Form NPORT-P Flat Rock Opportunity For: Mar 31

  
    NPORT-P
    false
    
      
      
        
          0001732078
          XXXXXXXX
        
      
      
      
      
    
  
  
    
      Flat Rock Opportunity Fund
      811-23328
      0001732078
      5493005KW2SJEHL1XG95
      680 S CACHE STREET SUITE 100
      JACKSON
      
      83001
      3075005200
      Flat Rock Opportunity Fund
      5493005KW2SJEHL1XG95
      2022-12-31
      2022-03-31
      N
    
    
      273404830.29
      92032592.93
      181372237.36
      0.00000000
      0.00000000
      0.00000000
      0.00000000
      0.00000000
      0.00000000
      37000000.00000000
      0.00000000
      0.00000000
      0.00000000
      0.00000000
      0.00000000
      0.00000000
      186296.20000000
      
        
          USD
          
          
        
      
      
      
      N
      
        
          
        
        
        
        
      
      
      
      
    
    
      
        Oaktree Clo Ltd
        N/A
        
        67400JAC7
        
          
        
        9000000.00000000
        PA
        USD
        6931989.89000000
        3.821968560844
        Long
        ABS-O
        CORP
        KY
        Y
        3
        
          N
          N
          N
        
      
      
        Lcm 32 Ltd
        549300PWEMQKJMMXR454
        
        50202BAC0
        
          
        
        6000000.00000000
        PA
        USD
        4671241.14000000
        2.575499540609
        Long
        ABS-O
        CORP
        KY
        Y
        3
        
          N
          N
          N
        
      
      
        Ocp Clo Ltd
        25490028U8Y2XMZWXO46
        
        670864AC1
        
          
        
        6000000.00000000
        PA
        USD
        5060938.25000000
        2.790359938028
        Long
        ABS-O
        CORP
        KY
        Y
        3
        
          N
          N
          N
        
      
      
        Churchill Middle Market Clo Ltd
        N/A
        
        171518AC7
        
          
        
        21500000.00000000
        PA
        USD
        20512580.46000000
        11.30965839015
        Long
        ABS-O
        CORP
        KY
        Y
        3
        
          N
          N
          N
        
      
      
        Allegro Clo Ltd
        25490093RGALWPW3N486
        
        01750YAC9
        
          
        
        9000000.00000000
        PA
        USD
        6930135.16000000
        3.820945951195
        Long
        ABS-O
        CORP
        KY
        Y
        3
        
          N
          N
          N
        
      
      
        Dryden Senior Loan Fund
        N/A
        
        26252XAA5
        
          
        
        11300000.00000000
        PA
        USD
        8471577.65000000
        4.670823811466
        Long
        ABS-O
        CORP
        KY
        Y
        3
        
          N
          N
          N
        
      
      
        Ares Clo Ltd
        N/A
        
        04018GAC0
        
          
        
        8000000.00000000
        PA
        USD
        6814177.44000000
        3.757012395714
        Long
        ABS-O
        CORP
        KY
        Y
        3
        
          N
          N
          N
        
      
      
        Lcm Ltd Partnership
        54930038DJKYPKSVRB29
        
        50203DAE1
        
          
        
        659110.00000000
        PA
        USD
        92335.11000000
        0.050909175154
        Long
        ABS-O
        CORP
        KY
        Y
        3
        
          N
          N
          N
        
      
      
        Blackrock Baker Clo 2021-1, Ltd.
        549300VQVBWL9YJZSB29
        
        91734KAN7
        
          
        
        7347140.00000000
        PA
        USD
        2203875.06000000
        1.215111580514
        Long
        ABS-O
        CORP
        KY
        Y
        3
        
          N
          N
          N
        
      
      
        Barings Middle Market Clo Ltd.
        549300NSFWDKJE15UK02
        
        06761EAC9
        
          
        
        3240000.00000000
        PA
        USD
        3332147.37000000
        1.837187112262
        Long
        ABS-O
        CORP
        KY
        Y
        3
        
          N
          N
          N
        
      
      
        Maranon Loan Funding Ltd
        N/A
        
        56577NAN4
        
          
        
        10000000.00000000
        PA
        USD
        2725000.00000000
        1.502435014125
        Long
        ABS-O
        CORP
        KY
        Y
        3
        
          N
          N
          N
        
      
      
        New Mountain Clo 1 Ltd
        5493000BYT2KQ1EMLL07
        
        64755AAC4
        
          
        
        10520364.00000000
        PA
        USD
        9435369.40000000
        5.202212608356
        Long
        ABS-O
        CORP
        KY
        Y
        3
        
          N
          N
          N
        
      
      
        Dryden Senior Loan Fund
        N/A
        
        26251HAC7
        
          
        
        10000000.00000000
        PA
        USD
        8369801.60000000
        4.614709352339
        Long
        ABS-O
        CORP
        KY
        Y
        3
        
          N
          N
          N
        
      
      
        Tcp Whitney Clo Ltd
        549300HQR4ENRKHLM113
        
        87240GAC5
        
          
        
        11500000.00000000
        PA
        USD
        9935733.52000000
        5.478089516136
        Long
        ABS-O
        CORP
        KY
        N
        3
        
          N
          N
          N
        
      
      
        N/A
        N/A
        
        N/A
        
          
        
        10000000.00000000
        PA
        USD
        10000000.00000000
        5.513522987617
        Long
        DBT
        CORP
        US
        N
        3
        
          2049-12-31
          Fixed
          25.00000000
          N
          N
          N
        
        
          N
          N
          N
        
      
      
        Voya Clo Ltd
        N/A
        
        92918RAA6
        
          
        
        6960000.00000000
        PA
        USD
        5644894.74000000
        3.112325691167
        Long
        ABS-O
        CORP
        KY
        Y
        3
        
          N
          N
          N
        
      
      
        N/A
        N/A
        
        N/A
        
          
        
        3750000.00000000
        PA
        USD
        3750000.00000000
        2.067571120356
        Long
        ABS-O
        CORP
        US
        N
        3
        
          N
          N
          N
        
      
      
        N/A
        N/A
        
        N/A
        
          
        
        -2000.00000000
        NS
        USD
        -19500000.00000000
        -10.7513698258
        Short
        EP
        CORP
        US
        N
        N/A
        
          N
          N
          N
        
      
      
        N/A
        N/A
        
        N/A
        
          
        
        6093115.54000000
        PA
        USD
        6093115.54000000
        3.359453259600
        Long
        ABS-O
        CORP
        US
        N
        3
        
          N
          N
          N
        
      
      
        N/A
        N/A
        
        N/A
        
          
        
        23125000.00000000
        PA
        USD
        23125000.00000000
        12.75002190886
        Long
        ABS-O
        CORP
        US
        N
        3
        
          N
          N
          N
        
      
      
        Tcp Whitney Clo Ltd
        549300HQR4ENRKHLM113
        
        87240GAK7
        
          
        
        3575762.00000000
        PA
        USD
        3385720.81000000
        1.866724951559
        Long
        ABS-O
        CORP
        KY
        
        Y
        3
        
          N
          N
          N
        
      
      
        Kkr Financial Clo Ltd
        5493005MGEI63K1CMN61
        
        48254MAC7
        
          
        
        6000000.00000000
        PA
        USD
        4975159.97000000
        2.743065886167
        Long
        ABS-O
        CORP
        KY
        
        Y
        3
        
          N
          N
          N
        
      
      
        Lcm Ltd Partnership
        54930038DJKYPKSVRB29
        
        50203EAA7
        
          
        
        8696000.00000000
        PA
        USD
        6778638.57000000
        3.737417958044
        Long
        ABS-O
        CORP
        KY
        Y
        3
        
          N
          N
          N
        
      
      
        Marble Point Clo Xx Ltd
        N/A
        
        56607LAA0
        
          
        
        6000000.00000000
        PA
        USD
        4244844.60000000
        2.340404828096
        Long
        ABS-O
        CORP
        KY
        Y
        3
        
          N
          N
          N
        
      
      
        Marble Point Clo Xviii Ltd
        N/A
        
        566077AA1
        
          
        
        5000000.00000000
        PA
        USD
        3873053.79000000
        2.135417110344
        Long
        ABS-O
        CORP
        KY
        Y
        3
        
          N
          N
          N
        
      
      
        N/A
        N/A
        
        N/A
        
          
        
        10000000.00000000
        PA
        USD
        10000000.00000000
        5.513522987617
        Long
        ABS-O
        CORP
        US
        N
        3
        
          N
          N
          N
        
      
      
        Alm Loan Funding
        N/A
        
        00166DAC5
        
          
        
        8000000.00000000
        PA
        USD
        5291158.35000000
        2.917292319384
        Long
        ABS-O
        CORP
        KY
        Y
        3
        
          N
          N
          N
        
      
      
        N/A
        N/A
        
        N/A
        
          
        
        5000000.00000000
        PA
        USD
        306517.22000000
        0.168998973857
        Long
        ABS-O
        CORP
        US
        N
        3
        
          N
          N
          N
        
      
      
        Bain Capital Credit Clo, Limited
        N/A
        
        05683PAC1
        
          
        
        8000000.00000000
        PA
        USD
        6402916.80000000
        3.530262896460
        Long
        ABS-O
        CORP
        KY
        Y
        3
        
          N
          N
          N
        
      
      
        Churchill Middle Market Clo Iv Ltd.
        549300S76WZNPZ0H3Z60
        
        171510AC4
        
          
        
        7000000.00000000
        PA
        USD
        5238306.90000000
        2.888152550934
        Long
        ABS-O
        CORP
        KY
        N
        3
        
          N
          N
          N
        
      
      
        Maranon Loan Funding Ltd
        N/A
        
        56577NAL8
        
          
        
        6100000.00000000
        PA
        USD
        6100000.00000000
        3.363249022446
        Long
        ABS-CBDO
        CORP
        KY
        Y
        3
        
          2034-01-15
          Floating
          8.22563000
          N
          N
          N
        
        
          N
          N
          N
        
      
      
        First American Government Obligations Fund
        549300R5MYM6VZF1RM44
        
        31846V336
        
          
        
        3408846.41000000
        NS
        USD
        3408846.41000000
        1.879475304279
        Long
        STIV
        RF
        US
        N
        1
        
          N
          N
          N
        
      
      
        Great Lakes Clo Ltd
        254900GKX01S4T3NFH46
        
        39055RAE2
        
          
        
        26740000.00000000
        PA
        USD
        19753841.06000000
        10.89132567780
        Long
        ABS-O
        CORP
        KY
        Y
        3
        
          N
          N
          N
        
      
      
        Voya Clo Ltd
        N/A
        
        92919HAC3
        
          
        
        8000000.00000000
        PA
        USD
        7100000.00000000
        3.914601321208
        Long
        ABS-O
        CORP
        KY
        Y
        3
        
          N
          N
          N
        
      
      
        Newstar Fairfield Fund Clo Ltd
        N/A
        
        65252CAA9
        
          
        
        3000000.00000000
        PA
        USD
        2861107.80000000
        1.577478362535
        Long
        ABS-CBDO
        CORP
        KY
        
        Y
        3
        
          2030-04-20
          Floating
          7.63400000
          N
          N
          N
        
        
          N
          N
          N
        
      
      
        Blackrock Baker Clo 2021-1, Ltd.
        549300VQVBWL9YJZSB29
        
        91734KAL1
        
          
        
        4323507.00000000
        PA
        USD
        4323507.00000000
        2.383775523162
        Long
        ABS-CBDO
        CORP
        KY
        Y
        3
        
          2034-01-15
          Floating
          8.34368000
          N
          N
          N
        
        
          N
          N
          N
        
      
      
        N/A
        N/A
        
        N/A
        
          
        
        -2500.00000000
        NS
        USD
        -24625000.00000000
        -13.5770503570
        Short
        EP
        CORP
        US
        N
        3
        
          N
          N
          N
        
      
      
        Blackrock Elbert Clo V Ltd
        54930088K41XQK16ML36
        
        09260YAD3
        
          
        
        6500000.00000000
        PA
        USD
        6276978.34000000
        3.460826437036
        Long
        ABS-O
        CORP
        KY
        N
        3
        
          N
          N
          N
        
      
      
        Oaktree Clo Ltd
        N/A
        
        67401VAC9
        
          
        
        5000000.00000000
        PA
        USD
        2876927.38000000
        1.586200524333
        Long
        ABS-O
        CORP
        KY
        Y
        3
        
          N
          N
          N
        
      
      
        N/A
        N/A
        
        N/A
        
          
        
        300000.00000000
        PA
        USD
        287198.01000000
        0.158347283013
        Long
        ABS-O
        CORP
        US
        N
        3
        
          N
          N
          N
        
      
      
        N/A
        N/A
        
        N/A
        
          
        
        4705882.36000000
        PA
        USD
        4705882.36000000
        2.594599056888
        Long
        ABS-O
        CORP
        US
        N
        3
        
          N
          N
          N
        
      
      
        Benefit Street Partners Clo Ltd
        N/A
        
        08187AAC9
        
          
        
        9246257.00000000
        PA
        USD
        7499680.97000000
        4.134966342789
        Long
        ABS-O
        CORP
        KY
        Y
        3
        
          N
          N
          N
        
      
      
        N/A
        N/A
        
        N/A
        
          
        
        5000000.00000000
        PA
        USD
        306517.22000000
        0.168998973857
        Long
        ABS-O
        CORP
        US
        N
        3
        
          N
          N
          N
        
      
    
    
      2022-04-30
      Flat Rock Opportunity Fund
      Ryan Ripp
      Ryan Ripp
      Chief Finanical Officer
    
  
  XXXX

Flat Rock Opportunity Fund

Schedule of Investments

March 31, 2022 (Unaudited)

 

Rate

Maturity

Principal Amount

Value

COLLATERALIZED LOAN OBLIGATIONS EQUITY(a)(b)(c)(d)(e)- 133.68%

Allegro CLO XIV, Ltd., Subordinated Notes

17.18%(f)

10/15/2034

$

9,000,000

$

6,930,135

ALM 2020, Ltd., Subordinated Notes

16.53%(f)

10/15/2029

8,000,000

5,291,158

Ares LIX CLO, Ltd., Subordinated Notes

17.27%(f)

04/25/2034

8,000,000

6,814,177

Bain Capital Credit CLO 2021-3, Ltd., Subordinated Notes

14.68%(f)

07/24/2034

8,000,000

6,402,917

Bain Capital Credit CLO 2021-3A, Ltd., Subordinated Notes Side Letter

14.37%(f)

07/24/2034

300,000

287,198

Barings Middle Market CLO Ltd 2021-I, Subordinated Notes

16.15%(f)

07/20/2033

3,240,000

3,332,147

Benefit Street Partners CLO XXV, Ltd., Subordinated Notes

14.72%(f)

01/15/2035

9,246,257

7,499,681

BlackRock Baker CLO 2021-1, Ltd., Class VDN

23.01%(f)

01/15/2034

7,347,140

2,203,875

BlackRock Elbert CLO V, Ltd., Subordinated Notes

16.47%(f)

12/15/2031

6,500,000

6,276,978

Brightwood CLO Warehouse(g)

15.21%(f)

12/31/2049

23,125,000

23,125,000

Churchill Middle Market CLO III, Ltd., Subordinated Notes

17.35%(f)

10/24/2033

21,500,000

20,512,581

Churchill Middle Market CLO IV, Ltd., Subordinated Notes

13.32%(f)

01/23/2032

7,000,000

5,238,307

CIFC Cobra II Ltd.(g)

26.07%(f)

12/31/2049

3,750,000

3,750,000

Dryden 33 Senior Loan Fund, Subordinated Notes

87.45%(f)

04/15/2029

10,000,000

613,034

Dryden 76 CLO, Ltd., Subordinated Notes

15.95%(f)

10/20/2034

11,300,000

8,471,578

Dryden 92 CLO, Ltd., Subordinated Notes

14.61%(f)

11/20/2034

10,000,000

8,369,802

Great Lakes CLO 2014-1, Ltd., Subordinated Notes

16.17%(f)

10/15/2029

26,740,000

19,753,841

KKR CLO 31, Ltd., Subordinated Notes

18.16%(f)

04/20/2034

6,000,000

4,975,160

LCM 32, Ltd., Subordinated Notes

16.14%(f)

07/20/2034

6,000,000

4,671,241

LCM 34, Ltd., Income Notes

15.82%(f)

10/20/2034

8,696,000

6,778,639

LCM 34, Ltd., Subordinated Notes, Class SUB2

15.81%(f)

10/20/2034

659,110

92,335

Maranon Loan Funding 2021-3, Ltd., Subordinated Notes

20.66%(f)

01/15/2034

10,000,000

2,725,000

Marble Point CLO XVIII, Ltd., Income Notes

14.32%(f)

10/15/2034

5,000,000

3,873,054

Marble Point CLO XX, Ltd., Income Notes

13.91%(f)

04/23/2034

6,000,000

4,244,845

Meadowvest CLO Warehouse(g)

20.28%(f)

12/31/2049

4,705,882

4,705,882

New Mountain CLO 1, Ltd., Subordinated Notes

13.76%(f)

10/15/2034

10,520,364

9,435,369

Oaktree CLO 2019-2, Ltd., Subordinated Notes

25.15%(f)

04/15/2031

5,000,000

2,876,927

Oaktree CLO 2019-4, Ltd., Subordinated Notes

15.93%(f)

10/20/2032

9,000,000

6,931,990

OCP CLO 2020-20, Ltd., Subordinated Notes

16.80%(f)

10/09/2033

6,000,000

5,060,938

Regatta XXI Funding Ltd. CLO(g)

20.28%(f)

12/31/2049

10,000,000

10,000,000

Symphony XXX, Ltd. CLO(g)

20.28%(f)

12/31/2049

6,093,116

6,093,116

TCP Whitney CLO, Ltd., Subordinated Notes

22.48%(f)

08/20/2033

11,500,000

9,935,734

TCP Whitney CLO, Ltd., Subordinated Notes, Class SUB2

16.86%(f)

08/20/2033

3,575,762

3,385,721

VOYA - Warehouse / Cactus V. LTD(g)

26.25%(f)

12/31/2049

10,000,000

10,000,000

Flat Rock Opportunity Fund

Schedule of Investments

March 31, 2022 (Unaudited)

 

		Rate		Maturity		Principal Amount				Value
Voya CLO 2021-1, Ltd., Income Notes		14.98%(f)		07/15/2034		$	6,960,000			$	5,644,895
Voya CLO 2022-1, Ltd., Subordinated Notes		17.33%(f)		04/20/2035			8,000,000				7,100,000
TOTAL COLLATERALIZED LOAN OBLIGATIONS EQUITY
(Cost $241,636,679)										$	243,403,255
COLLATERALIZED LOAN OBLIGATIONS DEBT(b)(c)(d)(e)- 7.30%
BlackRock Baker CLO 2021-1, Ltd., Class E		3M US L + 8.00%		01/15/2034			4,323,507				4,323,507
Maranon Loan Funding 2021-3, Ltd., Class E		3M US L + 8.00%		01/15/2034			6,100,000				6,100,000
NewStar Fairfield Fund CLO, Ltd., Class DN		3M US L + 7.38%		04/20/2030			3,000,000				2,861,108
TOTAL COLLATERALIZED LOAN OBLIGATIONS DEBT
(Cost $13,208,676)										$	13,284,615

 

		Rate		Shares				Value
SHORT TERM INVESTMENTS(b) - 1.98%
Money Market Fund - 1.98%
First American Government Obligations Fund		(7 Day Yield 0.18%)			3,605,084			$	3,605,084
TOTAL SHORT TERM INVESTMENTS
(Cost $3,605,084)								$	3,605,084
TOTAL INVESTMENTS - 142.96%
(Cost $258,450,439)								$	260,292,954
LIABILITIES IN EXCESS OF OTHER ASSETS - (42.96)%									(78,221,446	)
NET ASSETS - 100.00%								$	182,071,508

  

(a)

Collateralized Loan Obligations (“CLO”) equity positions are entitled to recurring distributions which are generally equal to the remaining cash flow of payments made by underlying securities less contractual payments to debt holders and fund expenses. The effective yield is estimated based upon the current projection of the amount and timing of these recurring distributions in addition to the estimated amount of terminal principal payment. Effective yields for the CLO equity positions are updated generally once a quarter or on a transaction such as an add-on purchase, refinancing or reset. The estimated yield and investment cost may ultimately not be realized.  Total fair value of the securities is $243,403,255, which represents 133.68% of net assets as of March 31, 2022.

Flat Rock Opportunity Fund

Schedule of Investments

March 31, 2022 (Unaudited)

 

(b)	All or a portion of the security has been pledged as collateral in connection with the credit facility with certain funds and accounts managed by (the "Credit Facility").  At March 31, 2022, the value of securities pledged amounted to $260,292,954, which represents approximately 142.96% of net assets.
(c)	Variable rate investment. Interest rates reset periodically. Interest rate shown reflects the rate in effect at March 31, 2022. For securities based on a published reference rate and spread, the reference rate and spread are included in the description above.
(d)	The level 3 assets were a result of unavailable quoted prices from an active market or the unavailability of other significant observable inputs.
(e)	Securities exempt from registration under Rule 144A of the Securities Act of 1933. These securities are not restricted and may normally be sold to qualified institutional buyers in transactions exempt from registration. Total fair value of Rule 144A securities amounts to $256,687,870, which represents 140.98% of net assets as of March 31, 2022.
(f)	Estimated yield.
(g)	Positions represent investments in a warehouse facility, which is a financing structure intended to aggregate loans that may be used to form the basis of a CLO position.

 

Investment Abbreviations:

LIBOR - London Interbank Offered Rate

Reference Rates:

3M US L - 3 Month LIBOR as of March 31, 2022 was 0.96%

 

See Notes to Quarterly Schedule of Investments.

Flat Rock Opportunity Fund

Notes to Quarterly Schedule of Investments

March 31, 2022 (Unaudited)

 

1. ORGANIZATION

 

Flat Rock Opportunity Fund (the “Fund”) is registered under the Investment Company Act of 1940, as amended, (the “1940 Act”) as a non-diversified, closed-end management investment company. The shares of beneficial interest of the Fund (the "Shares") are continuously offered under Rule 415 under the Securities Act of 1933, as amended (the "Securities Act"). The Fund operates as an interval fund pursuant to Rule 23c-3 under the 1940 Act, and has adopted a fundamental policy to conduct quarterly repurchase offers at net asset value (“NAV”).

 

The Fund’s investment objective is to generate current income and, as a secondary objective, long-term capital appreciation.

 

The Fund was incorporated as a Delaware statutory trust on February 12, 2018 pursuant to a Declaration of Trust governed by and interpreted in accordance with the laws of the State of Delaware. The Fund had no operations from that date to July 2, 2018, other than those related to organizational matters and the registration of its shares under applicable securities laws.

 

2. SIGNIFICANT ACCOUNTING POLICIES

 

The following is a summary of significant accounting policies followed by the Fund in preparation of its financial statements in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”). The Fund is an investment company under U.S. GAAP and follows the investment company accounting and reporting guidance of the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 946, Financial Services - Investment Companies and Accounting Standards Update (“ASU”) 2013-08.

 

Use of Estimates: The preparation of the financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reported amounts of increases and decreases in net assets from operations during the period. Actual results could differ from these estimates.

 

Security Valuation: The Fund determines the Net Asset Value (“NAV”) of its shares daily, on each day that the New York Stock Exchange (“NYSE”) is open for business, as of the close of regular trading (normally, 4:00 p.m., Eastern time).

 

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.

 

Short-term debt securities having a remaining maturity of 60 days or less when purchased are valued at cost adjusted for amortization of premiums and accretion of discounts, which approximates fair value.

 

Collateralized loan obligations (“CLOs”) are generally not traded on a national securities exchange and instead are valued utilizing a market approach. The market approach is a method of determining the valuation of a security based on the selling price of similar securities. The types of factors that may be taken into account in pricing CLOs include:

 

•

the yield of similar CLOs where pricing is available in the market;

•

the riskiness of the underlying pool of loans;

•

features of the CLO, including weighted average life test, liability pricing, management fees, covenant cushions, weighted average spread of underlying loans and net asset value.

 

The Fund’s Valuation Committee under the guidance of the Board of Trustees (the “Board”) is responsible for the valuation of the Fund’s portfolio investments for which market quotations are not readily available, as determined in good faith pursuant to the Fund’s valuation policy and consistently applied valuation process. The Board has delegated day-to-day responsibility for implementing the portfolio valuation process set forth in the valuation policy to the Adviser.

 

The fair value of securities may be difficult to determine and thus judgment plays a greater role in the valuation process. The fair valuation methodology may include or consider the following guidelines, as appropriate: (1) evaluation of all relevant factors, including but not limited to, pricing history, current market level and supply and demand of the respective security; (2) comparison to the values and current pricing of securities that have comparable characteristics; (3) knowledge of historical market information with respect to the security; and (4) other factors relevant to the security which would include, but not be limited to, duration, yield, fundamental analytical data, the U.S. Treasury yield curve and credit quality.

The Fund has engaged a third-party valuation firm to provide assistance to the Valuation Committee and the Board in valuing certain of the Fund’s investments. The Valuation Committee and the Board may evaluate the impact of such additional information, and factor it into its consideration of fair value.

 

Securities Transactions and Investment Income: Investment security transactions are accounted for on a trade date basis. Dividend income is recorded on the ex-dividend date. Discounts and premiums on securities purchased are amortized or accreted using the effective interest method. Realized gains and losses from securities transactions and unrealized appreciation and depreciation of securities are determined using the identified cost basis method for financial reporting purposes. Interest income from investments in the “equity” class of collateralized loan obligation (“CLO”) funds will be recorded based upon an estimate of an effective yield to expected maturity utilizing assumed cash flows in accordance with FASB ASC 325-40, Beneficial Interests in Securitized Financials Assets.

 

3. FAIR VALUE MEASUREMENTS

 

The Fund utilizes various inputs to measure the fair value of its investments. Observable inputs reflect the assumptions market participants would use in pricing the asset or liability that are developed based on market data obtained from sources independent of the reporting entity. Unobservable inputs reflect the reporting entity’s own assumptions about the assumptions market participants would use in pricing the asset or liability that are developed based on the best information available. These inputs are categorized in the following hierarchy under applicable financial accounting standards:

 

Level 1 - Unadjusted quoted prices in active markets for identical assets and liabilities that the Fund has the ability to access at the measurement date.

 

Level 2 - Significant observable inputs (including quoted prices for the identical instrument on an inactive market, quoted prices for similar instruments, interest rates, prepayment spreads, credit risk, yield curves, default rates and similar data).

 

Level 3 - Significant unobservable inputs (including the Fund's own assumptions in determining the fair value of the investments) to the extent relevant observable inputs are not available, for the asset or liability at the measurement date.

 

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

 

The inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for disclosure purposes, the level in the fair value hierarchy within which the fair value measurement falls is determined based on the lowest level input that is significant to the fair value measurement in its entirety. The inputs used for valuing securities are not necessarily an indication of the risk associated with investing in those securities.

 

The following table summarizes the inputs used to value the Fund's investments under the fair value hierarchy levels as of March 31, 2022:

 

Investments in Securities at Value		Level 1 – Quoted Prices				Level 2 – Significant Observable Inputs				Level 3 – Significant Unobservable Inputs				Total
Collateralized Loan Obligations Equity		$	–			$	–			$	243,403,255			$	243,403,255
Collateralized Loan Obligations Debt			–				–				13,284,615				13,284,615
Short Term Investments			3,605,084				–				–				3,605,084
Total		$	3,605,084			$	–			$	256,687,870			$	260,292,954

The following is a reconciliation of the fair value of investments for which the Fund has used Level 3 unobservable inputs in determining fair value as of March 31, 2022:

 

		Collateralized Loan Obligations Equity				Collateralized Loan Obligations Debt				Total
Balance as of December 31, 2021		$	192,608,658			$	13,278,278			$	205,886,936
Accrued discount/ premium			(6,687,659	)			14,728				(6,672,931	)
Realized Gain/(Loss)			-				-				-
Change in Unrealized Appreciation/(Depreciation)			(3,059,192	)			(8,391	)			(3,067,583	)
Purchases			62,316,448	)			-				62,316,448
Sales Proceeds			(1,775,000	)			-				(1,775,000	)
Transfer into Level 3			-				-				-
Transfer out of Level 3			-				-				-
Balance as of March 31, 2022		$	243,403,255			$	13,284,615			$	256,687,870
Net change in unrealized appreciation/(depreciation) attributable to Level 3 investments held at March 31, 2022		$	(3,059,192	)		$	(8,391	)		$	(3,067,583	)

 

The following table summarizes the valuation techniques and significant unobservable inputs used for the Fund's investments that are categorized in Level 3 of the fair value hierarchy as of March 31, 2022:

 

Asset Class		Fair Value				Valuation Technique(s)		Unobservable Input(s)		Input Value(s)
Collateralized Loan Obligations Equity		$	243,403,255			Third-party vendor pricing service		Broker quotes		N/A
Collateralized Loan Obligations Debt			13,284,615			Third-party vendor pricing service		Broker quotes		N/A

 

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