UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM N-CSR

 

 

CERTIFIED SHAREHOLDER REPORT OF REGISTERED

MANAGEMENT INVESTMENT COMPANIES

Investment Company Act file number 811-22562

 

 

Barings Global Short Duration High Yield Fund

(Exact name of registrant as specified in charter)

 

 

300 South Tryon Street, Charlotte, NC 28202

(Address of principal executive offices) (Zip code)

 

 

Janice M. Bishop

Secretary and Chief Legal Officer

c/o Barings LLC

Independence Wharf

470 Atlantic Avenue

Boston, MA 02210

(Name and address of agent for service)

 

 

704-805-7200

Registrant’s telephone number, including area code

Date of fiscal year end: December 31, 2017

Date of reporting period: December 31, 2017

 

 

 

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Item 1. Reports to Stockholders.

 

 

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Barings Global Short Duration High Yield Fund

c/o Barings LLC

300 S Tryon St.

Suite 2500

Charlotte, NC 28202

704.805.7200

http://www.Barings.com/bgh

ADVISER

Barings LLC

300 S Tryon St.

Suite 2500

Charlotte, NC 28202

SUB-ADVISOR

Barings Global Advisers Limited

61 Aldwych

London, UK

WC2B4AE

COUNSEL TO THE FUND

Ropes & Gray LLP

Prudential Tower

800 Boylston Street

Boston, Massachusetts 02110

INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Deloitte & Touche LLP

30 Rockefeller Plaza

New York, NY 10112

CUSTODIAN

US Bank

MK-WI-S302

1555 N. River Center Drive

Milwaukee, WI 53212

TRANSFER AGENT & REGISTRAR

U.S. Bancorp Fund Services, LLC

615 E. Michigan St.

Milwaukee, WI 53202

FUND ADMINISTRATION/ACCOUNTING

U.S. Bancorp Fund Services, LLC

615 E. Michigan St.

Milwaukee, WI 53202

 

PROXY VOTING POLICIES & PROCEDURES

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

FORM N-Q

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

CERTIFICATIONS

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

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.

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Barings Global Short Duration High Yield Fund 2017 Annual Report

 

OFFICERS OF THE FUND

 

 

 

 

 

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Barings Global Short Duration High Yield Fund 2017 Annual Report

 

Dear Fellow Shareholders,

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

The 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 what we view are 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

Following a strong first half of the year, driven by market technicals and stable corporate fundamentals, the second half of the year experienced similar strength driven by continued improvement in corporate fundamentals, stability in central bank policies and a firm backdrop for commodity prices. The global high yield markets experienced large new issuance volumes throughout the year; however, a large percentage of the new deals were refinancing-related and net new issuance was much more modest. During most of the year, demand outstripped supply and spreads tightened from the beginning of the year.

In the U.S., the high yield bond market was in risk-on mode as investors searched for yield. CCC assets were the main driver of performance for the year while BB assets and B assets also posted positive performance. The transportation and utility sectors finished as the top performing sectors in 2017 by generating double-digit returns. The retail sector was the worst performing sector as the sector continues to adjust to secular changes. New issue activity picked up, with gross new issuance totaling $328 billion and surpassing the levels of the last two years. However, over 63% of new issue activity was refinancing-related, leaving net new issuance at the lowest levels since 2011. U.S. high yield mutual funds ended the year with $20 billion in outflows, capping off a year of weaker retail demand for the asset class. However, retail outflows were more than offset by institutional inflows, adding to the market’s technical strength. The overall fundamental and technical picture remained firm with default rates continuing to stay below historical averages.

In Europe, market returns were positive across ratings categories as BB assets slightly outperformed B assets, while CCC assets materially outperformed. From an industry perspective, outside of consumer goods, which was impacted by an idiosyncratic credit event, all sectors saw positive performance led by insurance, energy, and real estate, which all posted double-digit returns. European new issuance surged in the fourth quarter to end the year at €93.7 billion, surpassing the annual record set in 2014. This predominately consisted of B assets and BB assets rated issues with CCC assets only accounting for about 7% of total issuance. Retail flows were negative for the year with €5.9 billion leaving high yield funds in 2017; however, the fundamental picture remains sound in the region as the default rate continued to decline.

Barings Global Short Duration High Yield Fund Overview and Performance

The Fund ended December with a portfolio of 144 issuers, up from 120 issuers at the beginning of the year. A majority of the issuers continue to be domiciled in the U.S. (74.9%) with the U.K. (9.7%) and France (3.6%) representing the next largest country exposures – see Country Composition chart on page 5. 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 we maintain a meaningful presence in the Western European market, finding attractive relative value opportunities in the U.S. market has generally been more favorable due primarily to the larger opportunity set from which to source ideas. While the Western European market 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.

As of December 31, 2017, the Fund remained well-positioned across the credit quality spectrum: 17.8% BB rated assets and above, 57.4% B rated assets, and 15.7% CCC rated assets and below, with over 45% 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 an

 

 

 

2

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Barings Global Short Duration High Yield Fund 2017 Annual Report

 

increase in BB rated assets and above, an over 10% decrease in B rated assets and a minor pick-up in CCC rated assets and below. Non-publicly rated securities and cash and accrued interest represented 7.0% and 2.2%, respectively.¹

The Fund paid six consecutive monthly dividend payments of $0.1534 per share in the second half of 2017. In total for 2017, the Fund paid investors $1.84 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. It should be noted that a portion of the monthly distributions in 2017 were from a source other than net investment income. The Fund’s share price and net asset value (“NAV”) ended the reporting period at $19.38 and $20.84, respectively, or at a 7.00% discount to NAV. Based on the Fund’s share price and NAV on December 31, 2017, the Fund’s market price and NAV distribution rates using the most recent monthly dividend, on an annualized basis, were 9.50% and 8.83%, respectively. Assets acquired through leverage, which represented 25.93% of the Fund’s total assets at the end of December, were accretive to net investment income and benefited shareholders.

In January 2018, the Fund announced the monthly dividend would be reduced by $0.0052 to $0.1482 per share. Based on the assessment of current market conditions, the portfolio management team made the decision to recommend a reduction in the Fund’s dividend rate that it believes is a better option for Fund shareholders at this time to reduce the risk of returns of capital in the future or increasing the risk profile of the Fund.

On a full year 2017 basis, the NAV total return was +9.40%, outperforming the global high yield bond market as measured by the Bank of America / Merrill Lynch Non-Financial Developed Markets High Yield Constrained Index (HNDC), which returned +7.53%. From a market value perspective, the total return for 2017 was +10.41%.²

In Conclusion

As 2018 approaches, the high yield bond markets in both the U.S. and Europe are showing little signs of stress, with most companies generating top and bottom line growth as well as reasonable balance sheet leverage. Global growth, which appears to be synchronized across North America and Europe, remains supportive. Looking into 2018, the fundamental picture should remain sound as corporate balance sheets continue to improve and default rates continue to stay below historical averages.

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 of 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

 

1.

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

 

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

 

 

 

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Barings Global Short Duration High Yield Fund 2017 Annual Report

 

PORTFOLIO COMPOSITION (% OF ASSETS*)

 

 

*	The percentages shown above represent a percentage of the assets as of December 31, 2017.

COUNTRY COMPOSITION (% OF ASSETS*)

 

 

*	The percentages shown above represent a percentage of the assets as of December 31, 2017.

 

 

 

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Barings Global Short Duration High Yield Fund 2017 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		11-20
Notes to the Financial Statements		21-29
Report of Independent Registered Public Accounting Firm		30
Results of Shareholder Meeting		31
Interested Trustee		32
Independent Trustees		33-34
Officers of the Fund		35-36
Approval of Investment Management Agreement and Sub-Advisory Agreement		37-38
Fund Dividend Reinvestment Plan		39
Joint Privacy Notice		40

 

 

 

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Barings Global Short Duration High Yield Fund 2017 Annual Report

 

STATEMENT OF ASSETS AND LIABILITIES

 

 

		DECEMBER 31, 2017
Assets
Investments, at fair value (cost $575,796,777)		$	559,870,097
Cash			7,702,955
Foreign currency, at fair value (cost $500,803)			508,250
Interest receivable			9,436,277
Prepaid expenses and other assets			26,847
Total assets			577,544,426
Liabilities
Note payable			150,200,000
Dividend payable			3,076,874
Payable for investments purchased			4,598,314
Payable to adviser			484,535
Unrealized depreciation on forward foreign exchange contracts			910,414
Accrued expenses and other liabilities			350,702
Total liabilities			159,620,839
Total net assets		$	417,923,587
Net Assets:
Common stock, $0.00001 par value		$	201
Additional paid-in capital			468,758,610
Dividends in excess of net investment income			(19,983	)
Accumulated net realized loss			(34,009,079	)
Net unrealized depreciation			(16,806,162	)
Total net assets		$	417,923,587
Common shares issued and outstanding (unlimited shares authorized)			20,057,849
Net asset value per share		$	20.84

 

See accompanying Notes to the Financial Statements.

 

 

 

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Barings Global Short Duration High Yield Fund 2017 Annual Report

 

STATEMENT OF OPERATIONS

 

 

		YEAR ENDED DECEMBER 31, 2017
Investment Income
Interest income		$	49,123,017
Other income			125,808
Total investment income			49,248,825
Operating Expenses
Advisory fees			5,763,143
Interest expense			3,137,865
Administrator fees			492,235
Professional fees			179,348
Directors’ fees			125,913
Printing and mailing expense			92,445
Other operating expenses			160,619
Total operating expenses			9,951,568
Net investment income			39,297,257
Realized and Unrealized Gains (Losses) on Investments
Net realized gain on investments			822,240
Net realized loss on forward foreign exchange contracts			(6,146,695	)
Net realized gain on foreign currency and translation			143,637
Net realized loss on investments			(5,180,818	)
Net unrealized appreciation of investments			4,603,723
Net unrealized depreciation of forward foreign exchange contracts			(2,559,555	)
Net unrealized appreciation of foreign currency and translation			72,152
Net unrealized appreciation on investments			2,116,320
Net realized and unrealized losses on investments			(3,064,498	)
Net increase in net assets resulting from operations		$	36,232,759

 

See accompanying Notes to the Financial Statements.

 

 

 

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Barings Global Short Duration High Yield Fund 2017 Annual Report

 

STATEMENT OF CASH FLOWS

 

 

		YEAR ENDED DECEMBER 31, 2017
Reconciliation of net increase in net assets resulting from operations to net cash provided by operating activities
Net increase in net assets applicable to common shareholders resulting from operations		$	36,232,759
Adjustments to reconcile net increase in net assets applicable to common shareholders resulting from operations to net cash provided by operating activities:
Purchases of long-term investments			(212,082,222	)
Proceeds from sales of long-term investments			206,361,774
Purchases of foreign currency			(306,298	)
Forward currency exchange contracts, net			2,559,555
Net unrealized appreciation			(4,611,279	)
Net realized gain			(822,240	)
Amortization and accretion			(2,029,025	)
Changes in operating assets and liabilities:
Decrease in interest receivable			680,358
Increase in prepaid expenses and other assets			(12,490	)
Decrease in receivable for investments sold			4,203,171
Increase in payable for investments purchased			4,463,866
Increase in payable to Adviser			108,065
Increase in accrued expenses and other liabilities			99,193
Net cash provided by operating activities			34,845,187
Cash Flows From Financing Activities
Advances from credit facility			29,800,000
Repayments on credit facility			(21,500,000	)
Distributions paid to common shareholders			(36,922,488	)
Net cash used in financing activities			(28,622,488	)
Net change in cash			6,222,699
Cash beginning of year			1,480,256
Cash end of year		$	7,702,955
Supplemental disclosure of cashflow information
Income taxes paid		$	—
Interest paid			2,984,602

 

See accompanying Notes to the Financial Statements.

 

 

 

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Barings Global Short Duration High Yield Fund 2017 Annual Report

 

STATEMENT OF CHANGES IN NET ASSETS

 

 

		YEAR ENDED DECEMBER 31, 2017				YEAR ENDED DECEMBER 31, 2016
Operations
Net investment income		$	39,297,257			$	40,264,312
Net realized loss on investments			(5,180,818	)			(30,201,421	)
Net unrealized appreciation on investments			2,116,320				75,217,081
Net increase (decrease) in net assets resulting from operations			36,232,759				85,279,972
Dividends to Common Stockholders
Net investment income			(32,762,778	)			(32,119,057	)
Return of capital			(4,159,710	)			(4,965,900	)
Total dividends to common stockholders			(36,922,488	)			(37,084,957	)
Total increase (decrease) in net assets			(689,729	)			48,195,015
Net Assets
Beginning of year			418,613,316				370,418,301
End of year		$	417,923,587			$	418,613,316
Dividends in excess of net investment income			(19,983	)			(2,788,527	)

 

See accompanying Notes to the Financial Statements.

 

 

 

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Barings Global Short Duration High Yield Fund 2017 Annual Report

 

FINANCIAL HIGHLIGHTS

 

 

		YEAR ENDED DECEMBER 31, 2017				YEAR ENDED DECEMBER 31, 2016				YEAR ENDED DECEMBER 31, 2015				YEAR ENDED DECEMBER 31, 2014				YEAR ENDED DECEMBER 31, 2013
Per Common Share Data
Net asset value, beginning of year		$	20.87			$	18.47			$	22.00			$	25.24			$	24.30
Income from investment operations:
Net investment income			1.77				1.57				1.90				2.12				2.05
Net realized and unrealized gains (losses) on investments			0.04				2.68				(3.23	)			(2.76	)			1.21
Total increase (decrease) from investment operations			1.81				4.25				(1.33	)			(0.64	)			3.26
Less dividends to common stockholders:
Net investment income			(1.63	)			(1.60	)			(2.20	)			(2.56	)			(2.01	)
Net realized gain			—				—				—				(0.04	)			(0.31	)
Return of capital			(0.21	)			(0.25	)			—				—				—
Total dividends to common stockholders			(1.84	)			(1.85	)			(2.20	)			(2.60	)			(2.32	)
Net asset value, end of year		$	20.84			$	20.87			$	18.47			$	22.00			$	25.24
Per common share market value, end of year		$	19.38			$	19.23			$	16.49			$	20.19			$	23.12
Total investment return based on net asset value (1)			9.40	%			25.42	%			(5.57	)%			(2.25	)%			14.48	%
Total investment return based on market value (1)			10.41	%			29.44	%			(8.13	)%			(2.06	)%			7.20	%
Supplemental Data and Ratios
Net assets, end of year (000’s)		$	417,924			$	418,613			$	370,418			$	441,234			$	506,197
Ratio of expenses (before reductions and reimbursements) to average net assets			2.33	%			2.05	%(2)			2.27	%			2.20	%			2.06	%
Ratio of expenses (after reductions and reimbursements) to average net assets			2.33	%			1.78	%			2.27	%			2.20	%			2.06	%
Ratio of net investment income (before reductions and reimbursements) to average net assets			9.20	%			10.68	%(2)			9.18	%			8.47	%			8.20	%
Ratio of net investment income (after reductions and reimbursements) to average net assets			9.20	%			10.41	%			9.18	%			8.47	%			8.20	%
Portfolio turnover rate			36.59	%			44.81	%			38.13	%			63.66	%			60.87	%

 

(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.

 

 

 

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Barings Global Short Duration High Yield Fund 2017 Annual Report

 

SCHEDULE OF INVESTMENTS

 

December 31, 2017

 

		SHARES				COST				FAIR VALUE
Equities — 0.64%*:
Common Stocks — 0.32%*:
Sabine Oil & Gas LLC¤			4,262				$248,858				$191,790
Templar Energy LLC¤			86,570				865,704				800,776
Templar Energy LLC¤			135,392				734,072				352,020
Total Common Stocks			226,224				1,848,634				1,344,586
Preferred Stocks — 0.30%*:
Pinnacle Operating Corp.¤			1,368,352				643,125				1,245,200
Total Preferred Stocks			1,368,352				643,125				1,245,200
Warrants — 0.02%*:
Sabine Oil & Gas LLC¤			13,512				60,669				87,828
Sabine Oil & Gas LLC¤			2,407				6,547				13,239
Total Warrants			15,919				67,216				101,067
Total Equities			1,610,495				2,558,975				2,690,853

 

		EFFECTIVE INTEREST RATE ‡				DUE DATE				PRINCIPAL				COST				FAIR VALUE
Fixed Income — 133.32%*:
Asset-Backed Securities — 4.23%*:
CDO/CLO — 4.23%*:
Anchorage Capital CLO LTD 2015-6A^~			7.71	%			7/15/2030				600,000				$616,819				$618,177
Anchorage Capital CLO LTD 2016-9A^~			8.61				1/15/2029				1,500,000				1,554,617				1,526,487
Carbone CLO, LTD 2017-1A^~			7.57				1/21/2031				750,000				750,000				752,083
Carlyle Global Market Strategies 2013-3A^~			9.11				10/15/2030				1,000,000				1,000,000				1,003,995
Carlyle Global Market Strategies 2017-5A¤^~			7.03				1/20/2030				700,000				700,000				700,000
Galaxy CLO Ltd 2017-24A^~			7.13				1/15/2031				1,000,000				1,000,000				1,001,835
GoldenTree Loan Opportunities XI Ltd 2015-11A¤^~			6.93				1/18/2031				500,000				500,000				500,000
KKR Financial CLO Ltd 2017-20¤^~			7.22				10/16/2030				1,500,000				1,500,000				1,500,000
Madison Park Funding Ltd 2015-19A^~			7.81				1/22/2028				1,000,000				1,010,668				1,011,164
Madison Park Funding Ltd 2016-22^~			8.02				10/25/2029				1,000,000				1,033,473				1,029,558
Madison Park Funding Ltd 2016-24^~			8.51				1/20/2028				1,000,000				1,046,876				1,044,074
Sound Point CLO LTD 2017-4A¤^~			7.24				1/20/2031				2,000,000				2,000,000				2,000,000
Steele Creek CLO Ltd 2017-1A^~			7.83				1/15/2031				800,000				800,000				802,919
Voya CLO Ltd 2015-1A¤^~			7.15				1/18/2029				1,700,000				1,688,778				1,688,778
Wellfleet CLO Ltd 2017-3A¤^~			7.28				1/17/2031				1,500,000				1,500,000				1,500,000
Wind River CLO Ltd 2017-4A^~			7.31				11/20/2030				1,000,000				1,000,000				1,003,511
Total CDO/CLO											17,550,000				17,701,231				17,682,581
Total Asset-Backed Securities											17,550,000				17,701,231				17,682,581

 

See accompanying Notes to the Financial Statements.

 

 

 

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Barings Global Short Duration High Yield Fund 2017 Annual Report

 

SCHEDULE OF INVESTMENTS (CONTINUED)

 

December 31, 2017

 

		EFFECTIVE INTEREST RATE ‡				DUE DATE				PRINCIPAL				COST				FAIR VALUE
Bank Loans§ — 25.18%*:
Automobile — 0.88%*:
Fleetpride			5.69	%			11/19/2019				800,208				$736,231				$796,007
			(3 Month LIBOR USD + 4.000	%)
FleetPride			9.69 (3 Month LIBOR USD + 8.000	%)			5/19/2020				2,983,420				2,953,433				2,904,359
Total Automobile											3,783,628				3,689,664				3,700,366
Beverage, Food and Tobacco — 0.14%*:
Del Monte Food Consumer Products, Inc.			4.70 (3 Month LIBOR USD + 3.250	%)			2/18/2021				736,900				670,461				585,312
Total Beverage, Food and Tobacco											736,900				670,461				585,312
Broadcasting and Entertainment — 1.08%*:
Endemol+			7.09 (3 Month LIBOR USD + 5.750	%)			8/11/2021				4,549,876				4,353,846				4,513,477
Total Broadcasting and Entertainment											4,549,876				4,353,846				4,513,477
Chemicals, Plastics and Rubber — 0.45%*:
Colouroz Investment 2 LLC+			8.61 (3 Month LIBOR USD + 7.250	%)			9/7/2022				2,033,201				2,026,418				1,538,462
Unifrax			8.83 (1 Month LIBOR USD + 7.500	%)			11/7/2025				333,349				331,682				337,516
Total Chemicals, Plastics and Rubber											2,366,550				2,358,100				1,875,978
Diversified/Conglomerate Manufacturing — 2.14%*:
Commercial Vehicle Group Inc.			7.57 (1 Month LIBOR USD + 6.000	%)			4/12/2023				630,408				618,664				631,984
Pelican Products, Inc.			9.94 (3 Month LIBOR USD + 8.250	%)			4/9/2021				8,344,100				8,349,555				8,302,380
Total Diversified/Conglomerate Manufacturing											8,974,508				8,968,219				8,934,364
Diversified/Conglomerate Service — 2.18%*:
Cologix			8.55 (1 Month LIBOR USD + 7.000	%)			3/21/2025				1,000,000				990,000				1,005,000
Misys (Almonde Inc.)+			8.57 (3 Month LIBOR USD + 7.250	%)			6/13/2025				8,085,136				8,197,021				8,087,158
Total Diversified/Conglomerate Service											9,085,136				9,187,021				9,092,158
Farming and Agriculture — 1.40%*:
Allflex Holdings, Inc.			8.73				7/19/2021				5,832,513				5,820,096				5,851,935
			(3 Month LIBOR USD + 7.000	%)
Total Farming and Agriculture											5,832,513				5,820,096				5,851,935

 

See accompanying Notes to the Financial Statements.

 

 

 

12

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Barings Global Short Duration High Yield Fund 2017 Annual Report

 

SCHEDULE OF INVESTMENTS (CONTINUED)

 

December 31, 2017

 

		EFFECTIVE INTEREST RATE ‡				DUE DATE				PRINCIPAL				COST				FAIR VALUE
Bank Loans (Continued)
Finance — 2.00%*:
Cunningham Lindsey Group, Inc.			5.44 (3 Month LIBOR USD + 3.750	%  %)			12/10/2019				114,313				$109,033				$113,856
Cunningham Lindsey Group, Inc.			9.69 (3 Month LIBOR USD + 8.000	%)			6/10/2020				5,504,015				5,506,090				5,416,281
Focus Financial			9.19 (3 Month LIBOR USD + 7.500	%)			5/9/2025				2,800,000				2,859,207				2,824,500
Total Finance											8,418,328				8,474,330				8,354,637
Healthcare, Education and Childcare — 0.72%*:
Prospect Medical Holdings			7.50 (6 Month LIBOR USD + 6.000	%)			6/30/2022				2,962,406				2,932,782				2,992,030
Total Healthcare, Education and Childcare											2,962,406				2,932,782				2,992,030
Home and Office Furnishings, Housewares, and Durable Consumer Products — 1.41%*:
AOT Bedding			9.41 (3 Month LIBOR USD + 8.000	%)			11/8/2024				6,933,333				6,889,101				5,893,333
Total Home and Office Furnishings, Housewares, and Durable Consumer Products											6,933,333				6,889,101				5,893,333
Information Technology — 1.24%*:
Digicert, Inc.			9.38 (3 Month LIBOR USD + 8.000	%)			10/31/2025				5,154,237				5,209,126				5,176,812
Total Information Technology											5,154,237				5,209,126				5,176,812
Insurance — 1.00%*:
AmWins Group Inc.			8.32 (1 Month LIBOR USD + 6.750	%)			1/24/2025				3,750,000				3,833,657				3,785,625
Higginbotham Insurance Agency, Inc.¤			10.00 (3 Month LIBOR USD + 9.000	%)			5/25/2022				402,337				398,314				398,314
Total Insurance											4,152,337				4,231,971				4,183,939
Mining, Steel, Iron and Non-Precious Metals — 2.80%*:
Boomerang Tube, LLC¤			19.57 (1 Month LIBOR USD + 18.000	%)			9/1/2018				189,752				189,752				189,752
Boomerang Tube, LLC¤			16.35	PIK			2/1/2019				2,282,971				2,282,971				2,282,971
Boomerang Tube, LLC¤			18.85	PIK			2/1/2019				1,951,650				1,951,650				214,681
Boomerang Tube, LLC¤			19.57 (1 Month LIBOR USD + 18.000	%)			9/1/2018				189,752				189,752				189,752
Boomerang Tube, LLC¤			15.00				8/1/2018				1,550,482				1,551,218				1,550,482
Boomerang Tube, LLC¤			20.00	PIK			2/1/2022				860,715				813,891				774,643
Boomerang Tube, LLC¤			19.57 (1 Month LIBOR USD + 18.000	%)			9/1/2018				189,752				189,752				189,752

 

See accompanying Notes to the Financial Statements.

 

 

 

13

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Barings Global Short Duration High Yield Fund 2017 Annual Report

 

SCHEDULE OF INVESTMENTS (CONTINUED)

 

December 31, 2017

 

		EFFECTIVE INTEREST RATE ‡				DUE DATE				PRINCIPAL				COST				FAIR VALUE
Bank Loans (Continued)
Mining, Steel, Iron and Non-Precious Metals (Continued)
Murray Energy Corp.			8.94	%			4/15/2020				7,212,924				$6,986,378				$6,329,341
			(3 Month LIBOR USD + 7.250	%)
Total Mining, Steel, Iron and Non-Precious Metals											14,427,998				14,155,364				11,721,374
Oil and Gas — 7.74%*:
Caelus Energy Alaska			9.10 (3 Month LIBOR USD + 7.500	%)			4/2/2021				17,863,828				17,460,357				15,809,488
Fieldwood Energy LLC			8.69 (3 Month LIBOR USD + 7.000	%)			8/31/2020				5,651,171				5,204,507				5,086,054
Fieldwood Energy LLC			8.82 (3 Month LIBOR USD + 7.125	%)			9/30/2020				8,925,706				7,301,294				2,863,634
Fieldwood Energy LLC			8.82 (3 Month LIBOR USD + 7.125	%)			10/2/2020				7,481,592				6,119,694				5,137,385
Gulf Finance, LLC			6.95 (3 Month LIBOR USD + 5.250	%)			8/25/2023				3,867,158				3,731,371				3,462,731
Total Oil and Gas											43,789,455				39,817,223				32,359,292
Total Bank Loans											121,167,205				116,757,304				105,235,007
Corporate Bonds — 103.91%*:
Aerospace and Defense — 1.39%*:
Swissport Investments^+			6.75				12/15/2021				950,000				1,040,150				1,184,959
Triumph Group, Inc.^			7.75				8/15/2025				1,289,000				1,289,000				1,367,951
VistaJet Malta Finance PLC#^			7.75				6/1/2020				3,510,000				3,241,614				3,264,300
Total Aerospace and Defense											5,749,000				5,570,764				5,817,210
Automobile — 3.71%*:
International Automotive Components Group, S.A.#^			9.13				6/1/2018				8,125,000				8,140,942				8,043,750
J.B. Poindexter & Co. Inc.#^			9.00				4/1/2022				7,209,000				7,459,467				7,479,338
Total Automobile											15,334,000				15,600,409				15,523,088
Beverage, Food and Tobacco — 3.28%*:
Boparan Finance plc^+			5.50				7/15/2021				2,600,000				3,155,417				3,166,225
Carrols Corp.#			8.00				5/1/2022				709,000				726,670				746,223
JBS USA LLC#^			8.25				2/1/2020				6,000,000				5,993,535				6,018,000
Manitowoc Foodservice#			9.50				2/15/2024				1,074,000				1,074,000				1,223,018
Premier Foods Finance^+			6.50				3/15/2021				1,850,000				2,661,918				2,541,483
Total Beverage, Food and Tobacco											12,233,000				13,611,540				13,694,949
Broadcasting and Entertainment — 4.96%*:
Arqiva Finance#^+			9.50				3/31/2020				5,000,000				7,801,520				7,007,655
Clear Channel Worldwide Holdings Inc.#			7.63				3/15/2020				8,165,000				7,922,562				7,991,494
Clear Channel Worldwide Holdings Inc.#			7.63				3/15/2020				1,277,000				1,277,000				1,251,460

 

See accompanying Notes to the Financial Statements.

 

 

 

14

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Barings Global Short Duration High Yield Fund 2017 Annual Report

 

SCHEDULE OF INVESTMENTS (CONTINUED)

 

December 31, 2017

 

		EFFECTIVE INTEREST RATE ‡				DUE DATE				PRINCIPAL				COST				FAIR VALUE
Corporate Bonds (Continued)
Broadcasting and Entertainment (Continued)
Dish DBS Corp.#			7.75	%			7/1/2026				3,094,000				$3,127,977				$3,252,568
Entertainment One Ltd.^+			6.88				12/15/2022				850,000				1,282,365				1,234,845
Total Broadcasting and Entertainment											18,386,000				21,411,424				20,738,022
Buildings and Real Estate — 1.41%*:
Beazer Homes USA Inc.#			8.75				3/15/2022				3,198,000				3,253,387				3,525,475
CD&R Waterworks Merger^			6.13				8/15/2025				94,000				94,000				95,410
Cemex S.A.B. de C.V.#^+			7.75				4/16/2026				602,000				601,916				681,765
Keystone Financing^+			9.50				10/15/2019				1,140,684				1,733,660				1,586,295
Total Buildings and Real Estate											5,034,684				5,682,963				5,888,945
Cargo Transport — 7.56%*:
Direct ChassisLink Inc.#^			10.00				6/15/2023				7,894,000				8,055,456				8,782,075
Kenan Advantage Group, Inc.#^			7.88				7/31/2023				10,000,000				10,064,756				10,350,000
World Flight Services, Inc.^+			9.50				7/15/2022				5,650,000				6,240,044				7,225,538
XPO Logistics, Inc.#^			6.50				6/15/2022				5,000,000				4,881,468				5,218,750
Total Cargo Transport											28,544,000				29,241,724				31,576,363
Chemicals, Plastics and Rubber — 6.83%*:
Chemours Co.#			7.00				5/15/2025				5,962,000				5,566,564				6,468,770
Consolidated Energy Finance S.A.#^			6.75				10/15/2019				3,198,000				3,137,211				3,253,965
Consolidated Energy Finance S.A.^			6.88				6/15/2025				1,779,000				1,770,105				1,885,740
CVR Partners LP#^			9.25				6/15/2023				6,213,000				6,136,921				6,686,741
Pinnacle Operating Corp.#^			9.00				5/15/2023				1,993,613				1,993,613				1,854,060
TPC Group, Inc.#^			8.75				12/15/2020				8,398,000				8,407,401				8,398,000
Total Chemicals, Plastics and Rubber											27,543,613				27,011,815				28,547,276
Containers, Packaging and Glass — 6.00%*:
Ardagh Packaging^+			6.75				5/15/2024				3,550,000				4,093,559				4,684,037
Coveris Holdings S.A.#^			7.88				11/1/2019				11,530,000				11,527,353				11,443,525
Horizon Holdings^+			7.25				8/1/2023				2,000,000				2,195,510				2,540,675
Onex Wizard Acquisition Co^+			7.75				2/15/2023				5,100,000				5,753,071				6,384,913
Total Containers, Packaging and Glass											22,180,000				23,569,493				25,053,150
Diversified/Conglomerate Manufacturing — 1.42%*:
Appvion Inc.#^			9.00				6/1/2020				13,200,000				13,322,596				1,980,000
FXI Holdings Inc.^			7.88				11/1/2024				1,000,000				990,000				997,800
StoneMor Partners L.P.#			7.88				6/1/2021				3,000,000				2,944,275				2,940,000
Total Diversified/Conglomerate Manufacturing											17,200,000				17,256,871				5,917,800
Diversified/Conglomerate Service — 5.31%*:
Carlson Travel Holdings Inc.^			9.50				12/15/2024				1,305,000				1,305,000				1,050,525
CSVC Acquisition Corp.#^			7.75				6/15/2025				5,197,000				5,187,000				4,963,135

 

See accompanying Notes to the Financial Statements.

 

 

 

15

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Barings Global Short Duration High Yield Fund 2017 Annual Report

 

SCHEDULE OF INVESTMENTS (CONTINUED)

 

December 31, 2017

 

		EFFECTIVE INTEREST RATE ‡				DUE DATE				PRINCIPAL				COST				FAIR VALUE
Corporate Bonds (Continued)
Diversified/Conglomerate Service (Continued)
Loxam^+			6.00	%			4/15/2025				800,000				$861,763				$1,043,471
Prime SEC SVCS Borrower LLC/SR SEC GLBL 23#^			9.25				5/15/2023				8,255,000				8,633,598				9,163,050
Zachry Holdings Inc.#^			7.50				2/1/2020				5,875,000				5,853,041				5,963,125
Total Diversified/Conglomerate Service											21,432,000				21,840,402				22,183,306
Diversified Natural Resources, Precious Metals and Minerals — 0.49%*:
IAMGOLD Corporation^+			7.00				4/15/2025				2,000,000				2,000,000				2,065,000
Total Diversified Natural Resources, Precious Metals and Minerals											2,000,000				2,000,000				2,065,000
Electronics — 2.12%*:
Microsemi Corporation#^			9.13				4/15/2023				691,000				691,000				777,375
TIBCO Software, Inc.#^			11.38				12/1/2021				2,915,000				3,147,146				3,175,542
Western Digital Corporation#			10.50				4/1/2024				4,224,000				4,336,956				4,894,560
Total Electronics											7,830,000				8,175,102				8,847,477
Finance — 4.69%*:
Galaxy Finco Ltd.^+			7.88				11/15/2021				3,900,000				6,351,439				5,272,156
GFKL Financial Services^+			8.50				11/1/2022				3,975,000				5,711,081				5,608,343
GFKL Financial Services^+			11.00				11/1/2023				1,600,000				2,229,894				2,320,244
Icahn Enterprises#			6.75				2/1/2024				3,000,000				2,996,250				3,082,500
Virtu Financial LLC^			6.75				6/15/2022				3,132,000				3,132,000				3,296,430
Total Finance											15,607,000				20,420,664				19,579,673
Healthcare, Education and Childcare — 9.98%*:
CHS/Community Health Systems, Inc.			6.25				3/31/2023				685,000				685,000				616,500
Cognita Financing^+			7.75				8/15/2021				2,200,000				3,433,054				3,072,800
Endo International^			6.00				2/1/2025				1,500,000				1,358,476				1,162,500
Horizon Pharma plc#^			8.75				11/1/2024				1,595,000				1,597,336				1,684,719
IDH Finance PLC^+			6.25				8/15/2022				1,150,000				1,506,794				1,419,829
Kindred Healthcare, Inc.#			8.75				1/15/2023				3,998,000				4,045,897				4,230,384
Regionalcare Hospital Partners, Inc.#^			8.25				5/1/2023				9,996,000				10,095,601				10,545,780
Tenet Healthcare Corporation#			8.13				4/1/2022				4,700,000				4,677,652				4,782,250
Valeant#^			6.13				4/15/2025				7,006,000				6,348,391				6,410,490
Valeant#^			7.50				7/15/2021				3,260,000				3,260,000				3,317,050
Valeant^			9.00				12/15/2025				2,945,000				2,931,874				3,069,279
Valeant^			6.50				3/15/2022				488,000				488,000				512,400
Valeant^			7.00				3/15/2024				831,000				831,000				889,170
Total Healthcare, Education and Childcare											40,354,000				41,259,075				41,713,151
Hotels, Motels, Inns and Gaming — 0.82%*:
TVL Finance Plc^+			8.50				5/15/2023				2,340,000				3,329,945				3,434,207
Total Hotels, Motels, Inns and Gaming											2,340,000				3,329,945				3,434,207

 

See accompanying Notes to the Financial Statements.

 

 

 

16

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Barings Global Short Duration High Yield Fund 2017 Annual Report

 

SCHEDULE OF INVESTMENTS (CONTINUED)

 

December 31, 2017

 

		EFFECTIVE INTEREST RATE ‡				DUE DATE				PRINCIPAL				COST				FAIR VALUE
Corporate Bonds (Continued)
Insurance — 1.19%*:
Onex York Acquisition Corp.#^			8.50	%			10/1/2022				5,102,000				$5,013,438				$4,974,450
Total Insurance											5,102,000				5,013,438				4,974,450
Leisure, Amusement, Motion Pictures and Entertainment — 2.12%*:
Perform Group^+			8.50				11/15/2020				2,400,000				3,134,178				3,337,564
WMG Acquisition Group#^			6.75				4/15/2022				5,299,000				5,170,220				5,537,455
Total Leisure, Amusement, Motion Pictures and Entertainment											7,699,000				8,304,398				8,875,019
Machinery (Non-Agriculture, Non-Construct, Non-Electronic) — 3.32%*:
Apex Tool Group LLC#^			7.00				2/1/2021				4,896,000				4,505,525				4,712,400
Park-Ohio Holdings Corp.			6.63				4/15/2027				808,000				808,000				870,620
Xerium Technologies#			9.50				8/15/2021				8,200,000				8,277,832				8,302,500
Total Machinery (Non-Agriculture, Non-Construct, Non-Electronic)											13,904,000				13,591,357				13,885,520
Mining, Steel, Iron and Non-Precious Metals — 7.49%*:
Allegheny Technologies Inc.#			7.88				8/15/2023				3,000,000				3,114,458				3,241,860
Alliance Resources Partners, L.P.^			7.50				5/1/2025				823,000				823,000				874,438
Big River Steel LLC#^			7.25				9/1/2025				1,547,000				1,547,000				1,635,953
Consol Energy Inc.^			11.00				11/15/2025				3,491,000				3,491,000				3,665,550
Hecla Mining Company#			6.88				5/1/2021				5,888,000				5,719,382				6,035,200
Kissner Milling Company Limited#^			8.38				12/1/2022				6,475,000				6,467,984				6,539,750
Northwest Acquisitions ULC^+			7.13				11/1/2022				411,000				406,738				424,357
SunCoke Energy Inc.#^			7.50				6/15/2025				2,743,000				2,702,212				2,866,435
TMS International Corp.#^			7.25				8/15/2025				2,250,000				2,250,000				2,351,250
United States Steel Corp.#			6.88				8/15/2025				2,093,000				2,093,000				2,184,673
Warrior Met Coal Inc.^			8.00				11/1/2024				914,000				914,000				943,705
Zekelman Industries Inc.^			9.88				6/15/2023				489,000				489,000				550,125
Total Mining, Steel, Iron and Non-Precious Metals											30,124,000				30,017,774				31,313,296
Oil and Gas — 15.14%*:
CITGO Holding Inc.#^			10.75				2/15/2020				8,584,000				8,493,496				9,206,340
Covey Park Energy LLC^			7.50				5/15/2025				397,000				397,000				413,753
EP Energy#			9.38				5/1/2020				7,375,000				4,846,925				6,231,875
EP Energy#^			8.00				2/15/2025				5,055,000				4,962,456				3,690,150
Ferrellgas Partners LP#			8.63				6/15/2020				8,060,000				8,006,334				6,871,150
Ferrellgas Partners LP			8.63				6/15/2020				1,254,000				1,216,869				1,069,035
Globe Luxembourg SA^+			9.88				4/1/2022				400,000				394,940				424,000
Jonah Energy LLC^			7.25				10/15/2025				2,214,000				2,214,000				2,230,605
Jupiter Resources Inc.#^+			8.50				10/1/2022				13,375,000				11,965,175				8,292,500
Kosmos Energy Ltd.#^+			7.88				8/1/2021				3,984,000				3,876,864				4,073,640
Kosmos Energy Ltd.#^+			7.88				8/1/2021				5,164,000				4,901,386				5,280,190

 

See accompanying Notes to the Financial Statements.

 

 

 

17

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Barings Global Short Duration High Yield Fund 2017 Annual Report

 

SCHEDULE OF INVESTMENTS (CONTINUED)

 

December 31, 2017

 

		EFFECTIVE INTEREST RATE ‡				DUE DATE				PRINCIPAL				COST				FAIR VALUE
Corporate Bonds (Continued)
Oil and Gas (Continued)
Pbf Holding Company LLC			7.00	%			11/15/2023				1,000,000				$997,500				$1,040,000
Pbf Logistics LP#			6.88				5/15/2023				1,117,000				1,117,000				1,150,510
Topaz Marine SA#^+			9.13				7/26/2022				8,500,000				8,500,000				8,781,588
Welltec^+			9.50				12/1/2022				4,513,000				4,469,043				4,535,565
Total Oil and Gas											70,992,000				66,358,988				63,290,901
Personal and Non Durable Consumer Products — 0.92%*:
High Ridge Brands Co.^			8.88				3/15/2025				2,982,000				2,982,000				2,653,980
Mattel Inc.^			6.75				12/31/2025				1,169,000				1,169,000				1,184,723
Total Personal and Non Durable Consumer Products											4,151,000				4,151,000				3,838,703
Personal Transportation — 1.87%*:
Hertz Corporation			7.38				1/15/2021				2,000,000				1,905,433				2,020,000
Hertz Corporation			6.25				10/15/2022				2,000,000				1,744,125				1,930,000
Hertz Corporation#^			7.63				6/1/2022				3,678,000				3,672,435				3,852,705
Total Personal Transportation											7,678,000				7,321,993				7,802,705
Retail Store — 1.62%*:
HSS Financing PLC^+			6.75				8/1/2019				816,000				1,240,099				1,013,582
Maxeda DIY^+			6.13				7/15/2022				750,000				855,530				905,086
Travelex^+			8.00				5/15/2022				4,000,000				4,421,260				4,861,778
Total Retail Store											5,566,000				6,516,889				6,780,446
Telecommunications — 8.41%*:
Altice S.A.#^+			7.75				5/15/2022				3,240,000				3,240,000				3,191,400
Altice S.A.#^+			7.50				5/15/2026				2,622,000				2,670,512				2,792,430
Altice S.A.#^+			7.63				2/15/2025				2,976,000				3,071,804				2,849,520
Cincinnati Bell Inc.^			7.00				7/15/2024				2,150,000				2,150,000				2,133,875
Digicel Limited#^+			6.00				4/15/2021				4,000,000				3,602,352				3,937,040
Digicel Limited^+			8.25				9/30/2020				6,000,000				5,896,617				5,902,740
GTT Communications^			7.88				12/31/2024				3,044,000				3,116,397				3,211,420
Hughes Satellite Systems Corp			6.63				8/1/2026				3,000,000				2,924,904				3,142,500
Numericable-SFR#^+			7.38				5/1/2026				3,183,000				3,206,421				3,266,554
Sprint Corp.#			7.88				9/15/2023				4,428,000				4,309,176				4,715,820
Total Telecommunications											34,643,000				34,188,183				35,143,299
Textiles & Leather — 0.56%*:
Perry Ellis International Inc#			7.88				4/1/2019				2,334,000				2,357,127				2,334,000
Total Textiles & Leather											2,334,000				2,357,127				2,334,000

 

See accompanying Notes to the Financial Statements.

 

 

 

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Barings Global Short Duration High Yield Fund 2017 Annual Report

 

SCHEDULE OF INVESTMENTS (CONTINUED)

 

December 31, 2017

 

		EFFECTIVE INTEREST RATE ‡				DUE DATE				PRINCIPAL				COST				FAIR VALUE
Corporate Bonds (Continued)
Utilities — 1.30%*:
NRG Energy#			7.25	%			5/15/2026				5,000,000				$4,975,929				$5,443,700
Total Utilities											5,000,000				4,975,929				5,443,700
Total Corporate Bonds											428,960,297				438,779,267				434,261,656
Total Fixed Income											567,677,502				573,237,802				557,179,244
Total Investments											569,287,997				575,796,777				559,870,097
Other assets and liabilities — (33.96)%																			(141,946,510	)
Net Assets — 100%																			$417,923,587

‡	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, 2017.

§

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, 2017. Bank loans are also subject to mandatory and/or optional prepayment which cannot be predicted. As a result, the remaining maturity may be substantially less than the stated maturity shown.

+	Foreign security.

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

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

 

		United States			74.9%
		United Kingdom			9.7%
		France			3.6%
		Canada			1.9%
		Jamaica			1.8%
		Ghana			1.7%
		Azerbaijan			1.6%
		Switzerland			1.4%
		Netherlands			1.0%
		(Individually less than 1%)			2.4%
					100.0%

 

See accompanying Notes to the Financial Statements.

 

 

 

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Barings Global Short Duration High Yield Fund 2017 Annual Report

 

SCHEDULE OF INVESTMENTS (CONTINUED)

 

December 31, 2017

 

 

A summary of outstanding derivatives at December 31, 2017 is as follows:

Schedule of Open Forward Currency Contracts

December 31, 2017

 

COUNTERPARTY OF CONTRACT		FORWARD SETTLEMENT DATE		CURRENCY TO BE RECEIVED				AMOUNT OF CURRENCY TO BE RECEIVED IN LOCAL CURRENCY				CURRENCY TO BE DELIVERED				AMOUNT OF CURRENCY TO BE DELIVERED IN LOCAL CURRENCY				UNREALIZED APPRECIATION (DEPRECIATION)
JP MORGANCHASE SECURITIES INC.		1/16/2018			USD				29,642,949				EUR				(25,157,201	)			(575,754	)
MORGANSTANLEY & CO. INCORPORATED		1/16/2018			USD				41,756,499				GBP				(31,155,812	)			(334,660	)
																					(910,414	)

 

See accompanying Notes to the Financial Statements.

 

 

 

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Barings Global Short Duration High Yield Fund 2017 Annual Report

 

NOTES TO THE FINANCIAL STATEMENTS

 

December 31, 2017

 

 

 

 

21

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Barings Global Short Duration High Yield Fund 2017 Annual Report

 

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

 

December 31, 2017

 

 

 

 

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Barings Global Short Duration High Yield Fund 2017 Annual Report

 

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

 

December 31, 2017

 

 

 

DESCRIPTION		LEVEL 1				LEVEL 2				LEVEL 3				TOTAL INVESTMENTS
Assets:
Equities:
Common Stocks		$	–			$	–			$	1,344,586			$	1,344,586
Preferred Stocks			–				–				1,245,200				1,245,200
Warrants			–				–				101,067				101,067
Total Equities:			–				–				2,690,853				2,690,853
Fixed Income:
Asset-Backed Securities		$	–			$	9,793,803			$	7,888,778			$	17,682,581
Bank Loans			–				99,444,660				5,790,347				105,235,007
Bonds			–				434,261,656				–				434,261,656
Total Fixed Income		$	–			$	543,500,119			$	13,679,125			$	557,179,244
Total Assets		$	–			$	543,500,119			$	16,369,978			$	559,870,097
Liabilities:
Foreign Exchange Contracts		$	–			$	910,414			$	–			$	910,414
Total Liabilities:		$	–			$	910,414			$	–			$	910,414

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, 2017:

 

TYPE OF ASSETS		FAIR VALUE AS OF DECEMBER 31, 2017				VALUATION TECHNIQUE(S)		UNOBSERVABLE INPUT
Equities
Pinnacle Operating Corp.		$	1,245,200			Broker Quote		$91.00; pricing source depth of 1.
Sabine Oil & Gas, LLC		$	191,790			Broker Quote		$45.00; pricing source depth of 1.
Sabine Oil & Gas, LLC		$	87,828			Broker Quote		$6.50; pricing source depth of 1.
Sabine Oil & Gas, LLC		$	13,239			Broker Quote		$5.50; pricing source depth of 1.
Templar Energy LLC		$	800,776			Broker Quote		$9.25; pricing source depth of 1.
Templar Energy LLC		$	352,020			Broker Quote		$2.60; pricing source depth of 1.

 

 

 

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Barings Global Short Duration High Yield Fund 2017 Annual Report

 

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

 

December 31, 2017

 

TYPE OF ASSETS		FAIR VALUE AS OF DECEMBER 31, 2017				VALUATION TECHNIQUE(S)		UNOBSERVABLE INPUT
Asset-Backed Securities
Carlyle Global Market Strategies 2017-5A		$	700,000			Broker Quote		$100.00; pricing source depth of 1.
GoldenTree Loan Opportunities XI Ltd 2015-11A		$	500,000			Broker Quote		$100.00; pricing source depth of 1.
KKR Financial CLO Ltd 2017-20		$	1,500,000			Broker Quote		$100.00; pricing source depth of 1.
Sound Point CLO Ltd 2017-20		$	2,000,000			Broker Quote		$100.00; pricing source depth of 1.
Voya CLO Ltd 2015-1A		$	1,688,778			Broker Quote		$99.34; pricing source depth of 1.
Wellfleet CLO Ltd 2017-3A		$	1,500,000			Broker Quote		$100.00; pricing source depth of 1.
Second Lien Term Loans
Boomerang Tube, LLC		$	1,550,482			Discounted Cash Flow		Average Enterprise Valuation Multiple: 5.5x; EBITDA: $38.8 million; Discount rate: 10%.
Boomerang Tube, LLC		$	774,643			Discounted Cash Flow		Average Enterprise Valuation Multiple: 5.5x; EBITDA: $38.8 million; Discount rate: 10%.
Boomerang Tube, LLC		$	189,752			Discounted Cash Flow		Average Enterprise Valuation Multiple: 5.5x; EBITDA: $38.8 million; Discount rate: 10%.
Boomerang Tube, LLC		$	214,681			Discounted Cash Flow		Average Enterprise Valuation Multiple: 5.5x; EBITDA: $38.8 million; Discount rate: 10%.
Boomerang Tube, LLC		$	189,752			Discounted Cash Flow		Average Enterprise Valuation Multiple: 5.5x; EBITDA: $38.8 million; Discount rate: 10%.
Boomerang Tube, LLC		$	2,282,971			Discounted Cash Flow		Average Enterprise Valuation Multiple: 5.5x; EBITDA: $38.8 million; Discount rate: 10%.
Boomerang Tube, LLC		$	189,752			Discounted Cash Flow		Average Enterprise Valuation Multiple: 5.5x; EBITDA: $38.8 million; Discount rate: 10%.
Higginbotham Insurance Agency, Inc.		$	398,314			Valued at Cost		$99.00; pricing source depth of 1.

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

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

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

Although the Fund believes the valuation methods described above are appropriate, the use of different methodologies or assumptions to determine fair value could result in different estimates of fair value at the reporting date.

 

 

 

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Barings Global Short Duration High Yield Fund 2017 Annual Report

 

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

 

December 31, 2017

 

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 DECEMBER 31, 2017				CHANGE IN UNREALIZED APPRECIATION / DEPRECIATION FROM INVESTMENTS HELD AS OF DECEMBER 31, 2017
Equities
Common Stocks		$	2,001,569			$	0			$	0			$	19,024			$	0			$	0			$	0			($	676,007	)		$	1,344,586			($	676,007	)
Preferred Stocks			0				0				0				643,125				0				0				0				602,075				1,245,200				602,075
Warrants			109,026				0				0				0				0				0				0				(7,959	)			101,067				(7,959	)
Total Equities		$	2,110,595			$	0			$	0			$	662,149			$	0			$	0			$	0			($	81,891	)		$	2,690,853			($	81,891	)
Fixed Income
Asset-Backed Securities		$	0			$	0			$	0			$	7,888,778			$	0			$	0			$	0			$	0			$	7,888,778			$	0
Bank Loans			3,871,669				0				0				2,294,833				0				6,045				0				(382,200	)			5,790,347				(382,200	)
Total Fixed Income		$	3,871,669			$	0			$	0			$	10,183,611			$	0			$	6,045			$	0			($	382,200	)		$	13,679,125			($	382,200	)
Total		$	5,982,264			$	0			$	0			$	10,845,760			$	0			$	6,045			$	0			($	464,091	)		$	16,369,978			($	464,091	)

 

 

 

 

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Barings Global Short Duration High Yield Fund 2017 Annual Report

 

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

 

December 31, 2017

 

 

 

 

26

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Barings Global Short Duration High Yield Fund 2017 Annual Report

 

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

 

December 31, 2017

 

 

 

 

27

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Barings Global Short Duration High Yield Fund 2017 Annual Report

 

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

 

December 31, 2017

 

 

 

 

28

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Barings Global Short Duration High Yield Fund 2017 Annual Report

 

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

 

December 31, 2017

 

 

 

 

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Barings Global Short Duration High Yield Fund 2017 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, 2017, the related statements of operations and cash flows for the year then ended, the statements of changes in net assets and the financial highlights for each of the two years in the period then ended, and the related notes to the financial statements. The financial highlights for each of the three 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, 2017, and the results of its operations and its cash flows for the year then ended, and the changes in its net assets and the financial highlights for each of the two 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 owned as of December 31, 2017, by correspondence with the custodian, brokers and agent banks; when replies were not received from brokers and 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, 2018

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

 

.

 

 

 

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Barings Global Short Duration High Yield Fund 2017 Annual Report

 

RESULTS OF SHAREHOLDER MEETING

 

 

The Annual Meeting of Shareholders (“Annual Meeting”) was held on Thursday, August 3, 2017. The shareholders were asked to elect as Trustee Thomas W. Okel for a three-year term. The shareholders approved the proposal. The results of shareholder voting are set forth below:

 

SHARES FOR		WITHHELD				TOTAL				% OF SHARES VOTED FOR
Thomas W. Okel 18,446,591			188,345				18,634,936				98.99	%

The Fund’s other Trustees Rodney J. Dillman, Bernard A. Harris, Jr., Thomas M. Finke and Martin A. Sumichrast continued to serve their respective terms following the Annual Meeting.

 

 

 

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Barings Global Short Duration High Yield Fund 2017 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 (53) 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		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).

 

 

 

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Barings Global Short Duration High Yield Fund 2017 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 (65) 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. (61) 300 South Tryon Street Suite 2500 Charlotte, NC 28202		Trustee		Trustee since 2012		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); Director (since 2016), AIMIS, Inc. (American Institute of Minimally Invasive Surgery, an educator of advanced surgical techniques for women’s health specialists); 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 (55) 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		Trustee (since 2013), Barings Funds Trust (open-end investment company advised by Barings); Trustee (since 2015), Horizon Funds (mutual fund complex).
Cynthia R. Plouché (61) 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).

 

 

 

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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 (51) 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).

 

 

 

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Barings Global Short Duration High Yield Fund 2017 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 (50) 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 (50) 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 (40) 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 (42) 550 South Tryon Street Charlotte, NC 28202		Vice President		Since 2012		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 (48) 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 (44) 300 South Tryon Street Suite 2500 Charlotte, NC 28202		Chief Compliance Officer		Since 2012		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 (53) 300 South Tryon Street Suite 2500 Charlotte, NC 28202		Vice President, Secretary and Chief Legal Officer		Since 2012		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.

 

 

 

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Barings Global Short Duration High Yield Fund 2017 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 (45) 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).
Kristin Goodchild (33) 300 South Tryon Street Suite 2500 Charlotte, NC 28202		Assistant Secretary		Since 2015		Counsel (since 2016), Senior Paralegal (2013-2016), Paralegal (2008-2012), Barings; Assistant Secretary (since 2015), Barings Funds Trust (open-end investment company advised by Barings); Associate Secretary (since 2015), Barings Corporate Investors and Barings Participation Investors (closed-end investment companies advised by Barings); Assistant Secretary (since 2015), CI Subsidiary Trust and PI Subsidiary Trust.

 

 

 

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Barings Global Short Duration High Yield Fund 2017 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 (“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 “Sub-Advisory Agreement” and together with the Management Agreement, the “Agreements”) between Barings and Barings Global Advisers Limited (“BGA”). 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 4, 2017 and August 3, 2017 (the “Meetings”) for the specific purpose of considering whether to approve the continuation of 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 to the Fund, the Trustees considered the specific responsibilities of Barings and BGA 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 and BGA to attract and retain high-quality personnel, and the organizational depth and stability of Barings and BGA. The Trustees also considered the trading capabilities of Barings and BGA.

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 1st quintile, 1st quintile, 4th quintile and 3rd quintile of the Broadridge performance universe for the one-year, two-year, three-year and four-year periods ended March 31, 2017 (the 1st quintile being the best performers and the 5th quintile being the worst performers). Given the size of the Broadridge performance universe and information provided by Barings regarding the differences between the Fund and other funds in its Broadridge performance universe, 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 performance of the Fund ranked, respectively, 2nd, 2nd and 4th out of nine funds for the one-year, two-year and three-year periods ended March 31, 2017. 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’ and BGA’s responses and efforts relating to investment performance.

 

 

 

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Barings Global Short Duration High Yield Fund 2017 Annual Report

 

APPROVAL OF INVESTMENT MANAGEMENT AGREEMENT

AND SUB-ADVISORY AGREEMENT (CONTINUED)

 

 

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 its sub-advisory fee under the Sub-Advisory 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 5th 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.

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 BGA 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. Additionally, the Trustees considered so-called “fall-out benefits” to Barings and BGA 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 represent reasonable compensation in light of the services being provided by Barings and BGA 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 2018.

 

 

 

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Barings Global Short Duration High Yield Fund 2017 Annual Report

 

FUND DIVIDEND REINVESTMENT PLAN

 

 

 

 

 

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Barings Global Short Duration High Yield Fund 2017 Annual Report

 

 

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:

 

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

 

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

 

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

 

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Our Internet website.

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

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

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

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

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

January 2017

 

 

 

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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 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, 2017				Deloitte Year Ended December 31, 2016
Audit Fees		$	72,870			$	68,000
Audit-Related Fees			0				0
Tax Fees			11,500				11,500
All Other Fees			0				0
Total Fees		$	84,370			$	79,500

Non-Audit Fees Billed to Barings and MassMutual:

 

		Deloitte Year Ended December 31, 2017				Deloitte Year Ended December 31, 2016
Audit-Related Fees		$	4,392,135			$	4,914,087
Tax Fees			2,710,931				2,950,324
All Other Fees			14,168,133				9,091,158
Total Fees		$	21,271,199			$	16,955,569

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.

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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 2017, 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 2017 and 2016 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 2016 fees billed represent final 2016 amounts, which may differ from the preliminary figures available as of the filing date of the Registrant’s 2017 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 2017 Annual Form N-CSR, but are now properly included in the 2017 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’ Proxy Voting Policy to generally vote proxies in accordance with the recommendations of the Research Provider. In

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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 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 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 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 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’ 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, 1500 Main Street, Suite 2800, P.O. Box 15189, Springfield, MA 01115-5189, or calling toll-free, 1-877-766-0014.

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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 Global Advisers Limited (“BGA”). 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 in 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. He 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.

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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 (C)		Registered Investment Companies			7			$	1,350.78				0				N/A
		Other Pooled Investment Vehicles			7			$	2,046.62				0				N/A
		Other Accounts (D)			19			$	3,767.15				0				N/A
Craig Abouchar (C)		Registered Investment Companies			2			$	204.41				0				N/A
		Other Pooled Investment Vehicles			6			$	2,271.30				0				N/A
		Other Accounts			5			$	680.97				0				N/A
Scott Roth (C)		Registered Investment Companies			4			$	820.49				0				N/A
		Other Pooled Investment Vehicles			7			$	2,196.99				0				N/A
		Other Accounts (D)			16			$	3,189.99				0				N/A
Chris Sawyer (C)		Registered Investment Companies			1			$	173.11				0				N/A
		Other Pooled Investment Vehicles			7			$	10,659.25				0				N/A
		Other Accounts			0			$	0				0				N/A

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(A)	Account asset size has been calculated as of December 31, 2017.

(B)	Asset size in millions.

(C)	Represents accounts advised by Barings over which Messrs. Feeley, Abouchar, Roth and Sawyer have day-to-day management responsibilities.

(D)	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.

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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.

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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’ Employee Co-Investment Policy, which ensures that any co-investment by a Barings employee is consistent with Barings’ Code of Ethics, as summarized above.

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 an 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, 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

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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’ Employee Co-Investment Policy, which ensures that any co-investment by a Barings employee is consistent with Barings’ Code of Ethics, as summarized above.

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 Short Sales 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 Code of Ethics, as summarized above.

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 Errors Policy governing the resolution of trading errors, and will follow the Global 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 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.

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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.

BGA (Sub-Adviser):

On March 29, 2012, Barings Global Advisers Limited (“BGA”) and Barings (U.K.) Limited (“Barings UK”) entered into a services agreement pursuant to which Barings UK agreed to provide personnel services to BGA (including the secondment of investment staff on a part-time basis) sufficient to enable BGA 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;

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(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 BGA 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 BGA 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.

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BENEFICIAL OWNERSHIP. As of December 31, 2017, 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.

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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.

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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 9, 2018

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 9, 2018
By (Signature and Title):		/s/ Carlene Pollock
		Carlene Pollock, Chief Financial Officer
Date:		March 9, 2018