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: May 31, 2018
1
Item 1. Report to Stockholders.
Table of Contents
Shareholder Letter | 2 |
Disclosure of Fund Expenses | 8 |
Summaries of Portfolio Holdings | 9 |
Growth of $10,000 Investment | |
Stone Harbor Emerging Markets Debt Fund | 12 |
Stone Harbor High Yield Bond Fund | 13 |
Stone Harbor Local Markets Fund | 14 |
Stone Harbor Emerging Markets Corporate Debt Fund | 15 |
Stone Harbor Investment Grade Fund | 16 |
Stone Harbor Strategic Income Fund | 17 |
Stone Harbor Emerging Markets Debt Allocation Fund | 18 |
Stone Harbor 500 Plus Fund | 19 |
Report of Independent Registered Public Accounting Firm | 20 |
Statements of Investments | |
Stone Harbor Emerging Markets Debt Fund | 21 |
Stone Harbor High Yield Bond Fund | 31 |
Stone Harbor Local Markets Fund | 39 |
Stone Harbor Emerging Markets Corporate Debt Fund | 45 |
Stone Harbor Investment Grade Fund | 50 |
Stone Harbor Strategic Income Fund | 56 |
Stone Harbor Emerging Markets Debt Allocation Fund | 59 |
Stone Harbor 500 Plus Fund | 60 |
Statements of Assets & Liabilities | 64 |
Statements of Operations | 66 |
Statements of Changes in Net Assets | 68 |
Financial Highlights | |
Stone Harbor Emerging Markets Debt Fund | 72 |
Stone Harbor High Yield Bond Fund | 73 |
Stone Harbor Local Markets Fund | 74 |
Stone Harbor Emerging Markets Corporate Debt Fund | 75 |
Stone Harbor Investment Grade Fund | 76 |
Stone Harbor Strategic Income Fund | 77 |
Stone Harbor Emerging Markets Debt Allocation Fund | 78 |
Stone Harbor 500 Plus Fund | 79 |
Notes to Financial Statements | 80 |
Additional Information | 102 |
Board Approval of Investment Advisory Agreement | 104 |
Trustees & Officers | 107 |
Stone Harbor Investment Funds Annual Report | May 31, 2018 | 1 |
Stone Harbor Investment Funds | Shareholder Letter |
May 31, 2018 (Unaudited)
Dear Shareholder,
The 12-month period ended May 31, 2018 was a mixed investment environment. A key factor that continued to have a pronounced impact on markets was global monetary policy. While growth remained generally solid, central bank responses to growth reflected the different stages of the economic cycle in each region and ranged from multiple interest rate increases in the U.S. to continued, albeit slowing, Quantitative Easing (“QE”) in Europe. Other important themes that impacted credit markets included the uncertainty surrounding the Trump administration’s policies, especially on trade; and on the positive side, the stabilization of commodity prices at higher levels. This mixed macroeconomic backdrop produced varying investment results across global credit markets during the period.
In the U.S., the Federal Reserve (“Fed”) raised the Fed Funds rate from 1.25% to 1.75% during the period and continues to raise rates in response to solid growth and tightening labor markets accompanied by still limited inflation. During the 12-month period, two year yields rose by 129 basis points (“bps”) to 2.42%, while ten year yields rose a more modest 63 bps to 2.84%. In Europe, faced with clearly above trend growth but with a larger output gap, the European Central Bank (“ECB”) moved to tentatively reduce accommodation by slowing the pace of QE. As a consequence, German two year yields rose by 6 bps to -0.62% and ten year yields were virtually unchanged on the year at 0.34%. During the reporting period, the U.K. saw growth moderate to levels below those of Europe. However, inflation pressure rose as a result of weak Sterling, rising commodity prices, and tight labor markets. The Monetary Policy Committee (“MPC”) in the UK raised rates once to 50 bps from 25 bps. Over the reporting period, U.K. ten year yields rose by 18 bps to 1.23%. Japanese ten year yields were unchanged over the same period. In emerging markets, despite signs of improved growth and inflation in many countries, as well as stronger commodity prices, emerging markets debt (“EMD”) spreads widened over the reporting period. Higher bond yields in the U.S. and other developed markets and the U.S. dollar appreciation in the latter part of the reporting period negatively impacted emerging markets.
Looking forward, growth in the U.S. appears to us to remain strong over the first part of the next 12 months, supported by tax cuts, but is expected to slow somewhat thereafter. On the other hand, we believe European growth is likely to soften in the near term from elevated readings, but remain stable, whereby the ECB may be encouraged to begin the process of raising rates towards the latter half of 2019. Generally, we believe politics is likely to play a heightened role in influencing market sentiment and growth prospects. In our view, heightened trade tensions and more aggressive tariffs from the U.S., combined with retaliatory measures, remain the central risk and suggest a greater degree of growth uncertainty.
While implicit risk of increased trade tensions may pressure emerging markets, recent bond price weakness as a result of local developments, particularly in Argentina, Turkey, Russia, Brazil, and Mexico, have left EMD with attractive valuations, in our view. In this context, a diminution of current risks may support EMD relative performance.
At Stone Harbor Investment Partners LP (“Stone Harbor”), we will continue to focus on capturing excess return from stable and improving credit situations in corporate and sovereign markets worldwide. 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 and look forward to providing you with another update in the next six months.
Market Review: Emerging Markets Debt
The trailing 12-month period ended May 31, 2018 was broadly characterized by continued global growth and strong underlying fundamental trends in developing countries. However, the threat of inflation in the U.S. and trade war rhetoric - particularly, trade tariffs implemented by the U.S. and China - dominated headlines and led to a spike in global equity and credit market volatility. Despite this market disruption, the U.S. Fed remained on track for slow and steady rate increases and delivered three rate hikes during the reporting period (i.e., June 2017, December 2017, and March 2018). At the same time, the ECB maintained its accommodative monetary policy stance. Rising oil prices provided further support to improving economic activity in several large emerging market (“EM”) countries - particularly emerging markets oil exporters. EM technical conditions also remained supportive with inflows into all EM debt asset classes during the period.
Nevertheless, as detailed in the table below, total returns on the three major sectors of EM debt remained well below their strong performances from the prior year.
Last 12-month Total Return | |||
EMD Sector | Benchmark | 31-May-18 | 31-May-17 |
USD Sovereign | JP Morgan EMBI Global Diversified | -0.56% | 9.77% |
Local Currency Sovereign | JP Morgan GBI EM Global Diversified | 1.01% | 12.17% |
USD Corporate | JP Morgan CEMBI Broad Diversified | 0.48% | 8.50% |
* | Past performance does not guarantee future results. Cannot invest directly in an index. |
2 | www.shiplp.com |
Stone Harbor Investment Funds | Shareholder Letter |
May 31, 2018 (Unaudited)
Several factors constrained total returns on EM debt during the most recent 12 month period. U.S. and other developed market bond yields moved higher, negatively impacting returns on hard currency-denominated sovereign and corporate bonds. While the Euro strengthened relative to the U.S. dollar until April 2018, U.S. dollar appreciation in the latter part of the period detracted from returns on local currency assets. Credit spreads movements, on average, narrowed within the period until February, but then began to widen afterwards, reducing returns from sovereign and corporate bonds.
Stone Harbor Emerging Markets Debt Fund
The total return of the Stone Harbor Emerging Markets Debt Fund (the “Fund”) for the 12-month period ended May 31, 2018 was 0.08% (net of expenses) and 0.79% (gross of expenses). This performance compares to a benchmark return of -0.56% for the JPMorgan EMBI Global Diversified Index.
The Fund outperformed its benchmark primarily as a result of issue selection decisions in external sovereign bonds. Off-currency exposure in corporate and local currency bonds had mixed success. The corporate debt positions enhanced excess returns on average, while the local currency exposure detracted from relative performance. Duration-adjusted returns that are explained by U.S. Treasury movements were negative, while miscellaneous differences, which represents pricing differences among other factors, enhanced performance.
Positioning in Central Europe, the Middle East, and Africa contributed most to returns in excess of the benchmark, driven primarily by an overweight and issue selection in Ukraine. The most important factors driving Ukraine’s outperformance this period, in our view, were the ongoing recovery in growth, proven success in implementing reforms, and the International Monetary Fund (“IMF”) support. Overweights in Ghana and Iraq also enhanced performance. In Iraq, several key factors, including the country’s strong capacity and demonstrated willingness to pay, a successful IMF program, and rising oil prices and oil output, buoyed asset prices. In Latin America, the largest positive contributor to relative performance was issue selection in Argentina, where the Fund owned Euro-denominated sovereign bonds which outperformed comparable U.S. dollar denominated securities. In Asia, an underweight in the Philippines, and issue selection in Indonesia and Malaysia also enhanced performance. Top detractors included overweights in Argentina, Ecuador, and Venezuela.
The Fund uses various derivative instruments to implement its strategies. These derivatives are utilized to manage the Fund’s credit risk, interest rate risk and foreign exchange risk. These derivative positions may increase or decrease the Fund’s exposure to these risks. At the end of the reporting period the Fund had net exposure to these derivatives of approximately -$630 thousand. Over the course of the reporting period these derivative positions generated a net realized loss of approximately $7.1 million and $4.7 million in unrealized appreciation for a decrease in operations of $2.4 million. We plan to continue to utilize derivative instruments to implement our strategies related to credit risk, interest rate risk and foreign exchange risk.
Stone Harbor Local Markets Fund
The total return of the Stone Harbor Local Markets Fund (the “Fund”) for the 12-month period ended May 31, 2018 was -0.33% (net of expenses) and 0.57% (gross of expenses). This performance compares to a benchmark return of 1.01% for the JPMorgan GBI-EM Global Diversified Index. Contributions to the index total return from foreign currency exchange (“FX”) spot transactions and carry/duration were -3.39% and 4.55%, respectively. The Fund’s positive attribution from duration positioning was offset by FX exposure and issues, taxes and other considerations. Miscellaneous differences also detracted from relative performance.
Sources of the Fund’s underperformance included FX overweights in Argentina, Brazil, and Turkey. In the case of Argentina and Turkey, sharp currency depreciations led to emergency actions by the respective central banks to intervene in the FX markets to restore market confidence in May. In Asia, FX underweights in Malaysia and Thailand detracted most from relative performance. In Thailand, export-led growth and forecasts of a current account surplus supported the baht.
Other detractors to relative returns included issues, taxes, and curve positioning in Brazil, Chile, Czech Republic, Poland, Romania, and Russia.
The top positive contributors to relative performance included duration underweights in Argentina, Chile, Czech Republic, and Romania, as well as duration overweights in Brazil, Russia, and South Africa. Off-benchmark U.S. dollar-denominated securities in Argentina, which we added in the third quarter 2017 and in Ukraine also enhanced performance.
The Fund uses various derivative instruments to implement its strategies. These derivatives are utilized to manage the Fund’s credit risk, interest rate risk and foreign exchange risk. These derivative positions may increase or decrease the Fund’s exposure to these risks. At the end of the reporting period the Fund had net exposure to these derivatives of approximately $1.5 million. Over the course of the reporting period these derivative positions generated a net realized gain of approximately $204 thousand and $5.7 million in unrealized depreciation, for a decrease in operations of $5.5 million. We plan to continue to utilize derivative instruments to implement our strategies related to credit risk, interest rate risk and foreign exchange risk.
Stone Harbor Investment Funds Annual Report | May 31, 2018 | 3 |
Stone Harbor Investment Funds | Shareholder Letter |
May 31, 2018 (Unaudited)
Stone Harbor Emerging Markets Corporate Debt Fund
The total return of the Stone Harbor Emerging Markets Corporate Debt Fund (the “Fund”) for the 12-month period ended May 31, 2018 was 0.80% (net of expenses) and 1.81% (gross of expenses). This performance compares to a benchmark return of 0.48% for the JPMorgan CEMBI Broad Diversified Index. The index spread over comparable maturity U.S. Treasury securities widened by 27 basis points, ending the period at 284 basis points. The high yield sub-sector outperformed, returning 1.43%, while the investment grade sector returned -0.14%. Returns from the major EM regions (i.e., Africa, Asia, Eastern Europe, Latin America, and the Middle East) were mixed. Africa generated the strongest returns, followed by Latin America. Top country performers included Iraq (+20.29%), Latvia (+11.59%), and Ukraine (+17.98%); the bottom performers included Israel (-5.00%), Jamaica (-7.91%), and Russia (-2.90%).
The Fund outperformed its benchmark due to both country and regional exposures and issue selection decisions. The largest positive contributor to Fund performance was an overweight exposure in Ukraine. Ukraine corporate debt benefited from positive country developments - namely, ongoing recovery in growth, proven success in implementing reforms, and support from the IMF. An overweight exposure in Ghana and underweight exposures in Israel and Russia also enhanced returns. In Ghana, portfolio exposure in the oil and gas sector was helped by rising oil prices. Israel lagged other country returns at the index level, declining primarily in response to the weak performance of Teva Pharmaceutical debt; and the portfolio’s underweight enhanced performance. In Latin America, the top positive contributor to excess returns was an overweight exposure in Brazil, which was supported by strong performance from the oil and mining sectors. In Asia, an overweight exposure in Macau and Thailand contributed positively to excess returns.
In terms of issue selection, positive issue selection in Asia, particularly in India, Indonesia, and Thailand contributed most to excess returns. In other regions, strong issue selection in Chile and Mexico, as well as in Israel and Russia enhanced relative performance. Some of this positive attribution was offset by issue selection in Brazil, Jamaica, and Ukraine.
From an industry perspective, overweight exposures to exploration & production, and metals/mining/steel, and an underweight exposure to pharmaceuticals were among the top contributors to excess returns. Issue selection in several industries, including banking, energy & production, metals/mining/steel, and railroads also enhanced performance.
Attribution from credit rating was positive, with the largest positive contribution from an underweight in higher quality BBB rated credits. Overweights in B and BB rated credits also enhanced returns, as did an overweight in A rated credits.
The Fund may use various derivative instruments to implement its strategies. These derivatives may be used to manage the Fund’s credit risk, interest rate risk and foreign exchange risk. These derivative positions may increase or decrease the Fund’s exposure to these risks. At the end of the reporting period, the Fund did not have exposure to these derivatives.
Stone Harbor Emerging Markets Debt Allocation Fund
The Stone Harbor Emerging Markets Debt Allocation Fund’s (the “Fund”) performance for the 12-month period ended May 31, 2018 was 0.21% (net of direct and indirect expenses) and 1.06% (gross of direct and indirect expenses). This compares to a blended benchmark (50% JPMorgan EMBI Global Diversified Index / 50% JPMorgan GBI-EM Global Diversified Index) return of 0.29%.
The Fund generated positive performance from asset allocation decisions, driven primarily by the timely decisions to overweight local currency assets between November and January and then to reduce this exposure through the end of the reporting period.
Allocations to hard currency sovereign debt and out-of-benchmark exposure to U.S. dollar-denominated corporate debt enhanced relative performance, while local currency positioning detracted. Relative duration-adjusted returns that are explained by U.S. Treasury movements were positive; and miscellaneous difference, which represents pricing differences among other factors, was also positive.
Within the hard currency sovereign debt allocation, positioning in Central Europe, the Middle East, and Africa contributed most to returns in excess of the benchmark, driven primarily by an overweight and issue selection in Ukraine. The most important factors driving Ukraine’s outperformance this period, in our view, have been the ongoing recovery in growth, proven success in implementing reforms, and the IMF support. Overweights in Ghana and Iraq also enhanced performance. In Iraq, several key factors, including the country’s strong capacity and demonstrated willingness to pay, a successful IMF program, and rising oil prices and oil output, supported bond prices. In Latin America, the largest positive contributor to relative performance was issue selection in Argentina, where the Fund owned Euro-denominated sovereign bonds, which outperformed comparable U.S. dollar denominated securities. In Asia, an underweight in the Philippines, and issue selection in Indonesia and Malaysia also enhanced performance.
Within the local currency debt allocation, positioning in Argentina, Thailand, and Turkey detracted most from relative performance. In the case of Argentina and Turkey, sharp currency depreciations led to emergency actions by the respective central banks to intervene in the FX markets to restore market confidence in May 2018. In Thailand, an underweight to the baht detracted most from relative performance as export-led growth and forecasts of a current account surplus supported the currency. Some of the negative attribution was offset by overweight positioning in Poland, Russia, and South Africa.
4 | www.shiplp.com |
Stone Harbor Investment Funds | Shareholder Letter |
May 31, 2018 (Unaudited)
Out-of-benchmark exposure to hard currency corporate debt, particularly in Brazil, Ghana, and Indonesia, enhanced performance.
The Fund uses various derivative instruments to implement its strategies. These derivatives are utilized to manage the Fund’s credit risk, interest rate risk and foreign exchange risk. These derivative positions may increase or decrease the Fund’s exposure to these risks. At the end of the reporting period the Fund had net exposure to these derivatives of approximately -$2.0 thousand. Over the course of the reporting period these derivative positions generated a net realized loss of approximately $13.6 thousand and $2 thousand in unrealized appreciation, for a decrease in operations of $11.4 thousand. We plan to continue to utilize derivative instruments to implement our strategies related to credit risk, interest rate risk and foreign exchange risk.
Stone Harbor High Yield Bond Fund
The Stone Harbor High Yield Bond Fund (the “Fund”) return for the 12-months ended May 31, 2018 was 0.87% (net of expenses) and 1.53% (gross of expenses). This compares to a benchmark return of 2.09%. The benchmark was changed from the Citigroup High Yield Market Capped Index to the ICE BofAML US High Yield Master Constrained Index effective September 30, 2017.
During the reporting period, the high yield market was supported by overall positive earnings trends, improving credit fundamentals and fiscal stimulus from the recently passed Tax Cuts and Job Act of 2017. Oil prices rose to the highest level since 2014 as OPEC agreements to cut production remained in place. Market volatility increased during the latter part of the reporting period as U.S. trade tensions particularly with China and a lack of progress on NAFTA weighed on the market. The market was also negatively impacted by rising interest rates, volatility in equity markets, increasing idiosyncratic risks (an indication of, in our view, the latter part of a credit cycle), and increasing geopolitical tensions.
The par value of the Index declined slightly as new issuance declined from the same period last year. Over seventy percent of new issuance proceeds were used to repay or refinance existing debt, more companies were upgraded to investment grade than downgraded, and companies opted to refinance in the leveraged loan market. Market technicals were pressured by retail outflows, which were significantly higher than the prior 12 month period. High yield spreads, as represented by the current Index, tightened 15 basis points to end the period at 374 basis points. The average yield increased from 5.54% to 6.36%.
Top performing sectors at the index level for the period included Pharmaceuticals, which benefitted from a stabilization of the base business and improved fundamentals; Transportation-other; and Utilities, which benefitted from mergers and acquisitions activity. The bottom performers included Telecommunications, which underperformed due to weak operating results and Banking. Lower rated securities outperformed as earnings trends were strong and higher rated securities were negatively impacted by higher rates. Shorter duration securities outperformed longer duration bonds due to rising interest rates.
The high yield portfolio underperformed the index as a result of negative industry selection. Issue selection decisions contributed positively to performance. In terms of industry selection, an overweight to Cable & Media and an underweight to Finance detracted from performance. This performance was partially offset by an overweight and strong security selection to the Utilities sector. Security selection decisions in the consumer sectors, including Retail-Food & Drug and Retail Stores, detracted from relative returns as did security selection in Consumer Products. Negative contributions were partially offset by positive security selection in the Energy and Textile/Apparel sectors. From a credit quality perspective, weak credit selection decisions in B-rated securities was partly offset by favorable issue selection in BB- and CCC-rated bonds. The portfolio’s exposure to bank loans also enhanced performance, benefitting from the shorter duration, better capital structure positioning, and lower volatility of the asset class.
We continue to see some inflationary pressure building across many sectors related to labor, raw materials and transportation. For sectors where secular concerns are growing and negative surprises are rising, spread widening has occurred. Idiosyncratic events have continued to rise amid maturing credit cycles. We also have witnessed more shareholder friendly actions by companies. As the BB-rated sector has significantly underperformed and with macro concerns growing, we believe the BB sector and leveraged loans offers good relative value.
The Fund uses various derivative instruments to implement its strategies. These derivatives are utilized to manage the Fund’s credit risk, interest rate risk and foreign exchange risk. These derivative positions may increase or decrease the Fund’s exposure to these risks. At the end of the reporting period the Fund did not have exposure to these derivatives. Over the course of the reporting period these derivative positions generated a net realized loss of approximately $84 thousand and $36 thousand in unrealized appreciation for a decrease in operations of $48 thousand. We plan to continue to utilize derivative instruments to implement our strategies related to credit risk, interest rate risk and foreign exchange risk.
Stone Harbor Investment Funds Annual Report | May 31, 2018 | 5 |
Stone Harbor Investment Funds | Shareholder Letter |
May 31, 2018 (Unaudited)
Stone Harbor Investment Grade Fund
The total return of the Stone Harbor Investment Grade Fund (the “Fund”) for the 12 months ended May 31, 2018 was -0.81% (net of expenses) and -0.30% (gross of expenses). This performance compares to a benchmark return of -0.37% for the Bloomberg Barclays U.S. Aggregate Index. The Fund’s performance benefitted during the period by maintaining an average duration position modestly shorter than that of the benchmark. The 12-month period was characterized by rising U.S. Treasury rates, which can negatively affect bond prices. Additionally, the Fund was aided by an overweight to corporate bonds during the 12-month period as credit spreads moved tighter. Partially offsetting these gains were the effects of certain security selection decisions within the securitized sector.
During the reporting period, the U.S. Federal Reserve raised the Fed Funds rate from 1.25% to 1.75%, with forward guidance suggesting further rate increases. As a consequence, two year yields rose by 129 bps to 2.42%, while ten year yields rose a more modest 63 bps to 2.84%, resulting in a flatter yield curve. The investment grade corporate market -- with a heavy weighting in financial debt, which is often negatively impacted by a flatter curve -- saw spreads rise by 2 bps to 115 bps. Conversely, the U.S. high yield market benefitted from continued strong growth, improved corporate earnings, stronger commodity prices, and tax cuts and posted a spread tightening of 31 bps, ending the period at a spread of 332 bps.
Looking forward, growth in the U.S. appears to remain strong over the first part of the year, supported by tax cuts, but is expected to slow somewhat thereafter. The Fed is likely to continue to raise interest rates over the next six months, but we suspect, it will adopt a more conservative stance thereafter, adjusting for softer GDP readings and a flatter yield curve.
The Fund may use various derivative instruments to implement its strategies. These derivatives may be used to manage the Fund’s credit risk, interest rate risk and foreign exchange risk. These derivative positions may increase or decrease the Fund’s exposure to these risks. At the end of the reporting period the Fund did not have exposure to these derivatives.
Stone Harbor Strategic Income Fund
The total return of the Strategic Income Fund (the “Fund”) for the 12 month period ending May 31, 2018 was 0.60% (net of direct and indirect expenses) and 1.30% (gross of direct and indirect expenses). This performance compares to a benchmark return of 1.04% for the Bloomberg Barclays Global Credit Index (Hedged USD). The Fund outperformed its benchmark as a result of certain asset allocation, duration, and individual credit decisions. All portfolio sectors posted positive contributions from asset allocation, with U.S. high yield and emerging local currency debt the leaders. Partially offsetting these positive effects were costs associated with credit hedges (i.e. use of derivatives as an efficient and effective way to manage our credit exposure) during a period of tighter credit spreads. Within individual portfolio sectors, the Fund experienced outperformance in investment grade, hard currency emerging markets sovereign debt and emerging market corporates, while underperforming within the high yield and emerging markets local currency segments. In emerging markets hard currency, Argentina and Ukraine generated the largest positive contributions. In the high yield segment, an overweight to the Cable/Media sector had a negative effect. The Fund’s duration positioning (long relative to the benchmark) generated a negative contribution during the period as developed market government rates moved higher.
During the reporting period, the U.S. Federal Reserve raised the Fed Funds rate from 1.25% to 1.75%, with forward guidance suggesting further rate increases. As a consequence, two year yields rose by 129 bps to 2.42%, while ten year yields rose a more modest 63 bps to 2.84%, resulting in a flatter yield curve. The investment grade corporate market -- with a heavy weighting in financial debt, which is often negatively impacted by a flatter curve -- saw spreads rise by 2 bps to 115 bps. Conversely, the U.S. high yield market benefitted from continued strong growth, improved corporate earnings, stronger commodity prices, and tax cuts and posted a spread tightening of 31 bps, ending the period at a spread of 332 bps. In Europe, the ECB moved to slow the pace of QE. As a consequence, German two year yields rose by 6 bps to -0.62% and ten year yields were virtually unchanged on the year at 0.34%. European investment grade spreads widened 10 bps and High Yield spreads widened 30 bps. The Euro rallied modestly over the reporting period to 1.17 from 1.13, although it was markedly stronger during the first quarter of 2018. The MPC in the UK raised rates once to 50 bps from 25 bps. Over the reporting period, U.K. ten year yields rose by 18 bps to 1.23%. Japanese ten year yields were unchanged over the same period. In EMD, spread widened by nearly 50 bps over the reporting period, despite signs of improved growth and inflation recording in many countries, as well as stronger commodity price.
The Fund uses various derivative instruments to implement its strategies. These derivatives are utilized to manage the Fund’s credit risk, interest rate risk and foreign exchange risk. These derivative positions may increase or decrease the Fund’s exposure to these risks. At the end of the reporting period the Fund had net exposure to these derivatives of approximately $355 thousand. Over the course of the reporting period these derivative positions generated a net realized loss of approximately $200 thousand and $210 thousand in unrealized appreciation for an increase in operations of $10 thousand. We plan to continue to utilize derivative instruments to implement our strategies related to credit risk, interest rate risk and foreign exchange risk.
6 | www.shiplp.com |
Stone Harbor Investment Funds | Shareholder Letter |
May 31, 2018 (Unaudited)
Stone Harbor 500 Plus Fund
The total return of the Stone Harbor 500 Plus Fund (the “Fund”) for the 12 month period ending May 31, 2018 was 14.32% (net of expenses) and 14.93% (gross of expenses). This performance compares favorably versus the Fund’s benchmark, the S&P 500 Index, which returned 14.38% over that time period.
The Fund’s strategy of purchasing S&P futures, in an attempt to replicate the performance of the S&P 500 Index, while investing the remainder of the Fund’s cash in a portfolio of fixed income instruments designed to outperform USD 3-month LIBOR proved advantageous during the period. The 62 bps of performance above the S&P 500 can be attributed to two key areas: 1) overlay portfolio 2) the index replication. The overlay portfolio, which comprises mainly floating rate or short weighted average life fixed rate securitized bonds (i.e. less than 3-year weighted average life backed by residential mortgages), outperformed 3-month LIBOR by approximately 161 basis points during the past year. The majority of that performance resulted from carry and spread tightening in the non-agency and commercial mortgage backed bonds in the portfolio. At the end of May, the Fund was allocated approximately 37% to non-agency residential mortgage backed securities (RMBS), 34% to commercial mortgage backed securities (CMBS), 23% to asset backed securities (ABS), and 6% cash, which resulted in a yield-to-maturity of 2.68% and AA+ rated average credit quality. The Fund’s index replication strategy underperformed the S&P 500 by 83 bps over the time period due to unattractive calendar roll pricing in December 2017 and cash drag associated with maintaining the margin on the long futures position.
Due to the considerable spread tightening in 2017 and early 2018, we have become more defensive in the overlay portfolio. We have reduced the non-agency RMBS weighting, while increasing the allocation to asset backed securities; specifically, the auto and student loan sectors of the ABS market. We remain overweight in floating rate bonds in the overlay portfolio as we expect the Federal Reserve to continue to raise interest rates well into 2019.
The Fund uses various derivative instruments to implement its strategies. These derivatives are utilized to manage the Fund’s credit risk, interest rate risk and foreign exchange risk. These derivative positions may increase or decrease the Fund’s exposure to these risks. At the end of the reporting period the Fund had net exposure to these derivatives of approximately $86 thousand. Over the course of the period these derivative positions generated a net realized gain of approximately $426 thousand and $156 thousand in unrealized depreciation for an increase in operations of $270 thousand. We plan to continue to utilize derivative instruments to implement our strategies related to credit risk, interest rate risk and foreign exchange risk.
Sincerely,
Thomas K. Flanagan
Chairman of the Board of Trustees
Stone Harbor Investment Funds Annual Report | May 31, 2018 | 7 |
Stone Harbor Investment Funds | Disclosure of Fund Expenses |
May 31, 2018 (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, 2017 and held until May 31, 2018.
Actual Expenses. The first table below provides information about actual account values and actual expenses. You may use the information in this table, 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 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 tables 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 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.
BASED ON ACTUAL TOTAL RETURN
Actual Total Return | Beginning Account Value December 1, 2017 | Ending Account Value May 31, 2018 | Expense Ratio(1) | Expenses Paid During Period(2) | |
STONE HARBOR EMERGING MARKETS DEBT FUND | -3.15% | $ 1,000.00 | $968.50 | 0.70% | $3.44 |
STONE HARBOR HIGH YIELD BOND FUND | -0.12 | 1,000.00 | 998.80 | 0.66 | 3.29 |
STONE HARBOR LOCAL MARKETS FUND | -2.34 | 1,000.00 | 976.60 | 0.90 | 4.44 |
STONE HARBOR EMERGING MARKETS CORPORATE DEBT FUND | -2.84 | 1,000.00 | 971.60 | 1.01 | 4.99 |
STONE HARBOR INVESTMENT GRADE FUND | -1.57 | 1,000.00 | 984.30 | 0.51 | 2.52 |
STONE HARBOR STRATEGIC INCOME FUND | -0.51 | 1,000.00 | 994.90 | 0.07 | 0.35 |
STONE HARBOR EMERGING MARKETS DEBT ALLOCATION FUND | -2.45 | 1,000.00 | 975.50 | 0.04 | 0.20 |
STONE HARBOR 500 PLUS FUND | 2.84 | 1,000.00 | 1,028.40 | 0.61 | 3.08 |
BASED ON HYPOTHETICAL TOTAL RETURN
Hypothetical Annualized Total Return | Beginning Account Value December 1, 2017 | Ending Account Value May 31, 2018 | Expense Ratio(1) | Expenses Paid During Period(2) | |
STONE HARBOR EMERGING MARKETS DEBT FUND | 5.00% | $ 1,000.00 | $1,021.44 | 0.70% | $3.53 |
STONE HARBOR HIGH YIELD BOND FUND | 5.00 | 1,000.00 | 1,021.64 | 0.66 | 3.33 |
STONE HARBOR LOCAL MARKETS FUND | 5.00 | 1,000.00 | 1,020.44 | 0.90 | 4.53 |
STONE HARBOR EMERGING MARKETS CORPORATE DEBT FUND | 5.00 | 1,000.00 | 1,019.90 | 1.01 | 5.09 |
STONE HARBOR INVESTMENT GRADE FUND | 5.00 | 1,000.00 | 1,022.39 | 0.51 | 2.57 |
STONE HARBOR STRATEGIC INCOME FUND | 5.00 | 1,000.00 | 1,024.58 | 0.07 | 0.35 |
STONE HARBOR EMERGING MARKETS DEBT ALLOCATION FUND | 5.00 | 1,000.00 | 1,024.73 | 0.04 | 0.20 |
STONE HARBOR 500 PLUS FUND | 5.00 | 1,000.00 | 1,021.89 | 0.61 | 3.07 |
(1) | Annualized, based on the Fund's most recent fiscal half-year expenses. |
(2) | Expenses are equal to the Fund's annualized expense ratio multiplied by the average account value over the period, multiplied by the number of days in the most recent fiscal half year (182), divided by 365. Note this expense example is typically based on a six-month period. |
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Stone Harbor Investment Funds | Summaries of Portfolio Holdings |
May 31, 2018 (Unaudited)
STONE HARBOR EMERGING MARKETS DEBT FUND
Country Breakdown(1) | % |
Argentina | 8.23% |
Ukraine | 7.78% |
Ecuador | 7.05% |
Mexico | 6.76% |
Brazil | 5.71% |
Turkey | 5.60% |
Egypt | 5.17% |
Indonesia | 4.39% |
Iraq | 3.15% |
Nigeria | 2.86% |
Lebanon | 2.72% |
Oman | 2.47% |
Dominican Republic | 2.39% |
Ghana | 2.36% |
Ivory Coast | 2.21% |
Venezuela | 2.10% |
Malaysia | 2.08% |
Uruguay | 1.91% |
Colombia | 1.46% |
Sri Lanka | 1.41% |
Zambia | 1.40% |
Angola | 1.38% |
Gabon | 1.18% |
South Africa | 1.15% |
El Salvador | 1.04% |
Cameroon | 0.95% |
Azerbaijan | 0.89% |
China | 0.88% |
Kenya | 0.76% |
Russia | 0.71% |
Senegal | 0.70% |
Kazakhstan | 0.66% |
Jordan | 0.63% |
Panama | 0.60% |
Paraguay | 0.57% |
Costa Rica | 0.56% |
Luxembourg | 0.42% |
Peru | 0.35% |
Bahrain | 0.30% |
India | 0.28% |
Thailand | 0.23% |
Georgia | 0.20% |
Chile | 0.19% |
Jamaica | 0.18% |
Netherlands | 0.15% |
Total | 94.17% |
Short Term Investments | 2.99% |
Other Assets in Excess of Liabilities | 2.84% |
Total Net Assets | 100.00% |
STONE HARBOR HIGH YIELD BOND FUND
Industry Breakdown | % |
Exploration & Production | 7.15% |
Media Cable | 7.06% |
Chemicals | 6.06% |
Industrial Other | 5.67% |
Media Other | 5.65% |
Technology | 5.61% |
Healthcare | 5.39% |
Food/Beverage/Tobacco | 5.29% |
Electric | 4.93% |
Drillers/Services | 3.98% |
Building Products | 3.67% |
Gaming | 3.01% |
Leisure | 2.94% |
Containers/Packaging | 2.83% |
Wireless | 2.78% |
Metals/Mining/Steel | 2.73% |
Paper/Forest Products | 2.71% |
Pharmaceuticals | 2.52% |
Automotive | 2.47% |
Services Other | 2.45% |
Wirelines | 1.88% |
Consumer Products | 1.75% |
Diversified Manufacturing | 1.61% |
Satellite | 1.13% |
Retail Food/Drug | 1.11% |
Textile/Apparel | 0.87% |
Retail Non Food/Drug | 0.76% |
Gas Pipelines | 0.73% |
Utility Non Electric/Gas | 0.53% |
Construction Machinery | 0.44% |
Transportation Non Air/Rail | 0.00% |
Total | 95.71% |
Short Term Investments | 2.47% |
Other Assets in Excess of Liabilities | 1.82% |
Total Net Assets | 100.00% |
(1) | Country refers to country of primary risk exposure, as determined by Stone Harbor Investment Partners LP (the “Adviser” or “Stone Harbor”). In certain instances, a security’s country of incorporation may be different from its country of risk. |
Stone Harbor Investment Funds Annual Report | May 31, 2018 | 9 |
Stone Harbor Investment Funds | Summaries of Portfolio Holdings |
May 31, 2018 (Unaudited)
STONE HARBOR LOCAL MARKETS FUND
Country Breakdown(1) | % |
Indonesia | 11.09% |
Mexico | 10.94% |
Brazil | 10.55% |
South Africa | 9.93% |
Turkey | 8.55% |
Russia | 8.29% |
Colombia | 5.77% |
Poland | 4.84% |
Thailand | 2.39% |
Czech Republic | 1.85% |
Romania | 1.34% |
Malaysia | 1.23% |
Argentina | 0.95% |
Uruguay | 0.74% |
Ukraine | 0.65% |
Peru | 0.62% |
Luxembourg | 0.50% |
Chile | 0.30% |
Kazakhstan | 0.19% |
Total | 80.72% |
Short Term Investments | 4.90% |
Other Assets in Excess of Liabilities | 14.38% |
Total Net Assets | 100.00% |
(1) | Country refers to country of primary risk exposure, as determined by Stone Harbor. In certain instances, a security’s country of incorporation may be different from its country of risk. |
STONE HARBOR EMERGING MARKETS CORPORATE DEBT FUND
Industry Breakdown | % |
Exploration & Production | 16.76% |
Financial/Lease | 14.54% |
Metals/Mining/Steel | 10.72% |
Electric | 10.14% |
Wireless | 6.40% |
Food/Bev/Tobacco | 5.13% |
Capital Goods | 3.46% |
Gaming | 3.44% |
Gas Distributors | 2.96% |
Chemicals | 2.42% |
Railroads | 2.41% |
Technology | 2.05% |
Retail Food/Drug | 2.02% |
Home Builders | 1.70% |
Airlines | 1.69% |
Industrial Other | 1.68% |
Services Other | 1.67% |
Other | 1.63% |
Media Cable | 1.34% |
Retail Non Food/Drug | 1.23% |
Gas Pipelines | 1.17% |
Wirelines | 1.05% |
Automotive | 0.72% |
Transport Other | 0.71% |
Building Products | 0.24% |
Total | 97.28% |
Short Term Investments | 1.35% |
Other Assets in Excess of Liabilities | 1.37% |
Total Net Assets | 100.00% |
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Stone Harbor Investment Funds | Summaries of Portfolio Holdings |
May 31, 2018 (Unaudited)
STONE HARBOR INVESTMENT GRADE FUND
Industry Breakdown | % |
Asset Backed/Commercial Mortgage Backed | 14.14% |
U.S. Treasury Bonds/Notes | 23.85% |
U.S. Government Agency Mortgage Backed | 20.20% |
Banking | 7.77% |
Gas Pipelines | 3.26% |
Electric | 2.96% |
Technology | 2.22% |
Automotive | 2.05% |
Non Captive Finance | 1.76% |
Media Cable | 1.74% |
Real Estate Investment Trust (REITs) | 1.61% |
Retail Non Food/Drug | 1.57% |
Healthcare | 1.52% |
Exploration & Production | 1.48% |
Food and Beverage | 1.23% |
Wireless | 1.13% |
Metals/Mining/Steel | 0.97% |
Media Other | 0.91% |
Life Insurance | 0.89% |
Transportation Non Air/Rail | 0.87% |
Pharmaceuticals | 0.68% |
Wirelines | 0.66% |
Aerospace/Defense | 0.65% |
Restaurants | 0.46% |
Leisure | 0.45% |
Refining | 0.44% |
Construction Machinery | 0.44% |
Building Products | 0.42% |
Drillers/Services | 0.25% |
Retail Food/Drug | 0.21% |
Total | 96.79% |
Short Term Investments | 1.51% |
Other Assets in Excess of Liabilities | 1.70% |
Total Net Assets | 100.00% |
STONE HARBOR STRATEGIC INCOME FUND
Underlying Fund Breakdown | % |
Stone Harbor Emerging Markets Corporate Debt | 2.47% |
Stone Harbor Emerging Markets Debt Fund | 19.80% |
Stone Harbor High Yield Bond Fund | 32.16% |
Stone Harbor Investment Grade Fund | 33.51% |
Stone Harbor Local Markets Fund | 9.82% |
Total | 96.76% |
Short Term Investments | 0.86% |
Other Assets in Excess of Liabilities | 2.38% |
Total Net Assets | 100.00% |
STONE HARBOR EMERGING MARKETS DEBT ALLOCATION FUND
Underlying Fund Breakdown | % |
Stone Harbor Local Markets Fund | 50.57% |
Stone Harbor Emerging Markets Debt Fund | 48.79% |
Total | 99.36% |
Short Term Investments | 0.10% |
Other Assets in Excess of Liabilities | 0.54% |
Total Net Assets | 100.00% |
STONE HARBOR 500 PLUS FUND
Industry Breakdown | % |
Financial/Lease | 69.40% |
Transport Other | 5.03% |
Retail Non Food/Drug | 4.03% |
Automotive | 3.52% |
Lodging | 1.01% |
Other | 3.97% |
Total | 86.96% |
Short Term Investments | 7.10% |
Other Assets in Excess of Liabilities | 5.94% |
Total Net Assets | 100.00% |
Stone Harbor Investment Funds Annual Report | May 31, 2018 | 11 |
Stone Harbor Investment Funds | Growth of $10,000 Investment |
May 31, 2018 (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 JPMorgan Emerging Markets Bond Index Global Diversified (JPMorgan EMBI Global Diversified Index). Please refer to the Additional Information section for detailed benchmark descriptions.
Total Returns (Inception Date, August 16, 2007)
6 Month | 1 Year | 3 Year | 5 Year | 10 Year | Since Inception | |
Stone Harbor Emerging Markets Debt Fund | -3.15% | 0.08% | 5.05% | 3.29% | 6.28% | 6.79% |
JPMorgan EMBI Global Diversified Index | -3.38% | -0.56% | 4.50% | 4.34% | 6.67% | 7.04% |
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 and fund expenses or transaction costs. It is not possible to invest directly in an index.
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Stone Harbor Investment Funds | Growth of $10,000 Investment |
May 31, 2018 (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 BofAML US High Yield Master Constrained Index. Please refer to the Additional Information section for detailed benchmark descriptions.
Total Returns (Inception Date, August 16, 2007)
6 Month | 1 Year | 3 Year | 5 Year | 10 Year | Since Inception | |
Stone Harbor High Yield Bond Fund | -0.12% | 0.87% | 2.77% | 3.15% | 6.02% | 6.05% |
ICE BofAML US High Yield Master Constrained Index* | 0.02% | 2.29% | 4.90% | 4.88% | 7.78% | 7.59% |
Citigroup High Yield Market Capped Index | 0.26% | 2.47% | 4.46% | 4.47% | 7.25% | 7.16% |
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 and fund expenses or transaction costs. It is not possible to invest directly in an index.
* | Effective September 30, 2017, the benchmark of the Fund is the ICE BofAML US High Yield Master Constrained Index. The ICE BoA Merrill Lynch US High Yield Master Constrained Index is comprised of all securities in the ICE BoA Merrill Lynch US High Yield Index with issuer exposure capped at 2%. The ICE BofAML US High Yield Master Constrained Index is a broader index, inclusive of European domiciled issuers, and is considered by the Adviser to be a better representation of the Fund’s overall strategy than the Fund’s previous benchmark, the Citigroup High Yield Market Capped Index. |
Stone Harbor Investment Funds Annual Report | May 31, 2018 | 13 |
Stone Harbor Investment Funds | Growth of $10,000 Investment |
May 31, 2018 (Unaudited)
STONE HARBOR LOCAL MARKETS FUND
Comparison of Change in Value of $10,000 Investment in Stone Harbor Local Markets Fund and the JPMorgan Global Bond Index - Emerging Markets Global Diversified (JPMorgan GBI-EM Global Diversified). Please refer to the Additional Information section for detailed benchmark descriptions.
Total Returns (Inception Date, June 30, 2010)
6 Month | 1 Year | 3 Year | 5 Year | Since Inception | |
Stone Harbor Local Markets Fund | -2.34% | -0.33% | 1.38% | -3.15% | 0.15% |
JPMorgan GBI-EM Global Diversified Index | -1.74% | 1.01% | 2.53% | -1.66% | 1.71% |
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 and fund expenses or transaction costs. It is not possible to invest directly in an index.
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Stone Harbor Investment Funds | Growth of $10,000 Investment |
May 31, 2018 (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 JPMorgan Corporate Emerging Market Bond Index - Broad Diversified (JPMorgan CEMBI Broad Diversified Index). Please refer to the Additional Information section for detailed benchmark descriptions.
Total Returns (Inception Date, June 1, 2011)
6 Month | 1 Year | 3 Year | 5 Year | Since Inception | |
Stone Harbor Emerging Markets Corporate Debt Fund | -2.84% | 0.80% | 3.66% | 3.69% | 3.27% |
JPMorgan CEMBI Broad Diversified Index | -2.15% | 0.48% | 3.78% | 4.01% | 4.75% |
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 and fund expenses or transaction costs. It is not possible to invest directly in an index.
Stone Harbor Investment Funds Annual Report | May 31, 2018 | 15 |
Stone Harbor Investment Funds | Growth of $10,000 Investment |
May 31, 2018 (Unaudited)
STONE HARBOR INVESTMENT GRADE FUND
Comparison of Change in Value of $10,000 Investment in Stone Harbor Investment Grade Fund and the Bloomberg Barclays U.S. Aggregate Index. Please refer to the Additional Information section for detailed benchmark descriptions.
Total Returns (Inception Date, December 18, 2013)
6 Month | 1 Year | 3 Year | Since Inception | |
Stone Harbor Investment Grade Fund | -1.57% | -0.81% | 1.31% | 2.31% |
Bloomberg Barclays U.S. Aggregate Index | -1.04% | -0.37% | 1.39% | 2.43% |
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 and fund expenses or transaction costs. It is not possible to invest directly in an index.
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Stone Harbor Investment Funds | Growth of $10,000 Investment |
May 31, 2018 (Unaudited)
STONE HARBOR STRATEGIC INCOME FUND
Comparison of Change in Value of $10,000 Investment in Stone Harbor Strategic Income Fund and the Bloomberg Barclays Global Credit Index (Hedged USD). Please refer to the Additional Information section for detailed benchmark descriptions.
Total Returns (Inception Date, December 18, 2013)
6 Month | 1 Year | 3 Year | Since Inception | |
Stone Harbor Strategic Income Fund | -0.51% | 0.60% | 2.63% | 3.33% |
Bloomberg Barclays Global Credit Index (Hedged USD) | -0.88% | 1.04% | 3.19% | 4.03% |
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 and fund expenses or transaction costs. It is not possible to invest directly in an index.
Stone Harbor Investment Funds Annual Report | May 31, 2018 | 17 |
Stone Harbor Investment Funds | Growth of $10,000 Investment |
May 31, 2018 (Unaudited)
STONE HARBOR EMERGING MARKETS DEBT ALLOCATION FUND
Comparison of Change in Value of $10,000 Investment in Stone Harbor Emerging Markets Debt Allocation Fund, the JPMorgan EMBI Global Diversified Index, JPMorgan GBI-EM Global Diversified Index and the Blend Index (50% JPMorgan EMBI Global Diversified Index and 50% JP Morgan GBI-EM Global Diversified Index). Please refer to the Additional Information section for detailed benchmark descriptions.
Total Returns (Inception Date, October 20, 2014)
6 Month | 1 Year | 3 Year | Since Inception | |
Stone Harbor Emerging Markets Debt Allocation Fund | -2.45% | 0.21% | 3.09% | 1.19% |
JPMorgan EMBI Global Diversified Index | -3.38% | -0.56% | 4.50% | 4.19% |
JPMorgan GBI-EM Global Diversified Index | -1.74% | 1.01% | 2.53% | -1.06% |
Blend Index (50% JPMorgan EMBI Global Diversified Index and 50% JPMorgan GBI-EM Global Diversified Index) | -2.51% | 0.29% | 3.59% | 1.61% |
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 and fund expenses or transaction costs. It is not possible to invest directly in an index.
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Stone Harbor Investment Funds | Growth of $10,000 Investment |
May 31, 2018 (Unaudited)
STONE HARBOR 500 PLUS FUND
Comparison of Change in Value of $10,000 Investment in Stone Harbor 500 Plus Fund and S&P 500 Index. Please refer to the Additional Information section for detailed benchmark descriptions.
Total Returns (Inception Date, January 19, 2017)
6 Month | 1 Year | Since Inception | |
Stone Harbor 500 Plus Fund | 2.84% | 14.32% | 16.51% |
S&P 500 Index | 3.16% | 14.38% | 16.30% |
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 and fund expenses or transaction costs. It is not possible to invest directly in an index.
Stone Harbor Investment Funds Annual Report | May 31, 2018 | 19 |
Stone Harbor Investment Funds | Report of Independent Registered Public Accounting Firm |
To the Shareholders and the Board of Trustees of Stone Harbor Investment Funds:
Opinion on the Financial Statements and Financial Highlights
We have audited the accompanying statements of assets and liabilities of Stone Harbor Investment Funds comprising the Stone Harbor Emerging Markets Debt Fund, Stone Harbor High Yield Bond Fund, Stone Harbor Local Markets Fund, Stone Harbor Emerging Markets Corporate Debt Fund, Stone Harbor Investment Grade Fund, Stone Harbor Strategic Income Fund, Stone Harbor Emerging Markets Debt Allocation Fund, and Stone Harbor 500 Plus Fund (the “Funds”), including the statements of investments, as of May 31, 2018; 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 five years in the period then ended 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; the related statements of operations, changes in net assets, and the financial highlights for the periods indicated in the table below for Stone Harbor Investment Grade Fund, Stone Harbor Strategic Income Fund, Stone Harbor Emerging Markets Debt Allocation Fund, and Stone Harbor 500 Plus Fund; and the related notes. In our opinion, the financial statements and financial highlights present fairly, in all material respects, the financial position of each of the funds listed above constituting Stone Harbor Investment Funds as of May 31, 2018, and 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 (or for the periods listed in the table below), and the financial highlights for each of the five years in the period then ended (or for the periods listed in the table below), in conformity with accounting principles generally accepted in the United States of America.
Individual Fund Comprising the Stone Harbor Investment Funds | Statements of Operation | Statements of Changes in Net Assets | Financial Highlights |
Stone Harbor Investment Grade Fund
Stone Harbor Strategic Income Fund | For the year ended May 31, 2018 | For the years ended May 31, 2018 and 2017 | For the years ended May 31, 2018, 2017, 2016, 2015, and for the period December 19, 2013 (commencement of operations) to May 31, 2014 |
Stone Harbor Emerging Markets Debt Allocation Fund | For the year ended May 31, 2018 | For the years ended May 31, 2018 and 2017 | For the years ended May 31, 2018, 2017, 2016,and for the period October 21, 2014 (commencement of operations) to May 31, 2015 |
Stone Harbor 500 Plus Fund | For the year ended May 31, 2018 | For the year ended May 31, 2018, and the period January 20, 2017 (commencement of operations) to May 31, 2017 |
Basis for Opinion
These financial statements and financial highlights are the responsibility of the Funds’ management. Our responsibility is to express an opinion on the Funds’ financial statements and financial highlights based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Funds in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement, whether due to error or fraud. The Funds are not required to have, nor were we engaged to perform, an audit of their internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Funds’ internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements and financial highlights, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements and financial highlights. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements and financial highlights. Our procedures included confirmation of securities owned as of May 31, 2018, by correspondence with the custodian and brokers; when replies were not received from brokers, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinion.
Denver, Colorado
July 26, 2018
We have served as the auditor of one or more Stone Harbor Investment Partners investment companies since 2008.
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Stone Harbor Emerging Markets Debt Fund | Statements of Investments |
May 31, 2018
Currency | Rate | Maturity Date | Principal Amount/Shares* | Value (Expressed in USD) | ||||||||||||||
SOVEREIGN DEBT OBLIGATIONS - 73.13% | ||||||||||||||||||
Angola - 1.38% | ||||||||||||||||||
Republic of Angola | USD | 6M US L + 7.50% | 07/01/23 | 15,004,154 | $ | 16,617,100 | (1) | |||||||||||
Argentina - 8.03% | ||||||||||||||||||
Provincia del Chaco | USD | 9.38 | % | 08/18/24 | 1,886,000 | 1,711,545 | (2) | |||||||||||
Republic of Argentina: | ||||||||||||||||||
USD | 7.50 | % | 04/22/26 | 862,000 | 851,010 | |||||||||||||
EUR | 7.82 | % | 12/31/33 | 10,465,548 | 12,864,845 | |||||||||||||
EUR | 7.82 | % | 12/31/33 | 40,056,653 | 48,771,625 | |||||||||||||
USD | 8.28 | % | 12/31/33 | 2,046,975 | 2,003,477 | |||||||||||||
EUR | 2.26 | % | 12/31/38 | 34,760,000 | 25,763,349 | (3) | ||||||||||||
USD | 6.88 | % | 01/11/48 | 6,033,000 | 4,954,601 | |||||||||||||
96,920,452 | ||||||||||||||||||
Azerbaijan - 0.74% | ||||||||||||||||||
Republic of Azerbaijan: | ||||||||||||||||||
USD | 4.75 | % | 03/18/24 | 2,403,000 | 2,399,996 | (2) | ||||||||||||
USD | 4.75 | % | 03/18/24 | 2,777,000 | 2,773,529 | (4) | ||||||||||||
State Oil Co. of the Azerbaijan Republic | USD | 4.75 | % | 03/13/23 | 3,784,000 | 3,760,350 | ||||||||||||
8,933,875 | ||||||||||||||||||
Bahrain - 0.30% | ||||||||||||||||||
Kingdom of Bahrain | USD | 7.00 | % | 10/12/28 | 4,022,000 | 3,584,608 | (4) | |||||||||||
Brazil - 1.38% | ||||||||||||||||||
Brazil Minas SPE via State of Minas Gerais: | ||||||||||||||||||
USD | 5.33 | % | 02/15/28 | 1,851,000 | 1,829,714 | (4) | ||||||||||||
USD | 5.33 | % | 02/15/28 | 12,650,000 | 12,504,525 | (2) | ||||||||||||
Republic of Brazil: | ||||||||||||||||||
USD | 8.25 | % | 01/20/34 | 1,531,000 | 1,825,717 | |||||||||||||
USD | 5.63 | % | 02/21/47 | 560,000 | 495,600 | |||||||||||||
16,655,556 | ||||||||||||||||||
Cameroon - 0.95% | ||||||||||||||||||
Republic of Cameroon: | ||||||||||||||||||
USD | 9.50 | % | 11/19/25 | 400,000 | 446,000 | (2) | ||||||||||||
USD | 9.50 | % | 11/19/25 | 9,857,000 | 10,990,555 | (4) | ||||||||||||
11,436,555 | ||||||||||||||||||
Colombia - 1.35% | ||||||||||||||||||
Republic of Colombia: | ||||||||||||||||||
USD | 4.38 | % | 07/12/21 | 2,043,000 | 2,078,242 | |||||||||||||
USD | 4.00 | % | 02/26/24 | 3,780,000 | 3,761,100 | |||||||||||||
USD | 4.50 | % | 01/28/26 | 2,000,000 | 2,025,000 | |||||||||||||
USD | 5.63 | % | 02/26/44 | 2,617,000 | 2,763,552 | |||||||||||||
USD | 5.00 | % | 06/15/45 | 5,824,000 | 5,646,368 | |||||||||||||
16,274,262 | ||||||||||||||||||
Costa Rica - 0.29% | ||||||||||||||||||
Republic of Costa Rica: | ||||||||||||||||||
USD | 4.25 | % | 01/26/23 | 1,970,000 | 1,846,875 | (2) | ||||||||||||
USD | 7.00 | % | 04/04/44 | 1,675,000 | 1,610,094 | (4) | ||||||||||||
3,456,969 |
Stone Harbor Investment Funds Annual Report | May 31, 2018 | 21 |
Stone Harbor Emerging Markets Debt Fund | Statements of Investments |
May 31, 2018
Currency | Rate | Maturity Date | Principal Amount/Shares* | Value (Expressed in USD) | ||||||||||||||
Dominican Republic - 2.39% | ||||||||||||||||||
Dominican Republic: | ||||||||||||||||||
USD | 7.50 | % | 05/06/21 | 15,174,000 | $ | 15,968,890 | (2) | |||||||||||
USD | 6.60 | % | 01/28/24 | 1,632,000 | 1,725,244 | (2) | ||||||||||||
USD | 5.88 | % | 04/18/24 | 447,000 | 458,734 | (4) | ||||||||||||
USD | 5.50 | % | 01/27/25 | 422,000 | 419,363 | (2) | ||||||||||||
USD | 6.88 | % | 01/29/26 | 5,512,000 | 5,862,977 | (2) | ||||||||||||
USD | 8.63 | % | 04/20/27 | 1,199,000 | 1,361,494 | (2) | ||||||||||||
USD | 7.45 | % | 04/30/44 | 2,915,000 | 3,111,762 | (4) | ||||||||||||
28,908,464 | ||||||||||||||||||
Ecuador - 6.60% | ||||||||||||||||||
Republic of Ecuador: | ||||||||||||||||||
USD | 10.75 | % | 03/28/22 | 1,943,000 | 2,049,583 | (4) | ||||||||||||
USD | 10.75 | % | 03/28/22 | 2,356,000 | 2,485,239 | (2) | ||||||||||||
USD | 8.75 | % | 06/02/23 | 2,746,000 | 2,685,739 | (2) | ||||||||||||
USD | 7.95 | % | 06/20/24 | 1,497,000 | 1,407,180 | (4) | ||||||||||||
USD | 7.95 | % | 06/20/24 | 5,443,000 | 5,116,420 | (2) | ||||||||||||
USD | 9.65 | % | 12/13/26 | 2,037,000 | 2,019,757 | (4) | ||||||||||||
USD | 9.65 | % | 12/13/26 | 2,481,000 | 2,459,998 | (2) | ||||||||||||
USD | 8.88 | % | 10/23/27 | 10,020,000 | 9,468,149 | (2) | ||||||||||||
USD | 8.88 | % | 10/23/27 | 22,195,000 | 20,972,610 | (4) | ||||||||||||
USD | 7.88 | % | 01/23/28 | 8,161,000 | 7,215,997 | (2) | ||||||||||||
USD | 7.88 | % | 01/23/28 | 26,958,000 | 23,836,398 | (4) | ||||||||||||
79,717,070 | ||||||||||||||||||
Egypt - 5.17% | ||||||||||||||||||
Republic of Egypt: | ||||||||||||||||||
USD | 6.13 | % | 01/31/22 | 6,417,000 | 6,489,191 | (4) | ||||||||||||
USD | 5.58 | % | 02/21/23 | 2,455,000 | 2,430,450 | (4) | ||||||||||||
USD | 5.88 | % | 06/11/25 | 2,066,000 | 2,016,933 | (4) | ||||||||||||
EUR | 4.75 | % | 04/16/26 | 1,370,000 | 1,561,559 | (4) | ||||||||||||
USD | 7.50 | % | 01/31/27 | 1,990,000 | 2,074,575 | (4) | ||||||||||||
USD | 7.50 | % | 01/31/27 | 2,217,000 | 2,311,222 | (2) | ||||||||||||
USD | 6.59 | % | 02/21/28 | 17,794,000 | 17,349,150 | (4) | ||||||||||||
EUR | 5.63 | % | 04/16/30 | 12,654,000 | 14,275,405 | (4) | ||||||||||||
USD | 6.88 | % | 04/30/40 | 2,672,000 | 2,515,020 | (4) | ||||||||||||
USD | 8.50 | % | 01/31/47 | 675,000 | 717,610 | (2) | ||||||||||||
USD | 8.50 | % | 01/31/47 | 8,170,000 | 8,685,731 | (4) | ||||||||||||
USD | 7.90 | % | 02/21/48 | 2,002,000 | 2,018,266 | (2) | ||||||||||||
62,445,112 | ||||||||||||||||||
El Salvador - 1.04% | ||||||||||||||||||
Republic of El Salvador: | ||||||||||||||||||
USD | 7.38 | % | 12/01/19 | 190,000 | 196,035 | (4) | ||||||||||||
USD | 5.88 | % | 01/30/25 | 1,789,000 | 1,706,259 | (2) | ||||||||||||
USD | 6.38 | % | 01/18/27 | 819,000 | 782,145 | (4) | ||||||||||||
USD | 8.63 | % | 02/28/29 | 4,277,000 | 4,691,848 | (2) | ||||||||||||
USD | 8.25 | % | 04/10/32 | 867,000 | 912,517 | (4) | ||||||||||||
USD | 7.63 | % | 02/01/41 | 4,341,000 | 4,297,590 | (2) | ||||||||||||
12,586,394 | ||||||||||||||||||
Gabon - 1.18% | ||||||||||||||||||
Republic of Gabon: | ||||||||||||||||||
USD | 6.38 | % | 12/12/24 | 2,962,801 | 2,851,696 | (4) | ||||||||||||
USD | 6.38 | % | 12/12/24 | 8,284,014 | 7,973,363 | (2) | ||||||||||||
USD | 6.95 | % | 06/16/25 | 3,513,000 | 3,425,175 | (4) | ||||||||||||
14,250,234 |
22 | www.shiplp.com |
Stone Harbor Emerging Markets Debt Fund | Statements of Investments |
May 31, 2018
Currency | Rate | Maturity Date | Principal Amount/Shares* | Value (Expressed in USD) | ||||||||||||||
Georgia - 0.20% | ||||||||||||||||||
Republic of Georgia | USD | 6.88 | % | 04/12/21 | 2,308,000 | $ | 2,455,135 | (4) | ||||||||||
Ghana - 2.30% | ||||||||||||||||||
Republic of Ghana: | ||||||||||||||||||
USD | 10.75 | % | 10/14/30 | 2,047,000 | 2,579,220 | (4) | ||||||||||||
USD | 10.75 | % | 10/14/30 | 20,007,000 | 25,208,820 | (2) | ||||||||||||
27,788,040 | ||||||||||||||||||
Indonesia - 1.89% | ||||||||||||||||||
Republic of Indonesia: | ||||||||||||||||||
USD | 4.13 | % | 01/15/25 | 2,723,000 | 2,707,683 | (2) | ||||||||||||
USD | 4.75 | % | 01/08/26 | 3,456,000 | 3,551,040 | (2) | ||||||||||||
USD | 8.50 | % | 10/12/35 | 5,760,000 | 7,984,800 | (2) | ||||||||||||
USD | 6.63 | % | 02/17/37 | 3,550,000 | 4,186,781 | (2) | ||||||||||||
USD | 5.25 | % | 01/17/42 | 1,380,000 | 1,416,225 | (2) | ||||||||||||
USD | 6.75 | % | 01/15/44 | 948,000 | 1,164,263 | (2) | ||||||||||||
USD | 5.13 | % | 01/15/45 | 1,770,000 | 1,788,806 | (2) | ||||||||||||
22,799,598 | ||||||||||||||||||
Iraq - 2.59% | ||||||||||||||||||
Republic of Iraq: | ||||||||||||||||||
USD | 6.75 | % | 03/09/23 | 4,929,000 | 4,962,887 | (4) | ||||||||||||
USD | 5.80 | % | 01/15/28 | 27,778,000 | 26,284,932 | (2) | ||||||||||||
31,247,819 | ||||||||||||||||||
Ivory Coast - 2.21% | ||||||||||||||||||
Ivory Coast Government: | ||||||||||||||||||
USD | 5.38 | % | 07/23/24 | 7,455,000 | 7,175,438 | (4) | ||||||||||||
EUR | 5.13 | % | 06/15/25 | 3,511,000 | 4,238,344 | (4) | ||||||||||||
USD | 6.13 | % | 06/15/33 | 2,539,000 | 2,329,532 | (2) | ||||||||||||
USD | 6.13 | % | 06/15/33 | 14,051,000 | 12,891,793 | (4) | ||||||||||||
26,635,107 | ||||||||||||||||||
Jordan - 0.63% | ||||||||||||||||||
Kingdom of Jordan: | ||||||||||||||||||
USD | 6.13 | % | 01/29/26 | 1,060,000 | 1,041,450 | (2) | ||||||||||||
USD | 5.75 | % | 01/31/27 | 1,412,000 | 1,341,400 | (4) | ||||||||||||
USD | 5.75 | % | 01/31/27 | 2,750,000 | 2,612,500 | (2) | ||||||||||||
USD | 7.38 | % | 10/10/47 | 1,262,000 | 1,211,520 | (2) | ||||||||||||
USD | 7.38 | % | 10/10/47 | 1,485,000 | 1,425,600 | (4) | ||||||||||||
7,632,470 | ||||||||||||||||||
Kenya - 0.76% | ||||||||||||||||||
Republic of Kenya: | ||||||||||||||||||
USD | 6.88 | % | 06/24/24 | 8,441,000 | 8,546,512 | (4) | ||||||||||||
USD | 7.25 | % | 02/28/28 | 619,000 | 623,643 | (4) | ||||||||||||
9,170,155 | ||||||||||||||||||
Lebanon - 2.72% | ||||||||||||||||||
Lebanese Republic: | ||||||||||||||||||
USD | 5.15 | % | 11/12/18 | 2,622,000 | 2,625,278 | |||||||||||||
USD | 6.10 | % | 10/04/22 | 7,175,000 | 6,493,375 | |||||||||||||
USD | 6.40 | % | 05/26/23 | 2,406,000 | 2,174,423 | |||||||||||||
USD | 6.65 | % | 04/22/24 | 5,873,000 | 5,252,664 | |||||||||||||
USD | 6.60 | % | 11/27/26 | 3,729,000 | 3,118,376 | |||||||||||||
USD | 6.85 | % | 03/23/27 | 654,000 | 552,630 | |||||||||||||
USD | 6.75 | % | 11/29/27 | 2,250,000 | 1,878,750 | |||||||||||||
USD | 6.65 | % | 11/03/28 | 9,676,000 | 7,898,035 |
Stone Harbor Investment Funds Annual Report | May 31, 2018 | 23 |
Stone Harbor Emerging Markets Debt Fund | Statements of Investments |
May 31, 2018
Currency | Rate | Maturity Date | Principal Amount/Shares* | Value (Expressed in USD) | ||||||||||||||
Lebanon (continued) | ||||||||||||||||||
Lebanese Republic: (continued) | ||||||||||||||||||
USD | 6.65 | % | 02/26/30 | 3,463,000 | $ | 2,805,030 | ||||||||||||
32,798,561 | ||||||||||||||||||
Malaysia - 2.08% | ||||||||||||||||||
1MDB Global Investments, Ltd. | USD | 4.40 | % | 03/09/23 | 27,500,000 | 25,093,750 | (2) | |||||||||||
Mexico - 0.47% | ||||||||||||||||||
Mexican Bonos | MXN | 7.50 | % | 06/03/27 | 116,690,000 | 5,740,755 | ||||||||||||
Nigeria - 2.64% | ||||||||||||||||||
Republic of Nigeria: | ||||||||||||||||||
USD | 6.50 | % | 11/28/27 | 1,089,000 | 1,076,749 | (2) | ||||||||||||
USD | 6.50 | % | 11/28/27 | 14,440,000 | 14,277,550 | (4) | ||||||||||||
USD | 7.14 | % | 02/23/30 | 5,753,000 | 5,774,574 | (4) | ||||||||||||
USD | 7.88 | % | 02/16/32 | 3,765,000 | 3,953,250 | (4) | ||||||||||||
USD | 7.63 | % | 11/28/47 | 3,351,000 | 3,302,829 | (2) | ||||||||||||
USD | 7.63 | % | 11/28/47 | 3,589,000 | 3,537,408 | (4) | ||||||||||||
31,922,360 | ||||||||||||||||||
Oman - 2.47% | ||||||||||||||||||
Oman Government: | ||||||||||||||||||
USD | 4.13 | % | 01/17/23 | 3,019,000 | 2,913,335 | (4) | ||||||||||||
USD | 4.75 | % | 06/15/26 | 1,033,000 | 968,438 | (4) | ||||||||||||
USD | 5.38 | % | 03/08/27 | 3,695,000 | 3,574,912 | (4) | ||||||||||||
USD | 5.38 | % | 03/08/27 | 5,035,000 | 4,871,363 | (2) | ||||||||||||
USD | 5.63 | % | 01/17/28 | 3,623,000 | 3,509,781 | (4) | ||||||||||||
USD | 6.50 | % | 03/08/47 | 14,872,000 | 13,961,090 | (4) | ||||||||||||
29,798,919 | ||||||||||||||||||
Panama - 0.60% | ||||||||||||||||||
Republic of Panama: | ||||||||||||||||||
USD | 9.38 | % | 04/01/29 | 3,372,000 | 4,754,520 | |||||||||||||
USD | 8.13 | % | 04/28/34 | 1,779,000 | 2,457,244 | |||||||||||||
7,211,764 | ||||||||||||||||||
Paraguay - 0.57% | ||||||||||||||||||
Republic of Paraguay: | ||||||||||||||||||
USD | 4.70 | % | 03/27/27 | 1,794,000 | 1,761,484 | (2) | ||||||||||||
USD | 6.10 | % | 08/11/44 | 4,999,000 | 5,186,462 | (4) | ||||||||||||
6,947,946 | ||||||||||||||||||
Peru - 0.15% | ||||||||||||||||||
Republic of Peru | USD | 6.55 | % | 03/14/37 | 1,482,000 | 1,859,910 | ||||||||||||
Russia - 0.28% | ||||||||||||||||||
Russian Federation: | ||||||||||||||||||
USD | 5.00 | % | 04/29/20 | 66,000 | 67,609 | (4) | ||||||||||||
USD | 4.88 | % | 09/16/23 | 1,000,000 | 1,042,500 | (2) | ||||||||||||
USD | 4.25 | % | 06/23/27 | 200,000 | 194,250 | (2) | ||||||||||||
USD | 5.25 | % | 06/23/47 | 2,200,000 | 2,095,500 | (2) | ||||||||||||
3,399,859 | ||||||||||||||||||
Senegal - 0.70% | ||||||||||||||||||
Republic of Senegal: | ||||||||||||||||||
USD | 6.25 | % | 05/23/33 | 5,206,000 | 4,848,088 | (4) |
24 | www.shiplp.com |
Stone Harbor Emerging Markets Debt Fund | Statements of Investments |
May 31, 2018
Currency | Rate | Maturity Date | Principal Amount/Shares* | Value (Expressed in USD) | ||||||||||||||
Senegal (continued) | ||||||||||||||||||
Republic of Senegal: (continued) | ||||||||||||||||||
USD | 6.75 | % | 03/13/48 | 3,944,000 | $ | 3,569,320 | (4) | |||||||||||
8,417,408 | ||||||||||||||||||
South Africa - 1.15% | ||||||||||||||||||
Republic of South Africa: | ||||||||||||||||||
USD | 5.50 | % | 03/09/20 | 3,400,000 | 3,506,250 | |||||||||||||
USD | 4.67 | % | 01/17/24 | 2,882,000 | 2,862,186 | |||||||||||||
USD | 5.88 | % | 09/16/25 | 3,015,000 | 3,141,253 | |||||||||||||
USD | 4.30 | % | 10/12/28 | 4,757,000 | 4,346,709 | |||||||||||||
13,856,398 | ||||||||||||||||||
Sri Lanka - 1.41% | ||||||||||||||||||
Republic of Sri Lanka: | ||||||||||||||||||
USD | 6.25 | % | 10/04/20 | 340,000 | 347,650 | (2) | ||||||||||||
USD | 6.25 | % | 07/27/21 | 3,475,000 | 3,542,328 | (2) | ||||||||||||
USD | 5.88 | % | 07/25/22 | 6,616,000 | 6,603,595 | (4) | ||||||||||||
USD | 5.75 | % | 04/18/23 | 4,196,000 | 4,159,285 | (4) | ||||||||||||
USD | 6.75 | % | 04/18/28 | 2,399,000 | 2,375,010 | (4) | ||||||||||||
17,027,868 | ||||||||||||||||||
Turkey - 4.89% | ||||||||||||||||||
Republic of Turkey: | ||||||||||||||||||
USD | 6.25 | % | 09/26/22 | 9,510,000 | 9,688,312 | |||||||||||||
USD | 3.25 | % | 03/23/23 | 1,865,000 | 1,678,500 | |||||||||||||
USD | 5.75 | % | 03/22/24 | 3,248,000 | 3,191,160 | |||||||||||||
USD | 6.00 | % | 03/25/27 | 20,747,000 | 20,020,855 | |||||||||||||
USD | 6.13 | % | 10/24/28 | 6,118,000 | 5,835,043 | |||||||||||||
USD | 8.00 | % | 02/14/34 | 3,185,000 | 3,427,856 | |||||||||||||
USD | 6.88 | % | 03/17/36 | 3,493,000 | 3,388,210 | |||||||||||||
USD | 6.75 | % | 05/30/40 | 1,206,000 | 1,139,670 | |||||||||||||
USD | 6.63 | % | 02/17/45 | 1,090,000 | 998,031 | |||||||||||||
USD | 5.75 | % | 05/11/47 | 11,595,000 | 9,631,097 | |||||||||||||
58,998,734 | ||||||||||||||||||
Ukraine - 7.40% | ||||||||||||||||||
Ukraine Government: | ||||||||||||||||||
USD | 7.75 | % | 09/01/19 | 216,000 | 222,075 | (4) | ||||||||||||
USD | 7.75 | % | 09/01/21 | 879,000 | 908,117 | (4) | ||||||||||||
USD | 7.75 | % | 09/01/24 | 10,000 | 10,025 | (4) | ||||||||||||
USD | 7.75 | % | 09/01/24 | 369,000 | 369,923 | (2) | ||||||||||||
USD | 7.75 | % | 09/01/25 | 2,278,000 | 2,255,220 | (2) | ||||||||||||
USD | 7.75 | % | 09/01/25 | 9,890,000 | 9,791,100 | (4) | ||||||||||||
USD | 7.75 | % | 09/01/26 | 2,244,000 | 2,207,535 | (2) | ||||||||||||
USD | 7.75 | % | 09/01/26 | 8,123,000 | 7,991,001 | (4) | ||||||||||||
USD | 7.75 | % | 09/01/27 | 10,347,000 | 10,140,060 | (2) | ||||||||||||
USD | 7.75 | % | 09/01/27 | 11,024,000 | 10,803,520 | (4) | ||||||||||||
USD | 7.38 | % | 09/25/32 | 5,785,000 | 5,351,125 | (2) | ||||||||||||
USD | 7.38 | % | 09/25/32 | 29,533,000 | 27,318,025 | (4) | ||||||||||||
USD | 0.00 | % | 05/31/40 | 17,132,000 | 11,992,400 | (1) | ||||||||||||
89,360,126 | ||||||||||||||||||
Uruguay - 1.91% | ||||||||||||||||||
Republic of Uruguay: | ||||||||||||||||||
USD | 4.38 | % | 10/27/27 | 20,995,742 | 21,441,901 | |||||||||||||
USD | 7.63 | % | 03/21/36 | 1,228,017 | 1,584,142 | |||||||||||||
23,026,043 |
Stone Harbor Investment Funds Annual Report | May 31, 2018 | 25 |
Stone Harbor Emerging Markets Debt Fund | Statements of Investments |
May 31, 2018
Currency | Rate | Maturity Date | Principal Amount/Shares* | Value (Expressed in USD) | ||||||||||||||
Venezuela - 0.91% | ||||||||||||||||||
Republic of Venezuela: | ||||||||||||||||||
USD | 7.75 | % | 10/13/19 | 33,074,500 | $ | 9,550,262 | (5) | |||||||||||
USD | 9.25 | % | 05/07/28 | 1,927,000 | 557,866 | (5) | ||||||||||||
USD | 9.38 | % | 01/13/34 | 2,897,000 | 894,449 | (5) | ||||||||||||
11,002,577 | ||||||||||||||||||
Zambia - 1.40% | ||||||||||||||||||
Republic of Zambia: | ||||||||||||||||||
USD | 5.38 | % | 09/20/22 | 927,000 | 804,173 | (4) | ||||||||||||
USD | 5.38 | % | 09/20/22 | 3,998,000 | 3,468,265 | (2) | ||||||||||||
USD | 8.50 | % | 04/14/24 | 6,894,000 | 6,424,346 | (4) | ||||||||||||
USD | 8.97 | % | 07/30/27 | 6,716,000 | 6,212,300 | (2) | ||||||||||||
16,909,084 | ||||||||||||||||||
TOTAL SOVEREIGN DEBT OBLIGATIONS | 882,887,037 | |||||||||||||||||
(Cost $903,620,053) | ||||||||||||||||||
BANK LOANS - 0.65% | ||||||||||||||||||
Brazil - 0.65% | ||||||||||||||||||
Banco de Investimentos Credit Suisse | ||||||||||||||||||
Brasil SA - Brazil Loan Tranche A | USD | 6.25 | % | 01/10/18 | 3,994,000 | 4,080,271 | (6) | |||||||||||
Banco de Investimentos Credit Suisse | ||||||||||||||||||
Brasil SA - Brazil Loan Tranche B | USD | 6.25 | % | 01/10/18 | 3,650,000 | 3,728,840 | (6) | |||||||||||
7,809,111 | ||||||||||||||||||
TOTAL BANK LOANS | 7,809,111 | |||||||||||||||||
(Cost $7,645,841) | ||||||||||||||||||
CORPORATE BONDS - 19.83% | ||||||||||||||||||
Argentina - 0.20% | ||||||||||||||||||
Pampa Energia SA | USD | 7.50 | % | 01/24/27 | 984,000 | 941,885 | (4) | |||||||||||
Rio Energy SA | USD | 6.88 | % | 02/01/25 | 1,626,000 | 1,474,213 | (4) | |||||||||||
2,416,098 | ||||||||||||||||||
Azerbaijan - 0.15% | ||||||||||||||||||
Southern Gas Corridor CJSC | USD | 6.88 | % | 03/24/26 | 1,636,000 | 1,779,150 | (4) | |||||||||||
Brazil - 3.68% | ||||||||||||||||||
Adecoagro SA | USD | 6.00 | % | 09/21/27 | 3,751,000 | 3,291,502 | (4) | |||||||||||
Cosan Luxembourg SA | USD | 7.00 | % | 01/20/27 | 833,000 | 836,124 | (4) | |||||||||||
ESAL GmbH | USD | 6.25 | % | 02/05/23 | 1,509,000 | 1,447,584 | (4) | |||||||||||
Gol Finance, Inc. | USD | 7.00 | % | 01/31/25 | 2,653,000 | 2,277,468 | (4) | |||||||||||
JSL Europe SA | USD | 7.75 | % | 07/26/24 | 1,909,000 | 1,877,979 | (4) | |||||||||||
Marb Bondco PLC | USD | 6.88 | % | 01/19/25 | 524,000 | 486,010 | (4) | |||||||||||
Marfrig Holdings Europe BV | USD | 8.00 | % | 06/08/23 | 274,000 | 278,959 | (4) | |||||||||||
Minerva Luxembourg SA | USD | 6.50 | % | 09/20/26 | 3,799,000 | 3,506,477 | (4) | |||||||||||
Petrobras Global Finance BV: | ||||||||||||||||||
USD | 8.75 | % | 05/23/26 | 12,671,000 | 14,048,971 | |||||||||||||
USD | 7.38 | % | 01/17/27 | 9,826,000 | 9,992,354 | |||||||||||||
USD | 6.00 | % | 01/27/28 | 3,962,000 | 3,693,278 | (4) | ||||||||||||
Rumo Luxemburg Sarl | USD | 5.88 | % | 01/18/25 | 1,607,000 | 1,523,436 | (4) | |||||||||||
Vrio Finco 1 LLC / Vrio Finco 2, Inc. | USD | 6.25 | % | 04/04/23 | 1,163,000 | 1,174,630 | (4) | |||||||||||
44,434,772 | ||||||||||||||||||
Chile - 0.19% | ||||||||||||||||||
Geopark, Ltd. | USD | 6.50 | % | 09/21/24 | 2,393,000 | 2,338,200 | (4) |
26 | www.shiplp.com |
Stone Harbor Emerging Markets Debt Fund | Statements of Investments |
May 31, 2018
Currency | Rate | Maturity Date | Principal Amount/Shares* | Value (Expressed in USD) | ||||||||||||||
China - 0.88% | ||||||||||||||||||
Industrial & Commercial Bank of China, Ltd. | USD | 6.00 | % | Perpetual | 5,844,000 | $ | 5,988,756 | (2)(7) | ||||||||||
Sinochem Overseas Capital Co., Ltd. | USD | 6.30 | % | 11/12/40 | 3,754,000 | 4,643,229 | (2) | |||||||||||
10,631,985 | ||||||||||||||||||
Colombia - 0.11% | ||||||||||||||||||
Gran Tierra Energy International Holdings, Ltd. | USD | 6.25 | % | 02/15/25 | 1,391,000 | 1,319,711 | (4) | |||||||||||
Costa Rica - 0.27% | ||||||||||||||||||
Banco Nacional de Costa Rica | USD | 5.88 | % | 04/25/21 | 3,167,000 | 3,226,381 | (4) | |||||||||||
Ecuador - 0.45% | ||||||||||||||||||
EP PetroEcuador via Noble Sovereign Funding I, Ltd. | USD | 3M US L +5.63% | 09/24/19 | 2,308,421 | 2,308,421 | (1) | ||||||||||||
Petroamazonas EP: | ||||||||||||||||||
USD | 4.63 | % | 02/16/20 | 2,410,000 | 2,295,272 | (4) | ||||||||||||
USD | 4.63 | % | 11/06/20 | 891,000 | 810,810 | (4) | ||||||||||||
5,414,503 | ||||||||||||||||||
Ghana - 0.06% | ||||||||||||||||||
Tullow Oil PLC | USD | 6.25 | % | 04/15/22 | 717,000 | 714,311 | (4) | |||||||||||
India - 0.28% | ||||||||||||||||||
ABJA Investment Co., Pte, Ltd. | USD | 5.45 | % | 01/24/28 | 1,000,000 | 906,250 | ||||||||||||
Vedanta Resources PLC | USD | 6.13 | % | 08/09/24 | 2,608,000 | 2,428,700 | (4) | |||||||||||
3,334,950 | ||||||||||||||||||
Indonesia - 2.50% | ||||||||||||||||||
Indika Energy Capital II Pte, Ltd. | USD | 6.88 | % | 04/10/22 | 431,000 | 434,448 | (4) | |||||||||||
Indo Energy Finance II BV | USD | 6.38 | % | 01/24/23 | 4,051,000 | 3,975,044 | (2) | |||||||||||
Pertamina Persero PT: | ||||||||||||||||||
USD | 4.88 | % | 05/03/22 | 5,605,000 | 5,755,634 | (4) | ||||||||||||
USD | 4.30 | % | 05/20/23 | 3,000,000 | 2,998,755 | (4) | ||||||||||||
USD | 6.00 | % | 05/03/42 | 1,922,000 | 1,977,622 | (2) | ||||||||||||
USD | 5.63 | % | 05/20/43 | 4,428,000 | 4,354,208 | (2) | ||||||||||||
USD | 6.45 | % | 05/30/44 | 7,649,000 | 8,384,528 | (2) | ||||||||||||
PT Bakrie & Brothers TBK | IDR | 0.00 | % | 12/22/22 | 6,750,674,000 | 50 | (6)(8) | |||||||||||
PT Bumi Resources TBK (Eterna Capital Pte, Ltd.) | USD | 6.50% Cash + 1.00% PIK | 12/11/22 | 2,305,104 | 2,321,643 | (9) | ||||||||||||
30,201,932 | ||||||||||||||||||
Jamaica - 0.18% | ||||||||||||||||||
Digicel Group, Ltd. | USD | 7.13 | % | 04/01/22 | 3,167,000 | 2,188,397 | (4) | |||||||||||
Kazakhstan - 0.66% | ||||||||||||||||||
KazTransGas JSC | USD | 4.38 | % | 09/26/27 | 6,433,000 | 6,022,896 | (4) | |||||||||||
Nostrum Oil & Gas | USD | 7.00 | % | 02/16/25 | 2,076,000 | 1,948,845 | (4) | |||||||||||
` | 7,971,741 | |||||||||||||||||
Luxembourg - 0.42% | ||||||||||||||||||
Swiss Insured Brazil Power Finance Sarl | BRL | 9.85 | % | 07/16/32 | 18,871,000 | 5,008,629 | (4) | |||||||||||
Mexico - 6.29% | ||||||||||||||||||
Axtel SAB Axtel de CV | USD | 6.38 | % | 11/14/24 | 2,321,000 | 2,233,962 | (4) | |||||||||||
Banco Nacional de Comercio Exterior SNC: | ||||||||||||||||||
USD | 3.80 | % | 08/11/26 | 4,845,000 | 4,675,425 | (1)(2) | ||||||||||||
USD | 3.80 | % | 08/11/26 | 5,559,000 | 5,364,435 | (1)(4) |
Stone Harbor Investment Funds Annual Report | May 31, 2018 | 27 |
Stone Harbor Emerging Markets Debt Fund | Statements of Investments |
May 31, 2018 |
Currency | Rate | Maturity Date | Principal Amount/Shares* | Value (Expressed in USD) | ||||||||||||||
Mexico (continued) | ||||||||||||||||||
Banco Nacional de Comercio Exterior SNC: (continued) | ||||||||||||||||||
Cometa Energia SA de CV | USD | 6.38 | % | 04/24/35 | 2,618,000 | $ | 2,565,640 | (4) | ||||||||||
Comision Federal de Electricidad | USD | 4.88 | % | 01/15/24 | 1,538,000 | 1,547,613 | (4) | |||||||||||
Petroleos Mexicanos: | ||||||||||||||||||
USD | 4.50 | % | 01/23/26 | 1,723,000 | 1,617,552 | |||||||||||||
USD | 6.50 | % | 03/13/27 | 15,030,000 | 15,285,510 | |||||||||||||
USD | 9.50 | % | 09/15/27 | 1,062,000 | 1,246,522 | |||||||||||||
USD | 5.35 | % | 02/12/28 | 6,793,000 | 6,420,404 | (4) | ||||||||||||
USD | 6.50 | % | 06/02/41 | 1,183,000 | 1,105,514 | |||||||||||||
USD | 6.38 | % | 01/23/45 | 6,751,000 | 6,167,039 | |||||||||||||
USD | 5.63 | % | 01/23/46 | 5,375,000 | 4,560,688 | |||||||||||||
USD | 6.75 | % | 09/21/47 | 24,473,000 | 23,125,761 | |||||||||||||
75,916,065 | ||||||||||||||||||
Netherlands - 0.15% | ||||||||||||||||||
Petrobras Global Finance BV | USD | 5.75 | % | 02/01/29 | 2,026,000 | 1,816,512 | ||||||||||||
Nigeria - 0.22% | ||||||||||||||||||
IHS Netherlands Holdco BV | USD | 9.50 | % | 10/27/21 | 2,630,000 | 2,666,162 | (4) | |||||||||||
Peru - 0.20% | ||||||||||||||||||
Peru Payroll Deduction Finance Ltd. | USD | 0.00 | % | 11/01/29 | 3,272,900 | 2,430,128 | (8) | |||||||||||
Russia - 0.43% | ||||||||||||||||||
Sberbank of Russia PJSC | USD | 5.50 | % | 02/26/24 | 5,165,000 | 5,204,254 | (1)(4) | |||||||||||
Thailand - 0.23% | ||||||||||||||||||
PTTEP Treasury Center Co., Ltd. | USD | 4.88 | % | Perpetual | 2,804,000 | 2,818,020 | (4)(7) | |||||||||||
Turkey - 0.71% | ||||||||||||||||||
Akbank Turk AS: | ||||||||||||||||||
USD | 6.80 | % | 04/27/28 | 707,000 | 650,882 | (1)(2) | ||||||||||||
USD | 6.80 | % | 04/27/28 | 2,433,000 | 2,239,881 | (1)(4) | ||||||||||||
Turkiye Garanti Bankasi AS: | ||||||||||||||||||
USD | 6.13 | % | 05/24/27 | 300,000 | 280,126 | (1)(2) | ||||||||||||
USD | 6.13 | % | 05/24/27 | 4,384,000 | 4,093,582 | (4) | ||||||||||||
Turkiye Is Bankasi AS | USD | 7.00 | % | 06/29/28 | 1,446,000 | 1,319,475 | (4) | |||||||||||
8,583,946 | ||||||||||||||||||
Ukraine - 0.38% | ||||||||||||||||||
Metinvest BV | USD | 7.75 | % | 04/23/23 | 2,809,000 | 2,759,843 | (4) | |||||||||||
Ukreximbank Via Biz Finance PLC | USD | 9.63 | % | 04/27/22 | 1,800,000 | 1,870,110 | ||||||||||||
4,629,953 | ||||||||||||||||||
Venezuela - 1.19% | ||||||||||||||||||
Petroleos de Venezuela SA: | ||||||||||||||||||
USD | 6.00 | % | 05/16/24 | 60,489,976 | 13,915,719 | (2)(5) | ||||||||||||
USD | 9.75 | % | 05/17/35 | 1,517,000 | 398,212 | (2)(5) | ||||||||||||
14,313,931 | ||||||||||||||||||
TOTAL CORPORATE BONDS | 239,359,731 | |||||||||||||||||
(Cost $256,947,906) | ||||||||||||||||||
CREDIT LINKED NOTES -0.56% | ||||||||||||||||||
Iraq - 0.56% | ||||||||||||||||||
Republic of Iraq (Counterparty: Bank of America - Merrill Lynch): | ||||||||||||||||||
JPY | 2.59 | % | 01/01/28 | 647,723,810 | 4,573,989 | (1)(6) |
28 | www.shiplp.com |
Stone Harbor Emerging Markets Debt Fund | Statements of Investments |
May 31, 2018 |
Currency | Rate | Maturity Date | Principal Amount/Shares* | Value (Expressed in USD) | ||||||||||||||||
Iraq (continued) | ||||||||||||||||||||
Republic of Iraq (Counterparty: Bank of America - Merrill Lynch): (continued) | ||||||||||||||||||||
JPY | 2.86 | % | 01/01/28 | 295,794,158 | $ | 2,143,444 | (1)(6) | |||||||||||||
6,717,433 | ||||||||||||||||||||
TOTAL CREDIT LINKED NOTES | 6,717,433 | |||||||||||||||||||
(Cost $8,874,790) | ||||||||||||||||||||
SHORT TERM INVESTMENTS - 2.99% | ||||||||||||||||||||
Money Market Mutual Funds - 2.99% | ||||||||||||||||||||
State Street Institutional Liquid Reserves | ||||||||||||||||||||
Fund (7-Day Yield) | USD | 1.95 | % | N/A | 36,147,644 | 36,151,259 | ||||||||||||||
TOTAL SHORT TERM INVESTMENTS | 36,151,259 | |||||||||||||||||||
(Cost $36,144,823) | ||||||||||||||||||||
Total Investments - 97.16% | 1,172,924,571 | |||||||||||||||||||
(Cost $1,213,233,413) | ||||||||||||||||||||
34,326,723 | (10) | |||||||||||||||||||
Other Assets In Excess of Liabilities - 2.84% | ||||||||||||||||||||
Net Assets - 100.00% | $ | 1,207,251,294 |
* | The principal amount/shares of each security is stated in the currency in which the security is denominated. |
Currency Abbreviations:
BRL | - | Brazilian Real |
EUR | - | Euro Currency |
IDR | - | Indonesian Rupiah |
JPY | - | Japanese Yen |
MXN | - | Mexican Peso |
USD | - | United States Dollar |
Investment Abbreviations:
LIBOR - London Interbank Offered Rate
Libor Rates:
3M US L - 3 Month LIBOR as of May 31, 2018 was 2.32%
6M US L - 6 Month LIBOR as of May 31, 2018 was 2.47%
(1) | Floating or variable rate security. The reference rate is described above. The rate in effect as of May 31, 2018 is based on the reference rate plus the displayed spread as of the security's last reset date. Certain variable rate securities are not based on a published reference rate and spread but are determined by the issuer or agent and are based on current market conditions. These securities do not indicate a reference rate and spread in their description. |
(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, 2018, the aggregate market value of those securities was $301,459,543, which represents approximately 24.97% of net assets. |
(3) | Step bond. Coupon changes periodically based upon a predetermined schedule. Interest rate disclosed is that which is in effect as of May 31, 2018. |
(4) | 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 $431,315,122, which represents approximately 35.73% of net assets as of May 31, 2018. |
(5) | Security is in default and therefore is non-income producing. |
(6) | The level 3 assets were valued using significant unobservable inputs as a result of unavailable quoted prices from an active market or the unavailability of other significant observable inputs. |
Stone Harbor Investment Funds Annual Report | May 31, 2018 | 29 |
Stone Harbor Emerging Markets Debt Fund | Statements of Investments |
May 31, 2018 |
(7) | Security has no contractual maturity date, is not redeemable and contractually pays an indefinite stream of interest. |
(8) | Issued with a zero coupon. Income is recognized through the accretion of discount. |
(9) | Payment-in-kind securities. |
(10) | Includes cash which is being held as collateral for forward foreign currency contracts and credit default swap contracts. |
OUTSTANDING FORWARD FOREIGN CURRENCY CONTRACTS
Counterparty | Foreign Currency | Contracted Amount** | Purchase/Sale Contract | Settlement Date | Current Value | Unrealized Appreciation/ (Depreciation) | ||||||||||||
J.P. Morgan Chase & Co. | BRL | 16,755,766 | Purchase | 06/04/18 | $ | 4,499,340 | $ | 10,788 | ||||||||||
J.P. Morgan Chase & Co. | BRL | 16,755,766 | Sale | 06/04/18 | 4,499,340 | 274,111 | ||||||||||||
J.P. Morgan Chase & Co. | EUR | 87,869,537 | Sale | 06/08/18 | 102,757,478 | 2,956,596 | ||||||||||||
$ | 3,241,495 | |||||||||||||||||
J.P. Morgan Chase & Co. | BRL | 16,755,766 | Sale | 07/03/18 | $ | 4,486,589 | $ | (11,822 | ) | |||||||||
J.P. Morgan Chase & Co. | EUR | 9,895,528 | Sale | 06/08/18 | 11,572,150 | (91,937 | ) | |||||||||||
J.P. Morgan Chase & Co. | EUR | 5,312,000 | Purchase | 06/08/18 | 6,212,025 | (111,364 | ) | |||||||||||
J.P. Morgan Chase & Co. | JPY | 733,236,600 | Sale | 06/08/18 | 6,742,200 | (43,810 | ) | |||||||||||
$ | (258,933 | ) |
** | The contracted amount is stated in the currency in which the contract is denominated. |
CREDIT DEFAULT SWAP CONTRACTS ON CREDIT INDICES ISSUE - SELL PROTECTION (OVER THE COUNTER)(1)
Reference Obligations | Counterparty | Fixed Deal Pay Rate | Currency | Maturity Date | Implied Credit Spread at May 31, 2018(2) | Notional Amount***(3) | Value | Upfront Premiums Received/(Paid) | Unrealized Depreciation | |||||||||||||||||||||||
Lebanese Republic | Goldman Sachs | |||||||||||||||||||||||||||||||
CDS SR 5Y(4) | & Co. | 1.000 | % | USD | 06/20/2023 | 5.949 | % | 20,920,000 | $ | (4,125,138 | ) | $ | 2,953,731 | $ | (1,171,407 | ) | ||||||||||||||||
$ | (4,125,138 | ) | $ | 2,953,731 | $ | (1,171,407 | ) |
Credit default swaps pay quarterly.
*** | The notional amount of each security is stated in the currency in which the security is denominated. |
(1) | If the Fund is a seller of protection and a credit event occurs, as defined under the terms of that particular swap agreement, the Fund will either (i) pay to the buyer of protection an amount equal to the notional amount of the swap and take delivery of the referenced obligation or underlying securities comprising the referenced index or (ii) pay a net settlement amount in the form of cash or securities equal to the notional amount of the swap less the recovery value of the referenced obligation or underlying securities comprising the referenced index. |
(2) | Implied credit spreads, represented in absolute terms, utilized in determining the market value of credit default swap agreements on sovereign issues of an emerging country as of period end serve as an indicator of the current status of the payment/performance risk and represent the likelihood or risk of default for the credit derivative. The implied credit spread of a particular referenced entity reflects the cost of buying/selling protection and may include upfront payments required to be made to enter into the agreement. Wider credit spreads represent a deterioration of the referenced entity’s credit soundness and a greater likelihood or risk of default or other credit event occurring as defined under the terms of the agreement. |
(3) | The maximum potential amount the Fund could be required to pay as a seller of credit protection or receive as a buyer of credit protection if a credit event occurs as defined under the terms of that particular swap agreement. |
(4) | Based on Lebanese Republic Sovereign Debt Obligation, USD denominated 6.00% fixed coupon, 02/20/2019 maturity. |
See Notes to Financial Statements.
30 | www.shiplp.com |
Stone Harbor High Yield Bond Fund | Statements of Investments |
May 31, 2018
Currency | Rate | Maturity Date | Principal Amount/Shares* | Value (Expressed in USD) | ||||||||||||
CORPORATE BONDS - 85.13% | ||||||||||||||||
Automotive - 1.56% | ||||||||||||||||
Allison Transmission | USD | 4.75 | % | 10/01/27 | 670,000 | $ | 628,962 | (1) | ||||||||
American Axle & Manufacturing, Inc. | USD | 6.25 | % | 03/15/26 | 120,000 | 116,424 | ||||||||||
Dana Financing Luxembourg Sarl | USD | 6.50 | % | 06/01/26 | 840,000 | 858,900 | (1) | |||||||||
1,604,286 | ||||||||||||||||
Building Products - 3.28% | ||||||||||||||||
American Woodmark Corp. | USD | 4.88 | % | 03/15/26 | 495,000 | 473,962 | (1) | |||||||||
Beacon Escrow Corp. | USD | 4.88 | % | 11/01/25 | 290,000 | 268,250 | (1) | |||||||||
Griffon Corp. | USD | 5.25 | % | 03/01/22 | 940,000 | 910,625 | ||||||||||
Norbord, Inc. | USD | 6.25 | % | 04/15/23 | 505,000 | 530,386 | (1) | |||||||||
Summit Materials LLC / Summit Materials Finance Corp. | USD | 6.13 | % | 07/15/23 | 435,000 | 441,525 | ||||||||||
TopBuild Corp. | USD | 5.63 | % | 05/01/26 | 285,000 | 281,438 | (1) | |||||||||
US Concrete, Inc. | USD | 6.38 | % | 06/01/24 | 460,000 | 469,775 | ||||||||||
3,375,961 | ||||||||||||||||
Chemicals - 5.65% | ||||||||||||||||
Axalta Coating Systems LLC | USD | 4.88 | % | 08/15/24 | 785,000 | 777,150 | (1) | |||||||||
CF Industries, Inc. | USD | 5.15 | % | 03/15/34 | 965,000 | 897,450 | ||||||||||
GCP Applied Technologies, Inc. | USD | 5.50 | % | 04/15/26 | 605,000 | 590,631 | (1) | |||||||||
INEOS Group Holdings SA | USD | 5.63 | % | 08/01/24 | 427,000 | 430,202 | (1) | |||||||||
OCI NV | USD | 6.63 | % | 04/15/23 | 810,000 | 836,325 | (1) | |||||||||
Platform Specialty Products Corp. | USD | 5.88 | % | 12/01/25 | 710,000 | 684,263 | (1) | |||||||||
Trinseo Materials Operating SCA / Trinseo Materials Finance, Inc. | USD | 5.38 | % | 09/01/25 | 740,000 | 734,450 | (1) | |||||||||
Versum Materials, Inc. | USD | 5.50 | % | 09/30/24 | 860,000 | 866,450 | (1) | |||||||||
5,816,921 | ||||||||||||||||
Consumer Products - 1.75% | ||||||||||||||||
ACCO Brands Corp. | USD | 5.25 | % | 12/15/24 | 500,000 | 501,250 | (1) | |||||||||
Energizer Holdings, Inc. | USD | 5.50 | % | 06/15/25 | 720,000 | 707,400 | (1) | |||||||||
Revlon Consumer Products Corp.: | ||||||||||||||||
USD | 5.75 | % | 02/15/21 | 330,000 | 249,150 | |||||||||||
USD | 6.25 | % | 08/01/24 | 600,000 | 351,000 | |||||||||||
1,808,800 | ||||||||||||||||
Containers/Packaging - 2.30% | ||||||||||||||||
Ardagh Packaging Finance PLC / Ardagh Holdings USA, Inc. | USD | 6.00 | % | 02/15/25 | 675,000 | 663,187 | (1) | |||||||||
Berry Global, Inc. | USD | 4.50 | % | 02/15/26 | 410,000 | 384,375 | (1) | |||||||||
Crown Americas LLC / Crown Americas Capital Corp. VI | USD | 4.75 | % | 02/01/26 | 390,000 | 369,369 | (1) | |||||||||
Flex Acquisition Co., Inc. | USD | 6.88 | % | 01/15/25 | 380,000 | 368,600 | (1) | |||||||||
Plastipak Holdings, Inc. | USD | 6.25 | % | 10/15/25 | 605,000 | 580,800 | (1) | |||||||||
2,366,331 | ||||||||||||||||
Diversified Manufacturing - 0.89% | ||||||||||||||||
SPX FLOW, Inc. | USD | 5.63 | % | 08/15/24 | 925,000 | 918,063 | (1) |
Stone Harbor Investment Funds Annual Report | May 31, 2018 | 31 |
Stone Harbor High Yield Bond Fund | Statements of Investments |
May 31, 2018
Currency | Rate | Maturity Date | Principal Amount/Shares* | Value (Expressed in USD) | ||||||||||||
Drillers/Services - 3.98% | ||||||||||||||||
Apergy Corp. | USD | 6.38 | % | 05/01/26 | 580,000 | $ | 590,875 | (1) | ||||||||
Ensco PLC | USD | 7.75 | % | 02/01/26 | 730,000 | 698,062 | ||||||||||
Nabors Industries, Inc. | USD | 5.50 | % | 01/15/23 | 750,000 | 738,750 | ||||||||||
Rowan Cos., Inc. | USD | 7.38 | % | 06/15/25 | 872,000 | 848,020 | ||||||||||
SESI LLC: | ||||||||||||||||
USD | 7.13 | % | 12/15/21 | 815,000 | 831,300 | |||||||||||
USD | 7.75 | % | 09/15/24 | 380,000 | 395,200 | |||||||||||
4,102,207 | ||||||||||||||||
Electric - 4.34% | ||||||||||||||||
Calpine Corp. | USD | 5.75 | % | 01/15/25 | 1,105,000 | 1,008,312 | ||||||||||
Covanta Holding Corp. | USD | 5.88 | % | 07/01/25 | 785,000 | 758,742 | ||||||||||
Dynegy, Inc. | USD | 8.00 | % | 01/15/25 | 785,000 | 853,688 | (1) | |||||||||
NRG Energy, Inc.: | ||||||||||||||||
USD | 6.25 | % | 07/15/22 | 710,000 | 734,850 | |||||||||||
USD | 5.75 | % | 01/15/28 | 670,000 | 663,360 | (1) | ||||||||||
Vistra Energy Corp. | USD | 8.13 | % | 01/30/26 | 415,000 | 455,890 | (1) | |||||||||
4,474,842 | ||||||||||||||||
Exploration & Production - 6.94% | ||||||||||||||||
Callon Petroleum Co.: | ||||||||||||||||
USD | 6.13 | % | 10/01/24 | 470,000 | 476,462 | |||||||||||
USD | 6.38 | % | 07/01/26 | 315,000 | 315,000 | |||||||||||
Diamondback Energy, Inc.: | ||||||||||||||||
USD | 4.75 | % | 11/01/24 | 575,000 | 557,031 | |||||||||||
USD | 5.38 | % | 05/31/25 | 190,000 | 188,338 | (1) | ||||||||||
Hilcorp Energy I LP / Hilcorp Finance Co. | USD | 5.75 | % | 10/01/25 | 240,000 | 240,600 | (1) | |||||||||
Laredo Petroleum, Inc. | USD | 5.63 | % | 01/15/22 | 835,000 | 830,825 | ||||||||||
Murphy Oil Corp. | USD | 6.88 | % | 08/15/24 | 235,000 | 249,687 | ||||||||||
Oasis Petroleum, Inc. | USD | 6.88 | % | 03/15/22 | 628,000 | 638,990 | ||||||||||
QEP Resources, Inc. | USD | 5.25 | % | 05/01/23 | 780,000 | 767,325 | ||||||||||
Range Resources Corp. | USD | 5.00 | % | 03/15/23 | 675,000 | 658,125 | ||||||||||
SM Energy Co.: | ||||||||||||||||
USD | 6.13 | % | 11/15/22 | 580,000 | 591,600 | |||||||||||
USD | 5.63 | % | 06/01/25 | 295,000 | 283,938 | |||||||||||
Southwestern Energy Co. | USD | 6.70 | % | 01/23/25 | 800,000 | 792,000 | ||||||||||
Whiting Petroleum Corp. | USD | 6.63 | % | 01/15/26 | 550,000 | 563,750 | (1) | |||||||||
7,153,671 | ||||||||||||||||
Food/Beverage/Tobacco - 4.80% | ||||||||||||||||
B&G Foods, Inc. | USD | 5.25 | % | 04/01/25 | 735,000 | 692,737 | ||||||||||
Chobani LLC / Chobani Finance Corp., Inc. | USD | 7.50 | % | 04/15/25 | 684,000 | 660,915 | (1) | |||||||||
Cott Holdings, Inc. | USD | 5.50 | % | 04/01/25 | 515,000 | 508,562 | (1) | |||||||||
Dean Foods Co. | USD | 6.50 | % | 03/15/23 | 480,000 | 471,600 | (1) | |||||||||
Pilgrim's Pride Corp.: | ||||||||||||||||
USD | 5.88 | % | 09/30/27 | 265,000 | 249,763 | (1) | ||||||||||
USD | 5.75 | % | 03/15/25 | 560,000 | 541,800 | (1) | ||||||||||
Pinnacle Foods Finance LLC / Pinnacle Food Finance Corp., Series WI | USD | 5.88 | % | 01/15/24 | 710,000 | 733,075 | ||||||||||
Post Holdings, Inc.: | ||||||||||||||||
USD | 5.50 | % | 03/01/25 | 425,000 | 419,688 | (1) | ||||||||||
USD | 5.00 | % | 08/15/26 | 380,000 | 357,200 | (1) | ||||||||||
Sigma Holdco BV | USD | 7.88 | % | 05/15/26 | 325,000 | 312,813 | (1) | |||||||||
4,948,153 |
32 | www.shiplp.com |
Stone Harbor High Yield Bond Fund | Statements of Investments |
May 31, 2018
Currency | Rate | Maturity Date | Principal Amount/Shares* | Value (Expressed in USD) | ||||||||||||
Gaming - 3.01% | ||||||||||||||||
Boyd Gaming Corp., Series WI | USD | 6.38 | % | 04/01/26 | 280,000 | $ | 287,700 | |||||||||
Golden Nugget, Inc. | USD | 6.75 | % | 10/15/24 | 615,000 | 623,456 | (1) | |||||||||
Jacobs Entertainment, Inc. | USD | 7.88 | % | 02/01/24 | 700,000 | 733,250 | (1) | |||||||||
MGM Growth Properties Operating Partnership | USD | 4.50 | % | 09/01/26 | 380,000 | 351,500 | ||||||||||
Pinnacle Entertainment, Inc. | USD | 5.63 | % | 05/01/24 | 715,000 | 752,538 | ||||||||||
Scientific Games International, Inc. | USD | 5.00 | % | 10/15/25 | 360,000 | 348,300 | (1) | |||||||||
3,096,744 | ||||||||||||||||
Gas Pipelines - 0.73% | ||||||||||||||||
Targa Resources Partners LP / Targa Resources | ||||||||||||||||
Partners Finance Corp.: | ||||||||||||||||
USD | 4.25 | % | 11/15/23 | 510,000 | 487,050 | |||||||||||
USD | 5.88 | % | 04/15/26 | 265,000 | 266,574 | (1) | ||||||||||
753,624 | ||||||||||||||||
Healthcare - 5.12% | ||||||||||||||||
CHS/Community Health Systems, Inc. | USD | 6.25 | % | 03/31/23 | 970,000 | 909,375 | ||||||||||
DaVita, Inc. | USD | 5.00 | % | 05/01/25 | 505,000 | 479,902 | ||||||||||
Encompass Health Corp. | USD | 5.75 | % | 11/01/24 | 520,000 | 529,750 | ||||||||||
Envision Healthcare Corp.: | ||||||||||||||||
USD | 5.63 | % | 07/15/22 | 590,000 | 602,537 | |||||||||||
USD | 6.25 | % | 12/01/24 | 360,000 | 381,672 | (1) | ||||||||||
HCA, Inc. | USD | 5.38 | % | 02/01/25 | 790,000 | 778,150 | ||||||||||
Hologic, Inc. | USD | 4.38 | % | 10/15/25 | 360,000 | 345,150 | (1) | |||||||||
Team Health Holdings, Inc. | USD | 6.38 | % | 02/01/25 | 555,000 | 482,850 | (1) | |||||||||
Tenet Healthcare Corp. | USD | 4.63 | % | 07/15/24 | 795,000 | 767,135 | (1) | |||||||||
5,276,521 | ||||||||||||||||
Industrial Other - 4.34% | ||||||||||||||||
AECOM | USD | 5.13 | % | 03/15/27 | 660,000 | 613,800 | ||||||||||
Gates Global LLC / Gates Global Co. | USD | 6.00 | % | 07/15/22 | 445,000 | 450,562 | (1) | |||||||||
MasTec, Inc. | USD | 4.88 | % | 03/15/23 | 933,000 | 927,169 | ||||||||||
Park-Ohio Industries, Inc. | USD | 6.63 | % | 04/15/27 | 835,000 | 862,138 | ||||||||||
RBS Global, Inc. / Rexnord LLC | USD | 4.88 | % | 12/15/25 | 420,000 | 405,300 | (1) | |||||||||
Waste Pro USA, Inc. | USD | 5.50 | % | 02/15/26 | 575,000 | 556,313 | (1) | |||||||||
Welbilt, Inc. | USD | 9.50 | % | 02/15/24 | 265,000 | 293,487 | ||||||||||
Wrangler Buyer Corp. | USD | 6.00 | % | 10/01/25 | 380,000 | 363,850 | (1) | |||||||||
4,472,619 | ||||||||||||||||
Leisure - 2.31% | ||||||||||||||||
AMC Entertainment Holdings, Inc. | USD | 5.75 | % | 06/15/25 | 605,000 | 593,657 | ||||||||||
Cinemark USA, Inc. | USD | 4.88 | % | 06/01/23 | 701,000 | 680,811 | ||||||||||
Live Nation Entertainment, Inc. | USD | 5.63 | % | 03/15/26 | 615,000 | 615,000 | (1) | |||||||||
Merlin Entertainments PLC | USD | 5.75 | % | 06/15/26 | 490,000 | 494,596 | (1) | |||||||||
2,384,064 | ||||||||||||||||
Media Cable - 7.06% | ||||||||||||||||
Altice France SA/France | USD | 7.38 | % | 05/01/26 | 355,000 | 347,456 | (1) | |||||||||
Cablevision Systems Corp. | USD | 5.88 | % | 09/15/22 | 1,239,000 | 1,239,000 | ||||||||||
CCO Holdings LLC / CCO Holdings Capital Corp.: | ||||||||||||||||
USD | 5.13 | % | 05/01/27 | 775,000 | 727,531 | (1) | ||||||||||
USD | 5.50 | % | 05/01/26 | 760,000 | 735,528 | (1) |
Stone Harbor Investment Funds Annual Report | May 31, 2018 | 33 |
Stone Harbor High Yield Bond Fund | Statements of Investments |
May 31, 2018
Currency | Rate | Maturity Date | Principal Amount/Shares* | Value (Expressed in USD) | ||||||||||||
Media Cable (continued) | ||||||||||||||||
DISH DBS Corp. | USD | 7.75 | % | 07/01/26 | 1,845,000 | $ | 1,598,231 | |||||||||
Quebecor Media, Inc. | USD | 5.75 | % | 01/15/23 | 601,000 | 614,523 | ||||||||||
Unitymedia GmbH | USD | 6.13 | % | 01/15/25 | 365,000 | 378,323 | (1) | |||||||||
UPC Holding BV | USD | 5.50 | % | 01/15/28 | 240,000 | 220,200 | (1) | |||||||||
UPCB Finance IV, Ltd. | USD | 5.38 | % | 01/15/25 | 430,000 | 414,950 | (1) | |||||||||
Virgin Media Finance PLC | USD | 6.00 | % | 10/15/24 | 485,000 | 472,584 | (1) | |||||||||
Ziggo BV | USD | 5.50 | % | 01/15/27 | 545,000 | 521,674 | (1) | |||||||||
7,270,000 | ||||||||||||||||
Media Other - 5.65% | ||||||||||||||||
AMC Networks, Inc. | USD | 4.75 | % | 08/01/25 | 715,000 | 673,887 | ||||||||||
Block Communications, Inc. | USD | 6.88 | % | 02/15/25 | 855,000 | 865,687 | (1) | |||||||||
EW Scripps Co. | USD | 5.13 | % | 05/15/25 | 650,000 | 616,687 | (1) | |||||||||
Nexstar Broadcasting, Inc. | USD | 5.63 | % | 08/01/24 | 670,000 | 657,035 | (1) | |||||||||
Sinclair Television Group, Inc. | USD | 5.63 | % | 08/01/24 | 710,000 | 708,900 | (1) | |||||||||
Sirius XM Radio, Inc. | USD | 5.00 | % | 08/01/27 | 605,000 | 577,860 | (1) | |||||||||
TEGNA, Inc. | USD | 6.38 | % | 10/15/23 | 609,000 | 632,599 | ||||||||||
Tribune Media Co. | USD | 5.88 | % | 07/15/22 | 1,070,000 | 1,087,388 | ||||||||||
5,820,043 | ||||||||||||||||
Metals/Mining/Steel - 2.73% | ||||||||||||||||
AK Steel Corp. | USD | 7.00 | % | 03/15/27 | 625,000 | 600,000 | ||||||||||
Coeur Mining, Inc. | USD | 5.88 | % | 06/01/24 | 735,000 | 723,056 | ||||||||||
Commercial Metals Co.: | ||||||||||||||||
USD | 5.75 | % | 04/15/26 | 455,000 | 452,725 | (1) | ||||||||||
USD | 5.38 | % | 07/15/27 | 500,000 | 480,000 | |||||||||||
Kaiser Aluminum Corp. | USD | 5.88 | % | 05/15/24 | 540,000 | 556,200 | ||||||||||
2,811,981 | ||||||||||||||||
Paper/Forest Products - 2.71% | ||||||||||||||||
Boise Cascade Co. | USD | 5.63 | % | 09/01/24 | 770,000 | 776,738 | (1) | |||||||||
Cascades, Inc. | USD | 5.50 | % | 07/15/22 | 800,000 | 802,000 | (1) | |||||||||
Louisiana-Pacific Corp. | USD | 4.88 | % | 09/15/24 | 750,000 | 736,875 | ||||||||||
Mercer International, Inc. | USD | 5.50 | % | 01/15/26 | 490,000 | 481,425 | (1) | |||||||||
2,797,038 | ||||||||||||||||
Pharmaceuticals - 2.52% | ||||||||||||||||
Charles River Laboratories International, Inc. | USD | 5.50 | % | 04/01/26 | 450,000 | 452,812 | (1) | |||||||||
Endo Finance LLC / Endo Ltd. / Endo Finco, Inc. | USD | 6.00 | % | 02/01/25 | 830,000 | 593,450 | (1) | |||||||||
Mallinckrodt International Finance SA / Mallinckrodt CB LLC | USD | 5.63 | % | 10/15/23 | 499,000 | 414,794 | (1) | |||||||||
Valeant Pharmaceuticals International, Inc.: | ||||||||||||||||
USD | 6.50 | % | 03/15/22 | 480,000 | 501,600 | (1) | ||||||||||
USD | 5.88 | % | 05/15/23 | 660,000 | 629,475 | (1) | ||||||||||
2,592,131 | ||||||||||||||||
Retail Food/Drug - 1.11% | ||||||||||||||||
Albertsons Cos. LLC / Safeway, Inc. / New | ||||||||||||||||
Albertson's Inc. / Albertson's LLC, Series WI | USD | 6.63 | % | 06/15/24 | 765,000 | 723,154 | ||||||||||
Safeway, Inc. | USD | 7.25 | % | 02/01/31 | 478,000 | 419,445 | ||||||||||
1,142,599 | ||||||||||||||||
Retail Non Food/Drug - 0.76% | ||||||||||||||||
JC Penney Corp., Inc.: | ||||||||||||||||
USD | 8.63 | % | 03/15/25 | 180,000 | 149,670 | (1) |
34 | www.shiplp.com |
Stone Harbor High Yield Bond Fund | Statements of Investments |
May 31, 2018
Currency | Rate | Maturity Date | Principal Amount/Shares* | Value (Expressed in USD) | ||||||||||||
Retail Non Food/Drug (continued) | ||||||||||||||||
JC Penney Corp., Inc.: (continued) | ||||||||||||||||
USD | 7.40 | % | 04/01/37 | 680,000 | $ | 404,600 | ||||||||||
PetSmart, Inc. | USD | 7.13 | % | 03/15/23 | 475,000 | 230,755 | (1) | |||||||||
785,025 | ||||||||||||||||
Satellite - 1.13% | ||||||||||||||||
Hughes Satellite Systems Corp. | USD | 6.63 | % | 08/01/26 | 595,000 | 580,125 | ||||||||||
Intelsat Jackson Holdings SA | USD | 5.50 | % | 08/01/23 | 665,000 | 583,122 | ||||||||||
1,163,247 | ||||||||||||||||
Services Other - 2.45% | ||||||||||||||||
Matthews International Corp. | USD | 5.25 | % | 12/01/25 | 725,000 | 703,250 | (1) | |||||||||
Travelport Corporate Finance PLC | USD | 6.00 | % | 03/15/26 | 550,000 | 554,125 | (1) | |||||||||
Weight Watchers International, Inc. | USD | 8.63 | % | 12/01/25 | 600,000 | 655,500 | (1) | |||||||||
West Corp. | USD | 8.50 | % | 10/15/25 | 660,000 | 615,450 | (1) | |||||||||
2,528,325 | ||||||||||||||||
Technology - 2.78% | ||||||||||||||||
Entegris, Inc. | USD | 4.63 | % | 02/10/26 | 675,000 | 650,532 | (1) | |||||||||
Nuance Communications, Inc. | USD | 5.63 | % | 12/15/26 | 865,000 | 847,700 | ||||||||||
PTC, Inc. | USD | 6.00 | % | 05/15/24 | 310,000 | 326,275 | ||||||||||
Seagate HDD Cayman | USD | 4.88 | % | 06/01/27 | 1,110,000 | 1,039,427 | ||||||||||
2,863,934 | ||||||||||||||||
Textile/Apparel - 0.57% | ||||||||||||||||
Levi Strauss & Co. | USD | 5.00 | % | 05/01/25 | 583,000 | 590,288 | ||||||||||
Wireless - 2.78% | ||||||||||||||||
Sprint Capital Corp. | USD | 8.75 | % | 03/15/32 | 1,365,000 | 1,472,494 | ||||||||||
T-Mobile USA, Inc.: | ||||||||||||||||
USD | 6.50 | % | 01/15/26 | 520,000 | 544,050 | |||||||||||
USD | 5.38 | % | 04/15/27 | 465,000 | 457,444 | |||||||||||
Wind Tre S.p.A. | USD | 5.00 | % | 01/20/26 | 485,000 | 390,425 | (1) | |||||||||
2,864,413 | ||||||||||||||||
Wirelines - 1.88% | ||||||||||||||||
Frontier Communications Corp.: | ||||||||||||||||
USD | 8.50 | % | 04/01/26 | 180,000 | 175,050 | (1) | ||||||||||
USD | 9.00 | % | 08/15/31 | 1,240,000 | 821,500 | |||||||||||
Windstream Services LLC / Windstream Finance Corp. | USD | 6.38 | % | 08/01/23 | 230,000 | 133,975 | ||||||||||
Zayo Group LLC / Zayo Capital, Inc. | USD | 5.75 | % | 01/15/27 | 830,000 | 805,100 | (1) | |||||||||
1,935,625 | ||||||||||||||||
TOTAL CORPORATE BONDS | 87,717,456 | |||||||||||||||
(Cost $89,134,909) | ||||||||||||||||
BANK LOANS - 9.48%(2) | ||||||||||||||||
Automotive - 0.91% | ||||||||||||||||
Navistar, Inc. - Tranche B Term Loan | USD | 1M US L + 3.50% | 11/06/24 | 927,675 | 935,212 | |||||||||||
Building Products - 0.39% | ||||||||||||||||
Summit Materials, LLC - New Term Loan | USD | 1M US L + 2.00% | 11/10/24 | 399,000 | 401,078 |
Stone Harbor Investment Funds Annual Report | May 31, 2018 | 35 |
Stone Harbor High Yield Bond Fund | Statements of Investments |
May 31, 2018
Currency | Rate | Maturity Date | Principal Amount/Shares* | Value (Expressed in USD) | |||||||||||
Chemicals - 0.41% | |||||||||||||||
MacDermid, Inc. (Platform Specialty Products Corporation) - Tranche B-7 Term Loan | USD | 1M US L + 2.50% | 06/07/20 | 422,632 | $ | 424,173 | |||||||||
Construction Machinery - 0.44% | |||||||||||||||
Gardner Denver, Inc. - Tranche B-1 Dollar Term Loan | USD | 3M US L + 2.75% | 07/30/24 | 451,850 | 454,392 | ||||||||||
Containers/Packaging - 0.53% | |||||||||||||||
Flex Acquisition Company, Inc. (aka Novolex) - Initial Term Loan | USD | 3M US L + 3.00% | 12/29/23 | 547,200 | 546,972 | ||||||||||
Diversified Manufacturing - 0.72% | |||||||||||||||
Blount International, Inc. - Refinancing Term Loan | USD | 1M US L + 4.25% | 04/12/23 | 731,753 | 741,814 | ||||||||||
Food/Beverage/Tobacco - 0.49% | |||||||||||||||
Sigma US Corp. Tlb 1l | USD | L + 3.00% | 03/07/25 | 500,000 | 501,094 | (3) | |||||||||
Healthcare - 0.27% | |||||||||||||||
Air Medical Group Holdings, Inc. - 2018 Term Loan | USD | 1M US L + 3.25% | 04/28/22 | 274,571 | 274,666 | ||||||||||
Industrial Other - 1.33% | |||||||||||||||
Filtration Group Corporation - Initial Dollar Term Loan | USD | 3M US L + 3.00% | 03/31/25 | 430,000 | 432,822 | ||||||||||
Gates Global LLC - Initial B-2 Dollar Term Loan | USD | 3M US L + 2.75% | 04/01/24 | 510,463 | 513,621 | ||||||||||
Welbilt, Inc. (Manitowoc Foodservice, Inc.) - Term B Loan | USD | 1M US L + 2.75% | 03/03/23 | 426,308 | 428,168 | ||||||||||
1,374,611 | |||||||||||||||
Leisure - 0.63% | |||||||||||||||
Crown Finance US, Inc. (Cineworld Group PLC) - Initial Dollar Tranche Term Loan | USD | 1M US L + 2.50% | 02/07/25 | 650,000 | 648,285 | ||||||||||
Technology - 2.83% | |||||||||||||||
Avaya, Inc. - Initial Term Loan | USD | 1M US L + 4.75% | 12/16/24 | 1,201,613 | 1,210,302 | ||||||||||
SS&C Technologies Holdings, Inc. - Term B-3 Loan | USD | 1M US L + 2.50% | 04/16/15 | 572,472 | 576,375 | ||||||||||
SS&C Technologies Holdings, Inc. - Term B-4 Loan | USD | 1M US L + 2.50% | 04/16/15 | 214,334 | 215,795 | ||||||||||
Vertiv Group Corp. (Cortes NP Acquisition Corp.) - Term B Loan | USD | 1M US L + 4.00% | 11/30/23 | 925,485 | 916,798 | ||||||||||
2,919,270 | |||||||||||||||
Utility Non Electric/Gas - 0.53% | |||||||||||||||
Lightstone Holdco LLC - Refinancing Term B Loan | USD | 1M US L + 3.75% | 01/30/24 | 515,281 | 518,502 | ||||||||||
Lightstone Holdco LLC - Refinancing Term C Loan | USD | 1M US L + 3.75% | 01/30/24 | 32,991 | 33,197 | ||||||||||
551,699 | |||||||||||||||
TOTAL BANK LOANS | 9,773,266 | ||||||||||||||
(Cost $9,724,197) | |||||||||||||||
COMMON/PREFERRED STOCKS - 1.05% | |||||||||||||||
Denbury Resources, Inc. | USD | 47,950 | 203,787 | (4) | |||||||||||
Gener8 Maritime, Inc. | USD | 44 | 294 | (4) | |||||||||||
Quiksilver, Inc. | USD | 10,219 | 306,570 | (4)(5) |
36 | www.shiplp.com |
Stone Harbor High Yield Bond Fund | Statements of Investments |
May 31, 2018
Currency | Rate | Maturity | Principal Amount/Shares* | Value (Expressed in USD) | |||||||||||||||
DateCOMMON/PREFERRED STOCKS (continued) | |||||||||||||||||||
Vistra Energy Corp. | USD | 23,234 | $ | 569,930 | |||||||||||||||
TOTAL COMMON/PREFERRED STOCKS | 1,080,581 | ||||||||||||||||||
(Cost $739,938) | |||||||||||||||||||
RIGHTS - 0.04% | |||||||||||||||||||
Electric - 0.04% | |||||||||||||||||||
Vistra Energy Corp. expires 10/01/2020, strike price $1.350 | USD | 75,699 | 39,364 | (4)(5) | |||||||||||||||
TOTAL RIGHTS | 39,364 | ||||||||||||||||||
(Cost $102,194) | |||||||||||||||||||
WARRANTS - 0.01% | |||||||||||||||||||
Exploration & Production - 0.01% | |||||||||||||||||||
Halcon Resources Corp. expires 09/09/2020, strike price $0.010 | USD | 9,675 | 6,482 | (4) | |||||||||||||||
Midstates Petroleum Co., Inc. expires 04/21/2020, strike price $0.010 | USD | 3,315 | 33 | (4)(5) | |||||||||||||||
TOTAL WARRANTS | 6,515 | ||||||||||||||||||
(Cost $129) | |||||||||||||||||||
SHORT TERM INVESTMENTS- 2.47% | |||||||||||||||||||
Money Market Mutual Funds - 2.47% | |||||||||||||||||||
State Street Institutional Liquid Reserves Fund (7-Day Yield) | USD 1.95% | N/A | 2,544,390 | 2,544,645 | |||||||||||||||
TOTAL SHORT TERM INVESTMENTS | 2,544,645 | ||||||||||||||||||
(Cost $2,543,881) | |||||||||||||||||||
Total Investments - 98.18% | 101,161,827 | ||||||||||||||||||
(Cost $102,245,248) | |||||||||||||||||||
Other Assets in Excess of Liabilities - 1.82% | 1,872,901 | ||||||||||||||||||
Net Assets - 100.00% | $ | 103,034,728 |
* | The principal amount/shares of each security is stated in the currency in which the security is denominated. |
Currency Abbreviations:
USD - United States Dollar
Investment Abbreviations:
LIBOR - London Interbank Offered Rate
Libor Rates:
1M US L - 1 Month LIBOR as of May 31, 2018 was 2.00%
3M US L - 3 Month LIBOR as of May 31, 2018 was 2.32%
(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 $43,646,554, which represents approximately 42.36% of net assets as of May 31, 2018. |
Stone Harbor Investment Funds Annual Report | May 31, 2018 | 37 |
Stone Harbor High Yield Bond Fund | Statements of Investments |
May 31, 2018
(2) | 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. 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. |
(3) | All or a portion of this position has not settled as of May 31, 2018. The interest rate shown represents the stated spread over the LIBOR rate. The Fund will not accrue interest until the settlement date, at which point LIBOR will be established. |
(4) | Non-income producing security. |
(5) | The level 3 assets were valued using significant unobservable inputs as a result of unavailable quoted prices from an active market or the unavailability of other significant observable inputs. |
See Notes to Financial Statements
38 | www.shiplp.com |
Stone Harbor Local Markets Fund | Statements of Investments |
May 31, 2018
Currency | Rate | Maturity Date | Principal Amount/Shares* | Value (Expressed in USD) | ||||||||||||
SOVEREIGN DEBT OBLIGATIONS - 73.80% | ||||||||||||||||
Argentina - 0.95% | ||||||||||||||||
Republic of Argentina: | ||||||||||||||||
EUR | 7.82 | % | 12/31/33 | 2,504,509 | $ | 3,049,405 | ||||||||||
EUR | 7.82 | % | 12/31/33 | 4,985,624 | 6,128,611 | |||||||||||
EUR | 2.26 | % | 12/31/38 | 990,000 | 733,766 | (1) | ||||||||||
9,911,782 | ||||||||||||||||
Brazil - 10.55% | ||||||||||||||||
Nota Do Tesouro Nacional: | ||||||||||||||||
BRL | 0.00 | % | 07/01/20 | 63,710,000 | 14,496,863 | (2) | ||||||||||
BRL | 10.00 | % | 01/01/21 | 181,331,000 | 49,930,690 | |||||||||||
BRL | 10.00 | % | 01/01/23 | 45,670,000 | 12,127,924 | |||||||||||
BRL | 10.00 | % | 01/01/25 | 84,320,000 | 21,703,342 | |||||||||||
BRL | 10.00 | % | 01/01/27 | 49,130,000 | 12,311,929 | |||||||||||
110,570,748 | ||||||||||||||||
Chile - 0.30% | ||||||||||||||||
Republic of Chile | CLP | 4.50 | % | 02/28/21 | 1,930,000,000 | 3,131,281 | ||||||||||
Colombia - 5.77% | ||||||||||||||||
Bogota Distrio Capital | COP | 9.75 | % | 07/26/28 | 31,352,000,000 | 11,850,489 | (3) | |||||||||
Republic of Colombia: | ||||||||||||||||
COP | 7.75 | % | 04/14/21 | 23,155,000,000 | 8,441,846 | |||||||||||
COP | 10.00 | % | 07/24/24 | 22,193,700,000 | 9,177,903 | |||||||||||
COP | 7.50 | % | 08/26/26 | 46,320,300,000 | 17,047,973 | |||||||||||
COP | 9.85 | % | 06/28/27 | 31,977,000,000 | 13,912,328 | |||||||||||
60,430,539 | ||||||||||||||||
Czech Republic - 1.85% | ||||||||||||||||
Czech Republic Government: | ||||||||||||||||
CZK | 2.40 | % | 09/17/25 | 13,500,000 | 642,556 | |||||||||||
CZK | 1.00 | % | 06/26/26 | 86,720,000 | 3,698,126 | |||||||||||
CZK | 0.25 | % | 02/10/27 | 161,370,000 | 6,395,738 | |||||||||||
CZK | 2.75 | % | 07/23/29 | 73,300,000 | 3,530,684 | |||||||||||
CZK | 0.95 | % | 05/15/30 | 105,420,000 | 4,159,150 | |||||||||||
CZK | 4.20 | % | 12/04/36 | 18,000,000 | 1,013,711 | |||||||||||
19,439,965 | ||||||||||||||||
Indonesia - 11.09% | ||||||||||||||||
Republic of Indonesia: | ||||||||||||||||
IDR | 7.00 | % | 05/15/22 | 224,070,000,000 | 16,307,361 | |||||||||||
IDR | 8.38 | % | 03/15/24 | 53,081,000,000 | 4,063,533 | |||||||||||
IDR | 11.00 | % | 09/15/25 | 86,142,000,000 | 7,573,586 | |||||||||||
IDR | 8.38 | % | 09/15/26 | 76,866,000,000 | 5,946,507 | |||||||||||
IDR | 7.00 | % | 05/15/27 | 38,000,000,000 | 2,725,485 | |||||||||||
IDR | 6.13 | % | 05/15/28 | 217,010,000,000 | 14,712,013 | |||||||||||
IDR | 9.00 | % | 03/15/29 | 105,132,000,000 | 8,483,574 | |||||||||||
IDR | 8.75 | % | 05/15/31 | 11,100,000,000 | 873,741 | |||||||||||
IDR | 8.25 | % | 06/15/32 | 302,000,000,000 | 22,902,663 | |||||||||||
IDR | 7.50 | % | 08/15/32 | 29,300,000,000 | 2,106,036 | |||||||||||
IDR | 6.63 | % | 05/15/33 | 151,142,000,000 | 10,156,808 | |||||||||||
IDR | 8.38 | % | 03/15/34 | 141,460,000,000 | 10,788,934 | |||||||||||
IDR | 8.25 | % | 05/15/36 | 2,900,000,000 | 219,404 | |||||||||||
IDR | 7.50 | % | 05/15/38 | 132,550,000,000 | 9,438,190 | |||||||||||
116,297,835 |
Stone Harbor Investment Funds Annual Report | May 31, 2018 | 39 |
Stone Harbor Local Markets Fund | Statements of Investments |
May 31, 2018
Currency | Rate | Maturity Date | Principal Amount/Shares* | Value (Expressed in USD) | ||||||||||||
Malaysia - 1.23% | ||||||||||||||||
Malaysian Government: | ||||||||||||||||
MYR | 4.18 | % | 07/15/24 | 8,160,000 | $ | 2,056,402 | ||||||||||
MYR | 3.96 | % | 09/15/25 | 10,125,000 | 2,500,722 | |||||||||||
MYR | 4.39 | % | 04/15/26 | 9,607,000 | 2,431,923 | |||||||||||
MYR | 4.50 | % | 04/15/30 | 11,241,000 | 2,786,243 | |||||||||||
MYR | 3.84 | % | 04/15/33 | 13,644,000 | 3,119,608 | |||||||||||
12,894,898 | ||||||||||||||||
Mexico - 4.71% | ||||||||||||||||
Mexican Bonos: | ||||||||||||||||
MXN | 6.50 | % | 06/10/21 | 33,190,000 | 1,609,681 | |||||||||||
MXN | 10.00 | % | 12/05/24 | 71,660,000 | 4,002,733 | |||||||||||
MXN | 7.50 | % | 06/03/27 | 188,590,000 | 9,277,993 | |||||||||||
MXN | 7.75 | % | 05/29/31 | 191,405,000 | 9,533,329 | |||||||||||
MXN | 7.75 | % | 11/23/34 | 121,616,000 | 6,035,134 | |||||||||||
MXN | 10.00 | % | 11/20/36 | 47,726,000 | 2,883,355 | |||||||||||
MXN | 7.75 | % | 11/13/42 | 114,450,000 | 5,640,953 | |||||||||||
United Mexican States | USD | 3.75 | % | 01/11/28 | 11,090,000 | 10,430,145 | ||||||||||
49,413,323 | ||||||||||||||||
Peru - 0.62% | ||||||||||||||||
Republic of Peru | PEN | 6.95 | % | 08/12/31 | 18,987,000 | 6,485,053 | (4) | |||||||||
Poland - 4.84% | ||||||||||||||||
Republic of Poland: | ||||||||||||||||
PLN | 3.25 | % | 07/25/25 | 113,480,000 | 31,257,486 | |||||||||||
PLN | 2.50 | % | 07/25/26 | 17,740,000 | 4,590,385 | |||||||||||
PLN | 2.50 | % | 07/25/27 | 29,390,000 | 7,519,417 | |||||||||||
PLN | 2.75 | % | 04/25/28 | 28,300,000 | 7,345,477 | |||||||||||
50,712,765 | ||||||||||||||||
Romania - 1.34% | ||||||||||||||||
Romania Government: | ||||||||||||||||
RON | 3.25 | % | 04/29/24 | 5,540,000 | 1,286,123 | |||||||||||
RON | 4.75 | % | 02/24/25 | 9,155,000 | 2,301,331 | |||||||||||
RON | 5.80 | % | 07/26/27 | 39,130,000 | 10,457,237 | |||||||||||
14,044,691 | ||||||||||||||||
Russia - 8.29% | ||||||||||||||||
Russian Federation: | ||||||||||||||||
RUB | 7.60 | % | 04/14/21 | 144,800,000 | 2,379,559 | |||||||||||
RUB | 7.50 | % | 08/18/21 | 111,490,000 | 1,822,340 | |||||||||||
RUB | 7.40 | % | 12/07/22 | 550,335,000 | 8,997,168 | |||||||||||
RUB | 7.00 | % | 08/16/23 | 270,143,000 | 4,378,797 | |||||||||||
RUB | 7.75 | % | 09/16/26 | 1,272,951,000 | 21,061,660 | |||||||||||
RUB | 8.15 | % | 02/03/27 | 899,971,000 | 15,250,875 | |||||||||||
RUB | 7.05 | % | 01/19/28 | 551,573,000 | 8,737,353 | |||||||||||
RUB | 8.50 | % | 09/17/31 | 1,176,492,000 | 20,634,012 | |||||||||||
RUB | 7.70 | % | 03/23/33 | 223,585,000 | 3,665,313 | |||||||||||
86,927,077 | ||||||||||||||||
South Africa - 9.93% | ||||||||||||||||
Republic of South Africa: | ||||||||||||||||
ZAR | 7.75 | % | 02/28/23 | 284,660,000 | 22,140,828 | |||||||||||
ZAR | 10.50 | % | 12/21/26 | 25,854,721 | 2,261,916 | |||||||||||
ZAR | 7.00 | % | 02/28/31 | 333,750,000 | 22,114,777 | |||||||||||
ZAR | 6.25 | % | 03/31/36 | 495,913,040 | 28,673,225 | |||||||||||
ZAR | 6.50 | % | 02/28/41 | 165,140,000 | 9,414,383 |
40 | www.shiplp.com |
Stone Harbor Local Markets Fund | Statements of Investments |
May 31, 2018
Currency | Rate | Maturity Date | Principal Amount/Shares* | Value (Expressed in USD) | ||||||||||||
South Africa (continued) | ||||||||||||||||
Republic of South Africa: (continued) | ||||||||||||||||
ZAR | 8.75 | % | 02/28/48 | 267,804,410 | $ | 19,510,168 | ||||||||||
104,115,297 | ||||||||||||||||
Thailand - 2.39% | ||||||||||||||||
Thailand Government: | ||||||||||||||||
THB | 2.55 | % | 06/26/20 | 121,700,000 | 3,865,016 | |||||||||||
THB | 1.20 | % | 07/14/21 | 248,981,567 | 7,814,336 | |||||||||||
THB | 3.85 | % | 12/12/25 | 145,750,000 | 4,973,664 | |||||||||||
THB | 3.58 | % | 12/17/27 | 163,330,000 | 5,446,435 | |||||||||||
THB | 4.68 | % | 06/29/44 | 78,759,000 | 2,990,024 | |||||||||||
25,089,475 | ||||||||||||||||
Turkey - 8.55% | ||||||||||||||||
Republic of Turkey: | ||||||||||||||||
TRY | 8.50 | % | 07/10/19 | 49,520,000 | 10,062,706 | |||||||||||
TRY | 13.00 | % | 11/13/19 | 3,180,000 | 669,370 | |||||||||||
TRY | 7.40 | % | 02/05/20 | 60,310,000 | 11,595,899 | |||||||||||
TRY | 9.40 | % | 07/08/20 | 14,910,000 | 2,891,469 | |||||||||||
TRY | 10.70 | % | 02/17/21 | 10,930,000 | 2,132,913 | |||||||||||
TRY | 9.20 | % | 09/22/21 | 3,613,225 | 669,781 | |||||||||||
TRY | 9.50 | % | 01/12/22 | 13,191,710 | 2,443,152 | |||||||||||
TRY | 11.00 | % | 03/02/22 | 12,230,000 | 2,367,689 | |||||||||||
TRY | 10.70 | % | 08/17/22 | 5,710,000 | 1,082,736 | |||||||||||
TRY | 8.50 | % | 09/14/22 | 36,053,420 | 6,362,673 | |||||||||||
TRY | 12.20 | % | 01/18/23 | 72,180,000 | 14,579,644 | |||||||||||
TRY | 7.10 | % | 03/08/23 | 27,463,000 | 4,509,987 | |||||||||||
TRY | 10.40 | % | 03/20/24 | 16,856,600 | 3,175,889 | |||||||||||
TRY | 9.00 | % | 07/24/24 | 24,634,850 | 4,325,770 | |||||||||||
TRY | 10.60 | % | 02/11/26 | 25,301,100 | 4,663,501 | |||||||||||
TRY | 11.00 | % | 02/24/27 | 50,016,000 | 9,329,427 | |||||||||||
TRY | 10.50 | % | 08/11/27 | 48,340,000 | 8,797,924 | |||||||||||
89,660,530 | ||||||||||||||||
Ukraine - 0.65% | ||||||||||||||||
Ukraine Government | USD | 0.00 | % | 05/31/40 | 9,794,000 | 6,855,800 | (5) | |||||||||
Uruguay - 0.74% | ||||||||||||||||
Oriental Republic of Uruguay: | ||||||||||||||||
UYU | 9.88 | % | 06/20/22 | 65,880,000 | 2,136,703 | (3) | ||||||||||
UYU | 9.88 | % | 06/20/22 | 83,838,000 | 2,719,139 | (4) | ||||||||||
UYU | 8.50 | % | 03/15/28 | 98,390,000 | 2,856,621 | (4) | ||||||||||
7,712,463 | ||||||||||||||||
TOTAL SOVEREIGN DEBT OBLIGATIONS | 773,693,522 | |||||||||||||||
(Cost $850,204,684) | ||||||||||||||||
CORPORATE BONDS - 6.92% | ||||||||||||||||
Kazakhstan - 0.19% | ||||||||||||||||
Development Bank of Kazakhstan JSC | KZT | 8.95 | % | 05/04/23 | 654,250,000 | 1,963,376 | (4) | |||||||||
Luxembourg - 0.50% | ||||||||||||||||
Swiss Insured Brazil Power Finance Sarl | BRL | 9.85 | % | 07/16/32 | 20,035,000 | 5,317,570 | (4) | |||||||||
Mexico - 6.23% | ||||||||||||||||
America Movil SAB de CV | MXN | 6.00 | % | 06/09/19 | 364,230,000 | 17,820,099 | ||||||||||
Petroleos Mexicanos: | ||||||||||||||||
MXN | 7.19 | % | 09/12/24 | 562,054,300 | 24,861,018 | (3) |
Stone Harbor Investment Funds Annual Report | May 31, 2018 | 41 |
Stone Harbor Local Markets Fund | Statements of Investments |
May 31, 2018
Currency | Rate | Maturity Date | Principal Amount/Shares* | Value (Expressed in USD) | ||||||||||||||
Mexico (continued) | ||||||||||||||||||
Petroleos Mexicanos: (continued) | ||||||||||||||||||
MXN | 7.47 | % | 11/12/26 | 520,590,000 | $ | 22,617,155 | ||||||||||||
65,298,272 | ||||||||||||||||||
TOTAL CORPORATE BONDS | 72,579,218 | |||||||||||||||||
(Cost $84,583,881) | ||||||||||||||||||
SHORT TERM INVESTMENTS - 4.90% | ||||||||||||||||||
Money Market Mutual Funds - 4.90% | ||||||||||||||||||
State Street Institutional Liquid Reserves Fund (7-Day Yield) | USD | 1.95 | % | N/A | 51,296,977 | 51,302,106 | ||||||||||||
TOTAL SHORT TERM INVESTMENTS | 51,302,106 | |||||||||||||||||
(Cost $51,297,903) | ||||||||||||||||||
Total Investments - 85.62% | 897,574,846 | |||||||||||||||||
(Cost $986,086,468) | ||||||||||||||||||
150,764,040 | (6) | |||||||||||||||||
Other Assets In Excess of Liabilities - 14.38% | ||||||||||||||||||
Net Assets - 100.00% | $ | 1,048,338,886 |
* | The principal amount/shares of each security is stated in the currency in which the security is denominated. |
Currency Abbreviations:
ARS - Argentine Peso
BRL - Brazilian Real
CLP - Chilean Peso
COP - Columbian Peso
CZK - Czech Republic Koruna
EUR - Euro Currency
IDR - Indonesian Rupiah
KZT - Kazakhstan Tenge
MXN - Mexican Peso
MYR - Malaysian Ringgit
PEN - Peruvian Nuevo Sol
PLN - Polish Zloty
RON - Romanian Leu
RUB - Russian Ruble
THB - Thai Baht
TRY - Turkish Lira
USD - United States Dollar
UYU - Uruguayan Peso
ZAR - South African Rand
(1) | Step bond. Coupon changes periodically based upon a predetermined schedule. Interest rate disclosed is that which is in effect as of May 31, 2018. |
(2) | Issued with a zero coupon. Income is recognized through the accretion of discount. |
(3) | 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 As of May 31, 2018, the aggregate market value of those pursuant to the Securities Act of 1933, or pursuant to an exemption from registration. securities was $38,848,210, which represents approximately 3.71% of net assets. |
(4) | 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 $19,341,759, which represents approximately 1.84% of net assets as of May 31, 2018. |
42 | www.shiplp.com |
Stone Harbor Local Markets Fund | Statements of Investments |
May 31, 2018
(5) | Floating or variable rate security. The reference rate is described above. The rate in effect as of May 31, 2018 is based on the reference rate plus the displayed spread as of the security's last reset date. Certain variable rate securities are not based on a published reference rate and spread but are determined by the issuer or agent and are based on current market conditions. These securities do not indicate a reference rate and spread in their description. |
(6) | Includes cash which is being held as collateral for forward foreign currency contracts and interest rate swap contracts. |
OUTSTANDING FORWARD FOREIGN CURRENCY CONTRACTS
Counterparty | Foreign Currency | Contracted Amount** | Purchase/Sale Contract | Settlement Date | Current Value | Unrealized Appreciation/ (Depreciation) | ||||||||||||
Barclays | MXN | 163,234,860 | Purchase | 06/08/18 | $ | 8,178,511 | $ | 28,585 | ||||||||||
Citigroup Global Markets | BRL | 6,597,818 | Purchase | 06/04/18 | 1,771,678 | 6,612 | ||||||||||||
Citigroup Global Markets | BRL | 6,597,818 | Sale | 06/04/18 | 1,771,678 | 31,142 | ||||||||||||
Citigroup Global Markets | CLP | 3,125,382,735 | Sale | 06/08/18 | 4,959,204 | 58,268 | ||||||||||||
Citigroup Global Markets | COP | 8,455,807,511 | Sale | 06/08/18 | 2,925,058 | 93,846 | ||||||||||||
Citigroup Global Markets | MXN | 87,373,204 | Sale | 06/22/18 | 4,366,615 | 30,428 | ||||||||||||
Citigroup Global Markets | PEN | 17,855,741 | Sale | 06/08/18 | 5,456,414 | 55,127 | ||||||||||||
Citigroup Global Markets | PLN | 61,660,560 | Purchase | 06/08/18 | 16,690,067 | 118,612 | ||||||||||||
Citigroup Global Markets | THB | 78,900,007 | Sale | 06/15/18 | 2,467,330 | 5,869 | ||||||||||||
Goldman Sachs & Co. | MXN | 99,779,896 | Purchase | 06/08/18 | 4,999,244 | 17,896 | ||||||||||||
Goldman Sachs & Co. | MXN | 86,074,560 | Sale | 06/22/18 | 4,301,713 | 30,325 | ||||||||||||
Goldman Sachs & Co. | ZAR | 67,600,613 | Sale | 06/22/18 | 5,297,324 | 198,660 | ||||||||||||
Goldman Sachs & Co. | ZAR | 128,374,716 | Purchase | 06/22/18 | 10,059,710 | 20,710 | ||||||||||||
HSBC | PLN | 53,036,701 | Purchase | 06/08/18 | 14,355,791 | 98,115 | ||||||||||||
J.P. Morgan Chase & Co. | ARS | 94,076,082 | Purchase | 06/21/18 | 3,701,792 | 45,512 | ||||||||||||
J.P. Morgan Chase & Co. | BRL | 12,289,519 | Purchase | 06/04/18 | 3,300,041 | 7,911 | ||||||||||||
J.P. Morgan Chase & Co. | BRL | 12,289,519 | Sale | 06/04/18 | 3,300,041 | 201,046 | ||||||||||||
J.P. Morgan Chase & Co. | CLP | 2,623,110,000 | Sale | 06/08/18 | 4,162,222 | 37,778 | ||||||||||||
J.P. Morgan Chase & Co. | COP | 19,723,279,967 | Sale | 06/08/18 | 6,822,736 | 215,451 | ||||||||||||
J.P. Morgan Chase & Co. | MXN | 112,643,678 | Sale | 06/22/18 | 5,629,547 | 37,917 | ||||||||||||
J.P. Morgan Chase & Co. | PEN | 1,675,095 | Purchase | 06/08/18 | 511,881 | 1,881 | ||||||||||||
J.P. Morgan Chase & Co. | PEN | 4,174,979 | Sale | 06/08/18 | 1,275,803 | 13,089 | ||||||||||||
J.P. Morgan Chase & Co. | PLN | 77,631,770 | Purchase | 06/08/18 | 21,013,099 | 138,171 | ||||||||||||
Morgan Stanley | MXN | 157,204,661 | Purchase | 06/08/18 | 7,876,381 | 23,530 | ||||||||||||
$ | 1,516,481 |
Stone Harbor Investment Funds Annual Report | May 31, 2018 | 43 |
Stone Harbor Local Markets Fund | Statements of Investments |
May 31, 2018
OUTSTANDING FORWARD FOREIGN CURRENCY CONTRACTS (continued)
Counterparty | Foreign Currency | Contracted Amount** | Purchase/Sale Contract | Settlement Date | Current Value | Unrealized Appreciation/ (Depreciation) | ||||||||||||
Citigroup Global Markets | ARS | 299,869,825 | Purchase | 06/21/18 | $ | 11,799,552 | $ | (316,448 | ) | |||||||||
Citigroup Global Markets | ARS | 110,775,000 | Purchase | 07/20/18 | 4,233,602 | (1,016,398 | ) | |||||||||||
Citigroup Global Markets | BRL | 6,597,818 | Sale | 07/03/18 | 1,766,657 | (6,793 | ) | |||||||||||
Citigroup Global Markets | CLP | 3,125,382,735 | Purchase | 06/08/18 | 4,959,204 | (28,162 | ) | |||||||||||
Citigroup Global Markets | CZK | 139,713,285 | Purchase | 06/29/18 | 6,335,430 | (66,704 | ) | |||||||||||
Citigroup Global Markets | PLN | 8,189,198 | Purchase | 07/11/18 | 2,218,135 | (14,897 | ) | |||||||||||
Citigroup Global Markets | TRY | 6,473,802 | Sale | 06/27/18 | 1,416,525 | (6,449 | ) | |||||||||||
Goldman Sachs & Co. | CLP | 18,374,500,200 | Purchase | 06/08/18 | 29,155,757 | (212,900 | ) | |||||||||||
Goldman Sachs & Co. | CZK | 237,909,568 | Purchase | 06/29/18 | 10,788,232 | (130,560 | ) | |||||||||||
Goldman Sachs & Co. | IDR | 91,438,472,920 | Sale | 06/08/18 | 6,577,535 | (75,475 | ) | |||||||||||
Goldman Sachs & Co. | PLN | 30,696,081 | Purchase | 07/11/18 | 8,314,375 | (57,243 | ) | |||||||||||
Goldman Sachs & Co. | RON | 5,815,729 | Purchase | 07/11/18 | 1,457,673 | (13,453 | ) | |||||||||||
Goldman Sachs & Co. | RUB | 1,124,670,467 | Purchase | 06/08/18 | 18,005,389 | (83,667 | ) | |||||||||||
Goldman Sachs & Co. | RUB | 534,840,167 | Sale | 06/08/18 | 8,562,512 | (150,390 | ) | |||||||||||
Goldman Sachs & Co. | ZAR | 70,720,495 | Purchase | 06/22/18 | 5,541,805 | (84,113 | ) | |||||||||||
J.P. Morgan Chase & Co. | ARS | 360,086,619 | Purchase | 06/08/18 | 14,365,510 | (1,869,942 | ) | |||||||||||
J.P. Morgan Chase & Co. | ARS | 198,585,668 | Purchase | 07/18/18 | 7,604,079 | (1,774,229 | ) | |||||||||||
J.P. Morgan Chase & Co. | BRL | 12,289,519 | Sale | 07/03/18 | 3,290,689 | (8,670 | ) | |||||||||||
J.P. Morgan Chase & Co. | COP | 53,345,193,153 | Purchase | 06/08/18 | 18,453,329 | (11,605 | ) | |||||||||||
J.P. Morgan Chase & Co. | CZK | 206,863,037 | Purchase | 06/29/18 | 9,380,398 | (108,732 | ) | |||||||||||
J.P. Morgan Chase & Co. | IDR | 108,175,655,000 | Sale | 06/08/18 | 7,781,508 | (96,618 | ) | |||||||||||
J.P. Morgan Chase & Co. | RON | 6,090,421 | Purchase | 07/11/18 | 1,526,523 | (14,283 | ) | |||||||||||
J.P. Morgan Chase & Co. | TRY | 29,924,044 | Sale | 06/27/18 | 6,547,646 | (40,877 | ) | |||||||||||
Morgan Stanley | RUB | 1,380,435,795 | Purchase | 06/08/18 | 22,100,058 | (65,291 | ) | |||||||||||
$ | (6,253,899 | ) |
** | The contracted amount is stated in the currency in which the contract is denominated. |
INTEREST RATE SWAP CONTRACTS (CENTRALLY CLEARED)
Pay/Receive Floating Rate | Clearing House | Floating Rate | Expiration Date | Notional Amount*** | Currency | Fixed Rate | Value | Unrealized Appreciation/ (Depreciation) | ||||||||||||||
Pay | Chicago Mercantile Exchange | JIBAR 3M | 04/25/2023 | 79,845,000 | ZAR | 7.315 | % | $ | (39,965 | ) | $ | (39,965 | ) | |||||||||
Pay | Chicago Mercantile Exchange | JIBAR 3M | 04/25/2023 | 4,851,000 | ZAR | 7.285 | % | (2,896 | ) | (2,896 | ) | |||||||||||
$ | (42,861 | ) | $ | (42,861 | ) |
Interest rate swaps pay quarterly.
*** | The notional amount of each security is stated in the currency in which the security is denominated. |
CROSS CURRENCY SWAP CONTRACTS (OVER THE COUNTER)
Fund Receives | Fund Pays | |||||||||||||
Notional Amount | Notional Currency | Fixed Rate | Notional Amount | Notional Currency | Fixed Rate | Expiration Date | Counterparty | Value | Unrealized Appreciation/ (Depreciation) | |||||
218,593,900 | MXN | 8.670% | 11,090,507 | USD | 3.750% | 1/11/2028 | Goldman Sachs & Co. | $ | (632,487) | $ | (632,487) |
Cross currency swaps pay semi-annually.
See Notes to Financial Statements
44 | www.shiplp.com |
Stone Harbor Emerging Markets Corporate Debt Fund | Statements of Investments |
May 31, 2018
Currency | Rate | Maturity Date | Principal Amount/Shares* | Value (Expressed in USD) | ||||||||||||
SOVEREIGN DEBT OBLIGATIONS - 1.63% | ||||||||||||||||
Argentina - 1.63% | ||||||||||||||||
Provincia de Buenos Aires | USD | 7.88 | % | 06/15/27 | 200,000 | $ | 187,750 | (1) | ||||||||
TOTAL SOVEREIGN DEBT OBLIGATIONS | 187,750 | |||||||||||||||
(Cost $207,332) | ||||||||||||||||
CORPORATE BONDS - 95.65% | ||||||||||||||||
Argentina - 2.24% | ||||||||||||||||
Pampa Energia SA: | ||||||||||||||||
USD | 7.38 | % | 07/21/23 | 68,000 | 68,238 | (1) | ||||||||||
USD | 7.50 | % | 01/24/27 | 43,000 | 41,160 | (1) | ||||||||||
Rio Energy SA | USD | 6.88 | % | 02/01/25 | 101,000 | 91,572 | (1) | |||||||||
YPF SA | USD | 8.50 | % | 07/28/25 | 55,000 | 56,497 | (1) | |||||||||
257,467 | ||||||||||||||||
Brazil - 9.97% | ||||||||||||||||
Adecoagro SA | USD | 6.00 | % | 09/21/27 | 94,000 | 82,485 | (1) | |||||||||
Banco do Brasil SA | USD | 9.00 | % | Perpetual | 71,000 | 71,799 | (1)(2) | |||||||||
BRF GmbH | USD | 4.35 | % | 09/29/26 | 152,000 | 127,779 | (1) | |||||||||
Cosan Luxembourg SA | USD | 7.00 | % | 01/20/27 | 39,000 | 39,146 | (1) | |||||||||
Cosan, Ltd. | USD | 5.95 | % | 09/20/24 | 64,000 | 62,000 | (1) | |||||||||
ESAL GmbH | USD | 6.25 | % | 02/05/23 | 113,000 | 108,401 | (1) | |||||||||
Gol Finance, Inc. | USD | 7.00 | % | 01/31/25 | 226,000 | 194,010 | (1) | |||||||||
JSL Europe SA | USD | 7.75 | % | 07/26/24 | 83,000 | 81,651 | (1) | |||||||||
Marfrig Holdings Europe BV | USD | 8.00 | % | 06/08/23 | 17,000 | 17,308 | (1) | |||||||||
Minerva Luxembourg SA | USD | 6.50 | % | 09/20/26 | 166,000 | 153,218 | (1) | |||||||||
Petrobras Global Finance BV: | ||||||||||||||||
USD | 6.25 | % | 03/17/24 | 19,000 | 19,289 | |||||||||||
USD | 8.75 | % | 05/23/26 | 25,000 | 27,719 | |||||||||||
Rumo Luxemburg Sarl | USD | 5.88 | % | 01/18/25 | 74,000 | 70,152 | (1) | |||||||||
Vrio Finco 1 LLC / Vrio Finco 2, Inc. | USD | 6.25 | % | 04/04/23 | 91,000 | 91,910 | (1) | |||||||||
1,146,867 | ||||||||||||||||
Chile - 3.02% | ||||||||||||||||
Colbun SA | USD | 4.50 | % | 07/10/24 | 69,000 | 69,473 | (1) | |||||||||
Empresa Electrica Angamos SA | USD | 4.88 | % | 05/25/29 | 60,260 | 57,798 | (1) | |||||||||
Empresa Nacional de | ||||||||||||||||
Telecomunicaciones SA | USD | 4.75 | % | 08/01/26 | 11,000 | 10,538 | (1) | |||||||||
Geopark, Ltd. | USD | 6.50 | % | 09/21/24 | 162,000 | 158,290 | (1) | |||||||||
VTR Finance BV | USD | 6.88 | % | 01/15/24 | 50,000 | 50,995 | (1) | |||||||||
347,094 | ||||||||||||||||
China - 7.48% | ||||||||||||||||
CNRC Capitale, Ltd. | USD | 3.90 | % | Perpetual | 200,000 | 191,000 | (2) | |||||||||
Country Garden Holdings Co., Ltd. | USD | 4.75 | % | 07/25/22 | 200,000 | 195,125 | ||||||||||
ENN Energy Holdings, Ltd. | USD | 3.25 | % | 07/24/22 | 200,000 | 193,750 | ||||||||||
Golden Eagle Retail Group, Ltd. | USD | 4.63 | % | 05/21/23 | 161,000 | 141,479 | (3) | |||||||||
Industrial & Commercial Bank of China, Ltd. | USD | 6.00 | % | Perpetual | 136,000 | 139,368 | (2)(3) | |||||||||
860,722 | ||||||||||||||||
Colombia - 5.26% | ||||||||||||||||
Banco de Bogota SA | USD | 6.25 | % | 05/12/26 | 17,000 | 17,276 | (1) | |||||||||
Bancolombia SA | USD | 4.88 | % | 10/18/27 | 110,000 | 104,527 |
Stone Harbor Investment Funds Annual Report | May 31, 2018 | 45 |
Stone Harbor Emerging Markets Corporate Debt Fund | Statements of Investments |
May 31, 2018
Currency | Rate | Maturity Date | Principal Amount/Shares* | Value (Expressed in USD) | ||||||||||||
Colombia (continued) | ||||||||||||||||
Ecopetrol SA: | ||||||||||||||||
USD | 5.88 | % | 09/18/23 | 45,000 | $ | 47,723 | ||||||||||
USD | 5.38 | % | 06/26/26 | 58,000 | 59,537 | |||||||||||
USD | 7.38 | % | 09/18/43 | 76,000 | 85,557 | |||||||||||
Gran Tierra Energy International Holdings, Ltd. | USD | 6.25 | % | 02/15/25 | 227,000 | 215,366 | (1) | |||||||||
Millicom International Cellular SA | USD | 5.13 | % | 01/15/28 | 49,000 | 45,325 | (1) | |||||||||
Oleoducto Central SA | USD | 4.00 | % | 05/07/21 | 30,000 | 29,997 | (1) | |||||||||
605,308 | ||||||||||||||||
Ghana - 1.97% | ||||||||||||||||
Tullow Oil PLC: | ||||||||||||||||
USD | 6.25 | % | 04/15/22 | 227,000 | 226,149 | (1)(3) | ||||||||||
226,149 | ||||||||||||||||
Guatemala - 0.37% | ||||||||||||||||
Energuate Trust | USD | 5.88 | % | 05/03/27 | 44,000 | 42,954 | (1) | |||||||||
Hong Kong - 3.46% | ||||||||||||||||
CK Hutchison Capital Securities 17, Ltd. | USD | 4.00 | % | Perpetual | 414,000 | 397,958 | (1)(2) | |||||||||
India - 5.46% | ||||||||||||||||
ABJA Investment Co., Pte, Ltd. | USD | 5.45 | % | 01/24/28 | 200,000 | 181,250 | ||||||||||
Greenko Dutch BV: | ||||||||||||||||
USD | 4.88 | % | 07/24/22 | 85,000 | 80,856 | (1) | ||||||||||
USD | 5.25 | % | 07/24/24 | 54,000 | 50,828 | (1) | ||||||||||
Vedanta Resources PLC: | ||||||||||||||||
USD | 6.00 | % | 01/31/19 | 66,000 | 66,413 | (1) | ||||||||||
USD | 6.38 | % | 07/30/22 | 87,000 | 85,689 | (1) | ||||||||||
USD | 7.13 | % | 05/31/23 | 51,000 | 50,630 | (1) | ||||||||||
USD | 6.13 | % | 08/09/24 | 121,000 | 112,681 | (1) | ||||||||||
628,347 | ||||||||||||||||
Indonesia - 7.00% | ||||||||||||||||
Indika Energy Capital II Pte, Ltd. | USD | 6.88 | % | 04/10/22 | 40,000 | 40,320 | (1) | |||||||||
Indo Energy Finance II BV | USD | 6.38 | % | 01/24/23 | 265,000 | 260,031 | (3) | |||||||||
Listrindo Capital BV | USD | 4.95 | % | 09/14/26 | 149,000 | 139,129 | (1) | |||||||||
Minejesa Capital BV: | ||||||||||||||||
USD | 4.63 | % | 08/10/30 | 80,000 | 74,305 | (1) | ||||||||||
USD | 5.63 | % | 08/10/37 | 104,000 | 96,785 | (1) | ||||||||||
PT Bumi Resources TBK (Eterna Capital Pte, Ltd.): | ||||||||||||||||
USD | 8.00% PIK | 12/11/22 | 61,600 | 59,928 | (4) | |||||||||||
6.50% Cash +1.00% | ||||||||||||||||
USD | PIK | 12/11/22 | 133,402 | 134,359 | (4)(5) | |||||||||||
804,857 | ||||||||||||||||
Israel - 1.31% | ||||||||||||||||
Delek & Avner Tamar Bond, Ltd.: | ||||||||||||||||
USD | 5.08 | % | 12/30/23 | 76,000 | 75,573 | (1) | ||||||||||
USD | 5.41 | % | 12/30/25 | 76,000 | 75,620 | (1) | ||||||||||
151,193 | ||||||||||||||||
Jamaica - 1.80% | ||||||||||||||||
Digicel Group, Ltd.: | ||||||||||||||||
USD | 8.25 | % | 09/30/20 | 81,000 | 61,560 | (1) | ||||||||||
USD | 7.13 | % | 04/01/22 | 211,000 | 145,801 | (1)(3) | ||||||||||
207,361 |
46 | www.shiplp.com |
Stone Harbor Emerging Markets Corporate Debt Fund | Statements of Investments |
May 31, 2018
Currency | Rate | Maturity Date | Principal Amount/Shares* | Value (Expressed in USD) | ||||||||||||
Kazakhstan - 1.50% | ||||||||||||||||
KazTransGas JSC | USD | 4.38 | % | 09/26/27 | 62,000 | $ | 58,047 | (1) | ||||||||
Nostrum Oil & Gas | USD | 7.00 | % | 02/16/25 | 122,000 | 114,528 | (1) | |||||||||
172,575 | ||||||||||||||||
Macau - 3.44% | ||||||||||||||||
Melco Resorts Finance, Ltd. | USD | 4.88 | % | 06/06/25 | 168,000 | 158,888 | (1) | |||||||||
Studio City Co., Ltd.: | ||||||||||||||||
USD | 8.50 | % | 12/01/20 | 47,000 | 47,750 | (3) | ||||||||||
USD | 7.25 | % | 11/30/21 | 51,000 | 53,231 | (1) | ||||||||||
Wynn Macau, Ltd. | USD | 5.50 | % | 10/01/27 | 141,000 | 135,536 | (1) | |||||||||
395,405 | ||||||||||||||||
Malaysia - 1.68% | ||||||||||||||||
Gohl Capital, Ltd. | USD | 4.25 | % | 01/24/27 | 200,000 | 192,942 | ||||||||||
Mexico - 7.12% | ||||||||||||||||
Alfa SAB de CV | USD | 5.25 | % | 03/25/24 | 35,000 | 35,504 | (1) | |||||||||
Axtel SAB Axtel de CV | USD | 6.38 | % | 11/14/24 | 126,000 | 121,275 | (1) | |||||||||
Cemex SAB de CV | USD | 7.75 | % | 04/16/26 | 26,000 | 28,099 | (1) | |||||||||
Cometa Energia SA de CV | USD | 6.38 | % | 04/24/35 | 150,000 | 147,000 | (1) | |||||||||
Metalsa SA de CV | USD | 4.90 | % | 04/24/23 | 86,000 | 83,128 | (1) | |||||||||
Mexico Generadora De Energia | USD | 5.50 | % | 12/06/32 | 83,580 | 83,058 | (1) | |||||||||
Petroleos Mexicanos | USD | 4.25 | % | 01/15/25 | 91,000 | 84,584 | ||||||||||
Sixsigma Networks Mexico SA de CV: | ||||||||||||||||
USD | 8.25 | % | 11/07/21 | 117,000 | 123,657 | (1) | ||||||||||
USD | 7.50 | % | 05/02/25 | 117,000 | 112,654 | (1) | ||||||||||
818,959 | ||||||||||||||||
Morocco - 0.45% | ||||||||||||||||
OCP SA: | ||||||||||||||||
USD | 5.63 | % | 04/25/24 | 21,000 | 21,604 | (1) | ||||||||||
USD | 4.50 | % | 10/22/25 | 31,000 | 29,779 | (1) | ||||||||||
51,383 | ||||||||||||||||
Nigeria - 1.15% | ||||||||||||||||
IHS Netherlands Holdco BV | USD | 9.50 | % | 10/27/21 | 131,000 | 132,801 | (1) | |||||||||
Oman - 0.52% | ||||||||||||||||
Oztel Holdings SPC, Ltd. | USD | 6.63 | % | 04/24/28 | 61,000 | 59,856 | (1) | |||||||||
Peru - 2.63% | ||||||||||||||||
Cia Minera Milpo SAA | USD | 4.63 | % | 03/28/23 | 87,000 | 86,091 | (1) | |||||||||
Inkia Energy, Ltd. | USD | 5.88 | % | 11/09/27 | 90,000 | 84,672 | (1) | |||||||||
Kallpa Generacion SA: | ||||||||||||||||
USD | 4.88 | % | 05/24/26 | 64,000 | 62,240 | (1) | ||||||||||
USD | 4.13 | % | 08/16/27 | 76,000 | 69,285 | (1) | ||||||||||
302,288 | ||||||||||||||||
Philippines - 1.67% | ||||||||||||||||
Royal Capital BV | USD | 4.88 | % | Perpetual | 200,000 | 192,273 | (2) | |||||||||
Russia - 1.64% | ||||||||||||||||
VEON Holdings BV | USD | 4.95 | % | 06/16/24 | 200,000 | 188,800 | (3) | |||||||||
Saudi Arabia - 1.42% | ||||||||||||||||
Acwa Power Management And | ||||||||||||||||
Investments One, Ltd. | USD | 5.95 | % | 12/15/39 | 167,000 | 163,869 | (1) |
Stone Harbor Investment Funds Annual Report | May 31, 2018 | 47 |
Stone Harbor Emerging Markets Corporate Debt Fund | Statements of Investments |
May 31, 2018
Currency | Rate | Maturity Date | Principal Amount/Shares* | Value (Expressed in USD) | ||||||||||||
Singapore - 1.74% | ||||||||||||||||
United Overseas Bank, Ltd. | USD | 3.75 | % | 09/19/24 | 200,000 | $ | 200,158 | |||||||||
South Africa - 0.90% | ||||||||||||||||
Myriad International Holdings BV | USD | 5.50 | % | 07/21/25 | 99,000 | 102,960 | (1) | |||||||||
South Korea - 0.97% | ||||||||||||||||
Shinhan Bank Co., Ltd. | USD | 3.88 | % | 03/24/26 | 117,000 | 112,135 | (3) | |||||||||
Thailand - 4.46% | ||||||||||||||||
PTTEP Treasury Center Co., Ltd. | USD | 4.88 | % | Perpetual | 510,000 | 512,550 | (1)(2) | |||||||||
Turkey - 7.12% | ||||||||||||||||
Akbank Turk AS: | ||||||||||||||||
USD | 5.13 | % | 03/31/25 | 77,000 | 69,974 | (1) | ||||||||||
USD | 6.80 | % | 04/27/28 | 231,000 | 212,664 | (1)(3)(5) | ||||||||||
Turkiye Garanti Bankasi AS: | ||||||||||||||||
USD | 5.25 | % | 09/13/22 | 138,000 | 132,135 | (1) | ||||||||||
USD | 6.13 | % | 05/24/27 | 284,000 | 265,187 | (1) | ||||||||||
Turkiye Is Bankasi AS: | ||||||||||||||||
USD | 5.00 | % | 04/30/20 | 129,000 | 125,807 | (1) | ||||||||||
USD | 7.00 | % | 06/29/28 | 14,000 | 12,775 | (1) | ||||||||||
818,542 | ||||||||||||||||
Ukraine - 4.96% | ||||||||||||||||
Metinvest BV | USD | 7.75 | % | 04/23/23 | 159,000 | 156,218 | (1) | |||||||||
State Savings Bank of Ukraine Via SSB #1 PLC | USD | 9.63 | % | 03/20/25 | 200,000 | 207,000 | (3)(6) | |||||||||
Ukraine Railways Via Shortline PLC | USD | 9.88 | % | 09/15/21 | 200,000 | 207,463 | (3) | |||||||||
570,681 | ||||||||||||||||
United Arab Emirates - 2.94% | ||||||||||||||||
Abu Dhabi Crude Oil Pipeline: | ||||||||||||||||
USD | 3.65 | % | 11/02/29 | 27,000 | 25,295 | (1) | ||||||||||
USD | 4.60 | % | 11/02/47 | 85,000 | 79,794 | (1) | ||||||||||
MAF Global Securities, Ltd. | USD | 5.50 | % | Perpetual | 239,000 | 232,876 | (2) | |||||||||
337,965 | ||||||||||||||||
TOTAL CORPORATE BONDS | 11,002,419 | |||||||||||||||
(Cost $11,344,604) | ||||||||||||||||
SHORT TERM INVESTMENTS- 1.35% | ||||||||||||||||
Money Market Mutual Funds - 1.35% | ||||||||||||||||
State Street Institutional Liquid Reserves Fund (7-Day Yield) | USD | 1.95 | % | N/A | 154,519 | 154,534 | ||||||||||
TOTAL SHORT TERM INVESTMENTS | 154,534 | |||||||||||||||
(Cost $154,491) | ||||||||||||||||
Total Investments - 98.63% | 11,344,703 | |||||||||||||||
(Cost $11,706,427) | ||||||||||||||||
Other Assets In Excess of Liabilities - 1.37% | 158,124 | |||||||||||||||
Net Assets - 100.00% | $ | 11,502,827 |
* | The principal amount/shares of each security is stated in the currency in which the security is denominated. |
Currency Abbreviations:
USD - United States Dollar
48 | www.shiplp.com |
Stone Harbor Emerging Markets Corporate Debt Fund | Statements of Investments |
May 31, 2018
(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 $7,311,972, which represents approximately 63.57% of net assets as of May 31, 2018. |
(2) | Security has no contractual maturity date, is not redeemable and contractually pays an indefinite stream of interest. |
(3) | 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, 2018, the aggregate market value of those securities was $1,888,640, which represents approximately 16.42% of net assets. |
(4) | Payment-in-kind securities. |
(5) | Floating or variable rate security. The reference rate is described above. The rate in effect as of May 31, 2018 is based on the reference rate plus the displayed spread as of the security's last reset date. Certain variable rate securities are not based on a published reference rate and spread but are determined by the issuer or agent and are based on current market conditions. These securities do not indicate a reference rate and spread in their description. |
(6) | Step bond.Coupon changes periodically based upon a predetermined schedule. Interest rate disclosed is that which is in effect as of May 31, 2018. |
See Notes to Financial Statements
Stone Harbor Investment Funds Annual Report | May 31, 2018 | 49 |
Stone Harbor Investment Grade Fund | Statements of Investments |
May 31, 2018
Currency | Rate | Maturity Date | Principal Amount/Shares* | Value (Expressed in USD) | ||||||||||||
CORPORATE BONDS - 38.60% | ||||||||||||||||
Aerospace/Defense - 0.65% | ||||||||||||||||
Northrop Grumman Corp.: | ||||||||||||||||
USD | 2.93 | % | 01/15/25 | 25,000 | $ | 23,818 | ||||||||||
USD | 4.03 | % | 10/15/47 | 50,000 | 47,081 | |||||||||||
70,899 | ||||||||||||||||
Automotive - 2.05% | ||||||||||||||||
Ford Motor Credit Co. LLC, Series GMTN | USD | 4.39 | % | 01/08/26 | 75,000 | 74,537 | ||||||||||
General Motors Financial Co. Inc. | USD | 4.35 | % | 04/09/25 | 50,000 | 49,820 | ||||||||||
Hyundai Capital America: | ||||||||||||||||
USD | 2.55 | % | 02/06/19 | 75,000 | 74,727 | (1) | ||||||||||
USD | 3.25 | % | 09/20/22 | 25,000 | 24,447 | (1) | ||||||||||
223,531 | ||||||||||||||||
Banking - 7.77% | ||||||||||||||||
Bank of America Corp.: | ||||||||||||||||
USD | 3M US L + 0.37 | % | 01/23/22 | 100,000 | 98,664 | (2) | ||||||||||
Series L | USD | 3.95 | % | 04/21/25 | 25,000 | 24,575 | ||||||||||
Capital One Financial Corp. | USD | 3.75 | % | 03/09/27 | 75,000 | 71,714 | ||||||||||
Citigroup, Inc. | USD | 4.40 | % | 06/10/25 | 125,000 | 125,280 | ||||||||||
Deutsche Bank AG | USD | 3.70 | % | 05/30/24 | 50,000 | 46,771 | ||||||||||
Goldman Sachs Group, Inc. | USD | 3.00 | % | 04/26/22 | 100,000 | 98,221 | ||||||||||
HSBC Holdings PLC | USD | 3.95 | % | 05/18/24 | 50,000 | 50,152 | (2) | |||||||||
Intesa Sanpaolo SpA | USD | 3.88 | % | 07/14/27 | 125,000 | 109,714 | (1) | |||||||||
JPMorgan Chase & Co. | USD | 3.88 | % | 09/10/24 | 50,000 | 49,554 | ||||||||||
Morgan Stanley, Series MTN | USD | 4.10 | % | 05/22/23 | 50,000 | 50,773 | ||||||||||
Synovus Financial Corp. | USD | 3.13 | % | 11/01/22 | 25,000 | 24,156 | ||||||||||
Wells Fargo & Co.: | ||||||||||||||||
USD | 2.10 | % | 07/26/21 | 75,000 | 72,283 | |||||||||||
Series MTN | USD | 3M US L + 1.31 | % | 05/22/28 | 25,000 | 23,921 | (2) | |||||||||
845,778 | ||||||||||||||||
Building Products - 0.42% | ||||||||||||||||
Vulcan Materials Co. | USD | 4.50 | % | 06/15/47 | 50,000 | 46,243 | ||||||||||
Construction Machinery - 0.44% | ||||||||||||||||
John Deere Capital Corp., Series MTN | USD | 2.15 | % | 09/08/22 | 50,000 | 47,923 | ||||||||||
Drillers/Services - 0.25% | ||||||||||||||||
Halliburton Co. | USD | 5.00 | % | 11/15/45 | 25,000 | 27,066 | ||||||||||
Electric - 2.96% | ||||||||||||||||
DTE Energy Co., Series C | USD | 3.50 | % | 06/01/24 | 50,000 | 49,250 | ||||||||||
Enel Finance International NV | USD | 2.88 | % | 05/25/22 | 50,000 | 47,898 | (1) | |||||||||
Exelon Generation Co. LLC | USD | 5.60 | % | 06/15/42 | 50,000 | 50,631 | ||||||||||
FirstEnergy Corp., Series C | USD | 4.85 | % | 07/15/47 | 50,000 | 52,081 | ||||||||||
Georgia Power Co. | USD | 4.30 | % | 03/15/42 | 50,000 | 50,776 | ||||||||||
NSTAR Electric Co. | USD | 3.20 | % | 05/15/27 | 50,000 | 48,278 | ||||||||||
South Carolina Electric & Gas Co. | USD | 4.10 | % | 06/15/46 | 25,000 | 22,946 | ||||||||||
321,860 | ||||||||||||||||
Exploration & Production - 1.48% | ||||||||||||||||
Anadarko Petroleum Corp. | USD | 6.45 | % | 09/15/36 | 50,000 | 59,055 |
50 | www.shiplp.com |
Stone Harbor Investment Grade Fund | Statements of Investments |
May 31, 2018
Currency | Rate | Maturity Date | Principal Amount/Shares* | Value (Expressed in USD) | ||||||||||||
Exploration & Production (continued) | ||||||||||||||||
Apache Corp. | USD | 5.10 | % | 09/01/40 | 50,000 | $ | 50,874 | |||||||||
Continental Resources, Inc. | USD | 4.50 | % | 04/15/23 | 50,000 | 50,941 | ||||||||||
160,870 | ||||||||||||||||
Food and Beverage - 1.23% | ||||||||||||||||
Dr Pepper Snapple Group, Inc.: | ||||||||||||||||
USD | 3.43 | % | 06/15/27 | 50,000 | 46,677 | (1) | ||||||||||
USD | 3.43 | % | 06/15/27 | 10,000 | 9,335 | |||||||||||
Kraft Heinz Foods Co. | USD | 4.88 | % | 02/15/25 | 75,000 | 77,870 | (1) | |||||||||
133,882 | ||||||||||||||||
Gas Pipelines - 3.26% | ||||||||||||||||
Boardwalk Pipelines LP | USD | 4.95 | % | 12/15/24 | 50,000 | 51,464 | ||||||||||
Dominion Energy, Inc. | USD | 2.58 | % | 07/01/20 | 50,000 | 49,302 | ||||||||||
EQT Midstream Partners LP | USD | 4.00 | % | 08/01/24 | 75,000 | 72,172 | ||||||||||
Kinder Morgan Energy Partners LP | USD | 5.50 | % | 03/01/44 | 50,000 | 50,851 | ||||||||||
Magellan Midstream Partners LP | USD | 5.00 | % | 03/01/26 | 25,000 | 26,757 | ||||||||||
Sabine Pass Liquefaction LLC | USD | 5.88 | % | 06/30/26 | 50,000 | 54,215 | ||||||||||
Western Gas Partners LP | USD | 5.45 | % | 04/01/44 | 50,000 | 49,847 | ||||||||||
354,608 | ||||||||||||||||
Healthcare - 1.52% | ||||||||||||||||
Cardinal Health, Inc. | USD | 3.41 | % | 06/15/27 | 50,000 | 46,353 | ||||||||||
CVS Health Corp.: | ||||||||||||||||
USD | 3.70 | % | 03/09/23 | 25,000 | 24,956 | |||||||||||
USD | 4.30 | % | 03/25/28 | 25,000 | 24,860 | |||||||||||
Teva Pharmaceutical Finance Netherlands III BV | USD | 2.20 | % | 07/21/21 | 75,000 | 68,931 | ||||||||||
165,100 | ||||||||||||||||
Leisure - 0.45% | ||||||||||||||||
Royal Caribbean Cruises, Ltd. | USD | 2.65 | % | 11/28/20 | 50,000 | 49,268 | ||||||||||
Life Insurance - 0.89% | ||||||||||||||||
American International Group, Inc. | USD | 3.88 | % | 01/15/35 | 50,000 | 45,309 | ||||||||||
Nippon Life Insurance Co. | USD | 5.10 | % | 10/16/44 | 50,000 | 51,586 | (1)(2) | |||||||||
96,895 | ||||||||||||||||
Media Cable - 1.74% | ||||||||||||||||
Charter Communications Operating LLC / Charter Communications Operating Capital, Series WI | USD | 5.38 | % | 05/01/47 | 100,000 | 93,210 | ||||||||||
Comcast Corp. | USD | 4.25 | % | 01/15/33 | 50,000 | 49,072 | ||||||||||
Cox Communications, Inc. | USD | 3.50 | % | 08/15/27 | 50,000 | 47,257 | (1) | |||||||||
189,539 | ||||||||||||||||
Media Other - 0.91% | ||||||||||||||||
Interpublic Group of Cos., Inc. | USD | 3.75 | % | 02/15/23 | 50,000 | 49,897 | ||||||||||
Omnicom Group, Inc. | USD | 3.65 | % | 11/01/24 | 50,000 | 48,957 | ||||||||||
98,854 | ||||||||||||||||
Metals/Mining/Steel - 0.97% | ||||||||||||||||
Anglo American Capital PLC | USD | 4.00 | % | 09/11/27 | 50,000 | 47,028 | (1) | |||||||||
Newmont Mining Corp. | USD | 6.25 | % | 10/01/39 | 50,000 | 59,249 | ||||||||||
106,277 |
Stone Harbor Investment Funds Annual Report | May 31, 2018 | 51 |
Stone Harbor Investment Grade Fund | Statements of Investments |
May 31, 2018
Currency | Rate | Maturity Date | Principal Amount/Shares* | Value (Expressed in USD) | ||||||||||||
Non Captive Finance - 1.76% | ||||||||||||||||
Air Lease Corp. | USD | 3.63 | % | 12/01/27 | 100,000 | $ | 92,962 | |||||||||
Discover Bank, Series BKNT | USD | 4.25 | % | 03/13/26 | 50,000 | 49,298 | ||||||||||
GATX Corp. | USD | 4.55 | % | 11/07/28 | 50,000 | 50,503 | ||||||||||
192,763 | ||||||||||||||||
Pharmaceuticals - 0.68% | ||||||||||||||||
Allergan PLC | USD | 4.55 | % | 03/15/35 | 25,000 | 23,964 | ||||||||||
Gilead Sciences, Inc. | USD | 4.50 | % | 02/01/45 | 50,000 | 50,161 | ||||||||||
74,125 | ||||||||||||||||
Real Estate Investment Trust (REITs) - 1.61% | ||||||||||||||||
Avalonbay Communities, Inc., Series MTN | USD | 3.20 | % | 01/15/28 | 25,000 | 23,607 | ||||||||||
DDR Corp. | USD | 4.25 | % | 02/01/26 | 50,000 | 49,237 | ||||||||||
Digital Realty Trust LP | USD | 4.75 | % | 10/01/25 | 50,000 | 51,859 | ||||||||||
Kimco Realty Corp. | USD | 3.20 | % | 05/01/21 | 50,000 | 49,872 | ||||||||||
174,575 | ||||||||||||||||
Refining - 0.44% | ||||||||||||||||
Andeavor | USD | 3.80 | % | 04/01/28 | 50,000 | 47,943 | ||||||||||
Restaurants - 0.46% | ||||||||||||||||
McDonald's Corp. | USD | 4.45 | % | 03/01/47 | 50,000 | 50,447 | ||||||||||
Retail Food/Drug - 0.21% | ||||||||||||||||
Kroger Co. | USD | 4.45 | % | 02/01/47 | 25,000 | 22,933 | ||||||||||
Retail Non Food/Drug - 1.57% | ||||||||||||||||
Alibaba Group Holdings, | USD | 4.20 | % | 12/06/47 | 50,000 | 47,297 | ||||||||||
Amazon.com, Inc. | USD | 4.05 | % | 08/22/47 | 50,000 | 50,003 | (1) | |||||||||
Dollar Tree, Inc. | USD | 3.70 | % | 05/15/23 | 25,000 | 24,938 | ||||||||||
Macy's Retail Holdings, Inc.: | ||||||||||||||||
USD | 3.88 | % | 01/15/22 | 25,000 | 24,972 | |||||||||||
USD | 2.88 | % | 02/15/23 | 25,000 | 23,704 | |||||||||||
170,914 | ||||||||||||||||
Technology - 2.22% | ||||||||||||||||
Broadcom Corp. / Broadcom Cayman Finance, Ltd.: | ||||||||||||||||
USD | 2.38 | % | 01/15/20 | 25,000 | 24,722 | |||||||||||
USD | 3.00 | % | 01/15/22 | 25,000 | 24,405 | |||||||||||
Microsoft Corp. | USD | 3.45 | % | 08/08/36 | 50,000 | 48,124 | ||||||||||
Oracle Corp. | USD | 3.85 | % | 07/15/36 | 25,000 | 24,604 | ||||||||||
Tencent Holdings, Ltd. | USD | 3.60 | % | 01/19/28 | 50,000 | 47,912 | (1) | |||||||||
Xilinx, Inc. | USD | 2.95 | % | 06/01/24 | 75,000 | 71,684 | ||||||||||
241,451 | ||||||||||||||||
Transportation Non Air/Rail - 0.87% | ||||||||||||||||
ERAC USA Finance LLC | USD | 4.20 | % | 11/01/46 | 50,000 | 45,399 | (1) | |||||||||
FedEx Corp. | USD | 4.40 | % | 01/15/47 | 50,000 | 48,588 | ||||||||||
93,987 | ||||||||||||||||
Wireless - 1.13% | ||||||||||||||||
Crown Castle International Corp. | USD | 3.20 | % | 09/01/24 | 50,000 | 47,744 |
52 | www.shiplp.com |
Stone Harbor Investment Grade Fund | Statements of Investments |
May 31, 2018
Currency | Rate | Maturity Date | Principal Amount/Shares* | Value (Expressed in USD) | ||||||||||||
Wireless (continued) | ||||||||||||||||
Vodafone Group PLC | USD | 5.00 | % | 05/30/38 | 75,000 | $ | 74,960 | |||||||||
122,704 | ||||||||||||||||
Wirelines - 0.66% | ||||||||||||||||
Verizon Communications, Inc. | USD | 3.38 | % | 02/15/25 | 75,000 | 72,285 | ||||||||||
TOTAL CORPORATE BONDS | 4,202,720 | |||||||||||||||
(Cost $4,286,401) | ||||||||||||||||
ASSET BACKED/COMMERCIAL MORTGAGE BACKED SECURITIES - 14.14% | ||||||||||||||||
1211 Avenue of the Americas Trust, Series 2015-1211 | USD | 3.90 | % | 08/10/25 | 25,000 | 25,541 | (1) | |||||||||
BHMS Mortgage Trust, Series 2014-ATLS | USD | 1M US L + 1.50 | % | 07/07/17 | 25,000 | 25,020 | (1)(2) | |||||||||
Fannie Mae Pool: | ||||||||||||||||
Series 2009 | USD | 5.00 | % | 02/01/23 | 140,607 | 149,162 | ||||||||||
Series 2016 | USD | 12M US L + 1.55% | 09/01/46 | 170,054 | 170,094 | (2) | ||||||||||
Financial Asset Securities Corp. AAA Trust, Series | ||||||||||||||||
2005-2 | USD | 1M US L + 0.30 | % | 11/26/35 | 29,093 | 28,777 | (1)(2) | |||||||||
Ford Credit Auto Owner Trust, Series 2018-1 | USD | 3.19 | % | 01/15/25 | 25,000 | 24,744 | (1) | |||||||||
Freddie Mac Non Gold Pool: | ||||||||||||||||
Series 2012 | USD | 12M US L + 1.65 | % | 12/01/42 | 127,304 | 127,553 | (2) | |||||||||
Series 2015 | USD | 12M US L + 1.63 | % | 07/01/45 | 86,697 | 86,169 | (2) | |||||||||
Freddie Mac Whole Loan Securities Trust: | ||||||||||||||||
Series 2015-SC02 | USD | 3.00 | % | 09/25/45 | 64,971 | 61,917 | ||||||||||
Series 2016-SC01 | USD | 3.50 | % | 07/25/46 | 100,590 | 98,856 | ||||||||||
GAHR Commercial Mortgage Trust, Series 2015- | ||||||||||||||||
NRF | USD | 1M US L + 1.30 | % | 12/15/34 | 14,336 | 14,342 | (1)(2) | |||||||||
JP Morgan Chase Commercial Mortgage | ||||||||||||||||
Securities Trust: | ||||||||||||||||
Series 2006-LDP9 | USD | 5.34 | % | 05/15/47 | 75,000 | 75,537 | ||||||||||
Series 2007-LDPX | USD | 5.46 | % | 01/15/49 | 9,840 | 9,878 | (2) | |||||||||
New Residential Advance Receivables Trust | ||||||||||||||||
Advance Receivables Backed Notes, Series | ||||||||||||||||
2017-T1 | USD | 3.21 | % | 02/16/21 | 100,000 | 99,575 | (1) | |||||||||
Oak Hill Advisors Residential Loan Trust, Series | ||||||||||||||||
2017-NPL2 | USD | 3.00 | % | 07/25/57 | 93,585 | 92,948 | (1)(3) | |||||||||
Progress Residential Trust, Series 2016-SFR1 | USD | 1M US L + 1.50 | % | 09/17/18 | 49,409 | 49,618 | (1)(2) | |||||||||
RBSSP Resecuritization Trust: | ||||||||||||||||
Series 2012-6 | USD | 1M US L + 0.34 | % | 11/26/35 | 32,156 | 32,118 | (1)(2) | |||||||||
Series 2012-6 | USD | 1M US L + 0.33 | % | 01/26/36 | 21,095 | 20,750 | (1)(2) | |||||||||
Series 2012-6 | USD | 1M US L + 0.23 | % | 08/26/36 | 15,687 | 15,704 | (1)(2) | |||||||||
TAL Advantage V LLC, Series 2013-2A | USD | 3.55 | % | 11/20/23 | 27,500 | 27,365 | (1) | |||||||||
Towd Point Mortgage Trust: | ||||||||||||||||
Series 2015-3 | USD | 3.00 | % | 02/25/23 | 40,107 | 40,003 | (1)(2) | |||||||||
Series 2015-5 | USD | 2.75 | % | 09/25/22 | 26,241 | 26,034 | (1)(2) | |||||||||
Series 2016-3 | USD | 2.25 | % | 04/25/56 | 89,983 | 88,512 | (1)(2) | |||||||||
Series 2016-5 | USD | 2.50 | % | 10/25/56 | 36,707 | 36,072 | (1)(2) | |||||||||
TRU Trust, Series 2016-TOYS | USD | 1M US L + 2.25 | % | 11/15/19 | 45,660 | 45,325 | (1)(2) | |||||||||
VOLT LIV LLC: | ||||||||||||||||
Series 2017-NPL1 | USD | 3.50 | % | 02/25/47 | 18,009 | 18,041 | (1)(3) |
Stone Harbor Investment Funds Annual Report | May 31, 2018 | 53 |
Stone Harbor Investment Grade Fund | Statements of Investments |
May 31, 2018
Currency | Rate | Maturity Date | Principal Amount/Shares* | Value (Expressed in USD) | |||||||||||||
ASSET BACKED/COMMERCIAL MORTGAGE BACKED SECURITIES (continued) | |||||||||||||||||
Series 2018-NPL1 | USD | 3.75 | % | 04/25/48 | 50,000 | $ | 50,179 | (1)(3) | |||||||||
TOTAL ASSET BACKED/COMMERCIAL MORTGAGE BACKED SECURITIES | 1,539,834 | ||||||||||||||||
(Cost $1,552,171) | |||||||||||||||||
U.S. TREASURY BONDS/NOTES - 23.85% | |||||||||||||||||
U.S. Treasury Bonds: | |||||||||||||||||
USD | 2.75 | % | 02/15/28 | 50,000 | 49,537 | ||||||||||||
USD | 2.50 | % | 02/15/46 | 225,000 | 203,221 | ||||||||||||
U.S. Treasury Notes: | |||||||||||||||||
USD | 0.75 | % | 02/15/19 | 175,000 | 173,229 | ||||||||||||
USD | 1.38 | % | 09/30/20 | 425,000 | 414,450 | ||||||||||||
USD | 2.00 | % | 11/15/21 | 625,000 | 612,610 | ||||||||||||
USD | 2.63 | % | 02/28/23 | 325,000 | 324,314 | ||||||||||||
USD | 2.75 | % | 02/15/24 | 250,000 | 250,176 | ||||||||||||
USD | 2.00 | % | 08/15/25 | 600,000 | 568,617 | ||||||||||||
TOTAL U.S. TREASURY BONDS/NOTES | 2,596,154 | ||||||||||||||||
(Cost $2,684,011) | |||||||||||||||||
U.S. GOVERNMENT AGENCY MORTGAGE BACKED SECURITIES - 20.20% | |||||||||||||||||
FGLMC TBA: | |||||||||||||||||
USD | 3.00 | % | 06/13/18 | 100,000 | 96,885 | (4) | |||||||||||
USD | 3.50 | % | 06/13/18 | 425,000 | 423,539 | (4) | |||||||||||
USD | 4.50 | % | 06/13/18 | 225,000 | 234,773 | (4) | |||||||||||
FNMA TBA: | |||||||||||||||||
USD | 3.00 | % | 06/13/18 | 350,000 | 339,268 | (4) | |||||||||||
USD | 3.50 | % | 06/13/18 | 450,000 | 448,471 | (4) | |||||||||||
USD | 4.00 | % | 06/13/18 | 400,000 | 408,625 | (4) | |||||||||||
USD | 2.50 | % | 06/18/18 | 100,000 | 97,418 | (4) | |||||||||||
USD | 3.00 | % | 06/18/18 | 100,000 | 99,445 | (4) | |||||||||||
USD | 3.50 | % | 06/18/18 | 50,000 | 50,660 | (4) | |||||||||||
TOTAL U.S. GOVERNMENT AGENCY MORTGAGE BACKED SECURITIES | 2,199,084 | ||||||||||||||||
(Cost $2,184,717) | |||||||||||||||||
SHORT TERM INVESTMENTS - 1.51% | |||||||||||||||||
Money Market Mutual Funds - 1.51% | |||||||||||||||||
State Street Institutional Liquid Reserves Fund (7-Day Yield) | USD | 1.95 | % | N/A | 163,912 | 163,929 | |||||||||||
TOTAL SHORT TERM INVESTMENTS | 163,929 | ||||||||||||||||
(Cost $163,882) | |||||||||||||||||
Total Investments - 98.30% | 10,701,721 | ||||||||||||||||
(Cost $10,871,182) | |||||||||||||||||
Other Assets in Excess of Liabilities - 1.70% | 185,205 | ||||||||||||||||
Net Assets - 100.00% | $ | 10,886,926 |
* | The principal amount/shares of each security is stated in the currency in which the security is denominated. |
54 | www.shiplp.com |
Stone Harbor Investment Grade Fund | Statements of Investments |
May 31, 2018
Currency Abbreviations:
USD | - | United States Dollar |
Investment Abbreviations:
LIBOR | - | London Interbank Offered Rate |
Libor Rates:
1M US L | - | 1 Month LIBOR as of May 31, 2018 was 2.00% |
3M US L | - | 3 Month LIBOR as of May 31, 2018 was 2.32% |
12M US L | - | 12 Month LIBOR as of May 31, 2018 was 2.72% |
(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 $1,431,186, which represents approximately 13.15% of net assets as of May 31, 2018. |
(2) | Floating or variable rate security. The reference rate is described above. The rate in effect as of May 31, 2018 is based on the reference rate plus the displayed spread as of the security's last reset date. Certain variable rate securities are not based on a published reference rate and spread but are determined by the issuer or agent and are based on current market conditions. These securities do not indicate a reference rate and spread in their description. |
(3) | Step bond. Coupon changes periodically based upon a predetermined schedule. Interest rate disclosed is that which is in effect as of May 31, 2018. |
(4) | Investment purchased on a delayed delivery basis. |
See Notes to Financial Statements.
Stone Harbor Investment Funds Annual Report | May 31, 2018 | 55 |
Stone Harbor Strategic Income Fund | Statements of Investments |
May 31, 2018
Currency | Rate | Shares* | Value (Expressed in USD) | |||||||||||||
OPEN-END FUNDS - 96.76% | ||||||||||||||||
Stone Harbor Emerging Markets Corporate Debt Fund | USD | N/A | 93,806 | $ | 825,491 | (1) | ||||||||||
Stone Harbor Emerging Markets Debt Fund | USD | N/A | 663,055 | 6,623,917 | (1) | |||||||||||
Stone Harbor High Yield Bond Fund | USD | N/A | 1,360,171 | 10,758,950 | (1) | |||||||||||
Stone Harbor Investment Grade Fund | USD | N/A | 1,086,575 | 10,876,614 | (1) | |||||||||||
Stone Harbor Local Markets Fund | USD | N/A | 380,064 | 3,283,750 | (1) | |||||||||||
32,368,722 | ||||||||||||||||
TOTAL OPEN-END FUNDS | 32,368,722 | |||||||||||||||
(Cost $33,818,156) | ||||||||||||||||
SHORT TERM INVESTMENTS - 0.86% | ||||||||||||||||
Money Market Mutual Funds - 0.86% | ||||||||||||||||
State Street Institutional Liquid Reserves Fund (7-Day Yield) | USD | 1.95 | % | 286,454 | 286,483 | |||||||||||
TOTAL SHORT TERM INVESTMENTS | 286,483 | |||||||||||||||
(Cost $286,436) | ||||||||||||||||
Total Investments - 97.62% | 32,655,205 | |||||||||||||||
(Cost $34,104,592) | ||||||||||||||||
Other Assets In Excess of Liabilities - 2.38% | 795,622 | (2) | ||||||||||||||
Net Assets - 100.00% | $ | 33,450,827 |
* | The shares of each security is stated in the currency in which the security is denominated. |
Currency Abbreviations:
AUD | - | Australian Dollar |
EUR | - | Euro Currency |
GBP | - | Great Britain Pound |
JPY | - | Japanese Yen |
MXN | - | Mexican Peso |
USD | - | United States Dollar |
(1) | Affiliated with the Fund, as each is a series of Stone Harbor Investment Funds and has the same investment adviser. |
(2) | Includes cash which is being held as collateral for forward foreign currency contracts, futures contracts and credit default swap contracts. |
OUTSTANDING FORWARD FOREIGN CURRENCY CONTRACTS | ||||||||||||||||||
Counterparty | Foreign Currency | Contracted Amount** | Purchase/Sale Contract | Settlement Date | Current Value | Unrealized Appreciation/ (Depreciation) | ||||||||||||
Citigroup Global Markets | EUR | 280,000 | Sale | 06/04/18 | $ | 327,334 | $ | 12,536 | ||||||||||
J.P. Morgan Chase & Co. | AUD | 440,000 | Purchase | 06/22/18 | 332,788 | 2,577 | ||||||||||||
J.P. Morgan Chase & Co. | EUR | 200,000 | Sale | 06/08/18 | 233,886 | 7,045 | ||||||||||||
J.P. Morgan Chase & Co. | GBP | 59,800 | Sale | 06/08/18 | 79,512 | 2,253 | ||||||||||||
J.P. Morgan Chase & Co. | GBP | 120,000 | Sale | 06/18/18 | 159,642 | 3,201 | ||||||||||||
J.P. Morgan Chase & Co. | JPY | 36,150,000 | Sale | 07/02/18 | 332,985 | 264 | ||||||||||||
J.P. Morgan Chase & Co. | MXN | 1,630,000 | Purchase | 06/04/18 | 81,726 | 271 | ||||||||||||
J.P. Morgan Chase & Co. | MXN | 11,350,000 | Sale | 06/04/18 | 569,075 | 5,660 | ||||||||||||
$ | 33,807 |
56 | www.shiplp.com |
Stone Harbor Strategic Income Fund | Statements of Investments |
May 31, 2018
OUTSTANDING FORWARD FOREIGN CURRENCY CONTRACTS (continued)
Counterparty | Foreign Currency | Contracted Amount** | Purchase/Sale Contract | Settlement Date | Current Value | Unrealized Appreciation/ (Depreciation) | ||||||||||||
Citigroup Global Markets | EUR | 280,000 | Purchase | 06/04/18 | $ | 327,334 | $ | (4,965 | ) | |||||||||
J.P. Morgan Chase & Co. | GBP | 120,000 | Purchase | 06/18/18 | 159,642 | (2,022 | ) | |||||||||||
J.P. Morgan Chase & Co. | MXN | 9,720,000 | Purchase | 06/04/18 | 487,348 | (16,642 | ) | |||||||||||
J.P. Morgan Chase & Co. | MXN | 11,480,000 | Purchase | 07/05/18 | 572,387 | (4,930 | ) | |||||||||||
$ | (28,559 | ) |
** | The contracted amount is stated in the currency in which the contract is denominated. |
FUTURES CONTRACTS
Description | Position | Contracts | Currency | Expiration Date | Notional Amount*** | Value and Unrealized Appreciation/ (Depreciation) | ||||||||||||||||
Euro-Bund Future | Long | 25 | EUR | 6/07/18 | 4,053,500 | $ | 162,176 | |||||||||||||||
Euro-Bund Future | Short | (2 | ) | EUR | 9/06/18 | (324,160 | ) | 17 | ||||||||||||||
US 5 Year Note Future | Long | 27 | USD | 9/28/18 | 3,075,047 | 6,015 | ||||||||||||||||
US Ultra T-Bond Future | Long | 2 | USD | 9/19/18 | 319,000 | 3,039 | ||||||||||||||||
$ | 171,247 | |||||||||||||||||||||
Long Gilt Future | Long | 10 | GBP | 9/26/18 | 1,234,599 | $ | (1,877 | ) | ||||||||||||||
US 10 Year Note Future | Short | (31 | ) | USD | 9/19/18 | (3,733,562 | ) | (11,546 | ) | |||||||||||||
$ | (13,423 | ) |
Stone Harbor Investment Funds Annual Report | May 31, 2018 | 57 |
Stone Harbor Strategic Income Fund | Statements of Investments |
May 31, 2018
CREDIT DEFAULT SWAP CONTRACTS ON CREDIT INDICES ISSUE - BUY PROTECTION (OVER THE COUNTER)(1)
Reference Obligations | Clearinghouse | Fixed Deal Pay Rate | Currency | Maturity Date | Implied Credit Spread at May 31, 2018(2) | Notional Amount***(3) | Value | Upfront Premiums Received/ (Paid) | Unrealized Appreciation | |||||||||||||||||||||||
ITRX EUR XOVER S29 5Y(4) | Intercontinental Exchange | 5.000 | % | EUR | 06/20/2023 | 3.092 | % | 650,000 | $ | (65,218 | ) | $ | 77,535 | $ | 12,317 | |||||||||||||||||
$ | (65,218 | ) | $ | 77,535 | $ | 12,317 |
Reference Obligations | Clearinghouse | Fixed Deal Pay Rate | Currency | Maturity Date | Implied Credit Spread at May 31, 2018(2) | Notional Amount***(3) | Value | Upfront Premiums Received/(Paid) | Unrealized Depreciation | |||||||||||||||||||||||
CDX.NA.HY.30(5) | Intercontinental Exchange | 5.000 | % | USD | 06/20/2023 | 3.500 | % | 5,400,000 | $ | (335,750 | ) | $ | 333,547 | $ | (2,203 | ) | ||||||||||||||||
$ | (335,750 | ) | $ | 333,547 | $ | (2,203 | ) |
Credit default swaps pay quarterly.
*** | The notional amount of each security is stated in the currency in which the security is denominated. |
(1) | If the Fund is a buyer of protection and a credit event occurs, as defined under the terms of that particular swap agreement, the Fund will either (i) receive from the seller of protection an amount equal to the notional amount of the swap and deliver the referenced obligation or (ii) receive a net settlement amount in the form of cash or securities equal to the notional amount of the swap less the recovery value of the referenced obligation. |
(2) | Implied credit spreads, represented in absolute terms, utilized in determining the market value of credit default swap agreements on sovereign issues of an emerging country as of period end serve as an indicator of the current status of the payment/performance risk and represent the likelihood or risk of default for the credit derivative. The implied credit spread of a particular referenced entity reflects the cost of buying/selling protection and may include upfront payments required to be made to enter into the agreement. Wider credit spreads represent a deterioration of the referenced entity’s credit soundness and a greater likelihood or risk of default or other credit event occurring as defined under the terms of the agreement. |
(3) | The maximum potential amount the Fund could be required to pay as a seller of credit protection or receive as a buyer of credit protection if a credit event occurs as defined under the terms of that particular swap agreement. |
(4) | Based on an index of 75 equally weighted CDS on the most liquid sub-investment grade European corporate entities. |
(5) | Based on an index of 100 North American equities with high yield credit ratings that trade in the CDS market. |
See Notes to Financial Statements.
58 | www.shiplp.com |
Stone Harbor Emerging Markets Debt Allocation Fund | Statements of Investments |
May 31, 2018
Currency | Rate | Shares* | Value (Expressed in USD) | |||||||||||||
OPEN-END FUNDS - 99.36% | ||||||||||||||||
Stone Harbor Emerging Markets Debt Fund | USD | N/A | 1,375,270 | $ | 13,738,946 | (1) | ||||||||||
Stone Harbor Local Markets Fund | USD | N/A | 1,648,261 | 14,240,975 | (1) | |||||||||||
27,979,921 | ||||||||||||||||
TOTAL OPEN-END FUNDS | 27,979,921 | |||||||||||||||
(Cost $25,493,058) | ||||||||||||||||
SHORT TERM INVESTMENTS - 0.10% | ||||||||||||||||
Money Market Mutual Funds - 0.10% | ||||||||||||||||
State Street Institutional Liquid Reserves Fund (7-Day Yield) | USD | 1.95 | % | 27,922 | 27,925 | |||||||||||
TOTAL SHORT TERM INVESTMENTS | 27,925 | |||||||||||||||
(Cost $27,925) | ||||||||||||||||
Total Investments - 99.46% | 28,007,846 | |||||||||||||||
(Cost $25,520,983) | ||||||||||||||||
Other Assets In Excess of Liabilities - 0.54% | 150,991 | |||||||||||||||
Net Assets - 100.00% | $ | 28,158,837 |
* | The shares of each security is stated in the currency in which the security is denominated. |
Currency Abbreviations:
EUR - Euro Currency
USD - United States Dollar
(1) | Affiliated with the Fund, as each is a series of Stone Harbor Investment Funds and has the same investment adviser. |
OUTSTANDING FORWARD FOREIGN CURRENCY CONTRACTS
Counterparty | Foreign Currency | Contracted Amount** | Purchase/Sale Contract | Settlement Date | Current V alue | Unrealized Appreciation/ (Depreciation) | ||||||||||||
Citigroup Global Markets | EUR | 48,000 | Sale | 06/25/18 | $ | 56,211 | $ | (409 | ) | |||||||||
Citigroup Global Markets | EUR | 297,270 | Purchase | 06/25/18 | 348,120 | (1,597 | ) | |||||||||||
$ | (2,006 | ) |
** | The contracted amount is stated in the currency in which the contract is denominated. |
See Notes to Financial Statements.
Stone Harbor Investment Funds Annual Report | May 31, 2018 | 59 |
Stone Harbor 500 Plus Fund | Statements of Investments |
May 31, 2018
Currency | Rate | Maturity Date | Principal Amount/Shares* | Value (Expressed in USD) | ||||||||||||||
ASSET BACKED/COMMERCIAL MORTGAGE BACKED SECURITIES - 86.96% | ||||||||||||||||||
1211 Avenue of the Americas Trust, Series 2015-1211 | USD | 3.90 | % | 08/10/25 | 45,000 | $ | 45,974 | (1) | ||||||||||
Ashford Hospitality Trust, Series 2018-ASHF | USD | 1M US L +0.90% | 04/15/20 | 50,000 | 50,131 | (1)(2) | ||||||||||||
CGMS Commercial Mortgage Trust, Series 2017-MDRB | USD | 1M US L +1.10% | 07/15/19 | 92,884 | 92,724 | (1)(2) | ||||||||||||
Financial Asset Securities Corp. AAA Trust, Series 2005-2 | USD | 1M US L +0.30% | 11/26/35 | 40,833 | 40,388 | (1)(2) | ||||||||||||
GAHR Commercial Mortgage Trust, Series 2015-NRF | USD | 1M US L +1.30% | 12/15/34 | 50,174 | 50,195 | (1)(2) | ||||||||||||
GCAT LLC, Series 2017-5 | USD | 3.23 | % | 07/25/47 | 27,189 | 27,103 | (1)(3) | |||||||||||
Hertz Fleet Lease Funding LP, Series 2017-1 | USD | 1M US L +0.65% | 04/10/31 | 25,000 | 25,037 | (1)(2) | ||||||||||||
Hertz Vehicle Financing LLC, Series 2015-2A | USD | 2.02 | % | 09/25/18 | 100,000 | 99,785 | (1) | |||||||||||
Hilton Orlando Trust, Series 2018-ORL | USD | 1M US L +0.77% | 12/15/24 | 25,000 | 25,063 | (1)(2) | ||||||||||||
Hudsons Bay Simon JV Trust, Series 2015-HBFL | USD | 1M US L +2.55% | 08/05/34 | 100,000 | 100,031 | (1)(2) | ||||||||||||
JP Morgan Chase Commercial Mortgage Securities Trust: | ||||||||||||||||||
Series 2006-LDP9 | USD | 5.34 | % | 05/15/47 | 80,000 | 80,573 | ||||||||||||
Series 2007-LDPX | USD | 5.46 | % | 01/15/49 | 17,712 | 17,780 | (2) | |||||||||||
Mill City Mortgage Loan Trust: | ||||||||||||||||||
Series 2016-1 | USD | 2.50 | % | 07/25/23 | 19,100 | 18,820 | (1)(2) | |||||||||||
Series 2017-1 | USD | 2.75 | % | 11/25/58 | 76,599 | 75,778 | (1)(2) | |||||||||||
New Residential Advance Receivables Trust Advance Receivables Backed Notes, Series 2017-T1 | USD | 3.21 | % | 02/16/21 | 100,000 | 99,575 | (1) | |||||||||||
Oak Hill Advisors Residential Loan Trust, Series 2017-NPL2 | USD | 3.00 | % | 07/25/57 | 93,585 | 92,948 | (1)(3) | |||||||||||
Pretium Mortgage Credit Partners LLC, Series 2018-NPL2 | USD | 3.70 | % | 03/27/33 | 96,798 | 96,750 | (1)(3) | |||||||||||
Progress Residential Trust, Series 2016-SFR1 | USD | 1M US L +1.50% | 09/17/18 | 39,527 | 39,694 | (1)(2) | ||||||||||||
RBS Commercial Funding Trust, Series 2013-GSP | USD | 3.83 | % | 01/13/24 | 95,000 | 96,413 | (1)(2) | |||||||||||
RCO V Mortgage LLC, Series 2018-1 | USD | 4.00 | % | 05/25/23 | 50,000 | 50,000 | (1)(3) | |||||||||||
Santander Drive Auto Receivables Trust, Series | ||||||||||||||||||
2018-1 | USD | 4.37 | % | 01/15/22 | 75,000 | 74,315 | (1) | |||||||||||
SLC Student Loan Trust, Series 2004-1 | USD | 3M US L +0.16% | 05/15/23 | 57,212 | 57,179 | (2) | ||||||||||||
SLM Student Loan Trust, Series 2005-3 | USD | 3M US L +0.09% | 10/25/24 | 123,652 | 123,576 | (2) | ||||||||||||
Springleaf Funding Trust, Series 2015-AA | USD | 3.16 | % | 05/15/19 | 53,765 | 53,765 | (1) | |||||||||||
TALL Mortgage Trust, Series 2018-TALL | USD | 1M US L + 0.971% | 03/15/20 | 100,000 | 100,133 | (1)(2) | ||||||||||||
Towd Point Mortgage Trust: | ||||||||||||||||||
Series 2015-3 | USD | 3.00 | % | 02/25/23 | 12,032 | 12,001 | (1)(2) | |||||||||||
Series 2016-2 | USD | 2.75 | % | 12/25/24 | 18,401 | 18,149 | (1)(2) | |||||||||||
Series 2016-3 | USD | 2.25 | % | 04/25/56 | 14,997 | 14,752 | (1)(2) | |||||||||||
Series 2017-1 | USD | 2.75 | % | 07/25/23 | 59,600 | 58,776 | (1)(2) | |||||||||||
Toyota Auto Receivables Owner Trust, Series 2014-C | USD | 1.44 | % | 04/15/20 | 13,043 | 13,037 | ||||||||||||
TRU Trust, Series 2016-TOYS | USD | 1M US L +2.25% | 11/15/19 | 36,528 | 36,260 | (1)(2) | ||||||||||||
VOLT LIV LLC, Series 2017-NPL1 | USD | 3.50 | % | 02/25/47 | 16,208 | 16,237 | (1)(3) | |||||||||||
VOLT LVIII LLC, Series 2017-NPL5 | USD | 3.38 | % | 05/25/20 | 37,614 | 37,646 | (1)(3) | |||||||||||
VOLT LXI LLC, Series 2017-NPL8 | USD | 3.13 | % | 06/25/20 | 53,361 | 53,144 | (1)(3) | |||||||||||
VOLT LXIV LLC, Series 2017-NP11 | USD | 3.38 | % | 10/25/47 | 83,623 | 83,498 | (1)(3) | |||||||||||
VOLT LXV LLC, Series 2018-NPL1 | USD | 3.75 | % | 04/25/48 | 100,000 | 100,359 | (1)(3) |
60 | www.shiplp.com |
Stone Harbor 500 Plus Fund | Statements of Investments |
May 31, 2018
Currency | Rate | Maturity Date | Principal Amount/Shares* | Value (Expressed in USD) | ||||||||||||||
ASSET BACKED/COMMERCIAL MORTGAGE BACKED SECURITIES (continued) | ||||||||||||||||||
Wells Fargo Commercial Mortgage Trust, Series 2015-BXRP | USD | 1M US L + 1.47% | 11/15/29 | 80,343 | $ | 80,374 | (1)(2) | |||||||||||
TOTAL ASSET BACKED/COMMERCIAL MORTGAGE BACKED SECURITIES | 2,157,963 | |||||||||||||||||
(Cost $2,158,288) | ||||||||||||||||||
SHORT TERM INVESTMENTS - 7.10% | ||||||||||||||||||
Money Market Mutual Funds - 7.10% | ||||||||||||||||||
State Street Institutional Liquid Reserves Fund (7-Day Yield) | USD | 1.95 | % | N/A | 176,285 | 176,302 | ||||||||||||
TOTAL SHORT TERM INVESTMENTS | 176,302 | |||||||||||||||||
(Cost $176,269) | ||||||||||||||||||
Total Investments - 94.06% | 2,334,265 | |||||||||||||||||
(Cost $2,334,557) | ||||||||||||||||||
Other Assets in Excess of Liabilities - 5.94% | 147,308 | (4) | ||||||||||||||||
Net Assets - 100.00% | $ | 2,481,573 |
* | The principal amount/shares of each security is stated in the currency in which the security is denominated. |
Currency Abbreviations:
USD - United States Dollar
Investment Abbreviations:
LIBOR - London Interbank Offered Rate
Libor Rates:
1M US L - 1 Month LIBOR as of May 31, 2018 was 2.00%
3M US L - 3 Month LIBOR as of May 31, 2018 was 2.32%
(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 $1,865,818, which represents approximately 75.19% of net assets as of May 31, 2018. |
(2) | Floating or variable rate security. The reference rate is described above. The rate in effect as of May 31, 2018 is based on the reference rate plus the displayed spread as of the security's last reset date. Certain variable rate securities are not based on a published reference rate and spread but are determined by the issuer or agent and are based on current market conditions. These securities do not indicate a reference rate and spread in their description. |
(3) | Step bond. Coupon changes periodically based upon a predetermined schedule. Interest rate disclosed is that which is in effect as of May 31, 2018. |
(4) | Includes cash which is being held as collateral for Futures Contracts. |
Stone Harbor Investment Funds Annual Report | May 31, 2018 | 61 |
Stone Harbor 500 Plus Fund | Statements of Investments |
May 31, 2018
FUTURES CONTRACTS
Description | Position | Contracts | Currency | Expiration Date | Notional Amount** | Value and Unrealized Appreciation/ (Depreciation) | ||||||||||||||||
S&P 500® Mini Future | Long | 18 | USD | 9/21/18 | 2,438,550 | $ | (23,285 | ) | ||||||||||||||
US 10 Year Note Future | Short | (3 | ) | USD | 9/19/18 | (361,312 | ) | (1,042 | ) | |||||||||||||
$ | (24,327 | ) |
** | The notional amount of each security is stated in the currency in which the security is denominated. |
See Notes to Financial Statements
62 | www.shiplp.com |
Intentionally Left Blank
Stone Harbor Investment Funds | Statements of Assets and Liabilities |
May 31, 2018
Stone Harbor Emerging Markets Debt Fund | Stone Harbor High Yield Bond Fund | Stone Harbor Local Markets Fund | ||||||||||
ASSETS: | ||||||||||||
Investments, at value(1) | $ | 1,172,924,571 | $ | 101,161,827 | $ | 897,574,846 | ||||||
Investments in affiliates, at value(2) | – | – | – | |||||||||
Cash | 7,568,898 | 5,511 | 37 | |||||||||
Foreign currency, at value (3) | 2,489,790 | – | 5,022,616 | |||||||||
Variation margin receivable on credit default swap contracts | – | – | – | |||||||||
Unrealized appreciation on forward foreign currency contracts | 3,241,495 | – | 1,516,481 | |||||||||
Deposits with brokers for credit default swap contracts | 4,170,000 | – | – | |||||||||
Deposits with brokers for forward foreign currency contracts | – | – | 6,329,959 | |||||||||
Cash pledged as collateral for forward commitments | – | – | – | |||||||||
Deposits with brokers for futures contracts | – | – | – | |||||||||
Deposits with brokers for interest rate swap contracts | – | – | 262,662 | |||||||||
Deposits with brokers for cross currency swap contracts | – | – | 290,041 | |||||||||
Receivable for investments sold | 25,102,539 | 1,796,521 | 126,056,495 | |||||||||
Receivable for fund shares sold | 28,130 | – | 24,980 | |||||||||
Receivable from adviser | – | – | – | |||||||||
Receivable on credit default swap contracts | 42,421 | – | – | |||||||||
Interest receivable on cross currency swap contracts | – | – | 212,013 | |||||||||
Interest receivable | 18,178,847 | 1,582,770 | 23,506,710 | |||||||||
Prepaid and other assets | 19,475 | 5,768 | 48,558 | |||||||||
Total Assets | 1,233,766,166 | 104,552,397 | 1,060,845,398 | |||||||||
LIABILITIES: | ||||||||||||
Payable due to brokers for forward foreign currency contracts | 3,700,000 | – | – | |||||||||
Payable for investments purchased | 17,296,175 | 1,357,475 | 4,758,297 | |||||||||
Payable for fund shares redeemed | 330,017 | – | – | |||||||||
Swap premium received | 2,953,731 | – | – | |||||||||
Unrealized depreciation on forward foreign currency contracts | 258,933 | – | 6,253,899 | |||||||||
Variation margin payable on interest rate swap contracts | – | – | 1,864 | |||||||||
Unrealized depreciation on cross currency swap contracts | – | – | 632,487 | |||||||||
Unrealized depreciation on credit default swap contracts | 1,171,407 | – | – | |||||||||
Variation margin payable on futures contracts | – | – | – | |||||||||
Payable to adviser | 614,875 | 43,813 | 652,461 | |||||||||
Payable to administrator | 67,956 | 19,865 | 56,867 | |||||||||
Other payables | 121,778 | 96,516 | 150,637 | |||||||||
Total Liabilities | 26,514,872 | 1,517,669 | 12,506,512 | |||||||||
Net Assets | $ | 1,207,251,294 | $ | 103,034,728 | $ | 1,048,338,886 | ||||||
NET ASSETS CONSIST OF: | ||||||||||||
Paid-in capital | $ | 1,404,456,391 | $ | 127,445,767 | $ | 1,338,077,726 | ||||||
Undistributed/(overdistributed) net investment income | (5,611,773 | ) | 100,323 | (17,409,848 | ) | |||||||
Accumulated net realized gain/(loss) | (153,064,100 | ) | (23,427,941 | ) | (176,900,481 | ) | ||||||
Net unrealized appreciation/(depreciation) | (38,529,224 | ) | (1,083,421 | ) | (95,428,511 | ) | ||||||
Net Assets | $ | 1,207,251,294 | $ | 103,034,728 | $ | 1,048,338,886 | ||||||
PRICING OF SHARES: | ||||||||||||
Institutional Class | ||||||||||||
Net Assets | $ | 1,207,251,294 | $ | 103,034,728 | $ | 1,048,338,886 | ||||||
Shares of beneficial interest outstanding (unlimited number of shares, par value of $0.001 per share authorized) | 120,839,296 | 13,021,383 | 121,403,860 | |||||||||
Net assets value, offering and redemption price per share | $ | 9.99 | $ | 7.91 | $ | 8.64 | ||||||
(1)Cost of Investments | $ | 1,213,233,413 | $ | 102,245,248 | $ | 986,086,468 | ||||||
(2)Cost of Investments in affiliates | $ | – | $ | – | $ | – | ||||||
(3)Cost of Investments in foreign cash | $ | 2,489,735 | $ | – | $ | 5,026,716 |
See Notes to Financial Statements.
64 | www.shiplp.com |
Stone Harbor Investment Funds | Statements of Assets and Liabilities |
May 31, 2018
Stone Harbor Emerging Markets Corporate Debt Fund | Stone Harbor Investment Grade Fund | Stone Harbor Strategic Income Fund | Stone Harbor Emerging Markets Debt Allocation Fund | Stone Harbor 500 Plus Fund | ||||||||||||||
$ | 11,344,703 | $ | 10,701,721 | $ | 286,483 | $ | 27,925 | $ | 2,334,265 | |||||||||
– | – | 32,368,722 | 27,979,921 | – | ||||||||||||||
14,803 | 925 | – | – | – | ||||||||||||||
– | – | 321,384 | – | – | ||||||||||||||
– | – | 3,920 | – | – | ||||||||||||||
– | – | 33,807 | – | – | ||||||||||||||
– | – | 258,545 | – | – | ||||||||||||||
– | – | – | – | – | ||||||||||||||
– | 2,200,000 | – | – | – | ||||||||||||||
– | – | 106,715 | – | 103,830 | ||||||||||||||
– | – | – | – | – | ||||||||||||||
– | – | – | – | – | ||||||||||||||
– | 32,064 | 15,000 | 10,000 | – | ||||||||||||||
– | – | – | 49,960 | – | ||||||||||||||
46,904 | 126,018 | 157,151 | 142,398 | 113,111 | ||||||||||||||
– | – | – | – | – | ||||||||||||||
– | – | – | – | – | ||||||||||||||
173,008 | 61,330 | 985 | 34 | 3,860 | ||||||||||||||
7,638 | 13,154 | 13,788 | 5,682 | 1,453 | ||||||||||||||
11,587,056 | 13,135,212 | 33,566,500 | 28,215,920 | 2,556,519 | ||||||||||||||
– | – | – | – | – | ||||||||||||||
12,659 | 2,184,717 | 15,000 | 10,000 | 300 | ||||||||||||||
– | – | – | – | – | ||||||||||||||
– | – | – | – | – | ||||||||||||||
– | – | 28,559 | 2,006 | – | ||||||||||||||
– | – | – | – | – | ||||||||||||||
– | – | – | – | – | ||||||||||||||
– | – | – | – | – | ||||||||||||||
– | – | 20,447 | – | 17,912 | ||||||||||||||
– | – | – | – | – | ||||||||||||||
3,030 | 11,400 | 2,188 | 1,536 | 4,964 | ||||||||||||||
68,540 | 52,169 | 49,479 | 43,541 | 51,770 | ||||||||||||||
84,229 | 2,248,286 | 115,673 | 57,083 | 74,946 | ||||||||||||||
$ | 11,502,827 | $ | 10,886,926 | $ | 33,450,827 | $ | 28,158,837 | $ | 2,481,573 | |||||||||
$ | 16,403,652 | $ | 11,092,594 | $ | 35,223,702 | $ | 33,530,289 | $ | 2,344,025 | |||||||||
20,536 | – | 98,644 | 242,872 | 22,576 | ||||||||||||||
(4,559,637 | ) | (36,207 | ) | (590,919 | ) | (8,099,181 | ) | 139,591 | ||||||||||
(361,724 | ) | (169,461 | ) | (1,280,600 | ) | 2,484,857 | (24,619 | ) | ||||||||||
$ | 11,502,827 | $ | 10,886,926 | $ | 33,450,827 | $ | 28,158,837 | $ | 2,481,573 | |||||||||
$ | 11,502,827 | $ | 10,886,926 | $ | 33,450,827 | $ | 28,158,837 | $ | 2,481,573 | |||||||||
1,307,685 | 1,087,670 | 3,470,385 | 3,045,003 | 232,635 | ||||||||||||||
$ | 8.80 | $ | 10.01 | $ | 9.64 | $ | 9.25 | $ | 10.67 | |||||||||
$ | 11,706,427 | $ | 10,871,182 | $ | 286,436 | $ | 27,925 | $ | 2,334,557 | |||||||||
$ | – | $ | – | $ | 33,818,156 | $ | 25,493,058 | $ | – | |||||||||
$ | – | $ | – | $ | 323,180 | $ | – | $ | – |
See Notes to Financial Statements.
Stone Harbor Investment Funds Annual Report | May 31, 2018 | 65 |
Stone Harbor Investment Funds | Statements of Operations |
For the Year Ended May 31, 2018
Stone Harbor Emerging Markets Debt Fund | Stone Harbor High Yield Bond Fund | Stone Harbor Local Markets Fund | ||||||||||
INVESTMENT INCOME: | ||||||||||||
Interest(1) | $ | 77,981,371 | $ | 7,498,368 | $ | 72,598,911 | ||||||
Dividends | 415,072 | 47,439 | 583,181 | |||||||||
Dividends from affiliated investment companies | – | – | – | |||||||||
Total Investment Income | 78,396,443 | 7,545,807 | 73,182,092 | |||||||||
EXPENSES: | ||||||||||||
Operational: | ||||||||||||
Investment advisory fee | 7,546,189 | 638,587 | 7,809,080 | |||||||||
Administration fees | 652,813 | 66,300 | 540,574 | |||||||||
Interest on line of credit | 26,170 | 892 | – | |||||||||
Line of credit commitment fee | 80,641 | 13,029 | 79,248 | |||||||||
Custodian fees | 135,272 | 27,118 | 520,178 | |||||||||
Printing fees | 5,493 | 6,327 | 4,794 | |||||||||
Professional fees | 129,729 | 113,898 | 129,446 | |||||||||
Offering costs | – | – | – | |||||||||
Trustee fees | 191,387 | 21,123 | 147,659 | |||||||||
Transfer agent fees | 19,843 | 20,270 | 20,981 | |||||||||
Registration fees | 26,295 | 21,534 | 23,472 | |||||||||
Insurance fees | 39,046 | 5,492 | 28,736 | |||||||||
Other | 75,541 | 47,730 | 59,065 | |||||||||
Total expenses before waiver/reimbursement | 8,928,419 | 982,300 | 9,363,233 | |||||||||
Less fees waived by investment adviser | – | (139,187 | ) | – | ||||||||
Less expenses reimbursed by investment adviser | – | – | – | |||||||||
Total Net Expenses | 8,928,419 | 843,113 | 9,363,233 | |||||||||
Net Investment Income | 69,468,024 | 6,702,694 | 63,818,859 | |||||||||
REALIZED AND UNREALIZED GAIN/(LOSS) ON INVESTMENTS: | ||||||||||||
Net realized gain/(loss) on: | ||||||||||||
Investments | 29,925,143 | 1,145,477 | (7,061,922 | ) | ||||||||
Investments - affiliated investment companies | – | – | – | |||||||||
Credit default swap contracts | 44,747 | – | – | |||||||||
Interest rate swap contracts | – | – | 220,439 | |||||||||
Futures contracts | – | – | – | |||||||||
Forward foreign currency contracts | (7,112,375 | ) | (84,045 | ) | (11,082 | ) | ||||||
Foreign currency transactions | 904,219 | 3,339 | 450,394 | |||||||||
Net realized gain/(loss) | 23,761,734 | 1,064,771 | (6,402,171 | ) | ||||||||
Long-term capital gain distributions from other investment companies | – | – | – | |||||||||
Change in unrealized appreciation/(depreciation) on: | ||||||||||||
Investments | (94,945,454 | ) | (6,326,896 | ) | (43,951,219 | ) | ||||||
Affiliated investment companies | – | – | – | |||||||||
Credit default swap contracts | (1,171,407 | ) | – | – | ||||||||
Interest rate swap contracts | – | – | (42,861 | ) | ||||||||
Cross currency swap contracts | – | – | (632,487 | ) | ||||||||
Futures contracts | – | – | – | |||||||||
Forward foreign currency contracts | 5,818,817 | 35,640 | (5,071,010 | ) | ||||||||
Translation of assets and liabilities denominated in foreign currencies | (141,540 | ) | (702 | ) | (1,747,933 | ) | ||||||
Net change in unrealized depreciation | (90,439,584 | ) | (6,291,958 | ) | (51,445,510 | ) | ||||||
Net Realized and Unrealized Gain/(Loss) | (66,677,850 | ) | (5,227,187 | ) | (57,847,681 | ) | ||||||
Net Increase/(Decrease) in Net Assets Resulting from Operations | $ | 2,790,174 | $ | 1,475,507 | $ | 5,971,178 | ||||||
(1)Including Foreign Tax Withholding | $ | 214,156 | $ | 9,687 | $ | 1,245,668 |
See Notes to Financial Statements.
66 | www.shiplp.com |
Stone Harbor Investment Funds | Statements of Operations |
For the Year Ended May 31, 2018
Stone Harbor Emerging Markets Corporate Debt Fund | Stone Harbor Investment Grade Fund | Stone Harbor Strategic Income Fund | Stone Harbor Emerging Markets Debt Allocation Fund | Stone Harbor 500 Plus Fund | ||||||||||||||
$ | 684,241 | $ | 288,167 | $ | – | $ | – | $ | 60,110 | |||||||||
4,678 | 7,606 | 8,369 | 386 | 3,979 | ||||||||||||||
– | – | 1,496,199 | 955,276 | – | ||||||||||||||
688,919 | 295,773 | 1,504,568 | 955,662 | 64,089 | ||||||||||||||
101,527 | 42,819 | 201,933 | 205,093 | 10,631 | ||||||||||||||
6,202 | 6,352 | 19,067 | 15,213 | 1,227 | ||||||||||||||
– | – | – | – | – | ||||||||||||||
908 | 1,121 | – | – | 177 | ||||||||||||||
5,643 | 14,482 | 22,817 | 7,063 | 12,802 | ||||||||||||||
4,576 | 4,576 | 4,581 | 4,690 | 3,824 | ||||||||||||||
88,038 | 71,519 | 68,109 | 63,253 | 73,670 | ||||||||||||||
– | – | – | – | 45,475 | ||||||||||||||
1,743 | 1,934 | 5,451 | 4,107 | 332 | ||||||||||||||
20,147 | 20,031 | 20,100 | 20,276 | 20,031 | ||||||||||||||
20,227 | 21,510 | 21,860 | 19,862 | 3,025 | ||||||||||||||
329 | 420 | 1,126 | 1,221 | 39 | ||||||||||||||
12,475 | 33,920 | 7,315 | 9,058 | 7,661 | ||||||||||||||
261,815 | 218,684 | 372,359 | 349,836 | 178,894 | ||||||||||||||
(101,527 | ) | (42,819 | ) | (201,933 | ) | (205,093 | ) | (10,631 | ) | |||||||||
(39,977 | ) | (113,633 | ) | (143,953 | ) | (130,941 | ) | (153,905 | ) | |||||||||
120,311 | 62,232 | 26,473 | 13,802 | 14,358 | ||||||||||||||
568,608 | 233,541 | 1,478,095 | 941,860 | 49,731 | ||||||||||||||
291,535 | 24,374 | 22 | (37 | ) | (2,425 | ) | ||||||||||||
– | – | (326,428 | ) | 116,347 | – | |||||||||||||
– | – | (317,213 | ) | – | – | |||||||||||||
– | – | – | – | – | ||||||||||||||
– | – | 86,671 | – | 425,518 | ||||||||||||||
– | – | 30,284 | (13,586 | ) | – | |||||||||||||
– | – | (3,258 | ) | (709 | ) | – | ||||||||||||
291,535 | 24,374 | (529,922 | ) | 102,015 | 423,093 | |||||||||||||
– | – | 56,034 | – | – | ||||||||||||||
(879,348 | ) | (328,710 | ) | 47 | – | (7,502 | ) | |||||||||||
– | – | (926,830 | ) | (1,013,846 | ) | – | ||||||||||||
– | – | 81,171 | – | – | ||||||||||||||
– | – | – | – | – | ||||||||||||||
– | – | – | – | – | ||||||||||||||
– | – | 130,763 | – | (155,792 | ) | |||||||||||||
– | – | (1,867 | ) | 2,173 | – | |||||||||||||
– | – | (5,741 | ) | – | – | |||||||||||||
(879,348 | ) | (328,710 | ) | (722,457 | ) | (1,011,673 | ) | (163,294 | ) | |||||||||
(587,813 | ) | (304,336 | ) | (1,196,345 | ) | (909,658 | ) | 259,799 | ||||||||||
$ | (19,205 | ) | $ | (70,795 | ) | $ | 281,750 | $ | 32,202 | $ | 309,530 | |||||||
$ | 673 | $ | – | $ | – | $ | – | $ | – |
See Notes to Financial Statements.
Stone Harbor Investment Funds Annual Report | May 31, 2018 | 67 |
Stone Harbor Investment Funds | Statements of Changes in Net Assets |
Stone Harbor Emerging Markets Debt Fund | ||||||||
For the Year Ended May 31, 2018 | For the Year Ended May 31, 2017 | |||||||
OPERATIONS: | ||||||||
Net investment income | $ | 69,468,024 | $ | 83,639,763 | ||||
Net realized gain/(loss) | 23,761,734 | 35,711,494 | ||||||
Net change in unrealized appreciation/(depreciation) | (90,439,584 | ) | 59,538,095 | |||||
Net increase/(decrease) in net assets resulting from operations | 2,790,174 | 178,889,352 | ||||||
DISTRIBUTIONS TO SHAREHOLDERS: | ||||||||
Institutional Class | ||||||||
From net investment income | (73,101,269 | ) | (90,794,571 | ) | ||||
Net decrease in net assets from distributions to shareholders | (73,101,269 | ) | (90,794,571 | ) | ||||
CAPITAL SHARE TRANSACTIONS: | ||||||||
Institutional Class | ||||||||
Proceeds from sale of shares | 187,084,762 | 263,243,956 | ||||||
Issued to shareholders in reinvestment of distributions | 72,381,762 | 85,031,047 | ||||||
Cost of shares redeemed | (423,675,659 | ) | (568,088,003 | ) | ||||
Net increase/(decrease) in net assets from capital share transactions | (164,209,135 | ) | (219,813,000 | ) | ||||
Net Increase/(Decrease) in Net Assets | (234,520,230 | ) | (131,718,219 | ) | ||||
NET ASSETS: | ||||||||
Beginning of year | 1,441,771,524 | 1,573,489,743 | ||||||
End of year | $ | 1,207,251,294 | $ | 1,441,771,524 | ||||
Includes undistributed/(overdistributed) net investment income of: | $ | (5,611,773 | ) | $ | 2,015,745 | |||
OTHER INFORMATION: | ||||||||
Share Transactions: | ||||||||
Institutional Class | ||||||||
Beginning shares | 135,994,567 | 156,258,645 | ||||||
Shares sold | 17,603,314 | 25,504,654 | ||||||
Shares reinvested | 6,957,773 | 8,200,580 | ||||||
Shares redeemed | (39,716,358 | ) | (53,969,312 | ) | ||||
Shares outstanding - end of year | 120,839,296 | 135,994,567 |
See Notes to Financial Statements.
68 | www.shiplp.com |
Stone Harbor Investment Funds | Statements of Changes in Net Assets |
Stone Harbor High Yield Bond Fund | Stone Harbor Local Markets Fund | Stone Harbor Emerging Markets Corporate Debt Fund | ||||||||||||||||||||
For the Year Ended May 31, 2018 | For the Year Ended May 31, 2017 | For the Year Ended May 31, 2018 | For the Year Ended May 31, 2017 | For the Year Ended May 31, 2018 | For the Year Ended May 31, 2017 | |||||||||||||||||
$ | 6,702,694 | $ | 13,431,860 | $ | 63,818,859 | $ | 64,714,279 | $ | 568,608 | $ | 678,113 | |||||||||||
1,064,771 | (6,382,656 | ) | (6,402,171 | ) | (76,330,124 | ) | 291,535 | 218,183 | ||||||||||||||
(6,291,958 | ) | 18,039,567 | (51,445,510 | ) | 118,797,535 | (879,348 | ) | 396,501 | ||||||||||||||
1,475,507 | 25,088,771 | 5,971,178 | 107,181,690 | (19,205 | ) | 1,292,797 | ||||||||||||||||
(7,200,890 | ) | (12,429,528 | ) | (12,203,950 | ) | – | (565,286 | ) | (653,203 | ) | ||||||||||||
(7,200,890 | ) | (12,429,528 | ) | (12,203,950 | ) | – | (565,286 | ) | (653,203 | ) | ||||||||||||
2,685,092 | 7,142,372 | 349,583,953 | 183,701,624 | 7,107,103 | 962,544 | |||||||||||||||||
6,248,424 | 11,608,008 | 11,862,219 | – | 565,286 | 653,203 | |||||||||||||||||
(60,458,154 | ) | (121,660,433 | ) | (297,816,541 | ) | (226,443,779 | ) | (8,749,817 | ) | (6,437,161 | ) | |||||||||||
(51,524,638 | ) | (102,910,053 | ) | 63,629,631 | (42,742,155 | ) | (1,077,428 | ) | (4,821,414 | ) | ||||||||||||
(57,250,021 | ) | (90,250,810 | ) | 57,396,859 | 64,439,535 | (1,661,919 | ) | (4,181,820 | ) | |||||||||||||
160,284,749 | 250,535,559 | 990,942,027 | 926,502,492 | 13,164,746 | 17,346,566 | |||||||||||||||||
$ | 103,034,728 | $ | 160,284,749 | $ | 1,048,338,886 | $ | 990,942,027 | $ | 11,502,827 | $ | 13,164,746 | |||||||||||
$ | 100,323 | $ | 560,218 | $ | (17,409,848 | ) | $ | (59,111,856 | ) | $ | 20,536 | $ | 17,169 | |||||||||
19,299,361 | 31,654,090 | 113,182,642 | 119,102,327 | 1,439,886 | 1,967,303 | |||||||||||||||||
328,690 | 869,025 | 39,322,266 | 21,754,483 | 772,377 | 106,476 | |||||||||||||||||
774,939 | 1,425,710 | 1,328,356 | – | 62,255 | 72,666 | |||||||||||||||||
(7,381,607 | ) | (14,649,464 | ) | (32,429,404 | ) | (27,674,168 | ) | (966,833 | ) | (706,559 | ) | |||||||||||
13,021,383 | 19,299,361 | 121,403,860 | 113,182,642 | 1,307,685 | 1,439,886 |
See Notes to Financial Statements.
Stone Harbor Investment Funds Annual Report | May 31, 2018 | 69 |
Stone Harbor Investment Funds | Statements of Changes in Net Assets |
Stone Harbor Investment Grade Fund | ||||||||
For the Year Ended May 31, 2018 | For the Year Ended May 31, 2017 | |||||||
OPERATIONS: | ||||||||
Net investment income | $ | 233,541 | $ | 280,338 | ||||
Net realized gain/(loss) | 24,374 | 56,374 | ||||||
Net realized gain/(loss) on investments - affiliated investment companies | – | – | ||||||
Long-term capital gain distributions from other investment companies | – | – | ||||||
Net change in unrealized appreciation/(depreciation) | (328,710 | ) | (32,311 | ) | ||||
Net increase/(decrease) in net assets resulting from operations | (70,795 | ) | 304,401 | |||||
DISTRIBUTIONS TO SHAREHOLDERS: | ||||||||
Institutional Class | ||||||||
From net investment income | (223,170 | ) | (297,043 | ) | ||||
From net realized gains | (109,833 | ) | (62,079 | ) | ||||
Net decrease in net assets from distributions to shareholders | (333,003 | ) | (359,122 | ) | ||||
CAPITAL SHARE TRANSACTIONS: | ||||||||
Institutional Class | ||||||||
Proceeds from sale of shares | 1,456,368 | 1,714,642 | ||||||
Issued to shareholders in reinvestment of distributions | 333,003 | 359,122 | ||||||
Cost of shares redeemed | (5,781,714 | ) | (2,528,868 | ) | ||||
Net increase/(decrease) in net assets from capital share transactions | (3,992,343 | ) | (455,104 | ) | ||||
Net Increase/(Decrease) in Net Assets | (4,396,141 | ) | (509,825 | ) | ||||
NET ASSETS: | ||||||||
Beginning of year | 15,283,067 | 15,792,892 | ||||||
End of year | $ | 10,886,926 | $ | 15,283,067 | ||||
Includes undistributed net investment income of: | $ | – | $ | – | ||||
OTHER INFORMATION: | ||||||||
Share Transactions: | ||||||||
Institutional Class | ||||||||
Beginning shares | 1,472,733 | 1,518,095 | ||||||
Shares sold | 141,189 | 164,614 | ||||||
Shares reinvested | 32,546 | 35,095 | ||||||
Shares redeemed | (558,798 | ) | (245,071 | ) | ||||
Shares outstanding - end of year | 1,087,670 | 1,472,733 |
See Notes to Financial Statements.
70 | www.shiplp.com |
Stone Harbor Investment Funds | Statements of Changes in Net Assets |
Stone Harbor Strategic Income Fund | Stone Harbor Emerging Markets Debt Allocation Fund | Stone Harbor 500 Plus Fund | ||||||||||||||||||||
For the Year Ended May 31, 2018 | For the Year Ended May 31, 2017 | For the Year Ended May 31, 2018 | For the Year Ended May 31, 2017 | For the Year Ended May 31, 2018 | For the Period January 20, 2017 (Commencement of Operations) to May 31, 2017 | |||||||||||||||||
$ | 1,478,095 | $ | 1,496,757 | $ | 941,860 | $ | 1,389,610 | $ | 49,731 | $ | 12,402 | |||||||||||
(203,494 | ) | 106,499 | (14,332 | ) | (250,448 | ) | 423,093 | (35 | ) | |||||||||||||
(326,428 | ) | (408,037 | ) | 116,347 | 2,151,359 | – | – | |||||||||||||||
56,034 | – | – | – | – | – | |||||||||||||||||
(722,457 | ) | 1,441,093 | (1,011,673 | ) | 2,512,704 | (163,294 | ) | 138,675 | ||||||||||||||
281,750 | 2,636,312 | 32,202 | 5,803,225 | 309,530 | 151,042 | |||||||||||||||||
(1,201,893 | ) | (1,417,693 | ) | (986,095 | ) | (1,818,851 | ) | (32,542 | ) | (12,105 | ) | |||||||||||
– | – | – | – | (282,502 | ) | – | ||||||||||||||||
(1,201,893 | ) | (1,417,693 | ) | (986,095 | ) | (1,818,851 | ) | (315,044 | ) | (12,105 | ) | |||||||||||
2,205,000 | 2,400,000 | 5,583,326 | 5,055,634 | – | 2,021,001 | |||||||||||||||||
1,108,938 | 1,247,105 | 986,095 | 1,818,851 | 315,044 | 12,105 | |||||||||||||||||
(6,251,885 | ) | (4,050,000 | ) | (5,137,545 | ) | (50,653,241 | ) | – | – | |||||||||||||
(2,937,947 | ) | (402,895 | ) | 1,431,876 | (43,778,756 | ) | 315,044 | 2,033,106 | ||||||||||||||
(3,858,090 | ) | 815,724 | 477,983 | (39,794,382 | ) | 309,530 | 2,172,043 | |||||||||||||||
37,308,917 | 36,493,193 | 27,680,854 | 67,475,236 | 2,172,043 | – | |||||||||||||||||
$ | 33,450,827 | $ | 37,308,917 | $ | 28,158,837 | $ | 27,680,854 | $ | 2,481,573 | $ | 2,172,043 | |||||||||||
$ | 98,644 | $ | 138,924 | $ | 242,872 | $ | 301,402 | $ | 22,576 | $ | 1,777 | |||||||||||
3,770,478 | 3,813,000 | 2,897,021 | 7,583,812 | 202,741 | – | |||||||||||||||||
222,462 | 243,244 | 573,307 | 538,403 | – | 201,592 | |||||||||||||||||
113,322 | 128,674 | 103,364 | 209,545 | 29,894 | 1,149 | |||||||||||||||||
(635,877 | ) | (414,440 | ) | (528,689 | ) | (5,434,739 | ) | – | – | |||||||||||||
3,470,385 | 3,770,478 | 3,045,003 | 2,897,021 | 232,635 | 202,741 |
See Notes to Financial Statements.
Stone Harbor Investment Funds Annual Report | May 31, 2018 | 71 |
Stone Harbor Emerging Markets Debt Fund | Financial Highlights |
For a share outstanding through the periods presented.
Institutional Class | For the Year Ended May 31, 2018 | For the Year Ended May 31, 2017 | For the Year Ended May 31, 2016 | For the Year Ended May 31, 2015 | For the Year Ended May 31, 2014 | |||||||||||||||
Net asset value - beginning of year | $ | 10.60 | $ | 10.07 | $ | 10.47 | $ | 11.11 | $ | 11.34 | ||||||||||
Income/(loss) from investment operations: | ||||||||||||||||||||
Net investment income(1) | 0.58 | 0.56 | 0.77 | 0.59 | 0.55 | |||||||||||||||
Net realized and unrealized gain/(loss) on investments | (0.56 | ) | 0.59 | (0.43 | ) | (0.70 | ) | (0.31 | ) | |||||||||||
Total income/(loss) from investment operations | 0.02 | 1.15 | 0.34 | (0.11 | ) | 0.24 | ||||||||||||||
Less distributions to shareholders: | ||||||||||||||||||||
From net investment income | (0.63 | ) | (0.62 | ) | (0.74 | ) | (0.53 | ) | (0.47 | ) | ||||||||||
Total distributions | (0.63 | ) | (0.62 | ) | (0.74 | ) | (0.53 | ) | (0.47 | ) | ||||||||||
Net Increase/(Decrease) in Net Asset Value | (0.61 | ) | 0.53 | (0.40 | ) | (0.64 | ) | (0.23 | ) | |||||||||||
Net asset value - end of year | $ | 9.99 | $ | 10.60 | $ | 10.07 | $ | 10.47 | $ | 11.11 | ||||||||||
Total Return | 0.08 | % | 11.70 | % | 3.70 | % | (1.01 | )% | 2.45 | % | ||||||||||
Ratios/Supplemental Data: | ||||||||||||||||||||
Net assets, end of period (in millions) | $ | 1,207 | $ | 1,442 | $ | 1,573 | $ | 1,936 | $ | 2,178 | ||||||||||
Ratio of expenses to average net assets without fee waivers/reimbursements/repayment of previously waived fees | 0.71 | % | 0.69 | % | 0.68 | % | 0.68 | % | 0.70 | % | ||||||||||
Ratio of expenses to average net assets with fee waivers/reimbursements/ repayment of previously waived fees | 0.71 | %(2) | 0.69 | % | 0.68 | % | 0.68 | % | 0.70 | % | ||||||||||
Ratio of net investment income to average net assets with fee waivers/reimbursements/repayment of previously waived fees | 5.53 | % | 5.37 | % | 7.73 | % | 5.54 | % | 5.21 | % | ||||||||||
Portfolio turnover rate | 108 | % | 114 | % | 90 | % | 75 | % | 68 | % |
(1) | Calculated using average shares throughout the period. |
(2) | The year ended May 31, 2018 includes borrowing costs of 0.01% to average net assets. |
See Notes to Financial Statements.
72 | www.shiplp.com |
Stone Harbor High Yield Bond Fund | Financial Highlights |
For a share outstanding through the periods presented.
Institutional Class | For the Year Ended May 31, 2018 | For the Year Ended May 31, 2017 | For the Year Ended May 31, 2016 | For the Year Ended May 31, 2015 | For the Year Ended May 31, 2014 | |||||||||||||||
Net asset value - beginning of year | $ | 8.31 | $ | 7.91 | $ | 8.68 | $ | 9.63 | $ | 9.83 | ||||||||||
Income/(loss) from investment operations: | ||||||||||||||||||||
Net investment income(1) | 0.43 | 0.46 | 0.49 | 0.54 | 0.60 | |||||||||||||||
Net realized and unrealized gain/(loss) on investments | (0.36 | ) | 0.39 | (0.77 | ) | (0.58 | ) | 0.13 | ||||||||||||
Total income/(loss) from investment operations | 0.07 | 0.85 | (0.28 | ) | (0.04 | ) | 0.73 | |||||||||||||
Less distributions to shareholders: | ||||||||||||||||||||
From net investment income | (0.47 | ) | (0.45 | ) | (0.49 | ) | (0.60 | ) | (0.64 | ) | ||||||||||
From net realized gains | – | – | – | (0.31 | ) | (0.29 | ) | |||||||||||||
Total distributions | (0.47 | ) | (0.45 | ) | (0.49 | ) | (0.91 | ) | (0.93 | ) | ||||||||||
Net Increase/(Decrease) in Net Asset Value | (0.40 | ) | 0.40 | (0.77 | ) | (0.95 | ) | (0.20 | ) | |||||||||||
Net asset value - end of year | $ | 7.91 | $ | 8.31 | $ | 7.91 | $ | 8.68 | $ | 9.63 | ||||||||||
Total Return(2) | 0.87 | % | 10.97 | % | (3.03 | )% | (0.27 | )% | 7.90 | % | ||||||||||
Ratios/Supplemental Data: | ||||||||||||||||||||
Net assets, end of period (in millions) | $ | 103 | $ | 160 | $ | 251 | $ | 290 | $ | 303 | ||||||||||
Ratio of expenses to average net assets without fee waivers/reimbursements/repayment of previously waived fees | 0.77 | % | 0.67 | % | 0.64 | % | 0.62 | %(3) | 0.62 | % | ||||||||||
Ratio of expenses to average net assets with fee waivers/reimbursements/ repayment of previously waived fees | 0.66 | %(4) | 0.65 | % | 0.64 | % | 0.60 | %(3) | 0.55 | % | ||||||||||
Ratio of net investment income to average net assets with fee waivers/reimbursements/repayment of previously waived fees | 5.25 | % | 5.63 | % | 6.06 | % | 5.98 | % | 6.23 | % | ||||||||||
Portfolio turnover rate | 58 | % | 70 | % | 48 | % | 52 | % | 54 | % |
(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) | Effective October 1, 2014, the expense limitation rate changed from 0.55% to 0.65%. |
(4) | The year ended May 31, 2018 includes borrowing costs of 0.01% to average net assets. |
See Notes to Financial Statements.
Stone Harbor Investment Funds Annual Report | May 31, 2018 | 73 |
Stone Harbor Local Markets Fund | Financial Highlights |
For a share outstanding through the periods presented.
Institutional Class | For the Year Ended May 31, 2018 | For the Year Ended May 31, 2017 | For the Year Ended May 31, 2016 | For the Year Ended May 31, 2015 | For the Year Ended May 31, 2014 | |||||||||||||||
Net asset value - beginning of year | $ | 8.76 | $ | 7.78 | $ | 8.38 | $ | 9.96 | $ | 10.51 | ||||||||||
Loss from investment operations: | ||||||||||||||||||||
Net investment income(1) | 0.56 | 0.56 | 0.50 | 0.52 | 0.53 | |||||||||||||||
Net realized and unrealized gain/(loss) on investments | (0.59 | ) | 0.42 | (1.10 | ) | (1.98 | ) | (0.96 | ) | |||||||||||
Total income/(loss) from investment operations | (0.03 | ) | 0.98 | (0.60 | ) | (1.46 | ) | (0.43 | ) | |||||||||||
Less distributions to shareholders: | ||||||||||||||||||||
From net investment income | (0.09 | ) | – | – | (0.12 | ) | (0.07 | ) | ||||||||||||
From net realized gains | – | – | – | – | (0.05 | ) | ||||||||||||||
Total distributions | (0.09 | ) | – | – | (0.12 | ) | (0.12 | ) | ||||||||||||
Net Increase/(Decrease) in Net Asset Value | (0.12 | ) | 0.98 | (0.60 | ) | (1.58 | ) | (0.55 | ) | |||||||||||
Net asset value - end of year | $ | 8.64 | $ | 8.76 | $ | 7.78 | $ | 8.38 | $ | 9.96 | ||||||||||
Total Return | (0.33 | )% | 12.60 | % | (7.16 | )% | (14.70 | )% | (4.04 | )% | ||||||||||
Ratios/Supplemental Data: | ||||||||||||||||||||
Net assets, end of period (in millions) | $ | 1,048 | $ | 991 | $ | 927 | $ | 1,563 | $ | 2,491 | ||||||||||
Ratio of expenses to average net assets without fee waivers/reimbursements/repayment of previously waived fees | 0.90 | % | 0.89 | % | 0.88 | % | 0.87 | % | 0.88 | % | ||||||||||
Ratio of expenses to average net assets with fee waivers/reimbursements/repayment of previously waived fees | 0.90 | %(2) | 0.89 | % | 0.88 | % | 0.87 | % | 0.88 | % | ||||||||||
Ratio of net investment income to average net assets with fee waivers/reimbursements/repayment of previously waived fees | 6.13 | % | 6.76 | % | 6.49 | % | 5.62 | % | 5.41 | % | ||||||||||
Portfolio turnover rate | 119 | % | 125 | % | 166 | % | 145 | % | 181 | % |
(1) | Calculated using average shares throughout the period. |
(2) | The year ended May 31, 2018 includes borrowing costs of 0.01% to average net assets. |
See Notes to Financial Statements.
74 | www.shiplp.com |
Stone Harbor Emerging Markets Corporate Debt Fund | Financial Highlights |
For a share outstanding through the periods presented.
Institutional Class | For the Year Ended May 31, 2018 | For the Year Ended May 31, 2017 | For the Year Ended May 31, 2016 | For the Year Ended May 31, 2015 | For the Year Ended May 31, 2014 | |||||||||||||||
Net asset value - beginning of year | $ | 9.14 | $ | 8.82 | $ | 9.11 | $ | 9.23 | $ | 9.37 | ||||||||||
Income from investment operations: | ||||||||||||||||||||
Net investment income(1) | 0.44 | 0.41 | 0.43 | 0.41 | 0.41 | |||||||||||||||
Net realized and unrealized gain/(loss) on investments | (0.36 | ) | 0.32 | (0.27 | ) | (0.08 | ) | (0.08 | ) | |||||||||||
Total income from investment operations | 0.08 | 0.73 | 0.16 | 0.33 | 0.33 | |||||||||||||||
Less distributions to shareholders: | ||||||||||||||||||||
From net investment income | (0.42 | ) | (0.41 | ) | (0.45 | ) | (0.45 | ) | (0.47 | ) | ||||||||||
Total distributions | (0.42 | ) | (0.41 | ) | (0.45 | ) | (0.45 | ) | (0.47 | ) | ||||||||||
Net Increase/(Decrease) in Net Asset Value | (0.34 | ) | 0.32 | (0.29 | ) | (0.12 | ) | (0.14 | ) | |||||||||||
Net asset value - end of year | $ | 8.80 | $ | 9.14 | $ | 8.82 | $ | 9.11 | $ | 9.23 | ||||||||||
Total Return(2) | 0.80 | % | 8.43 | % | 1.92 | % | 3.64 | % | 3.80 | % | ||||||||||
Ratios/Supplemental Data: | ||||||||||||||||||||
Net assets, end of period (in millions) | $ | 12 | $ | 13 | $ | 17 | $ | 24 | $ | 26 | ||||||||||
Ratio of expenses to average net assets without fee waivers/reimbursements | 2.19 | % | 1.91 | % | 1.37 | % | 1.40 | % | 1.22 | % | ||||||||||
Ratio of expenses to average net assets with fee waivers/reimbursements | 1.01 | %(3) | 1.00 | % | 1.00 | % | 1.00 | % | 1.00 | % | ||||||||||
Ratio of net investment income to average net assets with fee waivers/reimbursements | 4.76 | % | 4.49 | % | 4.93 | % | 4.52 | % | 4.58 | % | ||||||||||
Portfolio turnover rate | 115 | % | 72 | % | 127 | % | 62 | % | 78 | % |
(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) | The year ended May 31, 2018 includes borrowing costs of 0.01% to average net assets. |
See Notes to Financial Statements.
Stone Harbor Investment Funds Annual Report | May 31, 2018 | 75 |
Stone Harbor Investment Grade Fund | Financial Highlights |
For a share outstanding through the periods presented.
Institutional Class | For the Year Ended May 31, 2018 | For the Year Ended May 31, 2017 | For the Year Ended May 31, 2016 | For the Year Ended May 31, 2015 | For the Period December 19, 2013 (Commencement of Operations) to May 31, 2014 | |||||||||||||||
Net asset value - beginning of year | $ | 10.38 | $ | 10.40 | $ | 10.36 | $ | 10.38 | $ | 10.00 | ||||||||||
Loss from investment operations: | ||||||||||||||||||||
Net investment income(1) | 0.20 | 0.18 | 0.16 | 0.13 | 0.07 | |||||||||||||||
Net realized and unrealized gain/(loss) on investments | (0.28 | ) | 0.03 | 0.12 | 0.07 | 0.37 | ||||||||||||||
Total income/(loss) from investment operations | (0.08 | ) | 0.21 | 0.28 | 0.20 | 0.44 | ||||||||||||||
Less distributions to shareholders: | ||||||||||||||||||||
From net investment income | (0.20 | ) | (0.19 | ) | (0.15 | ) | (0.14 | ) | (0.06 | ) | ||||||||||
From net realized gains | (0.09 | ) | (0.04 | ) | (0.09 | ) | (0.08 | ) | – | |||||||||||
Total distributions | (0.29 | ) | (0.23 | ) | (0.24 | ) | (0.22 | ) | (0.06 | ) | ||||||||||
Net Increase/(Decrease) in Net Asset Value | (0.37 | ) | (0.02 | ) | 0.04 | (0.02 | ) | 0.38 | ||||||||||||
Net asset value - end of year | $ | 10.01 | $ | 10.38 | $ | 10.40 | $ | 10.36 | $ | 10.38 | ||||||||||
Total Return(2) | (0.81 | )% | 2.07 | % | 2.71 | % | 1.94 | % | 4.41 | % | ||||||||||
Ratios/Supplemental Data: | ||||||||||||||||||||
Net assets, end of period (in millions) | $ | 11 | $ | 15 | $ | 16 | $ | 10 | $ | 3 | ||||||||||
Ratio of expenses to average net assets without fees waived by investment adviser and expenses reimbursed by investment adviser | 1.79 | % | 1.32 | % | 1.40 | % | 2.07 | % | 4.14 | %(3) | ||||||||||
Ratio of expenses to average net assets with fees waived by investment adviser and expenses reimbursed by investment adviser | 0.51 | %(4) | 0.50 | % | 0.50 | % | 0.50 | % | 0.50 | %(3) | ||||||||||
Ratio of net investment income to average net assets with fees waived by investment adviser and expenses reimbursed by investment adviser | 1.91 | % | 1.72 | % | 1.57 | % | 1.26 | % | 1.62 | %(3) | ||||||||||
Portfolio turnover rate | 42 | % | 49 | % | 52 | % | 51 | % | 27 | % |
(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) | Annualized. |
(4) | The year ended May 31, 2018 includes borrowing costs of 0.01% to average net assets. |
See Notes to Financial Statements.
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Stone Harbor Strategic Income Fund | Financial Highlights |
For a share outstanding through the periods presented.
Institutional Class | For the Year Ended May 31, 2018 | For the Year Ended May 31, 2017 | For the Year Ended May 31, 2016 | For the Year Ended May 31, 2015 | For the Period December 19, 2013 (Commencement of Operations) to May 31, 2014 | |||||||||||||||
Net asset value - beginning of year | $ | 9.90 | $ | 9.57 | $ | 10.05 | $ | 10.44 | $ | 10.00 | ||||||||||
Income from investment operations: | ||||||||||||||||||||
Net investment income(1) | 0.40 | 0.38 | 0.43 | 0.49 | 0.15 | |||||||||||||||
Net realized and unrealized gain/(loss) on investments | (0.34 | ) | 0.31 | (0.43 | ) | (0.37 | ) | 0.42 | ||||||||||||
Total income from investment operations | 0.06 | 0.69 | – | 0.12 | 0.57 | |||||||||||||||
Less distributions to shareholders: | ||||||||||||||||||||
From net investment income | (0.32 | ) | (0.36 | ) | (0.35 | ) | (0.48 | ) | (0.13 | ) | ||||||||||
From net realized gains | – | – | (0.13 | ) | (0.03 | ) | – | |||||||||||||
Total distributions | (0.32 | ) | (0.36 | ) | (0.48 | ) | (0.51 | ) | (0.13 | ) | ||||||||||
Net Increase/(Decrease) in Net Asset Value | (0.26 | ) | 0.33 | (0.48 | ) | (0.39 | ) | 0.44 | ||||||||||||
Net asset value - end of year | $ | 9.64 | $ | 9.90 | $ | 9.57 | $ | 10.05 | $ | 10.44 | ||||||||||
Total Return(2) | 0.60 | % | 7.34 | % | 0.19 | % | 1.15 | % | 5.73 | % | ||||||||||
Ratios/Supplemental Data: | ||||||||||||||||||||
Net assets, end of period (in millions) | $ | 33 | $ | 37 | $ | 36 | $ | 34 | $ | 11 | ||||||||||
Ratio of expenses to average net assets without fees waived by investment adviser and expenses reimbursed by investment adviser | 1.01 | %(3) | 0.94 | %(3) | 0.96 | %(3) | 1.06 | %(3) | 1.46 | %(3)(4) | ||||||||||
Ratio of expenses to average net assets with fees waived by investment adviser and expenses reimbursed by investment adviser | 0.07 | %(3) | 0.11 | %(3) | 0.12 | %(3) | 0.11 | %(3) | 0.12 | %(3)(4) | ||||||||||
Ratio of net investment income to average net assets with fees waived by investment adviser and expenses reimbursed by investment adviser | 4.03 | %(3) | 3.89 | %(3) | 4.46 | %(3) | 4.88 | %(3) | 3.38 | %(3)(4) | ||||||||||
Portfolio turnover rate | 29 | % | 20 | % | 26 | % | 8 | % | 0 | %(5) |
(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) | Ratio does not include expenses of the mutual funds held in the investment portfolio. |
(4) | Annualized. |
(5) | Less than 0.5%. |
See Notes to Financial Statements.
Stone Harbor Investment Funds Annual Report | May 31, 2018 | 77 |
Stone Harbor Emerging Markets Debt Allocation Fund | Financial Highlights |
For a share outstanding through the periods presented.
Institutional Class | For the Year Ended May 31, 2018 | For the Year Ended May 31, 2017 | For the Year Ended May 31, 2016 | For the Period October 21, 2014 (Commencement of Operations) to May 31, 2015 | ||||||||||||
Net asset value - beginning of period | $ | 9.55 | $ | 8.90 | $ | 9.36 | $ | 10.00 | ||||||||
Income/(loss) from investment operations: | ||||||||||||||||
Net investment income(1) | 0.31 | 0.25 | 0.32 | 0.23 | ||||||||||||
Net realized and unrealized gain/(loss) on investments | (0.28 | ) | 0.74 | (0.52 | ) | (0.70 | ) | |||||||||
Total income/(loss) from investment operations | 0.03 | 0.99 | (0.20 | ) | (0.47 | ) | ||||||||||
Less distributions to shareholders: | ||||||||||||||||
From net investment income | (0.33 | ) | (0.34 | ) | (0.26 | ) | (0.17 | ) | ||||||||
Total distributions | (0.33 | ) | (0.34 | ) | (0.26 | ) | (0.17 | ) | ||||||||
Net Increase/(Decrease) in Net Asset Value | (0.30 | ) | 0.65 | (0.46 | ) | (0.64 | ) | |||||||||
Net asset value - end of period | $ | 9.25 | $ | 9.55 | $ | 8.90 | $ | 9.36 | ||||||||
Total Return(2)(3) | 0.21 | % | 11.51 | % | (1.96 | %) | (4.73 | %) | ||||||||
Ratios/Supplemental Data: | ||||||||||||||||
Net assets, end of period (in millions) | $ | 28 | $ | 28 | $ | 67 | $ | 85 | ||||||||
Ratio of expenses to average net assets without fees waived by investment adviser and expenses reimbursed by investment adviser | 1.19 | %(4) | 0.98 | %(4) | 0.87 | %(4) | 0.97 | %(4)(5) | ||||||||
Ratio of expenses to average net assets with fees waived by investment adviser and expenses reimbursed by investment adviser | 0.05 | %(4) | 0.05 | %(4) | 0.06 | %(4) | 0.10 | %(4)(5) | ||||||||
Ratio of net investment income to average net assets with fee waivers/reimbursements | 3.21 | %(4) | 2.72 | %(4) | 3.72 | %(4) | 3.68 | %(4)(5) | ||||||||
Portfolio turnover rate | 33 | % | 24 | % | 70 | % | 11 | % |
(1) | Calculated using average shares throughout the period. |
(2) | Total returns would have been lower in 2015 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) | Ratio does not include expenses of the mutual funds held in the investment portfolio. |
(5) | Annualized. |
See Notes to Financial Statements.
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Stone Harbor 500 Plus Fund | Financial Highlights |
For a share outstanding through the periods presented.
Institutional Class | For the Year Ended May 31, 2018 | For the Period January 20, 2017 (Commencement of Operations) to May 31, 2017 | ||||||
Net asset value - beginning of period | $ | 10.71 | $ | 10.00 | ||||
Income/(loss) from investment operations: | ||||||||
Net investment income(1) | 0.23 | 0.06 | ||||||
Net realized and unrealized gain on investments | 1.28 | 0.71 | ||||||
Total income from investment operations | 1.51 | 0.77 | ||||||
Less distributions to common shareholders: | ||||||||
From net investment income | (0.16 | ) | (0.06 | ) | ||||
From net realized gains | (1.39 | ) | – | |||||
Total distributions | (1.55 | ) | (0.06 | ) | ||||
Net Increase/(Decrease) in Net Asset Value | (0.04 | ) | 0.71 | |||||
Net asset value - end of period | $ | 10.67 | $ | 10.71 | ||||
Total Return(2)(3) | 14.32 | % | 7.71 | % | ||||
Ratios/Supplemental Data: | ||||||||
Net assets, end of period (in millions) | $ | 2 | $ | 2 | ||||
Ratio of expenses to average net assets without fees waived by investment adviser and expenses reimbursed by investment adviser | 7.57 | % | 12.71 | %(4)(5) | ||||
Ratio of expenses to average net assets with fees waived by investment adviser and expenses reimbursed by investment adviser | 0.61 | %(6) | 0.60 | %(4) | ||||
Ratio of net investment income to average net assets with fee waivers/reimbursements | 2.10 | % | 1.70 | %(4) | ||||
Portfolio turnover rate | 60 | % | 20 | % |
(1) | Calculated using average shares throughout the period. |
(2) | Total returns for periods of less than one year are not annualized. |
(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). |
(4) | Annualized. |
(5) | Ratios before fee waivers for start up periods may not be representative of long term operating results. |
(6) | The year ended May 31, 2018 includes borrowing costs of 0.01% to average net assets. |
See Notes to Financial Statements.
Stone Harbor Investment Funds Annual Report | May 31, 2018 | 79 |
Stone Harbor Investment Funds | Notes to Financial Statements |
May 31, 2018 |
1. ORGANIZATION
Stone Harbor Investment Funds, which consists of Stone Harbor Emerging Markets Debt Fund, Stone Harbor High Yield Bond Fund, Stone Harbor Local Markets Fund, Stone Harbor Emerging Markets Corporate Debt Fund, Stone Harbor Investment Grade Fund, Stone Harbor Strategic Income Fund, Stone Harbor Emerging Markets Debt Allocation Fund and Stone Harbor 500 Plus 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. 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, Distributor Class shares were not offered for sale in each Fund. The Trust’s Declaration of Trust permits the Trustees to create additional funds and share classes. The Trust also includes the Stone Harbor Emerging Markets Debt Blend Fund which had not commenced operations as of the reporting period.
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 types of 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 Investment Grade Fund’s investment objective is to maximize total return. The Fund invests in various types of fixed income securities and under normal market conditions will invest at least 80% of its net assets (plus any borrowings made for investment purposes) in Investment Grade Debt Securities. “Investment Grade Debt Securities” include fixed income securities that are rated investment grade by any of Moody’s Investors Services, Inc., Standard & Poor’s Rating Services, Fitch Ratings Limited, DBRS or other qualified rating agencies or, if unrated, are determined by the Adviser to be of comparable quality, and derivative instruments related to those securities.
80 | www.shiplp.com |
Stone Harbor Investment Funds | Notes to Financial Statements |
May 31, 2018 |
The Strategic Income Fund’s investment objective is to maximize total return. The Fund is intended to provide broad exposure to global credit markets. The Fund, either directly or through investment in the underlying funds (defined below), may invest in a broad variety of fixed income and other income producing securities and instruments (including derivatives), and will not be limited in terms of type of instrument, geography, credit rating or duration. The Fund may invest all or a significant portion of its assets in Stone Harbor Investment Grade Fund, Stone Harbor High Yield Bond Fund, Stone Harbor Emerging Markets Debt Fund, Stone Harbor Local Markets Fund and Stone Harbor Emerging Markets Corporate Debt Fund and other funds sponsored or advised by the Adviser (together, the “underlying funds”). The Fund is not required to invest in the underlying funds, and from time to time may not be invested in any underlying fund. In addition to investing in the underlying funds, the Fund may invest directly in fixed income securities and in other instruments and transactions.
The Emerging Markets Debt Allocation Fund’s investment objective is to maximize total return. The Fund will normally invest, either directly or through investment in the underlying funds (defined below), 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 or whose performance is linked to those countries’ currencies, markets, economies or ability to repay loans. The Fund may invest all or a significant portion of its assets in Stone Harbor Emerging Markets Debt Fund and Stone Harbor Local Markets Fund (together, the “underlying funds”). The Fund is not required to invest in the underlying funds, and from time to time may not be invested in any underlying fund. In addition to investing in the underlying funds, the Fund may invest directly in fixed income securities and in other instruments and transactions.
The 500 Plus Fund’s investment objective is to maximize total return. The Fund seeks to exceed the total return of the S&P 500 Index by investing its net assets (plus any borrowings made for investment purposes), under normal market conditions, primarily in S&P 500 Index derivatives and various types of fixed income instruments. The Fund typically will seek to gain long exposure to the S&P 500 Index through the use of S&P 500 Index derivatives in an amount, under normal market circumstances, approximately equal to the Fund’s net assets in an attempt to equal or exceed, net of expenses, the daily performance of the S&P 500 Index. However, since S&P 500 Index derivatives may be purchased with a fraction of the assets that would be needed to purchase the equity securities directly, the remainder of the Fund’s assets may be invested in fixed income instruments. The fixed income instruments will normally be actively managed with a view toward enhancing the Fund’s total return, subject to overall portfolio duration which is typically not expected to exceed two years. Fixed income instruments will typically be rated at least investment grade by any of Moody’s Investor Services, Inc., Standard & Poor’s Rating Services, Fitch Ratings Limited, DBRS or other qualified rating agencies or, if unrated, are determined by the Adviser to be of comparable quality, and derivative instruments related to those securities.
The Emerging Markets Debt Fund and Local Markets Fund are each classified as “non-diversified” under the 1940 Act. As a result, these Funds can invest a greater portion of the respective Funds’ assets in obligations of a single issuer than a “diversified” fund. These 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, Emerging Markets Corporate Debt Fund, Investment Grade Fund, Strategic Income Fund, Emerging Markets Debt Allocation Fund, and the 500 Plus Fund are diversified funds. The Emerging Markets Corporate Debt Fund was previously classified as a non-diversified investment company for purposes of the 1940 Act. As a result of ongoing operations, the Emerging Markets Corporate Debt Fund is now classified as a diversified company.
2. SIGNIFICANT ACCOUNTING POLICIES AND RISK DISCLOSURES
The following is a summary of significant accounting policies consistently followed by the Funds in the preparation of their financial statements. Each Fund is considered an investment company for financial reporting purposes under generally accepted accounting principles in the United States of America (“GAAP”). The policies are in conformity with GAAP. The preparation of the financial 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: Sovereign debt obligations, corporate bonds, convertible corporate bonds, and U.S. Treasury bonds, are generally valued at the mean between the closing bid and asked prices provided by an independent pricing service. The pricing services generally use market models that consider trade data, yields, spreads, quotations from dealers and active market makers, credit worthiness, market information on comparable securities, and other relevant security specific information. Asset backed/commercial mortgage backed securities are generally valued at the mean between the closing bid and asked prices provided by an independent pricing service. The pricing services generally use models that consider trade data, prepayment and default projections, benchmark yield and spread data and estimated cash flows of each tranche of the issuer. Bank loans are primarily valued by a loan pricing provider using a composite loan price at the mean of the bid and ask prices from one or more brokers of dealers. Credit Linked securities are generally valued using quotations from broker through which the Fund executed the transaction. The broker’s quotation considers cash flows, default and recovery rates, and other security specific information. 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. If on a given day, a closing price is not available on the exchange, the equity security is valued at the mean between the closing bid and asked prices, as such prices are provided by a pricing service. Publicly traded foreign government debt securities are typically traded internationally in the over the counter (“OTC”) 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 (the “Board”). Short term obligations with maturities of 60 days or less are valued at amortized cost, which approximates market value. Open end funds and money market mutual funds are valued at their net asset value. Futures contracts are ordinarily valued at the settlement price established by the securities or commodities exchange on which they are traded, except that S&P 500 futures contracts are priced at the last transaction price before 4:00 p.m. Eastern time (generally at approximately 3:59 p.m. Eastern time) on the commodities exchange on which they are traded. Over the counter traded options are priced by Markit and exchange traded options are valued by the securities or commodities exchange on which they are traded. OTC traded credit default swaps are valued by the independent pricing source using a mid price that is calculated based on data an independent pricing source receives from dealers. OTC traded foreign currency options are valued by an independent pricing source using mid foreign exchange rates against USD for all currencies at 4:00 p.m. Eastern Standard Time (“EST”). Derivatives which are cleared by an exchange are priced by using the last price on such exchange. Foreign currency positions including forward currency contracts are priced at the mean between the closing bid and asked prices at 4:00 p.m. EST.
Stone Harbor Investment Funds Annual Report | May 31, 2018 | 81 |
Stone Harbor Investment Funds | Notes to Financial Statements |
May 31, 2018 |
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, 2018:
Investments in Securities at Value* | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Stone Harbor Emerging Markets Debt Fund | ||||||||||||||||
Sovereign Debt Obligations | $ | – | $ | 882,887,037 | $ | – | $ | 882,887,037 | ||||||||
Bank Loans | – | – | 7,809,111 | 7,809,111 | ||||||||||||
Corporate Bonds | ||||||||||||||||
Indonesia | – | 30,201,882 | 50 | 30,201,932 | ||||||||||||
Other | – | 209,157,799 | – | 209,157,799 | ||||||||||||
Credit Linked Notes | – | – | 6,717,433 | 6,717,433 | ||||||||||||
Short Term Investments | 36,151,259 | – | – | 36,151,259 | ||||||||||||
Total | $ | 36,151,259 | $ | 1,122,246,718 | $ | 14,526,594 | $ | 1,172,924,571 | ||||||||
Other Financial Instruments** | ||||||||||||||||
Assets | ||||||||||||||||
Forward Foreign Currency Contracts | $ | – | $ | 3,241,495 | $ | – | $ | 3,241,495 | ||||||||
Liabilities | ||||||||||||||||
Forward Foreign Currency Contracts | – | (258,933 | ) | – | (258,933 | ) | ||||||||||
Credit Default Swap Contracts | – | (1,171,407 | ) | – | (1,171,407 | ) | ||||||||||
Total | $ | – | $ | 1,811,155 | $ | – | $ | 1,811,155 |
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Stone Harbor Investment Funds | Notes to Financial Statements |
May 31, 2018 |
Investments in Securities at Value* | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Stone Harbor High Yield Bond Fund | ||||||||||||||||
Corporate Bonds | $ | – | $ | 87,717,456 | $ | – | $ | 87,717,456 | ||||||||
Bank Loans | – | 9,773,266 | – | 9,773,266 | ||||||||||||
Common/Preferred Stocks | 774,011 | – | 306,570 | 1,080,581 | ||||||||||||
Rights | – | – | 39,364 | 39,364 | ||||||||||||
Warrants | 6,482 | – | 33 | 6,515 | ||||||||||||
Short Term Investments | 2,544,645 | – | – | 2,544,645 | ||||||||||||
Total | $ | 3,325,138 | $ | 97,490,722 | $ | 345,967 | $ | 101,161,827 |
Investments in Securities at Value* | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Stone Harbor Local Markets Fund | ||||||||||||||||
Sovereign Debt Obligations | $ | – | $ | 773,693,522 | $ | – | $ | 773,693,522 | ||||||||
Corporate Bonds | – | 72,579,218 | – | 72,579,218 | ||||||||||||
Short Term Investments | 51,302,106 | – | – | 51,302,106 | ||||||||||||
Total | $ | 51,302,106 | $ | 846,272,740 | $ | – | $ | 897,574,846 | ||||||||
Other Financial Instruments** | ||||||||||||||||
Assets | ||||||||||||||||
Forward Foreign Currency Contracts | $ | – | $ | 1,516,481 | $ | – | $ | 1,516,481 | ||||||||
Liabilities | ||||||||||||||||
Forward Foreign Currency Contracts | – | (6,253,899 | ) | – | (6,253,899 | ) | ||||||||||
Cross Currency Swap Contracts | – | (632,487 | ) | – | (632,487 | ) | ||||||||||
Interest Rate Swap Contracts | – | (42,861 | ) | – | (42,861 | ) | ||||||||||
Total | $ | – | $ | (5,412,766 | ) | $ | – | $ | (5,412,766 | ) |
Investments in Securities at Value* | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Stone Harbor Emerging Markets Corporate Debt Fund | ||||||||||||||||
Sovereign Debt Obligations | $ | – | $ | 187,750 | $ | – | $ | 187,750 | ||||||||
Corporate Bonds | – | 11,002,419 | – | 11,002,419 | ||||||||||||
Short Term Investments | 154,534 | – | – | 154,534 | ||||||||||||
Total | $ | 154,534 | $ | 11,190,169 | $ | – | $ | 11,344,703 |
Investments in Securities at Value* | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Stone Harbor Investment Grade Fund | ||||||||||||||||
Corporate Bonds | $ | – | $ | 4,202,720 | $ | – | $ | 4,202,720 | ||||||||
Asset Backed/Commercial Mortgage Backed Securities | – | 1,539,834 | – | 1,539,834 | ||||||||||||
U.S. Treasury Bonds/Notes | – | 2,596,154 | – | 2,596,154 | ||||||||||||
U.S. Government Agency Mortgage Backed Securities | – | 2,199,084 | – | 2,199,084 | ||||||||||||
Short Term Investments | 163,929 | – | – | 163,929 | ||||||||||||
Total | $ | 163,929 | $ | 10,537,792 | $ | – | $ | 10,701,721 |
Stone Harbor Investment Funds Annual Report | May 31, 2018 | 83 |
Stone Harbor Investment Funds | Notes to Financial Statements |
May 31, 2018 |
Investments in Securities at Value* | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Stone Harbor Strategic Income Fund | ||||||||||||||||
Open-End Funds | $ | 32,368,722 | $ | – | $ | – | $ | 32,368,722 | ||||||||
Short Term Investments | 286,483 | – | – | 286,483 | ||||||||||||
Total | $ | 32,655,205 | $ | – | $ | – | $ | 32,655,205 | ||||||||
Other Financial Instruments** | ||||||||||||||||
Assets | ||||||||||||||||
Futures Contracts | $ | 171,247 | $ | – | $ | – | $ | 171,247 | ||||||||
Credit Default Swap Contracts | – | 12,317 | – | 12,317 | ||||||||||||
Forward Foreign Currency Contracts | – | 33,807 | – | 33,807 | ||||||||||||
Liabilities | ||||||||||||||||
Forward Foreign Currency Contracts | – | (28,559 | ) | – | (28,559 | ) | ||||||||||
Futures Contracts | (13,423 | ) | – | – | (13,423 | ) | ||||||||||
Credit Default Swap Contracts | – | (2,203 | ) | – | (2,203 | ) | ||||||||||
Total | $ | 157,824 | 15,362 | $ | – | $ | 173,186 |
Investments in Securities at Value* | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Stone Harbor Emerging Markets Debt Allocation Fund | ||||||||||||||||
Open-End Funds | $ | 27,979,921 | $ | – | $ | – | $ | 27,979,921 | ||||||||
Short Term Investments | 27,925 | – | – | 27,925 | ||||||||||||
Total | $ | 28,007,846 | $ | – | $ | – | $ | 28,007,846 |
Other Financial Instruments** | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Liabilities | ||||||||||||||||
Forward Foreign Currency Contracts | – | (2,006 | ) | – | (2,006 | ) | ||||||||||
Total | $ | – | $ | (2,006 | ) | $ | – | $ | (2,006 | ) |
Investments in Securities at Value* | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Stone Harbor 500 Plus Fund | ||||||||||||||||
Asset Backed/Commercial Mortgage Backed Securities | $ | – | $ | 2,157,963 | $ | – | $ | 2,157,963 | ||||||||
Short Term Investments | 176,302 | – | – | 176,302 | ||||||||||||
Total | $ | 176,302 | $ | 2,157,963 | $ | – | $ | 2,334,265 | ||||||||
Other Financial Instruments** | ||||||||||||||||
Liabilities | ||||||||||||||||
Futures Contracts | (24,327 | ) | – | – | (24,327 | ) | ||||||||||
Total | $ | (24,327 | ) | $ | – | $ | – | $ | (24,327 | ) |
* | For detailed Industry/Country descriptions see accompanying Statement of Investments. |
** | Other financial instruments are derivative instruments reflected in the Statement 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. |
There were no transfers in or out of Levels 1 and 2 during the year ended May 31, 2018. It is the Funds’ policy to recognize transfers into and out of all levels at the end of the reporting period.
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Stone Harbor Investment Funds | Notes to Financial Statements |
May 31, 2018 |
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, 2017 | Accrued discount/ premium | Return of Capital | Realized Gain/(Loss) | Change in Unrealized Appreciation/ (Depreciation) | Purchases | Sales Proceeds | Transfer into Level 3 | Transfer out of Level 3 | Balance as of May 31, 2018 | Net change in unrealized appreciation/ (depreciation) attributable to Level 3 investments held at May 31, 2018 | |||||||||||||||||||||||||||||||||
Stone Harbor Emerging Markets Debt Fund | ||||||||||||||||||||||||||||||||||||||||||||
Bank Loans | $ | 13,589,848 | $ | – | $ | – | $ | (253,190 | ) | $ | 323,386 | $ | 1,793,118 | $ | (7,644,051 | ) | $ | – | $ | – | $ | 7,809,111 | $ | 73,483 | ||||||||||||||||||||
Corporate Bonds | – | – | – | – | (1 | ) | 51 | – | – | – | 50 | (1 | ) | |||||||||||||||||||||||||||||||
Credit Linked | ||||||||||||||||||||||||||||||||||||||||||||
Notes | 7,214,815 | 150,047 | – | (36,715 | ) | 231,415 | – | (842,129 | ) | – | – | 6,717,433 | 231,415 | |||||||||||||||||||||||||||||||
Total | $ | 20,804,663 | $ | 150,047 | $ | – | $ | (289,905 | ) | $ | 554,800 | $ | 1,793,169 | $ | (8,486,180 | ) | $ | – | $ | – | $ | 14,526,594 | $ | 304,897 |
Investments in Securities | Balance as of May 31, 2017 | Accrued discount/ premium | Return of Capital | Realized Gain/(Loss) | Change in Unrealized Appreciation/ (Depreciation) | Purchases | Sales Proceeds | Transfer into Level 3 | Transfer out of Level 3 | Balance as of May 31, 2018 | Net change in unrealized appreciation/ (depreciation) attributable to Level 3 investments held at May 31, 2018 | |||||||||||||||||||||||||||||||||
Stone Harbor High Yield Bond Fund | ||||||||||||||||||||||||||||||||||||||||||||
Bank Loans | $ | 903,047 | $ | – | $ | – | $ | – | $ | (14,986 | ) | $ | – | $ | (888,061 | ) | $ | – | $ | – | $ | – | $ | – | ||||||||||||||||||||
Warrants | 32 | – | – | – | 1 | – | – | – | – | 33 | 1 | |||||||||||||||||||||||||||||||||
Corporate Bonds | 112 | – | – | 12,295 | (112 | ) | – | (12,295 | ) | – | – | – | – | |||||||||||||||||||||||||||||||
Rights | 94,624 | – | – | – | (55,260 | ) | – | – | – | – | 39,364 | (55,260 | ) | |||||||||||||||||||||||||||||||
Common Stock | 129,373 | – | – | – | 177,197 | – | – | – | – | 306,570 | 177,197 | |||||||||||||||||||||||||||||||||
Total | $ | 1,127,188 | $ | – | $ | – | $ | 12,295 | $ | 106,840 | $ | – | $ | (900,356 | ) | $ | – | $ | – | $ | 345,967 | $ | 121,938 |
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.
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. Dividend income received from underlying affiliated funds is generally reinvested back into the underlying fund. 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. EST). 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.
Stone Harbor Investment Funds Annual Report | May 31, 2018 | 85 |
Stone Harbor Investment Funds | Notes to Financial Statements |
May 31, 2018 |
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 liquidity risk, market risk, interest rate risk and the risk that the counterparty will be unwilling or unable to meet its obligations under the note.
Segregation and Collateralization: In cases in which the 1940 Act and the interpretive positions of the U.S. Securities and Exchange Commission (“SEC”) require that a Fund either deliver collateral or segregate assets in connection with certain investments (e.g., foreign currency exchange contracts, securities with extended settlement periods, and swaps) or certain borrowings (e.g., reverse repurchase agreements), the Fund will segregate collateral or designate on its books and records cash or other liquid securities having a value at least equal to the amount that is required to be physically segregated for the benefit of the counterparty. Furthermore, based on requirements and agreements with certain exchanges and third party broker-dealers, each party has requirements to deliver/deposit cash or securities as collateral for certain investments. Cash collateral that has been pledged to cover obligations of the Funds and cash collateral received from the counterparty, if any, is reported separately on the Statements of Assets and Liabilities as “Deposits with brokers” or “Payable due to brokers”, respectively. Securities collateral pledged for the same purpose is noted on the Statements of Investments.
Line of Credit: On May 5, 2017, the Trust entered into a credit agreement (“Credit Agreement”) with State Street Bank and Trust Company (the “Bank”) in which the Funds may borrow through a revolving line of credit. Borrowings under the Credit Agreement are secured by investments held in the Funds. During the year ended May 31, 2018, the Stone Harbor Emerging Markets Debt Fund and the Stone Harbor High Yield Fund when using the line of credit borrowed an average amount of $27,892,857 and $5,700,000 at an average interest rate of 2.47% and 2.82% respectively. The remaining Funds did not borrow under the Credit Agreement. Interest and commitment fees on funded and unfunded loans can be found in the Statements of Operations of the applicable Fund. The Credit Agreement provides for an aggregate commitment amount of $50,000,000 with an annual commitment fee of 0.35% allocated on a pro-rata basis between the Funds based on their net assets, with the exception of the Stone Harbor Emerging Debt Allocation Fund and the Strategic Income Fund. The Credit Agreement will expire on May 3, 2019.
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.
While some loans are collateralized and senior to an issuer’s other debt securities, other loans may be unsecured and/or subordinated to other securities. Some senior loans, such as bank loans, may be illiquid and generally tend to be less liquid than many other debt securities.
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’ Statements 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. Loans may not be considered “securities”, and purchasers, such as the Funds, therefore may not be entitled to rely on the anti-fraud protections of the federal securities laws.
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.
Mortgage-Related and Other Asset-Backed Securities: Certain Funds may invest in mortgage-related and other asset-backed securities. These securities include mortgage pass-through securities, collateralized mortgage obligations, commercial mortgage-backed securities, stripped mortgage-backed securities, asset-backed securities, collateralized debt obligations and other securities that directly or indirectly represent a participation in, or are secured by and payable from, mortgage loans on real property. Mortgage-related and other asset-backed securities are interests in pools of loans or other receivables. Mortgage-related securities are created from pools of residential or commercial mortgage loans, including mortgage loans made by savings and loan institutions, mortgage bankers, commercial banks and others. Asset-backed securities are created from many types of assets, including auto loans, credit card receivables, home equity loans, and student loans. These securities provide a monthly payment which consists of both interest and principal payments. Interest payments may be determined by fixed or adjustable rates. The rate of prepayments on underlying mortgages will affect the price and volatility of a mortgage-related security, and may have the effect of shortening or extending the effective duration of the security relative to what was anticipated at the time of purchase. The timely payment of principal and interest of certain mortgage-related securities is guaranteed with the full faith and credit of the U.S. Government. Pools created and guaranteed by non-governmental issuers, including government sponsored corporations, may be supported by various forms of insurance or guarantees, but there can be no assurance that the private insurers or guarantors can meet their obligations under the insurance policies or guarantee arrangements.
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Stone Harbor Investment Funds | Notes to Financial Statements |
May 31, 2018 |
U.S. Government Agencies or Government-Sponsored Enterprises: Certain Funds may invest in securities of U.S. Government agencies or government-sponsored enterprises. U.S. Government securities are obligations of and, in certain cases, guaranteed by, the U.S. Government, its agencies or instrumentalities. Some U.S. Government securities, such as Treasury bills, notes and bonds, and securities guaranteed by the Government National Mortgage Association (“GNMA” or “Ginnie Mae”), are supported by the full faith and credit of the U.S. Government; others, such as those of the Federal Home Loan Banks, are supported by the right of the issuer to borrow from the U.S. Department of the Treasury (the “U.S. Treasury”); others, such as those of the Federal National Mortgage Association (“FNMA” or “Fannie Mae”), are supported by the discretionary authority of the U.S. Government to purchase the agency’s obligations. U.S. Government securities may include zero coupon securities, which do not distribute interest on a current basis and tend to be subject to greater risk than interest-paying securities of similar maturities.
Government-related guarantors (i.e., not backed by the full faith and credit of the U.S. Government) include FNMA and the Federal Home Loan Mortgage Corporation (“FHLMC” or “Freddie Mac”). FNMA is a government-sponsored corporation. FNMA purchases conventional (i.e., not insured or guaranteed by any government agency) residential mortgages from a list of approved seller/servicers which include state and federally chartered savings and loan associations, mutual savings banks, commercial banks and credit unions and mortgage bankers. Pass-through securities issued by FNMA are guaranteed as to timely payment of principal and interest by FNMA, but are not backed by the full faith and credit of the U.S. Government. FHLMC issues Participation Certificates (“PCs”), which are pass-through securities, each representing an undivided interest in a pool of residential mortgages. FHLMC guarantees the timely payment of interest and ultimate collection of principal, but PCs are not backed by the full faith and credit of the U.S. Government.
Forward Commitments: Certain Funds may contract to purchase securities for a fixed price at a transaction date beyond the customary settlement period (i.e., “when-issued,” “delayed-delivery,” “forward commitment,” or “To Be Announced (“TBA”) transactions”) consistent with a Fund’s ability to manage its investment portfolio and meet redemption requests. These transactions involve a commitment by a Fund to purchase securities for a predetermined price or yield with payment and delivery taking place more than three days in the future or after a period longer than the customary settlement period for that type of security. No interest will be earned by a Fund on such purchases until the securities are delivered; however, the market value may change prior to delivery. A Fund will not engage in these transactions for investment leverage.
When-issued securities involve the risk that the yield obtained in the transaction will be less than that available in the market when delivery takes place. Securities purchased on a when-issued basis are recorded as an asset and are subject to changes in value based upon changes in the value of the security or general level of interest rates. In when-issued and delayed-delivery transactions, a Fund relies on the seller to complete the transaction; the seller’s failure to do so may cause a Fund to miss an advantageous price or yield.
The Funds may enter into TBA commitments. TBA commitments are forward agreements for the purchase or sale of mortgage-backed securities for a fixed price, with payment and delivery on an agreed upon future settlement date. The specific securities to be delivered are not identified at the trade date. However, delivered securities must meet specified terms, including issuer, rate and mortgage terms. The Funds generally enter into TBA commitments with the intent to take possession of or deliver the underlying mortgage-backed securities but can extend the settlement or roll the transaction. Regulatory developments may limit the ability of a Fund to engage in TBA transactions to the extent desired.
Unsettled TBA sale (purchase) commitments are valued at the current market value of the underlying securities. The contract is adjusted to market value daily, and the change in market value is recorded by the Fund as an unrealized gain or loss. Outstanding TBA commitments and related deliverables are reflected on the Statement of Assets and Liabilities in Payable for investments purchased and Receivable for investments sold, respectively. If the TBA sale (purchase) commitment is closed through the acquisition of an offsetting purchase (sale) commitment, the Fund realizes a gain or loss from the sale of the securities based upon the unit price established at the date the commitment was entered into. These gain/loss amounts are reflected in the Accumulated net realized gain/loss on investments and Net unrealized appreciation on investments on the Statement of Assets and Liabilities.
Stone Harbor Investment Funds Annual Report | May 31, 2018 | 87 |
Stone Harbor Investment Funds | Notes to Financial Statements |
May 31, 2018 |
Emerging Market Risk: Emerging market countries often experience instability in their political and economic structures. Government actions could have a great effect on the economic conditions in these countries, which can affect the value and liquidity of the assets of a Fund. Specific risks that could decrease a Fund’s return include seizure of a company’s assets, restrictions imposed on payments as a result of blockages on foreign currency exchanges, expropriation, confiscatory taxation and unanticipated social or political occurrences. In addition, the ability of an emerging market government to make timely payments on its debt obligations will depend on the extent of its reserves, interest rate fluctuations and access to international credit and investments. A country with non-diversified exports or that relies on specific imports will be subject to a greater extent to fluctuations in the pricing of those commodities. Failure to generate adequate earnings from foreign trade would make it difficult for an emerging market country to service foreign debt. Disruptions resulting from social and political factors may cause the securities markets of emerging market countries to close. If this were to occur, the liquidity and value of a Fund’s assets invested in corporate debt obligations of emerging market companies would decline. Foreign investment in debt securities of emerging market countries may be restricted or controlled to varying degrees. These restrictions can limit or preclude foreign investment in debt securities of certain emerging market countries. In addition, certain emerging market countries may also restrict investment opportunities in issuers in industries deemed important to national interests.
Interest Rate Risk: Changes in interest rates will affect the value of a Fund’s investments. In general, as interest rates rise, bond prices fall, and as interest rates fall, bond prices rise. Interest rate risk is generally greater for funds that invest a significant portion of their assets in high yield securities. However, funds that generally invest a significant portion of their assets in higher-rated fixed income securities are also subject to this risk. A Fund also faces increased interest rate risk if it invests in fixed income securities paying no current interest (such as zero coupon securities and principal-only securities), interest-only securities and fixed income securities paying non-cash interest in the form of other securities.
Liquidity Risk: Liquidity risk exists when particular investments are difficult to purchase or sell at the time that a Fund would like or at the price that the Fund believes such investments are currently worth. Certain of the Funds’ investments may be illiquid. Illiquid securities may become harder to value, especially in changing markets. A Fund’s investments in illiquid securities may reduce the returns of the Fund because it may be unable to sell the illiquid securities at an advantageous time or price or possibly require the Fund to dispose of other investments at unfavorable times or prices in order to satisfy its obligations, which could prevent the Fund from taking advantage of other investment opportunities. Additionally, the market for certain investments may become illiquid under adverse market or economic conditions independent of any specific adverse changes in the conditions of a particular issuer. Derivatives, securities that involve substantial interest rate or credit risk and bank loans tend to involve greater liquidity risk. In addition, liquidity risk tends to increase to the extent a Fund invests in securities whose sale may be restricted by law or by contract, such as Rule 144A and Regulation S securities.
Foreign Investment Risk: The securities markets of many foreign countries are relatively small, with a limited number of companies representing a small number of industries. Additionally, issuers of foreign (non-U.S.) securities are usually not subject to the same degree of regulation as U.S. issuers. Reporting, accounting, auditing and custody standards of foreign countries differ, in some cases significantly, from U.S. standards. Global economies and financial markets are becoming increasingly interconnected, and conditions and events in one country, region or financial market may adversely impact issuers in a different country, region or financial market. Also, nationalization, expropriation or confiscatory taxation, currency blockage, political changes or diplomatic developments could adversely affect a Fund’s investments in a foreign country. In the event of nationalization, expropriation or other confiscation, a Fund could lose its entire investment in foreign (non-U.S.) securities. Adverse conditions in a certain region can adversely affect securities of other countries whose economies appear to be unrelated. Foreign (non-U.S.) securities may also be less liquid and more difficult to value than securities of U.S. issuers.
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, perceived 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 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, except for any distributions paid by the Local Markets Fund and the Emerging Markets Debt Allocation Fund, which are declared and paid annually. Capital gain distributions, if any, are declared and paid at least annually. A portion of the Fund’s distributions made for a taxable year may be recharacterized as a return of capital to shareholders. This may occur, for example, if the Fund’s distributions exceed its “earnings and profits” for the taxable year or because certain foreign currency losses may reduce the Fund’s income. This recharacterization may be retroactive. A return of capital will generally not be taxable, but will reduce a shareholder’s basis in his or her Fund shares and therefore result in a higher gain or lower loss when the shareholder sells the shares.
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Stone Harbor Investment Funds | Notes to Financial Statements |
May 31, 2018 |
Expenses: Direct expenses are charged to each Fund; expenses of the Trust are generally allocated to the Funds based on each Fund’s relative net assets.
Offering Costs: Offering costs for the Stone Harbor 500 Plus Fund of $64,739, consisted of fees related to the mailing and printing of the initial prospectus, certain startup legal costs, and initial registration filings. Such costs were amortized over a twelve month period beginning with the commencement of operations of the Fund.
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 year ended May 31, 2018, 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.
3. DERIVATIVE INSTRUMENTS
Risk Exposure and the Use of Derivative Instruments: The Funds’ investment objectives 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.
The Funds’ use of derivatives can result in losses due to unanticipated changes in the risk factors described in Note 2 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.
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.
Derivatives are also subject to the risk of possible regulatory changes, which could adversely affect the availability and performance of derivative securities, make them more costly and limit or restrict their use by the Fund, which could prevent the Fund from implementing its investment strategies and adversely affect returns.
Forward Foreign Currency Contracts: Certain Funds engaged in currency transactions with counterparties during the year ended May 31, 2018 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 delivery, 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.
Stone Harbor Investment Funds Annual Report | May 31, 2018 | 89 |
Stone Harbor Investment Funds | Notes to Financial Statements |
May 31, 2018 |
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.
Futures Contracts: Certain Funds invested in futures contracts during the year ended May 31, 2018 in accordance with their investment objectives. Each Fund does so for a variety of reasons including for cash management, hedging or non-hedging purposes in an attempt to achieve investment returns consistent with the Fund’s investment objective. A futures contract provides for the future sale by one party and purchase by another party of a specified quantity of the security or other financial instrument at a specified price and time. A futures contract on an index is an agreement pursuant to which two parties agree to take or make delivery of an amount of cash equal to the difference between the value of the index at the close of the last trading day of the contract and the price at which the index contract was originally written. Futures contract transactions may result in losses in excess of the amount invested in the futures contract. There can be no guarantee that there will be a correlation between price movements in the hedging vehicle and in the portfolio securities being hedged. An incorrect correlation could result in a loss on both the hedged securities in a Fund and the hedging vehicle so that the portfolio return might have been greater had hedging not been attempted. There can be no assurance that a liquid market will exist at a time when a Fund seeks to close out a futures contract or a futures option position. Lack of a liquid market for any reason may prevent a Fund from liquidating an unfavorable position, and the Fund would remain obligated to meet margin requirements until the position is closed. In addition, a Fund could be exposed to risk if the counterparties to the contracts are unable to meet the terms of their contracts. With exchange-traded futures contracts, there is minimal counterparty credit risk to the Funds since futures contracts are exchange-traded and the exchange’s clearinghouse, as counterparty to all exchange-traded futures contracts, guarantees the futures contracts against default.
When a purchase or sale of a futures contract is made by a Fund, the Fund is required to deposit with its broker a specified amount of liquid assets (“initial margin”). The margin required for a futures contract is set by the exchange on which the contract is traded and may be modified during the term of the contract. The margin is reported on the Statement of Assets and Liabilities as “Deposit with brokers for futures contracts”. The initial margin is in the nature of a performance bond or good faith deposit on the futures contract that is returned to a Fund upon termination of the contract, assuming all contractual obligations have been satisfied. Each day a Fund may pay or receive cash, called “variation margin,” equal to the daily change in value of the futures contract. Such payments or receipts are recorded for financial statement purposes as unrealized gains or losses by a Fund. Variation margin does not represent a borrowing or loan by a Fund but is instead a settlement between a Fund and the broker of the amount one would owe the other if the futures contract expired. When the contract is closed, a Fund records a realized gain or loss equal to the difference between the value of the contract at the time it was opened and the value at the time it was closed.
Swap Agreements: Certain Funds invested in swap agreements during the year ended May 31, 2018. Swap agreements are bilaterally negotiated agreements between a Fund and a counterparty to exchange or swap investment cash flows, assets, or market-linked returns at specified, future intervals. Swap agreements are privately negotiated in the over the counter market (“OTC swaps”) or may be executed in a multilateral or other trade facility platform, such as a registered exchange (“centrally cleared swaps”). In a centrally cleared swap, immediately following execution of the swap agreement, the swap agreement is novated to a central counterparty (the “CCP”) and the Fund’s counterparty on the swap agreement becomes the CCP. The Fund may enter into credit default swaps, interest rate swaps, total return swaps on individual securities or groups or indices of securities for hedging, investment or leverage purposes. In connection with these agreements, securities or cash may be identified as collateral or margin in accordance with the terms of the respective swap agreements to provide assets of value and recourse in the event of default or bankruptcy/insolvency.
Swaps are marked-to-market daily and changes in value, including the accrual of periodic amounts of interest, are recorded daily. Daily changes in valuation of centrally cleared swaps, if any, are recorded as a receivable or payable for the change in value as appropriate (“variation margin”) and also reflected in the change in unrealized appreciation/(depreciation) on credit default swap contracts in the Statement of Operations. Each day the Fund may pay or receive cash, equal to the variation margin of the centrally cleared swap. Changes in value for OTC swaps are reflected in the unrealized appreciation/(depreciation) of the position until a periodic payment is made by either party.
Swap payments received or paid at the beginning of the measurement period represent premiums paid or received upon entering into the swap agreement to compensate for differences between the stated terms of the swap agreement and prevailing market conditions (credit spreads, interest rates, and other relevant factors). Generally, the basis of the swap is the unamortized premium received or paid. Periodic payments received or made by the Fund are recorded as realized gains or losses, respectively. Any upfront fees paid are recorded as assets and any upfront fees received are recorded as liabilities. For centrally cleared swaps, these amounts are included in the deposits with brokers for swap contracts while OTC swaps are displayed as a swap premium paid/received. When the swap is terminated, the Fund will record a realized gain or loss equal to the difference between the proceeds from (or cost of) the closing transaction and the Fund’s basis in the contract, if any.
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Stone Harbor Investment Funds | Notes to Financial Statements |
May 31, 2018
Credit Default Swap Contracts: Certain Funds entered into credit default swap contracts during the year ended May 31, 2018 for hedging purposes to gain market exposure or to add leverage to its portfolio. When used for hedging purposes, a Fund is the buyer of a credit default swap contract. In that case, the Fund is entitled to receive the par (or other agreed upon) value of a referenced debt obligation, index or other investment from the counterparty to the contract in the event of a default by a third party, such as a U.S. or foreign issuer, on the referenced debt obligation. In return, the Fund would pay to the counterparty a periodic stream of payments over the term of the contract provided that no event of default has occurred. If no event of default occurs, the Fund has spent the stream of payments and received no benefit from the contract. When the Fund is the seller of a credit default swap contract, the Fund receives the stream of payments but is obligated to pay upon default of the referenced debt obligation. As the seller, the Fund effectively adds leverage to its portfolio because, in addition to its total assets, the Fund is subject to investment exposure on the notional amount of the swap.
In addition to the risks applicable to derivatives generally, credit default swaps involve special risks because they may be difficult to value, are highly susceptible to liquidity and credit risk and generally pay a return to the counterparty only in the event of an actual default by the issuer of the underlying obligation, as opposed to a credit downgrade or other indication of financial difficulty.
Interest Rate Swap Contracts: Certain Funds entered into interest rate swap agreements during the year ended May 31, 2018. Interest rate swap contracts involve the exchange by a Fund with another party for their respective commitment to pay or receive interest on the notional amount of principal. Certain forms of interest rate swap agreements may include: (i) interest rate caps, under which, in return for a premium, one party agrees to make payments to the other to the extent that interest rates exceed a specified rate, or “cap”, (ii) interest rate floors, under which, in return for a premium, one party agrees to make payments to the other to the extent that interest rates fall below a specified rate, or “floor”, (iii) interest rate collars, under which a party sells a cap and purchases a floor or vice versa in an attempt to protect itself against interest rate movements exceeding given minimum or maximum levels, (iv) callable interest rate swaps, under which the buyer pays an upfront fee in consideration for the right to early terminate the swap transaction in whole, at zero costs and at a predetermined date and time prior to the maturity date, (v) spreadlocks, which allow the interest rate swap users to lock in the forward differential (or spread) between the interest rate swap rate and a specified benchmark, or (vi) basis swaps, under which two parties can exchange variable interest rates based on different segments of money markets.
The tables below are a summary of the fair valuations of derivative instruments categorized by risk exposure.
Fair values of forward foreign currency contracts, swaps, and future contracts on the Statements of Assets and Liabilities as of May 31, 2018:
Risk Exposure | Location | Fair Value | Location | Fair Value | ||||||||
Stone Harbor Emerging Markets Debt Fund | ||||||||||||
Credit Risk (Swap Contracts) | Unrealized appreciation on credit default swap contracts | $ | – | Unrealized depreciation on credit default swap contracts | $ | (1,171,407 | ) | |||||
Foreign Exchange Rate Risk (Forward Foreign Currency Contracts) | Unrealized appreciation on forward foreign currency contracts | 3,241,495 | Unrealized depreciation on forward foreign currency contracts | (258,933 | ) | |||||||
Total | $ | 3,241,495 | $ | (1,430,340 | ) | |||||||
Stone Harbor Local Markets Fund | ||||||||||||
Interest Rate Risk (Swap Contracts)* | Unrealized appreciation on interest rate swap contracts | $ | – | Unrealized depreciation on interest rate swap contracts | $ | (42,861 | ) | |||||
Currency Risk (Swap Contracts) | Unrealized appreciation on cross currency swap contracts | – | Unrealized depreciation on cross currency swap contracts | (632,487 | ) | |||||||
Foreign Exchange Rate Risk (Forward Foreign Currency Contracts) | Unrealized appreciation on forward foreign currency contracts | 1,516,481 | Unrealized depreciation on forward foreign currency contracts | (6,253,899 | ) | |||||||
Total | $ | 1,516,481 | $ | (6,929,247 | ) |
Stone Harbor Investment Funds Annual Report | May 31, 2018 | 91 |
Stone Harbor Investment Funds | Notes to Financial Statements |
May 31, 2018
Stone Harbor Strategic Income Fund | ||||||||||||
Credit Risk (Swap Contracts)* | Unrealized appreciation on credit default swap contracts | $ | 12,317 | Unrealized depreciation on credit default swap contracts | $ | (2,203 | ) | |||||
Interest Rate Risk (Futures Contracts) | Unrealized appreciation on futures contracts | 171,247 | Unrealized depreciation on futures contracts | (13,423 | ) | |||||||
Foreign Exchange Rate Risk (Forward Foreign Currency Contracts) | Unrealized appreciation on forward foreign currency contracts | 33,807 | Unrealized depreciation on forward foreign currency contracts | (28,559 | ) | |||||||
Total | $ | 217,371 | $ | (44,185 | ) |
Risk Exposure | Location | Fair Value | Location | Fair Value | ||||||||
Stone Harbor Emerging Markets Debt Allocation Fund | ||||||||||||
Foreign Exchange Rate Risk (Forward Foreign Currency Contracts) | Unrealized appreciation on forward foreign currency contracts | $ | – | Unrealized depreciation on forward foreign currency contracts | $ | (2,006 | ) | |||||
Total | $ | – | $ | (2,006 | ) | |||||||
Stone Harbor 500 Plus Fund | ||||||||||||
Interest Rate Risk (Futures Contracts) | Unrealized appreciation on futures contracts | $ | – | Unrealized depreciation on futures contracts | $ | (1,042 | ) | |||||
Equity Risk (Futures Contracts)* | Unrealized appreciation on futures contracts | – | Unrealized depreciation on futures contracts | (23,285 | ) | |||||||
Total | $ | – | $ | (24,327 | ) |
* | The value presented includes cumulative gain/(loss) on open futures contracts and swap contracts; however, the value reflected on the accompanying Statement of Assets and Liabilities is only the unsettled variation margin receivable/(payable) as of May 31, 2018. |
The forward foreign currency contracts, swaps, and future contracts average value, net of both long and short positions, during the year ended May 31, 2018 is noted below:
Fund | Forward Foreign Currency Contracts* | Credit Default Swap Contracts** | Interest Rate Swap Contracts** | Cross Currency Swap Contracts** | Futures Contracts** | |||||||||||||||
Stone Harbor Emerging Markets Debt Fund | $ | (102,224,952 | ) | $ | (5,230,000 | ) | $ | – | $ | – | $ | – | ||||||||
Stone Harbor High Yield Bond Fund | (181,500 | ) | – | – | – | – | ||||||||||||||
Stone Harbor Local Markets Fund | 74,467,081 | – | 14,116,000 | 17,291,949 | – | |||||||||||||||
Stone Harbor Strategic Income Fund | (720,340 | ) | 7,842,438 | – | – | 1,618,401 | ||||||||||||||
Stone Harbor Emerging Markets Debt Allocation Fund | 117,941 | – | – | – | – | |||||||||||||||
Stone Harbor 500 Plus Fund | – | – | – | – | 2,123,860 |
* | Represents the average foreign currency amount translated into US dollars (bought) or sold |
** | Represents the average Notional Value |
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Stone Harbor Investment Funds | Notes to Financial Statements |
May 31, 2018
The effect of forward foreign currency contracts, credit default swaps, and futures contracts on the Statements of Operations for the year ended May 31, 2018:
Risk Exposure | Location | Realized Gain/(Loss) on Derivatives | Location | Change in Unrealized Appreciation/(Depreciation) on Derivatives Recognized in Income | ||||||||
Stone Harbor Emerging Markets Debt Fund | ||||||||||||
Credit Risk (Swap Contracts) | Net realized gain/(loss) on credit default swap contracts | $ | 44,747 | Change in unrealized appreciation/(depreciation) on credit default swap contracts | $ | (1,171,407 | ) | |||||
Foreign Exchange Rate Risk (Forward Foreign Currency Contracts) | Net realized gain/(loss) on forward foreign currency contracts | (7,112,375 | ) | Change in unrealized appreciation/(depreciation) on forward foreign currency contracts | 5,818,817 | |||||||
Total | $ | (7,067,628 | ) | $ | 4,647,410 | |||||||
Stone Harbor High Yield Bond Fund | ||||||||||||
Foreign Exchange Rate Risk (Forward Foreign Currency Contracts) | Net realized gain/(loss) on forward foreign currency contracts | $ | (84,045 | ) | Change in unrealized appreciation/(depreciation) on forward foreign currency contracts | $ | 35,640 | |||||
Total | $ | (84,045 | ) | $ | 35,640 | |||||||
Stone Harbor Local Markets Fund | ||||||||||||
Interest Rate Risk (Swap Contracts) | Net realized gain/(loss) on interest rate swap contracts | $ | 220,439 | Change in unrealized appreciation/(depreciation) on interest rate swap contracts | $ | (42,861 | ) | |||||
Currency Risk (Swap Contracts | Net realized gain/(loss) on cross currency swap contracts | – | Change in unrealized appreciation/(depreciation) on cross currency swap contracts | (632,487 | ) | |||||||
Foreign Exchange Rate Risk (Forward Foreign Currency Contracts) | Net realized gain/(loss) on forward foreign currency contracts | (11,082 | ) | Change in unrealized appreciation/(depreciation) on forward foreign currency contracts | (5,071,010 | ) | ||||||
Total | $ | 209,357 | $ | (5,746,358 | ) | |||||||
Stone Harbor Strategic Income Fund | ||||||||||||
Credit Risk (Swap Contracts) | Net realized gain/(loss) on credit default swap contracts | $ | (317,213 | ) | Change in unrealized appreciation/(depreciation) on credit default swap contracts | $ | 81,171 | |||||
Interest Rate Risk (Futures Contracts) | Net realized gain/(loss) on futures contracts | 86,671 | Change in unrealized appreciation/(depreciation) on futures contracts | 130,763 | ||||||||
Foreign Exchange Rate Risk (Forward Foreign Currency Contracts) | Net realized gain/(loss) on forward foreign currency contracts | 30,284 | Change in unrealized appreciation/(depreciation) on forward foreign currency contracts | (1,867 | ) | |||||||
Total | $ | (200,258 | ) | $ | 210,067 |
Stone Harbor Investment Funds Annual Report | May 31, 2018 | 93 |
Stone Harbor Investment Funds | Notes to Financial Statements |
May 31, 2018
Risk Exposure | Location | Realized Gain/(Loss) on Derivatives | Location | Change in Unrealized Appreciation/(Depreciation) on Derivatives Recognized in Income | ||||||||
Stone Harbor Emerging Markets Debt Allocation Fund | ||||||||||||
Foreign Exchange Rate Risk (Forward Foreign Currency Contracts) | Net realized gain/(loss) on forward foreign currency contracts | $ | (13,586 | ) | Change in unrealized appreciation/(depreciation) on forward foreign currency contracts | $ | 2,173 | |||||
Total | $ | (13,586 | ) | $ | 2,173 | |||||||
Stone Harbor 500 Plus Fund | ||||||||||||
Interest Rate Risk (Futures Contracts) | Net realized gain/(loss) on futures contracts | $ | 11,082 | Change in unrealized appreciation/(depreciation) on futures contracts | $ | (154,750 | ) | |||||
Equity Risk (Futures Contracts) | Net realized gain/(loss) on futures contracts | 414,436 | Change in unrealized appreciation/(depreciation) on futures contracts | (1,042 | ) | |||||||
Total | $ | 425,518 | $ | (155,792 | ) |
Offsetting Arrangements: Certain derivative contracts are executed under standardized netting agreements. A derivative netting arrangement creates an enforceable right of set-off that becomes effective, and affects the realization of settlement on individual assets, liabilities and collateral amounts, only following a specified event of default or early termination. Default events may include the failure to make payments or deliver securities timely, material adverse changes in financial condition or insolvency, the breach of minimum regulatory capital requirements, or loss of license, charter or other legal authorization necessary to perform under the contract. These agreements mitigate counterparty credit risk by providing for a single net settlement with a counterparty of all financial transactions covered by the agreement in an event of default as defined under such agreement.
The following table presents derivative financial instruments that are subject to enforceable netting arrangements, collateral arrangements or other similar agreements as of May 31, 2018.
Offsetting of Derivatives Assets
From | Gross Amounts of Recognized Assets | Gross Amounts Offset In The Statements of Assets and Liabilities | Net Amounts Presented In The Statements of Assets and Liabilities | Financial Instruments Available for Offset(a) | Cash Collateral Received(a) | Net Amount | ||||||||||||||||||
Stone Harbor Emerging Market Debt Fund | ||||||||||||||||||||||||
Forward Foreign | ||||||||||||||||||||||||
Currency Contracts | $ | 3,241,494 | $ | – | $ | 3,241,494 | $ | (258,933 | ) | $ | – | $ | 2,982,561 | |||||||||||
TOTAL | $ | 3,241,494 | $ | – | $ | 3,241,494 | $ | (258,933 | ) | $ | – | $ | 2,982,561 | |||||||||||
Stone Harbor Local Markets Funds | ||||||||||||||||||||||||
Forward Foreign | ||||||||||||||||||||||||
Currency Contracts | $ | 1,516,481 | $ | – | $ | 1,516,481 | $ | (1,389,783 | ) | $ | – | $ | 126,698 | |||||||||||
TOTAL | $ | 1,516,481 | $ | – | $ | 1,516,481 | $ | (1,389,783 | ) | $ | – | $ | 126,698 | |||||||||||
Stone Harbor Strategic Income Fund | ||||||||||||||||||||||||
Forward Foreign | ||||||||||||||||||||||||
Currency Contracts | $ | 33,807 | $ | – | $ | 33,807 | $ | (26,236 | ) | $ | – | $ | 7,571 | |||||||||||
TOTAL | $ | 33,807 | $ | – | $ | 33,807 | $ | (26,236 | ) | $ | – | $ | 7,571 |
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Stone Harbor Investment Funds | Notes to Financial Statements |
May 31, 2018
Offsetting of Derivatives Liabilities
Description | Gross Amounts of Recognized Liabilities | Gross Amounts Offset In The Statements of Assets and Liabilities | Net Amounts Presented In The Statements of Assets and Liabilities | Financial Instruments Available for Offset(a) | Cash Collateral Pledged(a) | Net Amount | ||||||||||||||||||
Stone Harbor Emerging Market Debt Fund | ||||||||||||||||||||||||
Forward Foreign | ||||||||||||||||||||||||
Currency Contracts | $ | 258,933 | $ | – | $ | 258,933 | $ | (258,933 | ) | $ | – | $ | – | |||||||||||
Credit Default Swap Contracts | 1,171,407 | – | 1,171,407 | – | (1,171,407 | ) | – | |||||||||||||||||
TOTAL | $ | 1,430,340 | $ | – | $ | 1,430,340 | $ | (258,933 | ) | $ | (1,171,407 | ) | $ | – | ||||||||||
Stone Harbor Local Markets Funds | ||||||||||||||||||||||||
Forward Foreign | ||||||||||||||||||||||||
Currency Contracts | $ | 6,253,899 | $ | – | $ | 6,253,899 | $ | (1,389,783 | ) | $ | (4,806,411 | ) | $ | 57,705 | ||||||||||
Cross Currency Swap Contracts | 632,487 | – | 632,487 | – | (290,041 | ) | 342,446 | |||||||||||||||||
TOTAL | $ | 6,886,386 | $ | – | $ | 6,886,386 | $ | (1,389,783 | ) | $ | (5,096,452 | ) | $ | 400,151 | ||||||||||
Stone Harbor Strategic Income Fund | ||||||||||||||||||||||||
Forward Foreign | ||||||||||||||||||||||||
Currency Contracts | $ | 28,559 | $ | – | $ | 28,559 | $ | (26,236 | ) | $ | – | $ | 2,323 | |||||||||||
TOTAL | $ | 28,559 | $ | – | $ | 28,559 | $ | (26,236 | ) | $ | – | $ | 2,323 | |||||||||||
Stone Harbor Emerging Markets Debt Allocation Fund | ||||||||||||||||||||||||
Forward Foreign | ||||||||||||||||||||||||
Currency Contracts | $ | 2,006 | $ | – | $ | 2,006 | $ | – | $ | – | $ | 2,006 | ||||||||||||
TOTAL | $ | 2,006 | $ | – | $ | 2,006 | $ | – | $ | – | $ | 2,006 |
(a) | These amounts are limited to the derivatives asset/liability balance and, accordingly, do not include excess collateral received/pledged. |
4. 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 periods ended May 31, here as follow:
Stone Harbor Emerging Markets Debt Fund | 2018 | 2017 | ||||||
Ordinary Income | $ | 73,101,269 | $ | 90,794,571 | ||||
Total | $ | 73,101,269 | $ | 90,794,571 | ||||
Stone Harbor High Yield Bond Fund | 2018 | 2017 | ||||||
Ordinary Income | $ | 7,200,890 | $ | 12,429,528 | ||||
Total | $ | 7,200,890 | $ | 12,429,528 | ||||
Stone Harbor Local Markets Fund | 2018 | 2017 | ||||||
Ordinary Income | $ | 12,203,950 | $ | – | ||||
Total | $ | 12,203,950 | $ | – | ||||
Stone Harbor Emerging Markets Corporate Debt Fund | 2018 | 2017 | ||||||
Ordinary Income | $ | 565,286 | $ | 653,203 | ||||
Total | $ | 565,286 | $ | 653,203 |
Stone Harbor Investment Grade Fund | 2018 | 2017 | ||||||
Ordinary Income | $ | 277,142 | $ | 351,688 | ||||
Long-Term Capital Gain | 55,861 | 7,434 | ||||||
Total | $ | 333,003 | $ | 359,122 |
Stone Harbor Investment Funds Annual Report | May 31, 2018 | 95 |
Stone Harbor Investment Funds | Notes to Financial Statements |
May 31, 2018
Stone Harbor Strategic Income Fund | 2018 | 2017 | ||||||
Ordinary Income | $ | 1,201,893 | $ | 1,417,693 | ||||
Total | $ | 1,201,893 | $ | 1,417,693 |
Stone Harbor Emerging Markets Debt Allocation Fund | 2018 | 2017 | ||||||
Ordinary Income | $ | 986,095 | $ | 1,818,851 | ||||
Total | $ | 986,095 | $ | 1,818,851 |
Stone Harbor 500 Plus Fund | 2018 | For the Period Ended May 31, 2017 | ||||||
Ordinary Income | $ | 144,565 | $ | 12,105 | ||||
Long-Term Capital Gain | 170,479 | – | ||||||
Total | $ | 315,044 | $ | 12,105 |
As of May 31, 2018, the components of distributable earnings on a tax basis were as follows:
Stone Harbor Emerging Markets Debt Fund | ||||
Undistributed Ordinary Income | $ | 2,960,266 | ||
Accumulated Capital Loss | (151,045,016 | ) | ||
Unrealized Depreciation | (39,547,726 | ) | ||
Cumulative Effect of Other Timing Difference* | (9,572,621 | ) | ||
Total | $ | (197,205,097 | ) | |
Stone Harbor High Yield Bond Fund | ||||
Undistributed Ordinary Income | $ | 100,323 | ||
Accumulated Capital Loss | (23,365,519 | ) | ||
Unrealized Depreciation | (1,145,843 | ) | ||
Total | $ | (24,411,039 | ) | |
Stone Harbor Local Markets Fund | ||||
Undistributed Ordinary Income | $ | 11,772,368 | ||
Accumulated Capital Loss | (175,433,948 | ) | ||
Unrealized Depreciation | (107,889,543 | ) | ||
Cumulative Effect of Other Timing Difference* | (18,187,717 | ) | ||
Total | $ | (289,738,840 | ) | |
Stone Harbor Emerging Markets Corporate Debt Fund | ||||
Undistributed Ordinary Income | $ | 20,536 | ||
Accumulated Capital Loss | (4,530,781 | ) | ||
Unrealized Depreciation | (390,580 | ) | ||
Total | $ | (4,900,825 | ) | |
Stone Harbor Investment Grade Fund | ||||
Accumulated Capital Loss | (36,207 | ) | ||
Unrealized Depreciation | (169,461 | ) | ||
Total | $ | (205,668 | ) | |
Stone Harbor Strategic Income Fund | ||||
Undistributed Ordinary Income | $ | 109,419 | ||
Accumulated Capital Loss | (89,686 | ) | ||
Unrealized Depreciation | (1,791,947 | ) | ||
Cumulative Effect of Other Timing Difference* | (661 | ) | ||
Total | $ | (1,772,875 | ) |
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Stone Harbor Investment Funds | Notes to Financial Statements |
May 31, 2018
Stone Harbor Emerging Markets Debt Allocation Fund | ||||
Undistributed Ordinary Income | $ | 240,866 | ||
Accumulated Capital Loss | (7,697,158 | ) | ||
Unrealized Appreciation | 2,082,834 | |||
Cumulative Effect of Other Timing Difference* | 2,006 | |||
Total | $ | (5,371,452 | ) | |
Stone Harbor 500 Plus Fund | ||||
Undistributed Ordinary Income | $ | 68,607 | ||
Accumulated Capital Gain | 69,233 | |||
Unrealized Depreciation | (24,619 | ) | ||
Cumulative Effect of Other Timing Difference* | 24,327 | |||
Total | $ | 137,548 |
* | Other temporary differences due to timing, consist primarily of mark-to-market on forward foreign currency contract, defaulted securities, and straddle loss deferrals. |
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, 2018, certain differences were reclassified. These differences were primarily attributed to the differing tax treatment of, foreign currencies, redemption-in-kind adjustments, book to tax distribution differences, and certain other investments.
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 | $ | 200,139 | $ | (3,994,273 | ) | $ | 3,794,134 | |||||
Stone Harbor High Yield Bond Fund | – | 38,301 | (38,301 | ) | ||||||||
Stone Harbor Local Markets Fund | (1,285,370 | ) | (9,912,901 | ) | 11,198,271 | |||||||
Stone Harbor Emerging Markets Corporate Debt Fund | – | 45 | (45 | ) | ||||||||
Stone Harbor Investment Grade Fund | – | (10,371 | ) | 10,371 | ||||||||
Stone Harbor Strategic Income Fund | – | (316,482 | ) | 316,482 | ||||||||
Stone Harbor Emerging Markets Debt Allocation Fund | – | (14,295 | ) | 14,295 | ||||||||
Stone Harbor 500 Plus Fund | (2,972 | ) | 3,610 | (638 | ) |
Capital Losses: As of May 31, 2018 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.
During the year ended May 31, 2018, the Funds utilized capital loss carryforwards as follows:
Fund | Amount | |||
Stone Harbor Emerging Markets Debt Fund | $ | 30,098,769 | ||
Stone Harbor High Yield Bond Fund | 266,730 | |||
Stone Harbor Emerging Markets Corporate Debt Fund | 350,208 | |||
Stone Harbor Strategic Income Fund | 117,122 | |||
Stone Harbor Emerging Markets Debt Allocation Fund | 218,904 |
Capital losses carried forward were as follows:
Fund | Short-Term | Long-Term | ||||||
Stone Harbor Emerging Markets Debt Fund | $ | 64,694,661 | $ | 84,250,044 | ||||
Stone Harbor High Yield Bond Fund | 650,393 | 22,313,856 | ||||||
Stone Harbor Local Markets Fund | 113,383,794 | 62,050,154 | ||||||
Stone Harbor Emerging Markets Corporate Debt Fund | 1,951,906 | 2,507,316 | ||||||
Stone Harbor Emerging Markets Debt Allocation Fund | 780,201 | 6,916,957 |
Stone Harbor Investment Funds Annual Report | May 31, 2018 | 97 |
Stone Harbor Investment Funds | Notes to Financial Statements |
May 31, 2018
The following Funds elect to defer to the year ending May 31, 2018 the following capital losses recognized during the period November 1, 2016 through May 31, 2018:
Fund | Amount | |||
Stone Harbor Emerging Markets Debt Fund | $ | 2,100,311 | ||
Stone Harbor High Yield Bond Fund | 401,270 | |||
Stone Harbor Emerging Markets Corporate Debt Fund | 71,559 | |||
Stone Harbor Investment Grade Fund | 36,207 | |||
Stone Harbor Strategic Income Fund | 89,686 |
Unrealized Appreciation and Depreciation on Investments: At May 31, 2018 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) | $ | 23,064,194 | ||
Gross depreciation on investments (excess of tax cost over value) | (62,580,383 | ) | ||
Net depreciation of foreign currency | (31,537 | ) | ||
Net unrealized depreciation | $ | (39,547,726 | ) | |
Cost of investments for income tax purposes | $ | 1,215,423,322 | ||
Stone Harbor High Yield Bond Fund | ||||
Gross appreciation on investments (excess of value over tax cost) | $ | 2,141,198 | ||
Gross depreciation on investments (excess of tax cost over value) | (3,287,041 | ) | ||
Net unrealized depreciation | $ | (1,145,843 | ) | |
Cost of investments for income tax purposes | $ | 102,307,670 | ||
Stone Harbor Local Markets Fund | ||||
Gross appreciation on investments (excess of value over tax cost) | $ | 30,079,451 | ||
Gross depreciation on investments (excess of tax cost over value) | (136,464,871 | ) | ||
Net depreciation of foreign currency | (1,504,123 | ) | ||
Net unrealized depreciation | $ | (107,889,543 | ) | |
Cost of investments for income tax purposes | $ | 999,220,853 | ||
Stone Harbor Emerging Markets Corporate Debt Fund | ||||
Gross appreciation on investments (excess of value over tax cost) | $ | 30,532 | ||
Gross depreciation on investments (excess of tax cost over value) | (421,112 | ) | ||
Net unrealized depreciation | $ | (390,580 | ) | |
Cost of investments for income tax purposes | $ | 11,735,283 | ||
Stone Harbor Investment Grade Fund | ||||
Gross appreciation on investments (excess of value over tax cost) | $ | 67,581 | ||
Gross depreciation on investments (excess of tax cost over value) | (237,042 | ) | ||
Net unrealized depreciation | $ | (169,461 | ) | |
Cost of investments for income tax purposes | $ | 10,871,182 |
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Stone Harbor Investment Funds | Notes to Financial Statements |
May 31, 2018
Stone Harbor Strategic Income Fund | ||||
Gross appreciation on investments (excess of value over tax cost) | $ | – | ||
Gross depreciation on investments (excess of tax cost over value) | (1,787,548 | ) | ||
Net depreciation of foreign currency | (4,399 | ) | ||
Net unrealized depreciation | $ | (1,791,947 | ) | |
Cost of investments for income tax purposes | $ | 34,448,000 | ||
Stone Harbor Emerging Markets Debt Allocation Fund | ||||
Gross appreciation on investments (excess of value over tax cost) | $ | 2,253,250 | ||
Gross depreciation on investments (excess of tax cost over value) | (170,416 | ) | ||
Net unrealized appreciation | $ | 2,082,834 | ||
Cost of investments for income tax purposes | $ | 25,923,006 | ||
Stone Harbor 500 Plus Fund | ||||
Gross appreciation on investments (excess of value over tax cost) | $ | 5,214 | ||
Gross depreciation on investments (excess of tax cost over value) | (29,833 | ) | ||
Net unrealized depreciation | $ | (24,619 | ) | |
Cost of investments for income tax purposes | $ | 2,334,557 |
5. 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%, 0.85%, 0.35%, 0.55%, 0.70%, and 0.45% of the average daily net assets for Stone Harbor Emerging Markets Debt Fund, Stone Harbor High Yield Bond Fund, Stone Harbor Local Markets Fund, Stone Harbor Emerging Markets Corporate Debt Fund, Stone Harbor Investment Grade Fund, Stone Harbor Strategic Income Fund, Stone Harbor Emerging Markets Debt Allocation Fund, and Stone Harbor 500 Plus Fund, respectively.
The Adviser has contractually agreed to waive investment advisory fees and reimburse other 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, borrowing costs, organizational 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, Stone Harbor Emerging Markets Corporate Debt Fund Institutional Class, Stone Harbor Investment Grade Fund Institutional Class, and Stone Harbor 500 Plus Fund Institutional Class will not exceed 0.75%, 0.65% 1.00%, 1.00%, 0.50%, and 0.60% respectively. The Adviser has contractually agreed to waive fees and reimburse expenses with respect to the Stone Harbor Strategic Income Fund Institutional Class and Stone Harbor Emerging Markets Debt Allocation Fund Institutional Class, so that the Net Annual Operating Expenses (inclusive of acquired fund fees and expenses but exclusive of brokerage expenses, interest expense, taxes, borrowing costs, money market expenses, organizational and extraordinary expenses) will not exceed 0.70% and 0.85%, respectively. The fee waiver agreements are in effect through September 30, 2019 and are 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; provided that the amount of such recovered fees and expenses does not cause the total annual operating expenses in any such year to exceed the applicable limits described above or any other lower limit then in effect. 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, 2018, deferred fees and expenses eligible to be recovered will expire as follows:
2019 | 2020 | 2021 | Total | |||||||||||||
Stone Harbor High Yield Bond Fund | $ | – | $ | 36,364 | $ | 139,187 | $ | 175,551 | ||||||||
Stone Harbor Emerging Markets Corporate Debt Fund | $ | 112,847 | $ | 136,853 | $ | 141,504 | $ | 391,204 | ||||||||
Stone Harbor Investment Grade Fund | $ | 125,244 | $ | 133,267 | $ | 156,452 | $ | 414,963 | ||||||||
Stone Harbor Strategic Income Fund | $ | 290,586 | $ | 316,580 | $ | 345,886 | $ | 953,052 | ||||||||
Stone Harbor Debt Allocation Fund | $ | 734,211 | $ | 475,248 | $ | 336,034 | $ | 1,545,493 | ||||||||
Stone Harbor 500 Plus Fund | N/A | $ | 88,145 | $ | 164,536 | $ | 252,681 |
Stone Harbor Investment Funds Annual Report | May 31, 2018 | 99 |
Stone Harbor Investment Funds | Notes to Financial Statements |
May 31, 2018
6. INVESTMENTS
During the year ended May 31, 2018, securities were redeemed in-kind from the Stone Harbor Emerging Markets Debt Fund and the Stone Harbor Local Markets Fund. The intent of the transfers was to save on transaction costs both for the redeeming shareholder at the institution they transferred to and for the Stone Harbor Emerging Markets Debt Fund and the Stone Harbor Local Markets Fund, on the sale of assets. The assets of the separate account in the Stone Harbor Emerging Markets Debt Fund and Stone Harbor Local Markets Fund, was redeemed-in-kind out of the Fund in the amount of $28,668,660 and $36,135,200, with a realized loss of $363,206 and $4,784,435 respectively.
For the year ended May 31, 2018, the aggregate cost of purchases and proceeds from sales of investments (excluding short-term investments and U.S. Government Obligations) were as follows:
Purchases | Sales | |||||||
Stone Harbor Emerging Markets Debt Fund | $ | 1,308,723,192 | $ | 1,466,110,444 | ||||
Stone Harbor High Yield Bond Fund | 72,212,030 | 124,531,987 | ||||||
Stone Harbor Local Markets Fund | 1,253,871,806 | 1,101,782,945 | ||||||
Stone Harbor Emerging Markets Corporate Debt Fund | 13,112,028 | 14,088,142 | ||||||
Stone Harbor Investment Grade Fund | 3,579,251 | 6,456,707 | ||||||
Stone Harbor Strategic Income Fund | 10,320,403 | 13,406,253 | ||||||
Stone Harbor Emerging Markets Debt Allocation Fund | 10,756,913 | 9,460,816 | ||||||
Stone Harbor 500 Plus Fund | 1,621,783 | 1,180,890 |
For the year ended May 31, 2018 the aggregate cost of purchases and proceeds from sales of U.S. Government Obligations were as follows:
Purchases | Sales | |||||||
Stone Harbor Investment Grade Fund | $ | 374,325 | $ | 737,427 |
7. AFFILIATED COMPANIES
Funds may invest in certain securities that are considered securities issued by affiliated companies. As defined by the Investment Company Act of 1940, as amended, an affiliated person, including an affiliated company, is one in which a Fund owns 5% or more of the outstanding voting securities, or a company which is under common ownership or control with the Fund. The purchases, sales, dividend income, capital gains, return of capital distributions received, shares and value of investments in affiliated companies for the year ended May 31, 2018 were as follows:
Stone Harbor Strategic Income Fund
Security Name | Share Balance May 31, 2017 | Purchases | Sales | Share Balance May 31, 2018 | Market Value May 31, 2018 | Dividend Income | Change in Unrealized Gain/(Loss) | Realized Gain/(Loss) | ||||||||||||||||||||||||
Stone Harbor Emerging Markets Corporate Debt Fund | 102,140 | 10,520 | (18,854 | ) | 93,806 | $ | 825,491 | $ | 41,659 | $ | (32,340 | ) | $ | 1,287 | ||||||||||||||||||
Stone Harbor Emerging Markets Debt Fund | 531,630 | 253,712 | (122,287 | ) | 663,055 | 6,623,917 | 394,579 | (353,476 | ) | (12,881 | ) | |||||||||||||||||||||
Stone Harbor High Yield Bond Fund | 1,560,636 | 195,529 | (395,994 | ) | 1,360,171 | 10,758,950 | 731,583 | (81,823 | ) | (521,026 | ) | |||||||||||||||||||||
Stone Harbor Investment Grade Fund | 1,471,669 | 173,704 | (558,798 | ) | 1,086,575 | 10,876,614 | 276,659 | (423,637 | ) | 16,939 | ||||||||||||||||||||||
Stone Harbor Local Markets Fund | 216,232 | 477,583 | (313,751 | ) | 380,064 | 3,283,750 | 51,719 | (35,554 | ) | 189,253 | ||||||||||||||||||||||
3,882,307 | 1,111,048 | (1,409,684 | ) | 3,583,671 | $ | 32,368,722 | $ | 1,496,199 | $ | (926,830 | ) | $ | (326,428 | ) |
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Stone Harbor Investment Funds | Notes to Financial Statements |
May 31, 2018
Stone Harbor Emerging Markets Debt Allocation Fund
Security Name | Share Balance May 31, 2017 | Purchases | Sales | Share Balance May 31, 2018 | Market Value May 31, 2018 | Dividend Income | Change in Unrealized Gain/(Loss) | Realized Gain/(Loss) | ||||||||||||||||||||||||
Stone Harbor Emerging Markets Debt Fund | 1,142,278 | 592,304 | (359,312 | ) | 1,375,270 | $ | 13,738,946 | $ | 778,999 | $ | (789,719 | ) | $ | (100,260 | ) | |||||||||||||||||
Stone Harbor Local Markets Fund | 1,766,344 | 497,291 | (615,374 | ) | 1,648,261 | 14,240,975 | 176,277 | (224,127 | ) | 216,607 | ||||||||||||||||||||||
2,908,622 | 1,089,595 | (974,686 | ) | 3,023,531 | $ | 27,979,921 | $ | 955,276 | $ | (1,013,846 | ) | $ | 116,347 |
The High Yield Fund engaged in cross trades with an affiliate during the year ended May 31, 2018 pursuant to Rule 17a-7 under the 1940 Act. Cross trading is the buying or selling of portfolio securities between funds to which the Adviser serves as the investment adviser. The Board of Trustees previously adopted procedures that apply to transactions between the Portfolios pursuant to Rule 17a-7. At its regularly scheduled meetings, the Trustees review such transactions as of the most current calendar quarter for compliance with the requirements set forth by Rule 17a-7 and the High Yield Fund’s procedures. The procedures require that the transactions be a purchase or sale for no consideration other than cash payment against prompt delivery of a security for which market quotations are readily available, and be consistent with the investment policies of the Funds involved. During the year ended May 31, 2018 the High Yield Fund sold securities to another fund for which the Adviser is the investment adviser in the amount of $5,430,548, resulting in a realized loss of $64,361.
8. SHARES OF BENEFICIAL INTEREST
At May 31, 2018, 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.
9. BENEFICIAL OWNERSHIP
As of May 31, 2018, IMF Retired Staff Benefits owned beneficially 42.25% of the Stone Harbor High Yield Bond Fund’s outstanding shares, an individual shareholder owned beneficially 58.99% of the Stone Harbor Emerging Markets Debt Allocation Fund’s outstanding shares, the Stone Harbor Strategic Income Fund owned beneficially 99.90% of the Stone Harbor Investment Grade Fund’s outstanding shares, an individual shareholder owned 67.94% of the Stone Harbor Strategic Income Fund’s outstanding shares, one individual shareholder held 34.20% of the Stone Harbor Emerging Markets Corporate Bond Fund’s outstanding shares, and an individual shareholder owned beneficially 99.51% of the Stone Harbor 500 Plus Fund’s outstanding shares.
10. 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.
11. OTHER
The Funds, along with the Stone Harbor Emerging Markets Total Income Fund and the Stone Harbor Emerging Markets Income Fund (the “Stone Harbor Fund Complex”) pays each Trustee who is not an interested person, of the Investment Adviser or any of its affiliates an aggregate fee of $84,000 per year. The Chair of the Audit Committee of the Board receives additional compensation of $5,000 per year for his service as chair. These fees were allocated over the Stone Harbor Fund Complex based on the average net assets of each fund. Interested Trustees of the Trust are not compensated by the Stone Harbor Fund Complex. All Trustees are reimbursed for reasonable travel and out-of-pocket expenses incurred to attend such meetings. Officers of the Funds do not receive compensation for performing the duties of their office.
12. RECENT ACCOUNTING PRONOUNCEMENT
In March 2017, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update “Premium Amortization on Purchased Callable Debt Securities” which amends the amortization period for a callable debt security held at a premium from the maturity date to the earliest call date. The guidance is effective for annual periods beginning after December 15, 2018, and interim periods within those annual periods. At this time, management is evaluating the implications of these changes on the funds.
Stone Harbor Investment Funds Annual Report | May 31, 2018 | 101 |
Stone Harbor Investment Funds | Additional Information |
May 31, 2018 (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 12-month period ended June 30 are 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, 2018. 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, 2017:
Stone Harbor Emerging Markets Debt Fund | Stone Harbor High Yield Bond Fund | Stone Harbor Local Markets Fund | Stone Harbor Emerging Markets Corporate Debt Fund | Stone Harbor Investment Grade Fund | Stone Harbor Strategic Income Fund | Stone Harbor Emerging Markets Debt Allocation Fund | |
Dividends Received Deduction Percentage | 0.00% | 0.01% | 0.00% | 0.00% | 0.00% | 0.01% | 0.00% |
Qualified Dividend Income Percentage | 0.00% | 0.01% | 0.00% | 0.00% | 0.00% | 0.01% | 0.00% |
In early 2018, if applicable, shareholders of record received this information for the distributions paid to them by the Funds during the calendar year 2017 via Form 1099. The Funds will notify shareholders in early 2019 of amounts paid to them by the Funds, if any, during the calendar year 2018.
Pursuant to Section 852(b)(3) of the Internal Revenue Code, the Stone Harbor Investment Grade Fund and the Stone Harbor 500 Plus Fund designated $55,861 and $170,479, respectively, as long term capital gain dividends.
BENCHMARK DESCRIPTIONS
Index | Description |
Bloomberg Barclays U.S. Aggregate Index | The Bloomberg Barclays U.S. Aggregate Index represents securities that are SEC-registered, taxable, and dollar denominated. The index covers the U.S. investment grade fixed rate bond market, with index components for government and corporate securities, mortgage pass-through securities, and asset-backed securities. These major sectors are subdivided into more specific indices that are calculated and reported on a regular basis. |
Bloomberg Barclays Global Credit Index (Hedged USD) | Bloomberg Barclays Global Credit Index is a subset of the Global Aggregate Index and is subject to the same quality, liquidity, and maturity requirements and exclusion rules of the latter. Constituents must be rated investment grade by at least two of the three major ratings agencies. Constituents must have a remaining maturity of at least one year. The index does not include convertibles, floating-rate notes, fixed-rate perpetuals, warrants, linked bonds, and structured products. |
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 and capping the par value of individual issuers at US $15 billion par amount outstanding. The 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. |
ICE BofAML US High Yield Constrained Index (HUC0) | The ICE BofAML US High Yield Constrained Index (HUC0) contains all securities in ICE BofAML US High Yield Index but caps issuer exposure at 2%. Index constituents are capitalization-weighted, based on their current amount outstanding, provided the total allocation to an individual issuer does not exceed 2%. Issuers that exceed the limit are reduced to 2% and the face value of each of their bonds is adjusted on a pro-rata basis. Similarly, the face values of bonds of all other issuers that fall below the 2% cap are increased on a pro-rata basis. In the event there are fewer than 50 issuers in the Index, each is equally weighted and the face values of their respective bonds are increased or decreased on a pro-rata basis. |
JPMorgan CEMBI Broad Diversified Index | The JPMorgan CEMBI Broad Diversified tracks total returns of U.S. dollar-denominated debt instruments issued by corporate entities in emerging market countries and consists of an investable universe of corporate bonds. The minimum amount outstanding required is $350 mm for the CEMBI Broad Diversified. The CEMBI Broad Diversified limits the weights of those index countries with larger corporate debt stocks by only including a specified portion of these countries’ eligible current face amounts of debt outstanding. |
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Stone Harbor Investment Funds | Additional Information |
May 31, 2018 (Unaudited)
JPMorgan EMBI Global Diversified Index | The JPMorgan EMBI Global Diversified (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. The index 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. |
JPMorgan GBI EM Global Diversified Index | The JPMorgan 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. |
S&P 500 Index | The S&P 500 is an index of 500 stocks chosen for market size, liquidity and industry grouping, among other factors. The S&P 500 is designed to be a leading indicator of U.S. equities and is meant to reflect the risk/return characteristics of the large cap universe. |
DEFINITIONS
ABS – An asset-backed security (ABS) is a financial security backed by a loan, lease or receivables against assets other than real estate and mortgage-backed securities.
Alpha – A measure of performance on a risk-adjusted basis. The excess return of the fund relative to the return of the benchmark index is a fund’s alpha.
Basis Point – A unit equal to one hundredth of a percentage point.
Beta – A measure of the volatility, or systematic risk, of a security or a portfolio in comparison to the market as a whole.
Broad–based securities indices are unmanaged and are not subject to fees and expenses typically associated with managed accounts or investment funds. Investments cannot be made directly in a broad-based securities index.
CMBS – Commercial mortgage-backed securities (CMBS) are a type of mortgage-backed security that is secured by mortgages on commercial properties, instead of residential real estate.
Credit Spread – The difference in yield between a U.S. Treasury bond and a debt security with the same maturity.
Derivative – A security with a price that is dependent on or derived from one or more underlying assets.
Duration – A measure of the sensitivity of the price (the value of principal) of a fixed-income investment to a change in interest rates. Duration is expressed as a number of years.
Floating Rate Bonds – Bond whose interest amount fluctuates in step with the market interest rates, or some other external measure.
High Yield Spread – The percentage difference in current yields of high-yield bonds compared to investment grade corporate bonds.
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.
Par Value – The face value of a bond.
RMBS – Residential mortgage-backed securities (RMBS) are a type of mortgage-backed debt obligation whose cash flows come from residential debt, such as mortgages, home-equity loans and subprime mortgages.
S&P Futures – S&P 500 futures are a type of capital asset contract that provides a buyer the right to a predetermined selection of stocks and on a predetermined future date listed on the S&P 500 stock market index.
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 U.S. dollar, while sovereign debt described as local is issued in a foreign currency.
Spread – The difference between the bid and ask price of a security or asset.
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”. For additional information please go to the Understanding Ratings section at www.standardpoors.com.
Tranche – Portions of debt or structured financing. Each portion (or tranche) is one of several related securities offered at the same time but with a different set of risks, rewards, and maturities.
USD 3-Month LIBOR – The average interest rate at which a selection of banks in London are prepared to lend to one another in American dollars with a maturity of 3 months. The LIBOR interest rates are used by banks as the base rate in setting the level of their savings, mortgage and loan interest rates.
Yield Curve – Yield curve tracks the relationship between interest rates and the maturity of Treasury Securities at a given time.
Yield-To-Maturity – The total return anticipated on a bond if the bond is held until the end of its lifetime. Yield to maturity is considered a long-term bond yield, but is expressed as an annual rate.
Stone Harbor Investment Funds Annual Report | May 31, 2018 | 103 |
Stone Harbor Investment Funds | Board Approval of Investment Advisory Agreement |
May 31, 2018 (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, Stone Harbor Emerging Markets Corporate Debt Fund, Stone Harbor Investment Grade Fund, Stone Harbor Strategic Income Fund, Stone Harbor Emerging Markets Debt Allocation Fund, Stone Harbor Emerging Markets Debt Blend Fund and Stone Harbor 500 Plus 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 Stone Harbor Investment Partners LP, each Fund’s investment adviser (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 the Adviser, including the Funds’ respective portfolio managers, and regularly reviews detailed information regarding the investment program and performance of each Fund. The Board of Trustees also receives periodic updates between meetings. The Trustees, including the Independent Trustees, met on April 18, 2018 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 provided in response to a request for information from the Independent Trustees’ independent legal counsel; (ii) information about the Adviser, including the Adviser’s financial results and financial condition, and services provided by the Adviser; (iii) information on each Fund’s investment objective and strategies and the size, education and experience of the Adviser’s investment staff; (iv) information on each Fund’s investment performance and the performance of a group of comparable funds prepared by a third party; (v) information on each Fund’s advisory fees and other expenses, including information about the fees charged to institutional accounts managed by the Adviser and other Funds where the Adviser serves as sub-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; (vi) information about the profitability of each Agreement to the Adviser; (vii) information regarding arrangements in respect of the distribution of the Funds’ shares; (viii) information regarding the allocation of the Funds’ brokerage; and (ix) information regarding the Adviser’s program for assuring the Funds’ and their service providers’ compliance with applicable laws. Throughout the process, the Independent Trustees were afforded the opportunity to ask questions and request additional information. In addition, the Independent Trustees were assisted by independent legal counsel throughout the process.
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. The Trustees also considered 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. Based on these considerations, the Trustees concluded that the Funds would continue to benefit from the nature, extent and quality of these services as a result of the Adviser’s experience, personnel, operations, and resources.
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 and benchmark selected by a third party. The Trustees also considered the Adviser’s performance and reputation generally and its investment techniques, risk management controls and decision-making processes. The Trustees noted that: (1) although Stone Harbor Emerging Markets Corporate Debt Fund’s performance lagged the third party benchmark and peer group average for the one-year period, the Fund’s performance exceeded that of its peer group average for the three-year period and exceeded the third party benchmark and peer group average for the five-year period; (2) although Stone Harbor Emerging Markets Debt Fund’s performance slightly lagged the third party benchmark and peer group average for the one-year period, the Fund’s performance exceeded that of the third party benchmark and peer group average for all remaining relevant time periods; (3) Stone Harbor High Yield Bond Fund’s performance lagged the performance of the third party benchmark and peer group for all time periods; (4) Stone Harbor Investment Grade Fund’s performance lagged the performance of the third party benchmark and peer group average for the one-year period, exceeded the performance of the peer group average for the three-year period and lagged the performance of the third party benchmark for the three-year period; (5) Stone Harbor Local Markets Fund’s performance exceeded the performance of its peer group average over the one-year period and the three-year period, but lagged the peer group average over the five-year period and lagged the third party benchmark’s performance over the one-year, three-year and five-year periods; (6) Stone Harbor Strategic Income Fund’s performance lagged the performance of the third party benchmark and peer group average for the one-year period, exceeded the performance of the peer group average for the three-year period and equaled the performance of the third party benchmark for the three-year period; (7) Stone Harbor Emerging Markets Debt Allocation Fund’s performance exceeded the performance of the third party benchmark and peer group average for the one-year period and lagged the performance of the third party benchmark and peer group average for the three-year period; and (8) Stone Harbor 500 Plus Fund’s performance exceeded the performance of the third party benchmark and peer group average for the one-year period. With respect to Funds whose performance lagged the third party benchmark or peer group average for certain periods, the Trustees concluded that other factors relevant to performance supported renewal of the Agreements. These factors included one or more of the following: (1) that the underperformance was attributable, to a significant extent, to investment decisions (such as security selection or sector or country allocation) by the Adviser that were consistent with the Fund’s investment objective and strategies, (2) that the Fund’s more recent performance, although lagging in certain periods, had shown improvement when compared to relevant performance benchmarks and categories, (3) any performance issues were attributable in part to market or economic conditions, or (4) that the Fund’s long-term performance was strong when compared to relevant performance benchmarks and/or peer groups. In addition, in cases where a Fund had extended underperformance, the Trustees had further discussions with senior management of the Adviser to consider the factors that contributed to underperformance and the Adviser discussed the steps that it had taken to improve performance and its plans to monitor performance going forward. With respect to Stone Harbor Emerging Markets Debt Blend Fund, the Trustees noted that the Fund was not yet operational and therefore no performance information had been provided for the Fund.
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Stone Harbor Investment Funds | Board Approval of Investment Advisory Agreement |
May 31, 2018 (Unaudited)
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 comparable funds selected by the third party. The Trustees noted that each of the Funds is subject to expense caps (although the total expense ratios for certain Funds are below the cap), and each of the Fund’s advisory fee and total expenses (after application of the expense caps and waivers) align competitively with comparable groups of mutual funds. The Trustees noted that each of the Fund’s total expenses (after application of the expense caps and waivers) was at or below the median total expenses of the comparable funds selected by the third party, other than the Stone Harbor Emerging Markets Corporate Debt Fund, whose total expenses were higher than the median. With respect to the Emerging Markets Corporate Debt Fund, the Trustees noted that the Fund’s advisory fee was below the median advisory fee of the comparable funds (after application of the expense caps and waivers). The Adviser also provided information about the costs to it of providing services to the Funds, including information about how such costs are determined for each Fund, and information about its profitability with respect to its management of each of the Funds, as well as information about the advisory fees it charges with respect to other funds, institutional separate accounts and sub-advised funds with similar strategies, and information about differences in such fees and the reasons for such differences. 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, and that the Funds are relatively small when compared to certain of the Adviser’s institutional accounts and therefore are able to take advantage of resources that the Adviser devotes to institutional accounts. With respect to funds for which the Adviser serves as sub-adviser, the Trustees took into account the additional and different services provided as an adviser and the additional risks faced as an adviser of a fund compared to serving as a sub-adviser of a fund. In this regard, the Trustees took into account that fees charged by the Adviser for advisory services may be different than fees charged by the Adviser for sub-advisory services. The Trustees also considered the demands and complexity of the investment management of the Funds as compared to the complexity of managing (or sub-advising) other funds and separate accounts. The Trustees also considered the Adviser’s description of how profitability is determined and the reasons for differences in profitability between Funds and from year to year.
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.
Stone Harbor Investment Funds Annual Report | May 31, 2018 | 105 |
Stone Harbor Investment Funds | Board Approval of Investment Advisory Agreement |
May 31, 2018 (Unaudited)
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 also considered the investments in personnel and technology, which the Adviser had made over the years, and the extent to which those investments could benefit the Funds. The Trustees noted that the Funds’ expenses are capped, and that the Adviser proposed to maintain the Funds’ fee waiver/expense reimbursement arrangements at current levels until September 30, 2019. They also noted that some of the Funds had expense ratios that were below the cap. The Trustees also considered whether breakpoints in the investment advisory fees would be appropriate and, after discussion, decided not to propose the implementation of breakpoints at this time but indicated that the implementation of breakpoints might be considered in the future.
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:
• | 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. The Trustees also considered the possible conflicts of interest associated with these fallout and other benefits, and the reporting, disclosure and other processes in place to disclose and monitor such possible conflicts of interest. |
• | The Trustees’ review and discussion of the Funds’ advisory arrangements in prior years, and management’s record of responding to Trustee concerns raised during the year and in prior years. |
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, Stone Harbor Emerging Markets Corporate Debt Fund, Stone Harbor Investment Grade Fund, Stone Harbor Strategic Income Fund, Stone Harbor Emerging Markets Debt Allocation Fund, Stone Harbor Emerging Markets Debt Blend Fund and Stone Harbor 500 Plus Fund should be continued through June 20, 2019.
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Stone Harbor Investment Funds | Trustees & Officers |
May 31, 2018 (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, year of birth 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 and Year of Birth(1) | Position(s) Held with the Trust | Term of Office and Length of Time Served(2) | Principal Occupation(s) During Past 5 Years | Number of Portfolios in Fund Complex Overseen by Trustee(3) | Other Directorships Held by Trustee |
Alan Brott 1942 | Chairman of the Audit Committee; Trustee | Since 2007 | Columbia University - Associate Professor, 2000-Present; Consultant, 1991-Present. | 11 | Stone Harbor Emerging Markets Income Fund, Stone Harbor Emerging Markets Total Income Fund, Grosvenor Registered Multi- Strategy Fund, Man FRM Alternative Multi- Strategy Fund, Excelsior Private Markets Funds (3 funds), UST Global Private Markets, and NB Crossroads Private Markets Fund (2 funds). |
Heath B. McLendon 1933 | Trustee | Since 2007 | Retired since 2006; formerly Citigroup - Chairman of Equity Research Oversight Committee. | 11 | Stone Harbor Emerging Markets Income Fund and Stone Harbor Emerging Markets Total Income Fund. |
Patrick Sheehan 1947 | Trustee | Since 2007 | Retired since 2002; formerly, Citigroup Asset Management- Managing Director and Fixed Income Portfolio Manager. | 11 | Stone Harbor Emerging Markets Income Fund and Stone Harbor Emerging Markets Total Income Fund. |
Stone Harbor Investment Funds Annual Report | May 31, 2018 | 107 |
Stone Harbor Investment Funds | Trustees & Officers |
May 31, 2018 (Unaudited)
INDEPENDENT TRUSTEES (continued)
Name and Year of Birth(1) | Position(s) Held with the Trust | Term of Office and Length of Time Served(2) | Principal Occupation(s) During Past 5 Years | Number of Portfolios in Fund Complex Overseen by Trustee(3) | Other Directorships Held by Trustee |
Glenn Marchak 1956 | Trustee | Since 2015 | Consultant and Private Investor. | 11 | Stone Harbor Emerging Markets Income Fund, Stone Harbor Emerging Markets Total Income Fund, Apollo Tactical Income Fund Inc. and Apollo Senior Floating Rate Fund Inc. |
Bruce Speca 1956 | Trustee | Since 2016 | Trustee, the Advisors’ Inner Circle Fund, The Advisors’ Inner Circle Fund II, Bishop Street Funds and The KP Funds (November 2011-Present); Global Head of Asset Allocation, Manulife Asset Management (subsidiary of Manulife Financial), 2010 to 2011; Executive Vice President - Investment Management Services, John Hancock Financial Services (subsidiary of Manulife Financial), 2003 to 2010. | 11 | Stone Harbor Emerging Markets Income Fund, Stone Harbor Emerging Markets Total Income Fund, The Advisors’ Inner Circle Fund, The Advisors’ Inner Circle Fund II, Bishop Street Funds and The KP Funds. |
INTERESTED TRUSTEE
Name and Year of Birth(1) | Position(s) Held with the Trust | Term of Office and Length of Time Served(2) | Principal Occupation(s) During Past 5 Years | Number of Portfolios in Fund Complex Overseen by Trustee(3) | Other Directorships Held by Trustee |
Thomas K. Flanagan* 1953 | Chairman and Trustee | Since 2012 | Since April 2006, Portfolio Manager and other senior management positions at 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. | 11 | Stone Harbor Emerging Markets Income Fund and Stone Harbor Emerging Markets Total Income Fund. |
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Stone Harbor Investment Funds | Trustees & Officers |
May 31, 2018 (Unaudited)
OFFICERS
Name and Year of Birth(1) | Position(s) Held with the Trust | Term of Office and Length of Time Served(2) | Principal Occupation(s) During Past 5 Years |
Peter J. Wilby 1958 | President | Since 2007 | Co-portfolio manager of the Fund; since April 2006, Chief Investment Officer of Stone Harbor; prior to April 2006, Chief Investment Officer — North American Fixed Income at Citigroup Asset Management; joined Citigroup or its predecessor firms in 1989. |
Jeffrey S. Scott 1959 | Chief Compliance Officer | Since 2007 | Since April 2006, Chief Compliance Officer of Stone Harbor; from October 2006 to March 2007, Director of Compliance, New York Life Investment Management LLC; from July 1998 to September 2006, Chief Compliance Officer, Salomon Brothers Asset Management Inc. |
Thomas M. Reynolds 1960 | Principal Financial and Accounting Officer | Since 2014 | Since February 2008, Controller of Stone Harbor; from February 2006 to February 2008, Vice President of Portfolio Administration for Goldman Sachs Asset Management; from 1991 to 2006, various positions at Citigroup Asset Management. |
Amanda Suss 1969 | Treasurer | Since 2014 | Since July 2011, Senior Finance Associate of Stone Harbor; from 2000 to July 2006, Director of Business Operations at Citigroup Asset Management; From April 1994 to April 2000, Mutual Fund Accounting Manager at Smith Barney Asset Management. |
Adam J. Shapiro 1963 | Secretary; Anti-Money Laundering Officer | Since 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, Citigroup Asset Management. |
Vilma V. DeVooght 1977 | Assistant Secretary | Since 2015 | Senior Counsel, ALPS, since 2014; Associate Counsel, First Data Corporation 2012 to 2014; Legal Counsel, Invesco 2009 to 2011. |
Erich Rettinger 1985 | Assistant Treasurer | Since 2016 | Fund Controller, since 2013, and Fund Accountant, 2007 to 2013, ALPS. |
* | Mr. Flanagan is an interested person of the Trust (as defined in the 1940 Act) (an “Interested Trustee”) because of his position with the Adviser |
(1) | The business address of each Trustee and Officer of the Fund is c/o Stone Harbor Investment Partners LP, 31 West 52nd Street, 16th Floor, New York, NY 10019. |
(2) | Each Trustee serves until retirement, resignation or removal from the Board. Officers are typically elected every year, unless an officer earlier retires, resigns or is removed from office. |
(3) | The term “Fund Complex” as used in this table includes each Fund of the Trust, the Stone Harbor Emerging Markets Income Fund and the Stone Harbor Emerging Markets Total Income Fund, two closed-end funds advised by the Adviser. |
Stone Harbor Investment Funds Annual Report | May 31, 2018 | 109 |
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
State Street Bank and Trust Company
One Iron Street Boston,
Massachusetts 02210
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 material must be accompanied or preceded by a prospectus.
SHF000916 exp. 7/30/2019
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 Exhibit 12.A.1. 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, 2017 and May 31, 2018, the aggregate fees billed for professional services rendered by the principal accountant for the audit of the Registrant’s annual financial statements were $333,000 and $ 339,000, respectively. |
(b) | Audit-Related Fees: For the Registrant’s fiscal years ended May 31, 2017 and May 31, 2018, there were no fees billed for assurance and related services by the principal accountant that were reasonably related to the performance of the audit of the Registrant’s financial statements and were not reported in paragraph (a) of this Item 4. |
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(c) | Tax Fees: For the Registrant’s fiscal years ended May 31, 2017 and May 31, 2018, the aggregate fees billed for professional services rendered by the principal accountant for tax compliance, tax advice and tax planning were $32,600 and $45,760, respectively. The fiscal year 2017 and 2018 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, 2017 and May 31, 2018, 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. These fees were related to services provided to assist Stone Harbor Investment Funds in Indian tax matters. |
(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, 2017 and May 31, 2018 were $0 and $0, respectively. |
(h) | Not applicable. |
Item 5. | Audit Committee of Listed Registrants. |
Not applicable.
Item 6. | Investments. |
(a) | Schedule of Investments in securities of unaffiliated issuers as of the close of the reporting period 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.
Item 8. | Portfolio Managers of Closed-End Management Investment Companies. |
Not applicable.
Item 9. | Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers. |
Not applicable.
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.
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 period covered by this report that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting. |
Item 12. | Disclosure of Securities Lending Activities for Closed-End Management Investment Companies. |
Not applicable.
Item 13. | 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 13.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. |
(a)(4) | 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 and Chief Executive Officer/Principal Executive Officer | |||
Date: | August 7, 2018 |
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
Stone Harbor Investment Funds | |||
By: | /s/ Peter J. Wilby | ||
Peter J. Wilby | |||
President and Chief Executive Officer/Principal Executive Officer | |||
Date: | August 7, 2018 | ||
By: | /s/ Thomas M. Reynolds | ||
Thomas M. Reynolds | |||
Principal Financial Officer/Principal Accounting Officer | |||
Date: | August 7, 2018 |
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