UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM N-CSR

 

 

CERTIFIED SHAREHOLDER REPORT OF REGISTERED

MANAGEMENT INVESTMENT COMPANIES

811-22562

Investment Company Act file number

 

 

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, 2018

Date of reporting period: December 31, 2018

 

 

 

---

Item 1. Reports to Stockholders.

 

 

---

 

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 or Part F of Form N-PORT (beginning with filings after March 31, 2019). 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.

LEGAL MATTERS

The Fund has entered into contractual arrangements with an investment adviser, transfer agent and custodian (collectively “service providers”) who each provide services to the Fund. Shareholders are not parties to, or intended beneficiaries of, these contractual arrangements, and these contractual arrangements are not intended to create any shareholder right to enforce them against the service providers or to seek any remedy under them against the service providers, either directly or on behalf of the Fund.

Under the Fund’s Bylaws, any claims asserted against or on behalf of the Fund, including claims against Trustees and officers must be brought in courts located within the Commonwealth of Massachusetts.

The Fund’s registration statement and this shareholder report are not contracts between the Fund and its shareholders and do not give rise to any contractual rights or obligations or any shareholder rights other than any rights conferred explicitly by federal or state securities laws that may not be waived.

---

Barings Global Short Duration High Yield Fund 2018 Annual Report

 

OFFICERS OF THE FUND

 

 

 

 

 

1

---

Barings Global Short Duration High Yield Fund 2018 Annual Report

 

Dear Fellow Shareholders,

We are pleased to provide you with the 2018 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 (the “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 Fund’s strategy, primarily focusing on North American and Western European high yield 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

For much of the year, the global high yield bond market generated a positive return on the back of stable economic growth, low inflation, and solid corporate fundamentals. During the fourth quarter, a bout of volatility across asset classes drove markets lower, with the high yield market ending the year negative. While declines in crude oil prices contributed to negative performance in the energy sector, the late period sell-off was more technical in nature as negative investor sentiment was exacerbated by global trade tensions, Federal Reserve policy and ongoing Brexit negotiations. Notwithstanding this negative sentiment, corporate balance sheets remained stable and the underlying fundamental picture remained sound.

In the U.S. high yield bond market, the automotive sector was the most significant underperformer during the year, followed by the energy sector, which was driven by the above-mentioned crude oil price volatility. Sectors with positive returns at year-end were led by health care, followed by telecommunications and utilities. As volatility spiked later in the year, the market became notably more risk averse, which led the CCC-rated portion of the market to underperform relative to B-rated and BB-rated. The option-adjusted spread and the yield-to-worst widened to end at 540 basis points (bps) and 8.01%, respectively, the highest since mid-2016. Yearly gross high yield new issuance was down 43% year-over-year with $168.3 billion pricing, while new issuance net of refinancing totaled $64.1 billion. U.S. high yield mutual funds saw outflows of $45.1 billion in 2018, and fund flows continue to be a significant driver of market moves. The par-weighted U.S. high yield default rate was up slightly to end the year; however, it was still below historical averages at 1.81%.

The European high yield bond market generated a negative return during the year, driven by a particularly volatile fourth quarter which declined in tandem with equity markets. Similarly to the U.S. high yield market, CCC-rated were a key driver of the underperformance, as a general risk-averse sentiment resulted in the category materially underperforming the higher rated portions of the market. Across sectors, basic industry was the worst performing sector, followed by the retail sector. The technology, health care and media sectors each generated modest positive returns during the year. European high yield bond new issuance was down from the 2017 record high, but still managed to finish with the fifth highest annual total on record. Gross new issuance finished the period with €63.5 billion pricing, while issuance net of refinancing finished at €29.8 billion. The option-adjusted spread widened year-over-year to end at 524 bps while the yield-to-worst widened to 5.07%. The European high yield default rate remains at historic lows and corporate fundamentals displayed stability during the year.

Barings Global Short Duration High Yield Fund Overview and Performance

The Fund ended December with a portfolio of 157 issuers, which is an increase from 144 issuers at the beginning of the year. A majority of the issuers continue to be domiciled in the U.S. (74.2%), with the U.K. (9.9%) and the Netherlands (2.6%) 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 over the course of the year, and exposure to foreign issuers decreased. While the Fund maintained a meaningful presence in the Western European market, finding attractive relative value opportunities in the U.S. market has generally been more favorable, mainly due to the larger opportunity set for idea sourcing. While Western Europe has a smaller market size, this region continues to be a core part of the portfolio and offers global diversification, reduced duration and higher quality relative to the U.S., and potentially attractive yield opportunities.

 

 

 

2

---

Barings Global Short Duration High Yield Fund 2018 Annual Report

 

As of December 31, 2018, the Fund remained, in our view, well positioned across the credit quality spectrum: 17.0% BB-rated and above, 60.4% B-rated, and 15.9% CCC-rated and below, with over 48% of the portfolio consisting of senior secured corporate obligations. The credit quality of the Fund’s underlying holdings changed since the beginning of the year, with a decrease in BB-rated and above credits, an over 10% increase in B-rated credits, and a minor decrease in CCC-rated and below credits. Non-publicly rated securities represented 6.8% of the Fund’s market value.¹

The Fund paid 12 consecutive monthly dividend payments of $0.1482 per share during the year. In total for 2018, the Fund paid investors $1.78 per share, which we believe is an attractive level of yield for a global short duration high yield bond fund, given today’s low interest rate environment. The Fund’s share price and net asset value (“NAV”) ended the reporting period at $15.95 and $18.28, respectively, representing a 12.75% discount to NAV. Based on the Fund’s share price and NAV on December 31, 2018, the Fund’s market price and NAV distribution rates using the most recent monthly dividend were 11.15% and 9.73%, respectively, on an annualized basis. Assets acquired through leverage, which represented 29.75% of the Fund’s total assets at the end of December, were accretive to net investment income and benefited shareholders.

On a full year 2018 basis, the NAV total return was -3.42%, underperforming 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 -1.98%. From a market value perspective, the total return for 2018 was -9.38%.²

In Conclusion

We believe that the volatility and sentiment in the high yield market was driven by several factors, including trade wars, Brexit and monetary policy. However, on a fundamental basis, we believe corporate high yield issuers continue to generate modest top and bottom-line growth, with leverage remaining at healthy and sustainable levels. Default rates are below historical averages and we expect this to continue into 2019. While crude oil prices and geopolitical events may continue to cause further market price volatility, we believe this represents an attractive opportunity for investors in high yield.

At Barings, we seek to remain steadfast in our approach to fundamental bottom-up research. By focusing on corporate fundamentals, we primarily seek to preserve investor capital – with a value-oriented mindset to opportunistically invest in companies that may be experiencing unnecessary technical pressures through market or economic cycles. We take a long-term view on investing and adhere to a disciplined, repeatable investment process that is deeply rooted across a large research team to help identify unique investment opportunities across the global high yield market.

On behalf of the Barings team, we appreciate your continued trust in our ability to help you achieve your long-term investment goals.

Sincerely,

 

Sean Feeley

President

 

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 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 expense.

The statements and opinions expressed are those of the author as of the date of this report. All information is historical and not indicative of future results and subject to change. This information is not a recommendation to buy or sell any security.

 

 

 

3

---

Barings Global Short Duration High Yield Fund 2018 Annual Report

 

PORTFOLIO COMPOSITION (% OF ASSETS*)

 

 

*	The percentages shown above represent a percentage of the assets as of December 31, 2018.

COUNTRY COMPOSITION (% OF ASSETS*)

 

 

*	The percentages shown above represent a percentage of the assets as of December 31, 2018.

 

 

 

4

---

Barings Global Short Duration High Yield Fund 2018 Annual Report

 

FINANCIAL REPORT

 

 

Statement of Assets and Liabilities		6
Statement of Operations		7
Statement of Cash Flows		8
Statement of Changes in Net Assets		9
Financial Highlights		10
Schedule of Investments		11-21
Notes to the Financial Statements		22-31
Report of Independent Registered Public Accounting Firm		32
Results of Shareholder Meeting		33
Interested Trustee		34
Independent Trustees		35-36
Officers of the Trust		37-38
Approval of Investment Management Agreement and Sub-Advisory Agreement		39-40
Fund Dividend Reinvestment Plan		41
Joint Privacy Notice		42

 

 

 

5

---

Barings Global Short Duration High Yield Fund 2018 Annual Report

 

STATEMENT OF ASSETS AND LIABILITIES

 

 

		DECEMBER 31, 2018
Assets
Investments, at fair value (cost $553,033,464)		$	511,828,483
Cash			7,064,903
Foreign currency, at fair value (cost $60,473)			60,941
Interest receivable			9,383,825
Prepaid expenses and other assets			50,470
Total assets			528,388,622
Liabilities
Note payable			157,200,000
Dividend payable			2,972,573
Payable to Adviser			461,200
Unrealized depreciation on forward foreign exchange contracts			730,196
Accrued expenses and other liabilities			333,276
Total liabilities			161,697,245
Total net assets		$	366,691,377
Net Assets:
Common shares, $0.00001 par value		$	201
Additional paid-in capital			468,758,610
Accumulated losses			(102,067,434	)
Total net assets		$	366,691,377
Common shares issued and outstanding (unlimited shares authorized)			20,057,849
Net asset value per share		$	18.28

 

See accompanying Notes to the Financial Statements.

 

 

 

6

---

Barings Global Short Duration High Yield Fund 2018 Annual Report

 

STATEMENT OF OPERATIONS

 

 

		YEAR ENDED DECEMBER 31, 2018
Investment Income
Interest income		$	49,976,523
Other income			200,186
Total investment income			50,176,709
Operating Expenses
Advisory fees			5,745,725
Interest expense			5,238,936
Administrator fees			507,349
Professional fees			163,536
Directors’ fees			112,116
Printing and mailing expense			60,794
Pricing expense			12,000
Other operating expenses			141,494
Total operating expenses			11,981,950
Net investment income			38,194,759
Realized and Unrealized Gains (Losses) on Investments
Net realized loss on investments			(33,473,389	)
Net realized gain on forward foreign exchange contracts			4,842,399
Net realized gain on foreign currency and translation			3,625
Net realized loss on investments			(28,627,365	)
Net change in unrealized depreciation of investments			(25,278,301	)
Net change in unrealized appreciation of forward foreign exchange contracts			180,218
Net change in unrealized depreciation of foreign currency and translation			(30,643	)
Net change in unrealized depreciation on investments			(25,128,726	)
Net realized and unrealized losses on investments			(53,756,091	)
Net decrease in net assets resulting from operations		$	(15,561,332	)

 

See accompanying Notes to the Financial Statements.

 

 

 

7

---

Barings Global Short Duration High Yield Fund 2018 Annual Report

 

STATEMENT OF CASH FLOWS

 

 

		YEAR ENDED DECEMBER 31, 2018
Reconciliation of net decrease in net assets resulting from operations to net cash provided by operating activities
Net decrease in net assets applicable to common shareholders resulting from operations		$	(15,561,332	)
Adjustments to reconcile net decrease in net assets applicable to common shareholders resulting from operations to net cash provided by operating activities:
Purchases of long-term investments			(282,717,083	)
Proceeds from sales of long-term investments			273,277,378
Proceeds from sales of foreign currency, net			378,319
Forward currency exchange contracts, net			(180,218	)
Net unrealized depreciation			25,285,280
Net realized loss			33,473,389
Amortization and accretion			(1,208,359	)
Changes in operating assets and liabilities:
Decrease in interest receivable			52,452
Increase in prepaid expenses and other assets			(23,623	)
Decrease in payable for investments purchased			(4,598,314	)
Decrease in payable to Adviser			(23,335	)
Decrease in accrued expenses and other liabilities			(17,427	)
Net cash provided by operating activities			28,137,127
Cash flows from financing activities
Advances from credit facility			45,000,000
Repayments on credit facility			(38,000,000	)
Distributions paid to common shareholders			(35,775,179	)
Net cash used in financing activities			(28,775,179	)
Net change in cash			(638,052	)
Cash beginning of year			7,702,955
Cash end of year		$	7,064,903
Supplemental disclosure of cash flow information
Income taxes paid		$	—
Interest paid			5,017,187

 

See accompanying Notes to the Financial Statements.

 

 

 

8

---

Barings Global Short Duration High Yield Fund 2018 Annual Report

 

STATEMENTS OF CHANGES IN NET ASSETS

 

 

		YEAR ENDED DECEMBER 31, 2018				YEAR ENDED DECEMBER 31, 2017
Operations
Net investment income		$	38,194,759			$	39,297,257
Net realized loss on investments			(28,627,365	)			(5,180,818	)
Net unrealized appreciation (depreciation) on investments			(25,128,726	)			2,116,320
Net increase (decrease) in net assets resulting from operations			(15,561,332	)			36,232,759
Dividends to Common Shareholders
From distributable earnings			(35,670,878	)			(32,762,778	)(1)
Return of capital			—				(4,159,710	)
Total dividends to common shareholders			(35,670,878	)			(36,922,488	)
Total decrease in net assets			(51,232,210	)			(689,729	)
Net Assets
Beginning of year			417,923,587				418,613,316
End of year		$	366,691,377			$	417,923,587	(2)

 

 

 

(1)

For the year ended December 31, 2017, the source of distributions was from net investment income. The current year presentation of distributions conforms with the Disclosure Update and Simplification issued by the Securities and Exchange Commission. See Note 2M.

(2)

Includes dividends in excess of net investment income of $(19,983). The requirement to disclose the corresponding amount as of December 31, 2018 was eliminated.

 

See accompanying Notes to the Financial Statements.

 

 

 

9

---

Barings Global Short Duration High Yield Fund 2018 Annual Report

 

FINANCIAL HIGHLIGHTS

 

 

		YEAR ENDED DECEMBER 31, 2018				YEAR ENDED DECEMBER 31, 2017				YEAR ENDED DECEMBER 31, 2016				YEAR ENDED DECEMBER 31, 2015				YEAR ENDED DECEMBER 31, 2014
Per Common Share Data
Net asset value, beginning of year		$	20.84			$	20.87			$	18.47			$	22.00			$	25.24
Income from investment operations:
Net investment income			1.89				1.77				1.57				1.90				2.12
Net realized and unrealized gains (losses) on investments			(2.67	)			0.04				2.68				(3.23	)			(2.76	)
Total increase (decrease) from investment operations			(0.78	)			1.81				4.25				(1.33	)			(0.64	)
Less dividends to common shareholders:
Net investment income			(1.78	)			(1.63	)			(1.60	)			(2.20	)			(2.56	)
Net realized gain			—				—				—				—				(0.04	)
Return of capital			—				(0.21	)			(0.25	)			—				—
Total dividends to common shareholders			(1.78	)			(1.84	)			(1.85	)			(2.20	)			(2.60	)
Net asset value, end of year		$	18.28			$	20.84			$	20.87			$	18.47			$	22.00
Per common share market value, end of year		$	15.95			$	19.38			$	19.23			$	16.49			$	20.19
Total investment return based on net asset value (1)			(3.42	)%			9.40	%			25.42	%			(5.57	)%			(2.25	)%
Total investment return based on market value (1)			(9.38	)%			10.41	%			29.44	%			(8.13	)%			(2.06	)%
Supplemental Data and Ratios
Net assets, end of year (000’s)		$	366,691			$	417,924			$	418,613			$	370,418			$	441,234
Ratio of expenses (before reductions and reimbursements) to average net assets			2.93	%			2.33	%			2.05	%(2)			2.27	%			2.20	%
Ratio of expenses (after reductions and reimbursements) to average net assets			2.93	%			2.33	%			1.78	%			2.27	%			2.20	%
Ratio of net investment income (before reductions and reimbursements) to average net assets			9.34	%			9.20	%			10.68	%(2)			9.18	%			8.47	%
Ratio of net investment income (after reductions and reimbursements) to average net assets			9.34	%			9.20	%			10.41	%			9.18	%			8.47	%
Portfolio turnover rate			48.92	%			36.59	%			44.81	%			38.13	%			63.66	%

 

(1)

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.

(2)

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.

 

See accompanying Notes to the Financial Statements.

 

 

 

10

---

Barings Global Short Duration High Yield Fund 2018 Annual Report

 

SCHEDULE OF INVESTMENTS

 

December 31, 2018

 

										SHARES				COST				FAIR VALUE
Equities — 4.18%*:
Common Stocks — 4.09%*:
Boomerang Tube Holdings, Inc.¤											36,149,532				$3,510,832				$3,514,819
Fieldwood Energy LLC											167,574				4,057,567				6,032,664
Jupiter Resources Inc.											1,171,624				5,662,541				4,979,674
Sabine Oil & Gas LLC¤											4,262				248,858				187,528
Templar Energy LLC¤											86,570				865,704				216,426
Templar Energy LLC¤											135,392				734,072				81,235
Total Common Stocks											37,714,954				15,079,574				15,012,346
Preferred Stocks — 0.04%*:
Pinnacle Operating Corp.¤											1,368,352				643,125				136,835
Total Preferred Stocks											1,368,352				643,125				136,835
Warrants — 0.05%*:
Appvion Holdings Corp.¤											12,892				137,281				137,279
Appvion Inc.¤											12,892				—				—
Sabine Oil & Gas LLC¤											13,512				60,669				20,268
Sabine Oil & Gas LLC											2,407				6,547				12,035
Total Warrants											41,703				204,497				169,582
Total Equities											39,125,009				15,927,196				15,318,763
		EFFECTIVE INTEREST RATE ‡				DUE DATE				PRINCIPAL				COST				FAIR VALUE
Fixed Income — 135.40%*:
Asset-Backed Securities — 7.30%*:
CDO/CLO — 7.30%*:
Anchorage Capital CLO LTD 2015-6A, 3M LIBOR + 6.350%^~			8.79	%			7/15/2030				600,000				$613,617				$559,681
Anchorage Capital CLO LTD 2016-9A, 3M LIBOR + 7.250%^~			9.69				1/15/2029				1,500,000				1,543,538				1,499,874
BlueMountain CLO LTD 2018-23A, 3M LIBOR + 5.650%^~			8.11				10/20/2031				1,000,000				1,000,000				897,469
Carbone CLO, LTD 2017-1A, 3M LIBOR + 5.900%^~			8.37				1/20/2031				750,000				750,000				679,088
Carlyle Global Market Strategies 2013-3A, 3M LIBOR + 7.750%^~			10.19				10/15/2030				1,000,000				1,000,000				908,214
Carlyle Global Market Strategies 2017-5A, 3M LIBOR + 5.300%^~			7.77				1/20/2030				700,000				700,000				615,777
Cedar Funding LTD 2016-6A, 3M LIBOR + 5.900%^~			8.37				10/20/2028				2,500,000				2,500,000				2,487,500
Galaxy CLO Ltd 2017-24A, 3M LIBOR + 5.500%^~			7.94				1/15/2031				1,000,000				1,000,000				880,977
GoldenTree Loan Management 2018-3A, 3M LIBOR + 6.500%^~			8.97				4/22/2030				1,500,000				1,413,479				1,262,769

 

See accompanying Notes to the Financial Statements.

 

 

 

11

---

Barings Global Short Duration High Yield Fund 2018 Annual Report

 

SCHEDULE OF INVESTMENTS (CONTINUED)

 

December 31, 2018

 

		EFFECTIVE INTEREST RATE ‡				DUE DATE				PRINCIPAL				COST				FAIR VALUE
Fixed Income (Continued)
Asset-Backed Securities (Continued)
CDO/CLO (Continued)
GoldenTree Loan Opportunities XI Ltd 2015-11A, 3M LIBOR + 5.400%^~			7.84	%			1/18/2031				500,000				$500,000				$442,453
KKR Financial CLO Ltd 2017-20, 3M LIBOR + 5.500%^~			7.94				10/16/2030				1,500,000				1,500,000				1,304,296
Madison Park Funding Ltd 2015-19A, 3M LIBOR + 4.350%^~			6.82				1/22/2028				1,000,000				1,000,000				887,336
Madison Park Funding Ltd 2016-22, 3M LIBOR + 6.650%^~			9.14				10/25/2029				1,000,000				1,026,743				966,358
Madison Park Funding Ltd 2016-24, 3M LIBOR + 7.150%^~			9.62				1/20/2028				1,000,000				1,036,558				999,828
Madison Park Funding Ltd 2018-29A, 3M LIBOR + 7.570%^~#			9.82				10/18/2030				2,000,000				1,960,000				1,759,958
Magnetite CLO LTD 2016-18A, 3M LIBOR + 7.600%^~			10.22				11/15/2028				1,400,000				1,386,000				1,280,005
OHA Credit Partners LTD 2015-11A, 3M LIBOR + 7.900%^~			10.40				1/20/2032				2,000,000				1,970,323				1,751,090
OHA Loan Funding LTD 2013-1A, 3M LIBOR + 7.900%^~			10.38				7/23/2031				1,500,000				1,477,500				1,349,275
Sound Point CLO LTD 2017-4A, 3M LIBOR + 5.500%^~			7.97				1/21/2031				2,000,000				2,000,000				1,760,828
Steele Creek CLO Ltd 2017-1A, 3M LIBOR + 6.200%^~			8.64				10/15/2030				800,000				800,000				715,041
Voya CLO Ltd 2015-1A, 3M LIBOR + 5.650%^~			8.09				1/18/2029				1,700,000				1,688,778				1,550,130
Wellfleet CLO Ltd 2017-3A, 3M LIBOR + 5.550%^~			8.00				1/17/2031				1,500,000				1,500,000				1,310,071
Wind River CLO Ltd 2017-4A, 3M LIBOR + 5.800%^~			8.44				11/20/2030				1,000,000				1,000,000				900,713
Total CDO/CLO											29,450,000				29,366,536				26,768,731
Total Asset-Backed Securities											29,450,000				29,366,536				26,768,731
Bank Loans§ — 26.03%*:
Broadcasting and Entertainment — 1.18%*:
Endemol, 3M LIBOR + 5.750%~+			8.55				8/13/2021				4,502,848				4,351,939				4,306,975
Total Broadcasting and Entertainment											4,502,848				4,351,939				4,306,975
Cargo Transport — 0.79%*:
PS Logistics, 3M LIBOR + 4.750%~			7.28				3/13/2025				2,992,500				3,018,829				2,902,725
Total Cargo Transport											2,992,500				3,018,829				2,902,725

 

See accompanying Notes to the Financial Statements.

 

 

 

12

---

Barings Global Short Duration High Yield Fund 2018 Annual Report

 

SCHEDULE OF INVESTMENTS (CONTINUED)

 

December 31, 2018

 

		EFFECTIVE INTEREST RATE ‡				DUE DATE				PRINCIPAL				COST				FAIR VALUE
Fixed Income (Continued)
Bank Loans (Continued)
Chemicals, Plastics and Rubber — 0.54%*:
Colouroz Investment 2 LLC, 3M LIBOR + 7.250%~+			9.74	%			9/7/2022				2,033,201				$2,025,452				$1,683,755
SI Group, 3M LIBOR + 4.750%~			7.19				10/15/2025				311,704				299,423				299,235
Total Chemicals, Plastics and Rubber											2,344,905				2,324,875				1,982,990
Diversified/Conglomerate Manufacturing — 0.96%*:
Averys, 3M LIBOR + 8.250%~+			8.25				9/25/2026				500,000				571,943				574,669
Commercial Vehicle Group Inc., 1M LIBOR + 6.000%~			8.52				4/12/2023				614,448				604,361				608,304
SunSource, Inc., 1M LIBOR + 8.000%~			10.52				4/30/2026				2,500,000				2,522,667				2,343,750
Total Diversified/Conglomerate Manufacturing											3,614,448				3,698,971				3,526,723
Diversified/Conglomerate Service — 3.17%*:
Cologix, 1M LIBOR + 7.000%~			9.52				3/21/2025				1,000,000				990,000				963,330
Misys (Finastra), 3M LIBOR + 7.250%~+			10.05				6/16/2025				11,630,136				11,683,208				10,674,837
Total Diversified/Conglomerate Service											12,630,136				12,673,208				11,638,167
Electronics — 2.42%*:
Allflex Holdings, Inc., 3M LIBOR + 7.000%~			9.48				7/19/2021				5,526,776				5,512,033				5,436,966
PowerSchool, 1M LIBOR + 6.750%~			9.13				7/31/2026				3,500,000				3,465,000				3,430,000
Total Electronics											9,026,776				8,977,033				8,866,966
Healthcare, Education and Childcare — 4.10%*:
Argon Medical Devices, 1M LIBOR + 8.000%~			10.52				1/23/2026				8,179,057				8,261,632				8,076,819
ADVANZ PHARMA Corp., 1M LIBOR + 5.500%~+			7.89				9/6/2024				3,980,000				3,902,067				3,786,532
Prospect Medical Holdings, 1M LIBOR + 5.500%~			7.94				2/22/2024				3,225,697				3,191,031				3,177,311
Total Healthcare, Education and Childcare											15,384,754				15,354,730				15,040,662
Home and Office Furnishings, Housewares, and Durable Consumer Products — 0.95%*:
Serta Simmons Beddings LLC, 1M LIBOR + 8.000%~			10.43				11/8/2024				4,933,333				4,906,721				3,486,239
Total Home and Office Furnishings, Housewares, and Durable Consumer Products											4,933,333				4,906,721				3,486,239
Information Technology — 0.19%*:
BMC Software Finance, 3M LIBOR + 4.250%~			7.05				10/2/2025				713,124				705,993				686,161
Total Information Technology											713,124				705,993				686,161

 

See accompanying Notes to the Financial Statements.

 

 

 

13

---

Barings Global Short Duration High Yield Fund 2018 Annual Report

 

SCHEDULE OF INVESTMENTS (CONTINUED)

 

December 31, 2018

 

		EFFECTIVE INTEREST RATE ‡				DUE DATE				PRINCIPAL				COST				FAIR VALUE
Fixed Income (Continued)
Bank Loans (Continued)
Insurance — 0.81%*:
Asurion, 1M LIBOR + 6.500%~			9.02	%			8/4/2025				3,000,000				$3,074,460				$2,960,640
Total Insurance											3,000,000				3,074,460				2,960,640
Mining, Steel, Iron and Non-Precious Metals — 0.69%*:
Boomerang Tube, LLC, 3M LIBOR + 6.500%¤~			7.52				10/31/2021				2,540,684				2,540,684				2,540,684
Total Mining, Steel, Iron and Non-Precious Metals											2,540,684				2,540,684				2,540,684
Oil and Gas — 8.65%*:
Caelus Energy Alaska, 3M LIBOR + 7.500%~			10.30				4/15/2020				18,166,240				17,707,940				16,107,460
Fieldwood Energy LLC, 1M LIBOR + 5.250%~			7.77				4/11/2022				6,751,171				6,198,715				6,291,281
Fieldwood Energy LLC, 1M LIBOR + 7.250%~			9.77				4/11/2023				7,481,592				2,216,005				6,501,503
Gulf Finance, LLC, 1M LIBOR + 5.250%~			7.89				8/25/2023				3,726,094				3,610,394				2,827,174
Total Oil and Gas											36,125,097				29,733,054				31,727,418
Printing and Publishing — 1.58%*:
Getty Images, Inc., 1M LIBOR + 3.500%~			6.02				10/18/2019				5,954,837				5,827,390				5,776,192
Total Printing and Publishing											5,954,837				5,827,390				5,776,192
Total Bank Loans											103,763,442				97,187,887				95,442,542
Corporate Bonds — 102.07%*:
Aerospace and Defense — 1.53%*:
Swissport Investments^+			6.75				12/15/2021				950,000				1,040,150				1,112,956
Triumph Group, Inc.#			7.75				8/15/2025				1,289,000				1,289,000				1,137,542
VistaJet Malta Finance PLC^#			7.75				6/1/2020				3,510,000				3,344,228				3,360,825
Total Aerospace and Defense											5,749,000				5,673,378				5,611,323
Beverage, Food and Tobacco — 3.31%*:
Boparan Finance plc^+			5.50				7/15/2021				800,000				1,018,715				732,130
Carrols Corp.#			8.00				5/1/2022				709,000				723,063				710,773
JBS S.A.#^			6.75				2/15/2028				2,886,000				2,886,000				2,813,850
JBS USA LLC#^			7.25				6/1/2021				3,000,000				3,033,476				3,015,000
Manitowoc Foodservice#			9.50				2/15/2024				1,074,000				1,074,000				1,149,180
Refresco Group N.V.^+			6.50				5/15/2026				1,600,000				1,931,994				1,686,545
Simmons Foods, Inc.^			5.75				11/1/2024				2,885,000				2,047,647				2,048,350
Total Beverage, Food and Tobacco											12,954,000				12,714,895				12,155,828
Broadcasting and Entertainment — 6.43%*:
Arqiva Broadcast^+			6.75				9/30/2023				4,950,000				6,340,734				6,309,269
Clear Channel Worldwide Holdings Inc.#			7.63				3/15/2020				5,165,000				5,096,096				5,048,788
Dish DBS Corp.#			7.75				7/1/2026				7,094,000				6,856,459				5,870,285
Intelsat Jackson Holdings Ltd.#^			9.75				7/15/2025				4,609,000				4,843,541				4,621,905

 

See accompanying Notes to the Financial Statements.

 

 

 

14

---

Barings Global Short Duration High Yield Fund 2018 Annual Report

 

SCHEDULE OF INVESTMENTS (CONTINUED)

 

December 31, 2018

 

		EFFECTIVE INTEREST RATE ‡				DUE DATE				PRINCIPAL				COST				FAIR VALUE
Fixed Income (Continued)
Corporate Bonds (Continued)
Broadcasting and Entertainment (Continued)
Intelsat Jackson Holdings Ltd.#^			8.50	%			10/15/2024				1,801,000				$1,801,000				$1,746,970
Total Broadcasting and Entertainment											23,619,000				24,937,830				23,597,217
Buildings and Real Estate — 0.50%*:
New Enterprise Stone & Lime Co., Inc.#^			6.25				3/15/2026				2,000,000				2,032,939				1,820,000
Total Buildings and Real Estate											2,000,000				2,032,939				1,820,000
Cargo Transport — 4.91%*:
CMA CGM^+			7.75				1/15/2021				280,000				352,816				315,879
Direct ChassisLink, Inc.#^			10.00				6/15/2023				8,444,000				8,607,333				8,106,240
Kenan Advantage#^			7.88				7/31/2023				10,000,000				10,054,995				9,575,000
Total Cargo Transport											18,724,000				19,015,144				17,997,119
Chemicals, Plastics and Rubber — 8.75%*:
Carlyle Group#^			8.75				6/1/2023				3,000,000				2,970,300				2,872,500
Chemours Co.#			7.00				5/15/2025				5,962,000				5,606,414				6,006,715
Consolidated Energy Finance S.A.#^			6.88				6/15/2025				1,779,000				1,770,105				1,694,498
CVR Partners LP#^			9.25				6/15/2023				6,213,000				6,144,761				6,461,520
Nouryon#^+			8.00				10/1/2026				4,214,000				4,228,788				3,897,950
Nouryon^+			6.50				10/1/2026				1,765,000				1,973,913				1,866,032
Pinnacle Operating Corp.#^			9.00				5/15/2023				1,993,613				1,993,613				1,295,848
TPC Group, Inc.#^			8.75				12/15/2020				8,398,000				8,404,339				7,978,100
Total Chemicals, Plastics and Rubber											33,324,613				33,092,233				32,073,163
Diversified/Conglomerate Manufacturing — 0.98%*:
FXI Holdings Inc.#^			7.88				11/1/2024				1,000,000				990,000				857,500
StoneMor Partners L.P.#			7.88				6/1/2021				3,000,000				2,944,274				2,737,500
Total Diversified/Conglomerate Manufacturing											4,000,000				3,934,274				3,595,000
Diversified/Conglomerate Service — 6.52%*:
Algeco Scotsman^+			6.50				2/15/2023				1,750,000				2,126,414				1,958,045
ATALIAN S.A.^+			6.63				12/31/2025				550,000				765,516				574,242
Carlson Travel Holdings Inc.#^			9.50				12/15/2024				1,305,000				1,305,000				1,184,287
ADT Corp/Protection One#^			9.25				5/15/2023				13,983,000				14,748,634				14,419,969
Zachry Holdings Inc.#^			7.50				2/1/2020				5,875,000				5,863,099				5,757,500
Total Diversified/Conglomerate Service											23,463,000				24,808,663				23,894,043
Diversified Natural Resources, Precious Metals and Minerals — 0.51%*:
IAMGOLD Corporation#^+			7.00				4/15/2025				2,000,000				2,000,000				1,880,000
Total Diversified Natural Resources, Precious Metals and Minerals											2,000,000				2,000,000				1,880,000

 

See accompanying Notes to the Financial Statements.

 

 

 

15

---

Barings Global Short Duration High Yield Fund 2018 Annual Report

 

SCHEDULE OF INVESTMENTS (CONTINUED)

 

December 31, 2018

 

		EFFECTIVE INTEREST RATE ‡				DUE DATE				PRINCIPAL				COST				FAIR VALUE
Fixed Income (Continued)
Corporate Bonds (Continued)
Electronics — 3.10%*:
International Wire Group Inc.#^			10.75	%			8/1/2021				4,000,000				$3,797,821				$3,560,000
TIBCO Software, Inc.#^			11.38				12/1/2021				2,915,000				3,095,140				3,053,462
Veritas Bermuda Ltd.#^			10.50				2/1/2024				7,284,000				6,007,117				4,771,020
Total Electronics											14,199,000				12,900,078				11,384,482
Finance — 3.73%*:
Galaxy Finco Ltd.#^+			7.88				11/15/2021				3,900,000				6,351,213				4,853,635
GFKL Financial Services#^+			8.50				11/1/2022				3,975,000				5,714,172				4,252,545
GFKL Financial Services#^+			11.00				11/1/2023				1,600,000				2,206,558				1,529,193
Virtu Financial LLC#^			6.75				6/15/2022				3,132,000				3,132,000				3,044,210
Total Finance											12,607,000				17,403,943				13,679,583
Healthcare, Education and Childcare — 14.15%*:
Auris Luxembourg^			8.00				1/15/2023				1,750,000				2,037,029				2,041,356
Avantor Performance Materials Holdings, Inc.#^			9.00				10/1/2025				5,180,000				5,279,990				5,180,000
Bausch Health Companies Inc.#^			9.00				12/15/2025				12,922,000				13,192,773				12,857,390
Bausch Health Companies Inc.#^			9.25				4/1/2026				3,397,000				3,397,000				3,397,000
Bausch Health Companies Inc.#^			8.50				1/31/2027				317,000				317,000				307,490
Endo International^			6.00				2/1/2025				1,500,000				1,374,142				1,076,250
Envision Healthcare Corp.#^			8.75				10/15/2026				7,559,000				7,439,567				6,538,535
Horizon Pharma plc#^			8.75				11/1/2024				1,595,000				1,597,072				1,618,925
IDH Finance PLC^+			6.25				8/15/2022				1,150,000				1,506,794				1,202,680
Regionalcare Hospital Partners, Inc.#^			8.25				5/1/2023				9,996,000				10,079,091				10,095,960
Surgery Center Holdings, Inc.#^			8.88				4/15/2021				2,950,000				2,997,561				2,942,625
Synlab^+			8.25				7/1/2023				2,000,000				2,540,400				2,351,768
Tenet Healthcare Corporation#			8.13				4/1/2022				1,700,000				1,682,209				1,704,250
Teva Pharmaceutical#+			6.75				3/1/2028				578,000				578,000				560,048
Total Healthcare, Education and Childcare											52,594,000				54,018,628				51,874,277
Home and Office Furnishings, Housewares, and Durable Consumer Products — 1.49%*:
Balta#^+			7.75				9/15/2022				4,171,500				4,851,526				4,417,711
Mattel, Inc.#^			6.75				12/31/2025				1,169,000				1,169,000				1,042,970
Total Home and Office Furnishings, Housewares, and Durable Consumer Products											5,340,500				6,020,526				5,460,681
Hotels, Motels, Inns and Gaming — 1.18%*:
Boyne USA, Inc.#^			7.25				5/1/2025				950,000				950,000				980,875
TVL Finance Plc^+			8.50				5/15/2023				2,560,000				3,629,384				3,343,440
Total Hotels, Motels, Inns and Gaming											3,510,000				4,579,384				4,324,315

 

See accompanying Notes to the Financial Statements.

 

 

 

16

---

Barings Global Short Duration High Yield Fund 2018 Annual Report

 

SCHEDULE OF INVESTMENTS (CONTINUED)

 

December 31, 2018

 

		EFFECTIVE INTEREST RATE ‡				DUE DATE				PRINCIPAL				COST				FAIR VALUE
Fixed Income (Continued)
Corporate Bonds (Continued)
Insurance — 0.97%*:
Onex York Acquisition Corp.#^			8.50	%			10/1/2022				5,102,000				$5,028,852				$3,545,890
Total Insurance											5,102,000				5,028,852				3,545,890
Leisure, Amusement, Motion Pictures and Entertainment — 0.90%*:
Perform Group^+			8.50				11/15/2020				2,600,000				3,435,112				3,315,285
Total Leisure, Amusement, Motion Pictures and Entertainment											2,600,000				3,435,112				3,315,285
Machinery (Non-Agriculture, Non-Construct, Non-Electronic) — 2.29%*:
Apex Tool Group LLC#^			9.00				2/15/2023				9,913,000				9,707,704				8,376,485
Total Machinery (Non-Agriculture, Non-Construct, Non-Electronic)											9,913,000				9,707,704				8,376,485
Mining, Steel, Iron and Non-Precious Metals — 10.47%*:
Alliance Resources Partners, L.P.#^			7.50				5/1/2025				823,000				823,000				825,057
Big River Steel LLC#^			7.25				9/1/2025				1,547,000				1,547,000				1,535,397
Consol Energy Inc.#^			11.00				11/15/2025				9,316,000				9,698,332				10,201,020
First Quantum Minerals#^+			7.25				4/1/2023				2,000,000				1,904,627				1,760,000
First Quantum Minerals#^+			7.50				4/1/2025				4,775,000				4,745,156				3,939,375
Hecla Mining Company#			6.88				5/1/2021				5,888,000				5,764,254				5,770,240
Kissner Milling Company Limited#^			8.38				12/1/2022				6,475,000				6,467,593				6,442,625
Northwest Acquisitions ULC#^+			7.13				11/1/2022				411,000				406,738				405,986
SunCoke Energy Inc.#^			7.50				6/15/2025				2,743,000				2,702,212				2,598,993
TMS International Corp.#^			7.25				8/15/2025				2,250,000				2,250,000				2,103,750
United States Steel Corp.#			6.88				8/15/2025				2,093,000				2,093,000				1,915,095
Warrior Met Coal Inc.#^			8.00				11/1/2024				914,000				914,000				907,145
Total Mining, Steel, Iron and Non-Precious Metals											39,235,000				39,315,912				38,404,683
Oil and Gas — 19.79%*:
CGG Holdings^+			7.88				5/1/2023				200,000				246,740				230,296
Chaparral Energy Inc.#^			8.75				7/15/2023				2,589,000				2,589,000				1,851,135
CITGO Holding Inc.#^			10.75				2/15/2020				11,331,000				11,389,556				11,557,620
Covey Park Energy LLC#^			7.50				5/15/2025				1,597,000				1,602,575				1,373,420
Ensco PLC#			7.75				2/1/2026				603,000				603,000				446,220
Enven Energy Ventures#^			11.00				2/15/2023				3,572,000				3,572,000				3,822,040
EP Energy#^			9.38				5/1/2024				5,215,000				3,544,831				2,320,675
EP Energy#^			8.00				2/15/2025				10,183,000				8,666,036				4,200,488
Ferrellgas Partners LP#			8.63				6/15/2020				7,560,000				7,529,575				5,405,400
Ferrellgas Partners LP#			8.63				6/15/2020				1,254,000				1,230,949				896,610
Globe Luxembourg SA#^+			9.88				4/1/2022				3,121,000				3,201,265				2,559,220
Globe Luxembourg SA#^+			9.63				4/1/2023				4,238,000				4,297,137				3,411,590
Jonah Energy LLC#^			7.25				10/15/2025				3,714,000				3,431,551				2,376,960

 

See accompanying Notes to the Financial Statements.

 

 

 

17

---

Barings Global Short Duration High Yield Fund 2018 Annual Report

 

SCHEDULE OF INVESTMENTS (CONTINUED)

 

December 31, 2018

 

		EFFECTIVE INTEREST RATE ‡				DUE DATE				PRINCIPAL				COST				FAIR VALUE
Fixed Income (Continued)
Corporate Bonds (Continued)
Oil and Gas (Continued)
Kosmos Energy Ltd.#^+			7.88	%			8/1/2021				6,414,000				$6,236,315				$6,381,930
Kosmos Energy Ltd.#^+			7.88				8/1/2021				3,984,000				3,903,061				4,053,720
Neptune Energy#^			6.63				5/15/2025				1,600,000				1,600,000				1,484,000
Pbf Holding Company LLC#			7.00				11/15/2023				1,000,000				997,500				955,000
Pbf Logistics LP#			6.88				5/15/2023				1,117,000				1,117,000				1,097,453
Topaz Marine SA#^+			9.13				7/26/2022				8,500,000				8,500,000				8,509,860
Vine Oil & Gas#^			9.75				4/15/2023				5,000,000				5,000,000				4,000,000
Welltec#^+			9.50				12/1/2022				5,713,000				5,692,986				5,641,588
Total Oil and Gas											88,505,000				84,951,077				72,575,225
Personal and Non Durable Consumer Products — 0.52%*:
Herbalife Ltd.#^			7.25				8/15/2026				585,000				585,000				576,225
High Ridge Brands Co.^			8.88				3/15/2025				2,982,000				2,982,000				1,312,080
Total Personal and Non Durable Consumer Products											3,567,000				3,567,000				1,888,305
Personal Transportation — 1.10%*:
Hertz Corporation#^			7.63				6/1/2022				3,678,000				3,673,356				3,466,515
Naviera Armas, 3M EURIBOR + 6.500%^~+			6.50				7/31/2023				525,000				609,931				582,059
Total Personal Transportation											4,203,000				4,283,287				4,048,574
Printing and Publishing — 0.54%*:
Cimpress N.V.#^			7.00				6/15/2026				2,069,000				2,069,000				1,986,240
Total Printing and Publishing											2,069,000				2,069,000				1,986,240
Retail Store — 1.94%*:
Aurum^+			8.50				4/15/2023				600,000				854,701				708,550
Douglas GMBH^+			6.25				7/15/2022				775,000				750,924				649,097
Ken Garff Automotive#^			7.50				8/15/2023				1,092,000				1,092,000				1,075,620
Maxeda DIY^+			6.13				7/15/2022				750,000				855,530				788,542
Travelex#^+			8.00				5/15/2022				4,000,000				4,421,260				3,895,370
Total Retail Store											7,217,000				7,974,415				7,117,179
Telecommunications — 4.47%*:
Altice S.A.#^+			7.50				5/15/2026				1,322,000				1,366,041				1,206,325
Altice S.A.#^+			7.63				2/15/2025				4,476,000				4,412,371				3,345,810
Altice S.A.#^+			9.00				6/15/2023				3,150,000				4,100,518				3,717,606
Digicel Limited#^+			8.25				9/30/2020				3,000,000				2,965,809				2,025,000
Hughes Satellite Systems Corp#			6.63				8/1/2026				3,000,000				2,931,544				2,748,750
Sprint Corp.#			7.63				3/1/2026				3,108,000				3,105,500				3,069,150
Wind Tre, 3M EURIBOR + 2.750%^~+			2.75				1/20/2024				270,000				278,165				276,097
Total Telecommunications											18,326,000				19,159,948				16,388,738

 

See accompanying Notes to the Financial Statements.

 

 

 

18

---

Barings Global Short Duration High Yield Fund 2018 Annual Report

 

SCHEDULE OF INVESTMENTS (CONTINUED)

 

December 31, 2018

 

		EFFECTIVE INTEREST RATE ‡				DUE DATE				PRINCIPAL				COST				FAIR VALUE
Fixed Income (Continued)
Corporate Bonds (Continued)
Textiles & Leather — 0.15%*:
The Lycra Company^+			5.38	%			5/1/2023				200,000				$245,649				$210,199
The Lycra Company#^+			7.50				5/1/2025				372,000				372,000				348,006
Total Textiles & Leather											572,000				617,649				558,205
Utilities — 1.84%*:
Nordex^+			6.50				2/1/2023				1,950,000				2,421,789				2,016,155
NRG Energy#			7.25				5/15/2026				1,385,000				1,390,389				1,436,938
Techem^+			6.00				7/30/2026				3,050,000				3,497,796				3,293,514
Total Utilities											6,385,000				7,309,974				6,746,607
Total Corporate Bonds											401,778,113				410,551,845				374,298,447
Total Fixed Income											534,991,555				537,104,268				496,509,720
Total Investments											574,116,564				553,033,464				511,828,483
Other assets and liabilities — (39.58)%																			(145,137,106	)
Net Assets — 100%																			$366,691,377

 

‡	The effective interest rates are based on settled commitment amount.

*	Calculated as a percentage of net assets applicable to common shareholders.

¤	Value determined using significant unobservable inputs, security is categorized as Level 3.

^	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.

~	Variable rate security. The interest rate shown is the rate in effect at December 31, 2018.

#	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.

§

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 December 31, 2018. 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.

 

See accompanying Notes to the Financial Statements.

 

 

 

19

---

Barings Global Short Duration High Yield Fund 2018 Annual Report

 

SCHEDULE OF INVESTMENTS (CONTINUED)

 

December 31, 2018

 

Distributions of investments by country of risk. Percentage of assets are expressed by market value excluding cash and accrued income as of December 31, 2018.

 

		United States			74.2%
		United Kingdom			9.9%
		Netherlands			2.6%
		Ghana			2.0%
		Germany			2.0%
		Azerbaijan			1.7%
		Canada			1.4%
		France			1.4%
		Zambia			1.1%
		Denmark			1.1%
		Portugal			1.0%
		(Individually less than 1%)			1.6%
					100.0%

 

See accompanying Notes to the Financial Statements.

 

 

 

20

---

Barings Global Short Duration High Yield Fund 2018 Annual Report

 

SCHEDULE OF INVESTMENTS (CONTINUED)

 

December 31, 2018

 

A summary of outstanding derivatives at December 31, 2018 is as follows:

Schedule of Open Forward Currency Contracts

December 31, 2018

 

CURRENCY TO BE RECEIVED				CURRENCY TO BE DELIVERED(1)								COUNTERPARTY OF CONTRACT				FORWARD SETTLEMENT DATE				UNREALIZED APPRECIATION/ (DEPRECIATION)
280,672		USD			(282,474	)			EUR				BANK OF NEW YORK MELLON				1/15/2019			$	(1,802	)
29,620,699		USD			(29,910,396	)			EUR				JP MORGAN CHASE SECURITIES INC.				1/15/2019				(289,697	)
2,771,130		USD			(2,790,187	)			EUR				MORGAN STANLEY & CO. INCORPORATED				1/15/2019				(19,057	)
25,365,049		USD			(25,780,650	)			GBP				JP MORGAN CHASE SECURITIES INC.				1/15/2019				(415,601	)
1,780,801		USD			(1,784,840	)			GBP				MORGAN STANLEY & CO. INCORPORATED				1/15/2019				(4,039	)
																				$	(730,196	)

 

(1)	Values are listed in U.S. dollars.

 

See accompanying Notes to the Financial Statements.

 

 

 

21

---

Barings Global Short Duration High Yield Fund 2018 Annual Report

 

NOTES TO THE FINANCIAL STATEMENTS

 

December 31, 2018

 

 

 

 

22

---

Barings Global Short Duration High Yield Fund 2018 Annual Report

 

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

 

December 31, 2018

 

 

 

 

23

---

Barings Global Short Duration High Yield Fund 2018 Annual Report

 

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

 

December 31, 2018

 

 

DESCRIPTION		LEVEL 1				LEVEL 2				LEVEL 3				TOTAL INVESTMENTS
Assets:
Equities:
Common Stocks		$	–			$	11,012,338			$	4,000,008			$	15,012,346
Preferred Stocks			–				–				136,835				136,835
Warrants			–				12,035				157,547				169,582
Total Equities:			–				11,024,373				4,294,390				15,318,763
Fixed Income:
Asset-Backed Securities		$	–			$	26,768,731			$	–			$	26,768,731
Bank Loans			–				92,901,858				2,540,684				95,442,542
Corporate Bonds			–				374,298,447				–				374,298,447
Total Fixed Income		$	–			$	493,969,036			$	2,540,684			$	496,509,720
Total Assets		$	–			$	504,993,409			$	6,835,074			$	511,828,483
Liabilities:
Foreign Exchange Contracts		$	–			$	730,196			$	–			$	730,196
Total Liabilities:		$	–			$	730,196			$	–			$	730,196

 

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 December 31, 2018:

 

TYPE OF ASSETS		FAIR VALUE AS OF DECEMBER 31, 2018				VALUATION TECHNIQUE(S)		UNOBSERVABLE INPUT
Equities
Appvion Holdings Corp.		$	137,279			Broker Quote		$10.65: pricing source depth of 1.
Appvion, Inc.		$	0			Broker Quote		$0.00: pricing source depth of 1.
Boomerang Tube Holdings, Inc.		$	3,514,819			Model Price		Average Enterprise Valuation Multiple: 5 year projection, 5.5x; EBITDA: $19.8 million, 15% discount rate.
Pinnacle Operating Corp.		$	136,835			Broker Quote		$0.10: pricing source depth of 1.
Sabine Oil & Gas, LLC		$	187,528			Broker Quote		$44.00: pricing source depth of 1.
Sabine Oil & Gas, LLC		$	20,268			Broker Quote		$1.50: pricing source depth of 1.
Templar Energy LLC		$	216,426			Broker Quote		$2.50: pricing source depth of 1.
Templar Energy LLC		$	81,235			Broker Quote		$0.60: pricing source depth of 1.
Second Lien Term Loans
Boomerang Tube, LLC		$	2,540,684			Model Price		Average Enterprise Valuation Multiple: 5 year projection, 5.5x; EBITDA: $19.8 million, 15% discount rate.

 

 

 

24

---

Barings Global Short Duration High Yield Fund 2018 Annual Report

 

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

 

December 31, 2018

 

 

 

		BALANCE AT DECEMBER 31, 2017				TRANSFERS INTO LEVEL 3				TRANSFERS OUT OF LEVEL 3				PURCHASES				SALES				ACCRETION OF DISCOUNT				REALIZED GAIN/ (LOSS)				CHANGE IN UNREALIZED				BALANCE AT DECEMBER 31, 2018				CHANGE IN UNREALIZED APPRECIATION / (DEPRECIATION) FROM INVESTMENTS HELD AS OF DECEMBER 31, 2018
Equities
Common Stocks		$	1,344,586			$	0			$	0			$	3,510,832			$	0			$	0			$	0			($	855,410	)		$	4,000,008			($	855,410	)
Preferred Stocks			1,245,200				0				0				0				0				0				0				(1,108,365	)			136,835				(1,108,365	)
Warrants			101,067				0				(12,035	)			0				0				0				0				(68,766	)			157,547				(68,764	)
Total Equities		$	2,690,853			$	0			($	12,035	)		$	3,510,832			$	0			$	0			$	0			($	2,032,541	)		$	4,294,390			($	2,032,539	)
Fixed Income
Asset-Backed Securities		$	7,888,778			$	0			($	6,983,555	)		$	0			$	0			$	0			$	0			($	905,223	)		$	0			($	905,223	)
Bank Loans			5,790,347				0				0				4,434,405				(7,071,534	)			5,892				(2,395,379	)			1,776,953				2,540,684				1,776,953
Total Fixed Income		$	13,679,125			$	0			($	6,983,555	)		$	4,434,405			($	7,071,534	)		$	5,892			($	2,395,379	)		$	871,730			$	2,540,684			$	871,730
Total		$	16,369,978			$	0			($	6,995,590	)		$	7,945,237			($	7,071,534	)		$	5,892			($	2,395,379	)		($	1,160,811	)		$	6,835,074			($	1,160,809	)

 

 

 

 

25

---

Barings Global Short Duration High Yield Fund 2018 Annual Report

 

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

 

December 31, 2018

 

 

 

 

26

---

Barings Global Short Duration High Yield Fund 2018 Annual Report

 

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

 

December 31, 2018

 

 

 

 

27

---

Barings Global Short Duration High Yield Fund 2018 Annual Report

 

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

 

December 31, 2018

 

 

 

 

28

---

Barings Global Short Duration High Yield Fund 2018 Annual Report

 

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

 

December 31, 2018

 

 

 

 

29

---

Barings Global Short Duration High Yield Fund 2018 Annual Report

 

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

 

December 31, 2018

 

 

 

 

30

---

Barings Global Short Duration High Yield Fund 2018 Annual Report

 

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

 

December 31, 2018

 

 

 

 

31

---

Barings Global Short Duration High Yield Fund 2018 Annual Report

 

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

 

To the Shareholders and the Board of Trustees of Barings Global Short Duration High Yield Fund:

Opinion on the Financial Statements and Financial Highlights

We have audited the accompanying statement of assets and liabilities of Barings Global Short Duration High Yield Fund (the “Fund”), including the schedule of investments, as of December 31, 2018, the related statements of operations and cash flows for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, the financial highlights for each of the three years in the period then ended, and the related notes to the financial statements. The financial highlights for each of the two years in the period ended December 31, 2015 were audited by other auditors whose report, dated February 29, 2016, expressed an unqualified opinion on those financial highlights. In our opinion, the financial statements and financial highlights present fairly, in all material respects, the financial position of the Fund as of December 31, 2018, and the results of its operations and its cash flows for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the three years in the period then ended, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These financial statements and financial highlights are the responsibility of the Fund’s management. Our responsibility is to express an opinion on the Fund’s financial statements and financial highlights based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement, whether due to error or fraud. The Fund is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Fund’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements and financial highlights, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements and financial highlights. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements and financial highlights. Our procedures included confirmation of securities and senior loans owned as of December 31, 2018, by correspondence with the custodian, brokers and selling or agent banks; when replies were not received from brokers and selling or agent banks, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinion.

DELOITTE & TOUCHE LLP

New York, NY

February 28, 2019

We have served as the auditor of one or more Barings LLC investment companies since 2013.

 

 

 

32

---

Barings Global Short Duration High Yield Fund 2018 Annual Report

 

RESULTS OF SHAREHOLDER MEETING

 

 

The Annual Meeting of Shareholders (“Annual Meeting”) was held on Thursday, August 2, 2018. The shareholders were asked to elect Rodney J. Dillman and Martin A. Sumichrast as Trustees for a three-year term and Cynthia R. Plouché for a two-year term. The shareholders approved the proposal. The results of shareholder voting are set forth below:

 

SHARES FOR		WITHHELD				TOTAL				% OF SHARES VOTED FOR
Rodney J. Dillman			574,037				18,819,453				90.964	%
Martin A. Sumichrast			616,145				18,819,453				90.754	%
Cynthia R. Plouché			540,774				18,819,453				91.129	%

The Fund’s other Trustees Bernard A. Harris, Jr., Thomas M. Finke and Thomas W. Okel continued to serve their respective terms following the Annual Meeting.

 

 

 

33

---

Barings Global Short Duration High Yield Fund 2018 Annual Report

 

INTERESTED TRUSTEE

 

 

NAME (AGE), ADDRESS		POSITION(S) WITH THE TRUST		OFFICE TERM AND LENGTH OF TIME SERVED		PRINCIPAL OCCUPATIONS DURING PAST 5 YEARS		PORTFOLIOS OVERSEEN IN FUND COMPLEX		OTHER DIRECTORSHIPS HELD BY DIRECTOR
Thomas M. Finke (54) 300 South Tryon Street Suite 2500 Charlotte, NC 28202		Trustee		Trustee since 2013		Chairman and Chief Executive Officer (since 2008), Member of the Board of Managers (since 2006), President (2007-2008), Managing Director (2002-2008), Barings; Chief Investment Officer and Executive Vice President (2008-2011), Massachusetts Mutual Life Insurance Company.		9		Director, Barings BDC, Inc. (a business development company managed by Barings LLC) (since 2018); Trustee (since 2013), Barings Funds Trust (open-end investment company advised by Barings); Chairman (2012-2015), Director (since 2008), Barings (U.K.) Limited (investment advisory firm); Director (since 2008), Barings Guernsey Limited (holding company); Vice Chairman and Manager (since 2011), MM Asset Management Holding LLC (holding company); Director (since 2004), Jefferies Finance LLC (finance company); Chairman and Director (2012-2015), Barings Global Advisers Limited (investment advisory firm); Manager (2011-2016), Wood Creek Capital Management, LLC (investment advisory firm); Chairman and Manager (2007-2016), Barings Real Estate Advisers LLC (real estate advisory firm); Manager (2007-2015), Credit Strategies Management LLC (general partner of an investment fund); Manager (since 2005), Loan Strategies Management, LLC (general partner of an investment fund); Manager (since 2005), Jefferies Finance CP Funding LLC (investment company).

 

 

 

34

---

Barings Global Short Duration High Yield Fund 2018 Annual Report

 

INDEPENDENT TRUSTEES

 

 

NAME (AGE), ADDRESS		POSITION(S) WITH THE TRUST		OFFICE TERM AND LENGTH OF TIME SERVED		PRINCIPAL OCCUPATIONS DURING PAST 5 YEARS		PORTFOLIOS OVERSEEN IN FUND COMPLEX		OTHER DIRECTORSHIPS HELD BY DIRECTOR
Rodney J. Dillman (66) 300 South Tryon Street Suite 2500 Charlotte, NC 28202		Trustee, Chairman		Trustee since 2012		Retired (since 2012); Deputy General Counsel (2011-2012), Senior Vice President (2008-2012), Vice President (2000-2008), Massachusetts Mutual Life Insurance Company; Member of the Board of Directors and President (2008-2011), MassMutual International LLC; General Counsel (2006-2008), Babson Capital Management LLC (currently known as Barings LLC).		9		Trustee (since 2013), Barings Funds Trust (open-end investment company advised by Barings); Director (2016-2017), Social Reality, Inc. (digital platform technology and management software company for internet advertising).
Bernard A. Harris, Jr. (62) 300 South Tryon Street Suite 2500 Charlotte, NC 28202		Trustee		Trustee since 2012		Chief Executive Officer, National Math and Science Initiative (since 2017); Chief Executive Officer and Managing Partner (since 2002), Vesalius Ventures, Inc.; Director and President (since 1998), The Space Agency; President (since 1999), The Harris Foundation; Clinical Scientist, Flight Surgeon and Astronaut (1986-1996), NASA.		9		Trustee (since 2013), Barings Funds Trust (open-end investment company advised by Barings); Trustee (since 2011), Salient Midstream & MLP Fund and Salient MLP & Energy Infrastructure Fund; Trustee (since 2010), Salient Absolute Return Fund; Director (since 2009), Monebo Technologies Inc. (medical technology design company); Director (since 2009), The Endowment Funds (TEF); Director (since 2008), US Physical Therapy (USPH); Director (since 2012), E-Cardio, Inc. (provides services for cardiac monitoring).
Thomas W. Okel (56) 300 South Tryon Street Suite 2500 Charlotte, NC 28202		Trustee		Trustee since 2012		Executive Director (since 2011), Catawba Lands Conservancy; Global Head of Syndicated Capital Markets (1998-2010), Bank of America Merrill Lynch.		9		Director, Barings BDC, Inc. (a business development company managed by Barings LLC) (since 2018); Trustee (since 2013), Barings Funds Trust (open-end investment company advised by Barings); Trustee (since 2015), Horizon Funds (mutual fund complex).
Cynthia R. Plouché (62) 300 South Tryon Street Suite 2500 Charlotte, NC 28202		Trustee		Trustee since August 2017		Assessor (since 2014), Moraine Township (property assessment); Senior Portfolio Manager (2006-2012), Williams Capital Management, LLC (asset management).		9		Trustee (since August 2017), Barings Funds Trust (open-end investment company advised by Barings); Trustee (since 2014), Northern Trust Funds (mutual fund complex); Trustee (2001-2017), AXA VIP Trust (mutual fund complex).

 

 

 

35

---

Barings Global Short Duration High Yield Fund 2018 Annual Report

 

INDEPENDENT TRUSTEES (CONTINUED)

 

 

NAME (AGE), ADDRESS		POSITION(S) WITH THE TRUST		OFFICE TERM AND LENGTH OF TIME SERVED		PRINCIPAL OCCUPATIONS DURING PAST 5 YEARS		PORTFOLIOS OVERSEEN IN FUND COMPLEX		OTHER DIRECTORSHIPS HELD BY DIRECTOR
Martin A. Sumichrast (52) 300 South Tryon Street Suite 2500 Charlotte, NC 28202		Trustee		Trustee since 2012		Chairman and Chief Executive Officer (since 2016), Level Brands, Inc.; Managing Partner and Principal (since 2013), Stone Street Partners, LLC (merchant banking); Managing Director (since 2012), Washington Capital, LLC (family office); Managing Director (2002-2012), Lomond International (business advisory firm).		9		Trustee (since 2013), Barings Funds Trust (open-end investment company advised by Barings); Chairman and Director (since 2014), Kure Corp. (retail); Director (since 2014), Jadeveon Clowney Help-In-Time Foundation; Director (since 2015), Social Reality, Inc. (digital platform technology and management software company for internet advertising); Chairman and Chief Executive Officer (since 2016), Director (since 2015), Level Brands, Inc. (a retail/e-commerce beauty investment/management company).

 

 

 

36

---

Barings Global Short Duration High Yield Fund 2018 Annual Report

 

OFFICERS OF THE TRUST

 

 

NAME (AGE), ADDRESS		POSITION(S) WITH THE TRUST		OFFICE TERM* AND LENGTH OF TIME SERVED		PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS
Sean Feeley (51) 300 South Tryon Street Suite 2500 Charlotte, NC 28202		President		Since 2017		Vice President (2012-2017), Barings Global Short Duration High Yield Fund; Managing Director (since 2003), Barings; Vice President (since 2011), Barings Corporate Investors and Barings Participation Investors (closed-end investment companies advised by Barings); Vice President (since 2011), CI Subsidiary Trust and PI Subsidiary Trust.
Carlene Pollock (51) 300 South Tryon Street Suite 2500 Charlotte, NC 28202		Chief Financial Officer		Since 2016		Assistant Treasurer (2015-2016), Barings Global Short Duration High Yield Fund; Director (since 2015), Barings; Director (2013-2015), Corrum Capital Management (investment adviser); Vice President (2008-2013), Bank of New York Mellon (third party administrator); Chief Financial Officer (since 2016), Assistant Treasurer (2015-2016), Barings Funds Trust (open-end investment company advised by Barings).
Lesley Mastandrea (41) 300 South Tryon Street Suite 2500 Charlotte, NC 28202		Treasurer		Since 2016		Managing Director (since 2014), Director (2007-2014), Associate Director (2006-2007), Barings; Treasurer (since 2016), Barings Funds Trust (open-end investment company advised by Barings).
Michael Freno (43) 550 South Tryon Street Charlotte, NC 28202		Vice President		Since 2012		Chairman of Board, Barings BDC, Inc. (since 2018); Head of Global Fixed Income and Multi Assets Groups (since 2017); Head of U.S. High Yield Investments Group (2015-2017), Managing Director (since 2010), Member of the High Yield Investment Committee (since 2010), Director (2007-2009), Associate Director (2005-2006), Barings.
Scott Roth (49) 550 South Tryon Street Charlotte, NC 28202		Vice President		Since 2012		Managing Director (since 2010), High Yield Team Leader (since 2010), Director (2002-2010), Barings.
Melissa LaGrant (45) 300 South Tryon Street Suite 2500 Charlotte, NC 28202		Chief Compliance Officer		Since 2012		Barings BDC, Inc., Chief Compliance Officer (since 2018); Managing Director (since 2005), Barings; Chief Compliance Officer (since 2013), Barings Finance LLC; Chief Compliance Officer (since 2006), Barings Corporate Investors and Barings Participation Investors (closed-end investment companies advised by Barings); Chief Compliance Officer (since 2013), Barings Funds Trust (open-end investment company advised by Barings).
Janice M. Bishop (54) 300 South Tryon Street Suite 2500 Charlotte, NC 28202		Vice President, Secretary and Chief Legal Officer		Since 2012		Secretary and Chief Legal Officer, Barings BDC, Inc. (2018); Senior Counsel and Managing Director (since 2014), Counsel (2007-2014), Barings; Vice President, Secretary and Chief Legal Officer (since 2015), Associate Secretary (2008-2015), Barings Corporate Investors and Barings Participation Investors (closed-end investment companies advised by Barings); Vice President, Secretary and Chief Legal Officer (since 2013), Barings Funds Trust (open-end investment company advised by Barings); Vice President and Secretary (since 2015), Assistant Secretary (2008-2015), CI Subsidiary Trust and PI Subsidiary Trust.

 

 

 

37

---

Barings Global Short Duration High Yield Fund 2018 Annual Report

 

OFFICERS OF THE TRUST (CONTINUED)

 

 

NAME (AGE), ADDRESS		POSITION(S) WITH THE TRUST		OFFICE TERM* AND LENGTH OF TIME SERVED		PRINCIPAL OCCUPATION(S) DURING PAST 5 YEARS
Michelle Manha (46) 300 South Tryon Street Suite 2500 Charlotte, NC 28202		Assistant Secretary		Since 2012		Associate General Counsel and Managing Director (since 2014), Counsel (2008-2014), Barings; Assistant Secretary (since 2013), Barings Funds Trust (open-end investment company advised by Barings).

 

 

 

38

---

Barings Global Short Duration High Yield Fund 2018 Annual Report

 

APPROVAL OF INVESTMENT MANAGEMENT AGREEMENT

AND SUB-ADVISORY AGREEMENT

 

 

The Investment Company Act of 1940 (the “1940 Act”) requires that both the full Board of Trustees and a majority of the Trustees who are not interested persons of Barings Global Short Duration High Yield Fund (the “Fund”), as defined under the 1940 Act (the “Independent Trustees”), voting separately, annually approve the continuation of the Investment Management Agreement (the “Management Agreement”) between the Fund and Barings LLC (“Barings”) and the Sub-Advisory Agreement (the “BGA Sub-Advisory Agreement” between Barings and Barings Global Advisers Limited (“BGA”). In addition, in connection with Barings’ consolidation of certain of its wholly-owned corporate entities, Barings proposed that the Board of Trustees and the Independent Trustees approve a new Sub-Advisory Agreement (the “BIIL Subadvisory Agreement” and together with the BGA Subadvisory Agreement and the Management Agreement, the “Agreements”) with Barings International Investments Limited (“BIIL”) on the same terms as the BGA Subadvisory Agreement, to take effect upon the transfer by Barings of the services performed by BGA to BIIL, as is also required by the 1940 Act. The Trustees considered matters bearing on the Fund and the Agreements at their meetings throughout the year, including a review of the Fund’s performance at each regular meeting. In addition, the Trustees met at in-person meetings held on May 9, 2018 and August 2, 2018 (the “Meetings”) for the specific purpose of considering whether to approve the Agreements for the Fund. The Trustees’ review process and considerations in approving the Agreements are summarized below.

Prior to the Meetings, the Trustees requested and received from Morgan, Lewis & Bockius LLP, independent legal counsel to the Independent Trustees, a memorandum describing the Trustees’ legal responsibilities in connection with their review and approval of the Agreements. The Independent Trustees met prior to the August Board meeting with independent legal counsel to discuss their duties, the memorandum and the Agreements. The Trustees also requested and received from Barings extensive written and oral information regarding various matters including: the principal terms of the Agreements; Barings and its personnel; the Fund’s investment performance, including comparative performance information; the nature and quality of the services provided by Barings to the Fund; the financial strength of Barings; the Fund’s fee and expense information, including comparative fee and expense information; the profitability of the advisory arrangement to Barings; and the “fallout” benefits to Barings resulting from the Agreements.

The Trustees’ conclusion as to the continuation of the Agreements was based on a comprehensive consideration of all information provided to the Board and not the result of any single issue. Some of the more significant factors that influenced the Trustees’ deliberations are described below, although individual Trustees may have evaluated the information presented differently from one another, giving different weights to various factors. It is also important to recognize that the Board’s review of the Agreements is the result of ongoing review and discussion, rather than a single discussion. The Trustees’ conclusions may be based, in part, on their consideration of these arrangements throughout the year and in prior years.

The Trustees considered the terms of the Agreements, including the scope of the advisory and non-advisory services provided under the Agreements or otherwise. In evaluating the nature, scope and quality of the services provided by Barings and BGA, and to be provided by BIIL, to the Fund, the Trustees considered the specific responsibilities of Barings, BGA and BIIL in the day-to-day management of the Fund, the qualifications, experience and responsibilities of the portfolio managers and other key personnel that are involved in the day-to-day management of the Fund, the ability of Barings, BGA and BIIL to attract and retain high-quality personnel, and the organizational depth and stability of Barings, BGA and BIIL. The Trustees also considered the trading capabilities of Barings, BGA and BIIL. With respect to the BIIL Sub-Advisory Agreement, the Trustees also considered Barings’ representation that the same people will continue to perform the same services they currently perform for the Fund, through BIIL, rather than BGA, and that the BIIL Sub-Advisory Agreement will not result in any change to the management of the Fund or the scope or quality of services provided to the Fund.

Based on information provided by Broadridge Financial Solutions, Inc. (“Broadridge”) and Barings, the Trustees reviewed the Fund’s net total return investment performance, as well as the performance of peer groups of funds, over various time periods. The net total return performance of the Fund ranked, respectively, in the 3^rd quintile, 2^nd quintile, 1^st quintile, 2^nd quintile, and 1^st quintile of the Broadridge performance universe for the one-year, two-year, three-year, four-year and five-year periods ended March 31, 2018 (the 1^st quintile being the best performers and the 5^th quintile being the worst performers). The Trustees also reviewed the Fund’s performance in comparison to a custom peer group developed by Barings comprised of nine (including the Fund) high-yield closed-end funds that employ generally similar investment strategies and invest in the same asset classes as the Fund. Relative to the custom peer group, the net total return

 

 

 

39

---

Barings Global Short Duration High Yield Fund 2018 Annual Report

 

APPROVAL OF INVESTMENT MANAGEMENT AGREEMENT

AND SUB-ADVISORY AGREEMENT (CONTINUED)

 

 

performance of the Fund ranked, respectively, 6^th, 2^nd and 2^nd out of nine funds for the one-year, three-year and five-year periods ended March 31, 2018. In the course of their deliberations, the Trustees also took into account information provided by Barings during investment review meetings conducted with portfolio management personnel during the course of the year. After reviewing these and related factors, the Trustees concluded, within the context of their overall conclusions regarding the Agreements, that they were satisfied with Barings’, BGA’s and BIIL’s responses and efforts relating to investment performance.

The Trustees considered the investment management fee paid by the Fund to Barings pursuant to the Management Agreement. The Trustees noted that Barings (and not the Fund) pays BGA, and will pay BIIL, its sub-advisory fee under the applicable subadvisory agreement. In assessing the reasonableness of the fee paid by the Fund under the Management Agreement, the Trustees considered, among other information, the Fund’s management fee and the total expense ratio for the Fund’s shares as a percentage of net asset value and the advisory fee and total expense ratios of peer groups of funds based on information provided by Broadridge. The Trustees considered that, according to the Broadridge data, the Fund’s actual management fee (which includes Barings’ advisory fee and Fund administration fees) and total expense ratio were each higher than the Broadridge expense group median for common and leverage assets. The Trustees also reviewed the Fund’s advisory fee and total expense ratio in comparison to a custom peer group developed by Barings comprised of nine (including the Fund) high-yield closed-end funds that employ generally similar investment strategies and invest in the same asset classes as the Fund. The Trustees considered that, according to the custom peer group data, the contractual advisory fee of the Fund ranked tied for 5^th out of nine funds. The Trustees also reviewed materials provided by Barings describing fees paid by other similar accounts managed by Barings, noting that Barings typically charges higher fees on its global accounts than on accounts that are invested primarily in domestic securities.

The Board noted that, because the Fund is closed-end and does not continue to offer its securities, its size was relatively stable and it was unlikely that Barings would realize economies of scale from the Fund’s growth other than through capital gains and income. The Trustees reviewed information prepared by Barings regarding Barings’ costs of managing the Fund, and the profitability of the Management Agreement to Barings. In considering the profitability to Barings, the Board noted that each of BGA and BIIL is an affiliate of Barings and is paid by Barings, and, therefore, did not consider its profitability separately.

The Trustees also considered the character and amount of other incidental benefits received by Barings and BGA, and which BIIL will receive. Additionally, the Trustees considered so-called “fall-out benefits” to Barings, BGA and BIIL, such as reputational value derived from serving as investment manager to the Fund. The Trustees also considered costs incurred by Barings in connection with the organization and initial offering of the Fund.

On the basis of the information provided, the Trustees concluded, within the context of their overall review of the Agreements, that the management fees charged to the Fund and the sub-advisory fee paid by Barings to BGA, and to be paid by Barings to BIIL, represent reasonable compensation in light of the services being provided by Barings, BGA and BIIL to the Fund. Based on their evaluation of factors that they deemed material, including those factors described above, the Board of Trustees, including the Independent Trustees, concluded that the Fund’s Management Agreement with Barings and Sub-Advisory Agreement with BGA should be continued for an additional one-year period through August 2019 and that the Fund’s Sub-Advisory Agreement with BIIL should be approved for a one-year period through August 2019.

 

 

 

40

---

Barings Global Short Duration High Yield Fund 2018 Annual Report

 

FUND DIVIDEND REINVESTMENT PLAN

 

 

 

 

 

41

---

Barings Global Short Duration High Yield Fund 2018 Annual Report

 

 

JOINT PRIVACY NOTICE OF BARINGS MANAGEMENT LLC AND

 

BARINGS GLOBAL SHORT DURATION HIGH YIELD FUND

 

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.

August 2018

 

 

 

42

---

This page intentionally left blank.

---

This page intentionally left blank.

---

This page intentionally left blank.

---

 

---

Item 2. Code of Ethics.

The Registrant adopted a Code of Ethics for Senior Financials Officers (the “Code”) on October 17, 2012, which is available on the Registrant’s website at www.barings.com/bgh. During the period covered by this Form N-CSR, there were no material amendments to, or waivers from, the code.

Item 3. Audit Committee Financial Expert.

The Registrant’s Board of Trustees has determined that Dr. Bernard A. Harris, Jr., Mr. Thomas W. Okel and Mr. Martin A. Sumichrast, constituting all the members of the Registrant’s Audit Committee, are audit committee financial experts. Dr. Harris, Mr. Okel and Mr. Sumichrast are “independent” for purposes of this Item 3 as required by applicable regulation.

Item 4. Principal Accountant Fees and Services.

The Registrant has engaged Deloitte & Touche LLP (“Deloitte”) as its principal accountant to perform audit services, audit-related services, tax services and other services during the past two fiscal years. The following table details the aggregate fees billed or expected to be billed for each of the last two fiscal years by Deloitte.

Fees Billed to the Registrant:

 

		Deloitte Year Ended December 31, 2018				Deloitte Year Ended December 31, 2017
Audit Fees		$	74,300			$	72,870
Audit-Related Fees			0				0
Tax Fees			11,965				11,730
All Other Fees			0				0
Total Fees		$	86,265			$	84,600

Non-Audit Fees Billed to Barings and MassMutual:

 

		Deloitte Year Ended December 31, 2018				Deloitte Year Ended December 31, 2017
Audit-Related Fees		$	4,557,727			$	4,580,506
Tax Fees			3,730,611				2,925,307
All Other Fees			9,229,409				14,196,333
Total Fees		$	17,517,747			$	21,702,146

---

The category “Audit Fees” refers to performing an audit of the Registrant’s annual financial statements or services that are normally provided by the principal accountant in connection with statutory and regulatory filings or engagements for those fiscal years. The category “Audit-Related Fees” reflects fees billed by Deloitte for various non-audit and non-tax services rendered to the Registrant and Barings and MassMutual, such as a SOC–1 review, consulting and agreed upon procedures reports. Preparation of Federal, state and local income tax and tax compliance work are representative of the fees reported in the “Tax Fees” category. The category “All Other Fees” represents fees billed by Deloitte for consulting rendered to the Registrant, Barings and MassMutual.

The Sarbanes-Oxley Act of 2002 and its implementing regulations allow the Registrant’s Audit Committee to establish a pre-approval policy for certain services rendered by the Registrant’s principal accountant. During 2018, the Registrant’s Audit Committee approved all of the services rendered to the Registrant by Deloitte and did not rely on such a pre-approval policy for any such services.

The Audit Committee has also reviewed the aggregate fees billed for professional services rendered by Deloitte for 2018 and 2017 for the Registrant and for the non-audit services provided to Barings, and Barings’ parent, MassMutual. As part of this review, the Audit Committee considered whether the provision of such non-audit services was compatible with maintaining the principal accountant’s independence.

The 2017 fees billed represent final 2017 amounts, which may differ from the preliminary figures available as of the filing date of the Registrant’s 2018 Annual Form N-CSR and includes, among other things, fees for services that may not have been billed as of the filing date of the Registrant’s 2018 Annual Form N-CSR, but are now properly included in the 2018 fees billed to the Registrant, Barings and MassMutual.

Item 5. Audit Committee of Listed Registrants.

The Registrant maintains an Audit Committee composed exclusively of Trustees of the Registrant who qualify as “independent” Trustees under the current listing standards of the New York Stock Exchange and the rules of the U.S. Securities and Exchange Commission. The Audit Committee operates pursuant to a written Audit Committee Charter, which is available (1) on the Registrant’s website, www.barings.com/bgh, and (2) without charge, upon request, by calling, toll-free 1-866-399-1516. The current members of the Audit Committee are Dr. Bernard A. Harris, Thomas W. Okel and Martin A. Sumichrast.

Item 6. Investments.

A schedule of investments for the Registrant is included as part of this report to shareholders under Item 1 of this Form N-CSR.

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

The Registrant’s Board of Trustees has delegated proxy voting responsibilities relating to the voting securities held by the Registrant to its investment adviser, Barings LLC (“Barings”). A summary of Barings’ proxy voting policies and procedures are set forth below.

---

Summary of Barings’ Proxy Voting Policy:

Barings understands that the voting of proxies is an integral part of its investment management responsibility and believes, as a general principle, that proxies should be acted upon (voted or abstained) solely in the best interest of its clients (i.e. in a manner believed by Barings to best pursue a client’s investment objectives). To implement this general principle, Barings engages a proxy service provider (the “Service Provider”) that is responsible for processing and maintaining records of proxy votes. In addition, the Service Provider will retain the services of an independent third party research provider (the “Research Provider”) to provide research and recommendations on proxies. It is Barings’ Global Proxy Voting Policy to generally vote proxies in accordance with the recommendations of the Research Provider. In circumstances where the Research Provider has not provided recommendations with respect to a proxy, Barings will vote in accordance with the Research Provider’s proxy voting guidelines (the “Guidelines”). In circumstances where the Research Provider has not provided a recommendation or has not contemplated an issue within its Guidelines, the proxy will be analyzed on a case-by-case basis.

Barings recognizes that there are times when it is in the best interest of clients to vote proxies (i) against the Research Provider’s recommendations or (ii) in instances where the Research Provider has not provided a recommendation vote against the Guidelines. Barings can vote, in whole or in part, against the Research Provider’s recommendations or Guidelines, as it deems appropriate. The procedures set forth in the Global Proxy Voting Policy are designed to ensure that votes against the Research Provider’s recommendations or Guidelines are made in the best interests of clients and are not the result of any material conflict of interest (a “Material Conflict”). For purposes of the Global Proxy Voting Policy, a Material Conflict is defined as any position, relationship or interest, financial or otherwise, of Barings or a Barings associate that could reasonably be expected to affect the independence or judgment concerning proxy voting.

Summary of Barings’ Proxy Voting Procedures:

Barings will vote all client proxies for which it has proxy voting discretion, where no Material Conflict exists, in accordance with the Research Provider’s recommendations or Guidelines, unless (i) Barings is unable or determines not to vote a proxy in accordance with the Global Proxy Voting Policy or (ii) an authorized investment person or designee (a “Proxy Analyst”) determines that it is in the client’s best interests to vote against the Research Provider’s recommendations or Guidelines. In such cases where a Proxy Analyst believes a proxy should be voted against the Research Provider’s recommendations or Guidelines, the proxy administrator will vote the proxy in accordance with the Proxy Analyst’s recommendation as long as (i) no other Proxy Analyst disagrees with such recommendation and (ii) no known Material Conflict is identified by the Proxy Analyst(s) or the proxy administrator. If a Material Conflict is identified by a Proxy Analyst or the proxy administrator, the proxy will be submitted to the Trading Practices Committee to determine how the proxy is to be voted in order to achieve that client’s best interests.

No associate, officer, director or board of managers/directors of Barings or its affiliates (other than those assigned such responsibilities under the Global Proxy Voting Policy) can influence how Barings votes client proxies, unless such person has been requested to provide assistance by a Proxy Analyst or Trading Practices Committee member and has disclosed any known Material Conflict. Pre-vote communications with proxy solicitors are prohibited. In the event that pre-vote communications occur, it should be reported to the Trading Practices Committee or Barings’ Chief Compliance Officer prior to voting. Any questions or concerns regarding proxy-solicitor arrangements should be addressed to Barings’ Chief Compliance Officer.

Investment management agreements generally delegate the authority to vote proxies to Barings in accordance with Barings’ Global Proxy Voting Policy. In the event an investment management agreement is silent on proxy voting, Barings should obtain written instructions from the client as to their voting preference. However, when the client does not provide written instructions as to their voting preferences, Barings will assume proxy voting responsibilities. In the event that a client makes a written request regarding voting, Barings will vote as instructed.

---

Obtaining a Copy of the Proxy Voting Policy

Clients can obtain a copy of Barings’ Proxy Voting Policy and information about how Barings voted proxies related to their securities, free of charge, by contacting the Chief Compliance Officer, Barings LLC, 300 South Tryon Street, Suite 2500, Charlotte, NC 28202, or calling toll-free, 1-877-766-0014.

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

The following disclosure item is made as of the date of this Form N-CSR unless otherwise indicated.

PORTFOLIO MANAGER. Sean Feeley serves as President of the Registrant (since 2017) and was formerly a Vice President (from 2012-2017). Mr. Feeley is a Managing Director of Barings and head of the High Yield Research Team with over 24 years of industry experience in high yield bonds and loans in various investment strategies. Prior to joining Barings in 2003, he was a Vice President at Cigna Investment Management in project finance and a Vice President at Credit Suisse in leveraged loan finance. He also currently serves as a Vice President of Barings Corporate Investors and Barings Participation Investors, both closed-end investment companies managed by Barings. Mr. Feeley holds a B.S. from Canisius College and an M.B.A. from Cornell University. Mr. Feeley is a Certified Public Accountant (inactive) and a Chartered Financial Analyst.

PORTFOLIO MANAGEMENT TEAM. Mr. Feeley has primary responsibility for overseeing the investments of the Registrant’s portfolio, with the day-to-day investment management responsibility of the Registrant’s portfolio being shared with the following Barings and Barings (U.K.) Limited investment professional (together with the Portfolio Manager, the “Portfolio Team”).

Scott Roth serves as a Vice President of the Registrant (since 2012). With over 21 years of industry experience, Mr. Roth is a Managing Director of Barings and serves as a lead portfolio manager for various global and U.S. high yield bond total return strategies. He joined Barings in 2002. Prior to joining Barings, he worked at Webster Bank, was a high yield analyst at Tower Square Capital Management and an underwriter at Chubb Insurance Company. He holds a B.B.A. from Western Michigan University and an M.B.A. from the University of Michigan. Mr. Roth is a Chartered Financial Analyst.

Craig Abouchar, with over 21 years of industry experience, is a Managing Director of Barings (U.K.) Limited (“Barings UK”), parent of Barings Barings International Investments Limited (“BIIL”). He joined Barings UK in 2016 and currently manages the European high yield funds. Prior to joining Barings UK, he was Co-CEO, Europe of Castle Hill Asset Management. Prior to Castle Hill, he was a portfolio manager at Ignis Investment Management. He previously served as chairman of the board of directors for the European High Yield Association. He holds a B.B.A. from Emory University and an M.B.A. from Columbia University. Mr. Abouchar is a Chartered Financial Analyst.

Chris Sawyer, with over 13 years of industry experience, is a Managing Director in Barings UK’s European High Yield Investments Group and a member of the firm’s European High Yield Investment Committee. He joined Barings UK 2005 as a member of the portfolio monitoring team, where he was responsible for performance analysis of individual portfolio assets, before joining the trading team in 2008. Chris is currently responsible for the portfolio management of several high yield strategies and manages the European High Yield trading operations. Mr. Sawyer holds a B.Sc. from Brunel University.

---

OTHER ACCOUNTS MANAGED BY THE PORTFOLIO MANAGEMENT TEAM.

 

PORTFOLIO ADVISORY TEAM (A) (B)		ACCOUNT CATEGORY		TOTAL NUMBER OF ACCOUNTS		APPROXIMATE TOTAL ASSET SIZE (A) (B)				NUMBER OF ACCOUNTS WITH PERFORMANCE- BASED ADVISORY FEE				APPROXIMATE ASSET SIZE OF PERFORMANCE- BASED FEE ACCOUNTS
Sean Feeley		Registered Investment Companies		5		$	1,234.65				0				N/A
		Other Pooled Investment Vehicles		7		$	2,101.91				0				N/A
		Other Accounts (C)		22		$	2,827.01				0				N/A
Craig Abouchar		Registered Investment Companies		1		$	22.66				0				N/A
		Other Pooled Investment Vehicles		5		$	2,324.41				0				N/A
		Other Accounts		8		$	1,221.52				0				N/A
Scott Roth		Registered Investment Companies		5		$	976.43				0				N/A
		Other Pooled Investment Vehicles		12		$	2,710.10				0				N/A
		Other Accounts (C)		20		$	2,973.41				0				N/A
Chris Sawyer		Registered Investment Companies		2		$	283.28				0				N/A
		Other Pooled Investment Vehicles		10		$	4,265.11				0				N/A
		Other Accounts		4		$	1,185.24				0				N/A

 

(A)	Account asset size has been calculated as of December 31, 2018.

---

(B)	Asset size in millions.

(C)	Messrs. Feeley and Roth manage the high yield sector of the general investment account of Massachusetts Mutual Life Insurance Company and C.M. Life Insurance Company; however, these assets are not represented in the table above.

MATERIAL CONFLICTS OF INTEREST. The potential for material conflicts of interest may exist as the members of the Portfolio Management Team have responsibilities for the day-to-day management of multiple advisory accounts. These conflicts may be heightened to the extent the individual, Barings and/or an affiliate has an investment in one or more of such accounts. Barings has identified (and summarized below) areas where material conflicts of interest are most likely to arise, and has adopted policies and procedures that it believes are reasonable to address such conflicts.

Transactions with Affiliates: From time to time, Barings or its affiliates, including MassMutual and its affiliates acts as principal, buys securities or other investments for itself from or sells securities or other investments it owns to its advisory clients. Likewise, Barings can either directly or on behalf of MassMutual, purchase and/or hold securities or other investments that are subsequently sold or transferred to advisory clients. Barings has a conflict of interest in connection with a transaction where it or an affiliate is acting as principal since it has an incentive to favor itself or its affiliates over its advisory clients in connection with the transaction. To address the conflicts of interest, Barings has adopted a Transactions with Affiliates Policy, which ensures any such transaction is consistent with Barings’ fiduciary obligations to act in the best interests of its clients, including its ability to obtain best execution in connection with the transaction, and is in compliance with applicable legal and regulatory requirements.

Cross Trades: Barings can effect cross-trades on behalf of its advisory clients whereby one advisory client buys securities or other investments from or sells securities or other investments to another advisory client. Barings can also effect cross-trades involving advisory accounts or funds in which it or its affiliates, including MassMutual, and their respective employees, have an ownership interest or for which Barings is entitled to earn a performance fee. As a result, Barings has a conflict of interest in connection with the cross-trade since it has an incentive to favor the advisory client or fund in which it or its affiliate has an ownership

---

interest and/or is entitled to a performance fee. To address the conflicts of interest, Barings has adopted a Transactions with Affiliates Policy, which ensures any such cross-trade is consistent with Barings’ fiduciary obligations to act in the best interests of each of its advisory clients, including its ability to obtain best execution for each advisory client in connection with the cross-trade transaction, and is in compliance with applicable legal and regulatory requirements. Barings will not receive a commission or any other remuneration (other than its advisory fee) for effecting cross-trades between advisory clients.

Loan Origination Transactions: While Barings or its affiliates generally do not act as an underwriter or member of a syndicate in connection with a securities offering, Barings or its affiliates (or an unaffiliated entity in which Barings or its affiliates have an ownership interest) can act as an underwriter, originator, agent, or member of a syndicate in connection with the origination of senior secured loans or other lending arrangements with borrowers, where such loans are purchased by Barings advisory clients during or after the original syndication. Barings advisory clients purchase such loans directly from Barings or its affiliates (or an unaffiliated entity in which Barings or its affiliates have an ownership interest) or from other members of the lending syndicate. In connection with such loan originations, Barings or its affiliates, either directly or indirectly, receive underwriting, origination, or agent fees. As a result, Barings has a conflict of interest in connection with such loan origination transactions since it has an incentive to base its investment recommendation to its advisory clients on the amount of compensation, underwriting, origination or agent fees it would receive rather than on its advisory clients’ best interests. To address the conflict of interest, Barings has adopted a Transactions with Affiliates Policy, which ensures any such transaction is consistent with Barings’ fiduciary obligations to act in the best interests of its clients, including its ability to obtain best execution in connection with the transaction, and is in compliance with applicable legal and regulatory requirements.

Investments by Advisory Clients: Barings has the ability to invest client assets in securities or other investments that are also held by (i) Barings or its affiliates, including MassMutual, (ii) other Barings advisory accounts, (iii) funds or accounts in which Barings or its affiliates or their respective employees have an ownership or economic interest or (iv) employees of Barings or its affiliates. Barings also has the ability, on behalf of its advisory clients, to invest in the same or different securities or instruments of issuers in which (a) Barings or its affiliates, including MassMutual, (b) other Barings advisory accounts, (c) funds or accounts in which Barings, its affiliates, or their respective employees have an ownership or economic interest or (d) employees of Barings or its affiliates, have an ownership interest as a holder of the debt, equity or other instruments of the issuer. Barings has a conflict of interest in connection with any such transaction since investments by its advisory clients can directly or indirectly benefit Barings and/or its affiliates and employees by potentially increasing the value of the securities or instruments it holds in the issuer. Any investment by Barings on behalf of its advisory clients will be consistent with its fiduciary obligations to act in the best interests of its advisory clients, and otherwise be consistent with such clients’ investment objectives and restrictions.

Barings or its affiliates can recommend that clients invest in registered or unregistered investment companies, including private investment funds such as hedge funds, private equity funds or structured funds (i) advised by Barings or an affiliate, (ii) in which Barings, an affiliate or their respective employees has an ownership or economic interest or (iii) with respect to which Barings or an affiliate has an interest in the entity entitled to receive the fees paid by such funds. Barings has a conflict of interest in connection with any such recommendation since it has an incentive to base its recommendation to invest in such

---

investment companies or private funds on the fees that Barings or its affiliates would earn as a result of the investment by its advisory clients in the investment companies or private funds. Any recommendation to invest in a Barings advised fund or other investment company will be consistent with Barings’ fiduciary obligations to act in the best interests of its advisory clients, consistent with such clients’ investment objectives and restrictions. In certain limited circumstances, Barings offers to clients that invest in private investment funds that it advises an equity interest in entities that receive advisory fees and carried profits interest from such funds.

Employee Co-Investment: Barings permits certain of its portfolio managers and other eligible employees to invest in certain private investment funds advised by Barings or its affiliates and/or share in the performance fees received by Barings from such funds. If the portfolio manager or other eligible employee was responsible for both the portfolio management of the private fund and other Barings advisory accounts, such person would have a conflict of interest in connection with investment decisions since the person has an incentive to direct the best investment ideas, or to allocate trades, in favor of the fund in which he or she is invested or otherwise entitled to share in the performance fees received from such fund. To address the conflicts of interest, Barings has adopted a Side by Side Management of Private Investment Funds and Other Advisory Accounts Policy which requires, among others things, that Barings treat each of its advisory clients in a manner consistent with its fiduciary obligations and prohibits Barings from favoring any particular advisory account as a result of the ownership or economic interests of Barings, its affiliates or employees, in such advisory account. Any investment by a Barings employee in one of its private funds is also governed by Barings’ Global Employee Co-Investment Policy, which ensures that any co-investment by a Barings employee is consistent with Barings’ Global Code of Ethics Policy.

Management of Multiple Accounts: As noted above, Barings’ portfolio managers are often responsible for the day-to-day management of multiple accounts, including, among others, separate accounts for institutional clients, closed-end and open-end registered investment companies, and/or private investment funds (such as hedge funds, private equity funds and structured funds), as well as for proprietary accounts of Barings and its affiliates, including MassMutual and its affiliates. The potential for material conflicts of interest exist whenever a portfolio manager has responsibility for the day-to-day management of multiple advisory accounts. These conflicts are heightened to the extent a portfolio manager is responsible for managing a proprietary account for Barings or its affiliates or where the portfolio manager, Barings and/or an affiliate has an investment in one or more of such accounts or an interest in the performance of one or more of such accounts (e.g., through the receipt of a performance fee).

Investment Allocation: Such potential conflicts include those relating to allocation of investment opportunities. For example, it is possible that an investment opportunity is suitable for more than one account managed by Barings, but is not available in sufficient quantities for all accounts to participate fully. Similarly, there can be limited opportunity to sell an investment held by multiple accounts. A conflict arises where the portfolio manager has an incentive to treat an account preferentially because the account pays Barings or its affiliates a performance-based fee or the portfolio manager, Barings or an affiliate has an ownership or other economic interest in the account. As noted above, Barings also acts as an investment manager for certain of its affiliates, including MassMutual. These affiliate accounts sometimes co-invest jointly and concurrently with Barings’ other advisory clients and therefore share in the allocation of such investment opportunities. To address the conflicts of interest associated with the allocation of trading and investment opportunities, Barings has adopted a Global Investment

---

Allocation Policy and trade allocation procedures that govern the allocation of portfolio transactions and investment opportunities across multiple advisory accounts, including affiliated accounts, which are summarized below under Item 12 – Brokerage Practices, Global Investment Allocation Policy. In addition, as noted above, to address the conflicts, Barings has adopted a Side by Side Management of Private Investment Funds and Other Advisory Accounts Policy which requires, among others things, that Barings treat each of its advisory clients in a manner consistent with its fiduciary obligations and prohibits Barings from favoring any particular advisory account as a result of the ownership or economic interests of Barings, its affiliates or employees, in such advisory accounts. Any investment by a Barings employee in one of its private funds is also governed by Barings’ Global Employee Co-Investment Policy, which ensures that any co-investment by a Barings employee is consistent with Barings’ Global Code of Ethics Policy.

Personal Securities Transactions; Short Sales: Potential material conflicts of interest also arise related to the knowledge and timing of an account’s trades, investment opportunities and broker or dealer selection. Barings and its portfolio managers have information about the size, timing and possible market impact of the trades of each account they manage. It is possible that portfolio managers could use this information for their personal advantage and/or to the advantage or disadvantage of various accounts which they manage. For example, a portfolio manager could cause a favored account to “front run” an account’s trade or sell short a security for an account immediately prior to another account’s sale of that security. To address these conflicts, Barings has adopted policies and procedures, including a Global Short Sale Policy, which ensures that the use of short sales by Barings is consistent with Barings’ fiduciary obligations to its clients, a Side by Side Management of Private Investment Funds and Other Advisory Accounts Policy, which requires, among other things, that Barings treat each of its advisory clients in a manner consistent with its fiduciary obligations and prohibits Barings from favoring any particular account as a result of the ownership or economic interest of Barings, its affiliates or employees and a Global Code of Ethics Policy.

Trade Errors: Potential material conflicts of interest also arise if a trade error occurs in a client account. A trade error is deemed to occur if there is a deviation by Barings from the applicable standard of care in connection with the placement, execution or settlement of a trade for an advisory account that results in (1) Barings purchasing assets not permitted or authorized by a client’s investment advisory agreement or otherwise failing to follow a client’s specific investment directives; (2) Barings purchasing or selling the wrong security or the wrong amount of securities on behalf of a client’s account; or (3) Barings purchasing or selling assets for, or allocating assets to, the wrong client account. When correcting these errors, conflicts of interest between Barings and its advisory accounts arise as decisions are made on whether to cancel, reverse or reallocate the erroneous trades. In order to address the conflicts, Barings has adopted a Global Client Account Errors Policy governing the resolution of trading errors, and will follow the Global Client Account Errors Policy in order to ensure that trade errors are handled promptly and appropriately and that any action taken to remedy an error places the interest of a client ahead of Barings’ interest.

Best Execution; Directed or Restricted Brokerage: With respect to securities and other transactions (including, but not limited to, derivatives transactions) for most of the accounts it manages, Barings determines which broker, dealer or other counterparty to use to execute each order, consistent with its fiduciary duty to seek best execution of the transaction. Barings manages certain accounts, however, for clients who limit its discretion with respect to the selection of counterparties or direct it to execute such client’s transactions through a particular counterparty. In these cases, trades for such an account in a particular security or other

---

transaction can be placed separately from, rather than aggregated with, those in the same security or transaction for other accounts. Placing separate transaction orders for a security or transaction can temporarily affect the market price of the security or transaction or otherwise affect the execution of the transaction to the possible detriment of one or more of the other account(s) involved. Barings has adopted a Global Best Execution Policy and a Directed or Restricted Brokerage Policy which are summarized below under Item 12 –Brokerage Practices, Counterparty Selection/Recommendations and Directed/Restricted Brokerage.

Barings and its portfolio managers or employees have other actual or potential conflicts of interest in managing an advisory account, and the list above is not a complete description of every conflict of interest that could be deemed to exist.

COMPENSATION.

Barings (Investment Adviser):

Compensation packages at Barings are structured such that key professionals have a vested interest in the continuing success of the firm. Portfolio managers’ compensation is comprised of base salary and a discretionarily allocated incentive bonus, which includes a performance-driven annual bonus, and may include a deferred long-term incentive bonus and also may contain a performance fee award. As part of the firm’s continuing effort to monitor retention, Barings participates in annual compensation surveys of investment management firms to ensure that Barings’ compensation is competitive with industry norms.

The base salary component is generally positioned at mid-market. Increases are tied to market, individual performance evaluations and budget constraints.

Portfolio Managers may receive a yearly incentive bonus. Factors impacting the potential bonuses include but are not limited to: i) investment performance of funds/accounts managed by a Portfolio Manager, ii) financial performance of Barings, iii) client satisfaction, iv) collaboration, v) risk management and vi) integrity.

Long-term incentives are designed to share the long-term success of the firm and take the form of deferred cash awards, which may include an award that resembles phantom restricted stock; linking the value of the award to a formula which includes Barings’ overall earnings, revenue and assets under management. A voluntary separation of service will result in a forfeiture of unvested long-term incentive awards.

BIIL (Sub-Adviser):

Barings International Investments Limited (“BIIL”) and Barings (U.K.) Limited (“Barings UK”) have entered into a services agreement pursuant to which Barings UK agreed to provide personnel services to BIIL (including the secondment of investment staff on a part-time basis) sufficient to enable BIIL to carry on its business (including to discharge its obligations under the Sub-Advisory Agreement). A summary of Barings UK’s employee remuneration structures appears below:

Barings UK’s remuneration structures are designed to support and further the firm’s business strategy, objectives, values and long-term interests. Packages aim to facilitate the retention of existing employees and attract high calibre new employees in order to achieve the best results for the firm and its clients. As a result, packages offered should be competitive with those available to professionals working in London in relevant areas (including banking, private equity, asset management, corporate finance advisory, law and accounting).

---

Remuneration Components:

Remuneration arrangements for employees currently comprise some or all of the following components:

(a) fixed salary;

(b) awards under the short-term incentive scheme (“STI”);

(c) awards under the long-term incentive scheme (“LTI”); and

(d) share of carried interest in certain funds (“Carried Interest”).

Fixed Salary:

All employees receive a fixed salary, payable in monthly instalments. Fixed salary generally comprises a pensionable and a non-pensionable element. The non-pensionable component is initially identified in the relevant employee’s employment contract. Fixed salaries (and the proportions of which are pensionable and non-pensionable) are reviewed from time to time.

Fixed salary for an earnings year is determined following the completion of the end-of-year appraisals for the previous year. Staff are notified of any change to their fixed salary in February, with any changes being backdated to the start of the earnings year.

Short-Term Incentive Scheme:

All employees are eligible to be considered for an STI award each year. While STI awards may be made in non-cash form, all awards have been made in cash to date. Awards are determined following the completion of the end-of-year appraisals for the earnings year to which they correspond and are based on performance measurement, taking into account the profits generated by the firm. Staff who have been awarded an STI award are generally notified in February of their award. The award is typically paid within 2 weeks of staff being notified, following the finalization of Barings UK’s accounts. Leavers generally forfeit any STI that has been awarded but not yet paid.

Long-Term Incentive Scheme:

LTI awards are used to reward and retain employees that senior management consider are key to Barings’s business. All employees are eligible to be considered for an LTI award each year. Awards are based on performance measurement, taking into account the profits generated by the firm. LTI awards are entirely made in non-cash form.

Barings UK’s LTI scheme broadly mirrors the equivalent scheme operated by Barings, whereby beneficiaries are notified in February (following the relevant earnings year) of the amount of the award that will be made to them in July. Prior to July of that year, recipients of LTI awards are asked to express a preference as to how they would like their award to be allocated (they may track one or more of a prescribed range of reference assets, including a term deposit rate, individual funds managed by Barings UK or BIIL and various external funds). Awards are then made in July, with payments in respect of those awards (as adjusted for the performance of the selected reference assets) being made in four equal annual instalments, commencing on the first anniversary of the award date. As with STI, leavers generally forfeit any outstanding LTI.

Carried Interest:

Carried Interest is only relevant to funds which pay an incentive fee to Barings UK or BIIL in its capacity as investment manager. Proposals regarding the allocation of Carried Interest are made to the Barings UK Remuneration Committee, which in turn reviews and approves the recipients, amounts and structure of any such awards. Generally, awards are only made to members of senior management and employees directly involved in the management of the investments comprising the portfolio of the relevant fund. The rules regarding forfeiture of Carried Interest by leavers vary by fund.

---

BENEFICIAL OWNERSHIP. As of December 31, 2018, members of the Portfolio Management Team beneficially owned the following dollar range of equity securities in the Registrant:

 

Portfolio Management Team:		Dollar Range of Beneficially Owned* Equity Securities of the Registrant:
Sean Feeley			$100,001-$500,000
Craig Abouchar			None
Scott Roth			$10,001-$50,000
Chris Sawyer			None

 

*	Beneficial ownership has been determined in accordance with Rule 16(a)-1(a)(2) under the Securities Exchange Act of 1934, as amended.

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

Not applicable for this filing.

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

Not applicable for this filing.

Item 11. Controls and Procedures.

 

(a)

The principal executive officer and the principal financial officer of the Registrant evaluated the effectiveness of 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 and based on that evaluation have concluded that such disclosure controls and procedures are effective to provide reasonable assurance that material information required to be disclosed by the Registrant on Form N-CSR is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms.

 

(b)

There were no changes to the Registrant’s internal controls over financial reporting (as defined in Rule 30a-3(d) under the Act) during the Registrant’s second half year that have materially affected, or are reasonably likely to materially affect, the Registrant’s internal control over financial reporting 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. Disclosure of Securities Lending Activities for Closed-End Management Investment Companies

The registrant did not engage in securities lending activities during the fiscal year reported on this Form N-CSR.

---

Item 13. 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/bgh.

 

(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 principal executive officer].

Filed herewith [for principal 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:		March 8, 2019

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:		March 8, 2019
		By (Signature and Title):		/s/ Carlene Pollock
				Carlene Pollock, Chief Financial Officer
		Date:		March 8, 2019