engaged in a U.S. trade or business
for U.S. tax purposes. It is intended that the Portfolio's assets will be
managed in such a way that an Investor in the Portfolio will be able to
comply with the provisions of the Internal Revenue Code applicable to
regulated investment companies. Accordingly, no provision for federal
income taxes is necessary.
D. Swap Agreement. The Portfolio may enter into swap agreements. A
swap is an exchange of cash payments between the Portfolio and another
party which is based on a specific financial index. Cash payments are
exchanged at specified intervals and the expected income or expense is
recorded on an accrual basis. The value of the swap is adjusted daily and
the change in value is recorded as unrealized appreciation or
depreciation. Risks may arise upon entering into
<PAGE>
BBH BROAD MARKET FIXED
INCOME PORTFOLIO NOTES TO FINANCIAL STATEMENTS (continued)
these agreements from the potential inability of counterparties to meet
the terms of their contract and from unanticipated changes in the value of
the financial index on which the swap agreement is based. The Portfolio
may use swaps for both hedging and non-hedging purposes. For hedging
purposes, the Portfolio may use swaps to reduce its exposure to interest
and foreign exchange rate fluctuations. For non-hedging purposes, the
Portfolio may use swaps to take a position on anticipated changes in the
underlying financial index.
2. Transactions with Affiliates.
Investment Advisory Fee. The Portfolio has an investment advisory
agreement with Brown Brothers Harriman (the "Adviser") for which the Adviser
receives a fee calculated and paid monthly at an annual rate equivalent to 0.30%
of the Portfolio's average daily net assets.
Administrative Fee. The Portfolio has an administration agreement with
Brown Brothers Harriman (the "Administrator") for which the Administrator
receives a fee from the Portfolio calculated daily and paid monthly at an annual
rate equivalent to 0.035% of the Portfolio's average daily net assets. The
Administrator has a subadministration services agreement with 59 Wall Street
Administrators, Inc. for which 59 Wall Street Administrators, Inc. receives such
compensation as is from time to time agreed upon, but not in excess of the
amount paid to the Administrator. For the period ended October 31, 2000, the
Portfolio incurred $9,301 for administrative services.
Custody Fee. The Portfolio has a custody agreement with Brown Brothers
Harriman (the "Custodian") for which the Custodian receives a fee calculated and
paid monthly. Custody fees for the Portfolio were reduced by $466 as a result of
an expense offset arrangement with the Portfolio's custodian.
Expense Payment Fee. Brown Brothers Harriman Trust Company, LLC pays
certain expenses of the Portfolio and receives a fee from the Portfolio,
computed and paid monthly, such that after such fee the aggregate expenses will
not exceed 0.40% of the Portfolio's average daily net assets. For the period
ended October 31, 2000, Brown Brothers Harriman Trust Company, LLC incurred
$125,223 in expenses, including investment advisory fees of $65,483 and custody
fees of $21,623 on behalf of the Portfolio. The expense reimbursement agreement
will terminate when the aggregate amount of fees received by Brown Brothers
Harriman Trust Company, LLC thereunder equals the aggregate amount of expenses
paid by Brown Brothers Harriman Trust Company, LLC.
3. Investment Transactions. For the period ended October 31, 2000, the
cost of purchases and the proceeds of sales of investment securities other than
short-term investments were $226,278,306 and $170,635,837, respectively.
4. Financial Futures Contracts. As of October 31, 2000, the Portfolio held
open futures contracts. The contractual amount of the futures contracts
represents the investment the Portfolio has in a particular contract and does
not necessarily represent the amounts potentially subject to risk. The
measurement of risk associated with futures contracts is meaningful only when
all related and offsetting transactions are considered. A summary of obligations
under open futures contracts at October 31, 2000, is as follows:
<PAGE>
BBH BROAD MARKET FIXED INCOME PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (continued)
Unrealized
Base Contract Appreciation
Position Expiration Date Contracts Bond Value (Depreciation)
-------- --------------- --------- ----------- ------------- --------------
Long December 2000 100 US Treasury 9,984,375 28,750
Short December 2000 50 US Treasury 5,035,156 (21,094)
--------------
7,656
--------------
As of October 31, 2000, the Portfolio had segregated sufficient cash and/or
securities to cover the initial margin requirements on open futures contracts.
5. Swap Agreement. At October 31, 2000, the Portfolio had the following
open swap agreement:
Unrealized
Notional Amount Description Depreciation
--------------- ---------------------------------------- ------------
Agreement with Goldman Sachs terminating
April 1, 2001 to pay 1 month LIBOR minus
10 basis points monthly and to receive
the return on the Commercial Mortgage
$5,000,000 Bond Securities Index monthly $25,000
LIBOR - London Interbank Offer Rate
<PAGE>
[Letterhead of Deloitte & Touche LLP]
[LOGO] Deloitte
& Touche
INDEPENDENT AUDITORS' REPORT
Board of Trustees and Investors
BBH Broad Market Fixed Income Portfolio:
We have audited the accompanying statement of assets and liabilities,
including the portfolio of investments, of BBH Broad Market Fixed Income
Portfolio as of October 31, 2000, and the related statement of operations, the
statement of changes in net assets, and the financial highlights for the period
from July 20, 2000 (Commencement of Operations) to October 31, 2000. These
financial statements and financial highlights are the responsibility of the
Portfolio'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 auditing standards generally
accepted in the United States of America. 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. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. Our procedures included confirmation of
securities owned at October 31, 2000 by correspondence with the custodian and
brokers; where replies were not received from brokers, we performed other
procedures. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, such financial statements and financial highlights present
fairly, in all material respects, the financial position of BBH Broad Market
Fixed Income Portfolio at October 31, 2000, the results of its operations, the
changes in its net assets, and its financial highlights for the period then
ended in conformity with accounting principles generally accepted in the United
States of America.
DELOITTE & TOUCHE LLP
Boston, Massachusetts
December 22, 2000