UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

 

FORM N-Q

 

 

QUARTERLY SCHEDULE OF PORTFOLIO HOLDINGS OF REGISTERED MANAGEMENT INVESTMENT COMPANY

 

Investment Company Act file number: 811-22562

Barings Global Short Duration High Yield Fund
(Exact name of registrant as specified in charter)

550 South Tryon Street

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)

Registrant's telephone number, including area code

Date of fiscal year end: December 31, 2017

Date of reporting period:  March 31, 2017

 

Item 1. Schedule of Investments.

 

 

 

										SHARES		COST		FAIR VALUE
Equities — 0.73%*:
Common Stocks — 0.73%*:
			Sabine Oil & Gas LLC							4,262	$	248,858	$	136,384
			Sabine Oil & Gas LLC							13,512		60,669		74,316
			Sabine Oil & Gas LLC							2,407		6,547		10,832
			Pinnacle Operating Corp.							1,368,352		643,125		643,125
			Templar Energy LLC							135,392		782,567		1,049,290
			Templar Energy LLC							86,570		865,704		1,211,985
				Total Common Stocks						1,610,495		2,607,470		3,125,932
				Total Equities						1,610,495		2,607,470		3,125,932

					EFFECTIVE INTEREST RATE‡			DUE DATE		PRINCIPAL		COST		FAIR VALUE
Fixed Income — 130.79%*:
Bank Loans§ — 19.91%*:
	Aerospace and Defense — 0.35%*:
			Swissport Investments+		6.25	%	2/9/2022			1,400,000	$	1,493,719	$	1,514,523
				Total Aerospace and Defense						1,400,000		1,493,719		1,514,523
	Automobile — 0.80%*:
			FleetPride		5.25		11/19/2019			820,660		732,487		771,421
			FleetPride		9.25		5/19/2020			3,000,000		2,963,664		2,637,510
				Total Automobile						3,820,660		3,696,151		3,408,931
	Beverage, Food and Tobacco — 0.23%*:
			Del Monte Food Consumer Products, Inc.		4.31		2/18/2021			1,195,687		1,066,073		981,456
				Total Beverage, Food and Tobacco						1,195,687		1,066,073		981,456
	Broadcasting and Entertainment — 0.95%*:
			Endemol+		6.75		8/11/2021			4,585,146		4,358,090		4,059,780
				Total Broadcasting and Entertainment						4,585,146		4,358,090		4,059,780
	Chemicals, Plastics and Rubber — 0.48%*:
			Colouroz Investment 2 LLC+		8.25		9/30/2022			2,033,201		2,027,552		2,045,909
				Total Chemicals, Plastics and Rubber						2,033,201		2,027,552		2,045,909
	Diversified/Conglomerate Manufacturing — 0.15%*:
			Commercial Vehicle Group Inc.		7.00		3/13/2024			638,388		625,620		625,620
				Total Diversified/Conglomerate Manufacturing						638,388		625,620		625,620
	Diversified/Conglomerate Service — 0.23%*:
			Cologix		8.00		3/14/2025			1,000,000		990,000		995,630
				Total Diversified/Conglomerate Service						1,000,000		990,000		995,630
	Farming and Agriculture —  1.45%*:
			Allflex Holdings, Inc.		8.00		7/19/2021			6,232,322		6,220,697		6,208,951
				Total Farming and Agriculture						6,232,322		6,220,697		6,208,951

					EFFECTIVE INTEREST RATE‡			DUE DATE		PRINCIPAL		COST		FAIR VALUE
	Finance — 0.61%*:
			Cunningham Lindsey Group, Inc.		9.25	%	6/10/2020			5,504,015	$	5,507,315	$	2,628,167
				Total Finance						5,504,015		5,507,315		2,628,167
	Healthcare, Education and Childcare — 0.71%*:
			Prospect Medical Holdings		7.13		6/1/2022			2,984,962		2,955,113		3,026,006
				Total Healthcare, Education and Childcare						2,984,962		2,955,113		3,026,006
	Home and Office Furnishings, Housewares, and Durable Consumer Products — 1.46%*:
			AOT Bedding		9.04		11/8/2024			6,250,000		6,238,816		6,270,812
				Total Home and Office Furnishings, Housewares, and Durable Consumer Products						6,250,000		6,238,816		6,270,812
	Insurance — 0.89%*:
			AmWins Group Inc.		7.75		1/25/2025			3,750,000		3,843,185		3,818,737
				Total Insurance						3,750,000		3,843,185		3,818,737
	Mining, Steel, Iron and Non-Precious Metals — 1.72%*:
			Boomerang Tube, LLC		15.00		2/1/2022			670,565		670,565		670,565
			Boomerang Tube, LLC		20.00		2/1/2022			742,339		688,450		668,105
			Boomerang Tube, LLC		18.78		9/1/2026			189,752		189,752		189,752
			Boomerang Tube, LLC		18.28		2/1/2019			1,695,860		1,695,860		84,793
			Boomerang Tube, LLC		18.78		8/1/2017			189,752		189,752		189,752
			Boomerang Tube, LLC		15.78		2/1/2019			2,021,169		2,021,169		2,021,169
			Boomerang Tube, LLC		22.00		2/5/2021			189,752		189,752		189,752
			Murray Energy Corp.		8.40		4/16/2020			3,452,992		3,417,565		3,346,156
				Total Mining, Steel, Iron and Non-Precious Metals						9,152,181		9,062,865		7,360,044
	Oil and Gas — 9.30%*:
			Caelus Energy Alaska		8.75		4/15/2020			17,863,828		17,416,779		15,630,850
			Fieldwood Energy LLC		8.38		9/30/2020			8,925,706		7,139,324		6,359,566
			Fieldwood Energy LLC		8.38		10/2/2020			7,481,592		5,985,081		6,434,169
			Fieldwood Energy LLC		8.00		9/30/2020			5,651,171		5,086,639		5,322,725
			Gulf Finance, LLC		6.25		8/17/2023			2,937,316		2,868,027		2,925,067
			Jonah Energy LLC		7.50		5/12/2021			3,301,498		3,266,413		3,144,676
				Total Oil and Gas						46,161,111		41,762,263		39,817,053
	Printing and Publishing — 0.25%*:
			Springer+		9.00		8/14/2021			979,688		1,118,103		1,055,585
				Total Printing and Publishing						979,688		1,118,103		1,055,585
	Telecommunications — 0.33%*:
			CenturyLink, Inc.		6.15		2/8/2018			1,426,491		1,419,358		1,426,491
				Total Telecommunications						1,426,491		1,419,358		1,426,491
				Total Bank Loans						90,863,852		92,384,920		85,243,695
Corporate Bonds — 110.88%*:
	Aerospace and Defense — 0.26%*:
			Swissport Investments+^		6.75			12/15/2021		950,000		1,040,150		1,096,567
				Total Aerospace and Defense						950,000		1,040,150		1,096,567
	Automobile — 5.21%*:
			Gates Global LLC#^		6.00		7/15/2022			4,740,000		4,237,877		4,822,950
			International Automotive Components Group, S.A.#^		9.13		6/1/2018			8,125,000		8,168,627		8,064,062
			J.B. Poindexter & Co. Inc.#^		9.00		4/1/2022			8,989,000		9,304,074		9,415,977
				Total Automobile						21,854,000		21,710,578		22,302,989
	Beverage, Food and Tobacco — 0.96%*:
			Boparan Finance plc+^		5.50		7/15/2021			1,700,000		2,006,343		2,097,461
			Carrols Corp.#		8.00		5/1/2022			709,000		729,218		756,858
			Manitowoc Foodservice#		9.50		2/15/2024			1,074,000		1,074,000		1,237,785
				Total Beverage, Food and Tobacco						3,483,000		3,809,561		4,092,104
	Broadcasting and Entertainment — 4.61%*:
			Arqiva Finance+#^		9.50		3/31/2020			5,000,000		7,827,892		6,740,588
			Clear Channel Worldwide Holdings Inc.#		7.63		3/15/2020			7,000,000		6,688,969		6,947,500
			Clear Channel Worldwide Holdings Inc.		7.63		3/15/2020			1,277,000		1,277,000		1,286,578
			Dish DBS Corp.#		7.75		7/1/2026			3,094,000		3,130,075		3,596,775
			Entertainment One Ltd.+^		6.88		12/15/2022			850,000		1,282,395		1,161,342
				Total Broadcasting and Entertainment						17,221,000		20,206,331		19,732,783

					EFFECTIVE INTEREST RATE‡			DUE DATE		PRINCIPAL		COST		FAIR VALUE
	Buildings and Real Estate — 3.16%*:
			Beazer Homes USA Inc.#^		8.75	%	3/15/2022			3,198,000	$	3,261,270	$	3,501,810
			Cemex S.A.B. de C.V.+#^		9.38		10/12/2022			5,000,000		5,159,843		5,402,500
			Cemex S.A.B. de C.V.+#^		7.75		4/16/2026			602,000		601,916		677,376
			Keystone Financing+^		9.50		10/15/2019			3,000,000		4,735,212		3,948,506
				Total Buildings and Real Estate						11,800,000		13,758,241		13,530,192
	Cargo Transport — 7.06%*:
			Direct ChassisLink Inc.#^		10.00		6/15/2023			7,894,000		8,072,125		8,446,580
			Kenan Advantage Group, Inc.#^		7.88		7/31/2023			10,000,000		10,071,644		10,225,000
			World Flight Services, Inc.+^		9.50		7/15/2022			5,650,000		6,267,437		6,285,232
			XPO Logistics, Inc.#^		6.50		6/15/2022			5,000,000		4,865,290		5,250,000
				Total Cargo Transport						28,544,000		29,276,496		30,206,812
	Chemicals, Plastics and Rubber — 12.78%*:
			Associated Asphalt Partners LLC#^		8.50		2/15/2018			2,327,000		2,329,854		2,327,000
			Chemours Co.#		7.00		5/15/2025			5,962,000		5,538,841		6,418,093
			Consolidated Energy Finance S.A.+#^		6.75		10/15/2019			8,120,000		7,958,688		8,180,900
			Cornerstone Chemical Co.#^		9.38		3/15/2018			7,850,000		7,908,381		7,889,250
			CVR Partners LP#^		9.25		6/15/2023			5,913,000		5,823,881		6,068,216
			LSB Industries, Inc.#		8.50		8/1/2019			8,302,000		8,003,549		8,052,940
			Pinnacle Operating Corp.#^		9.00		5/15/2023			1,993,613		1,993,613		1,983,645
			Platform Specialty Products Corporation#^		10.38		5/1/2021			5,539,000		5,620,269		6,162,137
			TPC Group, Inc.#^		8.75		12/15/2020			8,398,000		8,409,619		7,643,860
				Total Chemicals, Plastics and Rubber						54,404,613		53,586,695		54,726,041
	Containers, Packaging and Glass — 6.00%*:
			Ardagh Packaging+^		6.75		5/15/2024			3,550,000		4,115,619		4,137,463
			Bormioli+^		10.00		8/1/2018			3,450,000		3,891,324		3,796,038
			Coveris Holdings S.A.#^		7.88		11/1/2019			9,850,000		9,876,954		9,702,250
			Horizon Holdings+^		7.25		8/1/2023			2,000,000		2,195,510		2,258,956
			Onex Wizard Acquisition Co+^		7.75		2/15/2023			5,100,000		5,773,379		5,801,142
				Total Containers, Packaging and Glass						23,950,000		25,852,786		25,695,849
	Diversified/Conglomerate Manufacturing — 3.38%*:
			Appvion Inc.#^		9.00		6/1/2020			13,200,000		13,347,428		7,755,000
			Carlisle Transportation Products#^		8.25		12/15/2019			4,250,000		4,258,060		3,740,000
			StoneMor Partners L.P.#		7.88		6/1/2021			3,000,000		2,944,274		2,981,250
				Total Diversified/Conglomerate Manufacturing						20,450,000		20,549,762		14,476,250
	Diversified/Conglomerate Service — 1.94%*:
			Carlson Travel Holdings Inc.^		9.50		12/15/2024			1,305,000		1,305,000		1,366,988
			Loxam+^		6.00		4/15/2025			800,000		861,763		866,586
			Zachry Holdings Inc.#^		7.50		2/1/2020			5,875,000		5,846,022		6,051,250
				Total Diversified/Conglomerate Service						7,980,000		8,012,785		8,284,824
	Diversified Natural Resources, Precious Metals and Minerals — 0.46%*:
			IAMGOLD Corporation+^		7.00		4/15/2025			2,000,000		2,000,000		1,980,000
				Total Diversified Natural Resources, Precious Metals and Minerals						2,000,000		2,000,000		1,980,000
	Electronics — 4.39%*:
			ADT Corp/Protection One#^		9.25		5/15/2023			8,255,000		8,675,267		9,049,544
			Microsemi Corporation#^		9.13		4/15/2023			1,326,000		1,326,000		1,523,242
			Western Digital Corporation#		10.50		4/1/2024			4,224,000		4,346,737		4,979,040
			TIBCO Software, Inc.^		11.38		12/1/2021			2,915,000		3,182,580		3,228,362
				Total Electronics						16,720,000		17,530,584		18,780,188
	Finance — 6.17%*:
			Galaxy Finco Ltd.+^		7.88		11/15/2021			3,900,000		6,351,594		4,978,729
			GFKL Financial Services+^		8.50		11/1/2022			5,575,000		8,186,690		7,406,791
			High Ridge Brands Co.^		8.88		3/15/2025			2,982,000		2,982,000		3,041,640
			Icahn Enterprises^		6.75		2/1/2024			3,000,000		2,996,250		3,093,750
			Marlin Financial+^		10.50		8/1/2020			4,100,000		5,840,319		5,531,391
			National Financial Partners Corp.#^		9.00		7/15/2021			2,220,000		2,212,547		2,346,207
				Total Finance						21,777,000		28,569,400		26,398,508

					EFFECTIVE INTEREST RATE‡			DUE DATE		PRINCIPAL		COST		FAIR VALUE
	Grocery — 0.87%*:
			Post Holdings#^		8.00	%	7/15/2025			1,232,000	$	1,232,000	$	1,382,920
			Premier Foods Finance+^		6.50		3/15/2021			1,850,000		2,663,019		2,341,734
				Total Grocery						3,082,000		3,895,019		3,724,654
	Healthcare, Education and Childcare — 10.83%*:
			Capsugel Holdings#^		7.00		5/15/2019			1,159,000		1,164,643		1,156,102
			Cerberus+^		8.25		2/1/2020			3,450,000		3,842,778		3,757,835
			CHS/Community Health Systemns, Inc.		6.25		3/31/2023			685,000		685,000		696,988
			CHS/Community Health Systemns, Inc.		6.88		2/1/2022			2,000,000		1,749,238		1,720,000
			Cognita Financing+^		7.75		8/15/2021			2,200,000		3,434,100		2,908,250
			Endo International^		6.00		2/1/2025			1,500,000		1,347,409		1,278,750
			Horizon Pharma plc#^		8.75		11/1/2024			1,595,000		1,597,500		1,660,794
			IDH Finance PLC+^		6.25		8/15/2022			1,150,000		1,506,794		1,391,527
			Kindred Healthcare, Inc.#		8.75		1/15/2023			5,699,000		5,752,500		5,713,247
			Regionalcare Hospital Partners, Inc.#^		8.25		5/1/2023			9,996,000		10,107,195		10,665,732
			Tenet Healthcare Corporation#		8.13		4/1/2022			4,700,000		4,674,460		4,905,625
			Valeant#^		6.13		4/15/2025			7,006,000		6,300,581		5,394,620
			Valeant#^		7.50		7/15/2021			3,260,000		3,260,000		2,856,575
			Valeant^		6.38		10/15/2020			1,000,000		924,301		905,000
			Valeant^		6.50		3/15/2022			488,000		488,000		502,030
			Valeant^		7.00		3/15/2024			831,000		831,000		852,814
				Total Healthcare, Education and Childcare						46,719,000		47,665,499		46,365,889
	Hotels, Motels, Inns and Gaming — 0.83%*:
			TVL Finance Plc+^		8.50		5/15/2023			2,600,000		3,720,870		3,565,500
				Total Hotels, Motels, Inns and Gaming						2,600,000		3,720,870		3,565,500
	Insurance — 1.11%*:
			Onex York Acquisition Corp.#^		8.50		10/1/2022			5,102,000		5,002,749		4,770,370
				Total Insurance						5,102,000		5,002,749		4,770,370
	Leisure, Amusement, Motion Pictures and Entertainment — 3.80%*:
			CPUK Finance Ltd+^		7.00		8/28/2020			2,100,000		3,021,588		2,767,867
			Perform Group+^		8.50		11/15/2020			2,400,000		3,122,158		3,179,853
			Vue Cinimas+^		7.88		7/15/2020			3,650,000		5,850,748		4,734,368
			WMG Acquisition Group#^		6.75		4/15/2022			5,299,000		5,152,796		5,570,574
				Total Leisure, Amusement, Motion Pictures and Entertainment						13,449,000		17,147,290		16,252,662
	Machinery (Non-Agriculture, Non-Construct, Non-Electronic) —3.77%*:
			Apex Tool Group LLC#^		7.00		2/1/2021			4,896,000		4,426,963		4,430,880
			Gardner Denver Inc.#^		6.88		8/15/2021			3,254,000		3,135,655		3,359,755
			Xerium Technologies#		9.50		8/15/2021			8,200,000		8,292,819		8,333,250
				Total Machinery (Non-Agriculture, Non-Construct, Non-Electronic)						16,350,000		15,855,437		16,123,885
	Mining, Steel, Iron and Non-Precious Metals — 5.07%*:
			Constellium Holdco B.V.+#^		7.00		1/15/2023			3,350,000		3,929,752		3,654,272
			Hecla Mining Company#		6.88		5/1/2021			5,888,000		5,688,468		6,020,480
			Kissner Milling Company Limited#^		8.38			12/1/2022		6,475,000		6,468,205		6,669,250
			Peabody Energy Corp.^		6.00		3/31/2022			347,000		347,000		345,048
			SunCoke Energy Inc.#		7.38		2/1/2020			4,445,000		4,263,803		4,489,450
			Zekelman Industries Inc.^		9.88			6/15/2023		489,000		489,000		546,457
				Total Mining, Steel, Iron and Non-Precious Metals						20,994,000		21,186,228		21,724,957
	Oil and Gas — 16.50%*:
			CITGO Holding Inc.#^		10.75		2/15/2020			8,584,000		8,465,723		9,227,800
			EP Energy#		9.38		5/1/2020			7,375,000		4,339,546		6,952,413
			EP Energy^		8.00			2/15/2025		4,368,000		4,369,660		4,062,240
			Ferrellgas Partners LP#		8.63		6/15/2020			8,060,000		7,992,087		7,717,450
			Ferrellgas Partners LP^		8.63		6/15/2020			1,254,000		1,206,181		1,200,705
			Globe Luxembourg SA+#^		9.63			5/1/2018		2,850,000		2,623,860		3,001,050
			Globe Luxembourg SA+^		9.88			4/1/2022		400,000		394,264		410,500
			Jupiter Resources Inc.+#^		8.50		10/1/2022			13,375,000		11,802,989		10,934,062
			Kosmos Energy Ltd.#^		7.88		8/1/2021			5,164,000		4,857,822		5,202,730
			Kosmos Energy Ltd.#^		7.88		8/1/2021			3,984,000		3,858,808		4,013,880
			Pbf Holding Company LLC		7.00		11/15/2023			1,000,000		997,500		1,002,500
			Pbf Holding Company LLC#		8.25		2/15/2020			6,000,000		6,138,793		6,120,000
			Pbf Logistics LP#		6.88		5/15/2023			1,117,000		1,117,000		1,130,962
			Topaz Marine SA+#^		8.63		11/1/2018			8,377,000		8,365,725		8,251,345
			Welltec+#^		8.00		2/1/2019			1,387,000		1,358,211		1,393,935
				Total Oil and Gas						73,295,000		67,888,169		70,621,572

					EFFECTIVE INTEREST RATE‡			DUE DATE		PRINCIPAL		COST		FAIR VALUE
	Retail Store — 2.31%*:
			Boing Group Finance+^		6.63	%	7/15/2019			3,050,000	$	4,161,278	$	3,271,873
			HSS Financing PLC+^		6.75		8/1/2019			816,000		1,240,099		1,027,370
			Takko Fashion+^		9.88		4/15/2019			2,300,000		3,043,619		2,061,064
			Travelex+^		8.00		8/1/2018			2,800,000		4,339,623		3,534,949
				Total Retail Store						8,966,000		12,784,619		9,895,256
	Telecommunications — 7.66%*:
			Altice S.A.+#^		7.75		5/15/2022			3,240,000		3,240,000		3,438,450
			Altice S.A.+#^		7.50		5/15/2026			2,622,000		2,673,672		2,785,875
			Altice S.A.+^		7.63			2/15/2025		1,250,000		1,321,280		1,321,094
			Digicel Limited+#^		6.00		4/15/2021			4,000,000		3,526,976		3,635,000
			Frontier Communications#		10.50		9/15/2022			1,406,000		1,406,000		1,423,575
			GTT Communications^		7.88		12/31/2024			3,044,000		3,121,958		3,158,150
			Hughes Satellite Systems Corp^		6.63		8/1/2026			3,000,000		2,919,790		3,067,500
			Numericable-SFR+#^		7.38		5/1/2026			3,183,000		3,207,833		3,278,490
			Sprint Corp.#		7.88		9/15/2023			4,428,000		4,299,404		4,904,010
			Wind Acquisition+#^		7.38		4/23/2021			5,545,000		5,227,215		5,766,800
				Total Telecommunications						31,718,000		30,944,128		32,778,944
	Textiles & Leather — 0.55%*:
			Perry Ellis International Inc#		7.88		4/1/2019			2,334,000		2,370,210		2,336,334
				Total Textiles & Leather						2,334,000		2,370,210		2,336,334
	Utilities — 1.20%*:
			NRG Energy#		7.25		5/15/2026			5,000,000		4,976,250		5,150,000
				Total Utilities						5,000,000		4,976,250		5,150,000
				Total Corporate Bonds						460,742,613		479,339,837		474,613,130
				Total Fixed Income						551,606,465		571,724,757		559,856,825
				Total Investments						553,216,960		574,332,227		562,982,757
Other assets and liabilities — (31.52)%														(134,927,286)
				Net Assets — 100%									$	428,055,471

‡

The effective interest rates are based on settled commitment amount.

*

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

§

Bank loans are exempt from registration under the Securities Act of 1933, as amended, but contain certain restrictions on resale and cannot be sold publicly. These loans pay interest at rates which adjust periodically. The interest rates shown for bank loans are the current interest rates at March 31, 2017. Bank loans are also subject to mandatory and/or optional prepayment which cannot be predicted. As a result, the remaining maturity may be substantially less than the stated maturity shown.

+

Foreign security.

>

Defaulted security.

#

All or a portion of the security is segregated as collateral for the credit facility.  See Note 8 to the financial statements for further disclosure.

^

Security exempt from registration under Rule 144a of the Securities Act of 1933.  These securities may only be resold in transactions exempt from registration, normally to qualified institutional buyers.

Distributions of investments by country of risk.  Percentage of assets are expressed by market value excluding cash and accrued income as of March 31, 2017.

United States

71.0%

United Kingdom

11.4%

France

4.4%

Canada

2.3%

Italy

1.7%

Switzerland

1.5%

United Arab Emirates

1.5%

Trinidad and Tobago

1.5%

Mexico

1.1%

(Individually less than 1%)

3.6%

100.0%

 

 

FORWARD FOREIGN EXCHANGE CONTRACTS at March 31, 2017
Counterparty	Currency	Contract Type	Delivery Date	Value	Aggregate Face Value	Unrealized Appreciation / (Depreciation)
J.P. Morgan
British pounds		Buy	4/18/2017	$      1,270,199	$       1,307,321	$           37,122
Euros		Sell	4/4/2017	(1,175,443)	(1,172,413)	3,030
Euros		Sell	4/18/2017	(40,756,349)	(41,210,647)	(454,298)
Euros		Buy	4/18/2017	1,213,480	1,210,185	(3,295)
U.S. Dollars		Buy	4/4/2017	1,175,443	1,175,443	-
U.S. Dollars		Buy	4/18/2017	37,568	37,568	-
U.S. Dollars		Buy	4/18/2017	40,718,781	40,718,781	-
U.S. Dollars		Sell	4/18/2017	(2,483,679)	(2,483,679)	-
				-	(417,441)	(417,441)
Morgan Stanley
British pounds		Sell	4/18/2017	(58,332,435)	(60,108,414)	(1,775,979)
Euros		Buy	4/4/2017	858,035	853,586	(4,449)
Euros		Sell	4/18/2017	(858,543)	(854,122)	4,421
U.S. Dollars		Buy	4/18/2017	59,190,978	59,190,978	-
U.S. Dollars		Sell	4/4/2017	(858,035)	(858,035)	-
				-	(1,776,007)	(1,776,007)
				-	(2,193,448)	(2,193,448)

 

 

 

 

 

Tax Basis

The cost basis of investments for federal income tax purposes at March 31, 2017 for Barings Global Short Duration High Yield Fund (the “Fund”) was as follows*:

 

Cost of investments		$	574,332,227
Gross unrealized appreciation			20,368,808
Gross unrealized depreciation			(31,718,278	)
Net unrealized depreciation		$	(11,349,470	)

*The above table only reflects tax adjustments through December 31, 2016.  For the previous fiscal year’s federal income tax information, please refer to the Notes to Financial Statements section in the Fund’s most recent annual report.

 

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

Level 1 – quoted prices in active markets for identical securities

Level 2 – other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, etc.)

Level 3 – significant unobservable inputs (including the Fund’s own assumptions in determining the fair value of investments)

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

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

 

The following is a summary of the inputs used as of March 31, 2017 in valuing the Fund’s investments:

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 March 31, 2017.

Templar Energy LLC	$1,049,290	Broker Quote	$6.75; pricing source depth of 1.
Templar Energy LLC	$1,211,985	Broker Quote	$12.25; pricing source depth of 1.
Second Lien Term Loans
Boomerang Tube, LLC	$ 670,565	Model Price	Average Enterprise Valuation Multiple:  5.5x; EBITDA: $36 million.
Boomerang Tube, LLC	$ 668,105	Model Price	Average Enterprise Valuation Multiple:  5.5x; EBITDA: $36 million.
Boomerang Tube, LLC	$189,752	Model Price	Average Enterprise Valuation Multiple:  5.5x; EBITDA: $36 million.
Boomerang Tube, LLC	$84,793	Model Price	Average Enterprise Valuation Multiple:  5.5x; EBITDA: $36 million.
Boomerang Tube, LLC	$ 189,752	Model Price	Average Enterprise Valuation Multiple:  5.5x; EBITDA: $36 million.
Boomerang Tube, LLC	$2,021,169	Model Price	Average Enterprise Valuation Multiple:  5.5x; EBITDA: $36 million.
Boomerang Tube, LLC	$ 189,752	Model Price	Average Enterprise Valuation Multiple:  5.5x; EBITDA: $36 million.

Pinnacle Operating Corp. restructured its debt securities on March 15, 2017.  The Fund subsequently received new equity securities, all of which are considered Level 3.

The Fund discloses transfers between levels based on valuations at the end of the reporting period.  The following is a reconciliation of Level 3 investments based upon the inputs used to determine fair value:

 

	BALANCE AT DECEMBER 31, 2016	TRANSFERS INTO LEVEL 3	TRANSFERS OUT OF LEVEL 3	PURCHASES	SALES	ACCRETION OF DISCOUNT	REALIZED GAIN LOSS	CHANGE IN UNREALIZED	BALANCE AT MARCH 31, 2017	CHANGE IN UNREALIZED APPRECIATION / DEPRECIATION FROM INVESTMENTS HELD AS OF MARCH 31, 2017
Common Stocks
Equities	$2,110,595	$0	$0	$710,644	$0	$0	$0	$304,693	$3,125,932	$304,693
Fixed Income
Bank Loan	$3,871,669	$0	$0	$510,160	$0	($190,694)	$0	($177,247)	$4,013,888	($177,247)
Total	$5,982,264	$0	$0	$1,220,804	$0	($190,694)	$0	$127,446	$7,139,820	$127,446

B.  Cash and Cash Equivalents

Cash and cash equivalents consist principally of short term investments that are readily convertible into cash and have original maturities of three months or less.  At March 31, 2016, all cash and cash equivalents are held by U.S. Bank, N.A.

C.  Investment Transactions, Related Investment Income and Expenses

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

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

Expenses are recorded on the accrual basis as incurred.

D.  Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.  Actual results could differ from those estimates.

E.  Federal Income Taxation

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

F. Dividends and Distributions

The Fund declares and pays dividends monthly from net investment income. To the extent that these distributions exceed net investment income, they may be classified as return of capital. The Fund also pays a distribution at least annually from its net realized capital gains, if any. Dividends and distributions are recorded on the ex-dividend date. All common shares have equal dividend and other distribution rights. A notice disclosing the source(s) of a distribution will be provided if payment is made from any source other than net investment income. Any such notice would be provided only for informational purposes in order to comply with the requirements of Section 19(a) of the 1940 Act and not for tax reporting purposes. The tax composition of the Fund’s distributions for each calendar year is reported on Internal Revenue Service Form 1099-DIV.

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

G.  Derivative Instruments

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

Forward Foreign Exchange Contracts – The Fund is subject to foreign currency exchange rate risk in the normal course of pursuing its investment objectives.  The Fund transacted in and currently holds forward foreign exchange contracts to hedge against changes in the value of foreign currencies.  The Fund entered into forward foreign exchange contracts obligating the Fund to deliver or receive a currency at a specified future date.  Forward foreign exchange contracts are valued daily and unrealized appreciation or depreciation is recorded daily as the difference between the contract exchange rate and the closing forward rate applied to the face amount of the contract. A realized gain or loss is recorded at the time the forward contract expires. Credit risk may arise as a result of the failure of the counterparty to comply with the terms of the contract. The Fund considers the creditworthiness of each counterparty to a contract in evaluating potential credit risk quarterly. The Fund is also subject to credit risk with respect to the counterparties to the derivative contracts which are not cleared through a central counterparty but instead are traded over-the-counter between two counterparties. If a counterparty to an over-the-counter derivative becomes bankrupt or otherwise fails to perform its obligations under a derivative contract due to financial difficulties, the Fund may experience significant delays in obtaining any recovery under the derivative contract in a bankruptcy or other reorganization proceeding. The Fund may obtain only a limited recovery or may obtain no recovery in such circumstances. The counterparty risk for cleared derivatives is generally lower than for uncleared over-the-counter derivative transactions since generally a clearing organization becomes substituted for each counterparty to a cleared derivative contract and, in effect, guarantees the parties’ performance under the contract as each party to a trade looks only to the clearing house for performance of financial obligations. However, there can be no assurance that the clearing house, or its members, will satisfy its obligations to the Fund. In addition, in the event of a bankruptcy of a clearing house, the Fund could experience a loss of the funds deposited with such clearing house as margin and of any profits on its open positions.  The counterparty risk to the Fund is limited to the net unrealized gain, in any, on the contract.

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

The Fund recognized an asset on the Statement of Assets and Liabilities as a result of forward foreign exchange contracts with Morgan Stanley and J.P. Morgan.  The Fund’s policy is to recognize an asset equal to the net value of all forward foreign exchange contracts with an unrealized gain and a liability equal to the net value of all forward foreign exchange contracts with an unrealized loss.  The Fund has recognized an asset of $45,107 in net unrealized appreciation and a liability of $2,238,555 in net unrealized depreciation on forward foreign exchange contracts.  Outstanding forward foreign exchange contracts as of March 31, 2017 are indicative of the volume of activity during the period.

For the period from January 1, 2017 through March 31, 2017, the Fund’s direct investment in derivatives consisted of forward foreign exchange contracts.

The following is a summary of the fair value of derivative instruments held directly by the Fund as of March 31, 2017.  These derivatives are presented in the Schedule of Investments.

Fair values of derivative instruments on the Statement of Assets and Liabilities as of March 31, 2017:

The effect of derivative instruments on the Statement of Operations for the period from January 1, 2017 through March 31, 2017:

Amount of Realized Gain/(Loss) on Derivatives

H.   Offsetting of Financial and Derivative Assets and Liabilities

The following is a summary by counterparty of the fair value of derivative investments subject to Master Netting Agreements and collateral pledged (received), if any, as of March 31, 2017.

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By (Signature and Title)  /s/ Russell D. Morrison

 Russell D. Morrison, President

Date   May 30, 2017