Barings Global Short Duration High Yield Fund

 

 

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 811-22562

 

 

Barings Global Short Duration High Yield Fund

(Exact name of registrant as specified in charter)

 

 

300 South Tryon Street, Suite 2500, Charlotte, NC 28202

(Address of principal executive offices) (Zip code)

 

 

Janice M. Bishop

Secretary and Chief Legal Officer

c/o Barings LLC

Independence Wharf

470 Atlantic Avenue

Boston, MA 02210

(Name and address of agent for service)

 

 

704-805-7200

Registrant’s telephone number, including area code

Date of fiscal year end: December 31, 2017

Date of reporting period: June 30, 2017

 

 

 


Item 1. Reports to Stockholders.

 

LOGO

BARINGS GLOBAL SHORT DURATION HIGH YIELD FUND

Semi-Annual Report

June 30, 2017


Barings Global Short Duration High Yield Fund

c/o Barings LLC

300 S Tryon St.

Suite 2500

Charlotte, NC 28202

704.805.7200

http://www.Barings.com/bgh

ADVISER

Barings LLC

300 S Tryon St.

Suite 2500

Charlotte, NC 28202

SUB-ADVISOR

Barings Global Advisers Limited

61 Aldwych

London, UK

WC2B4AE

COUNSEL TO THE FUND

Ropes & Gray LLP

Prudential Tower

800 Boylston Street

Boston, Massachusetts 02110

INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

KPMG LLP

Two Financial Center

60 South Street

Boston, Massachusetts 02111

CUSTODIAN

US Bank

MK-WI-S302

1555 N. River Center Drive

Milwaukee, WI 53212

TRANSFER AGENT & REGISTRAR

U.S. Bancorp Fund Services, LLC

615 E. Michigan St.

Milwaukee, WI 53202

FUND ADMINISTRATION/ACCOUNTING

U.S. Bancorp Fund Services, LLC

615 E. Michigan St.

Milwaukee, WI 53202

 

LOGO

PROXY VOTING POLICIES & PROCEDURES

The Trustees of Barings Global Short Duration High Yield Fund (the “Fund”) have delegated proxy voting responsibilities relating to the voting of securities held by the Fund to Barings LLC (“Barings”). A description of Barings’ proxy voting policies and procedures is available (1) without charge, upon request, by calling, toll-free 1-866-399-1516; (2) on the Fund’s website at http://www.barings.com/bgh; and (3) on the U.S. Securities and Exchange Commission’s (“SEC”) website at http://www.sec.gov.

FORM N-Q

The Fund will file its complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q. This information is available (1) on the SEC’s website at http://www.sec.gov; and (2) at the SEC’s Public Reference Room in Washington, DC (which information on their operation may be obtained by calling 1-800-SEC-0330). A complete schedule of portfolio holdings as of each quarter-end is available on the Fund’s website at http://www.barings.com/bgh or upon request by calling, toll-free, 1-866-399-1516.

CERTIFICATIONS

The Fund’s President has submitted to the NYSE the annual CEO Certification as required by Section 303A.12(a) of the NYSE Listed Company Manual.


Barings Global Short Duration High Yield Fund 2017 Semi-Annual Report

 

OFFICERS OF THE FUND

 

 

Sean Feeley

President

Carlene Pollock

Chief Financial Officer

Lesley Mastandrea

Treasurer

Michael Freno

Vice President

Scott Roth

Vice President

Melissa LaGrant

Chief Compliance Officer

Janice Bishop

Secretary/Chief Legal Officer

Michele Manha

Assistant Secretary

Kristin Goodchild

Assistant Secretary

Barings Global Short Duration High Yield Fund is a closed-end investment company, first offered to the public in 2012, whose shares are traded on the New York Stock Exchange.

INVESTMENT OBJECTIVE & POLICY

Barings Global Short Duration High Yield Fund (the “Fund”) was organized as a business trust under the laws of the Commonwealth of Massachusetts. The Fund is registered under the Investment Company Act of 1940, as amended, as a diversified, closed-end management investment company with its own investment objective. The Fund’s common shares are listed on the New York Stock Exchange under the symbol “BGH”.

The Fund’s primary investment objective is to seek as high a level of current income as the Adviser (as defined herein) determines is consistent with capital preservation. The Fund seeks capital appreciation as a secondary investment objective when consistent with its primary investment objective. There can be no assurance that the Fund will achieve its investment objectives.

The Fund will seek to take advantage of inefficiencies between geographies, primarily the North American and Western European high yield bond and loan markets and within capital structures between bonds and loans. For example, the Fund will seek to take advantage of differences in pricing between bonds and loans of an issuer denominated in U.S. dollars and substantially similar bonds and loans of the same issuer denominated in Euros, potentially allowing the Fund to achieve a higher relative return for the same credit risk exposure.

 

 

 

 

1


Barings Global Short Duration High Yield Fund 2017 Semi-Annual Report

 

Dear Fellow Shareholders,

It is our pleasure to provide you with the 2017 Semi-Annual Report for the Barings Global Short Duration High Yield Fund (the “Fund”) to recap portfolio performance and positioning. We would like to remind shareholders that we continue to believe our Global High Yield Investments Group is one of the largest teams in the market primarily focused on North American and Western European credits. Utilizing the Group’s expertise, deep resources, and time-tested process, we continue to believe we can provide investors an attractive level of current income by uncovering compelling opportunities across the global high yield market.

The global nature of the portfolio, primarily focusing on North American and Western European credits, may provide investors with additional benefits compared to a U.S.-only portfolio, such as additional diversification, higher credit quality, increased yield, and lower duration. More importantly, the global strategy provides flexibility to dynamically shift the geographical weighting in order to capture, in our opinion, the best risk-adjusted investment opportunities. This strategy also focuses closely on limiting the duration of the Fund while maintaining what we consider a reasonable amount of leverage.

Market Review

In 2017, global high yield has seen a strong first half of the year driven by market technicals and fundamentals, although new and recurring headwinds remain present. A strong corporate earnings season and demand for high yield have contributed to positive returns overall, while renewed volatility in crude oil prices caused the energy sector to be the performance laggard across the market.

In the United States, the Federal Reserve voted to raise interest rates for the second time in 2017 as inflation rates extended their decline. This leaves one potential rate hike left for the latter part of the year, if the year ends with three increases. As it stands, the recent rate hikes have had a negligible effect on the global high yield markets. The price of crude oil began a rollercoaster of peaks and troughs over the past six months from its high in mid-February to more recently hovering near November 2016 lows. Even as OPEC production cuts remain in place, the effects of these reductions remain to be seen. Crude oil price declines subsequently led to lower prices within the energy sector resulting in notable underperformance year-to-date.

In Europe, Central Banks continued a policy of credit easing and the British exit from the European Union negotiations continued with no substantial consequences. Several member states saw manufacturing and industrial productivity grow at its fastest rate in six years as firms added to headcount at a record pace. High-profile elections took place in Great Britain and France, though markets remained steadfast as concerns of major disruptions receded. Strengthening of economies across the Eurozone has provided the European Central Bank with some much needed flexibility as inflation numbers posted higher than expected and prospects of policy tightening shown on the horizon.

Overall, during the first half of the year, the market technicals remained firm with corporate fundamentals trending positive. Default rates across the high yield market remain low at 1.50% and are expected to stay range bound for the remainder of the year. While high yield net new issuance has been at historic lows, the issuance has predominantly been in the form of refinancing activity and higher in quality. Over the period, demand has outpaced supply and contributed to the strong technical picture. Outside of the reemergence of energy sector volatility, a handful of macroeconomic data and events will be closely monitored, such as the continued slower pace of economic growth and investor uncertainty across the geopolitical landscape.

Barings Global Short Duration High Yield Fund Overview and Performance

The Fund ended June with a portfolio of 127 issuers, which is a slight increase from the beginning of the year of 120 issuers. A majority of the issuers are domiciled in the U.S. (73.8%) with the U.K. (10.6%) and France (4.0%) representing the next largest country exposures – see Country Composition chart on page 4. From a geographic standpoint, exposure to U.S. domiciled companies increased marginally and exposure to foreign issuers decreased over the course of the year. While maintaining a meaningful presence in the Western European market, relative value opportunities in the U.S. market have generally been more attractive compared to Europe over this time period. The Western European market continues to be a core part of the portfolio and offers global diversification, reduced duration, and potentially attractive yield opportunities while also providing a larger investment opportunity set.

 

 

 

2


Barings Global Short Duration High Yield Fund 2017 Semi-Annual Report

 

As of June 30, 2017, the Fund remained well positioned across the credit quality spectrum: 12.5% BB-rated and above, 64.6% B-rated, and 17.3% CCC-rated and below, with over 50% of the portfolio consisting of senior secured obligations. The credit quality of the Fund’s underlying holdings changed slightly since the beginning of the year with an increase in BB-rated and above credits, a modest decrease in B-rated credits and a minor pick-up in CCC-rated and below credits. Non-publicly rated securities and cash and accrued interest represented 3.2% and 2.4%, respectively.1

The Fund paid six consecutive monthly dividend payments of $0.1534 per share in the first half of 2017, which we believe is an attractive level of yield for a global short duration high yield bond fund. The Fund’s share price and net asset value (“NAV”) ended the reporting period at $19.78 and $21.32, respectively, or at a 7.22% discount to NAV. Based on the Fund’s share price and NAV on June 30, 2017, the Fund’s market price and NAV distribution rates using the most recent monthly dividend, on an annualized basis, were 9.31% and 8.63%, respectively. Assets acquired through leverage, which represented 25.13% of the Fund’s total assets at the end of June, were accretive to net investment income and benefited shareholders.

On a year-to-date basis through June 30, 2017, the NAV total return was +6.94%, outperforming the global high yield bond market as measured by the Bank of America / Merrill Lynch Non-Financial Developed Markets High Yield Constrained Index (HNDC), which returned +4.85%. From a market value perspective, the total return year-to-date through June 30, 2017 was +7.67%.2

In Conclusion

As we enter the second half of 2017, we will continue to monitor the geopolitical environment as well as the renewed instability in the energy space. In North America and in Europe, we expect to see ongoing economic growth while labor markets continue to improve and domestic production expands. The U.S. political environment remains in the spotlight as a number of agenda items remain in progress including tax reform, healthcare and energy production regulations. In the coming months, crude oil prices, corporate earnings and market technicals will be closely monitored across the global high yield market.

At Barings, we remain committed to focusing on corporate fundamentals as market sentiment can quickly change and happen unexpectedly. Our focused and disciplined approach emphasizes our fundamental bottom-up research with the goal of preserving investor capital while seeking to capture attractive capital appreciation opportunities that may exist through market and economic cycles. On behalf of the Barings team, we continue to take a long-term view of investing and look forward to helping you achieve your investment goals.

Sincerely,

 

LOGO

Sean Feeley

President

Barings Global Short Duration High Yield Fund

 

1.  Ratings are based on Moody’s, S&P and Fitch. If securities are rated differently by the rating agencies, the higher rating is applied and all ratings are converted to the equivalent Moody’s major rating category for purposes of the category shown. Credit ratings are based largely on the rating agency’s investment analysis at the time of rating and the rating assigned to any particular security is not necessarily a reflection of the issuer’s current financial condition. The rating assigned to a security by a rating agency does not necessarily reflect its assessment of the volatility of a security’s market value or of the liquidity of an investment in the security. Ratings of Baa3 or higher by Moody’s and BBB- or higher by S&P and Fitch are considered to be investment grade quality.

 

2.  Past performance is not necessarily indicative of future results. Current performance may be lower or higher. All performance is net of fees, which is inclusive of advisory fees, administrator fees and interest expenses.

 

 

 

3


Barings Global Short Duration High Yield Fund 2017 Semi-Annual Report

 

PORTFOLIO COMPOSITION (% OF ASSETS*)

 

LOGO

COUNTRY COMPOSITION (% OF ASSETS*)

 

LOGO

 

* Percentage of assets are expressed by market value excluding cash and accrued income, and may vary over time. The percentages shown above represent a percentage of the assets as of June 30, 2017.

 

 

 

4


Barings Global Short Duration High Yield Fund 2017 Semi-Annual Report

 

FINANCIAL REPORT

 

 

Statement of Assets and Liabilities   6
Statement of Operations   7
Statement of Cash Flows   8
Statements of Changes in Net Assets   9
Financial Highlights   10
Schedule of Investments   11-18
Notes to the Financial Statements   19-27
Fund Dividend Reinvestment Plan   28
Joint Privacy Notice   29

 

 

 

5


Barings Global Short Duration High Yield Fund 2017 Semi-Annual Report

 

STATEMENT OF ASSETS AND LIABILITIES

 

(Unaudited)

 

      JUNE 30, 2017  
Assets   
Investments, at fair value (cost $579,957,600)    $ 572,781,760  
Cash      11,996,158  
Foreign currency, at fair value (cost $1,608,569)      1,645,579  
Interest receivable      9,841,602  
Unrealized appreciation on forward foreign exchange contracts      84,957  
Prepaid expenses and other assets      4,318  
  

 

 

 

Total assets

     596,354,374  
  

 

 

 
Liabilities   
Note payable      153,200,000  
Dividend payable      3,076,874  
Payable for investments purchased      10,827,825  
Payable to adviser      477,055  
Unrealized depreciation on forward foreign exchange contracts      1,060,636  
Accrued expenses and other liabilities      194,429  
  

 

 

 

Total liabilities

     168,836,819  
  

 

 

 

Total net assets

   $ 427,517,555  
  

 

 

 
Net Assets:   
Common stock, $0.00001 par value    $ 201  
Additional paid-in capital      472,918,320  
Dividends in excess of net investment income      (1,218,587
Accumulated net realized loss      (36,140,286
Net unrealized depreciation      (8,042,093
  

 

 

 

Total net assets

   $ 427,517,555  
  

 

 

 
Common shares issued and outstanding (unlimited shares authorized)      20,057,849  
  

 

 

 

Net asset value per share

   $ 21.31  
  

 

 

 

 

See accompanying Notes to Financial Statements.

 

 

 

6


Barings Global Short Duration High Yield Fund 2017 Semi-Annual Report

 

STATEMENT OF OPERATIONS

 

(Unaudited)

 

      PERIOD FROM
JANUARY 1, 2017
THROUGH
JUNE 30, 2017
 
Investment Income   

Interest income

   $ 24,686,531  

Other income

     63,974  
  

 

 

 

Total investment income

     24,750,505  
  

 

 

 
Operating Expenses   

Advisory fees

     2,856,164  

Interest expense

     1,436,316  

Administrator fees

     229,590  

Professional fees

     69,950  

Directors’ fees

     59,508  

Printing and mailing expense

     37,667  

Other operating expenses

     30,126  
  

 

 

 

Total operating expenses

     4,719,321  
  

 

 

 

Net investment income

     20,031,184  
  

 

 

 
Realized and Unrealized Gains (Losses) on Investments   

Net realized loss on investments

     (281,537

Net realized loss on forward foreign exchange contracts

     (3,297,584

Net realized gain on foreign currency and translation

     33,031  
  

 

 

 

Net realized loss on investments

     (3,546,090
  

 

 

 

Net unrealized appreciation of investments

     13,354,563  

Net unrealized depreciation of forward foreign exchange contracts

     (2,624,820

Net unrealized appreciation of foreign currency and translation

     150,646  
  

 

 

 

Net unrealized appreciation on investments

     10,880,389  
  

 

 

 

Net realized and unrealized gains on investments

     7,334,299  
  

 

 

 

Net increase in net assets resulting from operations

   $ 27,365,483  
  

 

 

 

 

See accompanying Notes to Financial Statements.

 

 

 

7


Barings Global Short Duration High Yield Fund 2017 Semi-Annual Report

 

STATEMENT OF CASH FLOWS

 

(Unaudited)

 

      PERIOD FROM
JANUARY 1, 2017
THROUGH
JUNE 30, 2017
 
Reconciliation of net increase in net assets resulting from
operations to net cash provided by operating activities
  
Net increase in net assets applicable to common shareholders resulting from operations    $ 27,365,483  
Adjustments to reconcile net increase in net assets applicable to common shareholders resulting from operations to net cash provided by operating activities:   

Purchases of long-term investments

     (120,851,877

Proceeds from sales of long-term investments

     109,025,915  

Purchases of foreign currency, net

     (1,550,295

Forward currency exchange contracts, net

     2,624,820  

Net unrealized appreciation

     (13,391,682

Net realized loss

     281,537  

Amortization and accretion

     (1,051,880

Changes in operating assets and liabilities:

  

Decrease in interest receivable

     275,033  

Decrease in prepaid expenses and other assets

     10,039  

Decrease in receivable for investments sold

     4,203,171  

Increase in payable for investments purchased

     10,693,377  

Increase in payable to Adviser

     100,585  

Decrease in accrued expenses and other liabilities

     (57,080
  

 

 

 

Net cash provided by operating activities

     17,677,146  
  

 

 

 
Cash Flows From Financing Activities   

Advances from credit facility

     11,300,000  

Distributions paid to common shareholders

     (18,461,244
  

 

 

 

Net cash used in financing activities

     (7,161,244
  

 

 

 

Net change in cash

     10,515,902  

Cash beginning of period

     1,480,256  
  

 

 

 

Cash end of period

   $ 11,996,158  
  

 

 

 

Supplemental disclosure of cashflow information

  

Income taxes paid

   $  

Interest paid

     1,368,829  

 

See accompanying Notes to Financial Statements.

 

 

 

8


Barings Global Short Duration High Yield Fund 2017 Semi-Annual Report

 

STATEMENT OF CHANGES IN NET ASSETS

 

(Unaudited)

 

      PERIOD FROM
JANUARY 1, 2017
THROUGH
JUNE 30, 2017
     YEAR ENDED
DECEMBER 31, 2016
 
Operations      

Net investment income

   $ 20,031,184      $ 40,264,312  

Net realized loss on investments

     (3,546,090      (30,201,421

Net unrealized appreciation on investments

     10,880,389        75,217,081  
  

 

 

    

 

 

 

Net increase (decrease) in net assets resulting from operations

     27,365,483        85,279,972  
  

 

 

    

 

 

 
Dividends to Common Stockholders      

Net investment income

     (18,461,244      (32,119,057

Return of capital

            (4,965,900
  

 

 

    

 

 

 

Total dividends to common stockholders

     (18,461,244      (37,084,957
  

 

 

    

 

 

 

Total increase (decrease) in net assets

     8,904,239        48,195,015  
  

 

 

    

 

 

 
Net Assets      

Beginning of period

     418,613,316        370,418,301  
  

 

 

    

 

 

 

End of period

   $ 427,517,555      $ 418,613,316  
  

 

 

    

 

 

 

Dividends in excess of net investment income

     (1,218,587      (2,788,527
  

 

 

    

 

 

 

 

See accompanying Notes to Financial Statements.

 

 

 

9


Barings Global Short Duration High Yield Fund 2017 Semi-Annual Report

 

FINANCIAL HIGHLIGHTS

 

(Unaudited)

 

     PERIOD FROM
JANUARY 1,
2017
THROUGH
JUNE 30,
2017
    YEAR ENDED
DECEMBER 31,
2016
    YEAR ENDED
DECEMBER 31,
2015
    YEAR ENDED
DECEMBER 31,
2014
    YEAR ENDED
DECEMBER 31,
2013
    PERIOD FROM
OCTOBER 26,
2012 (1)
THROUGH
DECEMBER 31,
2012
 
Per Common Share Data (2)            

Net asset value, beginning of period

  $ 20.87     $ 18.47     $ 22.00     $ 25.24     $ 24.30       23.82 (3) 

Income from investment operations:

           

Net investment income

    1.00       1.57       1.90       2.12       2.05       0.18  

Net realized and unrealized gains (losses) on investments

    0.36       2.68       (3.23     (2.76     1.21       0.47  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total increase (decrease) from investment operations

    1.36       4.25       (1.33     (0.64     3.26       0.65  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Less dividends to common stockholders:

           

Net investment income

    (0.92     (1.60     (2.20     (2.56     (2.01     (0.17

Net realized gain

                      (0.04     (0.31      

Return of capital

          (0.25                        
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total dividends to common stockholders

    (0.92     (1.85     (2.20     (2.60     (2.32     (0.17
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net asset value, end of period

  $ 21.31     $ 20.87     $ 18.47     $ 22.00     $ 25.24     $ 24.30  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Per common share market value, end of period

  $ 19.78     $ 19.23     $ 16.49     $ 20.19     $ 23.12     $ 23.77  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total investment return based on net asset value (2)(4)

    6.89     25.42     (5.57 )%      (2.25 )%      14.48     2.69
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total investment return based on market value (2)(4)

    7.67     29.44     (8.13 )%      (2.06 )%      7.20     (4.27 )% 
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
Supplemental Data and Ratios            

Net assets, end of period (000’s)

  $ 427,518     $ 418,613     $ 370,418     $ 441,234     $ 506,197     $ 487,005  

Ratio of expenses (before reductions and reimbursements) to average net assets

    2.22 %(6)      2.05 %(5)      2.27     2.20     2.06     1.85 %(6) 

Ratio of expenses (after reductions and reimbursements) to average net assets

    2.22 %(6)      1.78     2.27     2.20     2.06     1.85 %(6) 

Ratio of net investment income (before reductions and reimbursements) to average net assets

    9.41 %(6)      10.68 %(5)      9.18     8.47     8.20     4.70 %(6) 

Ratio of net investment income (after reductions and reimbursements) to average net assets

    9.41 %(6)      10.41     9.18     8.47     8.20     4.70 %(6) 

Portfolio turnover rate (2)

    19.30     44.81     38.13     63.66     60.87     4.74

 

(1)   Commencement of operations.
(2)   Not annualized.
(3)   Net asset value at the beginning of the period reflects the deduction of the sales load and offering costs of $1.18 per share paid by the shareholder from the $25.00 offering price.
(4)   Total investment return calculation assumes reinvestment of dividends at actual prices pursuant to the Fund’s dividend reinvestment plan. Total investment return does not reflect brokerage commissions.
(5)   The Adviser contractually waived a portion of its management and other fees equal to an annual rate of 0.275% of the Fund’s managed assets for a period of one year ended December 31, 2016.
(6)   Annualized for periods less than one full year.

 

See accompanying Notes to Financial Statements.

 

 

 

10


Barings Global Short Duration High Yield Fund 2017 Semi-Annual Report

 

SCHEDULE OF INVESTMENTS

 

June 30, 2017 (Unaudited)

 

     SHARES     COST     FAIR
VALUE
 

Equities — 0.71%*:

     

Common Stocks — 0.71%*:

     

Pinnacle Operating Corp.

    1,368,352       $643,125       $1,176,783  

Sabine Oil & Gas LLC

    4,262       248,858       189,659  

Sabine Oil & Gas LLC

    13,512       60,669       97,962  

Sabine Oil & Gas LLC

    2,407       6,547       15,044  

Templar Energy LLC

    86,571       865,704       800,776  

Templar Energy LLC

    135,392       734,071       744,657  
 

 

 

   

 

 

   

 

 

 

Total Common Stocks

    1,610,496       2,558,974       3,024,881  
 

 

 

   

 

 

   

 

 

 

Total Equities

    1,610,496       2,558,974       3,024,881  
 

 

 

   

 

 

   

 

 

 

 

     EFFECTIVE
INTEREST RATE 
    DUE DATE     PRINCIPAL     COST     FAIR
VALUE
 

Fixed Income — 133.27%*:

         

Bank Loans§ — 23.58%*:

         

Automobile — 0.83%*:

         

FleetPride

    5.30     11/19/2019       802,350       $723,393       $784,297  

FleetPride

    9.30       5/19/2020       2,999,357       2,965,535       2,759,409  
     

 

 

   

 

 

   

 

 

 

Total Automobile

        3,801,708       3,688,928       3,543,706  
     

 

 

   

 

 

   

 

 

 

Beverage, Food and Tobacco — 0.22%*:

         

Del Monte Food Consumer Products, Inc.

    4.44       2/18/2021       1,192,606       1,070,554       957,066  
     

 

 

   

 

 

   

 

 

 

Total Beverage, Food and Tobacco

        1,192,606       1,070,554       957,066  
     

 

 

   

 

 

   

 

 

 

Broadcasting and Entertainment — 1.00%*:

         

Endemol+

    6.90       8/11/2021       4,573,389       4,357,068       4,279,915  
     

 

 

   

 

 

   

 

 

 

Total Broadcasting and Entertainment

        4,573,389       4,357,068       4,279,915  
     

 

 

   

 

 

   

 

 

 

Buildings and Real Estate — 0.52%*:

         

HD Supply Waterworks

    7.05       6/26/2018       2,215,798       2,215,798       2,215,798  
     

 

 

   

 

 

   

 

 

 

Total Buildings and Real Estate

        2,215,798       2,215,798       2,215,798  
     

 

 

   

 

 

   

 

 

 

Chemicals, Plastics and Rubber — 0.47%*:

         

Colouroz Investment 2 LLC+

    8.40       9/7/2022       2,033,201       2,027,303       1,984,913  
     

 

 

   

 

 

   

 

 

 

Total Chemicals, Plastics and Rubber

        2,033,201       2,027,303       1,984,913  
     

 

 

   

 

 

   

 

 

 

Diversified/Conglomerate Manufacturing — 1.81%*:

 

       

Commercial Vehicle Group Inc.

    7.23       4/12/2023       638,388       625,777       639,984  

Pelican Products, Inc.

    9.55       4/9/2021       7,144,100       7,153,760       7,090,519  
     

 

 

   

 

 

   

 

 

 

Total Diversified/Conglomerate Manufacturing

        7,782,488       7,779,537       7,730,503  
     

 

 

   

 

 

   

 

 

 

Diversified/Conglomerate Service — 1.92%*:

         

Cologix

    8.22       3/21/2025       1,000,000       990,000       1,004,170  

 

See accompanying Notes to Financial Statements.

 

 

 

11


Barings Global Short Duration High Yield Fund 2017 Semi-Annual Report

 

SCHEDULE OF INVESTMENTS (CONTINUED)

 

June 30, 2017 (Unaudited)

 

     EFFECTIVE
INTEREST RATE 
    DUE DATE     PRINCIPAL     COST     FAIR
VALUE
 

Bank Loans (Continued)

         

Diversified/Conglomerate Service (Continued)

         

Misys (Finastra)+

    8.46     6/16/2025       7,085,136       $7,207,724       $7,206,576  
     

 

 

   

 

 

   

 

 

 

Total Diversified/Conglomerate Service

        8,085,136       8,197,724       8,210,746  
     

 

 

   

 

 

   

 

 

 

Farming and Agriculture — 1.47%*:

         

Allflex Holdings, Inc.

    8.16       7/19/2021       6,232,322       6,219,761       6,268,656  
     

 

 

   

 

 

   

 

 

 

Total Farming and Agriculture

        6,232,322       6,219,761       6,268,656  
     

 

 

   

 

 

   

 

 

 

Finance — 0.64%*:

         

Cunningham Lindsey Group, Inc.

    9.32       6/10/2020       5,504,015       5,507,051       2,752,007  
     

 

 

   

 

 

   

 

 

 

Total Finance

        5,504,015       5,507,051       2,752,007  
     

 

 

   

 

 

   

 

 

 

Healthcare, Education and Childcare — 0.70%*:

 

       

Prospect Medical Holdings

    7.25       6/30/2022       2,977,444       2,947,669       2,999,774  
     

 

 

   

 

 

   

 

 

 

Total Healthcare, Education and Childcare

        2,977,444       2,947,669       2,999,774  
     

 

 

   

 

 

   

 

 

 

Home and Office Furnishings, Housewares, and Durable Consumer Products — 1.46%*:

 

   

AOT Bedding

    9.18       11/8/2024       6,250,000       6,237,626       6,221,375  
     

 

 

   

 

 

   

 

 

 

Total Home and Office Furnishings, Housewares, and Durable Consumer Products

        6,250,000       6,237,626       6,221,375  
     

 

 

   

 

 

   

 

 

 

Insurance — 0.89%*:

         

AmWins Group Inc.

    7.98       1/24/2025       3,750,000       3,840,627       3,815,625  
     

 

 

   

 

 

   

 

 

 

Total Insurance

        3,750,000       3,840,627       3,815,625  
     

 

 

   

 

 

   

 

 

 

Mining, Steel, Iron and Non-Precious Metals — 2.34%*:

 

     

Boomerang Tube, LLC

    15.00       8/1/2018       1,150,510       1,150,510       1,150,510  

Boomerang Tube, LLC

    20.00       2/1/2022       779,868       730,193       701,882  

Boomerang Tube, LLC

    19.20       2/6/2018       189,752       189,752       189,752  

Boomerang Tube, LLC

    18.49       2/1/2019       1,776,434       1,776,434       195,408  

Boomerang Tube, LLC

    19.20       8/1/2017       189,752       189,752       189,752  

Boomerang Tube, LLC

    16.20       2/1/2019       2,104,053       2,104,053       2,104,053  

Boomerang Tube, LLC

    19.20       8/17/2017       189,752       189,752       189,752  

Murray Energy Corp.

    8.54       4/16/2020       5,435,717       5,348,191       5,299,825  
     

 

 

   

 

 

   

 

 

 

Total Mining, Steel, Iron and Non-Precious Metals

        11,815,838       11,678,637       10,020,934  
     

 

 

   

 

 

   

 

 

 

Oil and Gas — 8.71%*:

         

Caelus Energy Alaska

    8.75       4/15/2020       17,863,828       17,433,004       15,333,060  

Fieldwood Energy LLC

    8.30       9/30/2017       5,651,171       5,120,741       5,269,717  

Fieldwood Energy LLC

    8.42       9/30/2020       8,925,706       7,218,725       4,931,453  

Fieldwood Energy LLC

    8.42       9/30/2017       7,481,592       6,051,485       5,891,753  

Gulf Finance, LLC

    6.55       8/25/2023       2,886,262       2,820,649       2,680,616  

Jonah Energy LLC

    7.73       5/12/2021       3,301,497       3,267,903       3,141,936  
     

 

 

   

 

 

   

 

 

 

Total Oil and Gas

        46,110,056       41,912,507       37,248,535  
     

 

 

   

 

 

   

 

 

 

 

See accompanying Notes to Financial Statements.

 

 

 

12


Barings Global Short Duration High Yield Fund 2017 Semi-Annual Report

 

SCHEDULE OF INVESTMENTS (CONTINUED)

 

June 30, 2017 (Unaudited)

 

     EFFECTIVE
INTEREST RATE 
    DUE DATE     PRINCIPAL     COST     FAIR
VALUE
 

Bank Loans (Continued)

         

Printing and Publishing — 0.27%*:

         

Springer+

    9.00     8/14/2021       979,688       $1,116,925       $1,130,142  
     

 

 

   

 

 

   

 

 

 

Total Printing and Publishing

        979,688       1,116,925       1,130,142  
     

 

 

   

 

 

   

 

 

 

Telecommunications — 0.33%*:

         

CenturyLink, Inc.

    6.15       2/8/2018       1,426,491       1,419,358       1,426,491  
     

 

 

   

 

 

   

 

 

 

Total Telecommunications

        1,426,491       1,419,358       1,426,491  
     

 

 

   

 

 

   

 

 

 
         

Total Bank Loans

        112,514,382       110,217,073       100,806,186  
     

 

 

   

 

 

   

 

 

 

Corporate Bonds — 109.69%*:

         

Aerospace and Defense — 0.27%*:

         

Swissport Investments+^

    6.75       12/15/2021       950,000       1,040,150       1,162,068  
     

 

 

   

 

 

   

 

 

 

Total Aerospace and Defense

        950,000       1,040,150       1,162,068  
     

 

 

   

 

 

   

 

 

 

Automobile — 5.18%*:

         

Gates Global LLC#^

    6.00       7/15/2022       4,740,000       4,256,924       4,751,850  

International Automotive Components Group, S.A.#^

    9.13       6/1/2018       8,125,000       8,159,653       7,942,187  

J.B. Poindexter & Co. Inc.#^

    9.00       4/1/2022       8,989,000       9,290,974       9,427,214  
     

 

 

   

 

 

   

 

 

 

Total Automobile

        21,854,000       21,707,551       22,121,251  
     

 

 

   

 

 

   

 

 

 

Beverage, Food and Tobacco — 2.37%*:

         

Boparan Finance plc+^

    5.50       7/15/2021       1,700,000       2,012,185       2,147,750  

Carrols Corp.#

    8.00       5/1/2022       709,000       728,388       754,199  

JBS USA LLC^

    8.25       2/1/2020       6,000,000       5,991,393       6,000,000  

Manitowoc Foodservice#

    9.50       2/15/2024       1,074,000       1,074,000       1,245,840  
     

 

 

   

 

 

   

 

 

 

Total Beverage, Food and Tobacco

        9,483,000       9,805,966       10,147,789  
     

 

 

   

 

 

   

 

 

 

Broadcasting and Entertainment — 4.94%*:

         

Arqiva Finance#+^

    9.50       3/31/2020       5,000,000       7,819,479       6,935,581  

Clear Channel Worldwide Holdings Inc.#

    7.63       3/15/2020       8,165,000       7,874,131       8,042,525  

Clear Channel Worldwide Holdings Inc.#

    7.63       3/15/2020       1,277,000       1,277,000       1,270,615  

Dish DBS Corp.#

    7.75       7/1/2026       3,094,000       3,129,390       3,666,390  

Entertainment One Ltd.+^

    6.88       12/15/2022       850,000       1,282,386       1,212,261  
     

 

 

   

 

 

   

 

 

 

Total Broadcasting and Entertainment

        18,386,000       21,382,386       21,127,372  
     

 

 

   

 

 

   

 

 

 

Buildings and Real Estate — 2.60%*:

         

Beazer Homes USA Inc.#

    8.75       3/15/2022       3,198,000       3,258,767       3,565,770  

Cemex S.A.B. de C.V.#+^

    9.38       10/12/2022       5,000,000       5,154,087       5,312,500  

Cemex S.A.B. de C.V.#+^

    7.75       4/16/2026       602,000       601,916       688,537  

Keystone Financing+^

    9.50       10/15/2019       1,140,684       1,746,434       1,553,291  
     

 

 

   

 

 

   

 

 

 

Total Buildings and Real Estate

        9,940,684       10,761,204       11,120,098  
     

 

 

   

 

 

   

 

 

 

Cargo Transport — 7.38%*:

 

   

Direct ChassisLink Inc.#^

    10.00       6/15/2023       7,894,000       8,066,745       8,762,340  

 

See accompanying Notes to Financial Statements.

 

 

 

13


Barings Global Short Duration High Yield Fund 2017 Semi-Annual Report

 

SCHEDULE OF INVESTMENTS (CONTINUED)

 

June 30, 2017 (Unaudited)

 

     EFFECTIVE
INTEREST RATE 
    DUE DATE     PRINCIPAL     COST     FAIR
VALUE
 

Corporate Bonds (Continued)

         

Cargo Transport (Continued)

 

   

Kenan Advantage Group, Inc.#^

    7.88     7/31/2023       10,000,000       $10,069,390       $10,500,000  

World Flight Services, Inc.+^

    9.50       7/15/2022       5,650,000       6,258,913       7,031,686  

XPO Logistics, Inc.#^

    6.50       6/15/2022       5,000,000       4,870,528       5,250,000  
     

 

 

   

 

 

   

 

 

 

Total Cargo Transport

        28,544,000       29,265,576       31,544,026  
     

 

 

   

 

 

   

 

 

 

Chemicals, Plastics and Rubber — 11.65%*:

 

   

Chemours Co.#

    7.00       5/15/2025       5,962,000       5,547,838       6,498,580  

Consolidated Energy Finance S.A.#^

    6.75       10/15/2019       3,198,000       3,121,465       3,261,960  

Consolidated Energy Finance S.A.^

    6.88       6/15/2025       1,779,000       1,770,105       1,832,370  

Cornerstone Chemical Co.#^

    9.38       3/15/2018       7,850,000       7,893,574       7,850,000  

CVR Partners LP#^

    9.25       6/15/2023       6,213,000       6,133,255       6,500,351  

LSB Industries, Inc.#

    8.50       8/1/2019       8,302,000       8,031,759       8,312,378  

Pinnacle Operating Corp.#^

    9.00       5/15/2023       1,993,613       1,993,613       1,893,932  

Platform Specialty Products Corporation#^

    10.38       5/1/2021       5,539,000       5,616,142       6,127,519  

TPC Group, Inc.#^

    8.75       12/15/2020       8,398,000       8,408,893       7,558,200  
     

 

 

   

 

 

   

 

 

 

Total Chemicals, Plastics and Rubber

        49,234,613       48,516,644       49,835,290  
     

 

 

   

 

 

   

 

 

 

Containers, Packaging and Glass — 6.28%*:

 

   

Ardagh Packaging+^

    6.75       5/15/2024       3,550,000       4,108,738       4,525,992  

Bormioli+^

    10.00       8/1/2018       3,450,000       3,875,701       3,994,252  

Coveris Holdings S.A.#^

    7.88       11/1/2019       9,850,000       9,873,623       9,702,250  

Horizon Holdings+^

    7.25       8/1/2023       2,000,000       2,195,510       2,419,462  

Onex Wizard Acquisition Co+^

    7.75       2/15/2023       5,100,000       5,767,013       6,197,542  
     

 

 

   

 

 

   

 

 

 

Total Containers, Packaging and Glass

        23,950,000       25,820,585       26,839,498  
     

 

 

   

 

 

   

 

 

 

Diversified/Conglomerate Manufacturing — 3.23%*:

 

   

Appvion Inc.#^

    9.00       6/1/2020       13,200,000       13,335,090       6,864,000  

Carlisle Transportation Products#^

    8.25       12/15/2019       4,250,000       4,256,835       3,957,813  

StoneMor Partners L.P.#

    7.88       6/1/2021       3,000,000       2,944,274       2,977,500  
     

 

 

   

 

 

   

 

 

 

Total Diversified/Conglomerate Manufacturing

        20,450,000       20,536,199       13,799,313  
     

 

 

   

 

 

   

 

 

 

Diversified/Conglomerate Service — 2.92%*:

 

   

Carlson Travel Holdings Inc.^

    9.50       12/15/2024       1,305,000       1,305,000       1,335,994  

CSVC Acquisition Corp.^

    7.75       6/15/2025       3,197,000       3,197,000       3,264,936  

Loxam+^

    6.00       4/15/2025       800,000       861,763       988,875  

Park-Ohio Holdings Corp.^

    6.63       4/15/2027       808,000       808,000       848,400  

Zachry Holdings Inc.#^

    7.50       2/1/2020       5,875,000       5,848,311       6,051,250  
     

 

 

   

 

 

   

 

 

 

Total Diversified/Conglomerate Service

        11,985,000       12,020,074       12,489,455  
     

 

 

   

 

 

   

 

 

 

Diversified Natural Resources, Precious Metals and Minerals — 0.48%*:

 

   

IAMGOLD Corporation+^

    7.00       4/15/2025       2,000,000       2,000,000       2,060,000  
     

 

 

   

 

 

   

 

 

 

Total Diversified Natural Resources, Precious Metals and Minerals

        2,000,000       2,000,000       2,060,000  
     

 

 

   

 

 

   

 

 

 

 

See accompanying Notes to Financial Statements.

 

 

 

14


Barings Global Short Duration High Yield Fund 2017 Semi-Annual Report

 

SCHEDULE OF INVESTMENTS (CONTINUED)

 

June 30, 2017 (Unaudited)

 

     EFFECTIVE
INTEREST RATE 
    DUE DATE     PRINCIPAL     COST     FAIR
VALUE
 

Corporate Bonds (Continued)

         

Electronics — 4.20%*:

 

   

ADT Corp/Protection One#^

    9.25     5/15/2023       8,255,000       $8,661,775       $8,970,378  

Microsemi Corporation#^

    9.13       4/15/2023       691,000       691,000       791,195  

TIBCO Software, Inc.^

    11.38       12/1/2021       2,915,000       3,171,650       3,213,788  

Western Digital Corporation#

    10.50       4/1/2024       4,224,000       4,343,556       4,982,968  
     

 

 

   

 

 

   

 

 

 

Total Electronics

 

    16,085,000       16,867,981       17,958,329  
     

 

 

   

 

 

   

 

 

 

Finance — 7.09%*:

 

   

Galaxy Finco Ltd.+^

    7.88       11/15/2021       3,900,000       6,351,545       5,209,110  

GFKL Financial Services+^

    8.50       11/1/2022       5,575,000       8,187,353       7,764,032  

High Ridge Brands Co.^

    8.88       3/15/2025       2,982,000       2,982,000       2,970,818  

Icahn Enterprises

    6.75       2/1/2024       3,000,000       2,996,250       3,127,800  

Marlin Financial+^

    10.50       8/1/2020       4,100,000       5,823,611       5,660,251  

National Financial Partners Corp.#^

    9.00       7/15/2021       2,220,000       2,212,491       2,329,446  

Virtu Financial LLC^

    6.75       6/15/2022       3,132,000       3,132,000       3,227,213  
     

 

 

   

 

 

   

 

 

 

Total Finance

 

    24,909,000       31,685,250       30,288,670  
     

 

 

   

 

 

   

 

 

 

Grocery — 0.57%*:

 

   

Premier Foods Finance+^

    6.50       3/15/2021       1,850,000       2,662,668       2,440,136  
     

 

 

   

 

 

   

 

 

 

Total Grocery

 

    1,850,000       2,662,668       2,440,136  
     

 

 

   

 

 

   

 

 

 

Healthcare, Education and Childcare — 10.30%*:

 

   

Capsugel Holdings#^

    7.00       5/15/2019       1,159,000       1,164,020       1,159,000  

CHS/Community Health Systems, Inc.

    6.25       3/31/2023       685,000       685,000       707,160  

CHS/Community Health Systems, Inc.

    6.88       2/1/2022       2,000,000       1,759,593       1,747,500  

Cognita Financing+^

    7.75       8/15/2021       2,200,000       3,433,764       2,984,892  

Endo International^

    6.00       2/1/2025       1,500,000       1,351,047       1,222,500  

Horizon Pharma plc#^

    8.75       11/1/2024       1,595,000       1,597,460       1,618,925  

IDH Finance PLC+^

    6.25       8/15/2022       1,150,000       1,506,794       1,455,511  

Kindred Healthcare, Inc.#

    8.75       1/15/2023       5,699,000       5,750,674       5,991,074  

Regionalcare Hospital Partners, Inc.#^

    8.25       5/1/2023       9,996,000       10,103,436       10,720,710  

Tenet Healthcare Corporation#

    8.13       4/1/2022       4,700,000       4,675,499       4,987,875  

Valeant#^

    6.13       4/15/2025       7,006,000       6,316,128       5,928,827  

Valeant#^

    7.50       7/15/2021       3,260,000       3,260,000       3,158,125  

Valeant^

    6.38       10/15/2020       1,000,000       929,001       968,750  

Valeant^

    6.50       3/15/2022       488,000       488,000       511,790  

Valeant^

    7.00       3/15/2024       831,000       831,000       873,589  
     

 

 

   

 

 

   

 

 

 

Total Healthcare, Education and Childcare

 

    43,269,000       43,851,416       44,036,228  
     

 

 

   

 

 

   

 

 

 

Hotels, Motels, Inns and Gaming — 0.79%*:

 

   

TVL Finance Plc+^

    8.50       5/15/2023       2,340,000       3,337,451       3,377,917  
     

 

 

   

 

 

   

 

 

 

Total Hotels, Motels, Inns and Gaming

 

    2,340,000       3,337,451       3,377,917  
     

 

 

   

 

 

   

 

 

 

Insurance — 1.15%*:

 

   

Onex York Acquisition Corp.#^

    8.50       10/1/2022       5,102,000       5,006,221       4,910,675  
     

 

 

   

 

 

   

 

 

 

Total Insurance

 

    5,102,000       5,006,221       4,910,675  
     

 

 

   

 

 

   

 

 

 

 

See accompanying Notes to Financial Statements.

 

 

 

15


Barings Global Short Duration High Yield Fund 2017 Semi-Annual Report

 

SCHEDULE OF INVESTMENTS (CONTINUED)

 

June 30, 2017 (Unaudited)

 

     EFFECTIVE
INTEREST RATE 
    DUE DATE     PRINCIPAL     COST     FAIR
VALUE
 

Corporate Bonds (Continued)

         

Leisure, Amusement, Motion Pictures and Entertainment — 2.07%*:

 

   

Perform Group+^

    8.50     11/15/2020       2,400,000       $3,125,978       $3,266,560  

WMG Acquisition Group#^

    6.75       4/15/2022       5,299,000       5,158,441       5,570,574  
     

 

 

   

 

 

   

 

 

 

Total Leisure, Amusement, Motion Pictures and Entertainment

 

    7,699,000       8,284,419       8,837,134  
     

 

 

   

 

 

   

 

 

 

Machinery (Non-Agriculture, Non-Construct, Non-Electronic) — 3.10%*:

 

   

Apex Tool Group LLC#^

    7.00       2/1/2021       4,896,000       4,452,486       4,553,280  

Xerium Technologies#

    9.50       8/15/2021       8,200,000       8,287,965       8,712,500  
     

 

 

   

 

 

   

 

 

 

Total Machinery (Non-Agriculture, Non-Construct, Non-Electronic)

 

    13,096,000       12,740,451       13,265,780  
     

 

 

   

 

 

   

 

 

 

Mining, Steel, Iron and Non-Precious Metals — 5.21%*:

 

   

Allegheny Technologies Inc.

    7.88       8/15/2023       1,000,000       1,034,351       1,045,000  

Alliance Resources Partners, L.P.^

    7.50       5/1/2025       823,000       823,000       865,179  

Constellium Holdco B.V.#+^

    7.00       1/15/2023       3,350,000       3,931,591       3,933,956  

Hecla Mining Company#

    6.88       5/1/2021       5,888,000       5,698,469       6,108,800  

Kissner Milling Company Limited#^

    8.38       12/1/2022       6,475,000       6,468,168       6,717,812  

Peabody Energy Corp.^

    6.00       3/31/2022       347,000       347,000       344,398  

SunCoke Energy Inc.^

    7.50       6/15/2025       2,743,000       2,702,211       2,708,712  

Zekelman Industries Inc.^

    9.88       6/15/2023       489,000       489,000       549,514  
     

 

 

   

 

 

   

 

 

 

Total Mining, Steel, Iron and Non-Precious Metals

 

    21,115,000       21,493,790       22,273,371  
     

 

 

   

 

 

   

 

 

 

Oil and Gas — 14.17%*:

 

   

CITGO Holding Inc.#^

    10.75       2/15/2020       8,584,000       8,474,678       9,324,370  

Covey Park Energy LLC^

    7.50       5/15/2025       397,000       397,000       397,000  

EP Energy#

    9.38       5/1/2020       7,375,000       4,496,386       5,817,031  

EP Energy#^

    8.00       2/15/2025       5,055,000       4,958,048       3,765,975  

Ferrellgas Partners LP#

    8.63       6/15/2020       8,060,000       7,996,705       7,616,700  

Ferrellgas Partners LP^

    8.63       6/15/2020       1,254,000       1,209,637       1,185,030  

Globe Luxembourg SA+^

    9.88       4/1/2022       400,000       394,475       388,000  

Jupiter Resources Inc.#+^

    8.50       10/1/2022       13,375,000       11,855,528       10,031,250  

Kosmos Energy Ltd.#^

    7.88       8/1/2021       3,984,000       3,864,673       4,063,680  

Kosmos Energy Ltd.#^

    7.88       8/1/2021       5,164,000       4,871,945       5,267,280  

Pbf Holding Company LLC

    7.00       11/15/2023       1,000,000       997,500       985,000  

Pbf Logistics LP#

    6.88       5/15/2023       1,117,000       1,117,000       1,133,755  

Topaz Marine SA#+^

    8.63       11/1/2018       9,341,000       9,327,476       9,276,921  

Welltec#+^

    8.00       2/1/2019       1,387,000       1,361,673       1,345,390  
     

 

 

   

 

 

   

 

 

 

Total Oil and Gas

 

    66,493,000       61,322,724       60,597,382  
     

 

 

   

 

 

   

 

 

 

Personal Transportation — 1.72%*:

         

Hertz Corporation

    7.38       1/15/2021       2,000,000       1,892,054       1,930,000  

Hertz Corporation

    6.25       10/15/2022       2,000,000       1,722,959       1,745,000  

Hertz Corporation^

    7.63       6/1/2022       3,678,000       3,671,996       3,669,173  
     

 

 

   

 

 

   

 

 

 

Total Personal Transportation

        7,678,000       7,287,009       7,344,173  
     

 

 

   

 

 

   

 

 

 

Retail Store — 2.69%*:

         

Boing Group Finance+^

    6.63       7/15/2019       3,050,000       4,160,415       3,531,763  

 

See accompanying Notes to Financial Statements.

 

 

 

16


Barings Global Short Duration High Yield Fund 2017 Semi-Annual Report

 

SCHEDULE OF INVESTMENTS (CONTINUED)

 

June 30, 2017 (Unaudited)

 

     EFFECTIVE
INTEREST RATE 
    DUE DATE     PRINCIPAL     COST     FAIR
VALUE
 

Corporate Bonds (Continued)

         

Retail Store (Continued)

         

HSS Financing PLC+^

    6.75     8/1/2019       816,000       $1,240,099       $1,057,915  

Takko Fashion+^

    9.88       4/15/2019       2,300,000       3,042,970       2,423,362  

Travelex+^

    8.00       5/15/2022       4,000,000       4,421,260       4,503,881  
     

 

 

   

 

 

   

 

 

 

Total Retail Store

        10,166,000       12,864,744       11,516,921  
     

 

 

   

 

 

   

 

 

 

Telecommunications — 7.57%*:

         

Altice S.A.#+^

    7.75       5/15/2022       3,240,000       3,240,000       3,438,450  

Altice S.A.#+^

    7.50       5/15/2026       2,622,000       2,672,640       2,910,420  

Altice S.A.+^

    7.63       2/15/2025       1,250,000       1,319,537       1,370,312  

Digicel Limited#+^

    6.00       4/15/2021       4,000,000       3,551,440       3,835,000  

GTT Communications^

    7.88       12/31/2024       3,044,000       3,120,325       3,257,080  

Hughes Satellite Systems Corp

    6.63       8/1/2026       3,000,000       2,921,588       3,225,000  

Numericable-SFR#+^

    7.38       5/1/2026       3,183,000       3,207,421       3,453,555  

Sprint Corp.#

    7.88       9/15/2023       4,428,000       4,302,561       5,092,200  

Wind Acquisition#+^

    7.38       4/23/2021       5,545,000       5,243,458       5,766,800  
     

 

 

   

 

 

   

 

 

 

Total Telecommunications

        30,312,000       29,578,970       32,348,817  
     

 

 

   

 

 

   

 

 

 

Textiles & Leather — 0.55%*:

         

Perry Ellis International Inc#

    7.88       4/1/2019       2,334,000       2,365,939       2,334,000  
     

 

 

   

 

 

   

 

 

 

Total Textiles & Leather

        2,334,000       2,365,939       2,334,000  
     

 

 

   

 

 

   

 

 

 

Utilities — 1.21%*:

         

NRG Energy#

    7.25       5/15/2026       5,000,000       4,976,185       5,175,000  
     

 

 

   

 

 

   

 

 

 

Total Utilities

        5,000,000       4,976,185       5,175,000  
     

 

 

   

 

 

   

 

 

 

Total Corporate Bonds

        454,225,297       467,181,553       468,950,693  
     

 

 

   

 

 

   

 

 

 

Total Fixed Income

        566,739,679       577,398,626       569,756,879  
     

 

 

   

 

 

   

 

 

 

Total Investments

        568,350,175       579,957,600       572,781,760  
     

 

 

   

 

 

   

 

 

 

Other assets and liabilities — (33.98)%

            (145,264,205
         

 

 

 

Net Assets — 100%

            $427,517,555  
         

 

 

 
The effective interest rates are based on settled commitment amount.
* Calculated as a percentage of net assets applicable to common shareholders.
§ Bank loans are exempt from registration under the Securities Act of 1933, as amended, but contain certain restrictions on resale and cannot be sold publicly. These loans pay interest at rates which adjust periodically. The interest rates shown for bank loans are the current interest rates at June 30, 2017. Bank loans are also subject to mandatory and/or optional prepayment which cannot be predicted. As a result, the remaining maturity may be substantially less than the stated maturity shown.
+ Foreign security.
# All or a portion of the security is segregated as collateral for the credit facility. See Note 8 to the financial statements for further disclosure.
^ Security exempt from registration under Rule 144a of the Securities Act of 1933. These securities may only be resold in transactions exempt from registration, normally to qualified institutional buyers.

 

See accompanying Notes to Financial Statements.

 

 

 

17


Barings Global Short Duration High Yield Fund 2017 Semi-Annual Report

 

SCHEDULE OF INVESTMENTS (CONTINUED)

 

June 30, 2017 (Unaudited)

 

Distributions of investments by country of risk. Percentage of assets are expressed by market value excluding cash and accrued income as of June 30, 2017.

 

   United States      73.8%  
   United Kingdom      10.6%  
   France      4.0%  
   Canada      2.1%  
   Italy      1.7%  
   United Arab Emirates      1.6%  
   Switzerland      1.3%  
   Mexico      1.0%  
   (Individually less than 1%)      3.9%  
     

 

 

 
        100.0%  
     

 

 

 

Forward Foreign Exchange Contracts at June 30, 2017 (Unaudited)

 

COUNTERPARTY   CURRENCY   CONTRACT TYPE     DELIVERY DATE     VALUE     AGGREGATE FACE
VALUE
    UNREALIZED
APPRECIATION/
(DEPRECIATION)
 

J.P. Morgan

           
  British pounds     Buy       7/17/2017     $ 2,494,962     $ 2,576,525     $ 81,563  
  British pounds     Sell       7/17/2017       (48,946,910     (49,226,568     (279,658
  Euros     Buy       7/17/2017       1,671,264       1,674,658       3,394  
  Euros     Sell       7/17/2017       (44,318,204     (45,096,944     (778,740
  Euros     Sell       7/3/2017       (1,618,581     (1,620,819     (2,238
  U.S. Dollars     Buy       7/3/2017       1,618,581       1,618,581        
  U.S. Dollars     Buy       7/17/2017       44,318,204       44,318,204        
  U.S. Dollars     Sell       7/17/2017       (1,671,264     (1,671,264      
  U.S. Dollars     Buy       7/17/2017       48,946,910       48,946,910        
  U.S. Dollars     Sell       7/17/2017       (2,494,962     (2,494,962      
       

 

 

   

 

 

   

 

 

 
                (975,679     (975,679
                (975,679     (975,679
       

 

 

   

 

 

   

 

 

 

 

See accompanying Notes to Financial Statements.

 

 

 

18


Barings Global Short Duration High Yield Fund 2017 Semi-Annual Report

 

NOTES TO THE FINANCIAL STATEMENTS

 

June 30, 2017 (Unaudited)

 

1. Organization

Barings Global Short Duration High Yield Fund (the “Fund”) was organized as a business trust under the laws of the Commonwealth of Massachusetts on May 20, 2011, and commenced operations on October 26, 2012. The Fund is registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as a diversified, closed-end management investment company.

Barings LLC (the “Adviser”), a wholly-owned indirect subsidiary of Massachusetts Mutual Life Insurance Company, is a registered investment adviser under the Investment Advisers Act of 1940, as amended, and serves as investment adviser to the Fund.

Barings Global Advisers Limited (the “Sub-Adviser”), an indirect wholly-owned subsidiary of the Adviser, serves as sub-adviser with respect to the Fund’s European investments.

The Fund’s primary investment objective is to seek as high a level of current income as the Adviser determines is consistent with capital preservation. The Fund seeks capital appreciation as a secondary investment objective when consistent with its primary investment objective. There can be no assurance that the Fund will achieve its investment objectives. The Fund seeks to take advantage of inefficiencies between geographies, primarily the North American and Western European high yield bond and loan markets and within capital structures between bonds and loans. Under normal market conditions, the Fund will invest at least 80% of its Managed Assets in bonds, loans and other income-producing instruments that are, at the time of purchase, rated below investment grade (below Baa3 by Moody’s Investors Service, Inc. (“Moody’s”) or below BBB- by either Standard & Poor’s Rating Services, a division of the McGraw-Hill Company, Inc. (“S&P”) or Fitch, Inc. (“Fitch”), or unrated but judged by the Adviser or Sub-Adviser to be of comparable quality).

 

2. Significant Accounting Policies

The following is a summary of significant accounting policies followed consistently by the Fund in the preparation of its financial statements in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”).

  A. Valuation of Investments

The Fund’s investments in fixed income securities are generally valued using the prices provided directly by independent third party services or provided directly from one or more broker dealers or market makers, each in accordance with the valuation policies and procedures approved by the Fund’s Board of Trustees (the “Board”).

The pricing services may use valuation models or matrix pricing, which consider yield or prices with respect to comparable bond quotations from bond dealers or by reference to other securities that are considered comparable in such characteristics as credit rating, interest rates and maturity date, to determine the current value. The closing prices of domestic or foreign securities may not reflect their market values at the time the Fund calculates its NAV if an event that materially affects the value of those securities has occurred since the closing prices were established on the domestic or foreign exchange market, but before the Fund’s NAV calculation. Under certain conditions, the Board has approved an independent pricing service to fair value foreign securities. This is generally accomplished by adjusting the closing price for movements in correlated indices, securities or derivatives. Fair value pricing may cause the value of the security on the books of the Fund to be different from the closing value on the non-U.S. exchange and may affect the calculation of the Fund’s NAV. The Fund may fair value securities in other situations, for example, when a particular foreign market is closed but the Fund is pricing their shares.

The Fund’s investments in bank loans are normally valued at the bid quotation obtained from dealers in loans by an independent pricing service in accordance with the Fund’s valuation policies and procedures approved by the Board.

A Valuation Committee, made up of officers of the Fund and employees of the Adviser, is responsible for determining, in accordance with the Fund’s valuation policies and procedures approved by the Board: (1) whether market quotations are readily available for investments held by the Fund; and (2) the fair value of investments held by the Fund for which market quotations are not readily available or are deemed not reliable by the Adviser. In certain cases, authorized pricing service vendors may not provide prices for a security held by the Fund, or the price provided by such pricing service vendor is deemed unreliable by the Adviser. In such cases, the Fund may use market maker

 

 

 

 

19


Barings Global Short Duration High Yield Fund 2017 Semi-Annual Report

 

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

 

June 30, 2017 (Unaudited)

 

quotations provided by an established market maker for that security (i.e. broker quotes) to value the security if the Adviser has experience obtaining quotations from the market maker and the Adviser determines that quotations obtained from the market maker in the past have generally been reliable (or, if the Adviser has no such experience with respect to a market maker, it determines based on other information available to it that quotations obtained by it from the market maker are reasonably likely to be reliable). In any such case, the Adviser will review any market quotations so obtained in light of other information in its possession for their general reliability.

Bank loans in which the Fund may invest have similar risks to lower-rated fixed income securities. Changes in the financial condition of the borrower or economic conditions or other circumstances may reduce the capacity of the borrower to make principal and interest payments on such instruments and may lead to defaults. Senior secured bank loans are supported by collateral; however, the value of the collateral may be insufficient to cover the amount owed to the Fund. By relying on a third party to administer a loan, the Fund is subject to the risk that the third party will fail to perform it obligations. The loans in which the Fund will invest are largely floating rate instruments; therefore, the interest rate risk generally is lower than for fixed-rate debt obligations. However, from the perspective of the borrower, an increase in interest rates may adversely affect the borrower’s financial condition. Due to the unique and customized nature of loan agreements evidencing loans and the private syndication thereof, loans are not as easily purchased or sold as publicly traded securities. Although the range of investors in loans has broadened in recent years, there can be no assurance that future levels of supply and demand in loan trading will provide the degree of liquidity which currently exists in the market. In addition, the terms of the loans may restrict their transferability without borrower consent. These factors may have an adverse effect on the market price and the Fund’s ability to dispose of particular portfolio investments. A less liquid secondary market also may make it more difficult for the Fund to obtain precise valuations of the high yield loans in its portfolio.

Fair value is defined as 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. A three-tier hierarchy is utilized 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 assumptions about risk. For example, market participants would consider the risk inherent in a particular valuation technique used to measure fair value, such as a pricing model, and/or the risk inherent in the inputs to the valuation technique. Inputs may be observable or unobservable. Observable inputs are inputs that reflect the assumptions market participants would use in pricing the asset or liability and are developed based on market data obtained from sources independent of the reporting entity. Unobservable inputs are inputs that reflect the reporting entity’s own assumptions about the assumptions market participants would use in pricing the asset or liability and are developed based on the best information available in the circumstances. The three-tier hierarchy of inputs is summarized in the three broad levels listed below.

Level 1 – quoted prices in active markets for identical securities

Level 2 – other significant observable inputs (including quoted prices for similar securities, 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)

The availability of observable inputs can vary from security to security and is affected by a wide variety of factors, including, for example, the type of security, whether the security is new and not yet established in the marketplace, the liquidity of markets, and other characteristics particular to the security. To the extent that valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. Accordingly, the degree of judgment exercised in determining fair value is greatest for instruments categorized in level 3.

The inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for disclosure purposes, the level in the fair value hierarchy within which the fair value measurement falls in its entirety is determined based on the lowest level input that is significant to the fair value measurement in its entirety.

 

 

 

 

20


Barings Global Short Duration High Yield Fund 2017 Semi-Annual Report

 

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

 

June 30, 2017 (Unaudited)

 

The following is a summary of the inputs used as of June 30, 2017 in valuing the Fund’s investments:

 

DESCRIPTION   LEVEL 1     LEVEL 2     LEVEL 3     TOTAL INVESTMENTS  

Assets:

       
Equities:        

Common Stocks

  $                     –     $ 1,176,783     $ 1,848,098     $ 3,024,881  
 

 

 

   

 

 

   

 

 

   

 

 

 
Total Equities:           1,176,783       1,848,098       3,024,881  
 

 

 

   

 

 

   

 

 

   

 

 

 
Fixed Income:        

Bank Loans

  $     $ 96,085,077     $ 4,721,109     $ 100,806,186  

Bonds

          468,950,693             468,950,693  
 

 

 

   

 

 

   

 

 

   

 

 

 
Total Fixed Income   $     $ 565,035,770     $ 4,721,109     $ 569,756,879  
 

 

 

   

 

 

   

 

 

   

 

 

 
Derivative Securities:        

Foreign Exchange Contracts:

  $     $ 82,719     $     $ 82,719  
 

 

 

   

 

 

   

 

 

   

 

 

 
Total Derivative Securities           82,719             82,719  
 

 

 

   

 

 

   

 

 

   

 

 

 
Total Assets   $     $ 566,295,272     $ 6,569,207     $ 572,864,479  
 

 

 

   

 

 

   

 

 

   

 

 

 
Liabilities:        

Foreign Exchange Contracts

  $     $ 1,058,398     $     $ 1,058,398  
 

 

 

   

 

 

   

 

 

   

 

 

 
Total Liabilities:   $     $ 1,058,398     $     $ 1,058,398  
 

 

 

   

 

 

   

 

 

   

 

 

 

The following table is a summary of quantitative information about significant unobservable valuation inputs for Level 3 fair value measurement for investments held as of June 30, 2017:

 

TYPE OF ASSETS   FAIR VALUE AS OF
JUNE 30, 2017
    VALUATION
TECHNIQUE(S)
  UNOBSERVABLE INPUT

Equities

     

Sabine Oil & Gas, LLC

  $ 189,659     Broker Quote  

$41.00; pricing source depth of 1.

Sabine Oil & Gas, LLC

  $ 97,962     Broker Quote  

$6.50; pricing source depth of 1.

Sabine Oil & Gas, LLC

  $ 15,044     Broker Quote  

$5.00; pricing source depth of 1.

Templar Energy LLC

  $ 800,776     Broker Quote  

$4.5; pricing source depth of 1.

Templar Energy LLC

  $ 744,657     Broker Quote  

$9.5; pricing source depth of 1.

Second Lien Term Loans

     

Boomerang Tube, LLC

  $ 1,150,510     Model Price  

Average Enterprise Valuation Multiple: 5.5x; EBITDA: $25 million.

Boomerang Tube, LLC

  $ 701,882     Model Price  

Average Enterprise Valuation Multiple: 5.5x; EBITDA: $25 million.

Boomerang Tube, LLC

  $ 189,752     Model Price  

Average Enterprise Valuation Multiple: 5.5x; EBITDA: $25 million.

Boomerang Tube, LLC

  $ 195,408     Model Price  

Average Enterprise Valuation Multiple: 5.5x; EBITDA: $25 million.

Boomerang Tube, LLC

  $ 189,752     Model Price  

Average Enterprise Valuation Multiple: 5.5x; EBITDA: $25 million.

Boomerang Tube, LLC

  $ 2,104,053     Model Price  

Average Enterprise Valuation Multiple: 5.5x; EBITDA: $25 million.

Boomerang Tube, LLC

  $ 189,752     Model Price  

Average Enterprise Valuation Multiple: 5.5x; EBITDA: $25 million.

 

 

 

21


Barings Global Short Duration High Yield Fund 2017 Semi-Annual Report

 

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

 

June 30, 2017 (Unaudited)

 

Boomerang Tube, LLC restructured its debt securities on February 2, 2016. The Fund subsequently received new debt securities, all of which are considered Level 3.

Sabine Oil & Gas, LLC restructured its Second Lien Term Loan on August 12, 2016. The Fund subsequently received new equity securities, all of which are considered Level 3.

Templar Energy, LLC restructured its Second Lien Term Loan on September 14, 2016. The Fund subsequently received new equity securities, all of which are considered Level 3.

The Fund discloses transfers between levels based on valuations at the end of the reporting period. Based on end of period market values, $3,202,492 was transferred from Level 3 to Level 2 for the period from January 1, 2017 through June 30, 2017. The following is a reconciliation of Level 3 investments based upon the inputs used to determine fair value:

 

     BALANCE
AT
DECEMBER 31, 2016
    TRANSFERS
INTO
LEVEL 3
    TRANSFERS
OUT OF
LEVEL 3
    PURCHASES     SALES     ACCRETION
OF
DISCOUNT
    REALIZED
GAIN
LOSS
    CHANGE
IN
UNREALIZED
    BALANCE
AT
JUNE 30, 2017
    CHANGE IN
UNREALIZED
APPRECIATION /
DEPRECIATION
FROM
INVESTMENTS
HELD AS  OF
JUNE 30,
2017
 

Common Stocks

 

Equities

  $ 2,110,595     $ 0     $ 0     $ 19,024     $ 0     $ 0     $ 0     ($ 281,521   $ 1,848,098     ($ 281,521
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Fixed Income

 

Bank Loan

  $ 3,871,669     $ 0     $ 0     $ 1,195,016     $ 0     ($ 130,992   $ 0     ($ 214,584   $ 4,721,109     ($ 214,584
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

  $ 5,982,264     $ 0     $ 0     $ 1,214,040     $ 0     ($ 130,992   $ 0     ($ 496,105   $ 6,569,207     ($ 496,105
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

  B. Cash and Cash Equivalents

Cash and cash equivalents consist principally of short term investments that are readily convertible into cash and have original maturities of three months or less. At June 30, 2017, all cash and cash equivalents are held by U.S. Bank, N.A.

 

  C. Investment Transactions, Related Investment Income and Expenses

Investment transactions are accounted for on a trade-date basis. Interest income is recorded on the accrual basis, including the amortization of premiums and accretion of discounts on bonds held using the yield-to-maturity method.

Realized gains and losses on investment transactions and unrealized appreciation and depreciation of investments are reported for financial statement and Federal income tax purposes on the identified cost method.

Expenses are recorded on the accrual basis as incurred.

 

  D. Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates

and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

 

  E. Federal Income Taxation

The Fund has elected to be taxed as a Regulated Investment Company (“RIC”) under sub-chapter M of the U.S. Internal Revenue Code of 1986, as amended, and intends to maintain this qualification and to distribute substantially all of its net taxable income to its shareholders.

 

  F. Dividends and Distributions

The Fund declares and pays dividends monthly from net investment income. To the extent that these distributions exceed net investment income, they may be classified as return of capital. The Fund also pays a distribution at least annually from its net realized capital gains, if any. Dividends and distributions are recorded on the ex-dividend date. All common shares have equal dividend

 

 

 

 

22


Barings Global Short Duration High Yield Fund 2017 Semi-Annual Report

 

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

 

June 30, 2017 (Unaudited)

 

and other distribution rights. A notice disclosing the source(s) of a distribution will be provided if payment is made from any source other than net investment income. Any such notice would be provided only for informational purposes in order to comply with the requirements of Section 19(a) of the 1940 Act and not for tax reporting purposes. The tax composition of the Fund’s distributions for each calendar year is reported on Internal Revenue Service Form 1099-DIV.

Dividends from net investment income and distributions from realized gains from investment transactions have been determined in accordance with Federal income tax regulations and may differ from net investment income and realized gains recorded by the Fund for financial reporting purposes. These differences, which could be temporary or permanent in nature may result in reclassification of distributions; however, net investment income, net realized gains and losses, and net assets are not affected.

 

  G. Derivative Instruments

The following is a description of the derivative instruments that the Fund utilizes as part of its investment strategy, including the primary underlying risk exposures related to the instrument.

Forward Foreign Exchange Contracts – The Fund is subject to foreign currency exchange rate risk in the normal course of pursuing its investment objectives. The Fund transacted in and currently holds forward foreign exchange contracts to hedge against changes in the value of foreign currencies. The Fund entered into forward foreign exchange contracts obligating the Fund to deliver or receive a currency at a specified future date. Forward foreign exchange contracts are valued daily and unrealized appreciation or depreciation is recorded daily as the difference between the contract exchange rate and the closing forward rate applied to the face amount of the contract. A realized gain or loss is recorded at the time the forward contract expires. Credit risk may arise as a result of the failure of the counterparty to comply with the terms of the contract. The Fund considers the creditworthiness of each counterparty to a contract in evaluating potential credit risk quarterly. The Fund is also subject to credit risk with respect to the counterparties to the derivative contracts which are not cleared through a central counterparty but instead are traded over-the-counter between two counterparties. If a counterparty to an over-the-counter derivative becomes bankrupt or otherwise fails to perform its obligations

under a derivative contract due to financial difficulties, the Fund may experience significant delays in obtaining any recovery under the derivative contract in a bankruptcy or other reorganization proceeding. The Fund may obtain only a limited recovery or may obtain no recovery in such circumstances. The counterparty risk for cleared derivatives is generally lower than for uncleared over-the-counter derivative transactions since generally a clearing organization becomes substituted for each counterparty to a cleared derivative contract and, in effect, guarantees the parties’ performance under the contract as each party to a trade looks only to the clearing house for performance of financial obligations. However, there can be no assurance that the clearing house, or its members, will satisfy its obligations to the Fund. In addition, in the event of a bankruptcy of a clearing house, the Fund could experience a loss of the funds deposited with such clearing house as margin and any profits on its open positions. The counterparty risk to the Fund is limited to the net unrealized gain, if any, on the contract.

The use of forward foreign exchange contracts does not eliminate fluctuations in the underlying prices of the Fund’s investment securities; however, it does establish a rate of exchange that can be achieved in the future. The use of forward foreign exchange contracts involves the risk that anticipated currency movements will not be accurately predicted. A forward foreign exchange contract would limit the risk of loss due to a decline in the value of a particular currency; however, it would also limit any potential gain that might result should the value of the currency increase instead of decrease. These contracts may involve market risk in excess of the amount of receivable or payable reflected on the Statement of Assets and Liabilities.

The Fund recognized an asset on the Statement of Assets and Liabilities as a result of forward foreign exchange contracts with J.P. Morgan. The Fund’s policy is to recognize an asset equal to the net value of all forward foreign exchange contracts with an unrealized gain and a liability equal to the net value of all forward foreign exchange contracts with an unrealized loss. The Fund has recognized an asset of $84,957 in net unrealized appreciation and a liability of $1,060,636 in net unrealized depreciation on forward foreign exchange contracts. Outstanding forward foreign exchange contracts as of June 30, 2017 are indicative of the volume of activity during the period.

 

 

 

 

23


Barings Global Short Duration High Yield Fund 2017 Semi-Annual Report

 

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

 

June 30, 2017 (Unaudited)

 

For the period from January 1, 2017 through June 30, 2017, the Fund’s direct investment in derivatives consisted of forward foreign exchange contracts.

The following is a summary of the fair value of derivative instruments held directly by the Fund as of June 30, 2017. These derivatives are presented in the Schedule of Investments.

Fair values of derivative instruments on the Statement of Assets and Liabilities as of June 30, 2017:

 

     STATEMENT OF ASSETS
AND LIABILITIES
LOCATION
    FAIR
VALUE
 

Derivatives

 

 

Forward Foreign Exchange Contracts

   
Unrealized
Appreciation
 
 
  $ 84,957  
   

 

 

 

Total Asset Derivatives

    $ 84,957  
   

 

 

 

Liability Derivatives

 

 

Forward Foreign Exchange Contracts

   
Unrealized
Depreciation
 
 
  $ 1,060,636  
   

 

 

 

Total Liability Derivatives

    $ 1,060,636  
   

 

 

 

The effect of derivative instruments on the Statement of Operations for the period from January 1, 2017 through June 30, 2017:

Amount of Realized Gain/(Loss) on Derivatives

 

     FORWARD FOREIGN
EXCHANGE CONTRACTS
 

Derivatives

 

Forward Foreign Exchange Contracts

  $ (3,297,584
 

 

 

 

Total

  $ (3,927,584
 

 

 

 

Change in Unrealized Appreciation/(Depreciation) on Derivatives

 

     FORWARD FOREIGN
EXCHANGE CONTRACTS
 

Derivatives

 

Forward Foreign Exchange Contracts

  $ (2,624,820
 

 

 

 

Total

  $ (2,624,820
 

 

 

 
  H. Offsetting of Financial and Derivative Assets and Liabilities

The following is a summary by counterparty of the fair value of derivative investments subject to Master Netting Agreements and collateral pledged (received), if any, as of June 30, 2017.

 

     J.P. MORGAN  

Assets:

 

Forward foreign exchange contracts

  $ 84,957  
 

 

 

 

Total Assets

  $ 84,957  
 

 

 

 

Liabilities:

 

Forward foreign exchange contracts

  $ 1,060,636  
 

 

 

 

Total Liabilities

  $ 1,060,636  
 

 

 

 

Net Exposure

  $ (975,679
 

 

 

 

 

  I. Foreign Securities

Investing in securities of foreign companies and foreign governments involves special risks and considerations not typically associated with investing in U.S. companies and the U.S. government. These risks include valuation of currencies and adverse political and economic developments. Moreover, securities of many foreign companies, foreign governments, and their markets may be less liquid and their prices more volatile than those of securities of comparable U.S. companies and the U.S. government.

 

  J. Foreign Currency Translation

The books and records of the Fund are maintained in U.S. dollars. Foreign currency transactions are translated into U.S. dollars on the following basis: (i) market value of investment securities, assets and liabilities at the daily rates of exchange, and (ii) purchases and sales of investment securities, dividend and interest income and certain expenses at the rates of exchange prevailing on the respective dates of such transactions. For financial reporting purposes, the Fund does not isolate changes in the exchange rate of investment securities from the fluctuations arising from changes in the market prices of securities. However, for Federal income tax purposes, the Fund does isolate and treat as ordinary income the effect of changes in foreign exchange rates on realized gain or loss from the sale of investment securities and payables and receivables arising from trade-date and settlement-date differences.

 

 

 

 

24


Barings Global Short Duration High Yield Fund 2017 Semi-Annual Report

 

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

 

June 30, 2017 (Unaudited)

 

  K. Counterparty Risk

The Fund seeks to manage counterparty credit risk by entering into agreements only with counterparties the Adviser believes have the financial resources to honor their obligations. The Adviser monitors the financial stability of the Fund’s counterparties.

 

  L. New Accounting Pronouncements

In October 2016, the U.S. Securities and Exchange Commission adopted new rules and amended existing rules (together, “final rules”) intended to modernize the reporting and disclosure of information by registered investment companies. In part, the final rules amend Regulation S-X and require standardized, enhanced disclosure about derivatives in investment company financial statements, as well as other amendments. The compliance date for the amendments to Regulation S-X is August 1, 2017. Management is currently evaluating the impact that the adoption of the amendments to Regulation S-X will have on the financial statements and related disclosures.

 

3. Advisory Fee

The Fund has entered into an Investment Management Agreement (the “Agreement”) with the Adviser, a related party. Pursuant to the Agreement, the Fund has agreed to pay the Adviser a fee payable at the end of each calendar month, at an annual rate of 1.00% of the Fund’s average daily managed assets during such month. Managed assets are the total assets of the Fund, which include any assets attributable to leverage such as assets attributable to reverse repurchase agreements, or bank loans, minus the sum of the Fund’s accrued liabilities (other than liabilities incurred for the purpose of leverage).

Subject to the supervision of the Adviser and the Board, the Sub-Adviser manages the investment and reinvestment of a portion of the assets of the Fund, as allocated from time to time to the Sub-Adviser by a global allocation investment committee composed of representatives of the Adviser and Sub-Adviser. The Adviser (not the Fund) will pay a portion of the fees it receives to the Sub-Adviser in return for its services.

 

4. Administrator Fee

The Fund has engaged U.S. Bancorp Fund Services, LLC (“US Bank”) to serve as the Fund’s administrator, fund accountant, and transfer agent. The Fund has engaged

U.S. Bank, N.A. to serve as the Fund’s custodian. The Fund has agreed to pay US Bank a fee payable at the end of each calendar month, at an annual rate of 0.075% of the Fund’s average daily managed assets.

 

5. Income Taxes

It is the Fund’s intention to qualify as a RIC under sub-chapter M of the Internal Revenue Code and distribute all of its taxable income. Accordingly, no provision for federal income taxes is required in the financial statements.

The tax character of dividends paid to shareholders during the tax year ended in 2016, as noted below, was as follows:

 

ORDINARY
INCOME
  NET LONG
TERM
CAPITAL
GAINS
    RETURN OF
CAPITAL
    TOTAL
DISTRIBUTIONS
PAID
 

$32,119,057

        $ 4,965,900     $ 37,084,957  

The amount and character of income and capital gain distributions to be paid, if any, are determined in accordance with federal income tax regulations, which may differ from U.S. GAAP. On December 31, 2016, undistributed net investment income was decreased by $3,842,030, net accumulated net realized gain was increased by $8,807,930, and paid-in capital was decreased by $4,965,900. This reclassification has no effect on the net assets of the Fund.

The following information is provided on a tax basis as of December 31, 2016:

 

Cost of investments

  $ 567,371,422  
 

 

 

 

Unrealized appreciation

    17,158,380  

Unrealized depreciation

    (37,688,783
 

 

 

 

Net unrealized appreciation (depreciation)

    (20,530,403

Undistributed ordinary income

     

Undistributed long term gains

     
 

 

 

 

Distributable earnings

     

Other accumulated gain/(loss)

    (33,774,802
 

 

 

 

Total accumulated gain/(loss)

    (54,305,205
 

 

 

 
 

 

 

 

25


Barings Global Short Duration High Yield Fund 2017 Semi-Annual Report

 

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

 

June 30, 2017 (Unaudited)

 

The capital loss carryforward is available to offset future taxable income. The Fund has the following capital loss amounts:

 

EXPIRING DECEMBER 31,                
2016   2017     2018     UNLIMITED –
SHORT TERM
    UNLIMITED –
LONG TERM
 

$    –

  $     –     $     –     $ 10,949,025     $ 19,996,030  

Under current tax rules, regulated investment companies can elect to treat certain late-year ordinary losses incurred and post-October capital losses (capital losses realized after October 31) as arising on the first day of the following taxable year. At December 31, 2016, the Fund deferred, on a tax basis, late-year December losses of $ 2,788,527.

The Fund recognizes the tax benefits of uncertain tax positions only where the position is “more likely than not” to be sustained assuming examination by tax authorities. Management has analyzed the Fund’s tax positions, and has concluded that no liability for unrecognized tax benefits should be recorded related to uncertain tax positions taken on U.S. tax returns and state tax returns filed since inception of the Fund. No income tax returns are currently under examination. All tax years since commencement of operations remain subject to examination by the tax authorities in the United States. Due to the nature of the Fund’s investments, the Fund may be required to file income tax returns in several states. The Fund is not aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will change materially in the next 12 months.

 

6. Investment Transactions

For the period from January 1, 2017 through June 30, 2017, the Fund purchased (at cost) and sold securities in the amount of $120,851,877 and $109,025,915 (excluding short-term debt securities), respectively.

 

7. Credit Facility

On November 8, 2012, the Fund entered into a $200,000,000 credit facility with BNP Paribas Prime Brokerage International, Ltd. (“BNP”) The credit facility previously had a variable annual interest rate equal to three-month LIBOR plus 0.90 percent. On January 6, 2014, the Fund entered into an amended agreement with a variable annual interest rate of three-month LIBOR plus

0.80 percent. Unused portions of the credit facility will accrue a commitment fee equal to an annual rate of 0.65 percent.

Changes to the credit facility’s capacity for the period from January 1, 2017 through June 30, 2017 were as follows:

 

DATE OF CHANGE   PREVIOUS
CAPACITY
    NEW
CAPACITY
 

Capacity at January 1, 2017:

 

  $ 141,900,000  

January 10, 2017

  $ 141,900,000     $ 142,400,000  

January 11, 2017

  $ 142,400,000     $ 142,700,000  

January 13, 2017

  $ 142,700,000     $ 142,900,000  

January 18, 2017

  $ 142,900,000     $ 144,300,000  

February 1, 2017

  $ 144,300,000     $ 145,200,000  

February 28, 2017

  $ 145,200,000     $ 147,400,000  

May 22, 2017

  $ 147,400,000     $ 147,500,000  

May 30, 2017

  $ 147,500,000     $ 148,300,000  

June 5, 2017

  $ 148,300,000     $ 150,200,000  

June 30, 2017

  $ 150,200,000     $ 153,200,000  

Capacity at June 30, 2017:

 

  $ 153,200,000  

The average principal balance and interest rate for the period during which the credit facility was utilized for the period from January 1, 2017 through June 30, 2017 was approximately $146,800,000 and 1.94 percent, respectively. At June 30, 2017, the principal balance outstanding was $153,200,000 at an interest rate of 2.10 percent.

 

8. Securities Lending

Through an agreement with the Fund, BNP may lend out securities the Fund has pledged as collateral on the note payable. In return, the Fund receives additional income that is netted against the interest charged on the outstanding credit facility balance. As of June 30, 2017, the total amount of income netted against the interest expense is $63,974.

 

9. Common Stock

The Fund has unlimited shares authorized and 20,057,849 shares outstanding at December 31, 2016 and June 30, 2017.

 

10. Aggregate Remuneration Paid to Officers, Trustees and Their Affiliated Persons

For the period from January 1, 2017 through June 30, 2017, the Fund paid its Trustees aggregate remuneration of $59,508. During the year, the Fund did not pay any

 

 

 

 

26


Barings Global Short Duration High Yield Fund 2017 Semi-Annual Report

 

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

 

June 30, 2017 (Unaudited)

 

compensation to any of its Trustees who are “interested persons” (as defined by the 1940 Act) of the Fund. The Fund classifies Mr. Finke as an interested person of the Fund.

All of the Fund’s officers are employees of the Adviser. Pursuant to the Agreement, the Fund does not compensate its officers who are employees of the Adviser (except for the Chief Compliance Officer of the Fund unless assumed by the Adviser). For the period from January 1, 2017 through June 30, 2017, the Adviser paid the compensation of the Chief Compliance Officer of the Fund.

The Fund did not make any payments to the Adviser for the period ended June 30, 2017, other than the amounts payable to the Adviser pursuant to the Agreement.

 

11. Subsequent Events

The Fund has evaluated the possibility of subsequent events existing in this report through the date that the

financial statements were issued. On July 3, 2017, the dividend payable of $3,076,874 was paid to common shareholders. The dividend amount consisted of net investment income.

In addition, as of June 30, 2017, the borrowing capacity on the current note payable was $153,200,000. On July 10, 2017, the note was paid down and borrowing capacity was decreased to $150,200,000. On July 20, 2017, the note was withdrawn upon and borrowing capacity was increased to $158,700,000. On July 28, 2017, the note was paid down and borrowing capacity decreased to $150,200,000.

Effective following the adjournment of the August 3, 2017 Board meeting, Cynithia Plouche’ was elected by the Trustees as a Trustee of the Fund.

 

 

 

 

27


Barings Global Short Duration High Yield Fund 2017 Semi-Annual Report

 

FUND DIVIDEND REINVESTMENT PLAN

 

 

INDEPENDENT TRUSTEES

Rodney J. Dillman

Chairman, Trustee

Dr. Bernard A. Harris, Jr.

Trustee

Thomas W. Okel

Trustee

Martin A. Sumichrast

Trustee

OFFICERS

Sean Feeley

President

Carlene Pollock

Chief Financial Officer

Lesley Mastandrea

Treasurer

Michael Freno

Vice President

Scott Roth

Vice President

Melissa LaGrant

Chief Compliance Officer

Janice Bishop

Secretary/Chief Legal Officer

Michele Manha

Assistant Secretary

Kristin Goodchild

Assistant Secretary

The Fund offers a Dividend Reinvestment Plan (the “Plan”). The Plan provides a simple way for shareholders to add to their holdings in the Fund through the reinvestment of dividends in additional common shares of the Fund. Shareholders will have all dividends, including any capital gain dividends, reinvested automatically in additional shares of the Fund by U.S. Bancorp Fund Services, LLC, as Plan Agent, unless a shareholder elects to receive cash instead. An election to receive cash may be revoked or reinstated at the option of the shareholder. All distributions to investors who elect not to participate in the Plan (or whose broker or nominee elects not to participate on the investor’s behalf) will receive dividends and distributions in cash.

Whenever the Fund declares a dividend payable in cash or shares, the Plan Agent, acting on behalf of each participating shareholder, will take the dividend in shares only if the net asset value per Fund share is equal to or less than the market price per Fund share plus estimated brokerage commissions as of the payment date for the dividend.

When the dividend is to be taken in shares, the number of shares to be received is determined by dividing the dollar amount of the cash dividend by the net asset value per Fund share as of the dividend payment date or, if greater than the net asset value per Fund share, 95% of the closing share price on the payment date. Generally, if the net asset value per Fund share is greater than the market price per Fund share plus estimated brokerage commissions as of the dividend payment date, the Plan Agent will endeavor to buy shares on the open market at current prices promptly after the dividend payment date.

The reinvestment of dividends does not, in any way, relieve participating shareholders of any Federal, state or local tax. For Federal income tax purposes, the amount reportable in respect of a dividend received in shares of the Fund will be the fair market value of the shares received, which will be reportable as ordinary income and/or capital gains. Investors should consult with their own tax advisors for further information about the tax consequences of dividend reinvestment.

There is no brokerage charge for the reinvestment of dividends in additional Fund shares; however, all participants pay a pro rata share of brokerage commissions incurred by the Plan Agent when it makes open market purchases. There is no direct service charge to participants in the Plan, though the Fund reserves the right to amend the Plan to include a service charge payable by participants.

Additional information about the Plan may be obtained from, and any questions regarding the Plan should be addressed to, U.S. Bancorp Fund Services, Plan Agent for Barings Global Short Duration High Yield Fund’s Dividend Reinvestment Plan, P.O. Box 701, Milwaukee, WI 52301.

 

 

 

 

28


Barings Global Short Duration High Yield Fund 2017 Semi-Annual Report

 

LOGO

 

This privacy notice is being provided on behalf of Barings LLC and its affiliates: Barings Securities LLC; Barings Australia Pty Ltd; Barings Advisers (Japan) KK; Barings Investment Advisers (Hong Kong) Limited; Barings Funds Trust; Barings Global Short Duration High Yield Fund; Barings Corporate Investors and Barings Participation Investors (together, for purposes of this privacy notice, “Barings”).

When you use Barings you entrust us not only with your hard-earned assets but also with your personal and financial data. We consider your data to be private and confidential, and protecting its confidentiality is important to us. Our policies and procedures regarding your personal information are summarized below.

We may collect non-public personal information about you from:

 

    Applications or other forms, interviews, or by other means;

 

    Consumer or other reporting agencies, government agencies, employers or others;

 

    Your transactions with us, our affiliates, or others; and

 

    Our Internet website.

We may share the financial information we collect with our financial service affiliates, such as insurance companies, investment companies and securities broker-dealers. Additionally, so that we may continue to offer you products and services that best meet your investment needs and to effect transactions that you request or authorize, we may disclose the information we collect, as described above, to companies that perform administrative or marketing services on our behalf, such as transfer agents, custodian banks, service providers or printers and mailers that assist us in the distribution of investor materials or that provide operational support to Barings. These companies are required to protect this information and will use this information only for the services for which we hire them, and are not permitted to use or share this information for any other purpose. Some of these companies may perform such services in jurisdictions other than the United States. We may share some or all of the information we collect with other financial institutions with whom we jointly market products. This may be done only if it is permitted by the state in which you live. Some disclosures may be limited to your name, contact and transaction information with us or our affiliates.

Any disclosures will be only to the extent permitted by federal and state law. Certain disclosures may require us to get an “opt-in” or “opt-out” from you. If this is required, we will do so before information is shared. Otherwise, we do not share any personal information about our customers or former customers unless authorized by the customer or as permitted by law.

We restrict access to personal information about you to those employees who need to know that information to provide products and services to you. We maintain physical, electronic and procedural safeguards that comply with legal standards to guard your personal information. As an added measure, we do not include personal or account information in non-secure e-mails that we send you via the Internet without your prior consent. We advise you not to send such information to us in non-secure e-mails.

This joint notice describes the privacy policies of Barings, the Funds and Barings Securities LLC. It applies to all Barings and the Funds accounts you presently have, or may open in the future, using your social security number or federal taxpayer identification number – whether or not you remain a shareholder of our Funds or as an advisory client of Barings. As mandated by rules issued by the Securities and Exchange Commission, we will be sending you this notice annually, as long as you own shares in the Funds or have an account with Barings.

Barings Securities LLC is a member of the Financial Industry Regulatory Authority (FINRA) and the Securities Investor Protection Corporation (SIPC). Investors may obtain information about SIPC including the SIPC brochure by contacting SIPC online at www.sipc.org or calling (202)-371-8300. Investors may obtain information about FINRA including the FINRA Investor Brochure by contacting FINRA online at www.finra.org or by calling (800) 289-9999.

January 2017

 

 

 

29


LOGO     Barings Global Short Duration High Yield Fund


Item 2. Code of Ethics.

Not applicable for semi-annual reports.

Item 3. Audit Committee Financial Expert.

Not applicable for semi-annual reports.

Item 4. Principal Accountant Fees and Services.

Not applicable for semi-annual reports.

Item 5. Audit Committee of Listed Registrants.

Not applicable for semi-annual reports.

Item 6. Investments.

 

(a) Schedule of Investments is included as part of the report to shareholders filed under Item 1 of this Form.

 

(b) Not applicable.

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

Not applicable for semi-annual reports.

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

Not applicable for semi-annual reports.

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 President and Chief Financial Officer have reviewed the Registrant’s disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940 (the “Act”)) as of a date within 90 days of the filing of this report, as required by Rule 30a-3(b) under the Act and Rules 13a-15(b) or 15d-15(b) under the Securities Exchange Act of 1934. Based on their review, such officers have concluded that the disclosure controls and procedures are effective in ensuring that information required to be disclosed in this report is appropriately recorded, processed, summarized and reported and made known to them by others within the Registrant and by the Registrant’s service provider.


(b) There were no changes in the Registrant’s internal control over financial reporting (as defined in Rule 30a-3(d) under the Act) 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.

Item 12. Exhibits.

 

  (a) (1) ANY CODE OF ETHICS, OR AMENDMENTS THERETO, THAT IS THE SUBJECT OF DISCLOSURE REQUIRED BY ITEM 2, TO THE EXTENT THAT THE REGISTRANT INTENDS TO SATISFY THE ITEM 2 REQUIREMENTS THROUGH THE FILING OF AN EXHIBIT.

The Registrant has posted its Code of Ethics on its website at www.barings.com/assets/user/media/Closed-End-Fund-Code-of-Ethics.pdf.

 

  (a) (2) A SEPARATE CERTIFICATION FOR EACH PRINCIPAL EXECUTIVE OFFICER AND PRINCIPAL FINANCIAL OFFICER OF THE REGISTRANT AS REQUIRED BY RULE 30a-2 UNDER THE ACT.

Filed herewith for President.

Filed herewith for Chief Financial Officer.

 

  (a) (3) ANY WRITTEN SOLICITATION TO PURCHASE SECURITIES UNDER RULE 23c-1 UNDER THE ACT (17 CFR 270.23c-1) SENT OR GIVEN DURING THE PERIOD COVERED BY THE REPORT BY OR ON BEHALF OF THE REGISTRANT TO 10 OR MORE PERSONS.

Not applicable for this filing.

 

  (b) CERTIFICATIONS PURSUANT TO RULE 30a-2(b) UNDER THE ACT.

Filed herewith.


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)  Barings Global Short Duration High Yield Fund            

By (Signature and Title)  /s/ Sean Feeley                                                     

                                                 Sean Feeley, President

Date           September 8, 2017                                                                         

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/ Sean Feeley                                                     

                                                 Sean Feeley, President

Date        September 8, 2017                                                                             

By (Signature and Title)  /s/ Carlene Pollock                                                  

                                                 Carlene Pollock, Chief Financial Officer

Date        September 8, 2017