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 | 811-22037 | |||||||
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Stone Harbor Investment Funds | ||||||||
(Exact name of registrant as specified in charter) | ||||||||
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1290 Broadway, Suite 1100 Denver, CO |
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(Address of principal executive offices) |
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Adam J. Shapiro, Esq. c/o Stone Harbor Investment Partners LP 31 West 52nd Street, 16th Floor New York, NY 10019 | ||||||||
(Name and address of agent for service) | ||||||||
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With copies To: | ||||||||
John M. Loder, Esq. Ropes & Gray LLP One International Place Boston, MA 02110-2624 | ||||||||
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Registrant’s telephone number, including area code: | (303) 623-2577 |
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Date of fiscal year end: | May 31 |
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Date of reporting period: | November 30, 2007 |
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Item 1. Reports to Stockholders.
Table of Contents
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5 | |
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6 | |
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7 | |
14 | |
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28 | |
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29 | |
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30 | |
31 | |
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32 | |
33 | |
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34 | |
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38 |
November 30, 2007
Dear Shareholder,
On behalf of Stone Harbor Investment Funds (the “Funds”), I would like to welcome you as investors.
This report will cover the period from August 16, 2007, the Funds’ inception date, through November 30, 2007. We will provide you with detailed information about the Funds’ performance, portfolio composition and expenses.
PERFORMANCE
The two Stone Harbor institutional mutual funds outperformed their respective benchmarks during this initial August to November period. The High Yield Bond Fund returned 3.40% net of expenses, compared to the Citigroup High Yield Market Capped Index return of 2.30%. In the same period, The Stone Harbor Emerging Markets Debt Fund returned 8.40% net of expenses, compared to the JP Morgan EMBI Global Diversified Index return of 6.82%. Although this initial period was brief, we were nevertheless pleased with these results, particularly in view of this year’s market turmoil.
THE MARKETS
The events of the credit markets during the latter half of 2007 have been widely discussed in the press. Investors appear to be well-versed in the perils of sub-prime lending and the lax lending standards used during the past few years. Compounding the problem was the splicing of these sub-prime loans into CDOs and CLOs and their placement into financial institutions around the world. Generally, the purchasers of these sub-prime derivatives were Structured Investment Vehicles (SIVs), hedge funds and banks. The fear of not knowing the true extent of potential losses, or even the specific institutions that owned the securities was a primary cause of the global financial system becoming extremely risk averse. The risk aversion was reflected in inter-bank borrowing rates rising to near record spreads to governments, freezing the money markets.
This revised assessment of risk carried into all corners of the credit markets. As is customary during times of stress, investors sought the safety of government bonds. Credit spreads widened substantially in the various sectors of the corporate debt market, including High Yield and Senior Leveraged Loans. The High Yield credit spread as measured by the Citigroup High Yield Market Capped Index widened to 554 basis points from 452 basis points during the August 16 to November 30, 2007 period.
Less affected during this difficult period was the Emerging Markets Debt asset class. One of the factors contributing to this sector’s relative strength has been its improving credit quality. Reflecting this improving credit quality, the leading market index is now 40% investment grade rated versus 1.7% just a decade ago. In addition, the emerging debt markets have been in a very strong technical position. Many countries have been buying back substantial amounts of dollar-based external debt and replacing it with bonds issued in local currencies. Thus, credit spreads in emerging markets debt have been less vulnerable. The market’s average credit spread, as measured by our JP Morgan benchmark, widened only slightly to 270 basis points from 269 basis points during the August 16 to November 30, 2007 period.
2
BOND PERFORMANCE COMPARISONS
The charts below depict the performance of various debt market indices over our reporting period. As can be seen, The Stone Harbor Funds fared well in comparison.
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| August 16– |
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| November 30, 2007 (%) |
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Citigroup Treasury 1-10 Year (1) |
| 4.24 |
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Lehman U.S. Corporate Investment Grade (2) |
| 3.10 |
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Citigroup High Yield Market Capped Index (3) |
| 2.30 |
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JP Morgan EMBI Global Diversified Index (4) |
| 6.82 |
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Stone Harbor High Yield Bond Fund |
| 3.40 |
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Stone Harbor Emerging Markets Debt Fund |
| 8.40 |
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3
We would like to thank you for your support and confidence in Stone Harbor. We will continue to keep our focus on producing strong investment returns and dedicated client service. Please feel free to contact us directly at 212-548-1200.
Sincerely,
Thomas W. Brock
Chairman of the Board of Trustees
November 30, 2007
(1) The Citigroup US Treasury 1-10 Year Benchmark (On-The-Run) Index measures total returns for the current ten year on-the-run Treasuries that have been in existence for the entire month.
(2) The Lehman Brothers U.S. Corporate Investment Grade Index is comprised of publicly issued U.S. corporate and specified foreign debentures and secured notes that meet the specified maturity, liquidity, and quality requirements. To qualify, bonds must be SEC-registered.
(3) The Citigroup High Yield Market Capped Index represents a modified version of the High Yield Market Index by delaying the entry of fallen angel issues and capping the par value of individual issuers at US$5 billion par amount outstanding.
(4) The JP Morgan EMBI Global Diversified is a uniquely-weighted version of the EMBI Global (Which tracks total returns for U.S.-dollar-denominated debt instruments issued by emerging market sovereign and quasi-sovereign entities: Brady bonds, loans, Eurobonds.) It limits the weights of index countries with larger debt stocks by only including specified portions of these countries’ eligible current face amounts of debt outstanding. The countries covered in the EMBI Global Diversified are identical to those covered by the EMBI Global.
This report must be preceded or accompanied by a prospectus. For more complete information including charges and expenses, please call 1-866-699-8158 to receive a prospectus. Read the prospectus carefully before investing or sending money.
Past performance is no guarantee of future results. The performance data quoted represents past performance and current returns may be lower or higher. Total return figures include change in share price, reinvestment of dividends and capital gains and do not reflect taxes that a shareholder would pay on fund distributions or on the redemption of fund shares. The investment return and net asset value will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than the original cost. [To obtain performance information for the most recent month end, please call 1-866-699-8158.]
For more complete information on the Funds, you may request additional prospectuses by calling 1-866-699-8158. You should consider each Fund’s investment objectives, risk, charges and expenses carefully before you invest. Information about these and other important information is in the Funds’ prospectus which you should read carefully before investing.
Not FDIC insured. May lose value. No bank guarantee.
4
For the period August 16, 2007 (Inception) to November 30, 2007 (Unaudited)
Example. As a shareholder of a Fund, you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments and/or redemption fees (if applicable) and (2) ongoing costs, including management fees and other Fund expenses. The below examples are intended to help you understand your ongoing costs (in dollars) of investing in a Fund and to compare these costs with the ongoing costs of investing in other mutual funds. The examples are based on an investment of $1,000 invested on August 16, 2007 and held until November 30, 2007.
Actual Expenses. The first line of the table below provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes. The second line of the table below provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in a Fund and other mutual funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect transaction fees, such as redemption fees, sales charges (loads) or exchange fees. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transaction fees were included, your costs would have been higher.
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| Beginning |
| Ending |
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| Expenses |
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| Account Value |
| Account Value |
| Expense |
| Paid During |
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| 8/16/2007 |
| 11/30/2007 |
| Ratio (a) |
| Period (b) |
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STONE HARBOR EMERGING MARKETS DEBT FUND |
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Institutional Class |
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Actual |
| $ | 1,000.00 |
| $ | 1,084.00 |
| 0.75 | % | $ | 2.27 |
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Hypothetical (5% return before expenses) |
| $ | 1,000.00 |
| $ | 1,012.34 |
| 0.75 | % | $ | 2.19 |
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STONE HARBOR HIGH YIELD BOND FUND |
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Institutional Class |
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Actual |
| $ | 1,000.00 |
| $ | 1,034.00 |
| 0.55 | % | $ | 1.62 |
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Hypothetical (5% return before expenses) |
| $ | 1,000.00 |
| $ | 1,012.92 |
| 0.55 | % | $ | 1.61 |
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(a) Annualized, based on the Fund’s expenses from August 16, 2007 (inception) through November 30, 2007. Additional information regarding the expenses is discussed on page 36.
(b) Expenses are equal to the Fund’s annualized expense ratio multiplied by the average account value over the period, multiplied by the number of days in the most recent fiscal half year (106), divided by 365. Note this expense example is typically based on a six-month period. As the Funds’ period of operations is less than six months as of the date of this report (August 16, 2007 to November 30, 2007), the expense examples shown are from inception date of the Funds through November 30, 2007 (106 days).
5
November 30, 2007 (Unaudited)
Under SEC Rules, all funds are required to include in their annual and semi-annual shareholder reports a presentation of portfolio holdings in a table, chart or graph by reasonably identifiable categories. The following tables which present holdings as a percent of total net assets (“TNA”) are provided in compliance with such requirements.
EMERGING MARKETS DEBT FUND
Country Breakout |
| % of TNA |
|
Argentina |
| 9.16 | % |
Brazil |
| 12.29 | % |
Chile |
| 1.40 | % |
Colombia |
| 5.86 | % |
Ecuador |
| 3.37 | % |
Egypt |
| 0.59 | % |
El Salvador |
| 3.95 | % |
Indonesia |
| 1.33 | % |
Iraq |
| 1.32 | % |
Malaysia |
| 6.37 | % |
Mexico |
| 4.69 | % |
Panama |
| 4.24 | % |
Peru |
| 3.41 | % |
Philippines |
| 7.45 | % |
Poland |
| 0.55 | % |
Russia |
| 6.89 | % |
South Africa |
| 1.55 | % |
Tunisia |
| 0.31 | % |
Turkey |
| 3.16 | % |
Ukraine |
| 2.72 | % |
United States |
| 10.16 | % |
Uruguay |
| 3.68 | % |
Venezuela |
| 4.36 | % |
Total |
| 98.81 | % |
Other Assets in Excess of Liabilities |
| 1.19 | % |
Total Net Assets |
| 100.00 | % |
HIGH YIELD BOND FUND
Industry Breakout |
| % of TNA |
|
Advertising |
| 1.92 | % |
Aerospace - Defense |
| 3.19 | % |
Agriculture |
| 1.09 | % |
Apparel |
| 0.80 | % |
Auto Manufacturers |
| 3.19 | % |
Beverages |
| 1.32 | % |
Biotechnology |
| 0.65 | % |
Building Materials |
| 0.93 | % |
Chemical |
| 4.17 | % |
Coal |
| 0.93 | % |
Commercial Services |
| 4.13 | % |
Distribution - Wholesale |
| 0.54 | % |
Diversified Financial Services |
| 7.85 | % |
Electric |
| 5.10 | % |
Electrical Components & Equipment |
| 0.43 | % |
Entertainment |
| 4.00 | % |
Environmental Control |
| 0.69 | % |
Food |
| 1.08 | % |
Forest Products & Paper |
| 1.06 | % |
Healthcare Products |
| 1.63 | % |
Healthcare Services |
| 3.71 | % |
Holding Companies - Diversified |
| 0.28 | % |
Home Furnishings |
| 0.33 | % |
Internet |
| 0.62 | % |
Iron/ Steel |
| 1.48 | % |
Lodging |
| 1.71 | % |
Machinery - Construction & Mining |
| 0.66 | % |
Media |
| 9.40 | % |
Miscellaneous Manufacturers |
| 1.32 | % |
Multimedia |
| 0.27 | % |
Office - Business Equipment |
| 1.47 | % |
Office Furnishings |
| 0.61 | % |
Oil & Gas |
| 4.63 | % |
Oil & Gas Services |
| 1.14 | % |
Packaging & Containers |
| 1.82 | % |
Pharmaceuticals |
| 0.43 | % |
Pipelines |
| 4.22 | % |
Real Estate Investment Trusts |
| 2.46 | % |
Research Services |
| 0.26 | % |
Retail |
| 2.77 | % |
Semiconductors |
| 0.93 | % |
Telecommunications |
| 8.56 | % |
Transportation |
| 0.75 | % |
Total |
| 94.53 | % |
Other Assets in Excess of Liabilities |
| 5.47 | % |
Total Net Assets |
| 100.00 | % |
6
November 30, 2007 (Unaudited) |
|
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| Principal |
| Market Value |
| |
Interest Rate/Maturity Date |
| Currency |
| Amount * |
| (Expressed in U.S. $) |
| |
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| |
SOVEREIGN DEBT OBLIGATIONS - 84.04% |
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Argentina - 9.16% |
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Republic of Argentina |
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8.750%, 02/04/2003 (1) |
| EUR |
| 57,000 |
| $ | 28,656 |
|
7.000%, 03/18/2004 (1) |
| EUR |
| 30,000 |
| 14,747 |
| |
7.000%, 03/18/2004 (1) |
| EUR |
| 58,000 |
| 14,565 |
| |
9.000%, 05/24/2005 (1) |
| EUR |
| 25,000 |
| 12,279 |
| |
9.000%, 04/26/2006 (1) |
| EUR |
| 58,000 |
| 27,822 |
| |
10.000%, 01/03/2007 (1) |
| ITL |
| 140,000,000 |
| 37,337 |
| |
10.250%, 01/26/2007 (1) |
| EUR |
| 661,000 |
| 337,161 |
| |
8.000%, 02/26/2008 (1) |
| EUR |
| 93,000 |
| 46,263 |
| |
7.000%, 03/28/2011 |
|
|
| 50,000 |
| 46,048 |
| |
5.389%, 08/03/2012 (2) |
|
|
| 100,000 |
| 88,009 |
| |
7.000%, 09/12/2013 |
|
|
| 55,000 |
| 47,045 |
| |
7.000%, 10/03/2015 |
|
|
| 85,000 |
| 68,123 |
| |
7.000%, 04/17/2017 |
|
|
| 295,000 |
| 230,887 |
| |
8.280%, 12/31/2033 (3) |
|
|
| 394,726 |
| 382,884 |
| |
1.330%, 12/31/2038 (4) |
|
|
| 150,000 |
| 65,512 |
| |
|
|
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|
|
| 1,447,338 |
| |
|
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Brazil - 11.14% |
|
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Republic of Brazil |
|
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| |
6.000%, 01/17/2017 |
|
|
| 150,000 |
| 153,450 |
| |
8.000%, 01/15/2018 |
|
|
| 160,000 |
| 179,760 |
| |
8.875%, 10/14/2019 |
|
|
| 30,000 |
| 37,612 |
| |
12.500%, 01/05/2022 |
| BRL |
| 1,135,000 |
| 688,179 |
| |
8.750%, 02/04/2025 |
|
|
| 30,000 |
| 38,475 |
| |
10.125%, 05/15/2027 |
|
|
| 50,000 |
| 72,313 |
| |
10.250%, 01/10/2028 |
| BRL |
| 270,000 |
| 138,563 |
| |
7.125%, 01/20/2037 |
|
|
| 335,000 |
| 383,910 |
| |
11.000%, 08/17/2040 |
|
|
| 50,000 |
| 67,187 |
| |
|
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| 1,759,449 |
| |
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Chile - 1.40% |
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Republic of Chile |
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5.411%, 01/28/2008 (2) |
|
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| 38,000 |
| 38,029 |
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5.500%, 01/15/2013 |
|
|
| 175,000 |
| 182,518 |
| |
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| 220,547 |
| |
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Colombia - 5.86% |
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Republic of Colombia |
|
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10.750%, 01/15/2013 |
|
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| 215,000 |
| 264,450 |
| |
8.250%, 12/22/2014 |
|
|
| 165,000 |
| 189,337 |
| |
7
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| Principal |
| Market Value |
| |
Interest Rate/Maturity Date |
| Currency |
| Amount * |
| (Expressed in U.S. $) |
| |
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Republic of Colombia (continued) |
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6.678%, 11/16/2015 (2) |
|
|
| 100,000 |
| $ | 104,000 |
|
11.750%, 02/25/2020 |
|
|
| 105,000 |
| 156,450 |
| |
9.850%, 06/28/2027 |
| COP |
| 415,000,000 |
| 204,514 |
| |
10.375%, 01/28/2033 |
|
|
| 5,000 |
| 7,494 |
| |
|
|
|
|
|
| 926,245 |
| |
|
|
|
|
|
|
|
| |
Ecuador - 3.37% |
|
|
|
|
|
|
| |
Republic of Ecuador |
|
|
|
|
|
|
| |
9.375%, 12/15/2015 |
|
|
| 235,000 |
| 237,350 |
| |
10.000%, 08/15/2030 |
|
|
| 305,000 |
| 295,850 |
| |
|
|
|
|
|
| 533,200 |
| |
|
|
|
|
|
|
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| |
Egypt - 0.59% |
|
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| |
Arab Republic of Egypt |
|
|
|
|
|
|
| |
8.750%, 07/18/2012 (5) |
| EGP |
| 500,000 |
| 92,457 |
| |
|
|
|
|
|
|
|
| |
El Salvador - 3.95% |
|
|
|
|
|
|
| |
Republic of El Salvador |
|
|
|
|
|
|
| |
7.750%, 01/24/2023 |
|
|
| 83,000 |
| 96,695 |
| |
7.650%, 06/15/2035 |
|
|
| 453,000 |
| 527,745 |
| |
|
|
|
|
|
| 624,440 |
| |
|
|
|
|
|
|
|
| |
Indonesia - 1.33% |
|
|
|
|
|
|
| |
Indonesia Government Credit Linked Note (7) |
|
|
|
|
|
|
| |
10.000%, 07/15/2017 |
| IDR |
| 867,000,000 |
| 91,951 |
| |
Republic of Indonesia |
|
|
|
|
|
|
| |
8.500%, 10/12/2035 |
|
|
| 100,000 |
| 117,750 |
| |
|
|
|
|
|
| 209,701 |
| |
|
|
|
|
|
|
|
| |
Iraq - 1.32% |
|
|
|
|
|
|
| |
Republic of Iraq |
|
|
|
|
|
|
| |
5.800%, 01/15/2028 |
|
|
| 325,000 |
| 208,000 |
| |
|
|
|
|
|
|
|
| |
Malaysia - 3.31% |
|
|
|
|
|
|
| |
Malaysia |
|
|
|
|
|
|
| |
7.500%, 07/15/2011 |
|
|
| 135,000 |
| 148,128 |
| |
3.502%, 05/31/2027 |
| MYR |
| 1,445,000 |
| 375,369 |
| |
|
|
|
|
|
| 523,497 |
| |
|
|
|
|
|
|
|
| |
Mexico - 4.29% |
|
|
|
|
|
|
| |
United Mexican States |
|
|
|
|
|
|
| |
8.000%, 12/19/2013 |
| MXN |
| 1,580,000 |
| 145,868 |
| |
8
|
|
|
| Principal |
| Market Value |
| |
Interest Rate/Maturity Date |
| Currency |
| Amount * |
| (Expressed in U.S. $) |
| |
|
|
|
|
|
|
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| |
United Mexican States (continued) |
|
|
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|
|
| |
7.250%, 12/15/2016 |
| MXN |
| 612,500 |
| $ | 53,692 |
|
8.125%, 12/30/2019 |
|
|
| 54,000 |
| 66,220 |
| |
8.300%, 08/15/2031 |
|
|
| 140,000 |
| 183,232 |
| |
7.500%, 04/08/2033 |
|
|
| 100,000 |
| 121,250 |
| |
6.750%, 09/27/2034 |
|
|
| 95,000 |
| 106,638 |
| |
|
|
|
|
|
| 676,900 |
| |
|
|
|
|
|
|
|
| |
Panama - 4.24% |
|
|
|
|
|
|
| |
Republic of Panama |
|
|
|
|
|
|
| |
7.250%, 03/15/2015 |
|
|
| 332,000 |
| 365,864 |
| |
9.375%, 01/16/2023 |
|
|
| 25,000 |
| 33,000 |
| |
8.875%, 09/30/2027 |
|
|
| 46,000 |
| 59,627 |
| |
9.375%, 04/01/2029 |
|
|
| 16,000 |
| 21,920 |
| |
6.700%, 01/26/2036 |
|
|
| 180,000 |
| 189,450 |
| |
|
|
|
|
|
| 669,861 |
| |
|
|
|
|
|
|
|
| |
Peru - 3.41% |
|
|
|
|
|
|
| |
Republic of Peru |
|
|
|
|
|
|
| |
6.438%, 03/07/2017 (2) |
|
|
| 18,900 |
| 18,900 |
| |
6.438%, 03/07/2017 (2) |
|
|
| 519,800 |
| 519,800 |
| |
|
|
|
|
|
| 538,700 |
| |
|
|
|
|
|
|
|
| |
Philippines - 7.45% |
|
|
|
|
|
|
| |
Republic of Philippines |
|
|
|
|
|
|
| |
8.375%, 02/15/2011 |
|
|
| 26,000 |
| 28,080 |
| |
8.250%, 01/15/2014 |
|
|
| 227,000 |
| 253,956 |
| |
8.875%, 03/17/2015 |
|
|
| 58,000 |
| 67,788 |
| |
9.375%, 01/18/2017 |
|
|
| 430,000 |
| 528,362 |
| |
7.500%, 09/25/2024 |
|
|
| 145,000 |
| 160,588 |
| |
9.500%, 02/02/2030 |
|
|
| 30,000 |
| 39,975 |
| |
6.375%, 01/15/2032 |
|
|
| 100,000 |
| 98,500 |
| |
|
|
|
|
|
| 1,177,249 |
| |
|
|
|
|
|
|
|
| |
Poland - 0.55% |
|
|
|
|
|
|
| |
Republic of Poland |
|
|
|
|
|
|
| |
5.000%, 10/19/2015 |
|
|
| 85,000 |
| 87,167 |
| |
|
|
|
|
|
|
|
| |
Russia - 6.89% |
|
|
|
|
|
|
| |
Russia Federation |
|
|
|
|
|
|
| |
12.750%, 06/24/2028 |
|
|
| 14,000 |
| 25,480 |
| |
7.500%, 03/31/2030 |
|
|
| 934,560 |
| 1,062,478 |
| |
|
|
|
|
|
| 1,087,958 |
| |
9
|
|
|
| Principal |
| Market Value |
| |
Interest Rate/Maturity Date |
| Currency |
| Amount * |
| (Expressed in U.S. $) |
| |
|
|
|
|
|
|
|
| |
South Africa - 1.55% |
|
|
|
|
|
|
| |
Republic of South Africa |
|
|
|
|
|
|
| |
6.500%, 06/02/2014 |
|
|
| 228,000 |
| $ | 244,815 |
|
|
|
|
|
|
|
|
| |
Tunisia - 0.31% |
|
|
|
|
|
|
| |
Banque Centrale de Tunisie |
|
|
|
|
|
|
| |
7.375%, 04/25/2012 |
|
|
| 10,000 |
| 10,931 |
| |
8.250%, 09/19/2027 |
|
|
| 30,000 |
| 38,118 |
| |
|
|
|
|
|
| 49,049 |
| |
|
|
|
|
|
|
|
| |
Turkey - 3.16% |
|
|
|
|
|
|
| |
Republic of Turkey |
|
|
|
|
|
|
| |
11.000%, 01/14/2013 |
|
|
| 55,000 |
| 67,306 |
| |
9.500%, 01/15/2014 |
|
|
| 35,000 |
| 41,344 |
| |
7.250%, 03/15/2015 |
|
|
| 56,000 |
| 59,990 |
| |
7.000%, 09/26/2016 |
|
|
| 100,000 |
| 105,250 |
| |
6.750%, 04/03/2018 |
|
|
| 100,000 |
| 102,750 |
| |
6.875%, 03/17/2036 |
|
|
| 125,000 |
| 123,125 |
| |
|
|
|
|
|
| 499,765 |
| |
|
|
|
|
|
|
|
| |
Ukraine - 2.72% |
|
|
|
|
|
|
| |
Ukraine Government |
|
|
|
|
|
|
| |
6.875%, 03/04/2011 (5) |
|
|
| 110,000 |
| 112,200 |
| |
7.650%, 06/11/2013 |
|
|
| 300,000 |
| 317,250 |
| |
|
|
|
|
|
| 429,450 |
| |
|
|
|
|
|
|
|
| |
Uruguay - 3.68% |
|
|
|
|
|
|
| |
Republic of Uruguay |
|
|
|
|
|
|
| |
7.500%, 03/15/2015 |
|
|
| 49,000 |
| 52,798 |
| |
8.000%, 11/18/2022 |
|
|
| 205,000 |
| 232,163 |
| |
7.875%, 01/15/2033 (3) |
|
|
| 800 |
| 905 |
| |
Uruguay Inflation Linked Notes |
|
|
|
|
|
|
| |
5.000%, 09/14/2018 (6) |
| UYU |
| 747,150 |
| 36,105 |
| |
4.250%, 04/05/2027 (6) |
| UYU |
| 476,834 |
| 21,650 |
| |
3.700%, 06/26/2037 (6) |
| UYU |
| 5,772,026 |
| 237,169 |
| |
|
|
|
|
|
| 580,790 |
| |
|
|
|
|
|
|
|
| |
Venezuela - 4.36% |
|
|
|
|
|
|
| |
Republic of Venezuela |
|
|
|
|
|
|
| |
8.500%, 10/08/2014 |
|
|
| 262,000 |
| 248,573 |
| |
9.250%, 09/15/2027 |
|
|
| 35,000 |
| 34,667 |
| |
9.375%, 01/13/2034 |
|
|
| 410,000 |
| 405,695 |
| |
|
|
|
|
|
| 688,935 |
| |
10
|
|
|
| Principal |
| Market Value |
| ||
Interest Rate/Maturity Date |
| Currency |
| Amount * |
| (Expressed in U.S. $) |
| ||
|
|
|
|
|
|
|
|
| |
TOTAL SOVEREIGN DEBT OBLIGATIONS |
|
|
|
|
|
|
| ||
(Cost $12,813,988) |
|
|
|
|
| $ | 13,275,513 |
| |
|
|
|
|
|
|
|
| ||
CORPORATE BONDS - 4.61% |
|
|
|
|
|
|
| ||
Brazil - 1.15% |
|
|
|
|
|
|
| ||
GTL Trade Finance, Inc. |
|
|
|
|
|
|
| ||
7.250%, 10/20/2017 (5) |
|
|
| 100,000 |
| 100,542 |
| ||
Petrobras International Finance Co. |
|
|
|
|
|
|
| ||
5.875%, 03/01/2018 |
|
|
| 80,000 |
| 81,366 |
| ||
|
|
|
|
|
| 181,908 |
| ||
Malaysia - 3.06% |
|
|
|
|
|
|
| ||
Petronas Capital Ltd. |
|
|
|
|
|
|
| ||
7.875%, 05/22/2022 |
|
|
| 380,000 |
| 483,878 |
| ||
|
|
|
|
|
|
|
| ||
Mexico - .40% |
|
|
|
|
|
|
| ||
Pemex Project Funding Master Trust |
|
|
|
|
|
|
| ||
8.500%, 02/15/2008 |
|
|
| 21,000 |
| 21,116 |
| ||
9.125%, 10/13/2010 |
|
|
| 38,000 |
| 42,324 |
| ||
|
|
|
|
|
| 63,440 |
| ||
TOTAL CORPORATE BONDS |
|
|
|
|
|
|
| ||
(Amortized Cost $693,938) |
|
|
|
|
| 729,226 |
| ||
|
|
|
|
|
|
|
| ||
U.S. TREASURY SECURITIES - 9.66% |
|
|
|
|
|
|
| ||
U.S. Treasury Notes |
|
|
|
|
|
|
| ||
4.875%, 08/31/2008 |
|
|
| 1,510,000 |
| 1,526,752 |
| ||
|
|
|
|
|
|
|
| ||
TOTAL U.S. TREASURY SECURITIES |
|
|
|
|
|
|
| ||
(Amortized Cost $1,518,042) |
|
|
|
|
| 1,526,752 |
| ||
|
|
|
|
|
|
|
| ||
MONEY MARKET MUTUAL FUNDS - 0.50% |
|
|
|
|
|
|
| ||
Dreyfus Cash Advantage Plus Fund (8) |
|
|
| 78,633 |
| 78,633 |
| ||
|
|
|
|
|
|
|
| ||
TOTAL MONEY MARKET MUTUAL FUNDS |
|
|
|
|
|
|
| ||
(Cost $78,633) |
|
|
|
|
| 78,633 |
| ||
|
|
|
|
|
|
|
| ||
Total Investments - 98.81% |
|
|
|
|
|
|
| ||
(Amortized Cost $15,104,601) |
|
|
|
|
| $ 15,610,124 |
| ||
Other Assets in Excess of Liabilities - 1.19% |
|
|
|
|
| $ | 188,321 |
| |
|
|
|
|
|
|
|
| ||
Net Assets - 100.00% |
|
|
|
|
| $ | 15,798,445 |
| |
11
* | The principal/contract amount of each security is stated in the currency in which the bond is denominated (U.S. Dollar unless otherwise notated). See below. | ||||
| |||||
|
|
|
| ||
| BRL |
| Brazilian Real | ||
| COP |
| Colombian Peso | ||
| EGP |
| Egyptian Pound | ||
| EUR |
| Euro Currency | ||
| IDR |
| Indonesian Rupiah | ||
| ITL |
| Italian Lira | ||
| MXN |
| Mexican Peso | ||
| MYR |
| Malaysian Ringgit | ||
| UYU |
| Uruguayan Peso | ||
|
|
|
| ||
(1) | Security is currently in default/non-income producing. | ||||
|
|
|
| ||
(2) | Floating or variable rate security. Interest rate disclosed is that which is in effect at November 30, 2007. | ||||
|
|
|
| ||
(3) | Pay-in-kind securities. | ||||
|
|
|
| ||
(4) | Step Bond. Coupon increases periodically based upon a predetermined schedule. Interest rate disclosed is that which is in effect at November 30, 2007. | ||||
| |||||
|
|
|
| ||
(5) | Security exempt from registration under Rule 144A of the Securities Act of 1933. Under procedures approved by the Board of Trustees, such securities have been determined to be liquid by the Investment Adviser and may be resold, normally to qualified buyers in transactions exempt from registration. Total market value of Rule 144A securities amounts to $305,199, which represents approximately 1.93% of net assets as of November 30, 2007. | ||||
| |||||
| |||||
| |||||
|
|
|
| ||
(6) | The underlying security is inflation linked. |
|
| ||
|
|
|
| ||
(7) | The security is issued by J.P. Morgan Securities, Inc. |
|
| ||
|
|
|
| ||
(8) | Investments in other funds are calculated at their respective net asset values as determined by those funds, in accordance with the Investment Company Act of 1940. | ||||
|
|
|
| ||
Please see “Notes to Financial Statements” for further information. |
|
| |||
12
OUTSTANDING FORWARD FOREIGN CURRENCY CONTRACTS
Contract |
| Contracted |
|
|
| Purchase/Sale |
| Expiration |
| Value on |
| Current |
| Unrealized |
| |||
Description |
| Amount |
|
|
| Contract |
| Date |
| Settlement Date |
| Value |
| Depreciation |
| |||
EURO |
| 330,000 |
| (EUR) |
| Sale |
| 1/17/08 |
| $ | 469,857 |
| $ | 484,799 |
| $ | (14,942 | ) |
OUTSTANDING SWAP CONTRACTS
Credit Default Swap Contracts
Reference |
| Swap\ |
| Notional |
| Rates Received |
| Termination |
| Unrealized |
| ||
Protection Sold: |
|
|
|
|
|
|
|
|
|
|
| ||
Republic of Venezuela |
| Lehman |
| $ | 300,000 | (USD) | 3.00 | % | 7/20/2017 |
| $ | (39,529 | ) |
Republic of Venezuela |
| Lehman |
| 325,000 | (USD) | 4.28 | % | 11/20/2017 |
| (27,241 | ) | ||
Turkish Government |
|
|
|
|
|
|
|
|
|
|
| ||
Int’l Bond |
| J.P. Morgan |
| 70,000 | (USD) | 1.62 | % | 2/20/2012 |
| (120 | ) | ||
Turkish Government |
|
|
|
|
|
|
|
|
|
|
| ||
Int’l Bond |
| J.P. Morgan |
| 65,000 | (USD) | 1.92 | % | 3/20/2012 |
| 576 |
| ||
Turkish Government |
|
|
|
|
|
|
|
|
|
|
| ||
Int’l Bond |
| Citigroup |
| 350,000 | (USD) | 1.68 | % | 11/20/1012 |
| (2,327 | ) | ||
Russian Federation |
| J.P. Morgan |
| 425,000 | (USD) | 1.04 | % | 9/17/2017 |
| (4,782 | ) | ||
Net Unrealized Depreciation |
|
|
|
|
|
|
|
|
| $ | (73,423 | ) | |
13
Statement of Investments
November 30, 2007 (Unaudited) |
|
|
| Principal |
|
|
| ||
Interest Rate/Maturity Date |
| Amount |
| Market Value |
| ||
|
|
|
|
|
| ||
CORPORATE BONDS - 87.96% |
|
|
|
|
| ||
Advertising - 1.92% |
|
|
|
|
| ||
Interep National Radio Sales, Inc. |
|
|
|
|
| ||
Series B, 10.000%, 07/01/2008 |
| $ | 4,000 |
| $ | 3,200 |
|
Lamar Media Corp. |
|
|
|
|
| ||
6.625%, 08/15/2015 (2) |
| 25,000 |
| 23,875 |
| ||
6.625%, 08/15/2015 |
| 110,000 |
| 105,050 |
| ||
Series B, 6.625%, 08/15/2015 |
| 330,000 |
| 315,150 |
| ||
R.H. Donnelley Corp. |
|
|
|
|
| ||
Series A-1, 6.875%, 01/15/2013 |
| 50,000 |
| 45,875 |
| ||
Series A-2, 6.875%, 01/15/2013 |
| 25,000 |
| 22,937 |
| ||
Series A-3, 8.875%, 01/15/2016 |
| 380,000 |
| 361,000 |
| ||
|
|
|
| 877,087 |
| ||
|
|
|
|
|
| ||
Aerospace-Defense - 3.11% |
|
|
|
|
| ||
Alliant Techsystems, Inc. |
|
|
|
|
| ||
6.750%, 04/01/2016 |
| 240,000 |
| 238,800 |
| ||
DRS Technologies, Inc. |
|
|
|
|
| ||
6.875%, 11/01/2013 |
| 50,000 |
| 49,625 |
| ||
6.625%, 02/01/2016 |
| 20,000 |
| 19,800 |
| ||
7.625%, 02/01/2018 |
| 160,000 |
| 163,600 |
| ||
Esterline Technologies Corp. |
|
|
|
|
| ||
6.625%, 03/01/2017 |
| 150,000 |
| 148,875 |
| ||
L-3 Communications Corp. |
|
|
|
|
| ||
7.625%, 06/15/2012 |
| 356,000 |
| 367,125 |
| ||
Series B, 6.375%, 10/15/2015 |
| 100,000 |
| 99,500 |
| ||
Moog, Inc. |
|
|
|
|
| ||
6.250%, 01/15/2015 |
| 210,000 |
| 204,750 |
| ||
TransDigm Group, Inc. |
|
|
|
|
| ||
7.750%, 07/15/2014 |
| 125,000 |
| 126,875 |
| ||
|
|
|
| 1,418,950 |
| ||
|
|
|
|
|
| ||
Agriculture - 1.09% |
|
|
|
|
| ||
Reynolds American, Inc. |
|
|
|
|
| ||
7.625%, 06/01/2016 |
| 455,000 |
| 499,004 |
| ||
|
|
|
|
|
| ||
Airlines - 0.00% (3) |
|
|
|
|
| ||
Continental Airlines, Inc. |
|
|
|
|
| ||
Series 981C, 6.541%, 03/15/2008 |
| 1,348 |
| 1,338 |
| ||
|
|
|
|
|
| ||
Apparel - 0.80% |
|
|
|
|
| ||
Levi Strauss & Co. |
|
|
|
|
| ||
9.750%, 01/15/2015 |
| 360,000 |
| 363,150 |
| ||
|
|
|
|
|
| ||
Auto Manufacturers - 2.07% |
|
|
|
|
| ||
Ford Motor Co. |
|
|
|
|
| ||
7.450%, 07/16/2031 |
| 410,000 |
| 311,600 |
| ||
8.900%, 01/15/2032 |
| 25,000 |
| 19,625 |
| ||
14
|
| Principal |
|
|
| ||
Interest Rate/Maturity Date |
| Amount |
| Market Value |
| ||
|
|
|
|
|
| ||
Auto Manufacturers (continued) |
|
|
|
|
| ||
General Motors Corp. |
|
|
|
|
| ||
8.375%, 07/15/2033 |
| $ | 735,000 |
| $ | 613,725 |
|
|
|
|
| 944,950 |
| ||
|
|
|
|
|
| ||
Beverages - 1.02% |
|
|
|
|
| ||
Constellation Brands, Inc. |
|
|
|
|
| ||
7.250%, 09/01/2016 |
| 445,000 |
| 418,300 |
| ||
7.250%, 05/15/2017 (2) |
| 50,000 |
| 46,750 |
| ||
|
|
|
| 465,050 |
| ||
|
|
|
|
|
| ||
Biotechnology - 0.65% |
|
|
|
|
| ||
FMC Finance III SA |
|
|
|
|
| ||
6.875%, 07/15/2017 (2) |
| 300,000 |
| 295,500 |
| ||
|
|
|
|
|
| ||
Building Materials - 0.93% |
|
|
|
|
| ||
Associated Materials, Inc. |
|
|
|
|
| ||
11.250%, 03/01/2014 (5) |
| 130,000 |
| 85,150 |
| ||
Interline Brands, Inc. |
|
|
|
|
| ||
8.125%, 06/15/2014 |
| 175,000 |
| 173,250 |
| ||
Nortek, Inc. |
|
|
|
|
| ||
8.500%, 09/01/2014 |
| 150,000 |
| 122,250 |
| ||
NTK Holdings, Inc. |
|
|
|
|
| ||
10.750%, 03/01/2014 (5) |
| 75,000 |
| 44,625 |
| ||
|
|
|
| 425,275 |
| ||
|
|
|
|
|
| ||
Chemical - 4.17% |
|
|
|
|
| ||
Basell AF SCA |
|
|
|
|
| ||
8.375%, 08/15/2015 (2) |
| 350,000 |
| 296,625 |
| ||
Equistar Chemicals, LP |
|
|
|
|
| ||
10.625%, 05/01/2011 |
| 28,000 |
| 29,400 |
| ||
Hercules, Inc. |
|
|
|
|
| ||
6.750%, 10/15/2029 |
| 225,000 |
| 217,687 |
| ||
Lyondell Chemical Co. |
|
|
|
|
| ||
8.000%, 09/15/2014 |
| 135,000 |
| 153,562 |
| ||
8.250%, 09/15/2016 |
| 225,000 |
| 264,938 |
| ||
MacDermid, Inc. |
|
|
|
|
| ||
9.500%, 04/15/2017 (2) |
| 75,000 |
| 68,438 |
| ||
Nalco Co. |
|
|
|
|
| ||
8.875%, 11/15/2013 |
| 305,000 |
| 318,725 |
| ||
NewMarket Corp. |
|
|
|
|
| ||
7.125%, 12/15/2016 |
| 205,000 |
| 203,975 |
| ||
Nova Chemicals Corp. |
|
|
|
|
| ||
6.500%, 01/15/2012 |
| 370,000 |
| 348,725 |
| ||
|
|
|
| 1,902,075 |
| ||
15
|
| Principal |
|
|
| ||
Interest Rate/Maturity Date |
| Amount |
| Market Value |
| ||
|
|
|
|
|
| ||
Coal - 0.93% |
|
|
|
|
| ||
Arch Western Finance LLC |
|
|
|
|
| ||
6.750%, 07/01/2013 (6) |
| $ | 225,000 |
| $ | 218,812 |
|
Peabody Energy Corp. |
|
|
|
|
| ||
Series B, 6.875%, 03/15/2013 |
| 65,000 |
| 65,488 |
| ||
7.375%, 11/01/2016 |
| 10,000 |
| 10,300 |
| ||
7.875%, 11/01/2026 |
| 125,000 |
| 129,375 |
| ||
|
|
|
| 423,975 |
| ||
|
|
|
|
|
| ||
Commercial Services - 3.92% |
|
|
|
|
| ||
ARAMARK Corp. |
|
|
|
|
| ||
8.411%, 02/01/2015 (6) |
| 65,000 |
| 63,375 |
| ||
8.500%, 02/01/2015 |
| 280,000 |
| 282,450 |
| ||
Cadmus Communications Corp. |
|
|
|
|
| ||
8.375%, 06/15/2014 |
| 200,000 |
| 182,000 |
| ||
Corrections Corp. of America |
|
|
|
|
| ||
7.500%, 05/01/2011 |
| 10,000 |
| 10,175 |
| ||
6.250%, 03/15/2013 |
| 350,000 |
| 347,375 |
| ||
6.750%, 01/31/2014 |
| 75,000 |
| 75,656 |
| ||
Education Management LLC |
|
|
|
|
| ||
8.750%, 06/01/2014 |
| 175,000 |
| 175,875 |
| ||
10.250%, 06/01/2016 |
| 195,000 |
| 199,875 |
| ||
Iron Mountain, Inc. |
|
|
|
|
| ||
8.625%, 04/01/2013 |
| 25,000 |
| 25,344 |
| ||
7.750%, 01/15/2015 |
| 125,000 |
| 126,250 |
| ||
8.750%, 07/15/2018 |
| 285,000 |
| 299,250 |
| ||
|
|
|
| 1,787,625 |
| ||
|
|
|
|
|
| ||
Distribution-Wholesale - 0.54% |
|
|
|
|
| ||
Baker & Taylor, Inc. |
|
|
|
|
| ||
11.500%, 07/01/2013 (2) |
| 245,000 |
| 246,225 |
| ||
|
|
|
|
|
| ||
Diversified Financial Services - 7.23% |
|
|
|
|
| ||
AmeriCredit Corp. |
|
|
|
|
| ||
8.500%, 07/01/2015 (2) |
| 110,000 |
| 78,650 |
| ||
Countrywide Home Loans, Inc. |
|
|
|
|
| ||
4.250%, 12/19/2007 |
| 175,000 |
| 173,265 |
| ||
Ford Motor Credit Co. |
|
|
|
|
| ||
7.375%, 10/28/2009 |
| 275,000 |
| 260,481 |
| ||
9.875%, 08/10/2011 |
| 725,000 |
| 702,116 |
| ||
8.000%, 12/15/2016 |
| 460,000 |
| 403,091 |
| ||
GMAC, LLC |
|
|
|
|
| ||
7.750%, 01/19/2010 |
| 125,000 |
| 118,722 |
| ||
6.625%, 05/15/2012 |
| 105,000 |
| 89,040 |
| ||
8.000%, 11/01/2031 |
| 145,000 |
| 123,322 |
| ||
Hughes Network Systems, LLC |
|
|
|
|
| ||
9.500%, 04/15/2014 |
| 160,000 |
| 162,000 |
| ||
16
|
| Principal |
|
|
| ||
Interest Rate/Maturity Date |
| Amount |
| Market Value |
| ||
|
|
|
|
|
| ||
Diversified Financial Services (continued) |
|
|
|
|
| ||
NSG Holdings, LLC |
|
|
|
|
| ||
7.750%, 12/15/2025 (2) |
| $ | 460,000 |
| $ | 456,550 |
|
Petroplus Finance Ltd. |
|
|
|
|
| ||
6.750%, 05/01/2014 (2) |
| 110,000 |
| 102,850 |
| ||
7.000%, 05/01/2017 (2) |
| 200,000 |
| 185,000 |
| ||
Residential Capital, LLC |
|
|
|
|
| ||
7.875%, 06/30/2015 |
| 75,000 |
| 48,000 |
| ||
Sensus Metering Systems, Inc. |
|
|
|
|
| ||
8.625%, 12/15/2013 |
| 125,000 |
| 120,000 |
| ||
Snoqualmie Entertainment Authority |
|
|
|
|
| ||
9.063%, 02/01/2014 (2)(6) |
| 50,000 |
| 48,000 |
| ||
Southern Star Central Corp. |
|
|
|
|
| ||
6.750%, 03/01/2016 |
| 25,000 |
| 24,125 |
| ||
Vanguard Health Holding Co. II, LLC |
|
|
|
|
| ||
9.000%, 10/01/2014 |
| 215,000 |
| 204,787 |
| ||
|
|
|
| 3,299,999 |
| ||
|
|
|
|
|
| ||
Electric - 5.10% |
|
|
|
|
| ||
The AES Corp. |
|
|
|
|
| ||
9.375%, 09/15/2010 |
| 118,000 |
| 123,458 |
| ||
8.875%, 02/15/2011 |
| 131,000 |
| 136,567 |
| ||
7.750%, 03/01/2014 |
| 250,000 |
| 246,875 |
| ||
8.000%, 10/15/2017 (2) |
| 150,000 |
| 150,000 |
| ||
Edison Mission Energy |
|
|
|
|
| ||
7.500%, 06/15/2013 |
| 55,000 |
| 55,275 |
| ||
7.200%, 05/15/2019 |
| 290,000 |
| 278,400 |
| ||
7.625%, 05/15/2027 |
| 160,000 |
| 150,000 |
| ||
Intergen NV |
|
|
|
|
| ||
9.000%, 06/30/2017 (2) |
| 200,000 |
| 211,000 |
| ||
Mirant Americas Generation, LLC |
|
|
|
|
| ||
8.500%, 10/01/2021 |
| 175,000 |
| 162,750 |
| ||
Mirant North America, LLC |
|
|
|
|
| ||
7.375%, 12/31/2013 |
| 115,000 |
| 115,863 |
| ||
NRG Energy, Inc. |
|
|
|
|
| ||
7.250%, 02/01/2014 |
| 25,000 |
| 24,500 |
| ||
7.375%, 02/01/2016 |
| 415,000 |
| 407,737 |
| ||
TECO Energy, Inc. |
|
|
|
|
| ||
7.500%, 06/15/2010 |
| 20,000 |
| 21,508 |
| ||
Texas Competitive Electric Holdings Co., LLC |
|
|
|
|
| ||
10.250%, 11/01/2015 (2) |
| 250,000 |
| 241,875 |
| ||
|
|
|
| 2,325,808 |
| ||
|
|
|
|
|
| ||
Electrical Components & Equipment - 0.43% |
|
|
|
|
| ||
Belden, Inc. |
|
|
|
|
| ||
7.000%, 03/15/2017 |
| 200,000 |
| 197,500 |
| ||
17
|
| Principal |
|
|
| ||
Interest Rate/Maturity Date |
| Amount |
| Market Value |
| ||
|
|
|
|
|
| ||
Entertainment - 4.00% |
|
|
|
|
| ||
AMC Entertainment, Inc. |
|
|
|
|
| ||
8.000%, 03/01/2014 |
| $ | 50,000 |
| $ | 47,625 |
|
11.000%, 02/01/2016 |
| 240,000 |
| 252,600 |
| ||
Cinemark, Inc. |
|
|
|
|
| ||
9.750%, 03/15/2014 (5) |
| 385,000 |
| 359,975 |
| ||
Great Canadian Gaming Corp. |
|
|
|
|
| ||
7.250%, 02/15/2015 (2) |
| 180,000 |
| 177,300 |
| ||
Isle of Capri Casinos, Inc. |
|
|
|
|
| ||
7.000%, 03/01/2014 |
| 245,000 |
| 210,700 |
| ||
Marquee Holdings, Inc. |
|
|
|
|
| ||
12.000%, 08/15/2014 (5) |
| 65,000 |
| 54,275 |
| ||
Penn National Gaming, Inc. |
|
|
|
|
| ||
6.875%, 12/01/2011 |
| 25,000 |
| 25,062 |
| ||
Pinnacle Entertainment, Inc. |
|
|
|
|
| ||
8.250%, 03/15/2012 |
| 25,000 |
| 25,375 |
| ||
8.750%, 10/01/2013 |
| 175,000 |
| 179,375 |
| ||
7.500%, 06/15/2015 (2) |
| 230,000 |
| 213,900 |
| ||
Seneca Gaming Corp. |
|
|
|
|
| ||
7.250%, 05/01/2012 |
| 170,000 |
| 171,700 |
| ||
Series B, 7.250%, 05/01/2012 |
| 105,000 |
| 106,050 |
| ||
|
|
|
| 1,823,937 |
| ||
|
|
|
|
|
| ||
Environmental Control - 0.69% |
|
|
|
|
| ||
Allied Waste North America, Inc. |
|
|
|
|
| ||
7.250%, 03/15/2015 |
| 225,000 |
| 225,000 |
| ||
Series B, 7.125%, 05/15/2016 |
| 50,000 |
| 50,125 |
| ||
Browning-Ferris Industries, Inc. |
|
|
|
|
| ||
9.250%, 05/01/2021 |
| 35,000 |
| 37,450 |
| ||
Safety-Kleen Services |
|
|
|
|
| ||
9.250%, 06/01/2008 (7) |
| 50,000 |
| 10 |
| ||
|
|
|
| 312,585 |
| ||
|
|
|
|
|
| ||
Food - 1.08% |
|
|
|
|
| ||
Dean Foods Co. |
|
|
|
|
| ||
7.000%, 06/01/2016 |
| 80,000 |
| 71,200 |
| ||
Dole Food Company, Inc. |
|
|
|
|
| ||
7.250%, 06/15/2010 |
| 275,000 |
| 253,000 |
| ||
8.750%, 07/15/2013 |
| 65,000 |
| 60,613 |
| ||
Pilgrim’s Pride Corp. |
|
|
|
|
| ||
9.250%, 11/15/2013 |
| 100,000 |
| 107,000 |
| ||
|
|
|
| 491,813 |
| ||
|
|
|
|
|
| ||
Forest Products & Paper - 1.06% |
|
|
|
|
| ||
Appleton Papers, Inc. |
|
|
|
|
| ||
8.125%, 06/15/2011 |
| 120,000 |
| 118,200 |
| ||
Series B, 9.750%, 06/15/2014 |
| 200,000 |
| 196,750 |
| ||
18
|
| Principal |
|
|
| ||
Interest Rate/Maturity Date |
| Amount |
| Market Value |
| ||
|
|
|
|
|
| ||
Forest Products & Paper (continued) |
|
|
|
|
| ||
Buckeye Technologies, Inc. |
|
|
|
|
| ||
8.000%, 10/15/2010 |
| $ | 111,000 |
| $ | 111,277 |
|
8.500%, 10/01/2013 |
| 25,000 |
| 25,375 |
| ||
NewPage Corp. |
|
|
|
|
| ||
10.000%, 05/01/2012 |
| 30,000 |
| 30,750 |
| ||
|
|
|
| 482,352 |
| ||
|
|
|
|
|
| ||
Healthcare-Products - 1.63% |
|
|
|
|
| ||
Accellent, Inc. |
|
|
|
|
| ||
10.500%, 12/01/2013 |
| 330,000 |
| 293,700 |
| ||
Advanced Medical Optics, Inc. |
|
|
|
|
| ||
7.500%, 05/01/2017 |
| 200,000 |
| 183,000 |
| ||
Boston Scientific Corp. |
|
|
|
|
| ||
6.400%, 06/15/2016 |
| 50,000 |
| 46,875 |
| ||
7.000%, 11/15/2035 |
| 100,000 |
| 89,500 |
| ||
The Cooper Cos., Inc. |
|
|
|
|
| ||
7.125%, 02/15/2015 |
| 135,000 |
| 131,625 |
| ||
|
|
|
| 744,700 |
| ||
|
|
|
|
|
| ||
Healthcare-Services - 3.61% |
|
|
|
|
| ||
Community Health Systems, Inc. |
|
|
|
|
| ||
8.875%, 07/15/2015 |
| 250,000 |
| 253,750 |
| ||
Da Vita, Inc. |
|
|
|
|
| ||
7.250%, 03/15/2015 |
| 445,000 |
| 434,987 |
| ||
HCA, Inc. |
|
|
|
|
| ||
9.250%, 11/15/2016 |
| 250,000 |
| 259,375 |
| ||
National Mentor Holdings, Inc. |
|
|
|
|
| ||
11.250%, 07/01/2014 |
| 175,000 |
| 185,062 |
| ||
Psychiatric Solutions, Inc. |
|
|
|
|
| ||
7.750%, 07/15/2015 |
| 15,000 |
| 14,700 |
| ||
7.750%, 07/15/2015 |
| 340,000 |
| 333,200 |
| ||
United Surgical Partners International, Inc. |
|
|
|
|
| ||
8.875%, 05/01/2017 |
| 75,000 |
| 73,500 |
| ||
9.250%, 05/01/2017 (8) |
| 95,000 |
| 91,913 |
| ||
|
|
|
| 1,646,487 |
| ||
|
|
|
|
|
| ||
Holding Companies-Diversified - 0.28% |
|
|
|
|
| ||
Atlantic Broadband Finance, LLC |
|
|
|
|
| ||
9.375%, 01/15/2014 |
| 135,000 |
| 126,225 |
| ||
|
|
|
|
|
| ||
Home Furnishings - 0.33% |
|
|
|
|
| ||
Norcraft Cos., LP |
|
|
|
|
| ||
9.000%, 11/01/2011 |
| 35,000 |
| 35,350 |
| ||
Norcraft Holdings, LP |
|
|
|
|
| ||
9.750%, 09/01/2012 (5) |
| 125,000 |
| 113,125 |
| ||
|
|
|
| 148,475 |
| ||
19
|
| Principal |
|
|
| ||
Interest Rate/Maturity Date |
| Amount |
| Market Value |
| ||
|
|
|
|
|
| ||
Internet - 0.10% |
|
|
|
|
| ||
FTD, Inc. |
|
|
|
|
| ||
7.750%, 02/15/2014 |
| $ | 50,000 |
| $ | 47,500 |
|
|
|
|
|
|
| ||
Iron/Steel - 1.48% |
|
|
|
|
| ||
RathGibson, Inc., |
|
|
|
|
| ||
11.250%, 02/15/2014 |
| 300,000 |
| 309,000 |
| ||
Steel Dynamics, Inc. |
|
|
|
|
| ||
7.375%, 11/01/2012 (2) |
| 125,000 |
| 124,688 |
| ||
6.750%, 04/01/2015 (2) |
| 250,000 |
| 240,000 |
| ||
|
|
|
| 673,688 |
| ||
|
|
|
|
|
| ||
Lodging - 1.24% |
|
|
|
|
| ||
MGM Mirage |
|
|
|
|
| ||
6.000%, 10/01/2009 |
| 35,000 |
| 34,825 |
| ||
8.375%, 02/01/2011 |
| 75,000 |
| 77,062 |
| ||
Station Casinos, Inc. |
|
|
|
|
| ||
6.000%, 04/01/2012 |
| 60,000 |
| 54,750 |
| ||
6.500%, 02/01/2014 |
| 20,000 |
| 16,300 |
| ||
6.875%, 03/01/2016 |
| 95,000 |
| 76,119 |
| ||
7.750%, 08/15/2016 |
| 325,000 |
| 307,125 |
| ||
|
|
|
| 566,181 |
| ||
|
|
|
|
|
| ||
Machinery-Construction & Mining - 0.66% |
|
|
|
|
| ||
Terex Corp., |
|
|
|
|
| ||
8.000%, 11/15/2017 |
| 300,000 |
| 303,000 |
| ||
|
|
|
|
|
| ||
Media - 8.22% |
|
|
|
|
| ||
CanWest MediaWorks, Inc. |
|
|
|
|
| ||
8.000%, 09/15/2012 |
| 75,000 |
| 69,938 |
| ||
CCH I Holdings, LLC |
|
|
|
|
| ||
10.000%, 05/15/2014 |
| 25,000 |
| 16,062 |
| ||
11.750%, 05/15/2014 (5) |
| 230,000 |
| 157,550 |
| ||
12.125%, 01/15/2015 (5) |
| 25,000 |
| 17,375 |
| ||
11.000%, 10/01/2015 |
| 295,000 |
| 258,125 |
| ||
CCO Holdings, LLC |
|
|
|
|
| ||
8.750%, 11/15/2013 |
| 75,000 |
| 73,687 |
| ||
Charter Communications Operating, LLC |
|
|
|
|
| ||
8.375%, 04/30/2014 (1)(2) |
| 50,000 |
| 49,250 |
| ||
CSC Holdings, Inc. |
|
|
|
|
| ||
Series B, 7.625%, 04/01/2011 |
| 275,000 |
| 270,875 |
| ||
6.750%, 04/15/2012 |
| 75,000 |
| 70,687 |
| ||
Dex Media, Inc. |
|
|
|
|
| ||
8.000%, 11/15/2013 |
| 20,000 |
| 19,200 |
| ||
9.000%, 11/15/2013 (5) |
| 100,000 |
| 92,250 |
| ||
Dex Media West, LLC |
|
|
|
|
| ||
Series B, 8.500%, 08/15/2010 |
| 20,000 |
| 20,450 |
| ||
Series B, 9.875%, 08/15/2013 |
| 44,000 |
| 45,815 |
| ||
20
|
| Principal |
|
|
| ||
Interest Rate/Maturity Date |
| Amount |
| Market Value |
| ||
|
|
|
|
|
| ||
Media (continued) |
|
|
|
|
| ||
9.000%, 11/15/2013 (5) |
| $ | 150,000 |
| $ | 138,375 |
|
Echostar DBS Corp. |
|
|
|
|
| ||
5.750%, 10/01/2008 |
| 55,000 |
| 55,069 |
| ||
7.000%, 10/01/2013 |
| 25,000 |
| 26,000 |
| ||
6.625%, 10/01/2014 |
| 350,000 |
| 355,250 |
| ||
7.125%, 02/01/2016 |
| 35,000 |
| 36,619 |
| ||
Idearc, Inc. |
|
|
|
|
| ||
8.000%, 11/15/2016 |
| 465,000 |
| 437,100 |
| ||
Radio One, Inc. |
|
|
|
|
| ||
Series B, 8.875%, 07/01/2011 |
| 205,000 |
| 190,650 |
| ||
The Reader’s Digest Association, Inc. |
|
|
|
|
| ||
9.000%, 02/15/2017 (2) |
| 220,000 |
| 181,500 |
| ||
Rogers Cable, Inc. |
|
|
|
|
| ||
8.750%, 05/01/2032 |
| 175,000 |
| 221,745 |
| ||
Salem Communications Holding Corp. |
|
|
|
|
| ||
7.750%, 12/15/2010 |
| 270,000 |
| 270,000 |
| ||
Sinclair Television Group, Inc. |
|
|
|
|
| ||
8.000%, 03/15/2012 |
| 83,000 |
| 85,075 |
| ||
Univision Communications, Inc. |
|
|
|
|
| ||
9.750%, 03/15/2015 (2)(8) |
| 325,000 |
| 303,875 |
| ||
Videotron Ltee |
|
|
|
|
| ||
6.875%, 01/15/2014 |
| 120,000 |
| 115,500 |
| ||
6.375%, 12/15/2015 |
| 185,000 |
| 171,588 |
| ||
|
|
|
| 3,749,610 |
| ||
|
|
|
|
|
| ||
Miscellaneous Manufacturers - 1.32% |
|
|
|
|
| ||
Blount, Inc. |
|
|
|
|
| ||
8.875%, 08/01/2012 |
| 50,000 |
| 50,250 |
| ||
Invensys PLC |
|
|
|
|
| ||
9.875%, 03/15/2011 (2) |
| 50,000 |
| 52,875 |
| ||
Koppers Holdings, Inc. |
|
|
|
|
| ||
9.875%, 11/15/2014 (5) |
| 250,000 |
| 213,750 |
| ||
Koppers, Inc. |
|
|
|
|
| ||
9.875%, 10/15/2013 |
| 50,000 |
| 52,750 |
| ||
RBS Global, Inc. and Rexnord Corp. |
|
|
|
|
| ||
9.500%, 08/01/2014 |
| 235,000 |
| 233,825 |
| ||
|
|
|
| 603,450 |
| ||
|
|
|
|
|
| ||
Office-Business Equipment - 1.47% |
|
|
|
|
| ||
Xerox Capital Trust I |
|
|
|
|
| ||
8.000%, 02/01/2027 |
| 670,000 |
| 670,996 |
| ||
|
|
|
|
|
| ||
Office Furnishings - 0.15% |
|
|
|
|
| ||
Interface, Inc. |
|
|
|
|
| ||
9.500%, 02/01/2014 |
| 65,000 |
| 67,925 |
| ||
21
|
| Principal |
|
|
| ||
Interest Rate/Maturity Date |
| Amount |
| Market Value |
| ||
|
|
|
|
|
| ||
Oil & Gas - 4.63% |
|
|
|
|
| ||
Chaparral Energy, Inc. |
|
|
|
|
| ||
8.500%, 12/01/2015 |
| $ | 250,000 |
| $ | 222,500 |
|
8.875%, 02/01/2017 (2) |
| 145,000 |
| 129,775 |
| ||
Chesapeake Energy Corp. |
|
|
|
|
| ||
7.625%, 07/15/2013 |
| 200,000 |
| 207,500 |
| ||
7.000%, 08/15/2014 |
| 50,000 |
| 50,250 |
| ||
6.250%, 01/15/2018 |
| 435,000 |
| 412,162 |
| ||
Exco Resources, Inc. |
|
|
|
|
| ||
7.250%, 01/15/2011 |
| 450,000 |
| 439,875 |
| ||
Hilcorp Energy I, LP |
|
|
|
|
| ||
7.750%, 11/01/2015 (2) |
| 245,000 |
| 238,263 |
| ||
9.000%, 06/01/2016 (2) |
| 205,000 |
| 210,125 |
| ||
Stone Energy Corp. |
|
|
|
|
| ||
8.250%, 12/15/2011 |
| 75,000 |
| 74,625 |
| ||
Swift Energy Co. |
|
|
|
|
| ||
7.125%, 06/01/2017 |
| 135,000 |
| 128,250 |
| ||
|
|
|
| 2,113,325 |
| ||
|
|
|
|
|
| ||
Oil & Gas Services - 1.14% |
|
|
|
|
| ||
Complete Production Services, Inc. |
|
|
|
|
| ||
8.000%, 12/15/2016 |
| 200,000 |
| 191,000 |
| ||
Dresser-Rand Group, Inc. |
|
|
|
|
| ||
7.375%, 11/01/2014 |
| 330,000 |
| 327,525 |
| ||
|
|
|
| 518,525 |
| ||
|
|
|
|
|
| ||
Packaging & Containers - 1.82% |
|
|
|
|
| ||
Crown Americas, LLC |
|
|
|
|
| ||
7.750%, 11/15/2015 |
| 55,000 |
| 56,375 |
| ||
Graphic Packaging International, Inc. |
|
|
|
|
| ||
8.500%, 08/15/2011 |
| 10,000 |
| 9,900 |
| ||
9.500%, 08/15/2013 |
| 210,000 |
| 208,950 |
| ||
Owens Brockway Glass Container, Inc. |
|
|
|
|
| ||
8.250%, 05/15/2013 |
| 25,000 |
| 26,000 |
| ||
6.750%, 12/01/2014 |
| 275,000 |
| 274,312 |
| ||
Owens-Illinois, Inc. |
|
|
|
|
| ||
7.500%, 05/15/2010 |
| 50,000 |
| 50,500 |
| ||
Packaging Dynamics Finance Corp. |
|
|
|
|
| ||
10.000%, 05/01/2016 (2) |
| 225,000 |
| 205,875 |
| ||
Radnor Holdings Corp. |
|
|
|
|
| ||
11.000%, 03/15/2010 (7) |
| 25,000 |
| 313 |
| ||
|
|
|
| 832,225 |
| ||
|
|
|
|
|
| ||
Pharmaceuticals - 0.43% |
|
|
|
|
| ||
Valeant Pharmaceuticals International |
|
|
|
|
| ||
7.000%, 12/15/2011 |
| 205,000 |
| 196,800 |
| ||
22
|
| Principal |
|
|
| ||
Interest Rate/Maturity Date |
| Amount |
| Market Value |
| ||
|
|
|
|
|
| ||
Pipelines - 4.22% |
|
|
|
|
| ||
ANR Pipeline Co. |
|
|
|
|
| ||
7.375%, 02/15/2024 |
| $ | 60,000 |
| $ | 68,918 |
|
7.000%, 06/01/2025 |
| 10,000 |
| 11,151 |
| ||
Atlas Pipeline Partners, LP |
|
|
|
|
| ||
8.125%, 12/15/2015 |
| 200,000 |
| 197,000 |
| ||
Dynegy Holdings, Inc. |
|
|
|
|
| ||
8.375%, 05/01/2016 |
| 395,000 |
| 381,669 |
| ||
7.125%, 05/15/2018 |
| 75,000 |
| 65,062 |
| ||
7.750%, 06/01/2019 |
| 60,000 |
| 54,300 |
| ||
7.625%, 10/15/2026 |
| 25,000 |
| 21,438 |
| ||
Targa Resources, Inc. |
|
|
|
|
| ||
8.500%, 11/01/2013 (2) |
| 455,000 |
| 448,175 |
| ||
Tennessee Gas Pipeline Co. |
|
|
|
|
| ||
8.375%, 06/15/2032 |
| 150,000 |
| 177,577 |
| ||
Transcontinental Gas Pipe Line Corp. |
|
|
|
|
| ||
6.400%, 04/15/2016 |
| 50,000 |
| 52,625 |
| ||
Williams Cos., Inc. |
|
|
|
|
| ||
7.875%, 09/01/2021 |
| 125,000 |
| 141,875 |
| ||
8.750%, 03/15/2032 |
| 250,000 |
| 303,125 |
| ||
|
|
|
| 1,922,915 |
| ||
Real Estate Investment Trusts - 2.37% |
|
|
|
|
| ||
Felcor Lodging, LP |
|
|
|
|
| ||
8.500%, 06/01/2011 |
| 250,000 |
| 264,375 |
| ||
7.260%, 12/01/2011 (6) |
| 90,000 |
| 89,550 |
| ||
Host Marriott, LP |
|
|
|
|
| ||
7.125%, 11/01/2013 |
| 75,000 |
| 75,563 |
| ||
Series O, 6.375%, 03/15/2015 |
| 75,000 |
| 73,687 |
| ||
Series Q, 6.750%, 06/01/2016 |
| 400,000 |
| 399,000 |
| ||
Omega Healthcare Investors, Inc. |
|
|
|
|
| ||
7.000%, 04/01/2014 |
| 180,000 |
| 179,100 |
| ||
|
|
|
| 1,081,275 |
| ||
Retail - 2.77% |
|
|
|
|
| ||
Claire’s Stores, Inc. |
|
|
|
|
| ||
9.625%, 06/01/2015 (2)(8) |
| 255,000 |
| 187,425 |
| ||
10.500%, 06/01/2017 (2) |
| 350,000 |
| 224,000 |
| ||
Inergy, LP |
|
|
|
|
| ||
8.250%, 03/01/2016 |
| 125,000 |
| 129,687 |
| ||
Michaels Stores, Inc. |
|
|
|
|
| ||
10.000%, 11/01/2014 |
| 220,000 |
| 217,800 |
| ||
11.375%, 11/01/2016 |
| 75,000 |
| 71,813 |
| ||
Neiman-Marcus Group, Inc. |
|
|
|
|
| ||
9.000%, 10/15/2015 (8) |
| 20,000 |
| 20,900 |
| ||
10.375%, 10/15/2015 |
| 200,000 |
| 213,500 |
| ||
Sbarro, Inc. |
|
|
|
|
| ||
10.375%, 02/01/2015 |
| 225,000 |
| 196,875 |
| ||
|
|
|
| 1,262,000 |
| ||
23
|
| Principal |
|
|
| ||
Interest Rate/Maturity Date |
| Amount |
| Market Value |
| ||
|
|
|
|
|
| ||
Semiconductors - 0.83% |
|
|
|
|
| ||
Freescale Semiconductor, Inc. |
|
|
|
|
| ||
8.875%, 12/15/2014 |
| $ | 140,000 |
| $ | 128,625 |
|
9.125%, 12/15/2014 (8) |
| 285,000 |
| 250,087 |
| ||
|
|
|
| 378,712 |
| ||
|
|
|
|
|
| ||
Telecommunications - 7.77% |
|
|
|
|
| ||
American Tower Corp. |
|
|
|
|
| ||
7.500%, 05/01/2012 |
| 75,000 |
| 77,062 |
| ||
7.000%, 10/15/2017 (2) |
| 50,000 |
| 51,125 |
| ||
Citizens Communications Co. |
|
|
|
|
| ||
7.875%, 01/15/2027 |
| 125,000 |
| 120,625 |
| ||
9.000%, 08/15/2031 |
| 305,000 |
| 308,813 |
| ||
Embarq Corp. |
|
|
|
|
| ||
7.082%, 06/01/2016 |
| 85,000 |
| 88,790 |
| ||
7.995%, 06/01/2036 |
| 350,000 |
| 370,989 |
| ||
Intelsat Bermuda Ltd. |
|
|
|
|
| ||
11.250%, 06/15/2016 |
| 200,000 |
| 208,000 |
| ||
Intelsat Corp. |
|
|
|
|
| ||
9.000%, 08/15/2014 |
| 25,000 |
| 25,500 |
| ||
Level 3 Financing, Inc. |
|
|
|
|
| ||
12.250%, 03/15/2013 |
| 220,000 |
| 220,550 |
| ||
9.250%, 11/01/2014 |
| 190,000 |
| 171,475 |
| ||
Lucent Technologies, Inc. |
|
|
|
|
| ||
6.450%, 03/15/2029 |
| 260,000 |
| 210,600 |
| ||
MetroPCS Wireless, Inc. |
|
|
|
|
| ||
9.250%, 11/01/2014 |
| 265,000 |
| 252,413 |
| ||
Qwest Communications International, Inc. |
|
|
|
|
| ||
Series B, 7.500%, 02/15/2014 |
| 175,000 |
| 174,562 |
| ||
Qwest Corp. |
|
|
|
|
| ||
8.875%, 03/15/2012 |
| 100,000 |
| 107,875 |
| ||
7.500%, 06/15/2023 |
| 25,000 |
| 23,875 |
| ||
6.875%, 09/15/2033 |
| 625,000 |
| 571,875 |
| ||
Rogers Wireless, Inc. |
|
|
|
|
| ||
7.250%, 12/15/2012 |
| 30,000 |
| 32,801 |
| ||
8.000%, 12/15/2012 |
| 45,000 |
| 46,994 |
| ||
Rural Cellular Corp. |
|
|
|
|
| ||
8.580%, 06/01/2013 (2)(6) |
| 230,000 |
| 234,600 |
| ||
Wind Acquisition Finance SA |
|
|
|
|
| ||
10.750%, 12/01/2015 (2) |
| 20,000 |
| 21,700 |
| ||
Windstream Corp. |
|
|
|
|
| ||
8.625%, 08/01/2016 |
| 215,000 |
| 224,138 |
| ||
|
|
|
| 3,544,362 |
| ||
24
|
| Principal |
|
|
| ||
Interest Rate/Maturity Date |
| Amount |
| Market Value |
| ||
|
|
|
|
|
| ||
Transportation - 0.75% |
|
|
|
|
| ||
Bristow Group, Inc. |
|
|
|
|
| ||
7.500%, 09/15/2017 (2) |
| $ | 105,000 |
| $ | 105,919 |
|
Navios Maritime Holdings, Inc. |
|
|
|
|
| ||
9.500%, 12/15/2014 |
| 230,000 |
| 237,475 |
| ||
|
|
|
| 343,394 |
| ||
|
|
|
|
|
| ||
TOTAL CORPORATE BONDS |
|
|
| 40,125,968 |
| ||
|
|
|
|
|
| ||
CONVERTIBLE CORPORATE BONDS - 0.22% |
|
|
|
|
| ||
Aerospace-Defense - 0.08% |
|
|
|
|
| ||
Alliant Techsystems, Inc. |
|
|
|
|
| ||
2.750%, 02/15/2024 (2) |
| 10,000 |
| 15,213 |
| ||
L-3 Communications Corp. |
|
|
|
|
| ||
3.000%, 08/01/2035 (2) |
| 15,000 |
| 18,694 |
| ||
|
|
|
| 33,907 |
| ||
|
|
|
|
|
| ||
Media - 0.05% |
|
|
|
|
| ||
Sinclair Broadcast Group, Inc. |
|
|
|
|
| ||
4.875%, 07/15/2018 (4) |
| 25,000 |
| 23,375 |
| ||
|
|
|
|
|
| ||
Real Estate Investment Trusts - 0.09% |
|
|
|
|
| ||
MeriStar Hospitality Corp. |
|
|
|
|
| ||
9.500%, 04/01/2010 |
| 40,000 |
| 41,060 |
| ||
|
|
|
|
|
| ||
TOTAL CONVERTIBLE CORPORATE BONDS |
|
|
|
|
| ||
(Amortized Cost $93,487) |
|
|
| 98,342 |
| ||
|
|
|
|
|
| ||
BANK LOANS - 5.82% |
|
|
|
|
| ||
Auto Manufacturers - 1.12% |
|
|
|
|
| ||
Ford Motor Co. |
|
|
|
|
| ||
8.700%, 11/29/2013 |
| 545,875 |
| 511,199 |
| ||
|
|
|
|
|
| ||
Beverages - 0.30% |
|
|
|
|
| ||
Tropicana Products, Inc. |
|
|
|
|
| ||
7.448%, 12/15/2011 |
| 142,147 |
| 137,727 |
| ||
|
|
|
|
|
| ||
Commercial Services - 0.21% |
|
|
|
|
| ||
ARAMARK Corp. |
|
|
|
|
| ||
5.198%, 01/26/2014 |
| 6,573 |
| 6,287 |
| ||
7.198%, 01/26/2014 |
| 91,966 |
| 87,966 |
| ||
|
|
|
| 94,253 |
| ||
|
|
|
|
|
| ||
Diversified Financial Services - 0.62% |
|
|
|
|
| ||
First Data Corp B-1 |
|
|
|
|
| ||
7.960%, 10/08/2014 |
| 300,000 |
| 284,644 |
| ||
25
|
| Principal |
|
|
| ||
Interest Rate/Maturity Date |
| Amount |
| Market Value |
| ||
|
|
|
|
|
| ||
Healthcare-Services - 0.10% |
|
|
|
|
| ||
HCA, Inc. |
|
|
|
|
| ||
7.448%, 11/18/2013 |
| $ | 49,625 |
| $ | 47,632 |
|
|
|
|
|
|
| ||
Internet - 0.52% |
|
|
|
|
| ||
Level 3 Communications, Inc. |
|
|
|
|
| ||
7.610%, 03/09/2014 |
| 250,000 |
| 237,396 |
| ||
|
|
|
|
|
| ||
Lodging - 0.47% |
|
|
|
|
| ||
Las Vegas Sands Corp., |
|
|
|
|
| ||
0.750%, 05/28/2013 |
| 45,000 |
| 42,622 |
| ||
6.950%, 05/28/2013 |
| 179,550 |
| 170,063 |
| ||
|
|
|
| 212,685 |
| ||
|
|
|
|
|
| ||
Media - 1.13% |
|
|
|
|
| ||
Crown Castle International Corp. |
|
|
|
|
| ||
6.731%, 03/02/2014 |
| 248,750 |
| 237,290 |
| ||
Merrill Communications, LLC |
|
|
|
|
| ||
11.253%, 11/27/2013 |
| 150,000 |
| 140,625 |
| ||
Univision Communications, Inc. |
|
|
|
|
| ||
1.000%, 10/20/2008 |
| 5,034 |
| 4,630 |
| ||
7.072%, 10/20/2008 |
| 4,027 |
| 3,703 |
| ||
7.210%, 10/03/2014 |
| 140,938 |
| 129,620 |
| ||
|
|
|
| 515,868 |
| ||
|
|
|
|
|
| ||
Multimedia - 0.27% |
|
|
|
|
| ||
Riverdeep Interactive Learning, Ltd. |
|
|
|
|
| ||
7.948%, 01/02/2014 |
| 124,060 |
| 123,466 |
| ||
|
|
|
|
|
| ||
Office Furnishings - 0.46% |
|
|
|
|
| ||
Collins & Aikman Floorcoverings, Inc. |
|
|
|
|
| ||
7.902%, 05/08/2014 |
| 224,438 |
| 208,727 |
| ||
|
|
|
|
|
| ||
Research Services - 0.26% |
|
|
|
|
| ||
Nielsen Finance, LLC |
|
|
|
|
| ||
6.896%, 08/08/2013 |
| 123,750 |
| 117,571 |
| ||
|
|
|
|
|
| ||
Semiconductors - 0.10% |
|
|
|
|
| ||
Freescale Semiconductor, Inc. |
|
|
|
|
| ||
7.330%, 12/01/2013 |
| 50,000 |
| 46,812 |
| ||
|
|
|
|
|
| ||
Telecommunications - 0.26% |
|
|
|
|
| ||
Charter Communications Holdings, LLC |
|
|
|
|
| ||
7.130%, 04/11/2014 (1) |
| 125,000 |
| 116,755 |
| ||
|
|
|
|
|
| ||
TOTAL BANK LOANS |
|
|
| 2,654,735 |
| ||
26
|
| Principal |
|
|
| ||
Interest Rate/Maturity Date |
| Amount |
| Market Value |
| ||
|
|
|
|
|
| ||
COMMON STOCKS - 0.53% |
|
|
|
|
| ||
Telecommunications - 0.53% |
|
|
|
|
| ||
American Tower Corp. (9) |
| $ | 3,930 |
| $ | 178,972 |
|
Virgin Media, Inc. |
| 3,372 |
| 64,068 |
| ||
|
|
|
|
|
| ||
TOTAL COMMON STOCKS |
|
|
| 243,040 |
| ||
|
|
|
|
|
| ||
MONEY MARKET MUTUAL FUNDS - 3.22% |
|
|
|
|
| ||
Dreyfus Cash Advantage Plus Fund (1) |
| 1,469,039 |
| 1,469,039 |
| ||
|
|
|
|
|
| ||
TOTAL MONEY MARKET MUTUAL FUNDS |
|
|
| 1,469,039 |
| ||
|
|
|
|
|
| ||
Total Investments - 97.75% |
|
|
| $ | 44,591,124 |
| |
|
|
|
|
|
| ||
Other Assets in Excess of Liabilities - 2.25% |
|
|
| 1,027,896 |
| ||
|
|
|
|
|
| ||
Net Assets - 100.00% |
|
|
| $ | 45,619,020 |
| |
(1) | Investments in other funds are calculated at their respective net asset values as determined by those funds, in accordance with the Investment Company Act of 1940. |
|
|
(2) | Security exempt from registration under Rule 144A of the Securities Act of 1933. Under procedures approved by the Board of Trustees, such securities have been determined to be liquid by the Investment Adviser and may be resold, normally to qualified buyers in transactions exempt from registration. Total market value of Rule 144A securities amounts to $5,885,615, which represents approximately 12.90% of net assets as of November 30, 2007. |
|
|
(3) | Amount represents less than 0.05% of net assets. |
|
|
(4) | Step-bond coupon increases periodically based upon a predetermined schedule. Interest rate disclosed is that which is in effect at November 30, 2007. |
|
|
(5) | These securities are issued with a zero coupon or interest rate which increases to the stated rate at a set date in the future. |
|
|
(6) | Floating or variable rate security. Interest rate disclosed is that which is in effect at November 30, 2007. |
|
|
(7) | Security is currently in default/non-income producing. |
|
|
(8) | Pay-in-kind securities. |
|
|
(9) | Non-income producing. |
Please see “Notes to Financial Statements” for further information.
27
Statement of Assets & Liabilities
November 30, 2007 (Unaudited)
|
| Stone Harbor |
| Stone Harbor |
| ||
|
| Emerging Markets |
| High Yield |
| ||
|
| Debt Fund |
| Bond Fund |
| ||
|
|
|
|
|
| ||
ASSETS: |
|
|
|
|
| ||
Investments, at value (1) |
| $ | 15,610,124 |
| $ | 44,591,124 |
|
Cash |
| –– |
| 31 |
| ||
Receivable for investments sold |
| 299,989 |
| 285,619 |
| ||
Interest receivable |
| 325,651 |
| 1,004,645 |
| ||
Receivable from investment advisor |
| 3,807 |
| 16,860 |
| ||
Unrealized appreciation on swap agreements |
| 7,584 |
| –– |
| ||
Deferred offering costs |
| 38,005 |
| 38,005 |
| ||
Total Assets |
| 16,285,160 |
| 45,936,284 |
| ||
|
|
|
|
|
| ||
LIABILITIES: |
|
|
|
|
| ||
Payable to custodian |
| 1,953 |
| –– |
| ||
Payable for investments purchased |
| 322,461 |
| 188,658 |
| ||
Unrealized depreciation on swap agreements |
| 73,999 |
| –– |
| ||
Unrealized depreciation on forward foreign currency contracts |
| 14,942 |
| –– |
| ||
Payable for offering cost |
| 6,817 |
| 6,817 |
| ||
Payable for trustee fees |
| 4,493 |
| 4,530 |
| ||
Other payables |
| 62,050 |
| 117,259 |
| ||
Total Liabilities |
| 486,715 |
| 317,264 |
| ||
Net Assets |
| $ | 15,798,445 |
| $ | 45,619,020 |
|
|
|
|
|
|
| ||
NET ASSETS CONSIST OF: |
|
|
|
|
| ||
Paid in capital |
| $ | 14,704,239 |
| $ | 44,066,487 |
|
Undistributed net investment income |
| 307,022 |
| 1,073,434 |
| ||
Accumulated net realized gain on investments, swaps and translation of assets and liabilities denominated in foreign currency |
| 315,092 |
| 96,228 |
| ||
Net unrealized appreciation on investments, swaps and translation of assets and liabilities denominated in foreign currencies |
| 472,092 |
| 382,871 |
| ||
Net Assets |
| $ | 15,798,445 |
| $ | 45,619,020 |
|
|
|
|
|
|
| ||
PRICING OF SHARES: |
|
|
|
|
| ||
Institutional Class Shares |
|
|
|
|
| ||
Net Assets |
| $ | 15,798,445 |
| $ | 45,619,020 |
|
Shares of beneficial interest outstanding (unlimited number of shares, par value of $0.001 per share authorized) |
| 1,457,166 |
| 4,411,781 |
| ||
Net asset value, offering and redemption price per share |
| $ | 10.84 |
| $ | 10.34 |
|
|
|
|
|
|
| ||
(1) Cost of Investments. |
| $ | 15,104,601 |
| $ | 44,208,253 |
|
Please see “Notes to Financial Statements” for further information.
28
For the period August 16, 2007 (Inception) to November 30, 2007 (Unaudited)
|
| Stone Harbor |
| Stone Harbor |
| ||
|
| Emerging Markets |
| High Yield |
| ||
|
| Debt Fund |
| Bond Fund |
| ||
|
|
|
|
|
| ||
INVESTMENT INCOME |
|
|
|
|
| ||
Interest |
| $ | 338,569 |
| $ | 1,146,400 |
|
Dividends |
| –– |
| 135 |
| ||
Total Investment Income |
| 338,569 |
| 1,146,535 |
| ||
|
|
|
|
|
| ||
EXPENSES |
|
|
|
|
| ||
Investment advisory fee |
| 25,190 |
| 66,325 |
| ||
Administrative fee |
| 15,636 |
| 51,491 |
| ||
Custodian fees |
| 4,378 |
| 1,741 |
| ||
Audit fees |
| 23,841 |
| 23,841 |
| ||
Printing fees |
| 4,652 |
| 4,675 |
| ||
Offering costs |
| 15,494 |
| 15,494 |
| ||
Legal fees |
| 5,003 |
| 20,401 |
| ||
Trustee fees |
| 4,493 |
| 4,530 |
| ||
Transfer agent fees |
| 5,855 |
| 5,852 |
| ||
Insurance fees |
| 2,342 |
| 7,027 |
| ||
Other |
| 342 |
| 1,591 |
| ||
Total expenses before waiver/reimbursement |
| 107,226 |
| 202,968 |
| ||
Less fees waived by investment advisor |
| (25,190 | ) | (66,325 | ) | ||
Less fees reimbursed by investment advisor |
| (50,489 | ) | (63,542 | ) | ||
Total Net Expenses |
| 31,547 |
| 73,101 |
| ||
Net Investment Income |
| 307,022 |
| 1,073,434 |
| ||
|
|
|
|
|
| ||
REALIZED AND UNREALIZED GAIN ON INVESTMENTS |
|
|
|
|
| ||
Net realized gain on: |
|
|
|
|
| ||
Investments |
| 203,217 |
| 96,228 |
| ||
Swaps |
| 1,079 |
| –– |
| ||
Foreign currency transactions |
| 110,796 |
| –– |
| ||
Net realized gain |
| 315,092 |
| 96,228 |
| ||
Change in unrealized appreciation on: |
|
|
|
|
| ||
Investments |
| 505,523 |
| 382,871 |
| ||
Swaps |
| (66,415 | ) | –– |
| ||
Translation of assets and liabilities denominated in foreign currencies |
| 32,984 |
| –– |
| ||
Net change |
| 472,092 |
| 382,871 |
| ||
Net Realized and Unrealized Gain on Investments |
| 787,184 |
| 479,099 |
| ||
Net Increase in Net Assets Resulting from Operations |
| $ | 1,094,206 |
| $ | 1,552,533 |
|
Please see “Notes to Financial Statements” for further information.
29
Statement of Changes in Net Assets
For the period August 16, 2007 (Inception) to November 30, 2007 (Unaudited)
|
| Stone Harbor |
| |
|
|
| ||
|
| Debt Fund |
| |
|
|
|
| |
OPERATIONS |
|
|
| |
Net investment income |
| $ | 307,022 |
|
Net realized gain on investments: |
|
|
| |
Securities transactions |
| 203,217 |
| |
Swaps |
| 1,079 |
| |
Foreign currency transactions |
| 110,796 |
| |
Net change in unrealized appreciation on investments, swaps and foreign currency translations |
| 472,092 |
| |
Net increase in net assets resulting from operations |
| 1,094,206 |
| |
|
|
|
| |
CAPITAL SHARE TRANSACTIONS: |
|
|
| |
Institutional Class Shares |
|
|
| |
Initial Investment (See Note 1) |
| 50,000 |
| |
Proceeds from sale of shares |
| 15,314,239 |
| |
Cost of shares redeemed |
| (660,000 | ) | |
Net increase in net assets from capital share transactions |
| 14,704,239 |
| |
Net Increase in Net Assets |
| 15,798,445 |
| |
Net Assets |
|
|
| |
Beginning of period |
| –– |
| |
End of period (including undistributed net investment income of $307,022) |
| $ | 15,798,445 |
|
|
|
|
| |
OTHER INFORMATION: |
|
|
| |
Share Transactions: |
|
|
| |
Institutional Class Shares |
|
|
| |
Initial investment (See Note 1) |
| 5,000 |
| |
Sold |
| 1,513,964 |
| |
Redeemed |
| (61,798 | ) | |
Net increase in shares outstanding |
| 1,457,166 |
|
Please see “Notes to Financial Statements” for further information.
30
Statement of Changes in Net Assets
For the period August 16, 2007 (Inception) to November 30, 2007 (Unaudited)
|
| Stone Harbor |
| |
|
|
| ||
|
| Bond Fund |
| |
|
|
|
| |
OPERATIONS |
|
|
| |
Net investment income |
| $ | 1,073,434 |
|
Net realized gain on investments |
| 96,228 |
| |
Net change in unrealized appreciation on investments |
| 382,871 |
| |
Net increase in net assets resulting from operations |
| 1,552,533 |
| |
|
|
|
| |
CAPITAL SHARE TRANSACTIONS |
|
|
| |
Institutional Class Shares |
|
|
| |
Initial Investment (See Note 1) |
| 50,000 |
| |
Proceeds from sales of shares |
| 45,356,487 |
| |
Cost of shares redeemed |
| (1,340,000 | ) | |
Net increase in net assets from capital share transactions |
| 44,066,487 |
| |
Net Increase in Net Assets |
| 45,619,020 |
| |
Net Assets |
|
|
| |
Beginning of period |
| –– |
| |
End of period (including undistributed net investment income of $1,073,434) |
| $ | 45,619,020 |
|
|
|
|
| |
OTHER INFORMATION: |
|
|
| |
Share Transactions: |
|
|
| |
Institutional Class Shares |
|
|
| |
Initial investment (See Note 1) |
| 5,000 |
| |
Sold |
| 4,535,627 |
| |
Redeemed |
| (128,846 | ) | |
Net increase in shares outstanding |
| 4,411,781 |
|
Please see “Notes to Financial Statements” for further information.
31
|
| |
For a share outstanding through the period presented |
| |
|
| Institutional Class Shares |
|
| For the period |
| |
|
| August 16, 2007 |
| |
|
| (Inception) to |
| |
|
| November 30, 2007 |
| |
|
|
|
| |
Net asset value - beginning of the period |
| $ | 10.00 |
|
Income from investment operations |
|
|
| |
Net investment income |
| 0.21 |
| |
Net realized and unrealized gain on investments |
| 0.63 |
| |
Total income from investment operations |
| 0.84 |
| |
Net Increase in Net Asset Value |
| 0.84 |
| |
Net asset value - end of period |
| $ | 10.84 |
|
|
|
|
| |
Total Return (1)(2) |
| 8.40 | % | |
|
|
|
| |
RATIOS/SUPPLEMENTAL DATA: |
|
|
| |
Net assets, end of period (in thousands) |
| $ | 15,798 |
|
Ratio of expenses to average net assets with fee waivers/reimbursements |
| 0.75 | %* | |
Ratio of expenses to average net assets without fee waivers/reimbursements |
| 2.55 | %* | |
Ratio of net investment income to average net assets with fee waivers/reimbursements |
| 7.29 | %* | |
|
|
|
| |
Portfolio Turnover Rate (3) |
| 67 | % |
* | Annualized. |
|
|
(1) | Total returns for periods of less than one year are not annualized. |
|
|
(2) | Total returns would have been lower had various fees and expenses not been waived and reimbursed during the period. |
|
|
(3) | A portfolio turnover rate is the percentage computed by taking the lesser of the purchases and sales of portfolio securities (excluding securities with a maturity date of one year or less at the time of acquisition) for a period and dividing it by the monthly average of the market value of such securities during the period. Purchases at cost and proceeds from sales of investment securities (excluding short-term and U.S. Government securities) for the period August 16, 2007 (Inception) to November 30, 2007 were $22,085,280 and $8,958,696, respectively. Purchases at cost and proceeds from sales of U.S. Government securities for the period August 16, 2007 (Inception) to November 30, 2007 were $1,877,093 and $356,692, respectively. |
Please see “Notes to Financial Statements” for further information.
32
Financial Highlights |
|
|
For a share outstanding through the period presented |
| |
|
| Institutional Class Shares |
|
| For the period |
| |
|
| August 16, 2007 |
| |
|
| (Inception) to |
| |
|
| November 30, 2007 |
| |
|
|
|
| |
Net asset value - beginning of the period |
| $ | 10.00 |
|
Income from investment operations |
|
|
| |
Net investment income |
| 0.24 |
| |
Net realized and unrealized gain on investments |
| 0.10 |
| |
Total income from investment operations |
| 0.34 |
| |
Net Increase in Net Asset Value |
| 0.34 |
| |
Net asset value - end of period |
| $ | 10.34 |
|
|
|
|
| |
Total Return (1)(2) |
| 3.40 | % | |
|
|
|
| |
RATIOS/SUPPLEMENTAL DATA: |
|
|
| |
Net assets, end of period (in thousands) |
| $ | 45,619 |
|
Ratio of expenses to average net assets with fee waivers/reimbursements |
| 0.55 | %* | |
Ratio of expenses to average net assets without fee waivers/reimbursements |
| 1.53 | %* | |
Ratio of net investment income to average net assets with fee waivers/reimbursements |
| 8.07 | %* | |
|
|
|
| |
Portfolio Turnover Rate (3) |
| 8 | % |
* | Annualized. |
|
|
(1) | Total returns for periods of less than one year are not annualized. |
|
|
(2) | Total returns would have been lower had various fees and expenses not been waived and reimbursed during the period. |
|
|
(3) | A portfolio turnover rate is the percentage computed by taking the lesser of the purchases and sales of portfolio securities (excluding securities with a maturity date of one year or less at the time of acquisition) for a period and dividing it by the monthly average of the market value of such securities during the period. Purchases at cost and proceeds from sales of investment securities (excluding short-term securities) for the period ended August 16, 2007 (Inception) to November 30, 2007 were $46,206,568 and $3,648,897, respectively. |
Please see “Notes to Financial Statements” for further information.
33
November 30, 2007 (Unaudited)
1. ORGANIZATION
Stone Harbor Investment Funds (the “Trust”) is a newly organized open-end management investment company registered under the Investment Company Act of 1940, as amended (the “1940 Act”). The Trust was organized on February 20, 2007 as a Massachusetts Business Trust. The Trust currently offers shares of beneficial interest (“shares”) of the Stone Harbor Emerging Markets Debt Fund and Stone Harbor High Yield Bond Fund (the “Funds”). Each Fund is a non-diversified portfolio with an investment objective to maximize total return. Shares of each Fund are currently divided into two classes, designated Institutional Class Shares and Distributor Class Shares. The Declaration of Trust permits the Trustees to create additional funds and share classes.
As newly organized entities, the Funds have no operating history. The Funds did not have any operations before the seed capital audit on June 15, 2007, other than those relating to the sale and issuance of 10,000 common shares, in the amount of 5,000 common shares in the Institutional Class for each Fund to Stone Harbor Investment Partners LP (“Stone Harbor” or the “Adviser”).
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently followed by each Fund in the preparation of its financial statements. The policies are in conformity with accounting principles generally accepted in the United States of America for investment companies.
Investment Valuation: For the purpose of pricing purchase and redemption orders, the net asset value per share of each class of each Fund is calculated separately and is determined once daily as of the close of regularly scheduled trading on the NYSE (normally, 4 p.m. Eastern time). With respect to each Fund, such calculation is determined on each day that the NYSE is open for trading, i.e., Monday through Friday, except for New Year’s Day, Martin Luther King, Jr. Day, Presidents’ Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day, and the preceding Friday or subsequent Monday when one of those holidays falls on a Saturday or Sunday, respectively.
In calculating net asset value, equity securities listed or traded on national securities exchanges are valued at the last sale price or, if there have been no sales on that day, at the mean of the current bid and ask price which represents the current value of the security. Over-the-counter securities are valued at the mean of the current bid and ask price.
Portfolio securities listed on the NASDAQ National Market System for which market quotations are available are valued at the official closing price. If there is no official closing price, the securities are valued at the last sale price or, if there have been no sales that day, at the mean of the current bid and ask price which represents the current value of the security.
Securities that are primarily traded on foreign exchanges generally are valued at the preceding closing values of such securities on their respective exchanges, except that when an occurrence subsequent to the time a value was so established is likely to have changed such value, then the fair value of those securities will be determined by consideration of other factors by or under the direction of the Funds’ Board of Trustees or its delegates. In valuing assets, prices denominated in foreign currencies are converted to U.S. dollar equivalents at the current exchange rate. Securities may be valued by independent pricing services which use prices provided by market-makers or estimates of market values obtained from yield data relating to instruments or securities with similar characteristics.
34
Notes to Financial Statements (con’t)
November 30, 2007 (Unaudited)
Short-term obligations with maturities of 60 days or less are valued at amortized cost, which constitutes fair value as determined by the Board of Trustees. Amortized cost involves valuing an instrument at its original cost to a Fund and thereafter assuming a constant amortization to maturity of any discount or premium, regardless of the impact of fluctuating interest rates on the market value of the instrument. All other securities and other assets of a Fund will be valued at fair value as determined in good faith pursuant to procedures adopted by the Board of Trustees of the applicable Fund.
Securities Transactions: Investment transactions are recorded on a trade date basis (on the date the investments are purchased or sold).
Investments: investments are accounted for on a mark-to-market basis with realized gains and losses and unrealized appreciation or depreciation of investment reported in the current period.
Investment Income: Interest income are accrued and recorded on a daily basis including amortization of premiums, accretion of discounts and income earned from money market funds. Interest is not accrued on securities that are in default. Dividend income is recorded on the ex-dividend date.
Other Expenses: Trust expenses which are not fund specific are allocated to each fund based upon its relative proportion of net to the Trust’s totals.
Forward Foreign Currency Transactions: The Funds may engage in currency transactions with counterparties to hedge the value of portfolio securities denominated in particular currencies against fluctuations in relative value, to gain or reduce exposure to certain currencies, or to generate income or gains. All commitments are marked to market daily at the applicable exchange rates and any resulting unrealized gains or losses are recorded in the Funds’ financial statements. The Funds record realized gains or losses at the time a forward contract is offset by entry into a closing transaction or extinguished by delivery of the currency.
Credit Default Swaps: The Funds may enter into credit default swap contracts for hedging purposes, to gain market exposure or to add leverage to its portfolio. When used for hedging purposes, a Fund would be the buyer of a credit default swap contract. In that case, the Fund would be entitled to receive the par (or other agreed-upon) value of a referenced debt obligation, index or other investment from the counterparty to the contract in the event of a default by a third party, such as a U.S. or foreign issuer, on the referenced debt obligation. In return, the Fund would pay to the counterparty a periodic stream of payments over the term of the contract provided that no event of default has occurred. If no default occurs, the Fund would have spent the stream of payments and received no benefit from the contract. When the Fund is the seller of a credit default swap contract, it receives the stream of payments but is obligated to pay upon default of the referenced debt obligation. As the seller, the Fund would effectively add leverage to its portfolio because, in addition to its total assets, the Fund would be subject to investment exposure on the notional amount of the swap.
In addition to the risks applicable to derivatives generally, credit default swaps involve special risks because they are difficult to value, are highly susceptible to liquidity and credit risk, and generally pay a return to the party that has paid the premium only in the event of an actual default by the issuer of the underlying obligation, as opposed to a credit downgrade or other indication of financial difficulty. Unrealized gains, including the accrual of interest are recorded as an asset and unrealized losses are reported as a liability on the Statement of Assets and Liabilities. The change in value of the credit
35
Notes to Financial Statements (con’t)
November 30, 2007 (Unaudited)
default swap, including the accrual of interest to be paid or received is reported as a change in unrealized appreciation/depreciation on the Statement of Operations. A realized gain or loss is recorded upon payment or receipt of a periodic payment or termination of the swap agreement.
Use of Estimates: The Funds’ financial statements are prepared in accordance with accounting principles generally accepted in the United States of America. For investment companies this requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of increases and decreases in net assets from operations during the reporting period. Actual results could differ from these estimates.
Federal Income Taxes: Each Fund complies with the requirements under Subchapter M of the Internal Revenue Code applicable to regulated investment companies and intends to distribute substantially all of its net taxable income and net capital gains, if any, each year. Each Fund is not subject to income taxes to the extent such distributions are made.
Distributions to Shareholders: Dividends from net investment income and distributions of net realized gains, if any, will be declared and paid at least annually. Distributions to shareholders are recorded by the Funds on the ex-dividend date.
Net investment income (loss) and net realized gain (loss) may differ for financial statement and tax purposes. The character of distributions made during the year from net investment income or net realized gains may differ from its ultimate characterization for federal income tax purposes. Also, due to the timing of dividend distributions, the fiscal year in which amounts are distributed may differ from the fiscal year in which the income or realized gain was recorded by a Fund.
The components of distributable earnings on a tax basis will not be known until year end when classifications of distributions are known.
3. UNREALIZED APPRECIATION AND DEPRECIATION ON INVESTMENTS
At November 30, 2007, the cost of securities on a tax basis and gross unrealized appreciation (depreciation) on investments for federal income tax purposes were as follows:
|
| Stone Harbor |
| Stone Harbor |
| ||
|
| Emerging Markets |
| High Yield |
| ||
|
| Debt Fund |
| Bond Fund |
| ||
|
|
|
|
|
| ||
Gross appreciation (excess of value over tax cost) |
| $ | 603,552 |
| $ | –– |
|
Gross depreciation (excess of tax cost over value) |
| (100,372 | ) | (1,699,764 | ) | ||
Net unrealized appreciation/(depreciation) |
| $ | 503,180 |
| $ | (1,699,764 | ) |
Cost of investments for income tax purposes |
| $ | 15,106,944 |
| $ | 46,290,888 |
|
The differences between book and tax net unrealized appreciation/(depreciation) are wash sale loss deferrals and carryover costs of certain investments.
36
Notes to Financial Statements (con’t)
November 30, 2007 (Unaudited)
4. ADVISORY FEES
Pursuant to the Investment Advisory Agreement (“Advisory Agreement”) with the Trust, Stone Harbor is entitled to an investment advisory fee, computed daily and payable monthly of 0.50% and 0.60% of the average daily net assets for Stone Harbor High Yield Bond Fund and Stone Harbor Emerging Markets Debt Fund, respectively.
The Adviser has contractually agreed to waive fees and reimburse expenses with respect to each of the Funds so that the Net Annual Operating Expenses (exclusive of acquired Fund fees and expenses, brokerage expenses, interest expense, taxes and extraordinary expenses) of the Stone Harbor High Yield Bond Fund Institutional Class, Stone Harbor High Yield Bond Fund Distributor Class, Stone Harbor Emerging Markets Debt Fund Institutional Class and Stone Harbor Emerging Markets Debt Fund Distributor Class will not exceed 0.55%, 0.80%, 0.75% and 1.00%, respectively. This undertaking is in effect through July 31, 2008 and is reevaluated on an annual basis. In addition, the Funds’ organizational expenses will be borne by the Adviser.
The Adviser will be permitted to recover, on a class by class basis, expenses it has borne through the undertakings described above to the extent that a Fund’s expenses in later periods fall below the annual rates set forth in the relevant undertaking. A Fund will not be obligated to pay any such deferred fees and expenses more than one year after the end of the fiscal year in which the fee and expense was deferred.
5. NEW ACCOUNTING PRONOUNCEMENTS
In June 2006, the Financial Accounting Standards Board (FASB) issued FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes, that requires the tax effects of certain tax positions to be recognized. These tax positions must meet a “more likely than not” standard that, based on their technical merits, have a more than 50 percent likelihood of being sustained upon examination. FASB Interpretation No. 48 is effective for fiscal periods beginning after December 15, 2006. At adoption, the financial statements must be adjusted to reflect only those tax positions that are more likely than not of being sustained. As of November 30, 2007, management has evaluated the application of FASB Interpretation No. 48 to the Funds and has determined that there is no material impact resulting from the adoption of this interpretation on the Funds’ financial statements.
In September 2006, FASB issued Statement of Financial Accounting Standards No. 157, “Fair Value Measurements” (SFAS No. 157). SFAS No. 157 defines fair value, establishes a framework for measuring fair value in accordance with generally accepted accounting principles, and expands disclosure about fair value measurements. SFAS No. 157 is effective for fiscal years beginning after November 15, 2007. Management has evaluated the impact the adoption of SFAS No. 157 will have on the Funds’ financial statements and believes that the impact on the disclosures will depend upon the composition of the portfolio on the date of adoption.
6. OTHER
Board of Trustees Compensation: No officer, trustee or employee of the Adviser or any of its affiliates receives any compensation from the Funds for serving as an officer or trustee of the Funds. Each individual Fund pays each Trustee who is not an interested person, as defined by the 1940 Act, of the Adviser or any of its affiliates, a fee of $1,250 per quarter plus $500 for each additional meeting in which that Trustee participates. All Trustees are reimbursed for reasonable travel and out-of-pocket expenses incurred to attend such meetings.
37
November 30, 2007 (Unaudited)
PORTFOLIO HOLDINGS
The SEC has adopted the requirement that all funds file a complete schedule of portfolio holdings with the SEC for their first and third fiscal quarters on Form N-Q. For the Funds, this would be for the fiscal quarters ending August 31 and February 29. The Form N-Q filing must be made within 60 days of the end of the quarter. The Funds’ Forms N-Q will be available on the SEC’s website at http://www. sec.gov., or they may be reviewed and copied at the SEC’s Public Reference Room in Washington, DC (call
1-800-732-0330 for information on the operation of the Public Reference Room).
PROXY VOTING
A description of the policies and procedures that the Funds use to determine how to vote proxies relating to portfolio securities and information regarding how the Funds voted proxies relating to portfolio securities for the period ending June 30, 2008 will be available without a charge, upon request, by contacting Stone Harbor Investment Funds at 1-866-699-8158 or on the SEC website at http://www.sec.gov.
BOARD APPROVAL OF INVESTMENT ADVISORY AGREEMENTS
The Board of Trustees, including the Independent Trustees, considers matters bearing on each Fund’s investment advisory agreement (together, the “Agreements”) at most of its meetings throughout the year. In addition, upon the expiration of the current Agreements in 2009, the Board, including the Independent Trustees, will meet once a year to review the Agreements and to determine whether to approve the continuation of the Agreements for an additional one-year period.
The Funds commenced operations in August 2007. The Board of Trustees approved each Fund’s Agreement at their initial Board meeting held on June 21, 2007. In considering whether to approve the Agreements, the Board of Trustees, including the Independent Trustees, did not identify any single factor as determinative. Matters considered by the Trustees, including the Independent Trustees, in connection with their approval of the Agreements included the following:
The nature, extent and quality of the services to be provided to the Funds under the Agreements. The Trustees considered the nature, extent and quality of the services proposed to be provided by Stone Harbor Investment Partners (the “Adviser”) to the Funds. The Trustees also considered the nature, extent and quality of the services provided by the Adviser to its institutional clients and sub-advised funds and the proposed dedication of resources to the Funds by the Adviser, including the Adviser’s dedication to attract and retain superior talent. The Trustees also noted that each Fund was expected to be offered to institutional clients of the Adviser and not to “retail” investors.
After reviewing these and related factors, the Trustees concluded, within the context of their overall conclusions regarding each investment advisory agreement, that the nature, extent and quality of services proposed supported the approval of the Agreements.
38
Additional Information (con’t)
November 30, 2007 (Unaudited)
Investment performance of the Adviser. Prior to the approval of the Agreements, the Trustees received information regarding the performance of other accounts managed or sub-advised by the Adviser or its personnel over various time periods, including information which compared the Adviser’s performance to that of appropriate performance benchmarks. They also considered the expense caps proposed for the Fund, which by lowering expenses would help performance.
The Trustees also considered the Adviser’s performance and reputation generally and its proposed investment techniques, risk management controls and decision-making processes.
After reviewing these and related factors, the Trustees concluded, within the context of their overall conclusions regarding each Agreement, that the performance of the Adviser supported the approval of the Agreements.
The costs of the services to be provided and profits to be realized by the Adviser from its relationship with the Funds. The Trustees considered the proposed fees to be charged to the Funds for advisory services as well as the total expense levels proposed for the Funds. This information included comparisons (provided by an independent third party) of the Funds’ proposed advisory fees and total expense levels to those of their peer groups and information about the advisory fees charged by the Adviser to its institutional and sub-advised accounts. In considering the fees charged to the Adviser’s institutional accounts, the Trustees considered, among other things, management’s representations about the differences between managing mutual funds as compared to other types of accounts, including the additional resources required to effectively manage mutual fund assets, and the fact that institutional clients generally paid for custodial services separately. In evaluating each Fund’s proposed advisory fees, the Trustees also took into account the demands, complexity and quality of the investment management of such Fund. The Trustees also considered the expense caps proposed by the Adviser and the fact that the Adviser did not expect to earn a profit from managing the Funds during the Funds initial fiscal year.
After reviewing these and related factors, the Trustees concluded, within the context of their overall conclusions regarding each Agreement, that the advisory fees proposed for each of the Funds were fair and reasonable, and that the costs of these services generally and the related profitability of the Adviser in respect of its relationship with the Funds supported the approval of the Agreements.
Economies of Scale. The Trustees considered the existence of any economies of scale in the provision of proposed services by the Adviser and whether those economies would be shared with the Funds through breakpoints in their investment advisory fees or other means, such as expense waivers. The Trustees noted that because the Funds were newly organized, the expected sizes of the Funds in the near term were not expected to generate any economies of scale. The Trustees also noted that the Funds would be subject to expense caps.
After reviewing these and related factors, the Trustees concluded, within the context of their overall conclusions regarding each investment advisory agreement, that the extent to which economies of scale would be shared with the Funds supported the approval of the Agreements.
39
Additional Information (con’t)
November 30, 2007 (Unaudited)
The Trustees also considered other factors, which included but were not limited to the following:
· the compliance programs of the Funds and the Adviser. They also considered the compliance-related resources the Adviser proposed to provide to the Funds, including resources designed to ensure compliance with the investment objectives, policies and restrictions of each Fund.
· potential “fallout benefits” to the Adviser, such as the benefits from offering its clients the ability to invest in a registered investment company.
Based on their evaluation of all factors that they deemed to be material, including those factors described above, the Trustees, including the Independent Trustees, concluded that the investment advisory agreements for each of the Funds should be approved.
40
|
OFFICERS AND TRUSTEES Alan Brott, Trustee Heath B. McLendon, Trustee Patrick Sheehan, Trustee Thomas W. Brock, Chairman Peter J. Wilby, President Pablo Cisilino, Exec. Vice President James E. Craige, Exec. Vice President Thomas K. Flanagan, Exec. Vice President Beth A. Semmel, Exec. Vice President Jeffrey S. Scott, Chief Compliance Officer Adam Shapiro, Secretary/Anti-Money Laundering Officer James J. Dooley, Treasurer Wade Clouse, Assistant Treasurer
INVESTMENT ADVISER Stone Harbor Investment Partners LP 31 W. 52nd Street 16th Floor New York, NY 10019
ADMINISTRATOR & FUND ACCOUNTANT ALPS Fund Services, Inc. 1290 Broadway, Suite 1100 Denver, Colorado 80203
DISTRIBUTOR ALPS Distributors, Inc. 1290 Broadway, Suite 1100 Denver, Colorado 80203
TRANSFER AGENT ALPS Fund Services, Inc. 1290 Broadway, Suite 1100 Denver, Colorado 80203
CUSTODIAN The Bank of New York One Wall Street New York, New York 10286
LEGAL COUNSEL Ropes & Gray LLP 1211 Avenue of the Americas New York, New York 10036
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM Deloitte & Touche LLP 555 17th Street, Suite 3600 Denver, Colorado 80202 | ||
| This report and its financial statements are submitted for the general information of the shareholders of the Funds. The report is not authorized for distribution to prospective investors in the Funds unless preceded or accompanied by a prospectus. | ||
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Item 2. Code of Ethics.
Not applicable to this Report.
Item 3. Audit Committee Financial Expert.
Not applicable to this Report.
Item 4. Principal Accountant Fees and Services.
Not applicable to this Report.
Item 5. Audit Committee of Listed Registrants.
Not applicable to this Report.
Item 6. Schedule of Investments.
Schedule of Investments is included as part of the Semi-Annual Report to Shareholders included under Item 1 of this form.
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies.
Not applicable.
Item 8. Portfolio Managers of Closed-End Management Investment Companies.
Not applicable.
Item 9. Purchases of Equity Securities by Closed-End Management Investment Companies and Affiliated Purchasers.
Not applicable.
Item 10. Submission of Matters to a Vote of Security Holders.
Shareholders who wish to recommend a nominee should send recommendations to the Fund’s Secretary that include all information relating to such person that is required to be disclosed in solicitations of proxies for the election of Trustees. A recommendation must be accompanied by a written consent of the individual to stand for election if nominated by the Board of Trustees and to serve if elected by the shareholders.
Item 11. Controls and Procedures.
(a) The Registrant’s principal executive and principal financial officers, or persons performing similar functions, have concluded that the Registrant’s disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940, as amended (the “1940 Act”) (17 CFR 270.30a-3(c))) are effective, as of a date within 90 days of the filing date of this Report, based on their evaluation of these controls and procedures required by Rule 30a-3(b) under the 1940 Act (17 CFR 270.30a-3(b)) and Rules 13a-15(b) or 15d-15(b) under the Securities Exchange Act of 1934, as amended (17 CFR 240.
13a-15(b) or 240.15d-15(b)).
(b) No changes in the Registrant’s internal control over financial reporting (as defined in Rule 30a-3(d) under the 1940 Act (17 CFR 270.30a-3(d)) occurred during the Registrant’s second fiscal quarter of the period covered by this Report that have materially affected, or are reasonably likely to materially affect, the Registrant’s internal control over financial reporting.
Item 12. Exhibits.
(a)(1) Not applicable to this Report.
(a)(2) The certifications required by Rule 30a-2(a) of the Investment Company Act of 1940, as amended, and Section 302 of the Sarbanes-Oxley Act of 2002 are attached hereto as Ex99.Cert.
(a)(3) Not applicable.
(b) The certifications by the Registrant’s Principal Executive Officer and Principal Financial Officer, as required by Rule 30a-2(b) of the Investment Company Act of 1940, as amended, and Section 906 of the Sarbanes-Oxley Act of 2002 are attached hereto as Ex99.906Cert.
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.
| Stone Harbor Investment Funds | ||
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| By: | /s/ Peter J. Wilby |
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| Peter J. Wilby | |
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| President/Principal Executive | |
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| Date: | February 7, 2008 |
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: | /s/ Peter J. Wilby |
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| Peter J. Wilby | ||
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| President/Principal Executive | ||
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| Date: | February 7, 2008 | ||
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| By: | /s/ James J. Dooley |
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| James J. Dooley | ||
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| Treasurer, Chief Financial Officer/ | ||
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| Date: | February 7, 2008 | ||