To that end, our portfolio companies have executed well and have produced solid growth and fundamental economic performance while maintaining appropriately conservative capital structures. These achievements are evident at the aggregate portfolio level, where we have observed attractive growth in revenue, cash flow, and earnings; superior profit margins; returns on capital; and healthy balance sheets. While the Fund is more fully valued than we have historically observed given the strong equity markets we experienced over the past several years, the valuation remains supportive on an absolute basis and is attractive relative to the Index.

For the quarter, the Strategy’s largest detractor to total return was Oracle (ORCL).

ORCL was the largest detractor to performance, returning -30.6% for the quarter, which represented a 119-bp detraction from the Strategy’s total return. The decline in share price was largely a result of the company missing revenue and profit expectations, even though artificial intelligence (AI) cloud services grew 68%.

Furthermore, concerns were raised around both the timeline for completion and source of funding for AI data center growth, with capital expenditures increasingly being funded by taking on debt. On the technical side, short interest for Oracle has increased more than 30% since June. This is weighing on the share price, but Oracle remains a good candidate for hedge funds to express skepticism of the AI infrastructure build-out or OpenAI directly because of its high liquidity, low borrowing costs to short shares, and the large size of the company protects short sellers from a buyout. While we appreciate these risks, we continue to maintain a high level of conviction both in the business fundamentals as well as the company’s stock and see opportunity over a longer time horizon.

For the quarter, the Strategy’s largest contributor to total return was Alphabet (GOOG).

GOOG has been the top contributor for two successive quarters, returning +28.9% for the fourth quarter, which represented a 202-bp contribution to the Strategy’s total return. GOOG reported results that exceeded expectations on most key metrics and showcased improving execution along its AI initiatives. Strong performance in the Search segment helped to dispel concerns about potential disruption by generative AI-focused competitors. In addition, the Google Cloud segment continued to demonstrate accelerated usage and progress in gaining share relative to its hyperscaler competitors. From a product perspective, GOOG saw rapid uptake of its key AI offerings during the quarter, with continued momentum in their Gemini ecosystem.

Over any period, stock prices reflect the confluence of many factors as well as the perspectives of myriad other investors, both active and passive, that do not share our perspectives on risk, fundamental economic value creation, or how to properly measure it. Regardless of these other views, over the long term, we believe that it is a reasonable and an economically sound premise that the price of stocks should follow their growth in free cash flow per share and that attractive valuations support economic upside and mitigate risk. This will remain our focus as we seek to deliver both strong absolute and relative after-tax returns over the long term.

While this work will continue and is a constant focus of our analytical and portfolio management activities, we expect it to slow in the near term given the sharp recovery in market prices and still-elevated levels of policy-induced risk. While we remain focused on finding new investments that meet our investment criteria and are attractively valued, we do so in the context of a market environment we view as challenged, with risks evident on many fronts.

Holdings are subject to change.

Strategy Activity

During the period of recent market volatility and uncertainty, we have been acting with an aim to improve an already high-quality portfolio to one possessing higher expected levels of economic profit growth and better valuation support. Specifically, we have and will continue to trim and sell portfolio companies when valuations increase to levels we believe to be in excess of the range of reasonable economic outcomes implied by current stock prices. Conversely, we may add new portfolio companies that meet our investment criteria and may add to existing portfolio company positions when valuations are at levels we believe to be attractive to that same range of reasonable economic outcomes.

During the quarter, we made several portfolio rebalancing trades reflective of relative valuation opportunities, risk, and fit with our investment criteria. Turnover during the quarter was modest, at 3.0%. While low relative to recent activity, this represents the select opportunity with pockets of valuation support.

We trimmed positions in Otis, Oracle, KLA, Apple, Adobe, ServiceNow, Thermo Fisher, and Alphabet, based on strength in performance and to manage overall portfolio balance and weightings. We deployed some of proceeds into Nike, Cadence, Coca-Cola, Visa, Mastercard, Microsoft and Progressive, names that we have a high degree of conviction in, as well as where we felt like the share price performance provided valuation support.

Outlook

At the end of fourth quarter 2025, we held positions in 42 companies, with the 10 largest holdings accounting for 47% of total assets. As of October 1, 2025, the Fund was trading at ~94% of our underlying base estimate of intrinsic value, which compares to ~122% for the Index. We ended the quarter with a cash position of 3.2%.

In our view, momentum and high beta continue to drive market performance, at the expense of growth, quality, and positive fundamental factors. After making opportunistic adjustments, we remain focused on finding new investments and rebalancing existing portfolio companies in the context of a market environment we view as challenged.

Specifically, with a backdrop of decelerating economic growth, extreme policy uncertainty and geopolitical risk, and still-high market expectations relative to history, we remain focused and committed to investing in companies that meet our qualitative criteria, have the fundamental financial characteristics in place that allow for durability in times of economic and market stress, and offer valuation support.

To conclude, our portfolio companies have executed well and produced solid growth and fundamental economic performance while maintaining appropriately conservative capital structures. Given the near- and longer-term outlooks provided by the companies in the Fund, we are optimistic that these strong trends will continue and that the differentiated financial attributes will be better recognized by other investors in the future, improving the stock price performance of the Fund relative to the Index over time.

Thank you for your interest in the BBH U.S. Large Cap, Core Select Strategy. Please reach out if you have any questions.

Inception date: 10/01/2005

Returns of less than one year are not annualized.

Past performance does not guarantee future results.

The S&P 500 is an unmanaged weighted index of 500 stocks providing a broad indicator of stock price movements. The composition of the index is materially different than the Fund’s holdings. The index is not available for direct investment.

Sources: BBH & Co. and S&P