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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
Stone Harbor Investment Funds
(Exact name of registrant as specified in charter)
1290 Broadway, Suite 1100
Denver, CO 80203
(Address of principal executive offices) (Zip code)
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)
With copies To:
Michael G. Doherty, Esq.
Ropes & Gray LLP
1211 Avenue of the Americas
New York, NY 10036
Registrant’s telephone number, including area code: (303) 623-2577
Date of fiscal year end: May 31
Date of reporting period: June 1, 2012 - May 31, 2013
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Item 1. Report to Stockholders.
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Stone Harbor Investment Funds Annual Report | May 31, 2013 | 1 |
Table of Contents
Stone Harbor Investment Funds | Shareholder Letter | |
May 31, 2013 (Unaudited) |
Dear Shareholder,
The twelve months ended May 31, 2013 provided attractive returns for fixed income investors. The period was characterized by a progressive decline in volatility as events in the eurozone stabilized and concerns about weaker Gross Domestic Product (“GDP”) growth in the U.S. were partially dispelled. This decline in volatility suffered a reversal in May, which we’ll describe in greater detail below. Fixed income markets have been influenced by the unprecedented degree of liquidity created by quantitative easing pursued by central banks throughout the developed world.
The pace and duration of these quantitative easing programs have preoccupied investors throughout the past twelve months. More recently, investors have tried to anticipate when the U.S. Federal Reserve (“Fed”) would begin to curtail their program of bond purchases. This withdrawal of liquidity will presumably signal that the U.S. economic recovery is accelerating, a positive for credit investors. That withdrawal of liquidity will likely be accompanied by rising interest rates, an obvious negative for fixed income investors. This trade-off between the positive impact of economic growth and the negative impact of rising rates will likely influence fixed income investors for many months into the future.
Market Review
The 12-month period ending May 31, 2013 was a solid year for credit-focused investors. Although the European debt crisis persisted throughout the period, investors benefited from several global events that collectively supported the credit markets. These events include the coordinated response of the European Central Bank (ECB) and the Federal Open Market Committee (FOMC) to the European sovereign/banking debt crisis; a global accommodative monetary policy; an improving U.S. economy with healthy corporate earnings; strong demand for risk assets; and relaxed concerns over economic growth in China. Spreads tightened across all major indexes amid record low yields. The S&P 500 reached new highs ending the period up 27.3%. Market volatility still played a role, however, as European sovereign debt concerns drove investors to the 10-year Treasury, which reached a low yield of 1.29% in July 2012. Concerns over U.S. monetary policy caused the 10-year U.S. Treasury to rebound to an intraday yield of 2.23% in May 2013 before ending the period at 2.13%, 57 basis points higher than its level a year ago.
Overall, a main thematic driver during the period was the ongoing recession in Europe, countered by moderate but steady growth in the U.S. The risk markets began the period impacted by a number of macroeconomic factors including the uncertainties surrounding the future of Greece’s participation in the European Union (EU), the financial viability of the Spanish banking system, and a weak global outlook. Europe faced its longest recession with unemployment reaching record levels, particularly in the peripheral countries, partially due to ECB mandated austerity programs. The ECB reduced its 2013 GDP forecast from 0.1% growth in November 2012 to a 0.5% contraction by the end of 2013.
In the eurozone, Greek elections ultimately showed support for a pro-European government, but Spain was forced to request a bank bailout from the EU. Recognizing the risk of contagion, the EU took action with a plan that would allow for direct bank recapitalization and the utilization of the firewalls (European Financial Stability/European Stability Mechanism) to stabilize markets. Officials also committed to breaking the link between sovereign and bank balance sheets. This commitment was fleeting as Spain required additional funds, Italy and Portugal warned they would not reach their deficit goals, and several European countries were downgraded by rating agencies. As the Spanish and Italian 10-year Treasury rates reached unsustainable levels and sovereign debt fears spread, ECB President Draghi stated that the ECB would do whatever it takes to preserve the Euro and instituted the first of two rates cuts during the year. The ECB announced plans to purchase an unlimited amount of sovereign bonds through Outright Monetary Transactions (OMT), a new program focusing on short maturities, after the affected countries officially requested aid. By implicitly capping short term yields and ensuring market access, this program greatly reduced risk levels in European sovereign debt. The action led to a significant recovery in peripheral bonds and reduced investor concerns. The OMT program, although never used, still proved to be effective in boosting investors’ confidence as they were seemingly unaffected by the subsequent rise of the Cyprus banking crisis and the temporary inability of Italy to form a governing coalition. But as Europe remained in the longest recession since the creation of the Euro, and with first quarter GDP at -1% and record unemployment, the ECB cut interest rates for a second time. At the end of the review period, the ECB also indicated a willingness to relax Euro zone austerity in favor of a more growth oriented policy.
The Federal Reserve was also proactive in its efforts to accelerate growth and implemented several significant monetary stimulus programs throughout the period. It announced the expansion of “Operation Twist” while maintaining that it was “prepared to take further action” as necessary. Within months of this announcement and one week after the ECB enacted its new bond purchase program, the Fed took very aggressive policy actions with an open-ended and unlimited asset purchase program, and vowed to maintain near-zero rates for a considerable time even after the recovery strengthens. This, combined with the ECB program, gave a significant lift to risk assets. In its final action, the Fed increased its purchase program and pledged to hold rates near zero until the economy achieved certain thresholds on unemployment and inflation. Nonetheless, the inability of the U.S. to promote a cohesive fiscal policy caused volatility in risk assets due to the prolonged negotiations regarding the fiscal cliff, the debt ceiling, and the inability to come to an agreement over sequestration.
During the period, the U.S. economy grew at a moderate pace led by the housing sector as housing starts were at their highest level in almost 5 years and home prices continue to trend upward. The unemployment rate declined to 7.5% from 8.2% and corporate profits exceeded revised expectations with profit margins remaining at near record levels. After growing at a 2.2% rate during calendar year 2012, the U.S. economy grew at a slightly faster pace, in spite of fiscal headwinds, in the first quarter of 2013 as GDP rose 2.5% driven by the biggest increase in consumer spending in two years.
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Stone Harbor Investment Funds | Shareholder Letter | |
May 31, 2013 (Unaudited) |
Economic stimulus was not limited to the U.S. and Europe, as Japan followed suit and instituted unprecedented stimulative measures. According to International Strategy and Investment, there were several hundred stimulative policy initiatives announced around the world over the past 20 months causing global short rates to reach a record low.
As a whole, global stimulus programs implemented over the past 12 months have helped to reduce the systemic risk associated with Europe and to gradually improve the U.S. economy. These programs, QE3 in particular, have had an important impact of providing assurance to market participants and encouraging the purchase of riskier assets. However, the investment landscape is shifting with investors now particularly focused on the eventual unwinding of the QE3 program. As alluded to earlier, markets seem now to be in the process of repositioning for the likelihood and timing of the normalization of Fed policy – a process that we believe will likely impact market volatility for several years to come.
At Stone Harbor, we will continue to focus on seeking to capture excess return from stable and improving credit situations in corporate and sovereign markets worldwide. We remain vigilant to the credit risks associated with the systemic banking problems in Europe, as well as the slowdown in global growth. As we continue to monitor these developments, please follow our progress throughout the year by visiting our website at www.shiplp.com. There, you will find updates on our view of credit markets, as well as related news and research. We appreciate the confidence you have placed in Stone Harbor Investment Partners LP and look forward to providing you with another update in the next six months.
Stone Harbor Emerging Markets Debt Fund
The total return of the Stone Harbor Emerging Markets Debt Fund (the “Fund” or “portfolio”) for the twelve months ended May 31, 2013 was 9.05% (net of expenses) and 9.73% (gross of expenses). This performance compares to a benchmark return of 10.07% for the J.P. Morgan EMBI Global Diversified. Market performance was positive with external sovereign bond credit spreads over comparable maturity U.S. Treasury securities tightening by over 130 basis points. Total returns on all country sub indices were also positive during the period. Strong inflows into the asset class, solid fundamentals, and low developed markets (DM) interest rates supported emerging markets (EM) debt performance during the 12-month period ending May 31, 2013.
Despite strong total returns during the period, market volatility spiked and returns turned sharply negative in May 2013, with hard currency EM sovereign debt experiencing its worst monthly performance since September of 2011. The major part of the downturn occurred after the U.S. Federal Reserve chairman commented that the Federal Open Market Committee would consider reductions in the Fed’s bond buying program over the next several meetings of the Committee. Despite recent market moves, our fundamental views have not changed. We continue to expect that China will maintain strong growth over the next year and that many EM country growth rates will improve in the next 12-18 months. In our view, expectations for improved U.S. growth, together with recent EM currency depreciation and prior monetary easing by EM central banks, will support EM growth in the months ahead. But this process will take time. Government deficits in most EM countries remain at healthy levels, particularly compared to the U.S., Japan and many advanced European countries. Over time, we believe markets will again focus on the relative strength of EM fundamentals and to begin to distinguish between the economic and policy performances of various EM countries and regions.
Technical factors continued to support EM debt returns despite volatility in May 2013. Investor demand remained strong. According to J.P. Morgan, new allocations to emerging markets from institutional fixed income investors set a new record in 2012 with inflows exceeding $95 billion. Of this amount, over 75% was allocated to U.S. dollar-denominated sovereign and corporate bonds; the remainder went to local currency investments. Although retail redemptions increased toward the end of the reporting period, inflows in 2013 remained strong at $35 billion as of the end of May, the third largest year-to-date reading since 2006. In addition, many emerging market governments took advantage of demand to fulfill a majority of their financing needs for 2012 and 2013.
Throughout the period, the portfolio was positioned to seek to take advantage of the portfolio management team’s country views and assessments of global risks and relative value. The Fund retained its exposure to corporate debt, with a market value exposure at the end of the reporting period of 13.69%. Exposure to local currency debt varied from a month end low of 1.48% at the end of the period to a month end high of 12.35% in March 2013, net of all hedges. The portfolio management team reduced the local interest rate and currency exposure at the end of the period as global growth expectations declined.
Despite generating a strong total return, the Fund underperformed its benchmark as a result of issue selection in Venezuela and allocations to local interest rates and corporate bonds from select countries. The Fund owned short duration securities in Venezuela that underperformed the Venezuela sub index prior to President Hugo Chavez’s death in March 2013. Markets had speculated that regime change following the passing of the populist leader would result in less radical policies from a new President. Long duration securities in Venezuela have since underperformed. In our view, Venezuela’s new President Nicolas Maduro has proven to be more pragmatic than his predecessor. We continue to believe that Venezuela demonstrates strong ability and willingness to repay its debt. An underweight to the Ivory Coast, whose bonds were in default for most of 2011-2012, also detracted from performance. Given market strength over the period, a cash position detracted from performance but enhanced returns during the May 2013 sell-off. Allocations to corporates in Brazil also detracted from performance. Erratic policymaking and a slowdown of the Brazilian economy weighed on prices of corporate bonds, particularly banks.
Stone Harbor Investment Funds Annual Report | May 31, 2013 | 3 |
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Stone Harbor Investment Funds | Shareholder Letter | |
May 31, 2013 (Unaudited) |
In general, country selection decisions enhanced performance. Our decision to overweight Venezuela debt offset some of the relative losses from issue selection in the country. Similarly, our overweight in Iraq and underweights in Brazil, Lebanon and Chile enhanced relative returns. The decision to underweight Hungary, however, detracted from performance. Allocations to foreign exchange in Mexico and to corporates in Kazakhstan also enhanced performance.
Stone Harbor High Yield Bond Fund
The Stone Harbor High Yield Bond Fund (the “Fund” or “portfolio”) return for the year ended May 31, 2013 was 15.87% (net of expenses) and 16.42% (gross of expenses). This compares to a benchmark return of 14.24% for the Citigroup High Yield Market Capped Index. The high yield market benefited from global monetary easing, and an improving U.S. economy. High yield spreads, as represented by the Citigroup High Yield Market Capped Index, tightened 221 basis points to end the period at 469 basis points, with the average yield declining from 7.67% to 5.65%. The market had 11 months of consistent positive monthly returns until May 2013 when the market was impacted by rising interest rates, and even then outperformed all other fixed income sectors, according to Citigroup High Yield Market Index. The 10-year Treasury reached a low yield of 1.29% and a high of 2.23% before ending the period at 2.13%, 57 basis points higher than its level at the beginning of the period.
All industries had positive returns for the period with Telecommunications and Building Products being the best performing sectors, while Towers and Publishing were the weakest. With the U.S. economy exhibiting moderate growth, CCC rated bonds significantly outperformed both BB and B securities (S&P ratings), according to Citigroup High Yield Market Capped index. The par-weighted default rate decreased from 2.21% to 1.00%, the lowest default rate since June 2011, and well below the long term average of 3.98%, according to J.P. Morgan. The market had more companies upgraded to investment grade (rising stars) than companies downgraded to high yield (fallen angels). However, the number of credit agency downgrades slightly exceeded the number of upgrades for the period. New issuance reached a record with the majority of funds used for refinancing outstanding debt. Mutual funds flows were solidly positive at $11.8 billion, according to Lipper FMI.
The portfolio outperformed its benchmark as a result of issue selection decisions. Issue selection within the Cable & Media, Telecommunications, and Food/Beverage sectors were the main drivers of performance. Industry selection detracted from performance due to an underweight in Home Builders and an overweight in the Chemicals sector, which was partially offset by an overweight to the Telecommunications sector. In terms of ratings, an underweight to BB rated bonds and our issue selection in B rated bonds contributed to performance.
We believe the portfolio is positioned for moderate U.S. economic growth. We remain overweight B rated securities relative to BB rated bonds, as we believe the quality sector should outperform on attractive valuations and lower interest rate sensitivities. The largest portfolio industry overweights currently include the Food/Beverage, Telecommunications, and Cable/Media sectors, while the largest industry underweights include Services-Other, Energy, and Home Builders. We do not believe significant credit excesses are occurring. Additionally, positive event risk could arise through merger and acquisition activity and deleveraging through initial public offerings. Risk factors include a disorderly response to the removal of quantitative easing (QE) in the U.S., a slowdown in global growth, a potential releveraging of corporate balance sheets, and geopolitical problems.
Stone Harbor Local Markets Fund
The total return on Stone Harbor Local Markets Fund (the “Fund” or “portfolio”) for the twelve months ended May 31, 2013 was 7.92% (net of expenses) and 8.78% (gross of expenses). This compares to a total return of 11.58% for the J.P. Morgan GBI-EM Global Diversified. During the period, movements in foreign exchange (“FX”) relative to the U.S. dollar contributed just 0.84% to the index total return. While global growth showed signs of stabilization, growth expectations remained low. In addition, in our view, improved economic performance at the end of 2012 and beginning of 2013 in the U.S. supported the U.S. dollar, limiting gains on currencies from emerging markets. Returns from falling interest rates and carry contributed most to total returns. Inflation surprised on the downside throughout the year, providing an anchor for yields at the short end of most local bond yield curves. Exceptionally easy monetary policies of major developed countries also contributed to these gains, in our view. Additionally, strong investor flows into the asset class due to still wide yield differentials relative to domestic debt from advanced economies further supported local rates, particularly in long duration instruments.
Despite strong total returns during the period, market volatility spiked and returns turned sharply negative in May 2013, with local currency debt posting its fourth worst monthly performance since 2008. The major part of the downturn occurred after the U.S. Federal Reserve chairman commented that the Federal Open Market Committee would consider reductions in the Fed’s bond buying program over the next several meetings of the Committee. U.S. Treasury yields moved higher in response and U.S. dollar strength led to a depreciation of EMFX by over 4% for the month, while rising local bond yields also contributed to the decline.
Throughout the reporting period, the portfolio favored faster growing economies in Latin America and Asia, with overweight allocations in Brazil, Colombia, Malaysia, and Mexico. The portfolio’s underweight positions have been concentrated in Central and Eastern Europe, where a mix of more limited growth prospects and short-term policymaking have reduced the attractiveness of local debt markets, in our view. Lower expectations for oil prices have led us to reduce exposure in Russia, a major oil producer, and to increase positions in Thailand and Turkey, both of which are oil importers. We remain underweight duration in most countries, though the recent moderation in food and energy prices has reduced inflation
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Stone Harbor Investment Funds | Shareholder Letter | |
May 31, 2013 (Unaudited) |
pressure in most EMs and has been an important input in our decision to increase the duration contribution in several countries. Many EM local debt markets, in our view, continue to price in little or no inflation risk premium, particularly at the long end of their yield curves.
The Fund underperformed its benchmark as a result of country selection and issue selection decisions. Nevertheless, the Fund’s overweights in Mexico and an underweight in Indonesia enhanced performance as did issue selection in South Africa and Colombia. The country decision that most detracted from performance was an underweight in Hungary, as the Forint performed well along with the Euro. Overweights in Brazil and South Africa also detracted from performance. Decisions to allocate to long duration bonds in Brazil, and to short duration bonds in Poland, Russia and Turkey detracted from excess returns. Brazil’s central bank lost the confidence of global investors, in our view, as it pursued a policy of weakening the Real and favoring growth oriented measures rather than its traditional role of fighting inflation. Real interest rates in Brazil, however, remained attractive, in our view, and the Brazilian Central Bank has shifted to tighter monetary policy.
Stone Harbor Emerging Markets Corporate Debt Fund
The total return of the Stone Harbor Emerging Markets Corporate Debt Fund (the “Fund” or “portfolio”) for the twelve months ending May 31, 2013 was 10.13% (net of expenses) and 11.13% (gross of expenses). This performance compares to a benchmark return of 9.92% for the J.P. Morgan Corporate Emerging Markets Bond Index Broad Diversified (CEMBI Broad Diversified). Market performance was positive with corporate bond credit spreads over comparable maturity U.S. Treasury securities tightening by over 138 basis points. Total returns on all country sub indices were also positive during the period. Strong inflows into the asset class, solid fundamentals, and low developed markets (DM) interest rates supported emerging markets (EM) debt performance during the 12-month period ending May 31, 2013.
Despite strong total returns during the period, market volatility spiked and returns turned sharply negative in May 2013, with corporate debt experiencing its worst monthly performance since September of 2011. The major part of the downturn occurred after the U.S. Federal Reserve chairman commented that the Federal Open Market Committee would consider reductions in the Fed’s bond buying program over the next several meetings of the Committee. Despite recent market moves, our fundamental views have not changed. Corporate default rates remain low. The dedicated EM corporate investor base continues to expand, demonstrated by an increase in assets benchmarked to market tracking indices. Using J.P. Morgan’s Corporate Emerging Market Bond Indices as a guide, dedicated assets have increased to $61 billion1, a 29% increase over prior year levels as of the end of May 2013.
The asset class benefited from record issuance, which has increased the stock of EM corporate debt to over $1.3 trillion2. Issuance in 2013 as of the end of May has amounted to $207 billion, a record level when compared to prior year’s issuances during the same time period. Most of the issuance in 2013 has been in investment grade rated issues. Non-investment grade issuance has been more limited and the relative scarcity of supply has provided a source of support for the high yield sector of EM corporates, in our view. Indeed, the non-investment grade sector of the CEMBI Broad Diversified outperformed the investment grade sector by nearly 800 basis points during the reporting period.
Returns for all 43 countries in the CEMBI Broad Diversified were positive over the period. China, India and Russia were the largest contributors to index performance. Regionally, Asia contributed most to total index returns, followed by Latin America. African credits contributed least to overall returns of the market given their smaller market capitalizations. On an industry basis, banks, metals/mining and steel concerns, and electricity providers were the top contributors to returns. From a ratings perspective, the BBB sector, the largest rating category in market capitalization terms, contributed most to returns, though the best performance came from the single B rated sub sector.
During the period, the Fund outperformed its benchmark primarily due to issue selection decisions. On a country basis, decisions that added the most to excess returns included allocations to Kazakhstan and the United Arab Emirates (UAE). In Kazakhstan, a debt restructuring of a large bank was the driver of outperformance. The issue selection decision that detracted most from relative returns was an investment in a Brazilian lender that was eventually liquidated by the government. Issue selection in Indonesia and Turkey also detracted from returns. On an industry basis, allocations to wireless communication providers, real estate management and development concerns and oil and gas exploration and production companies contributed most to excess returns while allocations to banks, electric utilities and construction machinery companies detracted most from relative performance.
Sincerely,
Thomas K. Flanagan
Chairman of the Board of Trustees
1 | AUM benchmarked to the JP Morgan CEMBI suite of indices. Includes CEMBI, CEMBI Broad, CEMBI Diversified, and CEMBI Narrow indices. |
2 | JP Morgan. As of June 20th, 2013 |
Stone Harbor Investment Funds Annual Report | May 31, 2013 | 5 |
Table of Contents
Stone Harbor Investment Funds | Shareholder Letter | |
May 31, 2013 (Unaudited) |
The Citigroup High Yield Market Index (previously the Salomon Smith Barney High Yield Market Index) is a total rate-of-return index which captures the performance of below investment-grade debt issued by corporations domiciled in the United States or Canada. This index comprises Citigroup’s broadest market measure and includes cash-pay and deferred-interest securities. All the bonds in the high-yield indices are publicly placed, have a fixed coupon and are nonconvertible.
The JP Morgan Emerging Markets Bond Index (EMBI) Global Diversified tracks total returns for U.S. dollar-denominated debt instruments issued by emerging markets sovereign and quasi-sovereign entities: Brady bonds, loans, and Eurobonds. Source: JP Morgan Chase.
The JP Morgan Government Bond Index – Emerging Markets (GBI-EM) Global Diversified consists of regularly traded, liquid fixed-rate, domestic currency government bonds to which international investors can gain exposure. The weightings among the countries are more evenly distributed within this index. Although not expected to be a principal investment tool, the Portfolio may make use of derivative securities (including futures and options on securities, securities indices or currencies, options on futures, forward currency contracts, and interest rate, currency or credit default) for the purposes of reducing risk and/or obtaining efficient investment exposure. Source: JP Morgan Chase.
Emerging markets corporate debt is represented by JP Morgan Corporate Emerging Markets Bond Index (CEMBI) Broad Diversified. The CEMBI tracks total returns of US dollar-denominated debt instruments issued by corporate entities in Emerging Markets countries. Two variations are available: CEMBI Broad and CEMBI. The CEMBI Broad is the most comprehensive corporate benchmark followed by the CEMBI, which consists of an Investable universe of corporate bonds. Both indices are also available in Diversified version. The JPMorgan CEMBI Broad Diversified limits the current face amount allocations of the bonds. Both indices are also available in outstanding countries with larger debt stocks. Qualifying corporate bonds have a face amount greater than USD 300 million, maturity greater than 5 years, verifiable prices and cash flows, and from countries within Asia ex-Japan, Latin America, Eastern Europe, Middle East, and Africa.
It is not possible to invest directly in an index.
Standard and Poor’s ratings are measured on a scale that generally ranges from AAA (highest) to D (lowest). A security that has not been given a credit rating by Standard and Poor’s is listed as “not rated”.
Basis Point – a unit equal to one hundredth of a percentage point.
The Fiscal Cliff – the sharp decline in the budget deficit that could have occurred beginning in 2013 due to increased taxes and reduced spending as required by previously enacted laws.
Operation Twist – a policy, originally from the 1960’s but revived in September 2011 and implemented by the Federal Reserve. The policy involves the selling of short-term Treasuries by the central bank in exchange for the same amount in longer-term bonds, thereby lowering longer-term interest rates.
Sovereign Debt – Refers to bonds issued by a national government in order to finance the issuing country’s growth. Sovereign debt described as external is denominated in US dollar, while sovereign debt described as local is issued in a foreign currency.
Investment Grade – Refers to bonds that are considered to have a relatively low risk of default, ranging from highest credit quality to good credit quality. Bonds rated below investment grade are considered to have significant speculative characteristics.
The S&P 500 – is a stock market index based on the market capitalizations of 500 leading companies publicly traded in the U.S. stock market, as determined by Standard & Poor’s. It differs from other U.S. stock market indices such as the Dow Jones Industrial Average and the Nasdaq due to its diverse constituency and weighting methodology.
Quantitative Easing (QE) – is an unconventional monetary policy used by central banks to stimulate the national economy when standard monetary policy has become ineffective. A central bank implements quantitative easing by buying financial assets from commercial banks and other private institutions, thus increasing the monetary base. This is distinguished from the more usual policy of buying or selling government bonds in order to keep market interest rates at a specified target value.
Contagion – the likelihood that significant economic changes in one country will spread to other countries. Contagion can refer to the spread of either economic booms or economic crises throughout a geographic region.
QE3 – the Federal Reserve announced in 2012 that it would begin a new open-ended program of unlimited purchases $85 billion in new assets, including $40 billion of mortgage-backed securities – nicknamed QE3 or quantitative easing three. The first round of QE came during the financial crisis in 2008 and 2009. The second round (QE2) came in November 2010.
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Stone Harbor Investment Funds | Disclosure of Fund Expenses | |
May 31, 2013 (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 December 1, 2012 and held until May 31, 2013.
Actual Expenses. The first line of each 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 each 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 transactional costs, 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 transactional costs were included, your costs would have been higher.
Beginning Account Value December 1, 2012 | Ending Account Value May 31, 2013 | Expense Ratio(1) | Expenses Paid During Period(2) | |||||||||||
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STONE HARBOR EMERGING MARKETS DEBT FUND |
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Institutional Class | ||||||||||||||
Actual | $ | 1,000.00 | $ | 976.60 | 0.68% | $ | 3.35 | |||||||
Hypothetical (5% return before expenses) | $ | 1,000.00 | $ | 1,021.54 | 0.68% | $ | 3.43 | |||||||
STONE HARBOR HIGH YIELD BOND FUND | ||||||||||||||
Institutional Class | ||||||||||||||
Actual | $ | 1,000.00 | $ | 1,063.50 | 0.55% | $ | 2.83 | |||||||
Hypothetical (5% return before expenses) | $ | 1,000.00 | $ | 1,022.19 | 0.55% | $ | 2.77 | |||||||
STONE HARBOR LOCAL MARKETS FUND | ||||||||||||||
Institutional Class | ||||||||||||||
Actual | $ | 1,000.00 | $ | 976.50 | 0.87% | $ | 4.29 | |||||||
Hypothetical (5% return before expenses) | $ | 1,000.00 | $ | 1,020.59 | 0.87% | $ | 4.38 | |||||||
STONE HARBOR EMERGING MARKETS CORPORATE DEBT FUND |
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Institutional Class | ||||||||||||||
Actual | $ | 1,000.00 | $ | 1,009.90 | 1.00% | $ | 5.01 | |||||||
Hypothetical (5% return before expenses) | $ | 1,000.00 | $ | 1,019.95 | 1.00% | $ | 5.04 |
(1) | Annualized, based on the Fund’s most recent fiscal half-year expenses. |
(2) | Expenses are equal to the Fund’s annualized ratio multiplied by the average account value over the period, multiplied by the number of days in the most recent fiscal half year (182), divided by 365. Note this expense example is typically based on a six-month period. |
Stone Harbor Investment Funds Annual Report | May 31, 2013 | 7 |
Table of Contents
Stone Harbor Investment Funds | Summaries of Portfolio Holdings | |
May 31, 2013 (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.
STONE HARBOR EMERGING MARKETS DEBT FUND |
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Country Breakdown | % of TNA | |||
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Venezuela | 9.94% | |||
Russia | 8.69% | |||
Brazil | 8.48% | |||
Turkey | 7.72% | |||
Indonesia | 6.66% | |||
Mexico | 5.79% | |||
Colombia | 5.21% | |||
Poland | 3.35% | |||
Kazakhstan | 3.33% | |||
Ukraine | 3.26% | |||
Panama | 3.05% | |||
China | 2.78% | |||
Peru | 2.48% | |||
Hungary | 2.44% | |||
Chile | 2.33% | |||
Lithuania | 2.19% | |||
Philippines | 1.89% | |||
Malaysia | 1.78% | |||
South Africa | 1.75% | |||
Qatar | 1.34% | |||
Croatia | 1.21% | |||
Iraq | 1.19% | |||
Dominican Republic | 1.15% | |||
Uruguay | 0.91% | |||
India | 0.72% | |||
El Salvador | 0.56% | |||
Slovakia | 0.52% | |||
United Arab Emirates | 0.46% | |||
Costa Rica | 0.34% | |||
Romania | 0.33% | |||
Morocco | 0.30% | |||
Guatemala | 0.27% | |||
Azerbaijan | 0.25% | |||
Jamaica | 0.22% | |||
Thailand | 0.21% | |||
Ivory Coast | 0.19% | |||
Argentina | 0.18% | |||
Singapore | 0.14% | |||
South Korea | 0.13% | |||
Hong Kong | 0.10% | |||
Nigeria | 0.06% | |||
Macao | 0.05% | |||
Gabon | 0.00% | * | ||
| ||||
Total | 93.95% | |||
| ||||
Short Term Investments | 3.36% | |||
| ||||
Other Assets in Excess of Liabilities | 2.69% | |||
| ||||
Total Net Assets | 100.00% | |||
|
STONE HARBOR HIGH YIELD BOND FUND |
| |||
Industry Breakdown | % of TNA | |||
| ||||
Exploration & Production | 8.87% | |||
Food/Beverage/Tobacco | 6.68% | |||
Healthcare | 7.39% | |||
Technology | 6.05% | |||
Wirelines | 5.50% | |||
Media Cable | 5.34% | |||
Wireless | 4.58% | |||
Drillers/Services | 4.53% | |||
Electric | 4.21% | |||
Media Other | 3.83% | |||
Gaming | 3.82% | |||
Paper/Forest Products | 3.20% | |||
Containers/Packaging | 3.12% | |||
Metals/Mining/Steel | 3.00% | |||
Retail Non Food/Drug | 2.82% | |||
Consumer Products | 2.54% | |||
Chemicals | 2.38% | |||
Services Other | 2.61% | |||
Financial/Lease | 2.01% | |||
Building Products | 1.87% | |||
Textile/Apparel | 1.45% | |||
Industrial Other | 1.45% | |||
Aerospace/Defense | 1.39% | |||
Automotive | 1.23% | |||
Non Captive Finance | 1.13% | |||
Gas Pipelines | 0.98% | |||
Banking | 0.83% | |||
Lodging | 0.83% | |||
Restaurants | 0.58% | |||
Home Builders | 0.56% | |||
Satellite | 0.55% | |||
Environmental Services | 0.45% | |||
Retail Food/Drug | 0.39% | |||
Publishing/Printing | 0.37% | |||
Leisure | 0.36% | |||
Home Furnishings | 0.34% | |||
Financial Other | 0.29% | |||
Capital Goods | 0.22% | |||
Railroads | 0.06% | |||
Airlines | 0.03% | |||
Publishing | 0.03% | |||
Transport Other | 0.00% | |||
| ||||
Total | 97.87% | |||
| ||||
Money Market Fund | 0.52% | |||
| ||||
Other Assets in Excess of Liabilities | 1.61% | |||
| ||||
Total Net Assets | 100.00% | |||
|
*Amount represents less than 0.005% of net assets.
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Table of Contents
Stone Harbor Investment Funds | Summaries of Portfolio Holdings | |
May 31, 2013 (Unaudited) |
STONE HARBOR LOCAL MARKETS FUND |
| |||
Country Breakdown | % of TNA | |||
| ||||
Mexico | 11.88% | |||
Brazil | 10.99% | |||
Russia | 9.45% | |||
South Africa | 9.29% | |||
Indonesia | 8.97% | |||
Thailand | 4.84% | |||
Malaysia | 4.84% | |||
Poland | 4.75% | |||
Turkey | 4.60% | |||
Colombia | 4.43% | |||
Hungary | 3.25% | |||
Nigeria | 0.36% | |||
Romania | 0.18% | |||
Chile | 0.14% | |||
| ||||
Total | 77.97% | |||
| ||||
Short Term Investments | 5.78% | |||
| ||||
Other Assets in Excess of Liabilities | 16.25% | |||
| ||||
Total Net Assets | 100.00% | |||
|
STONE HARBOR EMERGING MARKETS CORPORATE DEBT FUND | ||||
Country Breakdown | % of TNA | |||
| ||||
Brazil | 14.38% | |||
Russia | 12.91% | |||
Peru | 6.67% | |||
United Arab Emirates | 5.95% | |||
China | 5.16% | |||
Mexico | 5.09% | |||
Hong Kong | 4.76% | |||
Colombia | 4.10% | |||
Qatar | 3.97% | |||
Turkey | 3.89% | |||
Indonesia | 3.56% | |||
South Korea | 3.40% | |||
Thailand | 3.36% | |||
Chile | 3.34% | |||
India | 3.30% | |||
Venezuela | 3.18% | |||
Ukraine | 2.38% | |||
Singapore | 2.14% | |||
Jamaica | 1.75% | |||
South Africa | 1.37% | |||
Kazakhstan | 1.11% | |||
Argentina | 0.98% | |||
Macao | 0.91% | |||
Nigeria | 0.34% | |||
| ||||
Total | 98.00% | |||
| ||||
Short Term Investments | 1.83% | |||
| ||||
Other Assets in Excess of Liabilities | 0.17% | |||
| ||||
Total Net Assets | 100.00% | |||
|
Stone Harbor Investment Funds Annual Report | May 31, 2013 | 9 |
Table of Contents
Stone Harbor Investment Funds | Growth of $10,000 Investment | |
May 31, 2013 (Unaudited) |
STONE HARBOR EMERGING MARKETS DEBT FUND
Comparison of Change in Value of $10,000 Investment in Stone Harbor Emerging Markets Debt Fund and the JP Morgan Emerging Market Bond Index Global Diversified (JP Morgan EMBI Global Diversified).
The JP Morgan EMBI Global Diversified limits the weights of those index countries with larger debt stocks by only including specified portions of these countries’ eligible current face amounts outstanding. The countries covered in the EMBI Global Diversified are identical to those covered by the EMBI Global.
Average Annual Total Returns (Inception, August 16, 2007)
6 Months | 1 Year | 3 Years | 5 Years | Since Inception | ||||||||
Stone Harbor Emerging Markets Debt Fund | -2.34% | 9.05% | 9.89% | 9.36% | 9.91% | |||||||
JP Morgan EMBI Global Diversified | -2.31% | 10.07% | 9.85% | 9.04% | 9.42% |
The performance data quoted represents past performance and does not guarantee future results. Current performance may be lower or higher than the performance quoted. Average annual total returns reflect the reinvestment of dividends and capital gains distributions and include all fee waivers and expense reimbursements. Without the fee waivers and expense reimbursements, total return figures would have been lower. The performance data quoted does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. Investment return and principal value will vary, and shares, when redeemed, may be worth more or less than their original cost. Index returns do not include the effects of sales charges, management fees or transaction costs. It is not possible to invest directly in an index.
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Table of Contents
Stone Harbor Investment Funds | Growth of $10,000 Investment | |
May 31, 2013 (Unaudited) |
STONE HARBOR HIGH YIELD BOND FUND
Comparison of Change in Value of $10,000 Investment in Stone Harbor High Yield Bond Fund and the Citigroup High Yield Market Capped Index.
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 (corporate or municipal bonds that were investment-grade when issued but have since been downgraded) and capping the par value of individual issuers at US $5 billion par amount outstanding.
Average Annual Total Returns (Inception, August 16, 2007)
6 Months | 1 Year | 3 Years | 5 Years | Since Inception | ||||||||||||
Stone Harbor High Yield Bond Fund | 6.35% | 15.87% | 11.37% | 8.96% | 8.61% | |||||||||||
Citigroup High Yield Market Capped Index | 5.90% | 14.24% | 11.95% | 10.12% | 9.54% |
The performance data quoted represents past performance and does not guarantee future results. Current performance may be lower or higher than the performance quoted. Average annual total returns reflect the reinvestment of dividends and capital gains distributions and include all fee waivers and expense reimbursements. Without the fee waivers and expense reimbursements, total return figures would have been lower. The performance data quoted does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. Investment return and principal value will vary, and shares, when redeemed, may be worth more or less than their original cost. Index returns do not include the effects of sales charges, management fees or transaction costs. It is not possible to invest directly in an index.
Stone Harbor Investment Funds Annual Report | May 31, 2013 | 11 |
Table of Contents
Stone Harbor Investment Funds | Growth of $10,000 Investment | |
May 31, 2013 (Unaudited) |
STONE HARBOR LOCAL MARKETS FUND
Comparison of Change in Value of $10,000 Investment in Stone Harbor Local Markets Fund and the JP Morgan Global Bond Index – Emerging Markets Global Diversified (JP Morgan GBI-EM Global Diversified).
The JP Morgan GBI-EM Global Diversified consists of regularly traded, liquid fixed-rate, domestic currency government bonds to which international investors can gain exposure. The weightings among the countries are more evenly distributed within this index.
Average Annual Total Returns (Inception, June 30, 2010)
6 Months | 1 Year | Since Inception | ||||||
Stone Harbor Local Markets Fund | -2.35% | 7.92% | 6.05% | |||||
JP Morgan GBI-EM Global Diversified | -1.06% | 11.58% | 7.75% |
The performance data quoted represents past performance and does not guarantee future results. Current performance may be lower or higher than the performance quoted. Average annual total returns reflect the reinvestment of dividends and capital gains distributions and include all fee waivers and expense reimbursements. Without the fee waivers and expense reimbursements, total return figures would have been lower. The performance data quoted does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. Investment return and principal value will vary, and shares, when redeemed, may be worth more or less than their original cost. Index returns do not include the effects of sales charges, management fees or transaction costs. It is not possible to invest directly in an index.
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Table of Contents
Stone Harbor Investment Funds | Growth of $10,000 Investment | |
May 31, 2013 (Unaudited) |
STONE HARBOR EMERGING MARKETS CORPORATE DEBT FUND
Comparison of Change in Value of $10,000 Investment in Stone Harbor Emerging Market Corporate Debt Fund and the JP Morgan Corporate Emerging Market Bond Index – Broad Diversified (JP Morgan CEMBI Broad Diversified).
The JP Morgan CEMBI Broad is a market capitalization weighted index that tracks total returns of US dollar-denominated debt instruments issued by corporate entities in Emerging Markets countries. The CEMBI Broad Diversified limits the current face amount allocations of the bonds in the CEMBI Broad by constraining the total face amount outstanding for countries with larger debt stocks.
Average Annual Total Returns (Inception, June 1, 2011)
6 Months | 1 Year | Since Inception | ||||||
Stone Harbor Emerging Markets Corporate Debt Fund | 0.99% | 10.13% | 2.23% | |||||
JP Morgan CEMBI Broad Diversified | 1.13% | 9.92% | 6.60% |
The performance data quoted represents past performance and does not guarantee future results. Current performance may be lower or higher than the performance quoted. Average annual total returns reflect the reinvestment of dividends and capital gains distributions and include all fee waivers and expense reimbursements. Without the fee waivers and expense reimbursements, total return figures would have been lower. The performance data quoted does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. Investment return and principal value will vary, and shares, when redeemed, may be worth more or less than their original cost. Index returns do not include the effects of sales charges, management fees or transaction costs. It is not possible to invest directly in an index.
Stone Harbor Investment Funds Annual Report | May 31, 2013 | 13 |
Table of Contents
Stone Harbor Investment Funds | Registered Public Accounting Firm | |
To the Shareholders and Board of Trustees of Stone Harbor Investment Funds:
We have audited the accompanying statements of assets and liabilities of Stone Harbor Investment Funds (the “Funds”), comprising the Stone Harbor Emerging Markets Debt Fund, Stone Harbor High Yield Bond Fund, Stone Harbor Local Markets Fund, and Stone Harbor Emerging Markets Corporate Debt Fund, including the statements of investments, as of May 31, 2013, and the related statements of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the periods presented. These financial statements and financial highlights are the responsibility of the Funds’ management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. The Funds are not required to have, nor were we engaged to perform, an audit of their internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Funds’ internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of May 31, 2013, by correspondence with the custodian and brokers; where replies were not received from brokers, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of each of the funds constituting the Stone Harbor Investment Funds as of May 31, 2013, the results of their operations for the year then ended, the changes in their net assets for each of the two years in the period then ended, and the financial highlights for each of the periods presented, in conformity with accounting principles generally accepted in the United States of America.
DELOITTE & TOUCHE LLP
Denver, Colorado
July 30, 2013
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Table of Contents
Statements of Investments | ||
May 31, 2013 |
Currency | Rate | Maturity Date | Principal Amount* | Market Value (Expressed in U.S. $) | ||||||||||||||
SOVEREIGN DEBT OBLIGATIONS - 62.56% | ||||||||||||||||||
Argentina - 0.03% | ||||||||||||||||||
Republic of Argentina: | ||||||||||||||||||
USD | 0.000 | % | 03/31/2023 | 184,000 | $ | 142,600 | (1) | |||||||||||
USD | 6.000 | % | 03/31/2023 | 480,000 | 391,200 | (1) | ||||||||||||
|
| |||||||||||||||||
533,800 | ||||||||||||||||||
|
| |||||||||||||||||
Brazil - 4.91% | ||||||||||||||||||
Nota Do Tesouro Nacional | BRL | 10.000 | % | 01/01/2023 | 14,534,000 | 6,687,506 | ||||||||||||
Republic of Brazil: | ||||||||||||||||||
USD | 8.000 | % | 01/15/2018 | 3,560,000 | 4,098,450 | |||||||||||||
USD | 4.875 | % | 01/22/2021 | 3,410,000 | 3,819,200 | |||||||||||||
USD | 2.625 | % | 01/05/2023 | 13,475,000 | 12,491,325 | |||||||||||||
USD | 8.750 | % | 02/04/2025 | 1,680,000 | 2,486,400 | |||||||||||||
USD | 10.125 | % | 05/15/2027 | 3,402,000 | 5,647,320 | |||||||||||||
USD | 8.250 | % | 01/20/2034 | 16,529,000 | 24,091,018 | |||||||||||||
USD | 7.125 | % | 01/20/2037 | 23,497,000 | 30,810,441 | |||||||||||||
|
| |||||||||||||||||
90,131,660 | ||||||||||||||||||
|
| |||||||||||||||||
Chile - 0.14% | ||||||||||||||||||
Republic of Chile | USD | 3.250 | % | 09/14/2021 | 2,550,000 | 2,626,500 | ||||||||||||
|
| |||||||||||||||||
Colombia - 3.80% | ||||||||||||||||||
Bogota Distrio Capital | COP | 9.750 | % | 07/26/2028 | 7,800,000,000 | 5,935,165 | (2) | |||||||||||
Republic of Colombia: | ||||||||||||||||||
COP | 12.000 | % | 10/22/2015 | 4,798,000,000 | 2,939,680 | |||||||||||||
USD | 7.375 | % | 01/27/2017 | 1,838,000 | 2,187,220 | |||||||||||||
USD | 7.375 | % | 03/18/2019 | 2,808,000 | 3,506,490 | |||||||||||||
USD | 11.750 | % | 02/25/2020 | 3,851,000 | 5,834,265 | |||||||||||||
USD | 2.625 | % | 03/15/2023 | 5,373,000 | 4,996,890 | |||||||||||||
USD | 8.125 | % | 05/21/2024 | 25,000 | 34,625 | |||||||||||||
COP | 9.850 | % | 06/28/2027 | 2,240,000,000 | 1,658,169 | |||||||||||||
USD | 10.375 | % | 01/28/2033 | 2,006,000 | 3,299,870 | |||||||||||||
USD | 7.375 | % | 09/18/2037 | 26,572,000 | 36,270,780 | |||||||||||||
USD | 6.125 | % | 01/18/2041 | 2,577,000 | 3,079,515 | |||||||||||||
|
| |||||||||||||||||
69,742,669 | ||||||||||||||||||
|
| |||||||||||||||||
Costa Rica - 0.34% | ||||||||||||||||||
Republic of Costa Rica: | ||||||||||||||||||
USD | 4.375 | % | 04/30/2025 | 5,790,000 | 5,645,250 | (3) | ||||||||||||
USD | 5.625 | % | 04/30/2043 | 681,000 | 667,380 | (3) | ||||||||||||
|
| |||||||||||||||||
6,312,630 | ||||||||||||||||||
|
| |||||||||||||||||
Croatia - 1.21% | ||||||||||||||||||
Croatian Government: | ||||||||||||||||||
USD | 6.250 | % | 04/27/2017 | 1,704,000 | 1,844,580 | (3) | ||||||||||||
USD | 6.750 | % | 11/05/2019 | 5,250,000 | 5,834,325 | (2) | ||||||||||||
USD | 6.625 | % | 07/14/2020 | 2,881,000 | 3,187,106 | (2) | ||||||||||||
USD | 6.375 | % | 03/24/2021 | 388,000 | 423,405 | (2) | ||||||||||||
USD | 6.375 | % | 03/24/2021 | 7,428,000 | 8,105,805 | (3) | ||||||||||||
USD | 5.500 | % | 04/04/2023 | 2,779,000 | 2,841,528 | (3) | ||||||||||||
|
| |||||||||||||||||
22,236,749 | ||||||||||||||||||
|
|
Stone Harbor Investment Funds Annual Report | May 31, 2013 | 15 |
Table of Contents
Stone Harbor Emerging Markets Debt Fund | Statements of Investments | |
May 31, 2013 |
Currency | Rate | Maturity Date | Principal Amount* | Market Value (Expressed in U.S. $) | ||||||||||||||
Dominican Republic - 1.15% | ||||||||||||||||||
Dominican Republic International Bond: | ||||||||||||||||||
USD | 9.040 | % | 01/23/2018 | 3,334,672 | $ | 3,718,160 | (2) | |||||||||||
USD | 7.500 | % | 05/06/2021 | 15,269,000 | 17,330,315 | (2) | ||||||||||||
|
| |||||||||||||||||
21,048,475 | ||||||||||||||||||
|
| |||||||||||||||||
El Salvador - 0.56% | ||||||||||||||||||
Republic of El Salvador: | ||||||||||||||||||
USD | 7.375 | % | 12/01/2019 | 220,000 | 253,000 | (3) | ||||||||||||
USD | 7.375 | % | 12/01/2019 | 2,068,000 | 2,378,200 | (2) | ||||||||||||
USD | 7.750 | % | 01/24/2023 | 1,014,000 | 1,196,520 | (2) | ||||||||||||
USD | 8.250 | % | 04/10/2032 | 1,000,000 | 1,150,000 | (2) | ||||||||||||
USD | 7.650 | % | 06/15/2035 | 4,931,000 | 5,276,170 | (2) | ||||||||||||
|
| |||||||||||||||||
10,253,890 | ||||||||||||||||||
|
| |||||||||||||||||
Gabon - 0.00%(4) | ||||||||||||||||||
Republic of Gabon | USD | 8.200 | % | 12/12/2017 | 50,000 | 59,125 | (3) | |||||||||||
|
| |||||||||||||||||
Guatemala - 0.27% | ||||||||||||||||||
Republic of Guatemala: | ||||||||||||||||||
USD | 5.750 | % | 06/06/2022 | 2,743,000 | 2,989,870 | (2) | ||||||||||||
USD | 4.875 | % | 02/13/2028 | 2,102,000 | 2,059,960 | (3) | ||||||||||||
|
| |||||||||||||||||
5,049,830 | ||||||||||||||||||
|
| |||||||||||||||||
Hungary - 2.44% | ||||||||||||||||||
Republic of Hungary: | ||||||||||||||||||
EUR | 4.500 | % | 01/29/2014 | 2,326,000 | 3,079,899 | |||||||||||||
GBP | 5.500 | % | 05/06/2014 | 194,000 | 300,873 | |||||||||||||
USD | 4.750 | % | 02/03/2015 | 2,585,000 | 2,662,550 | |||||||||||||
GBP | 5.000 | % | 03/30/2016 | 668,000 | 1,037,255 | |||||||||||||
EUR | 3.500 | % | 07/18/2016 | 7,569,000 | 9,831,643 | |||||||||||||
EUR | 4.375 | % | 07/04/2017 | 2,798,000 | 3,688,972 | |||||||||||||
USD | 4.125 | % | 02/19/2018 | 2,444,000 | 2,431,780 | |||||||||||||
USD | 6.250 | % | 01/29/2020 | 2,444,000 | 2,648,685 | |||||||||||||
USD | 6.375 | % | 03/29/2021 | 13,042,000 | 14,166,872 | |||||||||||||
USD | 5.375 | % | 02/21/2023 | 4,980,000 | 4,961,325 | |||||||||||||
|
| |||||||||||||||||
44,809,854 | ||||||||||||||||||
|
| |||||||||||||||||
Indonesia - 6.09% | ||||||||||||||||||
Republic of Indonesia: | ||||||||||||||||||
USD | 6.875 | % | 01/17/2018 | 6,424,000 | 7,588,350 | (2) | ||||||||||||
USD | 11.625 | % | 03/04/2019 | 2,170,000 | 3,124,800 | (3) | ||||||||||||
USD | 11.625 | % | 03/04/2019 | 13,359,000 | 19,236,960 | (2) | ||||||||||||
USD | 5.875 | % | 03/13/2020 | 2,977,000 | 3,412,386 | (2) | ||||||||||||
USD | 4.875 | % | 05/05/2021 | 7,209,000 | 7,794,731 | (2) | ||||||||||||
USD | 3.750 | % | 04/25/2022 | 3,093,000 | 3,065,936 | (2) | ||||||||||||
USD | 3.375 | % | 04/15/2023 | 18,458,000 | 17,488,955 | (3) | ||||||||||||
USD | 8.500 | % | 10/12/2035 | 16,802,000 | 24,047,863 | (2) | ||||||||||||
USD | 6.625 | % | 02/17/2037 | 2,597,000 | 3,080,691 | (3) | ||||||||||||
USD | 6.625 | % | 02/17/2037 | 6,286,000 | 7,456,768 | (2) | ||||||||||||
USD | 7.750 | % | 01/17/2038 | 11,668,000 | 15,635,120 | (2) | ||||||||||||
|
| |||||||||||||||||
111,932,560 | ||||||||||||||||||
|
| |||||||||||||||||
Iraq - 0.67% | ||||||||||||||||||
Republic of Iraq | USD | 5.800 | % | 01/15/2028 | 13,894,000 | 12,296,190 | (2) | |||||||||||
|
|
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Table of Contents
Stone Harbor Emerging Markets Debt Fund | Statements of Investments | |
May 31, 2013 |
Currency | Rate | Maturity Date | Principal | Market Value | ||||||||||||||
Ivory Coast - 0.19% | ||||||||||||||||||
Ivory Coast Government International Bond | USD | 5.750 | % | 12/31/2032 | 3,823,000 | $ | 3,574,505 | (2)(5) | ||||||||||
|
| |||||||||||||||||
Lithuania - 2.19% | ||||||||||||||||||
Republic of Lithuania: | ||||||||||||||||||
USD | 7.375 | % | 02/11/2020 | 2,662,000 | 3,298,538 | (2) | ||||||||||||
USD | 6.125 | % | 03/09/2021 | 21,605,000 | 25,190,782 | (2) | ||||||||||||
USD | 6.625 | % | 02/01/2022 | 2,622,000 | 3,172,358 | (3) | ||||||||||||
USD | 6.625 | % | 02/01/2022 | 7,014,000 | 8,486,238 | (2) | ||||||||||||
|
| |||||||||||||||||
40,147,916 | ||||||||||||||||||
|
| |||||||||||||||||
Mexico - 4.52% | ||||||||||||||||||
United Mexican States: | ||||||||||||||||||
USD | 5.125 | % | 01/15/2020 | 16,092,000 | 18,385,110 | |||||||||||||
USD | 8.300 | % | 08/15/2031 | 479,000 | 704,130 | |||||||||||||
USD | 6.750 | % | 09/27/2034 | 9,940,000 | 12,698,350 | |||||||||||||
USD | 6.050 | % | 01/11/2040 | 7,578,000 | 8,989,402 | |||||||||||||
USD | 4.750 | % | 03/08/2044 | 10,124,000 | 10,010,105 | |||||||||||||
USD | 5.750 | % | 10/12/2110 | 30,954,000 | 32,285,022 | |||||||||||||
|
| |||||||||||||||||
83,072,119 | ||||||||||||||||||
|
| |||||||||||||||||
Morocco - 0.30% | ||||||||||||||||||
Moroccan Government | USD | 4.250 | % | 12/11/2022 | 5,560,000 | 5,434,900 | (3) | |||||||||||
|
| |||||||||||||||||
Panama - 3.05% | ||||||||||||||||||
Republic of Panama: | ||||||||||||||||||
USD | 5.200 | % | 01/30/2020 | 5,587,000 | 6,452,985 | |||||||||||||
USD | 9.375 | % | 01/16/2023 | 450,000 | 652,500 | |||||||||||||
USD | 7.125 | % | 01/29/2026 | 967,000 | 1,266,770 | |||||||||||||
USD | 8.875 | % | 09/30/2027 | 6,661,000 | 9,991,500 | |||||||||||||
USD | 9.375 | % | 04/01/2029 | 19,652,000 | 31,246,680 | |||||||||||||
USD | 8.125 | % | 04/28/2034 | 2,059,000 | 2,944,370 | |||||||||||||
USD | 6.700 | % | 01/26/2036 | 2,718,000 | 3,533,400 | |||||||||||||
|
| |||||||||||||||||
56,088,205 | ||||||||||||||||||
|
| |||||||||||||||||
Peru - 1.58% | ||||||||||||||||||
Republic of Peru: | ||||||||||||||||||
USD | 8.750 | % | 11/21/2033 | 8,256,000 | 12,961,920 | |||||||||||||
USD | 6.550 | % | 03/14/2037 | 1,970,000 | 2,531,450 | |||||||||||||
USD | 5.625 | % | 11/18/2050 | 11,897,000 | 13,562,580 | |||||||||||||
|
| |||||||||||||||||
29,055,950 | ||||||||||||||||||
|
| |||||||||||||||||
Philippines - 1.89% | ||||||||||||||||||
Republic of Philippines: | ||||||||||||||||||
USD | 9.500 | % | 02/02/2030 | 8,226,000 | 13,254,142 | |||||||||||||
USD | 7.750 | % | 01/14/2031 | 13,764,000 | 19,458,855 | |||||||||||||
USD | 6.375 | % | 01/15/2032 | 1,636,000 | 2,059,315 | |||||||||||||
|
| |||||||||||||||||
34,772,312 | ||||||||||||||||||
|
| |||||||||||||||||
Poland - 3.35% | ||||||||||||||||||
Republic of Poland: | ||||||||||||||||||
USD | 6.375 | % | 07/15/2019 | 27,558,000 | 33,267,191 | |||||||||||||
EUR | 4.200 | % | 04/15/2020 | 6,630,000 | 9,982,959 | |||||||||||||
EUR | 4.000 | % | 03/23/2021 | 665,000 | 998,196 | |||||||||||||
USD | 5.125 | % | 04/21/2021 | 10,758,000 | 12,169,019 |
Stone Harbor Investment Funds Annual Report | May 31, 2013 | 17 |
Table of Contents
Stone Harbor Emerging Markets Debt Fund | Statements of Investments | |
May 31, 2013 |
Currency | Rate | Maturity | Principal | Market Value | ||||||||||||||
Poland (continued) | ||||||||||||||||||
Republic of Poland (continued) | ||||||||||||||||||
USD | 5.000 | % | 03/23/2022 | 4,457,000 | $ | 5,022,504 | ||||||||||||
|
| |||||||||||||||||
61,439,869 | ||||||||||||||||||
|
| |||||||||||||||||
Qatar - 1.34% | ||||||||||||||||||
State of Qatar: | ||||||||||||||||||
USD | 6.550 | % | 04/09/2019 | 9,087,000 | 11,154,292 | (2) | ||||||||||||
USD | 5.250 | % | 01/20/2020 | 5,949,000 | 6,885,968 | (2) | ||||||||||||
USD | 6.400 | % | 01/20/2040 | 1,687,000 | 2,138,273 | (2) | ||||||||||||
USD | 5.750 | % | 01/20/2042 | 3,758,000 | 4,387,465 | (2) | ||||||||||||
|
| |||||||||||||||||
24,565,998 | ||||||||||||||||||
|
| |||||||||||||||||
Romania - 0.33% | ||||||||||||||||||
Romanian Government International Bond: | ||||||||||||||||||
USD | 6.750 | % | 02/07/2022 | 1,100,000 | 1,303,500 | (2) | ||||||||||||
USD | 6.750 | % | 02/07/2022 | 1,110,000 | 1,315,350 | (3) | ||||||||||||
USD | 4.375 | % | 08/22/2023 | 3,400,000 | 3,391,500 | (3) | ||||||||||||
|
| |||||||||||||||||
6,010,350 | ||||||||||||||||||
|
| |||||||||||||||||
Russia - 4.90% | ||||||||||||||||||
Russian Federation: | ||||||||||||||||||
USD | 12.750 | % | 06/24/2028 | 8,739,000 | 16,483,939 | (2) | ||||||||||||
USD | 7.500 | % | 03/31/2030 | 60,412,840 | 73,477,117 | (2)(5) | ||||||||||||
|
| |||||||||||||||||
89,961,056 | ||||||||||||||||||
|
| |||||||||||||||||
Slovakia - 0.52% | ||||||||||||||||||
Republic of Slovakia | USD | 4.375 | % | 05/21/2022 | 8,831,000 | 9,629,057 | (3) | |||||||||||
|
| |||||||||||||||||
South Africa - 1.56% | ||||||||||||||||||
Republic of South Africa: | ||||||||||||||||||
USD | 6.875 | % | 05/27/2019 | 8,113,000 | 9,725,459 | |||||||||||||
USD | 5.500 | % | 03/09/2020 | 7,679,000 | 8,610,079 | |||||||||||||
USD | 5.875 | % | 05/30/2022 | 5,256,000 | 6,050,970 | |||||||||||||
USD | 4.665 | % | 01/17/2024 | 4,019,000 | 4,194,831 | |||||||||||||
|
| |||||||||||||||||
28,581,339 | ||||||||||||||||||
|
| |||||||||||||||||
Turkey - 7.27% | ||||||||||||||||||
Republic of Turkey: | ||||||||||||||||||
USD | 7.000 | % | 09/26/2016 | 2,884,000 | 3,370,675 | |||||||||||||
USD | 7.500 | % | 07/14/2017 | 2,742,000 | 3,317,820 | |||||||||||||
USD | 6.750 | % | 04/03/2018 | 8,441,000 | 10,139,751 | |||||||||||||
USD | 7.000 | % | 03/11/2019 | 3,305,000 | 4,077,544 | |||||||||||||
USD | 7.500 | % | 11/07/2019 | 16,848,000 | 21,523,320 | |||||||||||||
USD | 7.000 | % | 06/05/2020 | 4,272,000 | 5,350,680 | |||||||||||||
USD | 5.625 | % | 03/30/2021 | 1,053,000 | 1,233,326 | |||||||||||||
USD | 5.125 | % | 03/25/2022 | 9,201,000 | 10,454,636 | |||||||||||||
USD | 6.250 | % | 09/26/2022 | 7,981,000 | 9,796,678 | |||||||||||||
USD | 3.250 | % | 03/23/2023 | 32,966,000 | 32,430,303 | |||||||||||||
USD | 7.375 | % | 02/05/2025 | 2,570,000 | 3,395,612 | |||||||||||||
USD | 8.000 | % | 02/14/2034 | 7,406,000 | 10,488,747 | |||||||||||||
USD | 6.875 | % | 03/17/2036 | 9,360,000 | 11,934,000 | |||||||||||||
USD | 7.250 | % | 03/05/2038 | 1,285,000 | 1,720,294 | |||||||||||||
USD | 6.000 | % | 01/14/2041 | 3,663,000 | 4,262,816 | |||||||||||||
|
| |||||||||||||||||
133,496,202 | ||||||||||||||||||
|
|
18 | www.shiplp.com |
Table of Contents
Stone Harbor Emerging Markets Debt Fund | Statements of Investments | |
May 31, 2013 |
Currency | Rate | Maturity Date | Principal | Market Value | ||||||||||||||
Ukraine - 2.51% | ||||||||||||||||||
Financing of Infrastructure - Projects State Enterprise | USD | 9.000 | % | 12/07/2017 | 3,002,000 | $ | 3,137,090 | (3) | ||||||||||
Ukraine Government: | ||||||||||||||||||
USD | 6.875 | % | 09/23/2015 | 208,000 | 210,600 | (2) | ||||||||||||
USD | 6.875 | % | 09/23/2015 | 1,723,000 | 1,744,537 | (3) | ||||||||||||
USD | 6.250 | % | 06/17/2016 | 2,600,000 | 2,587,000 | (3) | ||||||||||||
USD | 6.250 | % | 06/17/2016 | 14,090,000 | 14,019,550 | (2) | ||||||||||||
USD | 6.580 | % | 11/21/2016 | 1,460,000 | 1,456,350 | (2) | ||||||||||||
USD | 6.750 | % | 11/14/2017 | 4,950,000 | 4,931,438 | (2) | ||||||||||||
USD | 7.800 | % | 11/28/2022 | 13,838,000 | 13,907,190 | (3) | ||||||||||||
USD | 7.500 | % | 04/17/2023 | 4,127,000 | 4,028,984 | (3) | ||||||||||||
|
| |||||||||||||||||
46,022,739 | ||||||||||||||||||
|
| |||||||||||||||||
Uruguay - 0.91% | ||||||||||||||||||
Republic of Uruguay: | ||||||||||||||||||
USD | 8.000 | % | 11/18/2022 | 2,598,310 | 3,533,702 | |||||||||||||
USD | 6.875 | % | 09/28/2025 | 1,148,125 | 1,504,044 | |||||||||||||
USD | 7.875 | % | 01/15/2033 | 1,390,800 | 1,947,120 | (6) | ||||||||||||
USD | 7.625 | % | 03/21/2036 | 6,979,404 | 9,771,165 | |||||||||||||
|
| |||||||||||||||||
16,756,031 | ||||||||||||||||||
|
| |||||||||||||||||
Venezuela - 4.54% | ||||||||||||||||||
Republic of Venezuela: | ||||||||||||||||||
USD | 13.625 | % | 08/15/2018 | 1,051,000 | 1,200,767 | |||||||||||||
USD | 13.625 | % | 08/15/2018 | 1,669,000 | 1,873,453 | (2) | ||||||||||||
USD | 7.000 | % | 12/01/2018 | 3,370,000 | 3,024,575 | (2) | ||||||||||||
USD | 7.750 | % | 10/13/2019 | 10,641,100 | 9,550,387 | (2) | ||||||||||||
USD | 6.000 | % | 12/09/2020 | 4,600,000 | 3,691,500 | (2) | ||||||||||||
USD | 12.750 | % | 08/23/2022 | 32,534,700 | 35,422,155 | (2) | ||||||||||||
USD | 9.000 | % | 05/07/2023 | 4,206,700 | 3,764,997 | (2) | ||||||||||||
USD | 8.250 | % | 10/13/2024 | 19,697,700 | 16,693,801 | (2) | ||||||||||||
USD | 9.250 | % | 09/15/2027 | 1,973,000 | 1,797,896 | |||||||||||||
USD | 11.950 | % | 08/05/2031 | 5,395,000 | 5,523,131 | (2) | ||||||||||||
USD | 9.375 | % | 01/13/2034 | 928,000 | 821,280 | |||||||||||||
|
| |||||||||||||||||
83,363,942 | ||||||||||||||||||
|
| |||||||||||||||||
TOTAL SOVEREIGN DEBT OBLIGATIONS | 1,149,006,422 | |||||||||||||||||
|
| |||||||||||||||||
(Cost $1,121,598,270) | ||||||||||||||||||
BANK LOANS - 0.10%(7) | ||||||||||||||||||
Indonesia - 0.10% | ||||||||||||||||||
PT Bumi Resources | USD | 11.250 | % | 08/07/2013 | 1,337,000 | 1,324,967 | ||||||||||||
PT Bumi Tranche A | USD | 15.000 | % | 01/18/2014 | 577,486 | 311,843 | (1) | |||||||||||
PT Bumi Tranche B | USD | 15.000 | % | 01/18/2014 | 460,908 | 248,890 | (1) | |||||||||||
|
| |||||||||||||||||
1,885,700 | ||||||||||||||||||
|
| |||||||||||||||||
TOTAL BANK LOANS | 1,885,700 | |||||||||||||||||
|
| |||||||||||||||||
(Cost $2,375,393) | ||||||||||||||||||
CORPORATE BONDS - 28.66% | ||||||||||||||||||
Argentina - 0.02% | ||||||||||||||||||
Capex SA | USD | 10.000 | % | 03/10/2018 | 511,000 | 390,509 | (3) | |||||||||||
|
|
Stone Harbor Investment Funds Annual Report | May 31, 2013 | 19 |
Table of Contents
Stone Harbor Emerging Markets Debt Fund | Statements of Investments | |
May 31, 2013 |
Currency | Rate | Maturity Date | Principal Amount* | Market Value (Expressed in U.S. $) | ||||||||||||||
Azerbaijan - 0.25% | ||||||||||||||||||
State Oil Company | USD | 5.450 | % | 02/09/2017 | 4,350,000 | $ | 4,654,500 | |||||||||||
|
| |||||||||||||||||
Brazil - 2.61% | ||||||||||||||||||
Andrade Gutierrez International SA | USD | 4.000 | % | 04/30/2018 | 1,500,000 | 1,496,250 | (3) | |||||||||||
Banco do Brasil SA: | ||||||||||||||||||
USD | 3.875 | % | 10/10/2022 | 1,494,000 | 1,417,414 | |||||||||||||
USD | 6.250 | % | 12/31/2049 | 2,550,000 | 2,479,973 | (3)(8) | ||||||||||||
BM&FBovespa SA: | ||||||||||||||||||
USD | 5.500 | % | 07/16/2020 | 800,000 | 879,060 | (2) | ||||||||||||
USD | 5.500 | % | 07/16/2020 | 842,000 | 925,211 | (3) | ||||||||||||
BR Malls International Finance Ltd.: | ||||||||||||||||||
USD | 8.500 | % | 01/21/2049 | 260,000 | 283,087 | (2) | ||||||||||||
USD | 8.500 | % | 01/21/2049 | 2,482,000 | 2,702,385 | (3) | ||||||||||||
BR Properties SA | USD | 9.000 | % | 10/07/2015 | 310,000 | 331,700 | (3) | |||||||||||
Braskem Finance Ltd. | USD | 7.375 | % | 10/29/2049 | 1,200,000 | 1,254,000 | (3) | |||||||||||
Caixa Economica Federal: | ||||||||||||||||||
USD | 2.375 | % | 11/06/2017 | 5,000,000 | 4,775,000 | (3) | ||||||||||||
USD | 3.500 | % | 11/07/2022 | 588,000 | 546,840 | (3) | ||||||||||||
Centrais Eletricas Brasileiras SA | USD | 5.750 | % | 10/27/2021 | 2,319,000 | 2,429,268 | (2) | |||||||||||
Cosan Luxembourg SA | USD | 5.000 | % | 03/14/2023 | 1,105,000 | 1,107,891 | (3) | |||||||||||
ESAL GmbH | USD | 6.250 | % | 02/05/2023 | 2,466,000 | 2,475,248 | (3) | |||||||||||
General Shopping Finance Ltd. | USD | 10.000 | % | 11/09/2015 | 1,257,000 | 1,282,140 | (3) | |||||||||||
Globo Comunicacao e Participacoes SA | USD | 6.250 | % | 07/20/2049 | 825,000 | 886,447 | (2)(5) | |||||||||||
Hypermarcas SA | USD | 6.500 | % | 04/20/2021 | 1,328,000 | 1,427,600 | (3) | |||||||||||
Itau Unibanco Holding SA | USD | 5.650 | % | 03/19/2022 | 1,158,000 | 1,204,321 | (3) | |||||||||||
Minerva Luxembourg SA | USD | 7.750 | % | 01/31/2023 | 2,406,000 | 2,502,240 | (3) | |||||||||||
NET Servicos de Comunicacao SA | USD | 7.500 | % | 01/27/2020 | 2,302,000 | 2,577,430 | ||||||||||||
Odebrecht Drilling Norbe VIII/IX Ltd.: | ||||||||||||||||||
USD | 6.350 | % | 06/30/2021 | 370,500 | 407,550 | (2) | ||||||||||||
USD | 6.350 | % | 06/30/2021 | 665,950 | 732,545 | (3) | ||||||||||||
Odebrecht Finance Ltd. | USD | 5.125 | % | 06/26/2022 | 1,500,000 | 1,597,500 | (3) | |||||||||||
OGX Austria GmbH | USD | 8.500 | % | 06/01/2018 | 552,000 | 322,582 | (3) | |||||||||||
Petrobras International Finance Co.: | ||||||||||||||||||
USD | 2.875 | % | 02/06/2015 | 700,000 | 713,880 | |||||||||||||
USD | 5.375 | % | 01/27/2021 | 430,000 | 457,461 | |||||||||||||
QGOG Atlantic/Alaskan Rigs Ltd. | USD | 5.250 | % | 07/30/2018 | 1,735,957 | 1,796,715 | (3) | |||||||||||
Samarco Mineracao SA | USD | 4.125 | % | 11/01/2022 | 4,097,000 | 3,881,939 | (3) | |||||||||||
Schahin II Finance Co. SPV Ltd. | USD | 5.875 | % | 09/25/2022 | 1,422,933 | 1,483,298 | (3) | |||||||||||
Telemar Norte Leste SA | USD | 5.500 | % | 10/23/2020 | 1,712,000 | 1,712,527 | (3) | |||||||||||
Tonon Bioenergia SA | USD | 9.250 | % | 01/24/2020 | 1,200,000 | 1,212,857 | (3) | |||||||||||
Votorantim Cimentos SA | USD | 7.250 | % | 04/05/2041 | 500,000 | 543,750 | (3) | |||||||||||
|
| |||||||||||||||||
47,846,109 | ||||||||||||||||||
|
| |||||||||||||||||
Chile - 2.19% | ||||||||||||||||||
Banco del Estado de Chile | USD | 3.875 | % | 02/08/2022 | 3,277,000 | 3,395,791 | (3) | |||||||||||
Cencosud SA: | ||||||||||||||||||
USD | 5.500 | % | 01/20/2021 | 2,000,000 | 2,132,669 | (3) | ||||||||||||
USD | 4.875 | % | 01/20/2023 | 1,908,000 | 1,931,536 | (3) | ||||||||||||
CFR International SpA | USD | 5.125 | % | 12/06/2022 | 500,000 | 518,245 | (3) | |||||||||||
Codelco, Inc.: | ||||||||||||||||||
USD | 7.500 | % | 01/15/2019 | 3,216,000 | 4,009,017 | (2) | ||||||||||||
USD | 3.875 | % | 11/03/2021 | 2,798,000 | 2,897,455 | (2) | ||||||||||||
USD | 3.000 | % | 07/17/2022 | 5,823,000 | 5,599,048 | (3) | ||||||||||||
USD | 6.150 | % | 10/24/2036 | 9,230,000 | 10,691,155 | (2) | ||||||||||||
USD | 4.250 | % | 07/17/2042 | 7,321,000 | 6,586,631 | (3) |
20 | www.shiplp.com |
Table of Contents
Stone Harbor Emerging Markets Debt Fund | Statements of Investments | |
May 31, 2013 |
Currency | Rate | Maturity Date | Principal | Market Value | ||||||||||||||
Chile (continued) | ||||||||||||||||||
GeoPark Latin America Ltd. Agencia en Chile | USD | 7.500 | % | 02/11/2020 | 1,497,000 | $ | 1,564,365 | (3) | ||||||||||
Telefonica Chile SA | USD | 3.875 | % | 10/12/2022 | 972,000 | 952,560 | (3) | |||||||||||
|
| |||||||||||||||||
40,278,472 | ||||||||||||||||||
|
| |||||||||||||||||
China - 2.78% | ||||||||||||||||||
Amber Circle Funding Ltd. | USD | 3.250 | % | 12/04/2022 | 1,000,000 | 967,150 | (2) | |||||||||||
Bestgain Real Estate Ltd. | USD | 2.625 | % | 03/13/2018 | 1,100,000 | 1,067,055 | (2) | |||||||||||
China Liansu Group Holdings Ltd. | USD | 7.875 | % | 05/13/2016 | 393,000 | 414,615 | (3) | |||||||||||
China Overseas Finance Cayman II Ltd. | USD | 5.500 | % | 11/10/2020 | 300,000 | 330,652 | ||||||||||||
China Overseas Finance Cayman IV Ltd. | USD | 4.875 | % | 02/15/2017 | 300,000 | 323,795 | ||||||||||||
China Overseas Finance Cayman V Ltd. | USD | 3.950 | % | 11/15/2022 | 1,000,000 | 980,080 | ||||||||||||
CNPC General Capital Ltd. | USD | 1.950 | % | 04/16/2018 | 628,000 | 619,129 | (3) | |||||||||||
Country Garden Holdings Co. Ltd.: | ||||||||||||||||||
USD | 11.125 | % | 02/23/2018 | 500,000 | 561,250 | (2) | ||||||||||||
USD | 7.500 | % | 01/10/2023 | 795,000 | 814,875 | (3) | ||||||||||||
Kaisa Group Holdings Ltd. | USD | 8.875 | % | 03/19/2018 | 2,178,000 | 2,237,895 | (3) | |||||||||||
Mega Advance Investments Ltd. | USD | 5.000 | % | 05/12/2021 | 1,434,000 | 1,576,454 | (3) | |||||||||||
MIE Holdings Corp. | USD | 9.750 | % | 05/12/2016 | 805,000 | 857,325 | (3) | |||||||||||
Sinochem Overseas Capital Co. Ltd.: | ||||||||||||||||||
USD | 4.500 | % | 11/12/2020 | 5,534,000 | 5,874,037 | (2) | ||||||||||||
USD | 4.500 | % | 11/12/2020 | 18,617,000 | 19,760,921 | (3) | ||||||||||||
USD | 6.300 | % | 11/12/2040 | 4,685,000 | 5,187,068 | (2) | ||||||||||||
Sinopec Capital 2013 Ltd. | USD | 3.125 | % | 04/24/2023 | 4,584,000 | 4,364,564 | (3) | |||||||||||
Sinopec Group Overseas Development 2012 Ltd. | USD | 3.900 | % | 05/17/2022 | 1,071,000 | 1,107,194 | (2) | |||||||||||
Tencent Holdings Ltd.: | ||||||||||||||||||
USD | 4.625 | % | 12/12/2016 | 1,200,000 | 1,301,754 | (3) | ||||||||||||
USD | 3.375 | % | 03/05/2018 | 1,880,000 | 1,927,038 | (3) | ||||||||||||
Texhong Textile Group Ltd.: | ||||||||||||||||||
USD | 7.625 | % | 01/19/2016 | 343,000 | 359,292 | (3) | ||||||||||||
USD | 7.625 | % | 01/19/2016 | 439,000 | 459,853 | (2) | ||||||||||||
|
| |||||||||||||||||
51,091,996 | ||||||||||||||||||
|
| |||||||||||||||||
Colombia - 0.74% | ||||||||||||||||||
Bancolombia SA | USD | 5.125 | % | 09/11/2022 | 2,639,000 | 2,638,953 | ||||||||||||
Colombia Telecomunicaciones SA ESP | USD | 5.375 | % | 09/27/2022 | 647,000 | 647,139 | (3) | |||||||||||
Empresa de Energia de Bogota SA | USD | 6.125 | % | 11/10/2021 | 1,392,000 | 1,521,917 | (3) | |||||||||||
Grupo Aval Ltd.: | ||||||||||||||||||
USD | 5.250 | % | 02/01/2017 | 1,000,000 | 1,054,089 | (3) | ||||||||||||
USD | 4.750 | % | 09/26/2022 | 1,474,000 | 1,448,205 | (3) | ||||||||||||
Gruposura Finance | USD | 5.700 | % | 05/18/2021 | 1,882,000 | 2,070,200 | (3) | |||||||||||
Pacific Rubiales Energy Corp. | USD | 5.125 | % | 03/28/2023 | 2,417,000 | 2,471,714 | (3) | |||||||||||
Transportadora de Gas Internacional SA ESP | USD | 5.700 | % | 03/20/2022 | 1,500,000 | 1,639,759 | (3) | |||||||||||
|
| |||||||||||||||||
13,491,976 | ||||||||||||||||||
|
| |||||||||||||||||
Hong Kong - 0.10% | ||||||||||||||||||
Hutchison Whampoa International 10 Ltd. | USD | 6.000 | % | 10/28/2049 | 1,757,000 | 1,873,401 | (2)(8) | |||||||||||
|
|
Stone Harbor Investment Funds Annual Report | May 31, 2013 | 21 |
Table of Contents
Stone Harbor Emerging Markets Debt Fund | Statements of Investments | |
May 31, 2013 |
Currency | Rate | Maturity Date | Principal | Market Value | ||||||||||||||
India - 0.72% | ||||||||||||||||||
Bharti Airtel International Netherlands BV | USD | 5.125 | % | 03/11/2023 | 2,701,000 | $ | 2,707,752 | (3) | ||||||||||
ICICI Bank Ltd.: | ||||||||||||||||||
USD | 4.700 | % | 02/21/2018 | 252,000 | 264,882 | (2) | ||||||||||||
USD | 5.750 | % | 11/16/2020 | 508,000 | 555,938 | (3) | ||||||||||||
USD | 5.750 | % | 11/16/2020 | 1,200,000 | 1,313,238 | (2) | ||||||||||||
Reliance Holdings USA, Inc. | USD | 5.400 | % | 02/14/2022 | 1,710,000 | 1,870,706 | (3) | |||||||||||
Vedanta Resources PLC: | ||||||||||||||||||
USD | 6.000 | % | 01/31/2019 | 3,944,000 | 3,934,140 | (3) | ||||||||||||
USD | 8.250 | % | 06/07/2021 | 558,000 | 602,640 | (3) | ||||||||||||
USD | 7.125 | % | 05/31/2023 | 1,974,000 | 1,964,130 | (3) | ||||||||||||
|
| |||||||||||||||||
13,213,426 | ||||||||||||||||||
|
| |||||||||||||||||
Indonesia - 0.47% | ||||||||||||||||||
Berau Capital Resources Pte Ltd. | USD | 12.500 | % | 07/08/2015 | 200,000 | 212,750 | (2) | |||||||||||
BLT Finance BV | USD | 7.500 | % | 05/15/2014 | 644,000 | 86,940 | (1)(2) | |||||||||||
Indo Energy Finance II BV | USD | 6.375 | % | 01/24/2023 | 1,214,000 | 1,183,650 | (3) | |||||||||||
Indosat Palapa Co. BV: | ||||||||||||||||||
USD | 7.375 | % | 07/29/2020 | 241,000 | 264,497 | (3) | ||||||||||||
USD | 7.375 | % | 07/29/2020 | 550,000 | 603,625 | (2) | ||||||||||||
Listrindo Capital BV | USD | 6.950 | % | 02/21/2019 | 861,000 | 929,880 | (3) | |||||||||||
Pertamina Persero PT | USD | 6.000 | % | 05/03/2042 | 2,529,000 | 2,453,130 | (2) | |||||||||||
PT Adaro Indonesia | USD | 7.625 | % | 10/22/2019 | 1,717,000 | 1,837,190 | (2) | |||||||||||
TBG Global Pte Ltd. | USD | 4.625 | % | 04/03/2018 | 1,037,000 | 1,020,149 | (3) | |||||||||||
|
| |||||||||||||||||
8,591,811 | ||||||||||||||||||
|
| |||||||||||||||||
Jamaica - 0.22% | ||||||||||||||||||
Digicel Group Ltd.: | ||||||||||||||||||
USD | 10.500 | % | 04/15/2018 | 1,450,000 | 1,576,875 | (2) | ||||||||||||
USD | 8.250 | % | 09/30/2020 | 2,281,000 | 2,463,480 | (3) | ||||||||||||
|
| |||||||||||||||||
4,040,355 | ||||||||||||||||||
|
| |||||||||||||||||
Kazakhstan - 3.33% | ||||||||||||||||||
KazMunaiGaz Finance Sub BV: | ||||||||||||||||||
USD | 11.750 | % | 01/23/2015 | 13,511,000 | 15,503,872 | (2) | ||||||||||||
USD | 9.125 | % | 07/02/2018 | 1,449,000 | 1,814,872 | (2) | ||||||||||||
USD | 7.000 | % | 05/05/2020 | 6,662,000 | 7,819,523 | (2) | ||||||||||||
USD | 6.375 | % | 04/09/2021 | 9,538,000 | 10,766,018 | (2) | ||||||||||||
KazMunayGas National Co. JSC: | ||||||||||||||||||
USD | 9.125 | % | 07/02/2018 | 9,516,000 | 11,918,790 | (3) | ||||||||||||
USD | 7.000 | % | 05/05/2020 | 739,000 | 867,401 | (3) | ||||||||||||
USD | 6.375 | % | 04/09/2021 | 3,945,000 | 4,452,919 | (3) | ||||||||||||
USD | 4.400 | % | 04/30/2023 | 1,469,000 | 1,426,767 | (3) | ||||||||||||
USD | 5.750 | % | 04/30/2043 | 3,065,000 | 2,957,725 | (3) | ||||||||||||
Zhaikmunai LP | USD | 7.125 | % | 11/13/2019 | 3,325,000 | 3,578,531 | (3) | |||||||||||
|
| |||||||||||||||||
61,106,418 | ||||||||||||||||||
|
| |||||||||||||||||
Macau - 0.05% | ||||||||||||||||||
MCE Finance Ltd. | USD | 5.000 | % | 02/15/2021 | 921,000 | 921,000 | (3) | |||||||||||
|
| |||||||||||||||||
Malaysia - 1.78% | ||||||||||||||||||
IOI Investment L BHD | USD | 4.375 | % | 06/27/2022 | 3,000,000 | 3,048,825 | ||||||||||||
Penerbangan Malaysia BHD | USD | 5.625 | % | 03/15/2016 | 1,195,000 | 1,334,229 | (2) | |||||||||||
Petroliam Nasional BHD: | ||||||||||||||||||
USD | 7.750 | % | 08/15/2015 | 335,000 | 381,883 | (3) |
22 | www.shiplp.com |
Table of Contents
Stone Harbor Emerging Markets Debt Fund | Statements of Investments | |
May 31, 2013 |
Currency | Rate | Maturity Date | Principal | Market Value | ||||||||||||||
Malaysia (continued) | ||||||||||||||||||
Petroliam Nasional BHD (continued) | ||||||||||||||||||
USD | 7.625 | % | 10/15/2026 | 2,742,000 | $ | 3,847,821 | (2) | |||||||||||
Petronas Capital Ltd. | USD | 7.875 | % | 05/22/2022 | 15,945,000 | 21,702,740 | (2) | |||||||||||
Petronas Global Sukuk Ltd. | USD | 4.250 | % | 08/12/2014 | 2,240,000 | 2,319,856 | (3) | |||||||||||
|
| |||||||||||||||||
32,635,354 | ||||||||||||||||||
|
| |||||||||||||||||
Mexico - 1.27% | ||||||||||||||||||
America Movil SAB de CV: | ||||||||||||||||||
USD | 2.375 | % | 09/08/2016 | 704,000 | 724,574 | |||||||||||||
USD | 3.125 | % | 07/16/2022 | 1,800,000 | 1,727,192 | |||||||||||||
BBVA Bancomer SA | USD | 6.750 | % | 09/30/2022 | 920,000 | 1,044,200 | (3) | |||||||||||
Cemex Finance LLC | USD | 9.375 | % | 10/12/2022 | 2,423,000 | 2,731,932 | (3) | |||||||||||
Cemex SAB de CV | USD | 9.500 | % | 06/15/2018 | 2,638,000 | 2,961,155 | (3) | |||||||||||
Grupo Bimbo SAB de CV: | ||||||||||||||||||
USD | 4.875 | % | 06/30/2020 | 183,000 | 199,198 | (3) | ||||||||||||
USD | 4.500 | % | 01/25/2022 | 800,000 | 852,981 | (3) | ||||||||||||
Grupo Televisa SAB | USD | 6.000 | % | 05/12/2018 | 300,000 | 345,742 | ||||||||||||
Metalsa SAB de CV | USD | 4.900 | % | 04/24/2023 | 1,726,000 | 1,721,685 | (3) | |||||||||||
Mexichem SAB de CV | USD | 4.875 | % | 09/19/2022 | 953,000 | 990,951 | (3) | |||||||||||
Mexico Generadora De Energia | USD | 5.500 | % | 12/06/2032 | 2,861,000 | 2,881,212 | (3) | |||||||||||
Pemex Project Funding Master Trust | EUR | 5.500 | % | 02/24/2025 | 2,275,000 | 3,555,704 | (2) | |||||||||||
Petroleos Mexicanos | USD | 6.500 | % | 06/02/2041 | 2,129,000 | 2,400,448 | ||||||||||||
Telefonos de Mexico SAB de CV | USD | 5.500 | % | 11/15/2019 | 1,100,000 | 1,253,233 | ||||||||||||
|
| |||||||||||||||||
23,390,207 | ||||||||||||||||||
|
| |||||||||||||||||
Nigeria - 0.06% | ||||||||||||||||||
Afren PLC | USD | 10.250 | % | 04/08/2019 | 864,000 | 1,015,200 | (3) | |||||||||||
|
| |||||||||||||||||
Peru - 0.90% | ||||||||||||||||||
Ajecorp BV | USD | 6.500 | % | 05/14/2022 | 2,875,000 | 3,133,750 | (3) | |||||||||||
Alicorp SAA | USD | 3.875 | % | 03/20/2023 | 1,076,000 | 1,056,922 | (3) | |||||||||||
Banco de Credito del Peru: | ||||||||||||||||||
USD | 5.375 | % | 09/16/2020 | 526,000 | 569,437 | (3) | ||||||||||||
USD | 5.375 | % | 09/16/2020 | 1,465,000 | 1,585,981 | (2) | ||||||||||||
USD | 4.250 | % | 04/01/2023 | 328,000 | 323,832 | (3) | ||||||||||||
BBVA Banco Continental SA | USD | 5.000 | % | 08/26/2022 | 1,176,000 | 1,214,071 | (3) | |||||||||||
Cementos Pacasmayo SAA | USD | 4.500 | % | 02/08/2023 | 1,506,000 | 1,471,953 | (3) | |||||||||||
Consorcio Transmantaro SA | USD | 4.375 | % | 05/07/2023 | 897,000 | 874,575 | (3) | |||||||||||
Corp. Azucarera del Peru SA | USD | 6.375 | % | 08/02/2022 | 631,000 | 656,240 | (3) | |||||||||||
Inkia Energy Ltd. | USD | 8.375 | % | 04/04/2021 | 785,000 | 890,868 | (3) | |||||||||||
Southern Copper Corp.: | ||||||||||||||||||
USD | 6.750 | % | 04/16/2040 | 1,167,000 | 1,229,082 | |||||||||||||
USD | 5.250 | % | 11/08/2042 | 3,000,000 | 2,641,624 | |||||||||||||
Volcan Cia Minera SAA | USD | 5.375 | % | 02/02/2022 | 836,000 | 856,900 | (3) | |||||||||||
|
| |||||||||||||||||
16,505,235 | ||||||||||||||||||
|
| |||||||||||||||||
Russia - 3.79% | ||||||||||||||||||
Alfa Bank OJSC Via Alfa Bond Issuance PLC | USD | 7.500 | % | 09/26/2019 | 1,750,000 | 1,881,250 | (3) | |||||||||||
EDC Finance Ltd. | USD | 4.875 | % | 04/17/2020 | 2,725,000 | 2,704,562 | (3) | |||||||||||
EuroChem Mineral & Chemical Co. OJSC via EuroChem GI Ltd. | USD | 5.125 | % | 12/12/2017 | 3,000,000 | 3,041,250 | (3) | |||||||||||
Evraz Group SA | USD | 6.750 | % | 04/27/2018 | 208,000 | 208,260 | (3) | |||||||||||
Far Eastern Shipping Co.: | ||||||||||||||||||
USD | 8.000 | % | 05/02/2018 | 1,919,000 | 1,945,386 | (3) |
Stone Harbor Investment Funds Annual Report | May 31, 2013 | 23 |
Table of Contents
Stone Harbor Emerging Markets Debt Fund | Statements of Investments | |
May 31, 2013 |
Currency | Rate | Maturity Date | Principal | Market Value | ||||||||||||||
Russia (continued) | ||||||||||||||||||
Far Eastern Shipping Co. (continued) | ||||||||||||||||||
USD | 8.750 | % | 05/02/2020 | 859,000 | $ | 885,844 | (3) | |||||||||||
Gazprom OAO Via Gaz Capital SA: | ||||||||||||||||||
USD | 9.250 | % | 04/23/2019 | 7,874,000 | 10,019,665 | (2) | ||||||||||||
USD | 4.950 | % | 07/19/2022 | 860,000 | 878,275 | (3) | ||||||||||||
USD | 4.375 | % | 09/19/2022 | 2,183,000 | 2,106,595 | (3) | ||||||||||||
USD | 4.950 | % | 02/06/2028 | 6,070,000 | 5,819,612 | (3) | ||||||||||||
USD | 7.288 | % | 08/16/2037 | 1,642,000 | 1,925,245 | (2) | ||||||||||||
Metalloinvest Finance Ltd.: | ||||||||||||||||||
USD | 6.500 | % | 07/21/2016 | 1,137,000 | 1,205,220 | (3) | ||||||||||||
USD | 5.625 | % | 04/17/2020 | 1,450,000 | 1,433,687 | (3) | ||||||||||||
MTS International Funding Ltd. | USD | 5.000 | % | 05/30/2023 | 7,000,000 | 6,938,750 | (3) | |||||||||||
Nord Gold NV | USD | 6.375 | % | 05/07/2018 | 992,000 | 975,880 | (3) | |||||||||||
Novatek OAO via Novatek Finance Ltd.: | ||||||||||||||||||
USD | 5.326 | % | 02/03/2016 | 1,700,000 | 1,807,313 | (2) | ||||||||||||
USD | 6.604 | % | 02/03/2021 | 976,000 | 1,104,710 | (3) | ||||||||||||
OJSC Novolipetsk Steel via Steel Funding Ltd. | USD | 4.450 | % | 02/19/2018 | 800,000 | 793,000 | (3) | |||||||||||
Rosneft Oil Co. via Rosneft International Finance Ltd. | USD | 3.149 | % | 03/06/2017 | 2,079,000 | 2,094,593 | (2) | |||||||||||
Russian Agricultural Bank OJSC Via RSHB Capital SA: | ||||||||||||||||||
USD | 5.298 | % | 12/27/2017 | 1,320,000 | 1,390,950 | (2) | ||||||||||||
USD | 6.000 | % | 06/03/2021 | 2,342,000 | 2,391,768 | (2)(8) | ||||||||||||
Sberbank of Russia Via SB Capital SA: | ||||||||||||||||||
USD | 6.125 | % | 02/07/2022 | 1,300,000 | 1,438,125 | (3) | ||||||||||||
USD | 5.125 | % | 10/29/2022 | 1,148,000 | 1,142,260 | (3) | ||||||||||||
Severstal OAO Via Steel Capital SA: | ||||||||||||||||||
USD | 6.700 | % | 10/25/2017 | 649,000 | 694,430 | (2) | ||||||||||||
USD | 5.900 | % | 10/17/2022 | 1,000,000 | 970,000 | (3) | ||||||||||||
Sibur Securities Ltd. | USD | 3.914 | % | 01/31/2018 | 1,400,000 | 1,356,250 | (3) | |||||||||||
Vimpel Communications Holdings BV: | ||||||||||||||||||
USD | 6.255 | % | 03/01/2017 | 830,000 | 879,800 | (2) | ||||||||||||
USD | 5.200 | % | 02/13/2019 | 1,300,000 | 1,308,125 | (3) | ||||||||||||
Vimpel Communications Via VIP Finance Ireland Ltd. OJSC | USD | 7.748 | % | 02/02/2021 | 1,266,000 | 1,402,095 | (3) | |||||||||||
VTB Bank OJSC Via VTB Capital SA: | ||||||||||||||||||
USD | 6.315 | % | 02/22/2018 | 3,317,000 | 3,586,506 | (2) | ||||||||||||
USD | 6.950 | % | 10/17/2022 | 3,300,000 | 3,448,500 | (2) | ||||||||||||
USD | 6.250 | % | 06/30/2035 | 1,085,000 | 1,170,444 | (2) | ||||||||||||
Wind Acquisition Finance SA | USD | 11.750 | % | 07/15/2017 | 700,000 | 740,250 | (3) | |||||||||||
|
| |||||||||||||||||
69,688,600 | ||||||||||||||||||
|
| |||||||||||||||||
Singapore - 0.14% | ||||||||||||||||||
Oversea-Chinese Banking Corp. Ltd. | USD | 3.150 | % | 03/11/2023 | 1,225,000 | 1,232,901 | (3)(8) | |||||||||||
STATS ChipPAC Ltd. | USD | 4.500 | % | 03/20/2018 | 1,396,000 | 1,396,000 | (3) | |||||||||||
|
| |||||||||||||||||
2,628,901 | ||||||||||||||||||
|
| |||||||||||||||||
South Africa - 0.19% | ||||||||||||||||||
Gold Fields Orogen Holding BVI Ltd. | USD | 4.875 | % | 10/07/2020 | 3,700,000 | 3,459,500 | (2) | |||||||||||
|
| |||||||||||||||||
South Korea - 0.13% | ||||||||||||||||||
Korea East-West Power Co. Ltd. | USD | 2.500 | % | 07/16/2017 | 1,000,000 | 1,005,325 | (3) | |||||||||||
Korea Hydro & Nuclear Power Co. Ltd.: | ||||||||||||||||||
USD | 4.750 | % | 07/13/2021 | 809,000 | 879,646 | (2) |
24 | www.shiplp.com |
Table of Contents
Stone Harbor Emerging Markets Debt Fund | Statements of Investments | |
May 31, 2013 |
Currency | Rate | Maturity Date | Principal Amount* | Market Value (Expressed in U.S. $) | ||||||||||||||||
South Korea (continued) | ||||||||||||||||||||
Korea Hydro & Nuclear Power Co. Ltd. (continued) | ||||||||||||||||||||
USD | 3.000 | % | 09/19/2022 | 493,000 | $ | 472,343 | (3) | |||||||||||||
|
| |||||||||||||||||||
2,357,314 | ||||||||||||||||||||
|
| |||||||||||||||||||
Thailand - 0.21% | ||||||||||||||||||||
Bangkok Bank PCL | USD | 3.875 | % | 09/27/2022 | 1,537,000 | 1,547,990 | (3) | |||||||||||||
PTT Global Chemical PCL | USD | 4.250 | % | 09/19/2022 | 1,007,000 | 1,031,616 | (3) | |||||||||||||
PTTEP Canada International Finance Ltd. | USD | 5.692 | % | 04/05/2021 | 1,032,000 | 1,181,382 | (2) | |||||||||||||
|
| |||||||||||||||||||
3,760,988 | ||||||||||||||||||||
|
| |||||||||||||||||||
Turkey - 0.45% | ||||||||||||||||||||
Akbank TAS: | ||||||||||||||||||||
USD | 3.875 | % | 10/24/2017 | 1,800,000 | 1,842,750 | (3) | ||||||||||||||
USD | 5.000 | % | 10/24/2022 | 750,000 | 790,312 | (2) | ||||||||||||||
KOC Holding AS | USD | 3.500 | % | 04/24/2020 | 1,000,000 | 962,500 | (3) | |||||||||||||
Turkiye Garanti Bankasi AS | USD | 5.250 | % | 09/13/2022 | 3,122,000 | 3,305,418 | (3) | |||||||||||||
Yuksel Insaat AS | USD | 9.500 | % | 11/10/2015 | 2,077,000 | 1,443,515 | (2) | |||||||||||||
|
| |||||||||||||||||||
8,344,495 | ||||||||||||||||||||
|
| |||||||||||||||||||
Ukraine - 0.40% | ||||||||||||||||||||
Ferrexpo Finance PLC | USD | 7.875 | % | 04/07/2016 | 2,115,000 | 2,117,644 | (3) | |||||||||||||
Metinvest BV | USD | 8.750 | % | 02/14/2018 | 1,937,000 | 1,949,106 | (3) | |||||||||||||
Mriya Agro Holding PLC | USD | 9.450 | % | 04/19/2018 | 1,093,000 | 1,079,338 | (3) | |||||||||||||
National JSC Naftogaz of Ukraine | USD | 9.500 | % | 09/30/2014 | 2,189,000 | 2,257,406 | ||||||||||||||
|
| |||||||||||||||||||
7,403,494 | ||||||||||||||||||||
|
| |||||||||||||||||||
United Arab Emirates - 0.46% | ||||||||||||||||||||
Dubai Holding Commercial Operations MTN Ltd. | GBP | 6.000 | % | 02/01/2017 | 3,350,000 | 5,230,001 | ||||||||||||||
Emaar Sukuk Ltd. | USD | 6.400 | % | 07/18/2019 | 3,000,000 | 3,285,000 | ||||||||||||||
|
| |||||||||||||||||||
8,515,001 | ||||||||||||||||||||
|
| |||||||||||||||||||
Venezuela - 5.40% | ||||||||||||||||||||
Petroleos de Venezuela SA: | ||||||||||||||||||||
USD | 4.900 | % | 10/28/2014 | 67,953,517 | 65,490,202 | |||||||||||||||
USD | 5.000 | % | 10/28/2015 | 4,959,924 | 4,575,530 | |||||||||||||||
USD | 5.250 | % | 04/12/2017 | 4,775,600 | 4,077,169 | (2) | ||||||||||||||
USD | 8.500 | % | 11/02/2017 | 14,963,100 | 14,177,537 | (2) | ||||||||||||||
USD | 5.375 | % | 04/12/2027 | 16,700,100 | 10,896,815 | |||||||||||||||
|
| |||||||||||||||||||
99,217,253 | ||||||||||||||||||||
|
| |||||||||||||||||||
TOTAL CORPORATE BONDS (Cost $519,249,246) | 526,421,515 | |||||||||||||||||||
|
| |||||||||||||||||||
PARTICIPATION NOTES - 0.38% | ||||||||||||||||||||
Argentina - 0.03% | ||||||||||||||||||||
Hidroelec el Chocon SA | USD | 8.061 | % | 03/01/2015 | 676,923 | 582,154 | ||||||||||||||
|
|
Stone Harbor Investment Funds Annual Report | May 31, 2013 | 25 |
Table of Contents
Stone Harbor Emerging Markets Debt Fund | Statements of Investments | |
May 31, 2013 |
Counterparty | Currency | Rate | Maturity Date | Principal Amount/Shares* | Market Value (Expressed in U.S. $) | |||||||||||||||
Ukraine - 0.35% | ||||||||||||||||||||
Ukreximbank Biz Finance PLC | USD | 8.375 | % | 04/27/2015 | 6,358,000 | $ | 6,373,895 | (2) | ||||||||||||
|
| |||||||||||||||||||
TOTAL PARTICIPATION NOTES (Cost $6,722,403) | 6,956,049 | |||||||||||||||||||
|
| |||||||||||||||||||
CREDIT LINKED NOTES - 2.25% | ||||||||||||||||||||
Argentina - 0.10% | ||||||||||||||||||||
Cablevision SA | Deutsche Bank AG London | USD | 9.375 | % | 02/12/2018 | 2,456,000 | 1,780,600 | (3) | ||||||||||||
|
| |||||||||||||||||||
Brazil - 0.96% | ||||||||||||||||||||
Nota Do Tesouro Nacional: | ||||||||||||||||||||
Citigroup Global Markets | BRL | 10.000 | % | 01/01/2017 | 2,020,000 | 948,036 | ||||||||||||||
JPMorgan Chase & Co. | BRL | 10.000 | % | 01/01/2023 | 3,140,000 | 1,444,803 | ||||||||||||||
Barclays Bank PLC | BRL | 10.000 | % | 01/01/2023 | 33,760,000 | 15,214,068 | ||||||||||||||
|
| |||||||||||||||||||
17,606,907 | ||||||||||||||||||||
|
| |||||||||||||||||||
Colombia - 0.67% | ||||||||||||||||||||
Titulos de Tesoreria - Series B: | ||||||||||||||||||||
Citigroup Global Markets | COP | 11.000 | % | 07/24/2020 | 3,000,000,000 | 2,038,642 | ||||||||||||||
Citigroup Global Markets | COP | 11.000 | % | 07/24/2020 | 3,500,000,000 | 2,378,416 | ||||||||||||||
Citigroup Global Markets | COP | 11.000 | % | 07/24/2020 | 4,000,000,000 | 2,718,190 | ||||||||||||||
Citigroup Global Markets | COP | 11.000 | % | 07/24/2020 | 5,700,000,000 | 3,873,420 | ||||||||||||||
Citigroup Global Markets | COP | 11.000 | % | 07/27/2020 | 1,960,000,000 | 1,331,913 | ||||||||||||||
|
| |||||||||||||||||||
12,340,581 | ||||||||||||||||||||
|
| |||||||||||||||||||
Iraq - 0.52% | ||||||||||||||||||||
Republic of Iraq: | ||||||||||||||||||||
Bank of America - Merrill Lynch | JPY | 2.510 | % | 01/01/2028 | 984,900,619 | 6,617,967 | (8) | |||||||||||||
Bank of America - Merrill Lynch | JPY | 2.550 | % | 01/01/2028 | 449,513,192 | 3,020,471 | (8) | |||||||||||||
|
| |||||||||||||||||||
9,638,438 | ||||||||||||||||||||
|
| |||||||||||||||||||
TOTAL CREDIT LINKED NOTES (Cost $46,464,586) | 41,366,526 | |||||||||||||||||||
|
| |||||||||||||||||||
SHORT TERM INVESTMENTS - 3.36% | ||||||||||||||||||||
Money Market Mutual Funds - 3.36% | ||||||||||||||||||||
Dreyfus Institutional Cash Advantage Fund - Institutional Advantage Class (7-Day Yield) | USD | 0.07001 | % | N/A | 61,710,239 | 61,710,239 | ||||||||||||||
|
| |||||||||||||||||||
TOTAL SHORT TERM INVESTMENTS (Cost $61,710,239) | 61,710,239 | |||||||||||||||||||
|
| |||||||||||||||||||
Total Investments - 97.31% (Cost $1,758,120,137) | 1,787,346,451 | |||||||||||||||||||
Other Assets In Excess of Liabilities - 2.69% | 49,425,718 | |||||||||||||||||||
|
| |||||||||||||||||||
Net Assets - 100.00% | $ | 1,836,772,169 | ||||||||||||||||||
|
|
26 | www.shiplp.com |
Table of Contents
Stone Harbor Emerging Markets Debt Fund | Statements of Investments | |
May 31, 2013 |
* The principal amount of each security is stated in the currency in which the security is denominated. See below.
BRL | - | Brazilian Real | ||
COP | - | Colombian Peso | ||
EUR | - | Euro Currency | ||
GBP | - | Great Britain Pound | ||
JPY | - | Japanese Yen | ||
NGN | - | Nigerian Naira | ||
USD | - | United States Dollar |
(1) | Security is currently in default/non-income producing. |
(2) | Securities were originally issued pursuant to Regulation S under the Securities Act of 1933, which exempts securities offered and sold outside of the United States from registration. Such securities cannot be sold in the United States without either an effective registration statement filed pursuant to the Securities Act of 1933, or pursuant to an exemption from registration. As of May 31, 2013, the aggregate market value of those securities was $584,147,701, which represents approximately 31.80% of net assets. |
(3) | Security exempt from registration under Rule 144A of the Securities Act of 1933. Such securities may normally be sold to qualified institutional buyers in transactions exempt from registration. Total market value of Rule 144A securities amounts to $331,243,604, which represents approximately 18.03% of net assets as of May 31, 2013. |
(4) | Amount represents less than 0.005% of net assets. |
(5) | Step bond. Coupon increases periodically based upon a predetermined schedule. Interest rate disclosed is that which is in effect at May 31, 2013. |
(6) | Pay-in-kind securities. |
(7) | Bank loans generally pay interest at rates which are periodically determined by reference to a base lending rate plus a premium. All loans carry a variable rate of interest. These base lending rates are generally (i) the Prime Rate offered by one or more major United States banks, (ii) the lending rate offered by one or more European banks such as the London Interbank Offered Rate (“LIBOR”) or (iii) the Certificate of Deposit rate. Rate shown represents the weighted average rate at May 31, 2013. Bank Loans, while exempt from registration, under the Securities Act of 1933, contain certain restrictions on resale and cannot be sold publicly. Floating rate bank loans often require prepayments from excess cash flow or permit the borrower to repay at its election. The degree to which borrowers repay, whether as a contractual requirement or at their election, cannot be predicted with accuracy. As a result, the actual remaining maturity may be substantially less than the stated maturity shown. |
(8) | Floating or variable rate security. Interest rate disclosed is that which is in effect at May 31, 2013. |
Common Abbreviations:
AS | - | Anonim Sirket is the Turkish term for Incorporation. | ||
BHD | - | Berhad is the Malaysian term for public limited company. | ||
BV | - | Besloten Vennootschap is the Dutch term for private limited liability company. | ||
BVI | - | British Virgin Islands. | ||
ESP | - | Empresa de Servicios Publicos is the Colombian term for Public Service Company. | ||
GmbH | - | Gesellschaft mit beschrankter Haftung is the German term for a company with limited liability. | ||
JSC | - | Joint Stock Company. | ||
LLC | - | Lmited Liability Corporation. | ||
LP | - | Limited Partnership. | ||
Ltd. | - | Limited. | ||
MTN | - | Medium Term Note. | ||
NV | - | Naamloze Vennootschap is the Dutch term for a public limited liability corporation. | ||
OAO | - | Otkrytoe Aktsionernoe Obschestvo is the Russian term for Open Joint Stock Company. | ||
OJSC | - | Open Joint Stock Company. | ||
PCL | - | A rearrangement of the letters for Public Limited Company, used in Thailand. | ||
PLC | - | Public Limited Company. | ||
PT | - | Perseroan terbuka is an Indonesian term for limited liability company. | ||
Pte | - | Private. | ||
SA | - | Generally designates corporations in various countries, mostly those employing the civil law. | ||
SAA | - | Sociedad Anonima Abierta is the Peruvian term used for companies with 20 or more shareholders. | ||
SAB | - | Sociedad Anonima Bursatil is the Spanish term used for publicly held company. | ||
SAB de CV | - | A variable capital company. | ||
SpA | - | Societa per Azioni. | ||
SPV | - | Special Purpose Vehicle. | ||
TAS | - | TüRk Anonim Sirketi is the Turkish term for Joint Stock Company. |
Stone Harbor Investment Funds Annual Report | May 31, 2013 | 27 |
Table of Contents
Stone Harbor Emerging Markets Debt Fund | Statements of Investments | |
May 31, 2013 |
OUTSTANDING FORWARD FOREIGN CURRENCY CONTRACTS
Counterparty | Foreign Currency | Contracted Amount* | Purchase/Sale Contract | Settlement Date | Current Value | Unrealized Appreciation/ (Depreciation) | ||||||||||||
Citigroup Global Markets | COP | 27,887,671,995 | Sale | 06/04/2013 | $ | 14,644,446 | $ | 581,407 | ||||||||||
Citigroup Global Markets | COP | 27,887,671,995 | Sale | 06/28/2013 | 14,610,412 | 66,538 | ||||||||||||
JPMorgan Chase & Co. | EUR | 25,215,000 | Sale | 06/17/2013 | 32,776,280 | 503,234 | ||||||||||||
JPMorgan Chase & Co. | GBP | 3,571,100 | Sale | 06/17/2013 | 5,425,313 | 137,561 | ||||||||||||
JPMorgan Chase & Co. | JPY | 979,707,000 | Sale | 06/17/2013 | 9,753,366 | 330,053 | ||||||||||||
Citigroup Global Markets | NGN | 1,395,291,500 | Sale | 07/17/2013 | 8,669,668 | 21,029 | ||||||||||||
|
| |||||||||||||||||
$ | 1,639,822 | |||||||||||||||||
|
| |||||||||||||||||
Citigroup Global Markets | COP | 27,887,671,995 | Purchase | 06/04/2013 | $ | 14,644,446 | $ | (72,004) | ||||||||||
Citigroup Global Markets | COP | 13,657,845,597 | Purchase | 06/17/2013 | 7,162,943 | (242,091) | ||||||||||||
Citigroup Global Markets | COP | 29,582,819,500 | Sale | 07/05/2013 | 15,488,090 | (34,090) | ||||||||||||
JPMorgan Chase & Co. | EUR | 887,310 | Purchase | 06/17/2013 | 1,153,390 | (7,780) | ||||||||||||
JPMorgan Chase & Co. | GBP | 801,801 | Sale | 06/17/2013 | 1,218,119 | (11,376) | ||||||||||||
Citigroup Global Markets | NGN | 1,395,291,500 | Purchase | 07/17/2013 | 8,669,668 | (37,299) | ||||||||||||
|
| |||||||||||||||||
$ | (404,640) | |||||||||||||||||
|
|
*The contracted amount is stated in the currency in which the security is denominated.
See Notes to Financial Statements.
| ||
28 | www.shiplp.com |
Table of Contents
Statements of Investments | ||
May 31, 2013 |
Currency | Rate | Maturity Date | Principal | Market Value | ||||||||||||||
CORPORATE BONDS - 93.82% | ||||||||||||||||||
Aerospace/Defense - 1.28% | ||||||||||||||||||
CPI International, Inc. | USD | 8.000 | % | 02/15/2018 | 1,631,000 | $ | 1,732,938 | |||||||||||
Erickson Air-Crane, Inc. | USD | 8.250 | % | 05/01/2020 | 1,775,000 | 1,834,906 | (1) | |||||||||||
Triumph Group, Inc. | USD | 8.625 | % | 07/15/2018 | 1,253,000 | 1,372,035 | ||||||||||||
|
| |||||||||||||||||
4,939,879 | ||||||||||||||||||
|
| |||||||||||||||||
Automotive - 1.12% | ||||||||||||||||||
Chrysler Group LLC | USD | 8.000 | % | 06/15/2019 | 1,818,000 | 2,022,525 | ||||||||||||
The Goodyear Tire & Rubber Co.: | ||||||||||||||||||
USD | 6.500 | % | 03/01/2021 | 1,540,000 | 1,628,550 | |||||||||||||
USD | 7.000 | % | 05/15/2022 | 629,000 | 680,893 | |||||||||||||
|
| |||||||||||||||||
4,331,968 | ||||||||||||||||||
|
| |||||||||||||||||
Banking - 0.83% | ||||||||||||||||||
LBG Capital No. 1 PLC, Series 15 | EUR | 6.439 | % | 05/23/2020 | 1,213,000 | 1,634,692 | ||||||||||||
Provident Funding Associates LP: | ||||||||||||||||||
USD | 10.125 | % | 02/15/2019 | 894,000 | 1,005,750 | (1) | ||||||||||||
USD | 6.750 | % | 06/15/2021 | 575,000 | 589,375 | (1) | ||||||||||||
|
| |||||||||||||||||
3,229,817 | ||||||||||||||||||
|
| |||||||||||||||||
Building Products - 1.87% | ||||||||||||||||||
American Builders & Contractors Supply Co., Inc. | USD | 5.625 | % | 04/15/2021 | 1,135,000 | 1,152,025 | (1) | |||||||||||
American Standard Americas | USD | 10.750 | % | 01/15/2016 | 569,000 | 597,450 | (1) | |||||||||||
Griffon Corp. | USD | 7.125 | % | 04/01/2018 | 1,244,000 | 1,343,520 | ||||||||||||
HD Supply, Inc. | USD | 7.500 | % | 07/15/2020 | 2,180,000 | 2,316,250 | (1) | |||||||||||
Norcraft Cos. LP | USD | 10.500 | % | 12/15/2015 | 1,734,000 | 1,814,197 | ||||||||||||
|
| |||||||||||||||||
7,223,442 | ||||||||||||||||||
|
| |||||||||||||||||
Chemicals - 2.37% | ||||||||||||||||||
Hexion US Finance Corp.: | ||||||||||||||||||
USD | 6.625 | % | 04/15/2020 | 2,190,000 | 2,288,550 | |||||||||||||
USD | 6.625 | % | 04/15/2020 | 925,000 | 966,625 | (1) | ||||||||||||
Ineos Finance PLC | USD | 8.375 | % | 02/15/2019 | 1,933,000 | 2,162,544 | (1) | |||||||||||
Lyondell Chemical Co. | USD | 8.375 | % | 08/15/2015 | 945,000 | 0 | (2) | |||||||||||
Momentive Performance Materials, Inc. | USD | 8.875 | % | 10/15/2020 | 811,000 | 877,907 | ||||||||||||
Trinseo Materials Operating SCA/Trinseo Materials Finance, Inc. | USD | 8.750 | % | 02/01/2019 | 2,885,000 | 2,881,394 | (1) | |||||||||||
|
| |||||||||||||||||
9,177,020 | ||||||||||||||||||
|
| |||||||||||||||||
Consumer Products - 2.54% | ||||||||||||||||||
Alphabet Holding Co., Inc. | USD | 7.750 | % | 11/01/2017 | 1,331,000 | 1,377,585 | (1)(3) | |||||||||||
Elizabeth Arden, Inc. | USD | 7.375 | % | 03/15/2021 | 1,432,000 | 1,602,050 | ||||||||||||
First Quality Finance Co., Inc. | USD | 4.625 | % | 05/15/2021 | 915,000 | 896,700 | (1) | |||||||||||
Mead Products LLC | USD | 6.750 | % | 04/30/2020 | 2,212,000 | 2,333,660 | (1) | |||||||||||
Spectrum Brands Escrow Corp. | USD | 6.375 | % | 11/15/2020 | 1,587,000 | 1,708,009 | (1) | |||||||||||
The Sun Products Corp. | USD | 7.750 | % | 03/15/2021 | 1,885,000 | 1,913,275 | (1) | |||||||||||
|
| |||||||||||||||||
9,831,279 | ||||||||||||||||||
|
| |||||||||||||||||
Containers/Packaging - 3.12% | ||||||||||||||||||
Albea Beauty Holdings SA | EUR | 8.750 | % | 11/01/2019 | 1,212,000 | 1,610,738 | (4) | |||||||||||
ARD Finance SA | USD | 11.125 | % | 06/01/2018 | 2,072,707 | 2,279,978 | (1)(3) | |||||||||||
Ardagh Packaging Finance PLC | USD | 9.125 | % | 10/15/2020 | 1,821,000 | 2,012,205 | (1) | |||||||||||
Ball Corp. | USD | 4.000 | % | 11/15/2023 | 885,000 | 849,600 |
Stone Harbor Investment Funds Annual Report | May 31, 2013 | 29 |
Table of Contents
Stone Harbor High Yield Bond Fund | Statements of Investments | |
May 31, 2013 |
Currency | Rate | Maturity Date | Principal Amount* | Market Value (Expressed in U.S. $) | ||||||||||||||
Containers/Packaging (continued) | ||||||||||||||||||
Reynolds Group Issuer LLC | USD | 9.875 | % | 08/15/2019 | 3,123,000 | $ | 3,415,781 | |||||||||||
Sealed Air Corp. | USD | 8.375 | % | 09/15/2021 | 1,636,000 | 1,897,760 | (1) | |||||||||||
|
| |||||||||||||||||
12,066,062 | ||||||||||||||||||
|
| |||||||||||||||||
Drillers/Services - 4.42% | ||||||||||||||||||
Basic Energy Services, Inc.: | ||||||||||||||||||
USD | 7.750 | % | 02/15/2019 | 850,000 | 894,625 | |||||||||||||
USD | 7.750 | % | 10/15/2022 | 1,989,000 | 2,103,367 | |||||||||||||
Hornbeck Offshore Services, Inc.: | ||||||||||||||||||
USD | 5.875 | % | 04/01/2020 | 856,000 | 896,660 | |||||||||||||
USD | 5.000 | % | 03/01/2021 | 1,115,000 | 1,112,212 | (1) | ||||||||||||
Offshore Group Investment Ltd. | USD | 7.125 | % | 04/01/2023 | 2,260,000 | 2,344,750 | (1) | |||||||||||
Pacific Drilling SA | USD | 5.375 | % | 06/01/2020 | 2,005,000 | 1,989,963 | (1) | |||||||||||
Parker Drilling Co. | USD | 9.125 | % | 04/01/2018 | 2,104,000 | 2,293,360 | ||||||||||||
SESI LLC: | ||||||||||||||||||
USD | 6.375 | % | 05/01/2019 | 1,633,000 | 1,771,805 | |||||||||||||
USD | 7.125 | % | 12/15/2021 | 795,000 | 896,363 | |||||||||||||
Trinidad Drilling Ltd. | USD | 7.875 | % | 01/15/2019 | 2,587,000 | 2,793,960 | (1) | |||||||||||
|
| |||||||||||||||||
17,097,065 | ||||||||||||||||||
|
| |||||||||||||||||
Electric - 3.33% | ||||||||||||||||||
The AES Corp. | USD | 7.375 | % | 07/01/2021 | 1,889,000 | 2,219,575 | ||||||||||||
Calpine Corp. | USD | 7.875 | % | 01/15/2023 | 1,605,000 | 1,773,525 | (1) | |||||||||||
Edison Mission Energy: | ||||||||||||||||||
USD | 7.750 | % | 06/15/2016 | 1,451,000 | 827,070 | (2) | ||||||||||||
USD | 7.200 | % | 05/15/2019 | 1,540,000 | 889,350 | (2) | ||||||||||||
USD | 7.625 | % | 05/15/2027 | 1,135,000 | 655,462 | (2) | ||||||||||||
GenOn Energy, Inc. | USD | 9.500 | % | 10/15/2018 | 2,992,000 | 3,508,120 | ||||||||||||
NRG Energy, Inc.: | ||||||||||||||||||
USD | 8.250 | % | 09/01/2020 | 931,000 | 1,048,539 | |||||||||||||
USD | 7.875 | % | 05/15/2021 | 1,750,000 | 1,960,000 | |||||||||||||
|
| |||||||||||||||||
12,881,641 | ||||||||||||||||||
|
| |||||||||||||||||
Environmental Services - 0.45% | ||||||||||||||||||
Clean Harbors, Inc. | USD | 5.250 | % | 08/01/2020 | 1,663,000 | 1,741,993 | ||||||||||||
|
| |||||||||||||||||
Exploration & Production - 8.70% | ||||||||||||||||||
Access Midstream Partners LP/ACMP Finance Corp. | USD | 4.875 | % | 05/15/2023 | 1,580,000 | 1,568,150 | ||||||||||||
Atlas Pipeline Partners LP/Atlas Pipeline Finance Corp. | USD | 4.750 | % | 11/15/2021 | 2,005,000 | 1,957,381 | (1) | |||||||||||
Bonanza Creek Energy, Inc. | USD | 6.750 | % | 04/15/2021 | 1,530,000 | 1,606,500 | (1) | |||||||||||
Calumet Specialty Products Partners LP/Calumet Finance Corp.: | ||||||||||||||||||
USD | 9.375 | % | 05/01/2019 | 870,000 | 972,225 | |||||||||||||
USD | 9.625 | % | 08/01/2020 | 942,000 | 1,073,880 | (1) | ||||||||||||
Chesapeake Energy Corp. | USD | 3.250 | % | 03/15/2016 | 1,165,000 | 1,159,175 | ||||||||||||
EP Energy LLC/EP Energy Finance, Inc., Series WI | USD | 9.375 | % | 05/01/2020 | 1,551,000 | 1,766,201 | ||||||||||||
EP Energy LLC/Everest Acquisition Finance, Inc., Series WI | USD | 6.875 | % | 05/01/2019 | 1,547,000 | 1,678,495 | ||||||||||||
Forest Oil Corp. | USD | 7.500 | % | 09/15/2020 | 1,680,000 | 1,696,800 | (1) | |||||||||||
Kodiak Oil & Gas Corp. | USD | 5.500 | % | 01/15/2021 | 1,175,000 | 1,220,531 | (1) | |||||||||||
Laredo Petroleum, Inc. | USD | 7.375 | % | 05/01/2022 | 1,054,000 | 1,164,670 |
30 | www.shiplp.com |
Table of Contents
Stone Harbor High Yield Bond Fund | Statements of Investments | |
May 31, 2013 |
Currency | Rate | Maturity Date | Principal Amount* | Market Value (Expressed in U.S. $) | ||||||||||||||
Exploration & Production (continued) | ||||||||||||||||||
Linn Energy LLC | USD | 7.750 | % | 02/01/2021 | 2,006,000 | $ | 2,136,390 | |||||||||||
MEG Energy Corp. | USD | 6.500 | % | 03/15/2021 | 1,491,000 | 1,550,640 | (1) | |||||||||||
Midstates Petroleum Co., Inc./Midstates Petroleum Co. LLC | USD | 10.750 | % | 10/01/2020 | 1,942,000 | 2,087,650 | (1) | |||||||||||
Oasis Petroleum, Inc. | USD | 7.250 | % | 02/01/2019 | 2,656,000 | 2,875,120 | ||||||||||||
Plains Exploration & Production Co.: | ||||||||||||||||||
USD | 7.625 | % | 04/01/2020 | 835,000 | 945,638 | |||||||||||||
USD | 6.500 | % | 11/15/2020 | 994,000 | 1,105,825 | |||||||||||||
QEP Resources, Inc. | USD | 5.375 | % | 10/01/2022 | 1,989,000 | 2,048,670 | ||||||||||||
SandRidge Energy, Inc.: | ||||||||||||||||||
USD | 8.750 | % | 01/15/2020 | 1,412,000 | 1,524,960 | |||||||||||||
USD | 7.500 | % | 03/15/2021 | 1,591,000 | 1,646,685 | |||||||||||||
Venoco, Inc. | USD | 8.875 | % | 02/15/2019 | 1,862,000 | 1,871,310 | ||||||||||||
|
| |||||||||||||||||
33,656,896 | ||||||||||||||||||
|
| |||||||||||||||||
Financial Other - 0.29% | ||||||||||||||||||
Nationstar Mortgage LLC/Nationstar Capital Corp. | USD | 6.500 | % | 07/01/2021 | 1,110,000 | 1,137,750 | (1) | |||||||||||
|
| |||||||||||||||||
Financial/Lease - 2.01% | ||||||||||||||||||
Aircastle Ltd. | USD | 6.750 | % | 04/15/2017 | 2,756,000 | 3,045,380 | ||||||||||||
Ally Financial, Inc. | USD | 8.000 | % | 11/01/2031 | 1,440,000 | 1,850,400 | ||||||||||||
Genworth Holdings, Inc. | USD | 7.625 | % | 09/24/2021 | 2,347,000 | 2,889,615 | ||||||||||||
|
| |||||||||||||||||
7,785,395 | ||||||||||||||||||
|
| |||||||||||||||||
Food/Beverage/Tobacco - 6.31% | ||||||||||||||||||
B&G Foods, Inc. | USD | 4.625 | % | 06/01/2021 | 1,810,000 | 1,810,000 | ||||||||||||
Bakkavor Finance 2 PLC | GBP | 8.250 | % | 02/15/2018 | 350,000 | 554,395 | (4) | |||||||||||
Boparan Finance PLC | EUR | 9.750 | % | 04/30/2018 | 831,000 | 1,208,891 | (4) | |||||||||||
Chiquita Brands International, Inc./Chiquita Brands LLC | USD | 7.875 | % | 02/01/2021 | 1,660,000 | 1,788,650 | (1) | |||||||||||
Dean Foods Co. | USD | 9.750 | % | 12/15/2018 | 2,494,000 | 2,886,805 | ||||||||||||
Del Monte Corp. | USD | 7.625 | % | 02/15/2019 | 2,917,000 | 3,037,326 | ||||||||||||
Hawk Acquisition Sub, Inc. | USD | 4.250 | % | 10/15/2020 | 1,885,000 | 1,875,575 | (1) | |||||||||||
Pilgrim’s Pride Corp. | USD | 7.875 | % | 12/15/2018 | 1,751,000 | 1,912,968 | ||||||||||||
Post Holdings, Inc. | USD | 7.375 | % | 02/15/2022 | 2,636,000 | 2,949,025 | ||||||||||||
R&R Ice Cream PLC | EUR | 9.250 | % | 05/10/2018 | 1,450,000 | 1,912,904 | (1)(3) | |||||||||||
Shearer’s Foods LLC/Chip Fin Corp. | USD | 9.000 | % | 11/01/2019 | 1,421,000 | 1,605,730 | (1) | |||||||||||
Smithfield Foods, Inc. | USD | 6.625 | % | 08/15/2022 | 2,534,000 | 2,888,760 | ||||||||||||
|
| |||||||||||||||||
24,431,029 | ||||||||||||||||||
|
| |||||||||||||||||
Gaming - 3.36% | ||||||||||||||||||
American Casino & Entertainment Properties LLC | USD | 11.000 | % | 06/15/2014 | 818,000 | 820,556 | ||||||||||||
Boyd Gaming Corp. | USD | 9.125 | % | 12/01/2018 | 1,881,000 | 2,050,290 | ||||||||||||
Isle of Capri Casinos, Inc. | USD | 5.875 | % | 03/15/2021 | 3,555,000 | 3,555,000 | (1) | |||||||||||
MGM Resorts International: | ||||||||||||||||||
USD | 8.625 | % | 02/01/2019 | 882,000 | 1,047,375 | |||||||||||||
USD | 6.625 | % | 12/15/2021 | 3,235,000 | 3,509,975 |
Stone Harbor Investment Funds Annual Report | May 31, 2013 | 31 |
Table of Contents
Stone Harbor High Yield Bond Fund | Statements of Investments | |
May 31, 2013 |
Currency | Rate | Maturity Date | Principal Amount* | Market Value (Expressed in U.S. $) | ||||||||||||||
Gaming (continued) | ||||||||||||||||||
Pinnacle Entertainment, Inc. | USD | 8.750 | % | 05/15/2020 | 1,853,000 | $ | 2,031,351 | |||||||||||
|
| |||||||||||||||||
13,014,547 | ||||||||||||||||||
|
| |||||||||||||||||
Gas Pipelines - 0.98% | ||||||||||||||||||
Copano Energy LLC | USD | 7.125 | % | 04/01/2021 | 1,412,000 | 1,634,390 | ||||||||||||
Sabine Pass Liquefaction LLC | USD | 5.625 | % | 02/01/2021 | 2,135,000 | 2,148,344 | (1) | |||||||||||
|
| |||||||||||||||||
3,782,734 | ||||||||||||||||||
|
| |||||||||||||||||
Healthcare - 7.35% | ||||||||||||||||||
Amsurg Corp. | USD | 5.625 | % | 11/30/2020 | 914,000 | 955,130 | (1) | |||||||||||
Biomet, Inc. | USD | 6.500 | % | 08/01/2020 | 1,850,000 | 1,954,062 | (1) | |||||||||||
Emergency Medical Services Corp., Series WI | USD | 8.125 | % | 06/01/2019 | 1,865,000 | 2,042,175 | ||||||||||||
Fresenius Medical Care US Finance II, Inc. | USD | 5.875 | % | 01/31/2022 | 1,921,000 | 2,161,125 | (1) | |||||||||||
HCA Holdings, Inc. | USD | 7.750 | % | 05/15/2021 | 859,000 | 951,342 | ||||||||||||
HCA, Inc.: | ||||||||||||||||||
USD | 7.500 | % | 02/15/2022 | 970,000 | 1,132,475 | |||||||||||||
USD | 5.875 | % | 03/15/2022 | 1,746,000 | 1,920,600 | |||||||||||||
Health Management Associates, Inc. | USD | 7.375 | % | 01/15/2020 | 1,797,000 | 1,969,961 | ||||||||||||
HealthSouth Corp. | USD | 8.125 | % | 02/15/2020 | 1,928,000 | 2,144,900 | ||||||||||||
Hologic, Inc. | USD | 6.250 | % | 08/01/2020 | 1,428,000 | 1,533,315 | ||||||||||||
IASIS Healthcare LLC | USD | 8.375 | % | 05/15/2019 | 1,739,000 | 1,825,950 | ||||||||||||
Kinetic Concepts, Inc./KCI USA, Inc.: | ||||||||||||||||||
USD | 10.500 | % | 11/01/2018 | 1,757,000 | 1,910,738 | |||||||||||||
USD | 12.500 | % | 11/01/2019 | 1,341,000 | 1,394,640 | |||||||||||||
Prospect Medical Holdings, Inc. | USD | 8.375 | % | 05/01/2019 | 1,797,000 | 1,949,745 | (1) | |||||||||||
Radiation Therapy Services, Inc. | USD | 9.875 | % | 04/15/2017 | 1,810,000 | 1,067,900 | ||||||||||||
United Surgical Partners International, Inc., Series WI | USD | 9.000 | % | 04/01/2020 | 2,187,000 | 2,454,908 | ||||||||||||
Universal Hospital Services, Inc. | USD | 7.625 | % | 08/15/2020 | 999,000 | 1,081,418 | ||||||||||||
|
| |||||||||||||||||
28,450,384 | ||||||||||||||||||
|
| |||||||||||||||||
Home Builders - 0.45% | ||||||||||||||||||
Lennar Corp. | USD | 5.000 | % | 11/15/2022 | 1,754,000 | 1,758,385 | (1) | |||||||||||
|
| |||||||||||||||||
Home Furnishings - 0.34% | ||||||||||||||||||
RSI Home Products, Inc. | USD | 6.875 | % | 03/01/2018 | 1,270,000 | 1,323,975 | (1) | |||||||||||
|
| |||||||||||||||||
Industrial Other - 1.37% | ||||||||||||||||||
Cleaver-Brooks, Inc. | USD | 8.750 | % | 12/15/2019 | 1,655,000 | 1,803,950 | (1) | |||||||||||
MasTec, Inc. | USD | 4.875 | % | 03/15/2023 | 2,410,000 | 2,385,900 | ||||||||||||
Park-Ohio Industries, Inc. | USD | 8.125 | % | 04/01/2021 | 994,000 | 1,113,280 | ||||||||||||
|
| |||||||||||||||||
5,303,130 | ||||||||||||||||||
|
| |||||||||||||||||
Leisure - 0.36% | ||||||||||||||||||
AMC Entertainment, Inc. | USD | 9.750 | % | 12/01/2020 | 1,191,000 | 1,381,560 | ||||||||||||
|
| |||||||||||||||||
Lodging - 0.82% | ||||||||||||||||||
Choice Hotels International, Inc. | USD | 5.750 | % | 07/01/2022 | 1,181,000 | 1,316,815 | ||||||||||||
RHP Hotel Properties LP/RHP Finance Corp. | USD | 5.000 | % | 04/15/2021 | 1,815,000 | 1,845,628 | (1) | |||||||||||
|
| |||||||||||||||||
3,162,443 | ||||||||||||||||||
|
|
32 | www.shiplp.com |
Table of Contents
Stone Harbor High Yield Bond Fund | Statements of Investments | |
May 31, 2013 |
Currency | Rate | Maturity Date | Principal | Market Value | ||||||||||||||
Media Cable - 5.34% | ||||||||||||||||||
Cablevision Systems Corp. | USD | 8.000 | % | 04/15/2020 | 1,213,000 | $ | 1,379,788 | |||||||||||
CCO Holdings LLC: | ||||||||||||||||||
USD | 6.625 | % | 01/31/2022 | 2,243,000 | 2,422,440 | |||||||||||||
USD | 5.125 | % | 02/15/2023 | 700,000 | 689,500 | |||||||||||||
DISH DBS Corp.: | ||||||||||||||||||
USD | 5.875 | % | 07/15/2022 | 1,512,000 | 1,523,340 | |||||||||||||
Series WI | USD | 5.000 | % | 03/15/2023 | 5,375,000 | 5,106,250 | ||||||||||||
Mediacom LLC | USD | 7.250 | % | 02/15/2022 | 2,004,000 | 2,189,370 | ||||||||||||
Nara Cable Funding Ltd. | USD | 8.875 | % | 12/01/2018 | 1,892,000 | 2,005,520 | (1) | |||||||||||
Unitymedia KabelBW GmbH | EUR | 9.500 | % | 03/15/2021 | 1,205,000 | 1,812,167 | (4) | |||||||||||
UPC Holding BV | EUR | 6.375 | % | 09/15/2022 | 2,625,000 | 3,531,252 | (4) | |||||||||||
|
| |||||||||||||||||
20,659,627 | ||||||||||||||||||
|
| |||||||||||||||||
Media Other - 3.83% | ||||||||||||||||||
Allbritton Communications Co. | USD | 8.000 | % | 05/15/2018 | 1,286,000 | 1,395,310 | ||||||||||||
AMC Networks, Inc. | USD | 7.750 | % | 07/15/2021 | 791,000 | 899,763 | ||||||||||||
Bonten Media Group, Inc. | USD | 9.000 | % | 06/01/2015 | 429,195 | 424,903 | (1) | |||||||||||
Gray Television, Inc. | USD | 7.500 | % | 10/01/2020 | 2,446,000 | 2,629,450 | ||||||||||||
Interep National Radio Sales, Inc., Series B | USD | 10.000 | % | 07/01/2008 | 3,768 | 0 | (2) | |||||||||||
Local TV Finance LLC | USD | 9.250 | % | 06/15/2015 | 901,000 | 905,505 | (1) | |||||||||||
Nexstar Broadcasting, Inc. | USD | 6.875 | % | 11/15/2020 | 1,917,000 | 2,051,190 | (1) | |||||||||||
Radio One, Inc. | USD | 12.500 | % | 05/24/2016 | 2,546,627 | 2,603,926 | ||||||||||||
Sinclair Television Group, Inc. | USD | 6.125 | % | 10/01/2022 | 1,248,000 | 1,307,280 | (1) | |||||||||||
Univision Communications, Inc.: | ||||||||||||||||||
USD | 7.875 | % | 11/01/2020 | 1,893,000 | 2,082,300 | (1) | ||||||||||||
USD | 8.500 | % | 05/15/2021 | 465,000 | 505,688 | (1) | ||||||||||||
|
| |||||||||||||||||
14,805,315 | ||||||||||||||||||
|
| |||||||||||||||||
Metals/Mining/Steel - 2.92% | ||||||||||||||||||
APERAM | USD | 7.750 | % | 04/01/2018 | 1,770,000 | 1,770,000 | (1) | |||||||||||
Arch Coal, Inc. | USD | 7.250 | % | 06/15/2021 | 1,249,000 | 1,111,610 | ||||||||||||
Cloud Peak Energy Resources LLC | USD | 8.500 | % | 12/15/2019 | 1,118,000 | 1,235,390 | ||||||||||||
CONSOL Energy, Inc. | USD | 8.250 | % | 04/01/2020 | 2,227,000 | 2,471,970 | ||||||||||||
Peabody Energy Corp., Series WI | USD | 6.250 | % | 11/15/2021 | 2,590,000 | 2,719,500 | ||||||||||||
Taseko Mines Ltd. | USD | 7.750 | % | 04/15/2019 | 1,941,000 | 1,989,525 | ||||||||||||
|
| |||||||||||||||||
11,297,995 | ||||||||||||||||||
|
| |||||||||||||||||
Non Captive Finance - 1.13% | ||||||||||||||||||
CIT Group, Inc. | USD | 5.250 | % | 03/15/2018 | 2,088,000 | 2,255,040 | ||||||||||||
International Lease Finance Corp. | USD | 8.250 | % | 12/15/2020 | 1,736,000 | 2,109,240 | ||||||||||||
|
| |||||||||||||||||
4,364,280 | ||||||||||||||||||
|
| |||||||||||||||||
Paper/Forest Products - 3.08% | ||||||||||||||||||
Ainsworth Lumber Co. Ltd. | USD | 7.500 | % | 12/15/2017 | 1,672,000 | 1,814,120 | (1) | |||||||||||
Cascades, Inc.: | ||||||||||||||||||
USD | 7.750 | % | 12/15/2017 | 1,392,000 | 1,468,560 | |||||||||||||
USD | 7.875 | % | 01/15/2020 | 1,113,000 | 1,199,258 | |||||||||||||
Louisiana-Pacific Corp. | USD | 7.500 | % | 06/01/2020 | 2,374,000 | 2,688,555 | ||||||||||||
Mercer International, Inc. | USD | 9.500 | % | 12/01/2017 | 1,547,000 | 1,693,965 | ||||||||||||
Portucel SA | EUR | 5.375 | % | 05/15/2020 | 1,200,000 | 1,600,764 | (1) |
Stone Harbor Investment Funds Annual Report | May 31, 2013 | 33 |
Table of Contents
Stone Harbor High Yield Bond Fund | Statements of Investments | |
May 31, 2013 |
Currency | Rate | Maturity Date | Principal | Market Value | ||||||||||||||||
Paper/Forest Products (continued) | ||||||||||||||||||||
Xerium Technologies, Inc. | USD | 8.875 | % | 06/15/2018 | 1,412,000 | $ | 1,468,480 | |||||||||||||
|
| |||||||||||||||||||
11,933,702 | ||||||||||||||||||||
|
| |||||||||||||||||||
Publishing/Printing - 0.37% | ||||||||||||||||||||
IDEARC, Inc. | USD | 8.000 | % | 11/15/2016 | 1,265,000 | 0 | (2) | |||||||||||||
Quebecor Media, Inc. | USD | 5.750 | % | 01/15/2023 | 1,404,000 | 1,446,120 | ||||||||||||||
|
| |||||||||||||||||||
1,446,120 | ||||||||||||||||||||
|
| |||||||||||||||||||
Restaurants - 0.58% | ||||||||||||||||||||
Landry’s, Inc. | USD | 9.375 | % | 05/01/2020 | 2,068,000 | 2,259,290 | (1) | |||||||||||||
|
| |||||||||||||||||||
Retail Food/Drug - 0.39% | ||||||||||||||||||||
Albertsons, Inc.: | ||||||||||||||||||||
USD | 8.700 | % | 05/01/2030 | 577,000 | 504,875 | |||||||||||||||
USD | 8.000 | % | 05/01/2031 | 1,193,000 | 996,155 | |||||||||||||||
|
| |||||||||||||||||||
1,501,030 | ||||||||||||||||||||
|
| |||||||||||||||||||
Retail Non Food/Drug - 2.82% | ||||||||||||||||||||
The Bon-Ton Department Stores, Inc. | USD | 8.000 | % | 06/15/2021 | 1,355,000 | 1,397,344 | (1) | |||||||||||||
Claire’s Stores, Inc.: | ||||||||||||||||||||
USD | 9.250 | % | 06/01/2015 | 437,000 | 438,643 | |||||||||||||||
USD | 9.625 | % | 06/01/2015 | 762,282 | 764,196 | (3) | ||||||||||||||
Express LLC | USD | 8.750 | % | 03/01/2018 | 1,782,000 | 1,935,697 | ||||||||||||||
GRD Holdings III Corp. | USD | 10.750 | % | 06/01/2019 | 1,050,000 | 1,162,875 | (1) | |||||||||||||
Limited Brands, Inc.: | ||||||||||||||||||||
USD | 6.950 | % | 03/01/2033 | 1,145,000 | 1,192,231 | |||||||||||||||
USD | 7.600 | % | 07/15/2037 | 1,113,000 | 1,202,040 | |||||||||||||||
Petco Holdings, Inc. | USD | 8.500 | % | 10/15/2017 | 1,021,000 | 1,050,354 | (1)(3) | |||||||||||||
RadioShack Corp. | USD | 6.750 | % | 05/15/2019 | 2,247,000 | 1,769,512 | ||||||||||||||
|
| |||||||||||||||||||
10,912,892 | ||||||||||||||||||||
|
| |||||||||||||||||||
Satellite - 0.55% | ||||||||||||||||||||
Intelsat Jackson Holdings SA | USD | 7.250 | % | 04/01/2019 | 1,956,000 | 2,117,370 | ||||||||||||||
|
| |||||||||||||||||||
Services Other - 2.61% | ||||||||||||||||||||
Brickman Group Holdings, Inc. | USD | 9.125 | % | 11/01/2018 | 1,565,000 | 1,701,937 | (1) | |||||||||||||
Coinstar, Inc. | USD | 6.000 | % | 03/15/2019 | 2,150,000 | 2,198,375 | (1) | |||||||||||||
Nuance Communications, Inc. | USD | 5.375 | % | 08/15/2020 | 1,674,000 | 1,703,295 | (1) | |||||||||||||
ServiceMaster Co.: | ||||||||||||||||||||
USD | 8.000 | % | 02/15/2020 | 1,121,000 | 1,158,834 | |||||||||||||||
USD | 7.000 | % | 08/15/2020 | 1,611,000 | 1,604,959 | |||||||||||||||
USD | 7.450 | % | 08/15/2027 | 258,000 | 228,330 | |||||||||||||||
TransUnion Holding Co., Inc.: | ||||||||||||||||||||
USD | 9.625 | % | 06/15/2018 | 616,000 | 666,820 | |||||||||||||||
USD | 8.125 | % | 06/15/2018 | 776,000 | 828,380 | (1)(3) | ||||||||||||||
|
| |||||||||||||||||||
10,090,930 | ||||||||||||||||||||
|
| |||||||||||||||||||
Technology - 5.00% | ||||||||||||||||||||
Amkor Technology, Inc.: | ||||||||||||||||||||
USD | 6.375 | % | 10/01/2022 | 2,188,000 | 2,226,290 | |||||||||||||||
USD | 6.375 | % | 10/01/2022 | 275,000 | 279,125 | (1) |
34 | www.shiplp.com |
Table of Contents
Stone Harbor High Yield Bond Fund | Statements of Investments | |
May 31, 2013 |
Currency | Rate | Maturity Date | Principal | Market Value | ||||||||||||||
Technology (continued) | ||||||||||||||||||
CommScope, Inc. | USD | 8.250 | % | 01/15/2019 | 1,987,000 | $ | 2,185,700 | (1) | ||||||||||
CyrusOne LP/CyrusOne Finance Corp. | USD | 6.375 | % | 11/15/2022 | 2,099,000 | 2,251,177 | (1) | |||||||||||
First Data Corp.: | ||||||||||||||||||
USD | 12.625 | % | 01/15/2021 | 1,869,000 | 2,051,227 | |||||||||||||
USD | 7.375 | % | 06/15/2019 | 1,917,000 | 2,032,020 | (1) | ||||||||||||
iGATE Corp. | USD | 9.000 | % | 05/01/2016 | 1,750,000 | 1,890,000 | ||||||||||||
Infor US, Inc. | USD | 11.500 | % | 07/15/2018 | 2,339,000 | 2,754,173 | ||||||||||||
NCR Corp. | USD | 5.000 | % | 07/15/2022 | 2,052,000 | 2,077,650 | ||||||||||||
SSI Investments II | USD | 11.125 | % | 06/01/2018 | 1,440,000 | 1,598,400 | ||||||||||||
|
| |||||||||||||||||
19,345,762 | ||||||||||||||||||
|
| |||||||||||||||||
Textile/Apparel - 1.45% | ||||||||||||||||||
Burlington Holdings LLC/Burlington Holding Finance, Inc. | USD | 9.000 | % | 02/15/2018 | 1,015,000 | 1,036,569 | (1)(3) | |||||||||||
Levi Strauss & Co.: | ||||||||||||||||||
USD | 6.875 | % | 05/01/2022 | 1,641,000 | 1,827,664 | |||||||||||||
USD | 6.875 | % | 05/01/2022 | 190,000 | 211,612 | (1) | ||||||||||||
Quiksilver, Inc. | USD | 6.875 | % | 04/15/2015 | 2,533,000 | 2,536,192 | ||||||||||||
|
| |||||||||||||||||
5,612,037 | ||||||||||||||||||
|
| |||||||||||||||||
Wireless - 4.58% | ||||||||||||||||||
Cricket Communications, Inc. | USD | 7.750 | % | 10/15/2020 | 2,500,000 | 2,506,250 | ||||||||||||
Crown Castle International Corp. | USD | 5.250 | % | 01/15/2023 | 1,056,000 | 1,073,160 | ||||||||||||
Matterhorn Mobile Holdings SA | EUR | 8.250 | % | 02/15/2020 | 1,248,000 | 1,747,797 | (4) | |||||||||||
Mobile Challenger Intermediate Group SA | EUR | 8.750 | % | 03/15/2019 | 1,200,000 | 1,571,395 | (3)(4) | |||||||||||
NII International Telecom SCA | USD | 11.375 | % | 08/15/2019 | 1,170,000 | 1,301,625 | (1) | |||||||||||
Sprint Capital Corp. | USD | 8.750 | % | 03/15/2032 | 4,369,000 | 5,111,730 | ||||||||||||
Wind Acquisition Finance SA: | ||||||||||||||||||
USD | 12.250 | % | 07/15/2017 | 2,995,677 | 3,171,673 | (1)(3) | ||||||||||||
USD | 6.500 | % | 04/30/2020 | 1,210,000 | 1,249,325 | (1) | ||||||||||||
|
| |||||||||||||||||
17,732,955 | ||||||||||||||||||
|
| |||||||||||||||||
Wirelines - 5.50% | ||||||||||||||||||
CenturyLink, Inc.: | ||||||||||||||||||
Series T | USD | 5.800 | % | 03/15/2022 | 1,870,000 | 1,921,425 | ||||||||||||
Series U | USD | 7.650 | % | 03/15/2042 | 1,659,000 | 1,659,000 | ||||||||||||
Cincinnati Bell, Inc.: | ||||||||||||||||||
USD | 8.750 | % | 03/15/2018 | 1,666,000 | 1,715,980 | |||||||||||||
USD | 8.375 | % | 10/15/2020 | 2,065,000 | 2,204,387 | |||||||||||||
Citizens Communications Co. | USD | 9.000 | % | 08/15/2031 | 4,647,000 | 4,832,880 | ||||||||||||
Level 3 Financing, Inc., Series WI | USD | 7.000 | % | 06/01/2020 | 2,280,000 | 2,408,250 | ||||||||||||
Softbank Corp. | USD | 4.500 | % | 04/15/2020 | 1,780,000 | 1,806,632 | (1) | |||||||||||
Syniverse Holdings, Inc. | USD | 9.125 | % | 01/15/2019 | 811,000 | 890,073 | ||||||||||||
Windstream Corp. | USD | 7.500 | % | 04/01/2023 | 3,631,000 | 3,830,705 | ||||||||||||
|
| |||||||||||||||||
21,269,332 | ||||||||||||||||||
|
| |||||||||||||||||
TOTAL CORPORATE BONDS | 363,057,031 | |||||||||||||||||
|
| |||||||||||||||||
(Cost $342,850,551) |
Stone Harbor Investment Funds Annual Report | May 31, 2013 | 35 |
Table of Contents
Stone Harbor High Yield Bond Fund | Statements of Investments | |
May 31, 2013 |
Currency | Rate | Maturity Date | Principal | Market Value | ||||||||||||||
CONVERTIBLE CORPORATE BONDS - 1.33% | ||||||||||||||||||
Aerospace/Defense - 0.11% | ||||||||||||||||||
Triumph Group, Inc. | USD | 2.625 | % | 10/01/2026 | 150,000 | $ | 428,625 | |||||||||||
|
| |||||||||||||||||
Airlines - 0.03% | ||||||||||||||||||
AirTran Holdings, Inc. | USD | 5.250 | % | 11/01/2016 | 87,000 | 129,358 | ||||||||||||
|
| |||||||||||||||||
Automotive - 0.11% | ||||||||||||||||||
TRW Automotive, Inc. | USD | 3.500 | % | 12/01/2015 | 202,000 | 441,496 | ||||||||||||
|
| |||||||||||||||||
Drillers/Services - 0.11% | ||||||||||||||||||
Hornbeck Offshore Services, Inc. | USD | 1.500 | % | 09/01/2019 | 77,000 | 95,721 | (1) | |||||||||||
Subsea 7 SA, Series ACY | USD | 2.250 | % | 10/11/2013 | 300,000 | 323,550 | ||||||||||||
|
| |||||||||||||||||
419,271 | ||||||||||||||||||
|
| |||||||||||||||||
Exploration & Production - 0.04% | ||||||||||||||||||
Stone Energy Corp. | USD | 1.750 | % | 03/01/2017 | 162,000 | 156,735 | ||||||||||||
|
| |||||||||||||||||
Healthcare - 0.04% | ||||||||||||||||||
Dendreon Corp. | USD | 2.875 | % | 01/15/2016 | 187,000 | 140,718 | ||||||||||||
|
| |||||||||||||||||
Home Builders - 0.11% | ||||||||||||||||||
The Ryland Group, Inc. | USD | 0.250 | % | 06/01/2019 | 442,000 | 432,884 | ||||||||||||
|
| |||||||||||||||||
Industrial Other - 0.08% | ||||||||||||||||||
Altra Holdings, Inc. | USD | 2.750 | % | 03/01/2031 | 235,000 | 293,897 | ||||||||||||
|
| |||||||||||||||||
Lodging - 0.01% | ||||||||||||||||||
Home Inns & Hotels Management, Inc. | USD | 2.000 | % | 12/15/2015 | 45,000 | 40,781 | ||||||||||||
|
| |||||||||||||||||
Metals/Mining/Steel - 0.08% | ||||||||||||||||||
RTI International Metals, Inc.: | ||||||||||||||||||
USD | 3.000 | % | 12/01/2015 | 259,000 | 288,947 | |||||||||||||
USD | 1.625 | % | 10/15/2019 | 33,000 | 33,351 | |||||||||||||
|
| |||||||||||||||||
322,298 | ||||||||||||||||||
|
| |||||||||||||||||
Railroads - 0.06% | ||||||||||||||||||
Greenbrier Cos., Inc. | USD | 3.500 | % | 04/01/2018 | 237,000 | 249,294 | ||||||||||||
|
| |||||||||||||||||
Technology - 0.55% | ||||||||||||||||||
Alcatel-Lucent, Series ALU | EUR | 5.000 | % | 01/01/2015 | 1,500,000 | 63,424 | ||||||||||||
Alcatel-Lucent USA, Inc., Series A | USD | 2.875 | % | 06/15/2023 | 262,000 | 248,900 | ||||||||||||
Callidus Software, Inc. | USD | 4.750 | % | 06/01/2016 | 157,000 | 161,317 | ||||||||||||
Ciena Corp. | USD | 4.000 | % | 03/15/2015 | 210,000 | 237,825 | (1) | |||||||||||
Comtech Telecommunications Corp. | USD | 3.000 | % | 05/01/2029 | 646,000 | 669,014 | ||||||||||||
Intel Corp. | USD | 2.950 | % | 12/15/2035 | 267,000 | 296,871 | ||||||||||||
Micron Technology, Inc. | USD | 1.875 | % | 06/01/2027 | 97,000 | 113,551 | ||||||||||||
NetApp, Inc. | USD | 1.750 | % | 06/01/2013 | 56,000 | 64,120 | ||||||||||||
NetSuite, Inc. | USD | 0.250 | % | 06/01/2018 | 17,000 | 17,340 | (1) | |||||||||||
Nuance Communications, Inc. | USD | 2.750 | % | 11/01/2031 | 170,000 | 177,012 |
36 | www.shiplp.com |
Table of Contents
Stone Harbor High Yield Bond Fund | Statements of Investments | |
May 31, 2013 |
Currency | Rate | Maturity Date | Principal | Market Value | ||||||||||||||
Technology (continued) | ||||||||||||||||||
Symantec Corp., Series B | USD | 1.000 | % | 06/15/2013 | 55,000 | $ | 65,862 | |||||||||||
|
| |||||||||||||||||
2,115,236 | ||||||||||||||||||
|
| |||||||||||||||||
TOTAL CONVERTIBLE CORPORATE BONDS | 5,170,593 | |||||||||||||||||
|
| |||||||||||||||||
(Cost $5,196,789) | ||||||||||||||||||
BANK LOANS - 2.43%(5) | ||||||||||||||||||
Capital Goods - 0.22% | ||||||||||||||||||
Gardner Denver Inc. - Bridge Facility Term Loan | USD | 0.000 | % | 08/12/2013 | 860,000 | 860,000 | (6) | |||||||||||
|
| |||||||||||||||||
Electric - 0.88% | ||||||||||||||||||
Texas Competitive Electric Holdings Co. LLC - 2017 Term Loan: | ||||||||||||||||||
USD | 4.699 | % | 06/10/2013 | 46,932 | 34,160 | |||||||||||||
USD | 4.699 | % | 06/10/2013 | 3,077,595 | 2,239,913 | |||||||||||||
USD | 4.775 | % | 08/09/2013 | 1,528,082 | 1,112,156 | |||||||||||||
|
| |||||||||||||||||
3,386,229 | ||||||||||||||||||
|
| |||||||||||||||||
Food/Beverage/Tobacco - 0.37% | ||||||||||||||||||
New HB Aquisition LLC Term B Loan: | ||||||||||||||||||
USD | 6.750 | % | 06/28/2013 | 1,301,800 | 1,334,345 | |||||||||||||
USD | 6.750 | % | 06/28/2013 | 113,200 | 116,030 | |||||||||||||
|
| |||||||||||||||||
1,450,375 | ||||||||||||||||||
|
| |||||||||||||||||
Gaming - 0.46% | ||||||||||||||||||
Caesars Entertainment Operating Co., Inc. - Term B - 6 Loan | USD | 5.443 | % | 06/25/2013 | 1,995,971 | 1,792,631 | ||||||||||||
|
| |||||||||||||||||
Technology - 0.50% | ||||||||||||||||||
Alcatel-Lucent USA Inc. Term Loan | USD | 7.250 | % | 06/28/2013 | 1,890,263 | 1,915,664 | ||||||||||||
|
| |||||||||||||||||
TOTAL BANK LOANS | 9,404,899 | |||||||||||||||||
|
| |||||||||||||||||
(Cost $10,388,229) | ||||||||||||||||||
COMMON STOCKS - 0.16% | ||||||||||||||||||
Chemicals - 0.01% | ||||||||||||||||||
LyondellBasell Industries NV | USD | 340 | 22,661 | |||||||||||||||
|
| |||||||||||||||||
Paper/Forest Products - 0.12% | ||||||||||||||||||
NewPage Corp. | USD | 4,860 | 461,700 | (7) | ||||||||||||||
|
| |||||||||||||||||
Publishing - 0.03% | ||||||||||||||||||
Tribune Co. | USD | 2,226 | 126,325 | (7) | ||||||||||||||
|
| |||||||||||||||||
Transport Other - 0.00%(8) | ||||||||||||||||||
General Maritime | USD | 1,887 | 19 | (7) | ||||||||||||||
|
| |||||||||||||||||
TOTAL COMMON STOCKS | 610,705 | |||||||||||||||||
|
| |||||||||||||||||
(Cost $510,665) |
Stone Harbor Investment Funds Annual Report | May 31, 2013 | 37 |
Table of Contents
Stone Harbor High Yield Bond Fund | Statements of Investments | |
May 31, 2013 |
Currency | Rate | Maturity Date | Shares* | Market Value | ||||||||||||||
PREFERRED STOCKS - 0.13% | ||||||||||||||||||
Exploration & Production - 0.13% | ||||||||||||||||||
Apache Corp. | USD | 6.000 | % | 08/01/2013 | 2,802 | $ | 131,106 | |||||||||||
SandRidge Energy, Inc. | USD | 8.500 | % | 12/31/2049 | 3,701 | 364,548 | ||||||||||||
|
| |||||||||||||||||
495,654 | ||||||||||||||||||
|
| |||||||||||||||||
TOTAL PREFERRED STOCKS | 495,654 | |||||||||||||||||
|
| |||||||||||||||||
(Cost $533,121) | ||||||||||||||||||
WARRANTS - 0.00%(7) | ||||||||||||||||||
Transportation Non Air/Rail - 0.00% | ||||||||||||||||||
General Maritime | ||||||||||||||||||
expires 05/17/2017, strike price $0.010 | USD | 2,919 | 0 | |||||||||||||||
|
| |||||||||||||||||
TOTAL WARRANTS | 0 | |||||||||||||||||
|
| |||||||||||||||||
(Cost $0) | ||||||||||||||||||
SHORT TERM INVESTMENTS - 0.52% | ||||||||||||||||||
Money Market Mutual Funds - 0.52% | ||||||||||||||||||
Dreyfus Institutional Cash Advantage Fund - Institutional Advantage Class (7 - Day Yield) | USD | 0.07001 | % | N/A | 2,026,340 | 2,026,340 | ||||||||||||
|
| |||||||||||||||||
TOTAL SHORT TERM INVESTMENTS | 2,026,340 | |||||||||||||||||
|
| |||||||||||||||||
(Cost $2,026,340) | ||||||||||||||||||
Total Investments - 98.39% | 380,765,222 | |||||||||||||||||
(Cost $361,505,695) | ||||||||||||||||||
Other Assets in Excess of Liabilities - 1.61% | 6,217,078 | |||||||||||||||||
|
| |||||||||||||||||
Net Assets - 100.00% | $ | 386,982,300 | ||||||||||||||||
|
|
* The principal amount of each security is stated in the currency in which the security is denominated. See below.
EUR | - | Euro Currency | ||||
GBP | - | Great British Pound | ||||
USD | - | United States Dollar |
38 | www.shiplp.com |
Table of Contents
Stone Harbor High Yield Bond Fund | Statements of Investments | |
May 31, 2013 |
(1) | Security exempt from registration under Rule 144A of the Securities Act of 1933. Such securities may normally be sold to qualified institutional buyers in transactions exempt from registration. Total market value of Rule 144A securities amounts to $119,554,700, which represents approximately 30.89% of net assets as of May 31, 2013. |
(2) | Security is currently in default/non-income producing. |
(3) | Pay-in-kind securities. |
(4) | Securities were originally issued pursuant to Regulation S under the Securities Act of 1933, which exempts securities offered and sold outside of the United States from registration. Such securities cannot be sold in the United States without either an effective registration statement filed pursuant to the Securities Act of 1933, or pursuant to an exemption from registration. As of May 31, 2013, the aggregate market value of those securities was $12,036,635, which represents approximately 3.11% of net assets. |
(5) | Bank loans generally pay interest at rates which are periodically determined by reference to a base lending rate plus a premium. All loans carry a variable rate of interest. These base lending rates are generally (i) the Prime Rate offered by one or more major United States banks, (ii) the lending rate offered by one or more European banks such as the London Interbank Offered Rate (“LIBOR”) or (iii) the Certificate of Deposit rate. Rate shown represents the weighted average rate at May 31, 2013. Bank Loans, while exempt from registration, under the Securities Act of 1933, contain certain restrictions on resale and cannot be sold publicly. Floating rate bank loans often require prepayments from excess cash flow or permit the borrower to repay at its election. The degree to which borrowers repay, whether as a contractual requirement or at their election, cannot be predicted with accuracy. As a result, the actual remaining maturity may be substantially less than the stated maturity shown. |
(6) | Position or a portion of the position represents an unfunded loan commitment. At period end, the total principal amount and market value of unfunded commitments totaled $860,000 and $860,000 respectively. The coupon rate will be determined at time of settlement. |
(7) | Non-income producing security. |
(8) | Amount represents less than 0.005% of net assets. |
Common Abbreviations: | ||||||
BV | - | Besloten Vennootschap is the Dutch term for private limited liability company. | ||||
GmbH | - | Gesellschaft mit beschrankter Haftung is the German term for a company with limited liability. | ||||
LLC | - | Limited Liability Corporation. | ||||
LP | - | Limited Partnership. | ||||
Ltd. | - | Limited. | ||||
NV | - | Naamloze Vennootschap is the Dutch term for a public limited liability corporation. | ||||
PLC | - | Public Limited Company. | ||||
SA | - | Generally designates corporations in various countries, mostly those employing the civil law. | ||||
SCA | - | Societe en commandite pe actiuni is the Romanian term for limited liability partnership. |
OUTSTANDING FORWARD FOREIGN CURRENCY CONTRACTS
Counterparty | Foreign Currency | Contracted Amount* | Purchase/Sale Contract | Settlement Date | Current Value | Unrealized Appreciation/ (Depreciation) | ||||||||||||||
JPMorgan Chase & Co. | EUR | 12,140,224 | Sale | 06/17/2013 | $ | 15,780,741 | $ | 226,989 | ||||||||||||
JPMorgan Chase & Co. | EUR | 741,334 | Purchase | 06/17/2013 | 963,640 | 9,282 | ||||||||||||||
JPMorgan Chase & Co. | GBP | 377,300 | Sale | 06/17/2013 | 573,204 | 14,534 | ||||||||||||||
|
| |||||||||||||||||||
$ | 250,805 | |||||||||||||||||||
|
| |||||||||||||||||||
JPMorgan Chase & Co. | EUR | 1,800,986 | Sale | 06/17/2013 | $ | 2,341,052 | $ | (8,040 | ) | |||||||||||
|
| |||||||||||||||||||
$ | (8,040 | ) | ||||||||||||||||||
|
|
* The contracted amount is stated in the currency in which the security is denominated.
See Notes to Financial Statements.
Stone Harbor Investment Funds Annual Report | May 31, 2013 | 39 |
Table of Contents
Statements of Investments | ||
May 31, 2013 |
Currency | Rate | Maturity Date | Principal Amount* | Market Value (Expressed in U.S. $) | ||||||||||||||
SOVEREIGN DEBT OBLIGATIONS - 58.70% | ||||||||||||||||||
Brazil - 2.03% | ||||||||||||||||||
Nota Do Tesouro Nacional: | ||||||||||||||||||
BRL | 10.000% | 01/01/2017 | 18,840,000 | $ | 8,930,092 | |||||||||||||
BRL | 6.000% | 08/15/2020 | 34,555,767 | 17,905,015 | ||||||||||||||
BRL | 10.000% | 01/01/2023 | 28,851,000 | 13,275,164 | ||||||||||||||
Nota Do Tesouro Nacional -Series B | BRL | 6.000% | 08/15/2022 | 18,887,572 | 9,875,766 | |||||||||||||
|
| |||||||||||||||||
49,986,037 | ||||||||||||||||||
|
| |||||||||||||||||
Chile - 0.14% | ||||||||||||||||||
Republic of Chile: | ||||||||||||||||||
CLP | 5.500% | 08/05/2020 | 890,000,000 | 1,845,186 | ||||||||||||||
CLP | 6.000% | 01/01/2022 | 770,000,000 | 1,659,488 | (1) | |||||||||||||
|
| |||||||||||||||||
3,504,674 | ||||||||||||||||||
|
| |||||||||||||||||
Colombia - 2.84% | ||||||||||||||||||
Bogota Distrio Capital | COP | 9.750% | 07/26/2028 | 54,157,000,000 | 41,209,071 | (2) | ||||||||||||
Republic of Colombia: | ||||||||||||||||||
COP | 12.000% | 10/22/2015 | 14,340,000,000 | 8,785,955 | ||||||||||||||
COP | 7.750% | 04/14/2021 | 24,983,000,000 | 15,398,952 | ||||||||||||||
COP | 9.850% | 06/28/2027 | 6,092,000,000 | 4,509,626 | ||||||||||||||
|
| |||||||||||||||||
69,903,604 | ||||||||||||||||||
|
| |||||||||||||||||
Hungary - 3.25% | ||||||||||||||||||
Hungarian Government: | ||||||||||||||||||
HUF | 5.500% | 02/12/2014 | 1,525,690,000 | 6,746,938 | ||||||||||||||
HUF | 6.750% | 08/22/2014 | 414,880,000 | 1,873,375 | ||||||||||||||
HUF | 8.000% | 02/12/2015 | 4,695,930,000 | 21,805,778 | ||||||||||||||
HUF | 7.750% | 08/24/2015 | 4,765,350,000 | 22,347,323 | ||||||||||||||
HUF | 5.500% | 12/22/2016 | 1,537,980,000 | 6,927,001 | ||||||||||||||
HUF | 6.750% | 02/24/2017 | 1,184,190,000 | 5,532,558 | ||||||||||||||
HUF | 6.750% | 11/24/2017 | 1,997,920,000 | 9,391,813 | ||||||||||||||
HUF | 5.500% | 12/20/2018 | 1,199,000,000 | 5,366,770 | ||||||||||||||
|
| |||||||||||||||||
79,991,556 | ||||||||||||||||||
|
| |||||||||||||||||
Indonesia - 1.25% | ||||||||||||||||||
Indonesia Government: | ||||||||||||||||||
IDR | 5.250% | 05/15/2018 | 23,850,000,000 | 2,443,438 | ||||||||||||||
IDR | 7.000% | 05/15/2022 | 66,500,000,000 | 7,315,340 | ||||||||||||||
IDR | 5.625% | 05/15/2023 | 138,500,000,000 | 13,821,720 | ||||||||||||||
IDR | 6.125% | 05/15/2028 | 58,300,000,000 | 5,693,104 | ||||||||||||||
IDR | 6.625% | 05/15/2033 | 15,000,000,000 | 1,491,577 | ||||||||||||||
|
| |||||||||||||||||
30,765,179 | ||||||||||||||||||
|
| |||||||||||||||||
Malaysia - 4.84% | ||||||||||||||||||
Malaysian Government: | ||||||||||||||||||
MYR | 4.012% | 09/15/2017 | 91,000,000 | 30,157,148 | ||||||||||||||
MYR | 3.314% | 10/31/2017 | 75,510,000 | 24,390,291 | ||||||||||||||
MYR | 3.260% | 03/01/2018 | 20,230,000 | 6,521,384 | ||||||||||||||
MYR | 3.580% | 09/28/2018 | 9,960,000 | 3,252,507 | ||||||||||||||
MYR | 3.492% | 03/31/2020 | 40,920,000 | 13,276,882 | ||||||||||||||
MYR | 4.160% | 07/15/2021 | 35,740,000 | 12,138,222 | ||||||||||||||
MYR | 3.418% | 08/15/2022 | 40,980,000 | 13,408,751 | ||||||||||||||
MYR | 3.480% | 03/15/2023 | 26,780,000 | 8,710,629 | ||||||||||||||
MYR | 4.392% | 04/15/2026 | 10,350,000 | 3,648,717 |
40 | www.shiplp.com |
Table of Contents
Stone Harbor Local Markets Fund | Statements of Investments | |
May 31, 2013 |
Currency | Rate | Maturity Date | Principal Amount* | Market Value (Expressed in U.S. $) | ||||||||||||||
Malaysia (continued) | ||||||||||||||||||
Malaysian Government (continued) | ||||||||||||||||||
MYR | 3.844% | 04/15/2033 | 11,160,000 | $ | 3,673,185 | |||||||||||||
|
| |||||||||||||||||
119,177,716 | ||||||||||||||||||
|
| |||||||||||||||||
Mexico - 11.55% | ||||||||||||||||||
Mexican Bonos: | ||||||||||||||||||
MXN | 8.000% | 12/17/2015 | 1,000 | 85 | ||||||||||||||
MXN | 6.250% | 06/16/2016 | 49,040,000 | 4,039,776 | ||||||||||||||
MXN | 5.000% | 06/15/2017 | 162,495,000 | 12,942,986 | ||||||||||||||
MXN | 7.750% | 12/14/2017 | 27,570,000 | 2,434,887 | ||||||||||||||
MXN | 8.000% | 06/11/2020 | 336,024,000 | 30,845,360 | ||||||||||||||
MXN | 6.500% | 06/10/2021 | 457,649,000 | 38,789,478 | ||||||||||||||
MXN | 6.500% | 06/09/2022 | 525,095,000 | 44,470,008 | ||||||||||||||
MXN | 7.500% | 06/03/2027 | 205,140,000 | 18,794,161 | ||||||||||||||
MXN | 8.500% | 05/31/2029 | 62,000,000 | 6,129,094 | ||||||||||||||
MXN | 7.750% | 05/29/2031 | 392,760,000 | 35,949,718 | ||||||||||||||
Mexican Udibonos: | ||||||||||||||||||
MXN | 3.500% | 12/14/2017 | 3,771,378 | 328,328 | ||||||||||||||
MXN | 4.000% | 06/13/2019 | 25,357,557 | 2,293,808 | ||||||||||||||
MXN | 2.500% | 12/10/2020 | 729,667,436 | 60,824,739 | ||||||||||||||
MXN | 2.000% | 06/09/2022 | 337,052,057 | 26,726,086 | ||||||||||||||
|
| |||||||||||||||||
284,568,514 | ||||||||||||||||||
|
| |||||||||||||||||
Nigeria - 0.36% | ||||||||||||||||||
Nigerian Government Bond: | ||||||||||||||||||
NGN | 15.100% | 04/27/2017 | 235,230,000 | 1,608,697 | ||||||||||||||
NGN | 10.700% | 05/30/2018 | 69,000,000 | 409,526 | ||||||||||||||
NGN | 16.000% | 06/29/2019 | 350,000,000 | 2,547,104 | ||||||||||||||
NGN | 16.390% | 01/27/2022 | 558,000,000 | 4,442,419 | ||||||||||||||
|
| |||||||||||||||||
9,007,746 | ||||||||||||||||||
|
| |||||||||||||||||
Poland - 4.75% | ||||||||||||||||||
Republic of Poland: | ||||||||||||||||||
PLN | 3.000% | 08/24/2016 | 129,196,356 | 41,785,535 | ||||||||||||||
PLN | 3.750% | 04/25/2018 | 31,850,000 | 9,957,119 | ||||||||||||||
PLN | 5.750% | 10/25/2021 | 15,850,000 | 5,618,220 | ||||||||||||||
PLN | 5.750% | 09/23/2022 | 10,000,000 | 3,570,918 | ||||||||||||||
PLN | 4.000% | 10/25/2023 | 178,150,000 | 56,108,584 | ||||||||||||||
|
| |||||||||||||||||
117,040,376 | ||||||||||||||||||
|
| |||||||||||||||||
Romania - 0.18% | ||||||||||||||||||
Romania Government: | ||||||||||||||||||
RON | 6.000% | 10/19/2013 | 9,870,000 | 2,939,273 | ||||||||||||||
RON | 5.850% | 07/28/2014 | 70,000 | 21,023 | ||||||||||||||
RON | 6.250% | 10/25/2014 | 4,930,000 | 1,492,633 | ||||||||||||||
|
| |||||||||||||||||
4,452,929 | ||||||||||||||||||
|
| |||||||||||||||||
Russia - 9.45% | ||||||||||||||||||
Russian Federation: | ||||||||||||||||||
RUB | 7.100% | 03/13/2014 | 435,700,000 | 13,742,560 | ||||||||||||||
RUB | 7.000% | 06/03/2015 | 1,113,610,000 | 35,562,891 | ||||||||||||||
RUB | 6.880% | 07/15/2015 | 174,490,000 | 5,549,340 | ||||||||||||||
RUB | 7.350% | 01/20/2016 | 586,610,000 | 18,882,437 | ||||||||||||||
RUB | 7.400% | 06/14/2017 | 304,200,000 | 9,846,016 | ||||||||||||||
RUB | 6.200% | 01/31/2018 | 66,500,000 | 2,069,657 |
Stone Harbor Investment Funds Annual Report | May 31, 2013 | 41 |
Table of Contents
Stone Harbor Local Markets Fund | Statements of Investments | |
May 31, 2013 |
Currency | Rate | Maturity Date | Principal Amount* | Market Value | ||||||||||||||
Russia (continued) | ||||||||||||||||||
Russian Federation (continued) | ||||||||||||||||||
RUB | 7.850 | % | 03/10/2018 | 60,000,000 | $ | 1,969,976 | (1) | |||||||||||
RUB | 7.850 | % | 03/10/2018 | 760,000,000 | 24,953,025 | (2) | ||||||||||||
RUB | 7.500 | % | 03/15/2018 | 257,300,000 | 8,400,127 | |||||||||||||
RUB | 7.500 | % | 02/27/2019 | 417,800,000 | 13,678,150 | |||||||||||||
RUB | 7.600 | % | 04/14/2021 | 1,865,700,000 | 60,240,890 | |||||||||||||
RUB | 7.000 | % | 11/24/2021 | 352,730,000 | 10,825,784 | (3) | ||||||||||||
RUB | 7.600 | % | 07/20/2022 | 277,600,000 | 9,008,965 | |||||||||||||
RUB | 7.000 | % | 01/25/2023 | 582,730,000 | 18,049,057 | |||||||||||||
|
| |||||||||||||||||
232,778,875 | ||||||||||||||||||
|
| |||||||||||||||||
South Africa - 8.62% | ||||||||||||||||||
Republic of South Africa: | ||||||||||||||||||
ZAR | 13.500 | % | 09/15/2015 | 162,545,000 | 18,785,371 | |||||||||||||
ZAR | 8.250 | % | 09/15/2017 | 51,710,000 | 5,511,229 | |||||||||||||
ZAR | 8.000 | % | 12/21/2018 | 210,765,000 | 22,406,006 | |||||||||||||
ZAR | 7.250 | % | 01/15/2020 | 86,030,000 | 8,764,679 | |||||||||||||
ZAR | 6.750 | % | 03/31/2021 | 928,510,000 | 91,602,747 | |||||||||||||
ZAR | 10.500 | % | 12/21/2026 | 480,430,000 | 59,474,817 | |||||||||||||
ZAR | 6.250 | % | 03/31/2036 | 77,290,000 | 5,985,864 | |||||||||||||
|
| |||||||||||||||||
212,530,713 | ||||||||||||||||||
|
| |||||||||||||||||
Thailand - 4.84% | ||||||||||||||||||
Thailand Government: | ||||||||||||||||||
THB | 3.250 | % | 06/16/2017 | 1,409,740,000 | 47,262,636 | |||||||||||||
THB | 2.800 | % | 10/10/2017 | 253,640,000 | 8,328,075 | |||||||||||||
THB | 3.580 | % | 12/17/2017 | 196,370,000 | 6,324,636 | |||||||||||||
THB | 3.875 | % | 06/13/2019 | 4,775,000 | 164,175 | |||||||||||||
THB | 1.200 | % | 07/14/2021 | 807,322,638 | 27,282,341 | |||||||||||||
THB | 3.650 | % | 12/17/2021 | 285,690,000 | 9,613,936 | |||||||||||||
THB | 3.625 | % | 06/16/2023 | 610,830,000 | 20,363,164 | |||||||||||||
|
| |||||||||||||||||
119,338,963 | ||||||||||||||||||
|
| |||||||||||||||||
Turkey - 4.60% | ||||||||||||||||||
Republic of Turkey: | ||||||||||||||||||
TRY | 4.500 | % | 02/11/2015 | 29,663,191 | 16,855,832 | |||||||||||||
TRY | 4.000 | % | 04/29/2015 | 35,109,680 | 19,819,342 | |||||||||||||
TRY | 9.000 | % | 03/08/2017 | 6,930,000 | 4,024,766 | |||||||||||||
TRY | 10.500 | % | 01/15/2020 | 16,590,000 | 10,693,795 | |||||||||||||
TRY | 9.500 | % | 01/12/2022 | 25,450,000 | 15,895,207 | |||||||||||||
TRY | 8.500 | % | 09/14/2022 | 28,990,000 | 17,207,880 | |||||||||||||
TRY | 7.100 | % | 03/08/2023 | 52,990,000 | 28,921,076 | |||||||||||||
|
| |||||||||||||||||
113,417,898 | ||||||||||||||||||
|
| |||||||||||||||||
TOTAL SOVEREIGN DEBT OBLIGATIONS | 1,446,464,780 | |||||||||||||||||
|
| |||||||||||||||||
(Cost $1,512,328,549) | ||||||||||||||||||
CORPORATE BONDS - 2.90% | ||||||||||||||||||
Colombia - 0.41% | ||||||||||||||||||
Emgesa SA ESP: | ||||||||||||||||||
COP | 8.750 | % | 01/25/2021 | 636,000,000 | 394,740 | (1) | ||||||||||||
COP | 8.750 | % | 01/25/2021 | 10,543,000,000 | 6,543,614 | (2) | ||||||||||||
Empresas Publicas de Medellin ESP: | ||||||||||||||||||
COP | 8.375 | % | 02/01/2021 | 802,000,000 | 487,658 | (1) | ||||||||||||
COP | 8.375 | % | 02/01/2021 | 3,450,000,000 | 2,097,779 | (2) |
42 | www.shiplp.com |
Table of Contents
Stone Harbor Local Markets Fund | Statements of Investments | |
May 31, 2013 |
Counterparty | Currency | Rate | Maturity Date | Principal Amount* | Market Value | |||||||||||||||
Colombia (continued) | ||||||||||||||||||||
International Bank for | COP | 8.000 | % | 03/02/2020 | 1,050,000,000 | $ | 643,747 | |||||||||||||
|
| |||||||||||||||||||
10,167,538 | ||||||||||||||||||||
|
| |||||||||||||||||||
Indonesia - 1.49% | ||||||||||||||||||||
European Bank for | IDR | 7.200 | % | 06/08/2016 | 39,000,000,000 | 4,141,685 | ||||||||||||||
European Investment Bank | IDR | 6.000 | % | 04/22/2014 | 11,000,000,000 | 1,111,230 | ||||||||||||||
Inter-American Development Bank: | ||||||||||||||||||||
IDR | 6.500 | % | 03/10/2014 | 15,000,000,000 | 1,533,844 | |||||||||||||||
IDR | 6.500 | % | 06/04/2014 | 16,000,000,000 | 1,638,223 | |||||||||||||||
IDR | 0.000 | % | 08/20/2015 | 314,250,000,000 | 28,200,689 | (4) | ||||||||||||||
|
| |||||||||||||||||||
36,625,671 | ||||||||||||||||||||
|
| |||||||||||||||||||
Mexico - 0.33% | ||||||||||||||||||||
Petroleos Mexicanos | MXN | 7.650 | % | 11/24/2021 | 94,160,000 | 8,149,452 | (1) | |||||||||||||
|
| |||||||||||||||||||
South Africa - 0.67% | ||||||||||||||||||||
Asian Development Bank | ZAR | 6.500 | % | 09/15/2015 | 4,650,000 | 468,140 | ||||||||||||||
European Investment Bank: | ||||||||||||||||||||
ZAR | 8.000 | % | 10/21/2013 | 3,810,000 | 383,494 | |||||||||||||||
ZAR | 9.000 | % | 12/21/2018 | 139,000,000 | 15,399,486 | |||||||||||||||
ZAR | 0.000 | % | 12/31/2018 | 5,280,000 | 364,291 | (4) | ||||||||||||||
|
| |||||||||||||||||||
16,615,411 | ||||||||||||||||||||
|
| |||||||||||||||||||
TOTAL CORPORATE BONDS | 71,558,072 | |||||||||||||||||||
|
| |||||||||||||||||||
(Cost $75,707,243) | ||||||||||||||||||||
CREDIT LINKED NOTES - 16.37% | ||||||||||||||||||||
Brazil - 8.96% | ||||||||||||||||||||
Nota Do Tesouro Nacional: | ||||||||||||||||||||
HSBC Bank | BRL | 6.000 | % | 05/15/2015 | 3,475,617 | 1,694,378 | ||||||||||||||
Barclays Bank PLC | BRL | 6.000 | % | 05/15/2015 | 9,513,878 | 4,625,489 | ||||||||||||||
JPMorgan Chase & Co. | BRL | 6.000 | % | 05/15/2015 | 15,686,007 | 7,733,419 | ||||||||||||||
Barclays Bank PLC | BRL | 6.000 | % | 08/15/2016 | 11,158,949 | 5,471,550 | ||||||||||||||
HSBC Bank | BRL | 10.000 | % | 01/01/2017 | 4,350,000 | 2,041,595 | ||||||||||||||
JPMorgan Chase & Co. | BRL | 10.000 | % | 01/01/2017 | 5,290,000 | 2,478,251 | ||||||||||||||
Barclays Bank PLC | BRL | 10.000 | % | 01/01/2017 | 19,090,000 | 8,908,964 | ||||||||||||||
HSBC Bank | BRL | 10.000 | % | 01/01/2017 | 22,300,000 | 10,466,109 | ||||||||||||||
JPMorgan Chase & Co. | BRL | 6.000 | % | 08/15/2020 | 18,904,145 | 9,795,152 | ||||||||||||||
Citigroup Global Markets | BRL | 10.000 | % | 01/01/2021 | 2,600,000 | 1,192,081 | ||||||||||||||
Barclays Bank PLC | BRL | 10.000 | % | 01/01/2021 | 6,800,000 | 3,100,512 | ||||||||||||||
HSBC Bank | BRL | 10.000 | % | 01/01/2021 | 17,320,000 | 8,059,715 | ||||||||||||||
JPMorgan Chase & Co. | BRL | 10.000 | % | 01/01/2021 | 22,710,000 | 10,400,575 | ||||||||||||||
Citigroup Global Markets | BRL | 10.000 | % | 01/01/2021 | 24,000,000 | 11,003,829 | ||||||||||||||
HSBC Bank | BRL | 10.000 | % | 01/01/2021 | 50,500,000 | 23,147,391 | ||||||||||||||
HSBC Bank | BRL | 10.000 | % | 01/01/2021 | 108,460,000 | 49,714,179 | ||||||||||||||
JPMorgan Chase & Co. | BRL | 10.000 | % | 01/01/2023 | 10,830,000 | 4,983,190 | ||||||||||||||
Barclays Bank PLC | BRL | 10.000 | % | 01/01/2023 | 124,340,000 | 56,034,276 | ||||||||||||||
|
| |||||||||||||||||||
220,850,655 | ||||||||||||||||||||
|
|
Stone Harbor Investment Funds Annual Report | May 31, 2013 | 43 |
Table of Contents
Stone Harbor Local Markets Fund | Statements of Investments | |
May 31, 2013 |
Counterparty | Currency | Rate | Maturity Date | Principal Amount/Shares* | Market Value (Expressed in U.S. $) | |||||||||||||
Colombia - 1.18% | ||||||||||||||||||
Titulos de Tesoreria - Series B: | ||||||||||||||||||
Citigroup Global Markets | COP | 7.000 | % | 02/25/2015 | 10,735,873,200 | $ | 6,052,542 | |||||||||||
Citigroup Global Markets | COP | 7.250 | % | 06/15/2016 | 2,200,000,000 | 1,228,964 | ||||||||||||
Citigroup Global Markets | COP | 7.250 | % | 06/15/2016 | 10,000,000,000 | 5,586,199 | ||||||||||||
Citigroup Global Markets | COP | 4.250 | % | 05/17/2017 | 6,400,232,100 | 3,601,185 | ||||||||||||
Citigroup Global Markets | COP | 11.000 | % | 07/24/2020 | 2,800,000,000 | 1,902,733 | ||||||||||||
Citigroup Global Markets | COP | 11.000 | % | 07/24/2020 | 4,570,000,000 | 3,105,531 | ||||||||||||
Citigroup Global Markets | COP | 11.000 | % | 07/24/2020 | 6,578,000,000 | 4,470,063 | ||||||||||||
Citigroup Global Markets | COP | 11.000 | % | 07/27/2020 | 4,500,000,000 | 3,057,963 | ||||||||||||
|
| |||||||||||||||||
29,005,180 | ||||||||||||||||||
|
| |||||||||||||||||
Indonesia - 6.23% | ||||||||||||||||||
Republic of Indonesia: | ||||||||||||||||||
JPMorgan Chase & Co. | IDR | 5.250 | % | 05/15/2018 | 205,700,000,000 | 21,055,112 | ||||||||||||
JPMorgan Chase & Co. | IDR | 8.250 | % | 07/15/2021 | 44,000,000,000 | 5,189,709 | ||||||||||||
Deutsche Bank AG London | IDR | 8.250 | % | 07/15/2021 | 144,100,000,000 | 16,934,214 | ||||||||||||
JPMorgan Chase & Co. | IDR | 7.000 | % | 05/15/2022 | 132,500,000,000 | 14,591,909 | ||||||||||||
Deutsche Bank AG London | IDR | 7.000 | % | 05/15/2022 | 248,900,000,000 | 27,367,819 | ||||||||||||
Deutsche Bank AG London | IDR | 5.625 | % | 05/15/2023 | 33,500,000,000 | 3,344,459 | ||||||||||||
JPMorgan Chase & Co. | IDR | 5.625 | % | 05/15/2023 | 186,400,000,000 | 18,552,462 | ||||||||||||
HSBC Bank | IDR | 11.000 | % | 09/15/2025 | 51,100,000,000 | 7,307,639 | ||||||||||||
HSBC Bank | IDR | 11.000 | % | 09/15/2025 | 62,500,000,000 | 8,937,915 | ||||||||||||
Deutsche Bank AG London | IDR | 11.000 | % | 09/17/2025 | 33,600,000,000 | 4,713,914 | ||||||||||||
Deutsche Bank AG London | IDR | 7.000 | % | 05/15/2027 | 25,400,000,000 | 2,703,369 | ||||||||||||
JPMorgan Chase & Co. | IDR | 6.125 | % | 05/15/2028 | 16,900,000,000 | 1,650,316 | ||||||||||||
Deutsche Bank AG London | IDR | 8.250 | % | 06/15/2032 | 181,900,000,000 | 21,292,607 | ||||||||||||
|
| |||||||||||||||||
153,641,444 | ||||||||||||||||||
|
| |||||||||||||||||
TOTAL CREDIT LINKED NOTES | 403,497,279 | |||||||||||||||||
|
| |||||||||||||||||
(Cost $427,345,832) | ||||||||||||||||||
SHORT TERM INVESTMENTS - 5.78% | ||||||||||||||||||
Money Market Mutual Funds - 4.40% | ||||||||||||||||||
Dreyfus Institutional Cash Advantage Fund - Institutional Advantage Class (7-Day Yield) | USD | 0.07001 | % | N/A | 108,447,151 | 108,447,151 | ||||||||||||
|
|
44 | www.shiplp.com |
Table of Contents
Stone Harbor Local Markets Fund | Statements of Investments | |
May 31, 2013 |
Currency | Rate | Maturity Date | Principal | Market Value | ||||||||||||||
Foreign Treasury Bills - 1.38% | ||||||||||||||||||
Nigeria Treasury Bills, Zero Coupon Bonds (5): | ||||||||||||||||||
NGN | 10.893 | % | 09/05/2013 | 275,000,000 | $ | 1,686,604 | ||||||||||||
NGN | 10.276 | % | 10/10/2013 | 183,000,000 | 1,106,050 | |||||||||||||
NGN | 10.931 | % | 12/05/2013 | 94,000,000 | 556,649 | |||||||||||||
NGN | 12.015 | % | 12/19/2013 | 736,000,000 | 4,340,976 | |||||||||||||
NGN | 12.093 | % | 01/09/2014 | 1,058,080,000 | 6,212,883 | |||||||||||||
NGN | 11.695 | % | 01/23/2014 | 1,672,000,000 | 9,762,768 | |||||||||||||
NGN | 10.732 | % | 02/20/2014 | 138,000,000 | 801,788 | |||||||||||||
NGN | 10.907 | % | 03/06/2014 | 491,000,000 | 2,839,225 | |||||||||||||
NGN | 11.337 | % | 03/20/2014 | 1,155,800,000 | 6,651,650 | |||||||||||||
|
| |||||||||||||||||
33,958,593 | ||||||||||||||||||
|
| |||||||||||||||||
TOTAL SHORT TERM INVESTMENTS | 142,405,744 | |||||||||||||||||
|
| |||||||||||||||||
(Cost $142,693,016) | ||||||||||||||||||
Total Investments - 83.75% | 2,063,925,875 | |||||||||||||||||
(Cost $2,158,074,640) | ||||||||||||||||||
Other Assets In Excess of Liabilities - 16.25% | 400,501,204 | |||||||||||||||||
|
| |||||||||||||||||
Net Assets - 100.00% | $ | 2,464,427,079 | ||||||||||||||||
|
|
* The principal amount of each security is stated in the currency in which the security is denominated. See below.
BRL | - | Brazilian Real | ||
CLP | - | Chilean Peso | ||
COP | - | Colombian Peso | ||
HUF | - | Hungarian Forint | ||
IDR | - | Indonesian Rupiah | ||
MXN | - | Mexican Peso | ||
MYR | - | Malaysian Ringgit | ||
NGN | - | Nigerian Naira | ||
PLN | - | Polish Zloty | ||
RON | - | Romanian Leu | ||
RUB | - | Russian Ruble | ||
THB | - | Thai Baht | ||
TRY | - | Turkish Lira | ||
USD | - | United States Dollar | ||
ZAR | - | South African Rand |
(1) | Security exempt from registration under Rule 144A of the Securities Act of 1933. Such securities may normally be sold to qualified institutional buyers in transactions exempt from registration. Total market value of Rule 144A securities amounts to $12,661,314, which represents approximately 0.51% of net assets as of May 31, 2013. |
(2) | Securities were originally issued pursuant to Regulation S under the Securities Act of 1933, which exempts securities offered and sold outside of the United States from registration. Such securities cannot be sold in the United States without either an effective registration statement filed pursuant to the Securities Act of 1933, or pursuant to an exemption from registration. As of May 31, 2013, the aggregate market value of those securities was $74,803,489, which represents approximately 3.04% of net assets. |
(3) | Step bond. Coupon increases periodically based upon a predetermined schedule. Interest rate disclosed is that which is in effect at May 31, 2013. |
(4) | Issued with a zero coupon. Income is recognized through the accretion of discount. |
(5) | Rate shown represents the bond equivalent yield to maturity at date of purchase. |
Common Abbreviations:
ESP | - | Empresa de Servicios Publicos is the Colombian term for Public Service Company. | ||
SA | - | Generally designates corporations in various countries mostly employing civil law. |
Stone Harbor Investment Funds Annual Report | May 31, 2013 | 45 |
Table of Contents
Stone Harbor Local Markets Fund | Statements of Investments | |
May 31, 2013 |
OUTSTANDING FORWARD FOREIGN CURRENCY CONTRACTS
Counterparty | Foreign Currency | Contracted Amount* | Purchase/Sale Contract | Settlement Date | Current Value | Unrealized Appreciation/ (Depreciation) | ||||||||||||||
JPMorgan Chase & Co. | MYR | 26,971,188 | Sale | 06/17/2013 | $ | 8,692,303 | $ | 13,697 | ||||||||||||
|
| |||||||||||||||||||
$ | 13,697 | |||||||||||||||||||
|
| |||||||||||||||||||
Citigroup Global Markets | COP | 28,564,438,500 | Sale | 07/05/2013 | $ | 14,954,916 | $ | (32,916 | ) | |||||||||||
Citigroup Global Markets | HUF | 2,096,483,600 | Purchase | 08/21/2013 | 9,111,123 | (67,877 | ) | |||||||||||||
Citigroup Global Markets | HUF | 860,768,100 | Purchase | 09/03/2013 | 3,739,585 | (78,415 | ) | |||||||||||||
JPMorgan Chase & Co. | MYR | 464,286,720 | Purchase | 06/17/2013 | 149,630,817 | (1,504,183 | ) | |||||||||||||
Goldman Sachs | PLN | 330,827,775 | Purchase | 06/17/2013 | 100,454,937 | (70,063 | ) | |||||||||||||
Citigroup Global Markets | RON | 27,658,536 | Purchase | 06/21/2013 | 8,170,122 | (13,361 | ) | |||||||||||||
JPMorgan Chase & Co. | THB | 1,194,863,000 | Purchase | 06/17/2013 | �� | 39,429,163 | (135,837 | ) | ||||||||||||
Goldman Sachs | TRY | 270,909,681 | Purchase | 06/17/2013 | 144,350,436 | (598,564 | ) | |||||||||||||
|
| |||||||||||||||||||
$ | (2,501,216 | ) | ||||||||||||||||||
|
|
* The contracted amount is stated in the currency in which the security is denominated.
See Notes to Financial Statements.
| ||
46 | www.shiplp.com |
Table of Contents
Corporate Debt Fund | Statements of Investments | |
May 31, 2013 |
Currency | Rate | Maturity Date | Principal Amount* | Market Value (Expressed in U.S. $) | ||||||||||||||
CORPORATE BONDS - 97.54% | ||||||||||||||||||
Argentina - 0.52% | ||||||||||||||||||
Alto Palermo SA | USD | 7.875 | % | 05/11/2017 | 226,000 | $ | 204,359 | (1) | ||||||||||
Capex SA | USD | 10.000 | % | 03/10/2018 | 200,000 | 152,841 | (2) | |||||||||||
|
| |||||||||||||||||
357,200 | ||||||||||||||||||
|
| |||||||||||||||||
Brazil - 14.38% | ||||||||||||||||||
Andrade Gutierrez International SA | USD | 4.000 | % | 04/30/2018 | 494,000 | 492,765 | (2) | |||||||||||
Banco do Brasil SA: | ||||||||||||||||||
USD | 3.875 | % | 10/10/2022 | 203,000 | 192,594 | |||||||||||||
USD | 6.250 | % | 12/31/2049 | 868,000 | 844,163 | (2)(3) | ||||||||||||
BM&FBovespa SA | USD | 5.500 | % | 07/16/2020 | 450,000 | 494,471 | (1) | |||||||||||
BR Malls International Finance Ltd.: | ||||||||||||||||||
USD | 8.500 | % | 01/21/2049 | 300,000 | 326,638 | (1) | ||||||||||||
USD | 8.500 | % | 01/21/2049 | 346,000 | 376,723 | (2) | ||||||||||||
BR Properties SA | USD | 9.000 | % | 10/07/2049 | 200,000 | 214,000 | (1) | |||||||||||
Braskem Finance Ltd. | USD | 7.375 | % | 10/29/2049 | 200,000 | 209,000 | (2) | |||||||||||
Cosan Luxembourg SA | USD | 5.000 | % | 03/14/2023 | 349,000 | �� | 349,913 | (2) | ||||||||||
ESAL GmbH | USD | 6.250 | % | 02/05/2023 | 768,000 | 770,880 | (2) | |||||||||||
General Shopping Finance Ltd. | USD | 10.000 | % | 11/09/2015 | 158,000 | 161,160 | (2) | |||||||||||
Globo Comunicacao e Participacoes SA | USD | 6.250 | % | 07/20/2049 | 200,000 | 214,896 | (1)(4) | |||||||||||
Itau Unibanco Holding SA | USD | 5.650 | % | 03/19/2022 | 228,000 | 237,120 | (2) | |||||||||||
Minerva Luxembourg SA | USD | 7.750 | % | 01/31/2023 | 492,000 | 511,680 | (2) | |||||||||||
Odebrecht Drilling Norbe VIII/IX Ltd. | USD | 6.350 | % | 06/30/2021 | 712,500 | 783,750 | (1) | |||||||||||
Odebrecht Finance Ltd. | USD | 5.125 | % | 06/26/2022 | 510,000 | 543,150 | (2) | |||||||||||
OGX Austria GmbH | USD | 8.500 | % | 06/01/2018 | 244,000 | 142,591 | (2) | |||||||||||
Petrobras International Finance Co. | USD | 5.375 | % | 01/27/2021 | 267,000 | 284,051 | ||||||||||||
QGOG Atlantic/Alaskan Rigs Ltd. | USD | 5.250 | % | 07/30/2018 | 521,690 | 539,950 | (2) | |||||||||||
Samarco Mineracao SA | USD | 4.125 | % | 11/01/2022 | 1,168,000 | 1,106,689 | (2) | |||||||||||
Schahin II Finance Co. SPV Ltd. | USD | 5.875 | % | 09/25/2022 | 372,907 | 388,726 | (2) | |||||||||||
Tonon Bioenergia SA | USD | 9.250 | % | 01/24/2020 | 400,000 | 404,286 | (2) | |||||||||||
Votorantim Cimentos SA | USD | 7.250 | % | 04/05/2041 | 200,000 | 217,500 | (2) | |||||||||||
|
| |||||||||||||||||
9,806,696 | ||||||||||||||||||
|
| |||||||||||||||||
Chile - 3.34% | ||||||||||||||||||
Cencosud SA: | ||||||||||||||||||
USD | 5.500 | % | 01/20/2021 | 600,000 | 639,800 | (2) | ||||||||||||
USD | 4.875 | % | 01/20/2023 | 419,000 | 424,169 | (2) | ||||||||||||
CFR International SpA | USD | 5.125 | % | 12/06/2022 | 650,000 | 673,719 | (2) | |||||||||||
Telefonica Chile SA | USD | 3.875 | % | 10/12/2022 | 553,000 | 541,940 | (2) | |||||||||||
|
| |||||||||||||||||
2,279,628 | ||||||||||||||||||
|
| |||||||||||||||||
China - 5.16% | ||||||||||||||||||
China Liansu Group Holdings Ltd. | USD | 7.875 | % | 05/13/2016 | 200,000 | 211,000 | (2) | |||||||||||
China Overseas Finance Cayman IV Ltd. | USD | 4.875 | % | 02/15/2017 | 200,000 | 215,863 | ||||||||||||
Country Garden Holdings Co. Ltd. | USD | 7.500 | % | 01/10/2023 | 444,000 | 455,100 | (2) | |||||||||||
Kaisa Group Holdings Ltd. | USD | 8.875 | % | 03/19/2018 | 700,000 | 719,250 | (2) | |||||||||||
Mega Advance Investments Ltd. | USD | 5.000 | % | 05/12/2021 | 505,000 | 555,167 | (2) | |||||||||||
MIE Holdings Corp. | USD | 9.750 | % | 05/12/2016 | 249,000 | 265,185 | (2) | |||||||||||
Tencent Holdings Ltd.: | ||||||||||||||||||
USD | 4.625 | % | 12/12/2016 | 200,000 | 216,959 | (2) | ||||||||||||
USD | 3.375 | % | 03/05/2018 | 600,000 | 615,012 | (2) | ||||||||||||
Texhong Textile Group Ltd. | USD | 7.625 | % | 01/19/2016 | 250,000 | 261,875 | (1) | |||||||||||
|
| |||||||||||||||||
3,515,411 | ||||||||||||||||||
|
|
Stone Harbor Investment Funds Annual Report | May 31, 2013 | 47 |
Table of Contents
Stone Harbor Emerging Markets Corporate Debt Fund | Statements of Investments | |
May 31, 2013 |
Currency | Rate | Maturity Date | Principal Amount* | Market Value (Expressed in U.S. $) | ||||||||||||||||
Colombia - 4.10% | ||||||||||||||||||||
Bancolombia SA | USD | 5.125 | % | 09/11/2022 | 657,000 | $ | 656,988 | |||||||||||||
Empresa de Energia de Bogota SA | USD | 6.125 | % | 11/10/2021 | 400,000 | 437,333 | (2) | |||||||||||||
Grupo Aval Ltd.: | ||||||||||||||||||||
USD | 5.250 | % | 02/01/2017 | 200,000 | 210,818 | (2) | ||||||||||||||
USD | 4.750 | % | 09/26/2022 | 366,000 | 359,595 | (2) | ||||||||||||||
Gruposura Finance | USD | 5.700 | % | 05/18/2021 | 397,000 | 436,700 | (2) | |||||||||||||
Pacific Rubiales Energy Corp. | USD | 5.125 | % | 03/28/2023 | 250,000 | 255,659 | (2) | |||||||||||||
Transportadora de Gas Internacional SA ESP | USD | 5.700 | % | 03/20/2022 | 400,000 | 437,269 | (2) | |||||||||||||
|
| |||||||||||||||||||
2,794,362 | ||||||||||||||||||||
|
| |||||||||||||||||||
Hong Kong - 4.76% | ||||||||||||||||||||
Hutchison Whampoa International 09 Ltd. | USD | 7.625 | % | 04/09/2019 | 102,000 | 127,815 | (2) | |||||||||||||
Hutchison Whampoa International10 Ltd. | USD | 6.000 | % | 10/28/2049 | 400,000 | 426,500 | (1)(3) | |||||||||||||
Hutchison Whampoa International 11 Ltd. | USD | 4.625 | % | 01/13/2022 | 200,000 | 211,224 | (2) | |||||||||||||
Hutchison Whampoa International 12 II Ltd.: | ||||||||||||||||||||
USD | 2.000 | % | 11/08/2017 | 750,000 | 745,020 | (2) | ||||||||||||||
USD | 3.250 | % | 11/08/2022 | 750,000 | 720,011 | (2) | ||||||||||||||
PCCW-HKT Capital No. 4 Ltd. | USD | 4.250 | % | 02/24/2016 | 700,000 | 745,062 | ||||||||||||||
Sun Hung Kai Properties Capital Market Ltd. | USD | 4.500 | % | 02/14/2022 | 256,000 | 267,075 | ||||||||||||||
|
| |||||||||||||||||||
3,242,707 | ||||||||||||||||||||
|
| |||||||||||||||||||
India - 3.30% | ||||||||||||||||||||
Bharti Airtel International Netherlands BV | USD | 5.125 | % | 03/11/2023 | 345,000 | 345,862 | (2) | |||||||||||||
ICICI Bank Ltd.: | ||||||||||||||||||||
USD | 4.700 | % | 02/21/2018 | 208,000 | 218,633 | (1) | ||||||||||||||
USD | 5.750 | % | 11/16/2020 | 400,000 | 437,746 | (1) | ||||||||||||||
Reliance Holdings USA, Inc. | USD | 5.400 | % | 02/14/2022 | 250,000 | 273,495 | (2) | |||||||||||||
Vedanta Resources PLC: | ||||||||||||||||||||
USD | 6.000 | % | 01/31/2019 | 483,000 | 481,793 | (2) | ||||||||||||||
USD | 8.250 | % | 06/07/2021 | 242,000 | 261,360 | (2) | ||||||||||||||
USD | 7.125 | % | 05/31/2023 | 231,000 | 229,845 | (2) | ||||||||||||||
|
| |||||||||||||||||||
2,248,734 | ||||||||||||||||||||
|
| |||||||||||||||||||
Indonesia - 3.56% | ||||||||||||||||||||
Berau Capital Resources Pte Ltd. | USD | 12.500 | % | 07/08/2015 | 200,000 | 212,750 | (1) | |||||||||||||
BLT Finance BV | USD | 7.500 | % | 05/15/2014 | 100,000 | 13,500 | (1)(5) | |||||||||||||
Indo Energy Finance II BV | USD | 6.375 | % | 01/24/2023 | 637,000 | 621,075 | (2) | |||||||||||||
Indosat Palapa Co. BV | USD | 7.375 | % | 07/29/2020 | 400,000 | 439,000 | (1) | |||||||||||||
Listrindo Capital BV | USD | 6.950 | % | 02/21/2019 | 200,000 | 216,000 | (2) | |||||||||||||
PT Adaro Indonesia | USD | 7.625 | % | 10/22/2019 | 601,000 | 643,070 | (1) | |||||||||||||
TBG Global Pte Ltd. | USD | 4.625 | % | 04/03/2018 | 285,000 | 280,369 | (2) | |||||||||||||
|
| |||||||||||||||||||
2,425,764 | ||||||||||||||||||||
|
| |||||||||||||||||||
Jamaica - 1.75% | ||||||||||||||||||||
Digicel Group Ltd.: | ||||||||||||||||||||
USD | 10.500 | % | 04/15/2018 | 900,000 | 978,750 | (1) | ||||||||||||||
USD | 8.250 | % | 09/30/2020 | 200,000 | 216,000 | (2) | ||||||||||||||
|
| |||||||||||||||||||
1,194,750 | ||||||||||||||||||||
|
|
48 | www.shiplp.com |
Table of Contents
Stone Harbor Emerging Markets Corporate Debt Fund | Statements of Investments | |
May 31, 2013 |
Currency | Rate | Maturity Date | Principal | Market Value | ||||||||||||||
Kazakhstan - 1.11% | ||||||||||||||||||
Zhaikmunai LP | USD | 7.125 | % | 11/13/2019 | 700,000 | $ | 753,375 | (2) | ||||||||||
|
| |||||||||||||||||
Macau - 0.91% | ||||||||||||||||||
MCE Finance Ltd. | USD | 5.000 | % | 02/15/2021 | 623,000 | 623,000 | (2) | |||||||||||
|
| |||||||||||||||||
Mexico - 5.09% | ||||||||||||||||||
America Movil SAB de CV | USD | 3.125 | % | 07/16/2022 | 600,000 | 575,730 | ||||||||||||
Cemex Finance LLC | USD | 9.375 | % | 10/12/2022 | 288,000 | 324,720 | (2) | |||||||||||
Cemex SAB de CV | USD | 9.500 | % | 06/15/2018 | 1,000,000 | 1,122,500 | (2) | |||||||||||
Grupo Bimbo SAB de CV | USD | 4.875 | % | 06/30/2020 | 202,000 | 219,880 | (2) | |||||||||||
Grupo Televisa SAB | USD | 6.000 | % | 05/12/2018 | 200,000 | 230,495 | ||||||||||||
Mexichem SAB de CV | USD | 4.875 | % | 09/19/2022 | 400,000 | 415,929 | (2) | |||||||||||
Mexico Generadora De Energia | USD | 5.500 | % | 12/06/2032 | 240,000 | 241,695 | (2) | |||||||||||
Telefonos de Mexico SAB de CV | USD | 5.500 | % | 11/15/2019 | 300,000 | 341,791 | ||||||||||||
|
| |||||||||||||||||
3,472,740 | ||||||||||||||||||
|
| |||||||||||||||||
Nigeria - 0.34% | ||||||||||||||||||
Afren PLC | USD | 10.250 | % | 04/08/2019 | 200,000 | 235,000 | (2) | |||||||||||
|
| |||||||||||||||||
Peru - 6.67% | ||||||||||||||||||
Ajecorp BV | USD | 6.500 | % | 05/14/2022 | 500,000 | 545,000 | (2) | |||||||||||
Alicorp SAA | USD | 3.875 | % | 03/20/2023 | 759,000 | 745,542 | (2) | |||||||||||
Banco de Credito del Peru | USD | 5.375 | % | 09/16/2020 | 577,000 | 624,649 | (1) | |||||||||||
BBVA Banco Continental SA | USD | 5.000 | % | 08/26/2022 | 335,000 | 345,845 | (2) | |||||||||||
Cementos Pacasmayo SAA | USD | 4.500 | % | 02/08/2023 | 250,000 | 244,348 | (2) | |||||||||||
Cia Minera Milpo SAA | USD | 4.625 | % | 03/28/2023 | 482,000 | 469,894 | (2) | |||||||||||
Consorcio Transmantaro SA | USD | 4.375 | % | 05/07/2023 | 294,000 | 286,650 | (2) | |||||||||||
Corp. Azucarera del Peru SA | USD | 6.375 | % | 08/02/2022 | 378,000 | 393,120 | (2) | |||||||||||
Inkia Energy Ltd. | USD | 8.375 | % | 04/04/2021 | 350,000 | 397,203 | (2) | |||||||||||
Southern Copper Corp.: | ||||||||||||||||||
USD | 6.750 | % | 04/16/2040 | 145,000 | 152,714 | |||||||||||||
USD | 5.250 | % | 11/08/2042 | 200,000 | 176,108 | |||||||||||||
Volcan Cia Minera SAA | USD | 5.375 | % | 02/02/2022 | 163,000 | 167,075 | (2) | |||||||||||
|
| |||||||||||||||||
4,548,148 | ||||||||||||||||||
|
| |||||||||||||||||
Qatar - 3.97% | ||||||||||||||||||
Doha Finance Ltd. | USD | 3.500 | % | 03/14/2017 | 200,000 | 208,250 | ||||||||||||
Nakilat, Inc. | USD | 6.067 | % | 12/31/2033 | 100,000 | 116,500 | (1) | |||||||||||
Qtel International Finance Ltd. | USD | 4.750 | % | 02/16/2021 | 494,000 | 540,930 | (1) | |||||||||||
Ras Laffan Liquefied Natural Gas Co. Ltd. II | USD | 5.298 | % | 09/30/2020 | 678,870 | 750,151 | (1) | |||||||||||
Ras Laffan Liquefied Natural Gas Co. Ltd. III: | ||||||||||||||||||
USD | 5.832 | % | 09/30/2016 | 145,425 | 156,877 | (1) | ||||||||||||
USD | 6.750 | % | 09/30/2019 | 750,000 | 936,563 | (1) | ||||||||||||
|
| |||||||||||||||||
2,709,271 | ||||||||||||||||||
|
|
Stone Harbor Investment Funds Annual Report | May 31, 2013 | 49 |
Table of Contents
Stone Harbor Emerging Markets Corporate Debt Fund | Statements of Investments | |
May 31, 2013 |
Currency | Rate | Maturity Date | Principal Amount* | Market Value (Expressed in U.S. $) | ||||||||||||||
Russia - 12.91% | ||||||||||||||||||
Alfa Bank OJSC Via Alfa Bond Issuance PLC | USD | 7.500 | % | 09/26/2019 | 435,000 | $ | 467,625 | (2) | ||||||||||
EDC Finance Ltd. | USD | 4.875 | % | 04/17/2020 | 402,000 | 398,985 | (2) | |||||||||||
EuroChem Mineral & Chemical Co. OJSC via EuroChem GI Ltd. | USD | 5.125 | % | 12/12/2017 | 650,000 | 658,937 | (2) | |||||||||||
Far Eastern Shipping Co. | USD | 8.000 | % | 05/02/2018 | 400,000 | 405,500 | (2) | |||||||||||
Gazprom OAO Via Gaz Capital SA: | ||||||||||||||||||
USD | 3.850 | % | 02/06/2020 | 880,000 | 866,562 | (2) | ||||||||||||
USD | 4.950 | % | 07/19/2022 | 254,000 | 259,398 | (2) | ||||||||||||
Metalloinvest Finance Ltd.: | ||||||||||||||||||
USD | 6.500 | % | 07/21/2016 | 200,000 | 212,000 | (2) | ||||||||||||
USD | 5.625 | % | 04/17/2020 | 400,000 | 395,500 | (2) | ||||||||||||
MTS International Funding Ltd. | USD | 5.000 | % | 05/30/2023 | 700,000 | 693,875 | (2) | |||||||||||
Novatek OAO via Novatek Finance Ltd. | USD | 5.326 | % | 02/03/2016 | 500,000 | 531,563 | (1) | |||||||||||
Rosneft Oil Co. via Rosneft International Finance Ltd. | USD | 3.149 | % | 03/06/2017 | 442,000 | 445,315 | (1) | |||||||||||
Sberbank of Russia Via SB Capital SA | USD | 6.125 | % | 02/07/2022 | 400,000 | 442,500 | (2) | |||||||||||
Severstal OAO Via Steel Capital SA | USD | 5.900 | % | 10/17/2022 | 316,000 | 306,520 | (2) | |||||||||||
Vimpel Communications Holdings BV: | ||||||||||||||||||
USD | 6.255 | % | 03/01/2017 | 200,000 | 212,000 | (1) | ||||||||||||
USD | 5.200 | % | 02/13/2019 | 525,000 | 528,281 | (2) | ||||||||||||
Vimpel Communications Via VIP Finance Ireland Ltd. OJSC | USD | 7.748 | % | 02/02/2021 | 400,000 | 443,000 | (1) | |||||||||||
VTB Bank OJSC Via VTB Capital SA: | ||||||||||||||||||
USD | 6.315 | % | 02/22/2018 | 500,000 | 540,625 | (1) | ||||||||||||
USD | 6.950 | % | 10/17/2022 | 509,000 | 531,905 | (1) | ||||||||||||
Wind Acquisition Finance SA: | ||||||||||||||||||
USD | 11.750 | % | 07/15/2017 | 187,000 | 197,752 | (2) | ||||||||||||
USD | 12.250 | % | 07/15/2017 | 250,000 | 264,688 | (2)(6) | ||||||||||||
|
| |||||||||||||||||
8,802,531 | ||||||||||||||||||
|
| |||||||||||||||||
Singapore - 2.14% | ||||||||||||||||||
DBS Bank Ltd. | USD | 3.625 | % | 09/21/2022 | 200,000 | 206,356 | (1)(3) | |||||||||||
Oversea-Chinese Banking Corp. Ltd. | USD | 3.150 | % | 03/11/2023 | 550,000 | 553,548 | (2)(3) | |||||||||||
PSA International Pte Ltd. | USD | 3.875 | % | 02/11/2021 | 200,000 | 214,297 | ||||||||||||
STATS ChipPAC Ltd. | USD | 4.500 | % | 03/20/2018 | 483,000 | 483,000 | (2) | |||||||||||
|
| |||||||||||||||||
1,457,201 | ||||||||||||||||||
|
| |||||||||||||||||
South Africa - 1.37% | ||||||||||||||||||
Gold Fields Orogen Holding BVI Ltd. | USD | 4.875 | % | 10/07/2020 | 1,000,000 | 935,000 | (1) | |||||||||||
|
| |||||||||||||||||
South Korea - 3.40% | ||||||||||||||||||
Industrial Bank of Korea | USD | 2.375 | % | 07/17/2017 | 500,000 | 504,247 | (2) | |||||||||||
Korea East-West Power Co. Ltd. | USD | 2.500 | % | 07/16/2017 | 400,000 | 402,130 | (2) | |||||||||||
Korea Exchange Bank | USD | 3.125 | % | 06/26/2017 | 200,000 | 207,080 | (2) | |||||||||||
Korea Hydro & Nuclear Power Co. Ltd. | USD | 4.750 | % | 07/13/2021 | 400,000 | 434,930 | (1) | |||||||||||
KT Corp. | USD | 3.875 | % | 01/20/2017 | 400,000 | 423,386 | ||||||||||||
SK Telecom Co. Ltd. | USD | 2.125 | % | 05/01/2018 | 347,000 | 343,669 | (2) | |||||||||||
|
| |||||||||||||||||
2,315,442 | ||||||||||||||||||
|
| |||||||||||||||||
Thailand - 3.36% | ||||||||||||||||||
Bangkok Bank PCL: | ||||||||||||||||||
USD | 2.750 | % | 03/27/2018 | 294,000 | 297,800 | (2) | ||||||||||||
USD | 3.875 | % | 09/27/2022 | 353,000 | 355,524 | (2) |
50 | www.shiplp.com |
Table of Contents
Stone Harbor Emerging Markets Corporate Debt Fund | Statements of Investments | |
May 31, 2013 |
Counterparty | Currency | Rate | Maturity Date | Principal Amount* | Market Value (Expressed in U.S. $) | |||||||||||||||
Thailand (continued) | ||||||||||||||||||||
PTT Global Chemical PCL | USD | 4.250% | 09/19/2022 | 500,000 | $ | 512,222 | (2) | |||||||||||||
PTT PCL | USD | 4.500% | 10/25/2042 | 299,000 | 272,337 | (2) | ||||||||||||||
PTTEP Canada International Finance Ltd. | USD | 5.692% | 04/05/2021 | 400,000 | 457,900 | (1) | ||||||||||||||
Thai Oil PCL | USD | 3.625% | 01/23/2023 | 400,000 | 394,300 | (2) | ||||||||||||||
|
| |||||||||||||||||||
2,290,083 | ||||||||||||||||||||
|
| |||||||||||||||||||
Turkey - 3.89% | ||||||||||||||||||||
Akbank TAS: | ||||||||||||||||||||
USD | 3.875% | 10/24/2017 | 250,000 | 255,938 | (2) | |||||||||||||||
USD | 5.000% | 10/24/2022 | 396,000 | 417,285 | (1) | |||||||||||||||
KOC Holding AS | USD | 3.500% | 04/24/2020 | 340,000 | 327,250 | (2) | ||||||||||||||
Turkiye Garanti Bankasi AS: | ||||||||||||||||||||
USD | 4.000% | 09/13/2017 | 386,000 | 397,097 | (2) | |||||||||||||||
USD | 5.250% | 09/13/2022 | 825,000 | 873,469 | (2) | |||||||||||||||
Yuksel Insaat AS | USD | 9.500% | 11/10/2015 | 550,000 | 382,250 | (1) | ||||||||||||||
|
| |||||||||||||||||||
2,653,289 | ||||||||||||||||||||
|
| |||||||||||||||||||
Ukraine - 2.38% | ||||||||||||||||||||
Ferrexpo Finance PLC | USD | 7.875% | 04/07/2016 | 600,000 | 600,750 | (2) | ||||||||||||||
Metinvest BV | USD | 8.750% | 02/14/2018 | 700,000 | 704,375 | (2) | ||||||||||||||
Mriya Agro Holding PLC | USD | 9.450% | 04/19/2018 | 319,000 | 315,013 | (2) | ||||||||||||||
|
| |||||||||||||||||||
1,620,138 | ||||||||||||||||||||
|
| |||||||||||||||||||
United Arab Emirates - 5.95% | ||||||||||||||||||||
Dolphin Energy Ltd. | USD | 5.888% | 06/15/2019 | 340,335 | 373,517 | (1) | ||||||||||||||
DP World Sukuk Ltd. | USD | 6.250% | 07/02/2017 | 590,000 | 653,425 | (1) | ||||||||||||||
Dubai Holding Commercial Operations | GBP | 6.000% | 02/01/2017 | 400,000 | 624,478 | |||||||||||||||
Emaar Sukuk Ltd. | USD | 6.400% | 07/18/2019 | 900,000 | 985,500 | |||||||||||||||
MAF Global Securities Ltd. | USD | 5.250% | 07/05/2019 | 800,000 | 870,000 | |||||||||||||||
MAF Sukuk Ltd. | USD | 5.850% | 02/07/2017 | 500,000 | 546,250 | |||||||||||||||
|
| |||||||||||||||||||
4,053,170 | ||||||||||||||||||||
|
| |||||||||||||||||||
Venezuela - 3.18% | ||||||||||||||||||||
Petroleos de Venezuela SA: | ||||||||||||||||||||
USD | 5.250% | 04/12/2017 | 775,000 | 661,656 | (1) | |||||||||||||||
USD | 8.500% | 11/02/2017 | 1,587,700 | 1,504,346 | (1) | |||||||||||||||
|
| |||||||||||||||||||
2,166,002 | ||||||||||||||||||||
|
| |||||||||||||||||||
TOTAL CORPORATE BONDS | 66,499,642 | |||||||||||||||||||
|
| |||||||||||||||||||
(Cost $65,836,547) | ||||||||||||||||||||
CREDIT LINKED NOTES - 0.46% | ||||||||||||||||||||
Argentina - 0.46% | ||||||||||||||||||||
Cablevision SA | DeutscheBank AG London | USD | 9.375% | 02/12/2018 | 433,000 | 313,925 | (2) | |||||||||||||
|
| |||||||||||||||||||
TOTAL CREDIT LINKED NOTES | 313,925 | |||||||||||||||||||
|
| |||||||||||||||||||
(Cost $434,107) |
Stone Harbor Investment Funds Annual Report | May 31, 2013 | 51 |
Table of Contents
Stone Harbor Emerging Markets Corporate Debt Fund | Statements of Investments | |
May 31, 2013 |
Currency | Rate | Maturity Date | Shares* | Market Value | ||||||||||||
SHORT TERM INVESTMENTS - 1.83% | ||||||||||||||||
Money Market Mutual Funds - 1.83% | ||||||||||||||||
Dreyfus Institutional Cash Advantage Fund - Institutional Advantage Class (7-Day Yield) | USD | 0.07001 | % | N/A | 1,248,162 | $ | 1,248,162 | |||||||||
|
| |||||||||||||||
TOTAL SHORT TERM INVESTMENTS | 1,248,162 | |||||||||||||||
|
| |||||||||||||||
(Cost $1,248,162) | ||||||||||||||||
Total Investments - 99.83% | 68,061,729 | |||||||||||||||
(Cost $67,518,816) | ||||||||||||||||
Other Assets In Excess of Liabilities - 0.17% | 114,519 | |||||||||||||||
|
| |||||||||||||||
Net Assets - 100.00% | $ | 68,176,248 | ||||||||||||||
|
|
* The principal amount of each security is stated in the currency in which the security is denominated. See below.
GBP | - | Great Britain Pound | ||||
USD | - | United States Dollar |
(1) | Securities were originally issued pursuant to Regulation S under the Securities Act of 1933, which exempts securities offered and sold outside of the United States from registration. Such securities cannot be sold in the United States without either an effective registration statement filed pursuant to the Securities Act of 1933, or pursuant to an exemption from registration. As of May 31, 2013, the aggregate market value of those securities was $17,726,681, which represents approximately 26.00% of net assets. |
(2) | Security exempt from registration under Rule 144A of the Securities Act of 1933. Such securities may normally be sold to qualified institutional buyers in transactions exempt from registration. Total market value of Rule 144A securities amounts to $41,376,254, which represents approximately 60.69% of net assets as of May 31, 2013. |
(3) | Floating or variable rate security. Interest rate disclosed is that which is in effect at May 31, 2013. |
(4) | Step bond. Coupon increases periodically based upon a predetermined schedule. Interest rate disclosed is that which is in effect at May 31,2013. |
(5) | Security is currently in default/non-income producing. |
(6) | Pay-in-kind securities. |
Common Abbreviations:
AS | - | Anonim Sirket is the Turkish term for Incorporation. | ||||
BV | - | Besloten Vennootschap is the Dutch term for private limited liability company. | ||||
BVI | - | British Virgin Islands. | ||||
ESP | - | Empresa de Servicios Publicos is the Colombian term for Public Service Company. | ||||
GmbH | - | Gesellschaft mit beschrankter Haftung is the German term for a company wtih limited liability. | ||||
LLC | - | Limited Liability Corporation. | ||||
LP | - | Limited Partnership. | ||||
Ltd. | - | Limited. | ||||
MTN | - | Medium Term Note. | ||||
OAO | - | Otkrytoe Aktsionernoe Obschestvo is the Russian term for Open Joint Stock Company. | ||||
OJSC | - | Open Joint Stock Company. | ||||
PCL | - | A rearrangement of the letters for Public Limited Company, used in Thailand. | ||||
PLC | - | Public Limited Company. | ||||
PT | - | Perseroan terbuka is an Indonesian term for limited liability company. | ||||
Pte | - | Private. | ||||
SA | - | Generally designates corporations in various countries, mostly those employing the civil law. | ||||
SAA | - | Sociedad Anonima Abierta is the Peruvian term used for companies with 20 or more shareholders. | ||||
SAB | - | Sociedad Anonima Bursatil is the Spanish term used for publicly held company. | ||||
SAB de CV | - | A variable capital company. | ||||
SpA | - | Societa per Azioni. | ||||
SPV | - | Special Purpose Vehicle. | ||||
TAS | - | TüRk Anonim Sirketi is the Turkish term for Joint Stock Company. |
52 | www.shiplp.com |
Table of Contents
Stone Harbor Emerging Markets Corporate Debt Fund | Statements of Investments | |
May 31, 2013 |
OUTSTANDING FORWARD FOREIGN CURRENCY CONTRACTS
Counterparty | Foreign Currency | Contracted Amount* | Purchase/Sale Contract | Settlement Date | Current Value | Unrealized Appreciation | ||||||||||||||
JPMorgan Chase & Co. | GBP | 416,000 | Sale | 06/17/2013 | $ | 631,998 | $ | 16,025 | ||||||||||||
|
| |||||||||||||||||||
$ | 16,025 | |||||||||||||||||||
|
|
* The contracted amount is stated in the currency in which the security is denominated.
See Notes to Financial Statements.
Stone Harbor Investment Funds Annual Report | May 31, 2013 | 53 |
Table of Contents
Stone Harbor Investment Funds | Statements of Assets and Liabilities | |
May 31, 2013 |
Stone Harbor Emerging Markets Debt Fund | Stone Harbor High Yield Bond Fund | Stone Harbor Local Markets Fund | Stone Harbor Emerging Markets Corporate Debt Fund | |||||||||||||
ASSETS: | ||||||||||||||||
Investments , at value(1) | $ | 1,787,346,451 | $ | 380,765,222 | $ | 2,063,925,875 | $ | 68,061,729 | ||||||||
Cash | 4,760,814 | – | 1,406,309 | 473,102 | ||||||||||||
Foreign currency, at value (Cost $409,660, $0, $1,607,859 and $0, respectively) | 342,392 | – | 1,632,751 | – | ||||||||||||
Unrealized appreciation on forward foreign currency contracts | 1,639,822 | 250,805 | 13,697 | 16,025 | ||||||||||||
Receivable for investments sold | 73,479,892 | 7,572,959 | 472,678,003 | – | ||||||||||||
Receivable for fund shares sold | 16,506,405 | 641 | 1,818,107 | – | ||||||||||||
Interest receivable | 24,562,482 | 6,667,936 | 44,056,023 | 872,541 | ||||||||||||
Prepaid and other assets | 19,012 | 16,791 | 21,862 | 7,700 | ||||||||||||
Total Assets | 1,908,657,270 | 395,274,354 | 2,585,552,627 | 69,431,097 | ||||||||||||
LIABILITIES: | ||||||||||||||||
Payable to custodian due to overdraft | – | 84,813 | – | – | ||||||||||||
Payable due to broker for forward foreign currency contracts | 1,760,000 | 400,000 | 5,000 | – | ||||||||||||
Payable for investments purchased | 63,880,878 | 7,465,910 | 94,928,467 | 1,123,482 | ||||||||||||
Payable for fund shares redeemed | 4,462,007 | – | 21,017,038 | – | ||||||||||||
Unrealized depreciation on forward foreign currency contracts | 404,640 | 8,040 | 2,501,216 | – | ||||||||||||
Payable to adviser | 956,913 | 170,378 | 1,650,323 | 50,191 | ||||||||||||
Payable to administrator | 84,734 | 23,123 | 114,725 | 3,965 | ||||||||||||
Other payables | 335,929 | 139,790 | 908,779 | 77,211 | ||||||||||||
Total Liabilities | 71,885,101 | 8,292,054 | 121,125,548 | 1,254,849 | ||||||||||||
Net Assets | $ | 1,836,772,169 | $ | 386,982,300 | $ | 2,464,427,079 | $ | 68,176,248 | ||||||||
NET ASSETS CONSIST OF: | ||||||||||||||||
Paid-in capital | $ | 1,813,691,699 | $ | 357,417,956 | $ | 2,543,502,230 | $ | 69,220,447 | ||||||||
Undistributed net investment income | 327,850 | 1,606,754 | 9,453,766 | 152,302 | ||||||||||||
Accumulated net realized gain/(loss) on investments, forward foreign currency contracts and foreign currency transactions | (8,142,722 | ) | 8,455,066 | 8,053,161 | (1,755,356 | ) | ||||||||||
Net unrealized appreciation/(depreciation) on investments, forward foreign currency contracts and translation of assets and liabilities denominated in foreign currencies | 30,895,342 | 19,502,524 | (96,582,078 | ) | 558,855 | |||||||||||
Net Assets | $ | 1,836,772,169 | $ | 386,982,300 | $ | 2,464,427,079 | $ | 68,176,248 | ||||||||
PRICING OF SHARES: | ||||||||||||||||
Institutional Class | ||||||||||||||||
Net Assets | $ | 1,836,772,169 | $ | 386,982,300 | $ | 2,464,427,079 | $ | 68,176,248 | ||||||||
Shares of beneficial interest outstanding (unlimited number of shares, par value of $0.001 per share authorized) | 162,037,118 | 39,368,510 | 234,568,603 | 7,278,681 | ||||||||||||
Net assets value, offering and redemption price per share | $ | 11.34 | $ | 9.83 | $ | 10.51 | $ | 9.37 | ||||||||
(1)Cost of Investments | $ | 1,758,120,137 | $ | 361,505,695 | $ | 2,158,074,640 | $ | 67,518,816 |
See Notes to Financial Statements.
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Stone Harbor Investment Funds | Statements of Operations | |
For the Year Ended May 31, 2013 |
Stone Harbor Emerging Markets Debt Fund | Stone Harbor High Yield Bond Fund | Stone Harbor Local Markets Fund | Stone Harbor Emerging Markets Corporate Debt Fund | |||||||||||||
INVESTMENT INCOME: | ||||||||||||||||
Interest | $ | 85,648,851 | $ | 36,715,100 | $ | 113,612,187 | $ | 3,435,408 | ||||||||
Dividends | 81,085 | 26,076 | 225,965 | 1,496 | ||||||||||||
Total Investment Income | 85,729,936 | 36,741,176 | 113,838,152 | 3,436,904 | ||||||||||||
EXPENSES: | ||||||||||||||||
Investment advisory fee | 9,585,119 | 2,348,064 | 16,081,334 | 514,627 | ||||||||||||
Administration fee | 787,347 | 270,693 | 1,044,822 | 34,837 | ||||||||||||
Custodian fees | 258,637 | 31,284 | 954,274 | 6,055 | ||||||||||||
Audit fees | 66,219 | 66,941 | 66,764 | 52,674 | ||||||||||||
Printing fees | 10,154 | 9,730 | 18,642 | 10,389 | ||||||||||||
Legal fees | 31,627 | 31,627 | 31,627 | 29,871 | ||||||||||||
Trustee fee | 40,665 | 12,931 | 61,886 | 1,854 | ||||||||||||
Transfer agent fees | 38,924 | 24,291 | 38,933 | 21,141 | ||||||||||||
Registration fees | 72,367 | 32,035 | 158,488 | 30,070 | ||||||||||||
Insurance fees | 20,265 | 8,072 | 25,258 | 736 | ||||||||||||
Other | 11,657 | 3,691 | 14,614 | 2,304 | ||||||||||||
Total expenses before waiver | 10,922,981 | 2,839,359 | 18,496,642 | 704,558 | ||||||||||||
Less fees waived by investment adviser | – | (256,488 | ) | – | (99,115 | ) | ||||||||||
Total Net Expenses | 10,922,981 | 2,582,871 | 18,496,642 | 605,443 | ||||||||||||
Net Investment Income | 74,806,955 | 34,158,305 | 95,341,510 | 2,831,461 | ||||||||||||
REALIZED AND UNREALIZED GAIN/(LOSS) ON INVESTMENTS: |
| |||||||||||||||
Net realized gain/(loss) on: | ||||||||||||||||
Investments | (6,169,747 | ) | 14,855,490 | 16,373,427 | (1,400,594 | ) | ||||||||||
Forward foreign currency contracts | 4,578,885 | (407,916 | ) | 8,301,770 | 25,605 | |||||||||||
Foreign currency transactions | (20,641 | ) | 6,862 | (470,663 | ) | 2,062 | ||||||||||
Net realized gain/(loss) | (1,611,503 | ) | 14,454,436 | 24,204,534 | (1,372,927 | ) | ||||||||||
Change in unrealized appreciation/(depreciation) on: | ||||||||||||||||
Investments | 31,014,451 | 21,863,542 | (20,384,271 | ) | 3,504,751 | |||||||||||
Forward foreign currency contracts | (1,303,072 | ) | (62,683 | ) | 7,005,085 | (7,110 | ) | |||||||||
Translation of assets and liabilities denominated in foreign currencies | 714,858 | 7,369 | 1,644,080 | 561 | ||||||||||||
Net change | 30,426,237 | 21,808,228 | (11,735,106 | ) | 3,498,202 | |||||||||||
Net Realized and Unrealized Gain on Investments | 28,814,734 | 36,262,664 | 12,469,428 | 2,125,275 | ||||||||||||
Net Increase in Net Assets Resulting from Operations | $ | 103,621,689 | $ | 70,420,969 | $ | 107,810,938 | $ | 4,956,736 | ||||||||
See Notes to Financial Statements.
Stone Harbor Investment Funds Annual Report | May 31, 2013 | 55 |
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Stone Harbor Investment Funds | Statements of Changes in Net Assets | |
Stone Harbor Emerging Markets Debt Fund | Stone Harbor High Yield Bond Fund | |||||||||||||||
For the Year Ended | For the Year Ended | For the Year Ended | For the Year Ended | |||||||||||||
OPERATIONS: | ||||||||||||||||
Net investment income | $ | 74,806,955 | $ | 57,940,014 | $ | 34,158,305 | $ | 36,881,426 | ||||||||
Net realized gain/(loss) on investments, forward foreign currency contracts and foreign currency transactions | (1,611,503) | 12,428,756 | 14,454,436 | 405,445 | ||||||||||||
Net change in unrealized appreciation/(depreciation) on investments, forward foreign currency contracts and foreign currency translations | 30,426,237 | (24,488,836) | 21,808,228 | (30,819,198) | ||||||||||||
Net increase in net assets resulting from operations | 103,621,689 | 45,879,934 | 70,420,969 | 6,467,673 | ||||||||||||
DISTRIBUTIONS TO SHAREHOLDERS: | ||||||||||||||||
Institutional Class | ||||||||||||||||
From net investment income | (74,212,098) | (62,119,059) | (33,469,548) | (35,520,684) | ||||||||||||
From net realized gains | (7,462,387) | (9,021,936) | (1,484,074) | (14,866,777) | ||||||||||||
Net decrease in net assets from distributions to shareholders | (81,674,485) | (71,140,995) | (34,953,622) | (50,387,461) | ||||||||||||
CAPITAL SHARE TRANSACTIONS: | ||||||||||||||||
Institutional Class | ||||||||||||||||
Proceeds from sale of shares | 701,645,400 | 509,808,699 | 70,255,935 | 111,505,627 | ||||||||||||
Issued to shareholders in reinvestment of distributions | 78,161,464 | 67,065,948 | 31,890,743 | 48,229,973 | ||||||||||||
Cost of shares redeemed | (148,710,236) | (117,232,918) | (270,312,084) | (84,560,710) | ||||||||||||
Net increase/(decrease) in net assets from capital share transactions | 631,096,628 | 459,641,729 | (168,165,406) | 75,174,890 | ||||||||||||
Net Increase/(Decrease) in Net Assets | 653,043,832 | 434,380,668 | (132,698,059) | 31,255,102 | ||||||||||||
NET ASSETS: | ||||||||||||||||
Beginning of period | 1,183,728,337 | 749,347,669 | 519,680,359 | 488,425,257 | ||||||||||||
End of period | $ | 1,836,772,169 | $ | 1,183,728,337 | $ | 386,982,300 | $ | 519,680,359 | ||||||||
Includes undistributed net investment income of: | $ | 327,850 | $ | 1,084,360 | $ | 1,606,754 | $ | 1,700,036 | ||||||||
OTHER INFORMATION: | ||||||||||||||||
Share Transactions: | ||||||||||||||||
Institutional Class | ||||||||||||||||
Beginning shares | 108,310,075 | 66,925,355 | 56,889,085 | 48,832,904 | ||||||||||||
Shares sold | 59,623,123 | 45,737,532 | 7,368,911 | 11,902,013 | ||||||||||||
Shares reinvested | 6,675,662 | 6,095,861 | 3,323,302 | 5,307,792 | ||||||||||||
Shares redeemed | (12,571,742) | (10,448,673) | (28,212,788) | (9,153,624) | ||||||||||||
Shares outstanding - end of period | 162,037,118 | 108,310,075 | 39,368,510 | 56,889,085 | ||||||||||||
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Stone Harbor Investment Funds | Statements of Changes in Net Assets | |
Stone Harbor Local Markets Fund | Stone Harbor Emerging Markets Corporate Debt Fund | |||||||||||||||
For the Year Ended May 31, 2013 | For the Year Ended May 31, 2012 | For the Year Ended May 31, 2013 | For the Year Ended May 31, 2012(a) | |||||||||||||
OPERATIONS: | ||||||||||||||||
Net investment income | $ | 95,341,510 | $ | 59,803,238 | $ | 2,831,461 | $ | 1,969,621 | ||||||||
Net realized gain/(loss) on investments, forward foreign currency contracts and foreign currency transactions | 24,204,534 | (31,033,518) | (1,372,927) | (332,762) | ||||||||||||
Net change in unrealized appreciation/(depreciation) on investments, forward foreign currency contracts and foreign currency translations | (11,735,106) | (102,407,376) | 3,498,202 | (2,939,347) | ||||||||||||
Net increase/(decrease) in net assets resulting from operations | 107,810,938 | (73,637,656) | 4,956,736 | (1,302,488) | ||||||||||||
DISTRIBUTIONS TO SHAREHOLDERS: | ||||||||||||||||
Institutional Class | ||||||||||||||||
From net investment income | (80,332,640) | (46,535,140) | (2,733,381) | (1,965,171) | ||||||||||||
From net realized gains | (3,257,825) | – | – | – | ||||||||||||
From tax return of capital | – | (2,731,631) | – | – | ||||||||||||
Net decrease in net assets from distributions to shareholders | (83,590,465) | (49,266,771) | (2,733,381) | (1,965,171) | ||||||||||||
CAPITAL SHARE TRANSACTIONS: | ||||||||||||||||
Institutional Class | ||||||||||||||||
Proceeds from sale of shares | 960,952,241 | 1,147,925,382 | 30,480,000 | 35,932,000 | ||||||||||||
Issued to shareholders in reinvestment of distributions | 82,497,686 | 48,814,517 | 2,733,381 | 1,965,171 | ||||||||||||
Cost of shares redeemed | (166,738,410) | (116,133,532) | (1,890,000) | – | ||||||||||||
Net increase in net assets from capital share transactions | 876,711,517 | 1,080,606,367 | 31,323,381 | 37,897,171 | ||||||||||||
Net Increase in Net Assets | 900,931,990 | 957,701,940 | 33,546,736 | 34,629,512 | ||||||||||||
NET ASSETS: | ||||||||||||||||
Beginning of period | 1,563,495,089 | 605,793,149 | 34,629,512 | – | ||||||||||||
End of period | $ | 2,464,427,079 | $ | 1,563,495,089 | $ | 68,176,248 | $ | 34,629,512 | ||||||||
Includes undistributed/(overdistributed) net investment | $ | 9,453,766 | $ | (2,054,814) | $ | 152,302 | $ | 29,413 | ||||||||
OTHER INFORMATION: | ||||||||||||||||
Share Transactions: | ||||||||||||||||
Institutional Class | ||||||||||||||||
Beginning shares | 154,809,668 | 54,032,190 | 3,896,019 | – | ||||||||||||
Shares sold | 87,325,840 | 106,956,969 | 3,290,911 | 3,676,780 | ||||||||||||
Shares reinvested | 7,514,090 | 4,632,478 | 289,977 | 219,239 | ||||||||||||
Shares redeemed | (15,080,995) | (10,811,969) | (198,226) | – | ||||||||||||
Shares outstanding - end of period | 234,568,603 | 154,809,668 | 7,278,681 | 3,896,019 | ||||||||||||
(a) | The Fund commenced operations on June 1, 2011. |
See Notes to Financial Statements.
Stone Harbor Investment Funds Annual Report | May 31, 2013 | 57 |
Table of Contents
Markets Debt Fund | Financial Highlights | |
For a share outstanding through the periods presented. |
Institutional Class | For the Year Ended | For the Year Ended | For the Year Ended May 31, 2011 | For the Year Ended | For the Year Ended | |||||||||||||||
Net asset value - beginning of period | $ | 10.93 | $ | 11.20 | $ | 10.48 | $ | 9.22 | $ | 10.34 | ||||||||||
Income/(loss) from investment operations: |
| |||||||||||||||||||
Net investment income | 0.55 | (1) | 0.65 | (1) | 0.67 | (1) | 0.75 | 0.59 | ||||||||||||
Net realized and unrealized gain/(loss) on investments | 0.45 | (0.15) | 1.00 | 1.44 | (1.18) | |||||||||||||||
Total income/(loss) from investment operations | 1.00 | 0.50 | 1.67 | 2.19 | (0.59) | |||||||||||||||
Less distributions to common shareholders: |
| |||||||||||||||||||
From net investment income | (0.54) | (0.67) | (0.63) | (0.79) | (0.53) | |||||||||||||||
From net realized gains | (0.05) | (0.10) | (0.32) | (0.14) | – | |||||||||||||||
Total distributions | (0.59) | (0.77) | (0.95) | (0.93) | (0.53) | |||||||||||||||
Net Increase/(Decrease) in Net Asset Value | 0.41 | (0.27) | 0.72 | 1.26 | (1.12) | |||||||||||||||
Net asset value - end of period | $ | 11.34 | $ | 10.93 | $ | 11.20 | $ | 10.48 | $ | 9.22 | ||||||||||
Total Return(2) | 9.05 | % | 4.61 | % | 16.30 | % | 24.25 | % | (5.10) | % | ||||||||||
Ratios/Supplemental Data: | ||||||||||||||||||||
Net assets, end of period (in millions) | $ | 1,837 | $ | 1,184 | $ | 749 | $ | 178 | $ | 92 | ||||||||||
Ratio of expenses to average net assets without fee waivers/reimbursements/repayment of previously waived fees | 0.68 | % | 0.72 | % | 0.77 | % | 0.91 | % | 1.33 | % | ||||||||||
Ratio of expenses to average net assets with fee waivers/reimbursements/ repayment of previously waived fees | 0.68 | % | 0.72 | % | 0.75 | % | 0.75 | % | 0.75 | % | ||||||||||
Ratio of net investment income to average net assets with fee waivers/ reimbursements/repayment of previously waived fees | 4.68 | % | 5.78 | % | 6.02 | % | 6.80 | % | 9.32 | % | ||||||||||
Portfolio turnover rate | 68 | % | 60 | % | 82 | % | 125 | % | 84 | % |
(1) | Calculated using average shares throughout the period. |
(2) | Total returns would have been lower had various fees and expenses not been waived and reimbursed during the period. The total returns in the table represent the rate that an investor would have earned (or lost) on an investment in a Fund (assuming reinvestment of all dividends and distributions). |
See Notes to Financial Statements.
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Financial Highlights | ||
For a share outstanding through the periods presented. |
Institutional Class | For the Year Ended | For the Year Ended | For the Year Ended | For the Year Ended | For the Year Ended | |||||||||||||||
Net asset value - beginning of period | $ | 9.13 | $ | 10.00 | $ | 9.36 | $ | 8.39 | $ | 9.92 | ||||||||||
Income/(loss) from investment operations: |
| |||||||||||||||||||
Net investment income | 0.70 | (1) | 0.72 | (1) | 0.77 | (1) | 0.73 | 0.70 | ||||||||||||
Net realized and unrealized gain/(loss) on investments | 0.72 | (0.59) | 0.78 | 0.96 | (1.53) | |||||||||||||||
Total income/(loss) from investment operations | 1.42 | 0.13 | 1.55 | 1.69 | (0.83) | |||||||||||||||
Less distributions to common shareholders: |
| |||||||||||||||||||
From net investment income | (0.68) | (0.70) | (0.76) | (0.72) | (0.70) | |||||||||||||||
From net realized gains | (0.04) | (0.30) | (0.15) | – | – | |||||||||||||||
Total distributions | (0.72) | (1.00) | (0.91) | (0.72) | (0.70) | |||||||||||||||
Net Increase/(Decrease) in Net Asset Value | 0.70 | (0.87) | 0.64 | 0.97 | (1.53) | |||||||||||||||
Net asset value - end of period | $ | 9.83 | $ | 9.13 | $ | 10.00 | $ | 9.36 | $ | 8.39 | ||||||||||
Total Return(2) | 15.87 | % | 1.77 | % | 17.14 | % | 20.53 | % | (7.77) | % | ||||||||||
Ratios/Supplemental Data: | ||||||||||||||||||||
Net assets, end of period (in millions) | $ | 387 | $ | 520 | $ | 488 | $ | 408 | $ | 223 | ||||||||||
Ratio of expenses to average net assets without fee waivers/reimbursements/ repayment of previously waived fees | 0.60 | % | 0.62 | % | 0.65 | % | 0.67 | % | 0.88 | % | ||||||||||
Ratio of expenses to average net assets with fee waivers/reimbursements/ repayment of previously waived fees | 0.55 | % | 0.55 | % | 0.55 | % | 0.55 | % | 0.55 | % | ||||||||||
Ratio of net investment income to average net assets with fee waivers/ reimbursements/repayment of previously waived fees | 7.27 | % | 7.67 | % | 7.78 | % | 8.13 | % | 9.07 | % | ||||||||||
Portfolio turnover rate | 59 | % | 46 | % | 60 | % | 36 | % | 16 | % |
(1) | Calculated using average shares throughout the period. |
(2) | Total returns would have been lower had various fees and expenses not been waived and reimbursed during the period. The total returns in the table represent the rate that an investor would have earned (or lost) on an investment in a Fund (assuming reinvestment of all dividends and distributions). |
See Notes to Financial Statements.
Stone Harbor Investment Funds Annual Report | May 31, 2013 | 59 |
Table of Contents
Financial Highlights | ||
For a share outstanding through the periods presented. |
Institutional Class | For the Year Ended | For the Year Ended | For the Period June 30, 2010 (Inception) to May 31, 2011 | |||||||||
Net asset value - beginning of period | $ | 10.10 | $ | 11.21 | $ | 10.00 | ||||||
Income/(loss) from investment operations: | ||||||||||||
Net investment income(1) | 0.49 | 0.57 | 0.51 | |||||||||
Net realized and unrealized gain/(loss) on investments | 0.33 | (1.21) | 1.14 | |||||||||
Total income/(loss) from investment operations | 0.82 | (0.64) | 1.65 | |||||||||
Less distributions to common shareholders: | ||||||||||||
From net investment income | (0.39) | (0.45) | (0.39) | |||||||||
From net realized gains | (0.02) | – | (0.05) | |||||||||
From tax return of capital | – | (0.02) | – | |||||||||
Total distributions | (0.41) | (0.47) | (0.44) | |||||||||
Net Increase/(Decrease) in Net Asset Value | 0.41 | (1.11) | 1.21 | |||||||||
Net asset value - end of period | $ | 10.51 | $ | 10.10 | $ | 11.21 | ||||||
Total Return(2)(3) | 7.92 | % | (5.84) | % | 16.82% | |||||||
Ratios/Supplemental Data: | ||||||||||||
Net assets, end of period (in millions) | $ | 2,464 | $ | 1,563 | $ | 606 | ||||||
Ratio of expenses to average net assets without fee waivers/reimbursements/repayment of previously waived fees | 0.86 | % | 0.89 | % | 1.01%(4) | |||||||
Ratio of expenses to average net assets with fee waivers/reimbursements/repayment of previously waived fees | 0.86 | % | 0.89 | % | 1.00%(4) | |||||||
Ratio of net investment income to average net assets with fee waivers/reimbursements/repayment of previously waived fees | 4.45 | % | 5.35 | % | 5.13%(4) | |||||||
Portfolio turnover rate | 191 | % | 161 | % | 102% |
(1) | Calculated using average shares throughout the period. |
(2) | Total returns would have been lower had various fees and expenses not been waived and reimbursed during the period. The total returns in the table represent the rate that an investor would have earned (or lost) on an investment in a Fund (assuming reinvestment of all dividends and distributions). |
(3) | Total returns for periods of less than one year are not annualized. |
(4) | Annualized. |
See Notes to Financial Statements.
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Markets Corporate Debt Fund | Financial Highlights | |
For a share outstanding through the periods presented. |
For the Year Ended May 31, 2013 | For the Year Ended | |||||||
Net asset value - beginning of period | $ | 8.89 | $ | 10.00 | ||||
Income/(loss) from investment operations: | ||||||||
Net investment income(2) | 0.44 | 0.59 | ||||||
Net realized and unrealized gain/(loss) on investments | 0.46 | (1.11) | ||||||
Total income/(loss) from investment operations | 0.90 | (0.52) | ||||||
Less distributions to common shareholders: | ||||||||
From net investment income | (0.42) | (0.59) | ||||||
Total distributions | (0.42) | (0.59) | ||||||
Net Increase/(Decrease) in Net Asset Value | 0.48 | (1.11) | ||||||
Net asset value - end of period | $ | 9.37 | $ | 8.89 | ||||
Total Return(3) | 10.13 | % | (5.10) | % | ||||
Ratios/Supplemental Data: | ||||||||
Net assets, end of period (in millions) | $ | 68 | $ | 35 | ||||
Ratio of expenses to average net assets without fee waivers/reimbursements | 1.16 | % | 1.32 | % | ||||
Ratio of expenses to average net assets with fee waivers/reimbursements | 1.00 | % | 1.00 | % | ||||
Ratio of net investment income to average net assets with fee waivers/reimbursements | 4.68 | % | 6.41 | % | ||||
Portfolio turnover rate | 78 | % | 51 | % |
(1) | The Fund commenced operations on June 1, 2011. |
(2) | Calculated using average shares throughout the period. |
(3) | Total returns would have been lower had various fees and expenses not been waived and reimbursed during the period. The total returns in the table represent the rate that an investor would have earned (or lost) on an investment in a Fund (assuming reinvestment of all dividends and distributions). |
See Notes to Financial Statements.
Stone Harbor Investment Funds Annual Report | May 31, 2013 | 61 |
Table of Contents
Stone Harbor Investment Funds | Notes to Financial Statements | |
May 31, 2013 |
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Stone Harbor Investment Funds, which consists of Stone Harbor Emerging Markets Debt Fund, Stone Harbor High Yield Bond Fund, Stone Harbor Local Markets Fund and Stone Harbor Emerging Markets Corporate Debt Fund (each, a “Fund” and together, the “Funds”) is a Massachusetts business trust (the “Trust”), organized on February 20, 2007 and registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as an open-end management investment company. The Stone Harbor Emerging Markets Corporate Debt Fund commenced operations on June 1, 2011. 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. As of the date of this report, there were no outstanding shares for the Distributor Class of each Fund. The Declaration of Trust permits the Trustees to create additional funds and share classes.
The Emerging Markets Debt Fund’s investment objective is to maximize total return. The Fund normally will invest at least 80% of its net assets (plus any borrowings made for investment purposes) in Emerging Markets Fixed Income Securities. “Emerging Markets Fixed Income Securities” include fixed income securities and derivative instruments (including, but not limited to, spot and currency contracts, futures, options and swaps) that economically are tied to countries with emerging securities markets or whose performance is linked to those countries’ markets, economies or ability to repay loans. Emerging Markets Fixed Income Securities may be denominated in non-U.S. currencies or the U.S. dollar. A security or instrument is economically tied to an emerging market country if it is principally traded on the country’s securities markets or the issuer is organized or principally operates in the country, derives a majority of its income from its operations within the country or has a majority of its assets within the country. Emerging Markets Fixed Income Securities also include derivatives and other instruments used to hedge or gain exposure to emerging securities markets (for example, futures or other derivatives whose return is based on specific emerging markets securities or indices).
The High Yield Bond Fund’s investment objective is to maximize total return. The Fund will normally invest at least 80% of its net assets (plus any borrowings made for investment purposes) in High Yield Debt Securities. “High Yield Debt Securities” include fixed income securities and derivative instruments (including, but not limited to, spot and currency contracts, futures, options and swaps) rated below investment grade (or, if unrated, of comparable quality as determined by Stone Harbor Investment Partners LP (the “Adviser” or “Stone Harbor”). These securities and instruments are commonly referred to as “high yield” securities or “junk bonds,” and may include, among other things, bonds, debentures, notes, equipment trust certificates, commercial paper, commercial loans, preferred stock and other obligations of U.S. and non-U.S. issuers. High Yield Debt Securities also include securities or other instruments whose return is based on the return of high yield securities, including derivative instruments and instruments created to hedge or gain exposure to the high yield markets.
The Local Markets Fund’s investment objective is to maximize total return. The Fund normally will invest at least 80% of its net assets (plus any borrowings made for investment purposes) in Emerging Markets Investments. “Emerging Markets Investments” include fixed income securities and derivative instruments (including, but not limited to, spot and currency contracts, futures, options and swaps) that economically are tied to an emerging market country, which are denominated in the predominant currency of the local market of an emerging market country (an “Emerging Markets Currency”) or whose performance is linked to those countries’ currencies, markets, economies or ability to repay loans. Although under normal circumstances a significant portion of the Fund’s investments will be denominated in Emerging Markets Currencies, Emerging Markets Investments may be denominated in non - Emerging Markets Currencies, including the U.S. dollar. A security or instrument is economically tied to an emerging market country if it is principally traded on the country’s securities markets or the issuer is organized or principally operates in the country, derives a majority of its income from its operations within the country or has a majority of its assets within the country. Emerging Markets Investments also include Emerging Markets Currencies and derivatives and other instruments used to hedge or gain exposure to emerging securities markets or Emerging Markets Currencies (for example, futures or other derivatives whose return is based on specific emerging markets securities, emerging markets indices or Emerging Markets Currencies).
The Emerging Markets Corporate Debt Fund’s investment objective is to maximize total return. The Fund normally will invest at least 80% of its net assets (plus any borrowings made for investment purposes) in Emerging Markets Corporate Debt Investments. “Emerging Markets Corporate Debt Investments” are debt instruments, including loans, issued by corporations or other business organizations that are economically tied to an emerging market country. A corporation or other business organization is economically tied to an emerging market country if it issues securities that are principally traded on the country’s securities markets or if it is organized or principally operates in the country, derives a majority of its income from its operations within the country or has a majority of its assets within the country. Emerging Markets Corporate Debt Investments also include derivative instruments used for hedging purposes or to otherwise gain or reduce long or short exposure to Emerging Markets Corporate Debt Investments.
The Emerging Markets Debt Fund, Local Markets Fund and Emerging Markets Corporate Debt Fund are each classified as “non-diversified” under the 1940 Act. As a result, the Funds can invest a greater portion of the Funds’ assets in obligations of a single issuer than a “diversified” fund. The Funds may therefore be more susceptible than a diversified fund to being adversely affected by any single corporate, economic, political or regulatory occurrence. The High Yield Bond Fund is a diversified fund.
The following is a summary of significant accounting policies consistently followed by the Funds in the preparation of their financial statements. The policies are in conformity with accounting principles generally accepted in the United States of America (“GAAP”). The preparation of the financial
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statements in accordance with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of income and expenses during the reporting period. Actual results could differ from those estimates.
Investment Valuation: Debt securities, including bank loans and linked notes, are generally valued at the mean between the bid and asked prices provided by independent pricing services or brokers that are based on transactions in debt obligations, quotations from dealers, market transactions in comparable securities and various other relationships between securities. Equity securities for which market quotations are available are generally valued at the last sale price or official closing price on the primary market or exchange on which they trade. Publicly traded foreign government debt securities are typically traded internationally in the over the counter market, and are valued at the mean between the bid and asked prices as of the close of business of that market. When prices are not readily available, or are determined not to reflect fair value, such as when the value of a security has been significantly affected by events after the close of the exchange or market on which the security is principally traded, but before the Funds calculate their net asset value, the Funds may value these investments at fair value as determined in accordance with the procedures approved by the Funds’ Board of Trustees. Short term obligations with maturities of 60 days or less are valued at amortized cost, which approximates market value. Money market mutual funds are valued at their net asset value.
A three-tier hierarchy has been established to measure fair value based on the extent of use of “observable inputs” as compared to “unobservable inputs” for disclosure purposes and requires additional disclosures about these valuations measurements. Inputs refer broadly to the assumptions that market participants would use in pricing a security. Observable inputs are inputs that reflect the assumptions market participants would use in pricing the security developed based on market data obtained from sources independent of the reporting entity. Unobservable inputs are inputs that reflect the reporting entity’s own assumptions about the assumptions market participants would use in pricing the security developed based on the best information available in the circumstances.
The three-tier hierarchy is summarized as follows:
Level 1 | — | Unadjusted quoted prices in active markets for identical assets or liabilities that the Fund has the ability to access. | ||
Level 2 | — | Observable inputs other than quoted prices included in level 1 that are observable for the asset or liability, either directly or indirectly. These inputs may include quoted prices for the identical instrument on an inactive market, prices for similar instruments, interest rates, prepayment speeds, credit risk, yield curve, rates, and similar data | ||
Level 3 | — | Unobservable inputs for the asset or liability, to the extent relevant observable inputs are not available, representing the Fund’s own assumptions about the assumptions a market participant would use in valuing the asset or liability, and would be based on the best information available. |
The following is a summary of each Fund’s investments and financial instruments based on the three tier hierarchy as of
May 31, 2013:
Investments in Securities at Value* | Level 1 -Quoted and Unadjusted Prices | Level 2 - Other Significant Observable Inputs | Level 3 -Significant Unobservable Inputs | Total | ||||||||||||
Stone Harbor Emerging Markets Debt Fund |
| |||||||||||||||
Sovereign Debt Obligations | $ | – | $ | 1,149,006,422 | $ | – | $ | 1,149,006,422 | ||||||||
Bank Loans | ||||||||||||||||
Indonesia | – | 1,324,967 | 560,733 | 1,885,700 | ||||||||||||
Corporate Bonds | – | 526,421,515 | – | 526,421,515 | ||||||||||||
Participation Notes | – | 6,956,049 | – | 6,956,049 | ||||||||||||
Credit Linked Notes | ||||||||||||||||
Argentina | – | – | 1,780,600 | 1,780,600 | ||||||||||||
Brazil | – | 17,606,907 | – | 17,606,907 | ||||||||||||
Colombia | – | 12,340,581 | – | 12,340,581 | ||||||||||||
Iraq | – | – | 9,638,438 | 9,638,438 | ||||||||||||
Short Term Investments | 61,710,239 | – | – | 61,710,239 | ||||||||||||
Total | $ | 61,710,239 | $ | 1,713,656,441 | $ | 11,979,771 | $ | 1,787,346,451 | ||||||||
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Investments in Securities at Value* | Level 1 - Quoted and Unadjusted Prices | Level 2 - Other Significant Observable Inputs | Level 3 - Significant Unobservable Inputs | Total | ||||||||||||
Assets | ||||||||||||||||
Forward Foreign Currency Contracts | $ | – | $ | 1,639,822 | $ | – | $ | 1,639,822 | ||||||||
Liabilities | ||||||||||||||||
Forward Foreign Currency Contracts | – | (404,640) | – | (404,640) | ||||||||||||
Total | $ | – | $ | 1,235,182 | $ | – | $ | 1,235,182 | ||||||||
Investments in Securities at Value* | Level 1 - Quoted and Unadjusted Prices | Level 2 - Other Significant Observable Inputs | Level 3 - Significant Unobservable Inputs | Total | ||||||||||||
Stone Harbor High Yield Bond Fund |
| |||||||||||||||
Corporate Bonds | $ | – | $ | 363,057,031 | $ | – | $ | 363,057,031 | ||||||||
Convertible Corporate Bonds | – | 5,170,593 | – | 5,170,593 | ||||||||||||
Bank Loans | – | 9,404,899 | – | 9,404,899 | ||||||||||||
Common Stocks | ||||||||||||||||
Chemicals | 22,661 | – | – | 22,661 | ||||||||||||
Paper/Forest Products | – | 461,700 | – | 461,700 | ||||||||||||
Publishing | 126,325 | – | – | 126,325 | ||||||||||||
Transport Other | – | 19 | – | 19 | ||||||||||||
Preferred Stocks | 495,654 | – | – | 495,654 | ||||||||||||
Warrants | – | – | – | – | ||||||||||||
Short Term Investments | 2,026,340 | – | – | 2,026,340 | ||||||||||||
Total | $ | 2,670,980 | $ | 378,094,242 | $ | – | $ | 380,765,222 | ||||||||
Other Financial Instruments** | ||||||||||||||||
Assets | ||||||||||||||||
Forward Foreign Currency Contracts | $ | – | $ | 250,805 | $ | – | $ | 250,805 | ||||||||
Liabilities | ||||||||||||||||
Forward Foreign Currency Contracts | – | (8,040) | – | (8,040) | ||||||||||||
Total | $ | – | $ | 242,765 | $ | – | $ | 242,765 | ||||||||
Investments in Securities at Value* | Level 1 - Quoted and Unadjusted Prices | Level 2 - Other Significant Observable Inputs | Level 3 - Significant Unobservable Inputs | Total | ||||||||||||
Stone Harbor Local Markets Fund | ||||||||||||||||
Sovereign Debt Obligations | $ | – | $ | 1,446,464,780 | $ | – | $ | 1,446,464,780 | ||||||||
Corporate Bonds | – | 71,558,072 | – | 71,558,072 | ||||||||||||
Credit Linked Notes | – | 403,497,279 | – | 403,497,279 | ||||||||||||
Short Term Investments | ||||||||||||||||
Money Market Fund | 108,447,151 | – | – | 108,447,151 | ||||||||||||
Foreign Treasury Bills | – | 33,958,593 | – | 33,958,593 | ||||||||||||
Total | $ | 108,447,151 | $ | 1,955,478,724 | $ | – | $ | 2,063,925,875 | ||||||||
Other Financial Instruments** | ||||||||||||||||
Assets | ||||||||||||||||
Forward Foreign Currency Contracts | $ | – | $ | 13,697 | $ | – | $ | 13,697 | ||||||||
Liabilities | ||||||||||||||||
Forward Foreign Currency Contracts | – | (2,501,216) | – | (2,501,216) | ||||||||||||
Total | $ | – | $ | (2,487,519) | $ | – | $ | (2,487,519) | ||||||||
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Investments in Securities at Value* | Level 1 - Quoted and Unadjusted Prices | Level 2 - Other Significant Observable Inputs | Level 3 - Significant Unobservable Inputs | Total | ||||||||||||
Stone Harbor Emerging |
| |||||||||||||||
Corporate Bonds | $ | – | $ | 66,499,642 | $ | – | $ | 66,499,642 | ||||||||
Credit Linked Notes | – | – | 313,925 | 313,925 | ||||||||||||
Short Term Investments | 1,248,162 | – | – | 1,248,162 | ||||||||||||
Total | $ | 1,248,162 | $ | 66,499,642 | $ | 313,925 | $ | 68,061,729 | ||||||||
Other Financial Instruments** | ||||||||||||||||
Assets | ||||||||||||||||
Forward Foreign Currency Contracts | $ | – | $ | 16,025 | $ | – | $ | 16,025 | ||||||||
Total | $ | – | $ | 16,025 | $ | – | $ | 16,025 | ||||||||
* | For detailed Industry/Country descriptions, see accompanying Statements of Investments. |
** | Other financial instruments are derivative instruments not reflected in the Statements of Investments. The derivatives shown in this table are reported at their unrealized appreciation/(depreciation) at measurement date, which represents the change in the contract’s value from trade date. |
There were no transfers between Levels 1 and 2 during the year ended May 31, 2013. It is the Funds’ policy to recognize transfers into and out of all levels at the end of the reporting period. Other financial assets were moved from Level 2 to Level 3 as observable inputs were not available for purposes of valuing those assets.
The following is a reconciliation of assets in which significant unobservable inputs (Level 3) were used in determining fair value:
Investments in Securities | Balance as of May 31, 2012 | Accrued discount/ premium | Realized Gain (Loss)* | Change in Unrealized Appreciation/ (Depreciation)* | Purchases | Sales Proceeds | Transfer into Level 3 | Balance as of May 31, 2013 | Net change in unrealized appreciation/ (depreciation) included in the Statements of Operations attributable to Level 3 investments held at May 31, 2013 | |||||||||||||||||||||||||||
Stone Harbor Emerging Markets Debt Fund | ||||||||||||||||||||||||||||||||||||
Bank Loan | $ | 934,554 | $ | – | $ | – | $ | (373,821 | ) | $ | – | $ | – | $ | – | $ | 560,733 | $ | (373,821 | ) | ||||||||||||||||
Corporate Bond | 477,336 | 187,466 | (1,437,964 | ) | 1,136,007 | – | (362,845 | ) | – | – | – | |||||||||||||||||||||||||
Credit Linked Notes | – | 119,234 | 131,563 | (1,856,266 | ) | 8,783,362 | (559,926 | ) | 4,801,071 | 11,419,038 | (3,539,586 | ) | ||||||||||||||||||||||||
TOTAL | $ | 1,411,890 | $ | 306,700 | $ | (1,306,401 | ) | $ | (1,094,080 | ) | $ | 8,783,362 | $ | (922,771 | ) | $ | 4,801,071 | $ | 11,979,771 | $ | (3,913,407 | ) | ||||||||||||||
Investments in Securities | Balance as of May 31, 2012 | Accrued discount/ premium | Realized gain/(loss)* | Change in unrealized depreciation* | Sales Proceeds | Transfer into Level 3 | Balance as of May 31, 2013 | Net change in unrealized appreciation/ (depreciation) at May 31, 2013* | ||||||||||||||||||||||||
Stone Harbor Emerging Markets Corporate Debt Fund | ||||||||||||||||||||||||||||||||
Corporate Bonds | $ | 201,415 | $ | 77,937 | $ | (573,859 | ) | $ | 445,055 | $ | (150,548 | ) | $ | – | $ | – | $ | – | ||||||||||||||
Credit Linked Notes | – | – | – | – | – | 313,925 | 313,925 | (120,182 | ) | |||||||||||||||||||||||
TOTAL | $ | 201,415 | $ | 77,937 | $ | (573,859 | ) | $ | 445,055 | $ | (150,548 | ) | $ | 313,925 | $ | 313,925 | $ | (120,182 | ) | |||||||||||||
* | Realized gain/(loss) and change in unrealized appreciation/(depreciation) are included in the related amounts on the investment in the Statements of Operations. |
All level 3 investments have values determined utilizing third party pricing information without adjustment.
The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities.
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May 31, 2013 |
In the event a board approved independent pricing service is unable to provide an evaluated price for a security or the Adviser believes the price provided is not reliable, securities of the Funds may be valued at fair value as described above. In these instances the Adviser may seek to find an alternative independent source, such as a broker/dealer to provide a price quote, or by using evaluated pricing models similar to the techniques and models used by the independent pricing service. These fair value measurement techniques may utilize unobservable inputs (Level 3).
On at least a quarterly basis, the Adviser presents the factors considered in determining the fair value measurements and presents that information to the Board which meets at least quarterly.
Security Transactions and Investment Income: Security transactions are accounted for on a trade date basis. Interest income, adjusted for amortization of premium and accretion of discount, is recorded on the accrual basis. Dividend income is recorded on the ex-dividend date. Foreign dividend income is recorded on the ex-dividend date or as soon as practical after the Funds determine the existence of a dividend declaration after exercising reasonable due diligence. If applicable, any foreign capital gains taxes are accrued, net of unrealized gains, and are payable upon the sale of such investments. The cost of investments sold is determined by use of the specific identification method. To the extent any issuer defaults on an expected interest payment, the Funds’ policy is to generally halt any additional interest income accruals and consider the realizability of interest accrued up to the date of default.
Foreign Currency Translation: The books and records of the Funds are maintained in U.S. dollars. Investment valuations and other assets and liabilities initially expressed in foreign currencies are converted each business day into U.S. dollars based upon current exchange rates. Prevailing foreign exchange rates may generally be obtained at the close of the NYSE (normally, 4:00 p.m. Eastern time). The portion of realized and unrealized gains or losses on investments due to fluctuations in foreign currency exchange rates is not separately disclosed and is included in realized and unrealized gains or losses on investments, when applicable.
Foreign Securities: The Funds may directly purchase securities of foreign issuers. Investing in securities of foreign issuers involves special risks not typically associated with investing in securities of U.S. issuers. The risks include possible revaluation of currencies, the ability to repatriate funds, less complete financial information about companies and possible future adverse political and economic developments. Moreover, securities of many foreign issuers and their markets may be less liquid and their prices more volatile than those of securities of comparable U.S. issuers.
Credit Linked Notes: The Funds may invest in credit linked notes to obtain economic exposure to high yield, emerging markets or other securities. Investments in a credit linked note typically provide the holder with a return based on the return of an underlying reference instrument, such as an emerging market bond. Like an investment in a bond, investments in credit-linked securities represent the right to receive periodic income payments (in the form of distributions) and payment of principal at the end of the term of the security. In addition to the risks associated with the underlying reference instrument, an investment in a credit linked note is also subject to the risk that the counterparty will be unwilling or unable to meet its obligations under the note.
Loan Participations and Assignments: The Funds may invest in loans arranged through private negotiation between one or more financial institutions. The Funds’ investment in any such loan may be in the form of a participation in or an assignment of the loan. In connection with purchasing participations, the Funds generally will have no right to enforce compliance by the borrower with the terms of the loan agreement relating to the loan, nor any rights of set-off against the borrower and the Funds may not benefit directly from any collateral supporting the loan in which they have purchased the participation.
The Funds may also invest in unfunded loan commitments, which are contractual obligations for future funding. Information regarding unfunded commitments is included at the end of the Funds’ Schedules of Investments.
The Funds assume the credit risk of the borrower, the lender that is selling the participation and any other persons interpositioned between the Funds and the borrower. In the event of the insolvency of the lender selling the participation, the Funds may be treated as a general creditor of the lender and may not benefit from any set-off between the lender and the borrower.
Inflation-Indexed Bonds: Certain Funds may invest in inflation indexed bonds. Inflation-indexed bonds are fixed-income securities whose principal value is periodically adjusted to the rate of inflation. The interest rate on these bonds is generally fixed at issuance at a rate lower than typical bonds. Over the life of an inflation-indexed bond, however, interest will be paid based on a principal value which is adjusted for inflation. Any increase or decrease in the principal amount of an inflation-indexed bond will be included as interest income on the Statements of Operations, even though investors do not receive their principal until maturity.
Credit and Market Risk: The Funds invest in high yield and emerging market instruments that are subject to certain credit and market risks. The yields of high yield and emerging market debt obligations reflect, among other things, perce
ived credit and market risks. The Funds’ investment in securities rated below investment grade typically involves risks not associated with higher rated securities including, among others, greater risk related to timely and ultimate payment of interest and principal, greater market price volatility and less liquid secondary market trading. The
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May 31, 2013 |
consequences of political, social, economic or diplomatic changes may have disruptive effects on the market prices of investments held by the Funds. The Funds’ investment in non-U.S. dollar denominated securities may also result in foreign currency losses caused by devaluations and exchange rate fluctuations. Investments in derivatives are also subject to credit and market risks.
Distributions to Shareholders: Dividends and distributions to shareholders, which are determined in accordance with income tax regulations, are recorded on the ex-date. Income distributions, if any are generally declared and paid on a quarterly basis. Capital gain distributions, if any, are declared and paid at least annually.
Expenses: Direct expenses are charged to the Funds; general expenses of the Trust are allocated to the Funds based on each Fund’s relative net assets.
Federal and Other Taxes: No provision for income taxes is included in the accompanying financial statements, as the Funds intend to distribute to shareholders all taxable investment income and realized gains and otherwise comply with Subchapter M of the Internal Revenue Code of 1986, as amended, applicable to regulated investment companies.
The Funds evaluate tax positions taken (or expected to be taken) in the course of preparing the Funds’ tax provisions to determine whether these positions meet a “more-likely-than-not” standard that, based on the technical merits, have a more than fifty percent likelihood of being sustained by a taxing authority upon examination. A tax position that meets the “more-likely-than-not” recognition threshold is measured to determine the amount of benefit to recognize in the financial statements.
As of and during the period ended May 31, 2013, the Funds did not have a liability for any unrecognized tax benefits. The Funds file U.S. federal, state, and local tax returns as required. The Funds’ tax returns are subject to examination by the relevant tax authorities until expiration of the applicable statute of limitations which is generally three years after the filing of the tax return for federal purposes and four years for most state returns. Tax returns for open years have incorporated no uncertain tax positions that require a provision for income taxes.
2. DERIVATIVE INSTRUMENTS
Risk Exposure and the Use of Derivative Instruments: The Funds’ investment objectives not only permit the Funds to purchase investment securities, they also allow the Funds to enter in various types of derivatives contracts. In doing so, the Funds employ strategies in differing combinations to permit them to increase, decrease, or change the level or types of exposure to market factors. Central to those strategies are features inherent to derivatives that may make them more attractive for this purpose than equity or debt securities; they require little or no initial cash investment, they can focus exposure on only certain selected risk factors, and they may not require the ultimate receipt or delivery of the underlying security (or securities) to the contract. This may allow the Funds to pursue their objectives more quickly and efficiently than if they were to make direct purchases or sales of securities capable of affecting a similar response to market factors.
Market Risk Factors. In pursuit of their investment objectives, the Funds may seek to use derivatives to increase or decrease their exposure to the following market risk factors, among others:
Interest Rate Risk. Interest rate risk refers to the fluctuations in value of fixed-income securities resulting from the inverse relationship between price and yield. For example, an increase in general interest rates will tend to reduce the market value of already issued fixed-income investments, and a decline in general interest rates will tend to increase their value. In addition, debt securities with longer maturities, which tend to have higher yields, are subject to potentially greater fluctuations in value from changes in interest rates than obligations with shorter maturities.
Credit Risk. Credit risk relates to the ability of the issuer to meet interest and principal payments, or both, as they come due. In general, lower-grade, higher-yield bonds are subject to credit risk to a greater extent than lower-yield, higher-quality bonds.
Foreign Exchange Rate Risk. Foreign exchange risk relates to the change in the U.S. dollar value of a security held that is denominated in a foreign currency. The U.S. dollar value of a foreign currency denominated security will decrease as the dollar appreciates against the currency, while the U.S. dollar value will increase as the dollar depreciates against the currency.
Equity Risk. Equity risk relates to the change in value of equity securities as they relate to increases or decreases in the general market.
The Funds’ use of derivatives can result in losses due to unanticipated changes in these risk factors and the overall market. In instances where the Funds are using derivatives to decrease, or hedge, exposures to market risk factors for securities held by the Funds, there are also risks that those derivatives may not perform as expected resulting in losses for the combined or hedged positions.
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May 31, 2013 |
Derivatives may have little or no initial cash investment relative to their market value exposure and therefore can produce significant gains or losses in excess of their cost. This use of embedded leverage allows each Fund to increase its market value exposure relative to its net assets and can substantially increase the volatility of the Funds’ performance.
Additional associated risks from investing in derivatives also exist and potentially could have significant effects on the valuation of the derivative and the Funds. Typically, the associated risks are not the risks that the Funds are attempting to increase or decrease exposure to, per their investment objectives, but are the additional risks from investing in derivatives.
Examples of these associated risks are liquidity risk, which is the risk that the Funds will not be able to sell or close out the derivative in a timely manner, and counterparty credit risk, which is the risk that the counterparty will not fulfill its obligation to the Funds. Associated risks can be different for each type of derivative and are discussed by each derivative type below in the notes that follow.
Forward Foreign Currency Contracts. 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. A forward foreign currency contract is an agreement between two parties to buy and sell a currency at a set price on a future date. The contract is marked-to-market daily and the change in value is recorded by the Funds as an unrealized gain or loss. When a forward foreign currency contract is extinguished, through either delivery or offset by entering into another forward foreign currency contract, the Funds record a realized gain or loss equal to the difference between the value of the contract at the time it was opened and the value of the contract at the time it was extinguished.
Forward foreign currency contracts involve elements of market risk in excess of the amounts reflected in the Statements of Assets and Liabilities. The Funds bear the risk of an unfavorable change in the foreign exchange rate underlying the forward foreign currency contract. Risks may also arise upon entering into these contracts from the potential inability of the counterparties to meet the terms of their contracts.
The tables below are a summary of the fair valuations of derivative instruments categorized by risk exposure.
Fair values of forward foreign currency contracts on the Statements of Assets and Liabilities as of May 31, 2013:
Location | Fair Value of Asset Derivatives | Location | Fair Value of Liability Derivatives | |||||||||
| ||||||||||||
Stone Harbor Emerging Markets Debt Fund | Unrealized appreciation on forward foreign currency contracts | $ | 1,639,822 | Unrealized depreciation on forward foreign currency contracts | $ | (404,640 | ) | |||||
|
|
|
| |||||||||
$ | 1,639,822 | $ | (404,640 | ) | ||||||||
|
|
|
| |||||||||
Stone Harbor High Yield Fund | Unrealized appreciation on forward foreign currency contracts | $ | 250,805 | Unrealized depreciation on forward foreign currency contracts | $ | (8,040 | ) | |||||
|
|
|
| |||||||||
$ | 250,805 | $ | (8,040 | ) | ||||||||
|
|
|
| |||||||||
Stone Harbor Local Markets Fund | Unrealized appreciation on forward foreign currency contracts | $ | 13,697 | Unrealized depreciation on forward foreign currency contracts | $ | (2,501,216 | ) | |||||
|
|
|
| |||||||||
$ | 13,697 | $ | (2,501,216 | ) | ||||||||
|
|
|
| |||||||||
Stone Harbor Emerging Markets Corporate Debt Fund | Unrealized appreciation on forward foreign currency contracts | $ | 16,025 | Unrealized depreciation on forward foreign currency contracts | $ | – | ||||||
|
|
|
| |||||||||
$ | 16,025 | $ | – | |||||||||
|
|
|
|
The number of forward foreign currency contracts held at May 31, 2013 is representative of activity during the year ended May 31, 2013.
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The effect of forward foreign currency contracts on the Statements of Operations for the year ended May 31, 2013:
Location | Realized Gain/(Loss) | Location | Unrealized Gain/(Loss) | |||||||||
| ||||||||||||
Stone Harbor Emerging Markets Debt Fund | Net realized gain/(loss) on forward foreign currency contracts | $ | 4,578,885 | Change in unrealized appreciation/(depreciation) on forward foreign currency contracts | $ | (1,303,072) | ||||||
|
|
|
| |||||||||
$ | 4,578,885 | $ | (1,303,072) | |||||||||
|
|
|
| |||||||||
Location | Realized Gain/(Loss) | Location | Unrealized Gain/(Loss) | |||||||||
| ||||||||||||
Stone Harbor High Yield Fund | Net realized gain/(loss) on forward foreign currency contracts | $ | (407,916) | Change in unrealized appreciation/(depreciation) on forward foreign currency contracts | $ | (62,683) | ||||||
|
|
|
| |||||||||
$ | (407,916) | $ | (62,683) | |||||||||
|
|
|
| |||||||||
Location | Realized Gain/(Loss) | Location | Unrealized Gain/(Loss) | |||||||||
| ||||||||||||
Stone Harbor Local Markets Fund | Net realized gain/(loss) on forward foreign currency contracts | $ | 8,301,770 | Change in unrealized appreciation/(depreciation) on forward foreign currency contracts | $ | 7,005,085 | ||||||
|
|
|
| |||||||||
$ | 8,301,770 | $ | 7,005,085 | |||||||||
|
|
|
| |||||||||
Stone Harbor Emerging Markets Corporate Debt Fund | Net realized gain/(loss) on forward foreign currency contracts | $ | 25,605 | Change in unrealized appreciation/(depreciation) on forward foreign currency contracts | $ | (7,110) | ||||||
|
|
|
| |||||||||
$ | 25,605 | $ | (7,110) | |||||||||
|
|
|
|
3. TAX BASIS INFORMATION
Tax Basis of Distributions to Shareholders: 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 tax character of the distributions paid by the Funds during the year ended May 31, 2013, was as follows:
Stone Harbor Emerging Markets Debt Fund | ||||||||
For the Year Ended May 31, | ||||||||
2013 | 2012 | |||||||
Ordinary Income | $ | 78,804,336 | $ | 69,336,608 | ||||
Long-Term Capital Gain | 2,870,149 | 1,804,387 | ||||||
Total | $ | 81,674,485 | $ | 71,140,995 | ||||
Stone Harbor High Yield Bond Fund | ||||||||
For the Year Ended May 31, | ||||||||
2013 | 2012 | |||||||
Ordinary Income | $ | 33,469,548 | $ | 38,131,521 | ||||
Long-Term Capital Gain | 1,484,074 | 12,255,940 | ||||||
Total | $ | 34,953,622 | $ | 50,387,461 | ||||
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Stone Harbor Investment Funds | Notes to Financial Statements | |
May 31, 2013 |
Stone Harbor Local Markets Fund | ||||||||
For the Year Ended May 31, | ||||||||
2013 | 2012 | |||||||
Ordinary Income | $ | 82,687,694 | $ | 44,750,817 | ||||
Long-Term Capital Gain | 902,771 | 1,784,323 | ||||||
Return of Capital | – | 2,731,631 | ||||||
Total | $ | 83,590,465 | $ | 49,266,771 | ||||
Stone Harbor Emerging Markets Corporate Debt Fund | ||||||||
For the Year Ended May 31, | ||||||||
2013 | 2012 | |||||||
Ordinary Income | $ | 2,733,381 | $ | 1,965,171 | ||||
Total | $ | 2,733,381 | $ | 1,965,171 | ||||
As of May 31, 2013, the components of distributable earnings on a tax basis were as follows: |
| |||||||
Stone Harbor Emerging Markets Debt Fund | ||||||||
Undistributed Ordinary Income | $ | 1,934,150 | ||||||
Accumulated Capital Loss | (4,854,935 | ) | ||||||
Unrealized Appreciation | 26,952,947 | |||||||
Cumulative Effect of Other Timing Difference* | (951,692 | ) | ||||||
Total | $ | 23,080,470 | ||||||
Stone Harbor High Yield Bond Fund | ||||||||
Undistributed Ordinary Income | $ | 3,340,388 | ||||||
Accumulated Capital Gain | 7,048,548 | |||||||
Unrealized Appreciation | 19,420,537 | |||||||
Cumulative Effect of Other Timing Difference* | (245,129 | ) | ||||||
Total | $ | 29,564,344 | ||||||
Stone Harbor Local Markets Fund | ||||||||
Undistributed Ordinary Income | $ | 21,946,932 | ||||||
Accumulated Capital Gain | 4,745,258 | |||||||
Unrealized Depreciation | (106,582,261 | ) | ||||||
Cumulative Effect of Other Timing Difference* | 814,920 | |||||||
Total | $ | (79,075,151 | ) | |||||
Stone Harbor Emerging Markets Corporate Debt Fund | ||||||||
Undistributed Ordinary Income | $ | 168,327 | ||||||
Accumulated Capital Loss | (1,734,721 | ) | ||||||
Unrealized Appreciation | 538,220 | |||||||
Cumulative Effect of Other Timing Difference* | (16,025 | ) | ||||||
Total | $ | (1,044,199 | ) | |||||
* Other temporary differences due to timing, consist primarily of mark-to-market on forward foreign currency contracts.
The tax components of distributable earnings are determined in accordance with income tax regulations which may differ from the composition of net assets reported under GAAP. Accordingly, for the year ended May 31, 2013, certain differences were reclassified. These differences were primarily attributed to the differing tax treatment of foreign currencies, in kind transactions and certain other investments and the amounts reclassified did not affect net assets.
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Stone Harbor Investment Funds | Notes to Financial Statements | |
May 31, 2013 |
The reclassifications were as follows:
Fund | Paid-in Capital | Accumulated Net Investment Income/(Loss) | Accumulated Net Realized Gain/(Loss) on Investments | |||||||||
Stone Harbor Emerging Markets Debt Fund | $ | – | $ | (1,351,367) | $ | 1,351,367 | ||||||
Stone Harbor High Yield Bond Fund | 1,849,556 | (782,039) | (1,067,517) | |||||||||
Stone Harbor Local Markets Fund | – | (3,500,290) | 3,500,290 | |||||||||
Stone Harbor Emerging Markets Corporate Debt Fund | (105) | 24,809 | (24,704) |
Capital Losses: As of May 31, 2013 the following Funds had capital loss carryforwards which may reduce the Funds’ taxable income arising from future net realized gains on investments, if any, to the extent permitted by the Code and thus may reduce the amount of the distributions to shareholders which would otherwise be necessary to relieve the Funds of any liability for federal tax pursuant to the Code.
Capital losses deferred to next tax year were as follows:
Fund | Long-Term | |||
Stone Harbor Emerging Markets Corporate Debt Fund | $ | 362,605 |
Under the recently enacted Regulated Investment Company Modernization Act of 2010, capital losses incurred by each Fund after January 1, 2011 will not be subject to expiration.
The following Funds elect to defer to the year ending May 31, 2014 the following losses recognized during the period November 1, 2012 through May 31, 2013:
Capital | ||||
Stone Harbor Emerging Markets Debt Fund | $ | 4,955,505 | ||
Stone Harbor Emerging Markets Corporate Debt Fund | $ | 1,372,116 |
Unrealized Appreciation and Depreciation on Investments: At May 31, 2013 the aggregate gross unrealized appreciation and depreciation of investments for federal income purposes were as follows:
Stone Harbor Emerging Markets Debt Fund | ||||
Gross appreciation on investments (excess of value over tax cost) | $ | 68,576,482 | ||
Gross depreciation on investments (excess of tax cost over value) | (43,292,563) | |||
Net appreciation of foreign currency and derivatives | 1,669,028 | |||
Net tunrealized appreciation | $ | 26,952,947 | ||
Cost of investments for income tax purposes | $ | 1,762,062,532 | ||
Stone Harbor High Yield Bond Fund | ||||
Gross appreciation on investments (excess of value over tax cost) | $ | 24,305,683 | ||
Gross depreciation on investments (excess of tax cost over value) | (5,128,143) | |||
Net appreciation of foreign currency and derivatives | 242,997 | |||
Net unrealized appreciation | $ | 19,420,537 | ||
Cost of investments for income tax purposes | $ | 361,587,682 | ||
Stone Harbor Local Markets Fund | ||||
Gross appreciation on investments (excess of value over tax cost) | $ | 21,276,929 | ||
Gross depreciation on investments (excess of tax cost over value) | (125,425,877) | |||
Net depreciation of foreign currency and derivatives | (2,433,313) | |||
Net unrealized depreciation | $ | (106,582,261) | ||
Cost of investments for income tax purposes | $ | 2,168,074,823 | ||
Stone Harbor Investment Funds Annual Report | May 31, 2013 | 71 |
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Stone Harbor Investment Funds | Notes to Financial Statements | |
May 31, 2013 |
Stone Harbor Emerging Markets Corporate Debt Fund | ||||
Gross appreciation on investments (excess of value over tax cost) | $ | 1,615,081 | ||
Gross depreciation on investments (excess of tax cost over value) | (1,092,803) | |||
Net appreciation of foreign currency and derivatives | 15,942 | |||
Net unrealized appreciation | $ | 538,220 | ||
Cost of investments for income tax purposes | $ | 67,539,451 | ||
4. ADVISORY FEES
Stone Harbor Investment Partners LP is the Trust’s investment adviser. Under the investment advisory agreement the Trust pays an investment advisory fee calculated daily and paid monthly of 0.60%, 0.50%, 0.75% and 0.85% of the average daily net assets for Stone Harbor Emerging Markets Debt Fund, Stone Harbor High Yield Bond Fund, Stone Harbor Local Markets Fund, and Stone Harbor Emerging Markets Corporate 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 Emerging Markets Debt Fund Institutional Class, Stone Harbor High Yield Bond Fund Institutional Class, Stone Harbor Local Markets Fund Institutional Class and Stone Harbor Emerging Markets Corporate Debt Fund Institutional Class will not exceed 0.75%, 0.55%, 1.00% and 1.00%, respectively. This undertaking is in effect through September 30, 2013 and is reevaluated on an annual basis.
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 three years after the end of the fiscal year in which the fee and expense was deferred. At May 31, 2013, deferred fees and expenses eligible to be recovered will expire as follows:
2014 | 2015 | 2016 | Total | |||||||||||||
Stone Harbor High Yield Bond Fund | $ | 423,643 | $ | 324,939 | $ | 256,488 | $ | 581,427 | ||||||||
Stone Harbor Emerging Markets Corporate Debt Fund | N/A | $ | 97,840 | $ | 99,115 | $ | 196,955 |
5. INVESTMENTS
During the year ended May 31, 2013, common stock holdings were redeemed in-kind. The intent of the transfers was to save on equity transaction costs both for the redeeming shareholder at the institution they transferred to and for Stone Harbor High Yield Bond Fund on the sale of assets. The assets of one separate account in Stone Harbor High Yield Bond Fund were redeemed-in-kind out of Stone Harbor High Yield Bond Fund in the amount of $94,474,314 with a realized gain of $1,773,037.
For the year ended May 31, 2013, the aggregate cost of purchases and proceeds from sales of investments (excluding short-term investments and transfer-in-kinds) were as follows:
Purchases | Sales | |||||||
Stone Harbor Emerging Markets Debt Fund | $ | 1,617,996,821 | $ | 1,009,882,122 | ||||
Stone Harbor High Yield Bond Fund | 260,963,103 | 431,441,547 | ||||||
Stone Harbor Local Markets Fund | 4,228,771,263 | 3,428,001,078 | ||||||
Stone Harbor Emerging Markets Corporate Debt Fund | 76,046,262 | 45,013,768 |
6. APPLICATION OF RECENT ACCOUNTING PRONOUNCEMENTS
In December 2011, the FASB issued ASU No. 2011-11 “Disclosures about Offsetting Assets and Liabilities” to expand current disclosure requirements on the offsetting of certain assets and liabilities. The new disclosures will be required for investments and derivative financial instruments subject to master netting or similar agreements which are eligible for offset in the Statements of Assets and Liabilities and will require an entity to disclose both gross and net information about such investments and transactions in the financial statements. The guidance is effective for financial statements with fiscal years beginning on or after January 1, 2013, and interim periods within those fiscal years. Management is evaluating the impact of this guidance on the Funds’ financial statement disclosures.
7. SHARES OF BENEFICIAL INTEREST
At May 31, 2013, the Trust had an unlimited number of shares of beneficial interest authorized with a par value of $0.001 per share. The Funds have the ability to issue multiple classes of shares. Each share of a class represents an identical interest and has the same rights, except that each class bears certain direct expenses, including those specifically related to the distribution of its shares. Transactions in shares of the Institutional Class can be found on the Statements of Changes in Net Assets.
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Stone Harbor Investment Funds | Notes to Financial Statements | |
May 31, 2013 |
8. BENEFICIAL OWNERSHIP
As of May 31, 2013, Texas Treasury Safekeeping Trust owned beneficially 45.97% of the Stone Harbor Emerging Markets Corporate Debt Fund’s outstanding shares.
9. INDEMNIFICATIONS
Under the Trust’s organizational documents, its officers and Trustees are indemnified against certain liability arising out of the performance of their duties to the Trust. Additionally, in the normal course of business, the Trust enters into contracts with service providers that may contain general indemnification clauses. The Trust’s maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Trust that have not yet occurred.
10. 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. The Trust will pay each Trustee who is not an interested person an annual fee of $54,000. All Trustees are reimbursed for reasonable travel and out-of-pocket expenses incurred to attend such meetings.
11. SUBSEQUENT EVENTS
On June 3, 2013 the Stone Harbor Investment Grade Fund and the Stone Harbor Strategic Income Fund were added to the Trust. Both funds have completed registration with the Securities and Exchange Commission but have not commenced operations.
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Table of Contents
Stone Harbor Investment Funds | Additional Information | |
May 31, 2013 (Unaudited) |
FUND PORTFOLIO HOLDINGS
The SEC has adopted the requirement that all registered investment companies 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 28. 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, 2012 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.
SHAREHOLDER TAX INFORMATION
Certain tax information regarding the Trust is required to be provided to shareholders based upon each Fund’s income and distributions for the year ended May 31, 2013. The Funds designate the following as a percentage of taxable ordinary income distributions, up to the maximum amount allowable, for the calendar year ended December 31, 2012:
Stone Harbor Emerging Markets Debt Fund | Stone Harbor High Yield Bond Fund | Stone Harbor Local Markets Fund | Stone Harbor Emerging Markets Corporate Debt Fund | |||||
Dividends Received Deduction Percentage | 0.00% | 0.09% | 0.00% | 0.00% | ||||
Qualified Dividend Income Percentage | 0.00% | 0.09% | 0.00% | 0.00% |
In early 2013, if applicable, shareholders of record received this information for the distributions paid to them by the Funds during the calendar year 2012 via Form 1099. The Funds will notify shareholders in early 2014 of amounts paid to them by the Funds, if any, during the calendar year 2013.
Pursuant to Section 852(b)(3) of the Internal Revenue Code, the Stone Harbor Emerging Markets Debt Fund, the Stone Harbor High Yield Bond Fund, and the Stone Harbor Local Markets Fund designate $2,870,149, $1,484,074, and $902,771 respectively, as long term capital gain dividends.
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Stone Harbor Investment Funds | Investment Advisory Agreements | |
May 31, 2013 (Unaudited) |
The investment advisory agreements (each an “Agreement” and, together, the “Agreements”) for each of Stone Harbor Emerging Markets Debt Fund, Stone Harbor High Yield Bond Fund, Stone Harbor Local Markets Fund and Stone Harbor Emerging Markets Corporate Debt Fund (each, a “Fund” and together, the “Funds”) is subject to annual approval by (i) the vote of a majority of the entire Board of Trustees, or of a majority of the outstanding voting securities (as defined in the Investment Company Act of 1940, as amended (the “1940 Act”)), of the applicable Fund, and (ii) the vote of a majority of the Trustees who are not interested persons of the Funds (the “Independent Trustees”). Each Agreement is terminable with respect to a Fund by the Adviser, a majority of the Trustees, or a vote of a majority of the outstanding voting securities of the applicable Fund, without penalty, by not less than 60 days’ prior written notice. Each Agreement will terminate automatically in the event of its assignment (as defined for purposes of the 1940 Act).
The Board of Trustees, including the Independent Trustees, meets over the course of the year with representatives of Stone Harbor Investment Partners LP, each Fund’s investment adviser (the “Adviser”), including the Funds’ respective portfolio managers, and regularly reviews detailed information regarding the investment program and performance of each Fund. The Trustees, including the Independent Trustees, met on April 17, 2013 to review the Agreements for each Fund and to determine whether to approve the continuation of the Agreements for an additional one- year period. The Trustees considered all information they deemed reasonably necessary to evaluate the terms thereof. In connection with this meeting, the Trustees received materials to assist them with their review. These materials included, among other things, (i) information on each Fund’s investment performance and the performance of a group of similar mutual funds (some of which was prepared by a third party); (ii) information on each Fund’s advisory fees and other expenses, including information about the fees charged to institutional accounts managed by the Adviser, comparisons of the Funds’ fees to the fees of a group of similar funds prepared by a third party and information about any applicable expense caps; and (iii) information about the profitability of each Agreement to the Adviser. In considering whether to approve the continuation of each Agreement, the Board of Trustees, including the Independent Trustees, did not identify any single factor as determinative. Individual Trustees may have evaluated the information presented differently from one another, giving different weights to various factors. Matters considered by the Trustees, including the Independent Trustees, in connection with their approval of the Agreements included, but were not limited to, the following:
The nature, extent and quality of the services provided to the Funds under the Agreements.
The Trustees considered the nature, extent and quality of the services provided by the Adviser to the Funds. In this regard, the Trustees took into account the experience of each Fund’s portfolio management team and of the Adviser’s senior management, and the time and attention they devote to the Funds. After reviewing these and related factors, the Trustees concluded, within the context of their overall conclusions regarding each Agreement, that the nature, extent and quality of the services provided by the Adviser supported the renewal of the Agreements.
Investment performance of the Funds and the Adviser.
The Trustees reviewed performance information for each Fund, including information prepared by a third party, for various time periods since each Fund’s inception. The review included a comparison of each Fund’s performance to the performance of a group of comparable funds selected by a third party and each Fund’s respective benchmark. The Trustees also considered the Adviser’s performance and reputation generally and its 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 these factors supported the renewal 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 fees charged to each Fund for advisory services as well as the total expense level of each Fund. The Adviser furnished information to the Trustees compiled by a third party showing a comparison of each Fund’s advisory fees and total expense levels compared to a group of similar mutual funds selected by the third party. The Trustees considered that certain of the Funds, because they were smaller than most of the funds to which they were being compared, could not take advantage of economies of scale (which can reduce fund expenses) to the same extent as those larger funds. The Trustees noted that each of the Funds is subject to expense caps, and each Fund’s advisory fee and total expenses (after application of the expense caps and waivers) align competitively with comparable groups of mutual funds. The Adviser also provided information about the costs to it of providing services to the Funds and information about its profitability with respect to its management of the Funds, as well as information about the advisory fees it charges to other funds and institutional separate accounts with similar strategies and information about differences in such fees. In this regard, the Trustees noted that the effective management fee rates received by the Adviser from the Funds (after application of expense caps and waivers) are generally comparable to the fees charged to similarly managed institutional accounts. They also noted that the Funds were offered primarily to institutional investors, many of whom were focused on the Funds’ fees and expenses. The Trustees also considered the demands and complexity of the investment management of the Funds as compared to the complexity of managing separate accounts.
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Stone Harbor Investment Funds | Board Approval of Investment Advisory Agreements | |
May 31, 2013 (Unaudited) |
After reviewing these and related factors, the Trustees concluded, within the context of their overall conclusions regarding each Agreement, that the advisory fees 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 renewal of the Agreements.
Economies of Scale.
The Trustees considered to what extent economies of scale would likely be realized as the Funds grow and whether those economies would be shared with the Funds through breakpoints in their investment advisory fees or other means, such as expense caps. The Trustees noted that although the Funds do not have breakpoints in their management fees, the Funds’ total expenses are capped, that the Adviser proposed to maintain the Funds’ fee waiver/expense reimbursement arrangements at current levels until September 30, 2014 and that some of the Funds had expense ratios that were below the cap.
After reviewing these and related factors, the Trustees concluded, within the context of their overall conclusions regarding each Agreement, that the extent to which economies of scale would be shared with the Funds supported the approval of the Agreements.
The Trustees also considered other factors, which included but were not limited to the following:
• | Whether each Fund has operated in accordance with its investment objective and each Fund’s record of compliance with its investment restrictions, and the compliance programs of the Funds and the Adviser. They also considered the compliance-related resources the Adviser provided to the Funds, including resources designed to ensure compliance with the investment objectives, policies and restrictions of each Fund. |
• | So-called “fallout benefits” to the Adviser, such as the benefits from offering its institutional clients the ability to invest in a registered investment company. |
Based on their evaluation of all factors they deemed to be material, including those factors described above, the Trustees, including the Independent Trustees, concluded that the existing investment advisory agreements for Stone Harbor Emerging Markets Debt Fund, Stone Harbor High Yield Bond Fund, Stone Harbor Local Markets Fund and Stone Harbor Emerging Markets Corporate Debt Fund should be continued through June 20, 2014.
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Stone Harbor Investment Funds | Trustees & Officers | |
May 31, 2013 (Unaudited) |
The business and affairs of each Fund are managed under the direction of its Board of Trustees. The Board of Trustees approves all significant agreements between a Fund and the persons or companies that furnish services to the Fund, including agreements with its distributor, investment adviser, administrator, custodian and transfer agent. The day-to-day operations of the Fund are delegated to the Fund’s Adviser and administrator.
The name, age and principal occupations for the past five years of the Trustees and officers of the Funds are listed below, along with the number of portfolios in the Fund complex overseen by and the other directorships held by each Trustee. Except as otherwise noted, the address of each Trustee and officer is c/o Stone Harbor Investment Partners LP, 31 W. 52nd Street, 16th Floor, New York, New York 10019. The Trust’s Statement of Additional Information includes additional information about the Trustees and is available without a charge, upon request, by calling 1-866-699-8158.
INDEPENDENT TRUSTEES
Name & Year of Birth | Position with the Trust | Term of Office and Length of Time Served(1) | Principal Occupation(s) During Past Five Years | Number of Portfolios in Fund Complex Overseen by Trustee(2) | Other Directorships Held by Trustee | Experience, Qualifications, Attributes, Skills for Board Membership | ||||||
Alan Brott 1942 | Chairman of Audit Committee; Trustee | Since June 21, 2007 | Columbia University Associate Professor, 2000- Present; Consultant, 1991- Present. | 8 | Stone Harbor Emerging Markets Income Fund, Stone Harbor Emerging Markets Total Income Fund, Grosvenor Registered Multi- Strategy Fund, Excelsior Multi- Strategy Hedge Fund of Funds and Excelsior Private Markets Fund II. | Significant experience on Board of Trustees of the Fund and/or other business organizations; academic experience; significant public accounting experience, including significant experience as a partner at a public accounting firm. | ||||||
Heath B. McLendon 1933 | Trustee | Since June 21, 2007 | Retired; formerly Citigroup— Chairman of Equity Research Oversight Committee (retired December 31, 2006). | 8 | Stone Harbor Emerging Markets Income Fund, Stone Harbor Emerging Markets Total Income Fund. | Significant experience on Board of Trustees of the Trust and/or other business organizations; executive experience in the mutual fund industry. | ||||||
Patrick Sheehan 1947 | Trustee | Since June 21, 2007 | Retired; formerly, Citigroup Asset Management— Managing Director and Fixed Income Portfolio Manager, 1991- 2002. | 8 | Stone Harbor Emerging Markets Income Fund, Stone Harbor Emerging Markets Total Income Fund. | Significant experience on Board of Trustees of the Trust and/or other business organizations; experience in the financial industry, including executive and portfolio management experience. |
Stone Harbor Investment Funds Annual Report | May 31, 2013 | 77 |
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Stone Harbor Investment Funds | Trustees & Officers | |
May 31, 2013 (Unaudited) |
INTERESTED TRUSTEE
Name & Year of Birth | Position(s) Held with the Fund | Term of Office and Length of Time Served(1) | Principal Occupation(s) During Past Five Years | Number of Portfolios in Fund Complex Overseen by Trustee(2) | Other Directorships Held by Trustee | |||||
Thomas K.Flanagan(3) 1953 Class I | Chairman and Trustee | Trustee: Since 2012 | Co-portfolio manager of Stone Harbor Emerging Markets Income Fund; since April 2006, Portfolio Manager of Stone Harbor; Prior to April 2006, Managing Director and Senior Portfolio Manager for emerging markets debt portfolios at Salomon Brothers Asset Management Inc.; Joined Salomon Brothers Asset Management Inc. in 1991. | 8 | Stone Harbor Emerging Markets Income Fund, Stone Harbor Emerging Markets Total Income Fund. |
(1) | Trustees serve for an indefinite term, unless a trustee early retires, resigns or is removed from office. |
(2) | For purposes of this table, the Stone Harbor Fund Complex includes each series of the Stone Harbor Investment Funds (the “Funds”), the Stone Harbor Emerging Markets Income Fund, and the Stone Harbor Emerging Markets Total Income Fund, which shares an investment adviser with the Funds. As of May 31, 2013 the Stone Harbor Investment Grade Fund and the Stone Harbor Strategic Income Fund but have not commenced operations. |
(3) | Mr. Flanagan is an interested person of the Fund (as defined in the 1940 Act) (an “Interested Trustee”) because of his position with Stone Harbor Investment Partners LP. |
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Stone Harbor Investment Funds | Trustees & Officers | |
May 31, 2013 (Unaudited) |
OFFICERS
Name & Year of Birth | Position with the Trust | Term of Office and Length of Time Served(1) | Principal Occupation(s) During Past Five Years | Other Directorships by Trustee | ||||
Peter J. Wilby 1958 | President | Since June 21, 2007 | Co-portfolio manager of the Funds; since April 2006, Chief Investment Officer of Stone Harbor; prior to April 2006, Chief Investment Officer – North American Fixed Income; joined Citigroup or its predecessor firms in 1989. | N/A | ||||
Dan Berkery 1967 | Executive Vice President | Since September 27, 2010 | Co-portfolio manager of High Yield Bond Fund; Since June 2010, Portfolio Manager of Stone Harbor; Prior to June 2010, Executive Director, Portfolio Manager for convertible bond securities at UBS O’Conner; Joined UBS O’Conner in 2000. | N/A | ||||
Pablo Cisilino 1967 | Executive Vice President | Since June 21, 2007 | Co-portfolio manager of Emerging Markets Debt Fund, Local Markets Fund, and Emerging Markets Corporate Debt Fund; since July 2006, Portfolio Manager of Stone Harbor; from June 2004 to July 2006, Executive Director for Sales and Trading in Emerging Markets at Morgan Stanley Inc; prior to June 2004, Vice President for local markets and FX sales and trading, Goldman Sachs; joined Goldman Sachs in 1994. | N/A | ||||
James E. Craige 1967 | Executive Vice President | Since June 21, 2007 | Co-portfolio manager of Emerging Markets Debt Fund, Local Markets Fund, and Emerging Markets Corporate Debt Fund; since April 2006, Portfolio Manager of Stone Harbor; prior to April 2006, Managing Director and Senior Portfolio Manager at Salomon Brothers Asset Management Inc.; joined Salomon Brothers Asset Management Inc. in 1992. | N/A | ||||
David Oliver 1959 | Executive Vice President | Since September 29, 2008 | Co-portfolio manager of Emerging Markets Debt Fund, Local Markets Fund, and Emerging Markets Corporate Debt Fund; since June 2008, Senior Portfolio Manager of Stone Harbor; from 1986 to June 2008, Managing Director in Emerging Market sales and trading Citigroup. | N/A | ||||
Marianne Rossi 1960 | Executive Vice President | Since September 27, 2010 | Co-portfolio manager of High Yield Bond Fund; Since June 2010, Portfolio Manager of Stone Harbor; From October 2007 to June 2010, Senior Portfolio Manager for US and global high yield strategies at Fischer Francis Tree & Watts/BNP Paribas Asset Management; From December 2006 to October 2007, Chief Investment Officer, Head of Global High Yield and Senior Portfolio Manager at BNY Asset Management; Prior to December 2006, Head Global High Yield and Senior Portfolio Manager at UBS Global Asset Management; Joined UBS Global Asset Management in 2000. | N/A |
Stone Harbor Investment Funds Annual Report | May 31, 2013 | 79 |
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Stone Harbor Investment Funds | Trustees & Officers | |
May 31, 2013 (Unaudited) |
OFFICERS (continued)
Name & Year of Birth | Position with the Trust | Term of Office and Length of Time Served(1) | Principal Occupation(s) During Past Five Years | Other Directorships by Trustee | ||||
Jeffrey S. Scott 1959 | Chief Compliance Officer | Since June 21, 2007 | Since April 2006, Chief Compliance Officer of Stone Harbor; from October 2006 to March 2007, Director of Compliance, New YorkLife Investment Management LLC; from July 1998 to September 2006, Chief Compliance Officer, Salomon Brothers Asset Management Inc. | N/A | ||||
James J. Dooley 1956 | Treasurer | Since June 21, 2007 | Since April 2006, Head of Operations, Technology and Finance of Stone Harbor; from August 2004 to March 2006, Senior Operations Manager of Institutional Asset Management, CitigroupAsset Management; from October 2002 to August 2004, Managing Director, Global Operations & Application Development, AIG Global Investment Group; from May 2001 to September 2002, President and Chief Operating Officer, Financial Technologies International. | N/A | ||||
Adam J. Shapiro 1963 | Secretary; Anti- Money Laundering Officer | Since June 21, 2007 | Since April 2006, General Counsel of Stone Harbor; from April 2004 to March 2006, General Counsel, North American Fixed Income, Salomon Brothers Asset Management Inc.; from August 1999 to March 2004, Director of Product and Business Development, CitigroupAsset Management. | N/A | ||||
JoEllen L. Legg 1961 | Assistant Secretary | Since January 23, 2008 | Vice President, Assistant General Counsel of ALPS Fund Services, Inc., ALPS Advisors, Inc., ALPS Distributors, Inc.and ALPS Portfolio Solutions Distributors, Inc.; Secretary of ALPS Series Trust; Assistant Secretary of Stone Harbor Emerging Markets Income Fund, Stone Harbor Emerging Markets Total Income Fund, James Advantage Funds and WesMark Funds. | N/A | ||||
Gina Meyer(2) 1980 | Assistant Treasurer | Since July 17, 2013 | Since November 2012,Fund Controller for ALPS Fund Services, Inc.; from January 2011 to October 2012, Manager of Fund Accounting for Jackson National Asset Management; from August 2008 to January 2011, Supervisor of Fund Accounting for Jackson National Asset Management. | N/A |
(1) | Officers are typically elected every year, unless an officer early retires, resigns or is removed from office. |
(2) | Ms. Meyer was elected on July 17, 2013. |
80 | www.shiplp.com |
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INVESTMENT ADVISER
Stone Harbor Investment Partners LP
31 W. 52nd Street 16th Floor
New York, New York 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 Mellon
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.
SHF000636 exp. 07/31/14
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Item 2. | Code of Ethics. |
(a) | The Registrant, as of the end of the period covered by this report, has adopted a code of ethics that applies to the Registrant’s principal executive officer, principal financial officer, principal accounting officer or controller or any persons performing similar functions on behalf of the Registrant. |
(b) | Not applicable. |
(c) | During the period covered by this report, no amendments to the provisions of the code of ethics adopted in Item 2(a) above were made. |
(d) | During the period covered by this report, no implicit or explicit waivers to the provisions of the code of ethics adopted in Item 2(a) above were granted. |
(e) | Not applicable. |
(f) | The Registrant’s Code of Ethics is attached as an Exhibit hereto. |
Item 3. | Audit Committee Financial Expert. |
The Board of Trustees of the Registrant has determined that the Registrant has at least one audit committee financial expert serving on its Audit Committee. The Board of Trustees has designated Alan J. Brott as the Registrant’s “audit committee financial expert.” Mr. Brott is “independent” as defined in paragraph (a)(2) of Item 3 to Form N-CSR.
Mr. Brott has significant public accounting experience, including significant experience as a partner at a public accounting firm.
Item 4. | Principal Accountant Fees and Services. |
(a) | Audit Fees: For the Registrant’s fiscal years ended May 31, 2012 and May 31, 2013, the aggregate fees billed for professional services rendered by the principal accountant for the audit of the Registrant’s annual financial statements were $222,500 and $236,000, respectively. |
(b) | Audit-Related Fees: For the Registrant’s fiscal years ended May 31, 2012 and May 31, 2013, there were no fees billed for assurance and related services by the principal accountant that were reasonably related to the performance of the audit |
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of the Registrant’s financial statements and were not reported in paragraph (a) of this Item 4. |
(c) | Tax Fees: For the Registrant’s fiscal years ended May 31, 2012 and May 31, 2013, the aggregate fees billed for professional services rendered by the principal accountant for tax compliance, tax advice and tax planning were $18,540 and $18,540, respectively. The fiscal year 2012 and 2013 tax fees were for services pertaining to federal and state income tax return review, review of year-end dividend distributions and excise tax preparation. |
(d) | All Other Fees: For the Registrant’s fiscal years ended May 31, 2012 and May 31, 2013, aggregate fees billed to the Registrant by the principal accountant for services provided by the principal accountant other than the services reported in paragraphs (a) through (c) of this Item 4 were $0 and $0, respectively. |
(e)(1) | Audit Committee Pre-Approval Policies and Procedures: All services to be performed by the Registrant’s principal accountant must be pre-approved by the Registrant’s Audit Committee. |
(e)(2) | No services described in paragraphs (b) through (d) of this Item 4 were approved by the Registrant’s audit committee pursuant to paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X. |
(f) | Not applicable. |
(g) | The aggregate non-audit fees billed by the registrant’s accountant for services rendered to the registrant, and rendered to the registrant’s investment adviser, and any entity controlling, controlled by, or under common control with the adviser that provides ongoing services to the registrant for the fiscal year ended May 31, 2012 and May 31, 2013 were $0. |
(h) | Not applicable. |
Item 5. | Audit Committee of Listed Registrants. |
Not applicable to Registrant.
Item 6. | Investments. |
(a) | Schedule of Investments is included as part of the Report to Stockholders filed under Item 1 of this Form N-CSR. |
(b) | Not applicable. |
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Item 7. | Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies. |
Not applicable to Registrant.
Item 8. | Portfolio Managers of Closed-End Management Investment Companies. |
Not applicable to Registrant.
Item 9. | Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers. |
Not applicable to Registrant.
Item 10. | Submission of Matters to Vote of Security Holders. |
There have been no material changes to the procedures by which shareholders may recommend nominees to the Registrant’s Board of Trustees, where those changes were implemented after the Registrant last provided disclosure in response to the requirements of Item 407(c)(2) of Regulation S-K, or this Item.
Item 11. | Controls and Procedures. |
(a) | The Registrant’s principal executive officer and principal financial officer 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) are effective based on their evaluation of these controls and procedures as of a date within 90 days of the filing date of this report. |
(b) | There was no change in the Registrant’s internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940, as amended) during the second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting. |
Item 12. | Exhibits. |
(a)(1) | The Code of Ethics that applies to the Registrant’s principal executive officer and principal financial officer is attached hereto as Exhibit 12.A.1. |
(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 Exhibit 99.Cert. |
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(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 Exhibit 99.906Cert. |
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Stone Harbor Investment Funds | ||||
By: | /s/ Peter J. Wilby | |||
Peter J. Wilby | ||||
President/Principal Executive Officer | ||||
Date: | August 8, 2013 |
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 | |||
Peter J. Wilby | ||||
President/Principal Executive Officer | ||||
Date: | August 8, 2013 | |||
By: | /s/ James J. Dooley | |||
James J. Dooley | ||||
Treasurer, Chief Financial Officer/ Principal Financial Officer | ||||
Date: | August 8, 2013 |