Form NPORT-P Flat Rock Opportunity For: Sep 30

November 29, 2021 6:02 AM EST

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    NPORT-P
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          0001732078
          XXXXXXXX
        
      
      
      
    
  
  
    
      Flat Rock Opportunity Fund
      811-23328
      0001732078
      5493005KW2SJEHL1XG95
      1350 AVENUE OF THE AMERICAS
      NEW YORK
      
      10019
      2125963413
      Flat Rock Opportunity Fund
      5493005KW2SJEHL1XG95
      2021-12-31
      2021-09-30
      N
    
    
      189318784.52
      43191323.41
      146127461.11
      0.00000000
      0.00000000
      0.00000000
      0.00000000
      0.00000000
      0.00000000
      41625000.00000000
      0.00000000
      0.00000000
      0.00000000
      0.00000000
      0.00000000
      0.00000000
      0.00000000
      
        
          USD
          
          
        
      
      
      
      N
      
        
          
        
        
        
        
      
      
      
      
    
    
      
        Eaton Vance Cdo Ltd
        549300R0C8KS2AMEHL81
        Eaton Vance CLO 2018-1, Ltd.
        27831EAD9
        
          
        
        3000000.00000000
        PA
        USD
        2001351.24000000
        1.369592836827
        Long
        ABS-O
        CORP
        KY
        N
        3
        
          N
          N
          N
        
      
      
        Oaktree Clo Ltd
        N/A
        Oaktree CLO 2019-4, Ltd.
        67400JAC7
        
          
        
        9000000.00000000
        PA
        USD
        7805700.00000000
        5.341706439506
        Long
        ABS-O
        CORP
        KY
        Y
        3
        
          N
          N
          N
        
      
      
        Lcm 32 Ltd
        549300PWEMQKJMMXR454
        LCM 32, Ltd.
        50202BAC0
        
          
        
        6000000.00000000
        PA
        USD
        4859497.32000000
        3.325519572492
        Long
        ABS-O
        CORP
        KY
        
        Y
        3
        
          N
          N
          N
        
      
      
        Ocp Clo Ltd
        25490028U8Y2XMZWXO46
        OCP CLO 2020-20, Ltd.
        670864AC1
        
          
        
        6000000.00000000
        PA
        USD
        5587320.00000000
        3.823593428338
        Long
        ABS-O
        CORP
        KY
        
        Y
        3
        
          N
          N
          N
        
      
      
        Allegro Clo Ltd
        25490093RGALWPW3N486
        Allegro CLO XIV, Ltd.
        01750YAC9
        
          
        
        9000000.00000000
        PA
        USD
        7290000.00000000
        4.988795360313
        Long
        ABS-O
        CORP
        KY
        Y
        3
        
          N
          N
          N
        
      
      
        Ares Clo Ltd
        N/A
        Ares LIX CLO, Ltd.
        04018GAC0
        
          
        
        8000000.00000000
        PA
        USD
        7908736.00000000
        5.412217484601
        Long
        ABS-O
        CORP
        KY
        Y
        3
        
          N
          N
          N
        
      
      
        Lcm Ltd Partnership
        54930038DJKYPKSVRB29
        LCM 34, Ltd.
        50203DAE1
        
          
        
        659110.00000000
        PA
        USD
        94054.00000000
        0.064364356490
        Long
        ABS-O
        CORP
        KY
        
        Y
        3
        
          N
          N
          N
        
      
      
        Barings Middle Market Clo Ltd.
        549300NSFWDKJE15UK02
        Barings Middle Market CLO Ltd 2021-I
        06761EAC9
        
          
        
        3240000.00000000
        PA
        USD
        3223801.22000000
        2.206157005337
        Long
        ABS-O
        CORP
        KY
        
        Y
        3
        
          N
          N
          N
        
      
      
        Kkr Financial Clo Ltd
        5493000WWM0GGYYSIJ83
        KKR CLO 29, Ltd.
        48254KAE7
        
          
        
        5500000.00000000
        PA
        USD
        5161057.00000000
        3.531887135242
        Long
        ABS-O
        CORP
        KY
        
        Y
        3
        
          N
          N
          N
        
      
      
        Dryden Senior Loan Fund
        N/A
        Dryden 92 CLO, Ltd.
        26251HAC7
        
          
        
        10000000.00000000
        PA
        USD
        8639828.58000000
        5.912529044418
        Long
        ABS-O
        CORP
        KY
        Y
        3
        
          N
          N
          N
        
      
      
        Tcp Whitney Clo Ltd
        549300HQR4ENRKHLM113
        TCP Whitney CLO, Ltd.
        87240GAC5
        
          
        
        11500000.00000000
        PA
        USD
        9770187.18000000
        6.686071944167
        Long
        ABS-O
        CORP
        KY
        N
        3
        
          N
          N
          N
        
      
      
        N/A
        N/A
        BSP CLO WAREHOUSE
        N/A
        
          
        
        1828571.43000000
        PA
        USD
        1828571.43000000
        1.251353726472
        Long
        ABS-O
        CORP
        US
        N
        3
        
          N
          N
          N
        
      
      
        Kkr Financial Clo Ltd
        5493000WWM0GGYYSIJ83
        KKR CLO 29, Ltd.
        48254KAC1
        
          
        
        589812.00000000
        PA
        USD
        0.00000000
        0.000000
        Long
        ABS-CBDO
        CORP
        KY
        
        Y
        3
        
          2032-01-15
          Floating
          0.12613000
          N
          N
          N
        
        
          N
          N
          N
        
      
      
        Ares Clo Ltd
        549300FI9E5EZIMPA581
        Ares XLIX CLO, Ltd.
        04017KAD0
        
          
        
        3600000.00000000
        PA
        USD
        2404653.74000000
        1.645586477540
        Long
        ABS-O
        CORP
        KY
        N
        3
        
          N
          N
          N
        
      
      
        Voya Clo Ltd
        N/A
        Voya CLO 2021-1, Ltd.
        92918RAA6
        
          
        
        6960000.00000000
        PA
        USD
        6090000.00000000
        4.167594477957
        Long
        ABS-O
        CORP
        KY
        Y
        3
        
          N
          N
          N
        
      
      
        N/A
        N/A
        SYMPHONY CLO WAREHOUSE
        N/A
        
          
        
        2450000.25000000
        PA
        USD
        2450000.25000000
        1.676618639227
        Long
        ABS-O
        CORP
        US
        N
        3
        
          N
          N
          N
        
      
      
        Tcp Whitney Clo Ltd
        549300HQR4ENRKHLM113
        TCP Whitney CLO, Ltd.
        87240GAK7
        
          
        
        3575762.00000000
        PA
        USD
        3299609.48000000
        2.258035180339
        Long
        ABS-O
        CORP
        KY
        
        Y
        3
        
          N
          N
          N
        
      
      
        Symphony Clo Ltd
        54930002F1MQXJG7J014
        Symphony CLO XXVI, Ltd.
        87271QAC5
        
          
        
        4850000.00000000
        PA
        USD
        3034572.25000000
        2.076661174394
        Long
        ABS-O
        CORP
        KY
        
        Y
        3
        
          N
          N
          N
        
      
      
        Kkr Financial Clo Ltd
        5493005MGEI63K1CMN61
        KKR CLO 31, Ltd.
        48254MAC7
        
          
        
        6000000.00000000
        PA
        USD
        5704374.00000000
        3.903697468408
        Long
        ABS-O
        CORP
        KY
        
        Y
        3
        
          N
          N
          N
        
      
      
        Lcm Ltd Partnership
        54930038DJKYPKSVRB29
        LCM 34, Ltd.
        50203EAA7
        
          
        
        8696000.00000000
        PA
        USD
        6906431.21000000
        4.726306169653
        Long
        ABS-O
        CORP
        KY
        Y
        3
        
          N
          N
          N
        
      
      
        Marble Point Clo Xx Ltd
        N/A
        Marble Point CLO XX, Ltd.
        56607LAA0
        
          
        
        6000000.00000000
        PA
        USD
        5004834.00000000
        3.424978414038
        Long
        ABS-O
        CORP
        KY
        Y
        3
        
          N
          N
          N
        
      
      
        N/A
        N/A
        NORTHWOODS CLO WAREHOUSE
        N/A
        
          
        
        3750000.00000000
        PA
        USD
        3750000.00000000
        2.566252757363
        Long
        ABS-O
        CORP
        US
        N
        3
        
          N
          N
          N
        
      
      
        Marble Point Clo Xviii Ltd
        N/A
        Marble Point CLO XVIII, Ltd.
        566077AA1
        
          
        
        5000000.00000000
        PA
        USD
        4932795.00000000
        3.375679672068
        Long
        ABS-O
        CORP
        KY
        Y
        3
        
          N
          N
          N
        
      
      
        N/A
        N/A
        REGATTTA XXII CLO WAREHOUSE
        N/A
        
          
        
        3750000.00000000
        PA
        USD
        3750000.00000000
        2.566252757363
        Long
        ABS-O
        CORP
        US
        N
        3
        
          N
          N
          N
        
      
      
        Alm Loan Funding
        N/A
        ALM 2020, Ltd.
        00166DAC5
        
          
        
        8000000.00000000
        PA
        USD
        7378544.00000000
        5.049389036086
        Long
        ABS-O
        CORP
        KY
        Y
        3
        
          N
          N
          N
        
      
      
        N/A
        N/A
        Dryden 33 Senior Loan Fund
        N/A
        
          
        
        5000000.00000000
        PA
        USD
        2900251.71000000
        1.984741052755
        Long
        ABS-O
        CORP
        US
        N
        3
        
          N
          N
          N
        
      
      
        Bain Capital Credit Clo, Limited
        N/A
        Bain Capital Credit CLO 2021-3, Ltd.
        05683PAC1
        
          
        
        8000000.00000000
        PA
        USD
        6747871.82000000
        4.617798577175
        Long
        ABS-O
        CORP
        KY
        
        Y
        3
        
          N
          N
          N
        
      
      
        Churchill Middle Market Clo Iv Ltd.
        549300S76WZNPZ0H3Z60
        Churchill Middle Market CLO IV, Ltd.
        171510AC4
        
          
        
        7000000.00000000
        PA
        USD
        5688032.00000000
        3.892514081058
        Long
        ABS-O
        CORP
        KY
        N
        3
        
          N
          N
          N
        
      
      
        First American Government Obligations Fund
        549300R5MYM6VZF1RM44
        First American Government Obligations Fund
        31846V336
        
          
        
        15664681.82000000
        NS
        USD
        15664681.82000000
        10.71987544367
        Long
        STIV
        RF
        US
        N
        1
        
          N
          N
          N
        
      
      
        Great Lakes Clo Ltd
        254900GKX01S4T3NFH46
        Great Lakes CLO 2014-1, Ltd.
        39055RAE2
        
          
        
        26740000.00000000
        PA
        USD
        19520200.00000000
        13.35833788647
        Long
        ABS-O
        CORP
        KY
        Y
        3
        
          N
          N
          N
        
      
      
        Newstar Fairfield Fund Clo Ltd
        N/A
        NewStar Fairfield Fund CLO, Ltd.
        65252CAA9
        
          
        
        3000000.00000000
        PA
        USD
        2850247.50000000
        1.950521468277
        Long
        ABS-CBDO
        CORP
        KY
        
        Y
        3
        
          2030-04-20
          Floating
          7.51425000
          N
          N
          N
        
        
          N
          N
          N
        
      
      
        Blackrock Elbert Clo V Ltd
        54930088K41XQK16ML36
        BlackRock Elbert CLO V, Ltd.
        09260YAD3
        
          
        
        6500000.00000000
        PA
        USD
        6732147.50000000
        4.607037889293
        Long
        ABS-O
        CORP
        KY
        
        N
        3
        
          N
          N
          N
        
      
      
        Oaktree Clo Ltd
        N/A
        Oaktree CLO 2019-2, Ltd.
        67401VAC9
        
          
        
        5000000.00000000
        PA
        USD
        3060075.14000000
        2.094113670870
        Long
        ABS-O
        CORP
        KY
        Y
        3
        
          N
          N
          N
        
      
      
        N/A
        N/A
        BCC 2021-3A SUB SIDE LETTER
        N/A
        
          
        
        300000.00000000
        PA
        USD
        300000.00000000
        0.205300220589
        Long
        ABS-O
        CORP
        US
        N
        3
        
          N
          N
          N
        
      
      
        Bluemountain Clo Ltd
        N/A
        BlueMountain CLO XXIX, Ltd.
        09630LAC6
        
          
        
        6000000.00000000
        PA
        USD
        5551602.00000000
        3.799150384075
        Long
        ABS-O
        CORP
        KY
        Y
        3
        
          N
          N
          N
        
      
      
        N/A
        N/A
        Dryden 33 Senior Loan Fund
        N/A
        
          
        
        5000000.00000000
        PA
        USD
        2900251.71000000
        1.984741052755
        Long
        ABS-O
        CORP
        US
        N
        3
        
          N
          N
          N
        
      
    
    
      2021-10-30
      Flat Rock Opportunity Fund
      Ryan Ripp
      Ryan Ripp
      Chief Finanical Officer
    
  
  XXXX



Flat Rock Opportunity Fund Schedule of Investments

September 30, 2021(Unaudited)

 

   Rate  Maturity  Principal Amount   Value 
COLLATERALIZED LOAN OBLIGATIONS EQUITY(a)(b)(c)(d)(e) - 117.64%    
Allegro CLO XIV, Ltd., Subordinated Notes(f)  18.29%(g)  10/15/2034  $9,000,000   $7,290,000 
ALM 2020, Ltd., Subordinated Notes(f)  16.33%(g)  10/15/2029   8,000,000    7,378,544 
Ares LIX CLO, Ltd., Subordinated Notes(f)  17.79%(g)  04/25/2034   8,000,000    7,908,736 
Ares XLIX CLO, Ltd., Subordinated Notes  15.40%(g)  07/22/2030   3,600,000    2,404,654 
Bain Capital Credit CLO 2021-3, Ltd., Subordinated Notes (f)  15.70%(g)  07/24/2034   8,000,000    6,747,872 
Bain Capital Credit CLO 2021-3A, Ltd., Subordinated Notes Side Letter  15.40%(g)  07/24/2034   300,000    300,000 
Barings Middle Market CLO Ltd 2021-I, Subordinated Notes(f)  16.52%(g)  07/20/2033   3,240,000    3,223,801 
BlackRock Elbert CLO V, Ltd., Subordinated Notes  14.96%(g)  12/15/2031   6,500,000    6,732,148 
BlueMountain CLO XXIX, Ltd., Subordinated Notes(f)  18.54%(g)  07/25/2034   6,000,000    5,551,602 
BSP CLO Warehouse(h)  20.00%(g)  12/31/2049   1,828,571    1,828,571 
Churchill Middle Market CLO IV, Ltd., Subordinated Notes  14.85%(g)  01/23/2032   7,000,000    5,688,032 
Dryden 33 Senior Loan Fund, Subordinated Notes  32.58%(g)  04/15/2029   10,000,000    5,800,504 
Dryden 92 CLO, Ltd., Subordinated Notes(f)  14.90%(g)  11/20/2034   10,000,000    8,639,829 
Eaton Vance CLO 2018-1, Ltd., Subordinated Notes  11.12%(g)  10/15/2030   3,000,000    2,001,351 
Great Lakes CLO 2014-1, Ltd., Subordinated Notes(f)  15.70%(g)  10/15/2029   26,740,000    19,520,200 
KKR CLO 29, Ltd., Subordinated Notes(f)  16.57%(g)  01/15/2032   5,500,000    5,161,057 
KKR CLO 31, Ltd., Subordinated Notes(f)  18.65%(g)  04/20/2034   6,000,000    5,704,374 
LCM 32, Ltd., Subordinated Notes(f)  16.86%(g)  07/20/2034   6,000,000    4,859,497 
LCM 34, Ltd., Income Notes(f)  16.60%(g)  10/20/2034   8,696,000    6,906,431 
LCM 34, Ltd., Subordinated Notes, Series 2021-34A(f)  15.00%(g)  10/20/2034   659,110    94,054 
Marble Point CLO XVIII, Ltd., Income Notes(f)  17.35%(g)  10/15/2050   5,000,000    4,932,795 
Marble Point CLO XX, Ltd., Income Notes(f)  15.23%(g)  04/23/2051   6,000,000    5,004,834 
Northwoods CLO Warehouse(h)  25.00%(g)  12/31/2049   3,750,000    3,750,000 
Oaktree CLO 2019-2, Ltd., Subordinated Notes(f)  25.97%(g)  04/15/2031   5,000,000    3,060,075 
Oaktree CLO 2019-4, Ltd., Subordinated Notes(f)  16.00%(g)  10/20/2032   9,000,000    7,805,700 
OCP CLO 2020-20, Ltd., Subordinated Notes(f)  16.61%(g)  10/09/2033   6,000,000    5,587,320 
Regatta XXII CLO Warehouse(h)  20.00%(g)  12/31/2049   3,750,000    3,750,000 
Symphony CLO Warehouse(h)  20.00%(g)  12/31/2049   2,450,000    2,450,000 
Symphony CLO XXVI, Ltd., Subordinated Notes(f)  18.86%(g)  04/20/2033   4,850,000    3,034,572 
TCP Whitney CLO, Ltd., Subordinated Notes  25.24%(g)  08/20/2033   11,500,000    9,770,187 
 

 

Flat Rock Opportunity Fund Schedule of Investments

September 30, 2021(Unaudited)

 

   Rate  Maturity  Principal Amount   Value 
TCP Whitney CLO, Ltd., Subordinated Notes, Series 2021-1A(f)  18.18%(g)  08/20/2033  $3,575,762   $3,299,610 
Voya CLO 2021-1, Ltd., Income Notes(f)  15.82%(g)  07/15/2034   6,960,000    6,090,000 
                 
TOTAL COLLATERALIZED LOAN OBLIGATIONS EQUITY                
(Cost $164,841,796)             $172,276,350 
                 
COLLATERALIZED LOAN OBLIGATIONS DEBT(b)- 1.94%                
NewStar Fairfield Fund CLO, Ltd., Class DN(c)(d)(e)(f)  3M US L + 7.38%  04/20/2030   3,000,000    2,850,247 
                 
TOTAL COLLATERALIZED LOAN OBLIGATIONS DEBT                
(Cost $2,755,994)             $2,850,247 

 

   Rate  Shares   Value 
SHORT TERM INVESTMENTS(b) - 10.70%    
Money Market Fund - 10.70%    
First American Government Obligations Fund   (7 Day Yield 0.03%)  15,664,682   $15,664,682 
              
TOTAL SHORT TERM INVESTMENTS             
(Cost $15,664,682)          $15,664,682 
              
TOTAL INVESTMENTS - 130.28%             
(Cost $183,262,472)          $190,791,279 
LIABILITIES IN EXCESS OF OTHER ASSETS - (30.28)%           (44,348,092)
NET ASSETS - 100.00%          $146,443,187 

 

(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 $172,276,350, which represents 117.64% of net assets as of September 30, 2021.
(b)All or a portion of the security has been pledged as collateral in connection with the credit facility.  At September 30, 2021, the value of securities pledged amounted to $190,791,279, which represents approximately 130.28% of net assets.
(c)Variable rate investment. Interest rates reset periodically. Interest rate shown reflects the rate in effect at September 30, 2021. For securities based on a published reference rate and spread, the reference rate and spread are included in the description above.

 

 

Flat Rock Opportunity Fund Schedule of Investments

September 30, 2021(Unaudited)

 

 

(d)Fair valued as determined in good faith in accordance with procedures established by the Board of Trustees.
(e)The level 3 assets were a result of unavailable quoted prices from an active market or the unavailability of other significant observable inputs.
(f)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 $130,651,150, which represents 89.22% of net assets as of September 30, 2021.
(g)Estimated yield.
(h)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 September 30, 2021 was 0.13%

 

See Notes to Quarterly Schedule of Investments. 

 

 

Flat Rock Opportunity Fund

Notes to Quarterly Schedule of Investments

September 30, 2021 (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 September 30, 2021:

 

Investments in Securities at Value  Level 1 – Quoted Prices   Level 2 – Significant Observable Inputs   Level 3 – Significant Unobservable Inputs   Total 
Collateralized Loan Obligations Equity  $   $   $172,276,350   $172,276,350 
Collateralized Loan Obligations Debt           2,850,247    2,850,247 
Short Term Investments   15,664,682            15,664,682 
Total  $15,664,682   $   $175,126,597   $190,791,279 

 

For the period ended September 30, 2021, there were no transfers into or out of Level 3.

 

 

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 September 30, 2021:

 

   Collateralized Loan Obligations Equity   Collateralized Loan Obligations Debt   Total 
Balance as of December 31, 2020  $51,015,016   $44,909,660   $95,924,676 
Accrued discount/ premium   (2,533,723)   2,517,846    (15,877)
Realized Gain/(Loss)   135,030    4,909,669    5,044,699 
Change in Unrealized Appreciation/(Depreciation)   9,138,879    (4,774,609)   4,364,270 
Purchases   138,204,967        138,204,967 
Sales Proceeds   (23,683,819)   (44,712,319)   (68,396,138)
Transfer into Level 3            
Transfer out of Level 3            
Balance as of September 30, 2021  $172,276,350   $2,850,247   $175,126,597 
Net change in unrealized appreciation/(depreciation) attributable to Level 3 investments held at September 30, 2021  $8,751,420   $310,859   $9,062,279 

 

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, 2021:

 

Asset Class  Fair Value   Valuation Technique(s)  Unobservable Input(s)  Input Value(s)
Collateralized Loan Obligations Equity  $172,276,350   Third-party vendor pricing service  Broker quotes  N/A
Collateralized Loan Obligations Debt   2,850,247   Third-party vendor pricing service  Broker quotes  N/A

 

 

 



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