UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM N-Q

QUARTERLY SCHEDULE OF PORTFOLIO HOLDINGS OF REGISTERED

MANAGEMENT INVESTMENT COMPANY

Investment Company Act file number: 811-22800

Ivy High Income Opportunities Fund

(Exact name of registrant as specified in charter)

6300 Lamar Avenue, Overland Park, Kansas 66202

(Address of principal executive offices) (Zip code)

Mara D. Herrington

6300 Lamar Avenue

Overland Park, Kansas 66202

(Name and address of agent for service)

 

 

Registrant’s telephone number, including area code: 913-236-2000

Date of fiscal year end: September 30

Date of reporting period: June 30, 2013

 

 

 

ITEM 1.    SCHEDULE OF INVESTMENTS.

SCHEDULE OF INVESTMENTS

Ivy High Income Opportunities Fund (in thousands)

  JUNE 30, 2013 (UNAUDITED)

 

 

CORPORATE DEBT SECURITIES    Principal        Value  

Aerospace & Defense – 5.1%

  

Silver II Borrower SCA and Silver II US Holdings,

       

7.750%, 12–15–20 (A)

   $ 15,000         $ 15,075   
       

 

 

 

Agricultural Products – 2.7%

  

American Seafoods Group LLC,

       

10.750%, 5–15–16 (A)

     7,750           8,060   
       

 

 

 

Automotive Retail – 3.3%

  

Asbury Automotive Group, Inc.,

       

8.375%, 11–15–20 (A)

     8,794           9,739   
       

 

 

 

Broadcasting – 3.5%

  

Clear Channel Worldwide Holdings, Inc., Series B,

       

7.625%, 3–15–20

     10,000           10,350   
       

 

 

 

Building Products – 3.6%

  

HD Supply, Inc.,

       

7.500%, 7–15–20 (A)

     10,600           10,733   
       

 

 

 

Cable & Satellite – 12.3%

  

Cablevision Systems Corporation,

       

5.875%, 9–15–22

     10,000           9,675   

DISH DBS Corporation:

       

6.750%, 6–1–21

     16,500           17,531   

5.875%, 7–15–22

     2,000           2,030   

Univision Communications Inc.,

       

6.750%, 9–15–22 (A)

     6,926           7,272   
       

 

 

 
          36,508   
       

 

 

 

Casinos & Gaming – 0.8%

  

MCE Finance Limited,

       

5.000%, 2–15–21 (A)

     2,390           2,241   
       

 

 

 

Communications Equipment – 3.9%

  

Eagle Midco, Inc.,

       

9.000%, 6–15–18 (A)(B)

     12,000           11,700   
       

 

 

 

Construction Materials – 0.5%

  

Hillman Group, Inc. (The),

       

10.875%, 6–1–18

     1,500           1,624   
       

 

 

 

Consumer Finance – 1.7%

  

Creditcorp,

       

12.000%, 7–15–18 (A)

     5,000           4,954   
       

 

 

 

Diversified Capital Markets – 1.3%

  

Patriot Merger Corp.,

       

9.000%, 7–15–21 (A)

     3,827           3,741   
       

 

 

 

Diversified Metals & Mining – 4.8%

  

FMG Resources Pty Ltd.:

       

8.250%, 11–1–19 (A)

     2,500           2,575   

6.875%, 4–1–22 (A)

     12,000           11,640   
       

 

 

 
          14,215   
       

 

 

 

Diversified Support Services – 4.7%

  

Algeco Scotsman Global Finance plc,

       

8.500%, 10–15–18 (A)

     10,575           10,522   

Nexeo Solutions, LLC,

       

8.375%, 3–1–18

     3,600           3,582   
       

 

 

 
          14,104   
       

 

 

 

Electronic Components – 5.5%

  

WireCo WorldGroup Inc.,

       

9.500%, 5–15–17

     15,682           16,231   
       

 

 

 

 

Electronic Manufacturing Services – 0.7%

  

KEMET Corporation,

       

10.500%, 5–1–18

     2,000           2,040   
       

 

 

 

Finance – 1.5%

  

Mobile Challenger Intermediate Group S.A.,

       

8.750%, 3–15–19 (A)(B)(C)

   EUR 4,000           4,579   
       

 

 

 

Food Distributors – 2.9%

  

U.S. Foodservice, Inc.,

       

8.500%, 6–30–19

   $ 8,275           8,647   
       

 

 

 

Health Care Facilities – 2.9%

  

HCA Holdings, Inc.,

       

6.250%, 2–15–21

     8,335           8,502   
       

 

 

 

Health Care Supply – 2.8%

  

HCA Inc.,

       

7.500%, 2–15–22

     7,500           8,306   
       

 

 

 

Integrated Telecommunication Services – 4.3%

  

CenturyLink, Inc.,

       

5.800%, 3–15–22

     13,000           12,805   
       

 

 

 

Leisure Facilities – 0.6%

  

Regal Entertainment Group,

       

5.750%, 2–1–25

     2,000           1,900   
       

 

 

 

Marine – 4.3%

  

TRAC Intermodal LLC and TRAC Intermodal Corp.,

       

11.000%, 8–15–19 (A)

     11,711           12,882   
       

 

 

 

Multi-line Insurance – 0.1%

  

Audatex North America, Inc.,

       

6.000%, 6–15–21 (A)

     414           413   
       

 

 

 

Oil & Gas Refining & Marketing – 4.8%

  

Samson Investment Company,

       

10.000%, 2–15–20 (A)(D)

     6,000           6,323   

Shelf Drilling Holdings, Ltd.,

       

8.625%, 11–1–18 (A)

     7,608           7,912   
       

 

 

 
          14,235   
       

 

 

 

Paper Packaging – 5.1%

  

Reynolds Group Holdings Limited:

       

9.000%, 4–15–19

     6,000           6,195   

9.875%, 8–15–19

     8,500           9,095   
       

 

 

 
          15,290   
       

 

 

 

Pharmaceuticals – 2.1%

  

Valeant Pharmaceuticals International, Inc.,

       

6.375%, 10–15–20 (A)

     3,000           2,966   

VPII Escrow Corp.:

       

6.750%, 8–15–18 (A)

     1,596           1,636   

7.500%, 7–15–21 (A)

     1,663           1,721   
       

 

 

 
          6,323   
       

 

 

 

Precious Metals & Minerals – 1.1%

  

Prince Mineral Holding Corp,

       

11.500%, 12–15–19 (A)

     3,000           3,210   
       

 

 

 

Property & Casualty Insurance – 0.5%

  

Hub International Limited,

       

8.125%, 10–15–18 (A)

     1,412           1,468   
       

 

 

 

Retail Stores – 2.8%

  

Hot Topic, Inc.,

       

9.250%, 6–15–21 (A)

     8,285           8,388   
 

 

 

Jo-Ann Stores, Inc.,

       

8.125%, 3–15–19 (A)

     81           83   
       

 

 

 
          8,471   
       

 

 

 

Service – Other – 1.4%

  

B-Corp Merger Sub, Inc.,

       

8.250%, 6–1–19

     4,000           3,920   

Service Corporation International,

       

5.375%, 1–15–22 (A)

     185           185   
       

 

 

 
          4,105   
       

 

 

 

Specialized Consumer Services – 5.5%

  

Carlson Wagonlit B.V.:

       

6.875%, 6–15–19 (A)

     214           216   

7.500%, 6–15–19 (A)(C)

   EUR 710           946   

ServiceMaster Company (The):

       

8.000%, 2–15–20

   $ 12,500           12,469   

7.000%, 8–15–20

     3,000           2,846   
       

 

 

 
          16,477   
       

 

 

 

Specialized Finance – 1.9%

  

AA Bond Co Limited,

       

9.500%, 7–31–19 (A)(C)

   GBP 3,619           5,738   
       

 

 

 

Specialized REITs – 1.2%

  

CNL Lifestyles Properties, Inc.,

       

7.250%, 4–15–19

   $ 3,539           3,530   
       

 

 

 

Specialty Stores – 2.2%

  

Takko Luxembourg 2 S.C.A.,

       

9.875%, 4–15–19 (A)(C)

   EUR 5,500           6,533   
       

 

 

 

Textiles – 4.4%

  

Novalis S.A.S.,

       

6.000%, 6–15–18 (A)(C)

     10,000           13,082   
       

 

 

 

Thrifts & Mortgage Finance – 3.5%

  

Provident Funding Associates, L.P. and PFG Finance Corp.:

       

10.125%, 2–15–19 (A)

   $ 2,725           3,011   

6.750%, 6–15–21 (A)

     7,500           7,482   
       

 

 

 
          10,493   
       

 

 

 

TOTAL CORPORATE DEBT SECURITIES – 110.3%

  

     $ 328,304   

(Cost: $333,650)

       

LOANS

                   

Application Software – 0.8%

       

Misys plc and Magic Newco, LLC,

       

0.000%, 6–12–19 (D)

     2,000           2,260   
       

 

 

 

Broadcasting – 2.4%

       

PAW LUXCO II S.A.R.L.,

       

0.000%, 7–29–17 (C)(D)

   EUR 6,000           7,079   
       

 

 

 

Diversified Chemicals – 1.7%

       

MacDermid, Incorporated,

       

0.000%, 12–6–20 (D)

   $ 5,000           5,043   
       

 

 

 

Electronic Equipment & Instruments – 0.1%

  

Websense, Inc.,

       

0.000%, 11–19–20 (D)

     365           364   
       

 

 

 

Health Care Equipment – 3.6%

  

Carestream Health, Inc.:

       

0.000%, 6–5–19 (D)

     5,000           4,937   

0.000%, 12–5–19 (D)

     6,000           5,880   
       

 

 

 
          10,817   
       

 

 

 

Health Care Facilities – 0.7%

       

Surgery Center Holdings, Inc.,

       

0.000%, 4–11–20 (D)

     2,000           1,990   
       

 

 

 

Hotels, Resorts & Cruise Lines – 0.2%

  

Four Seasons Hotels Limited,

       

0.000%, 12–13–20 (D)

     599           603   
       

 

 

 

Leisure Facilities – 0.9%

       

Northfield Park Associates LLC,

       

0.000%, 11–9–18 (D)

     2,576           2,653   
       

 

 

 

Leisure Products – 3.2%

       

Visant Corporation,

       

5.250%, 12–22–16 (D)

     9,880           9,397   
       

 

 

 

Metal & Glass Containers – 1.7%

       

Evergreen Tank Solution, Inc.,

       

9.500%, 9–11–18 (D)

     5,023           4,998   
       

 

 

 

Movies & Entertainment – 10.0%

       

Formula One Holdings Ltd. and Delta Two S.a.r.l.,

       

4.500%, 4–30–19 (D)

     30,000           29,933   
       

 

 

 

Paper Packaging – 0.8%

       

FPC Holdings, Inc.,

       

0.000%, 5–16–20 (D)

     2,500           2,369   
       

 

 

 

Publishing – 3.9%

       

YP Holdings, LLC,

       

0.000%, 5–31–18 (D)

     12,000           11,830   
       

 

 

 

Specialized Finance – 1.7%

       

Orchard Acquisition Company, LLC,

       

9.000%, 2–4–19 (D)

     4,991           4,922   
       

 

 

 

TOTAL LOANS – 31.7%

  

     $ 94,258   

(Cost: $94,839)

       

SHORT–TERM SECURITIES

                   

Master Note – 2.6%

       

Toyota Motor Credit Corporation,

       

0.111%, 7–3–13 (E)

     7,686           7,686   
       

 

 

 

TOTAL SHORT-TERM SECURITIES – 2.6%

  

     $ 7,686   

(Cost: $7,686)

       

TOTAL INVESTMENT SECURITIES – 144.6%

  

     $ 430,248   

(Cost: $436,175)

       

BORROWINGS (F)(G) – (20.2)%

  

       (60,000 ) 

LIABILITIES, NET OF CASH AND OTHER
ASSETS – (24.4%)

   

       (72,773 ) 

NET ASSETS – 100.0%

  

     $ 297,475   
 

Notes to Schedule of Investments

 

(A) Securities were purchased pursuant to Rule 144A under the Securities Act of 1933 and may be resold in transactions exempt from registration, normally to qualified institutional buyers. At June 30, 2013, the total value of these securities amounted to $187,026 or 62.9% of net assets.

 

(B) Payment-in-kind bonds.

 

(C) Principal amounts are denominated in the indicated foreign currency, where applicable (EUR—Euro and GBP—British Pound).

 

(D) Variable rate security. Interest rate disclosed is that which is in effect at June 30, 2013.

 

(E) Variable rate security. Interest rate disclosed is that which is in effect at June 30, 2013. Date shown represents the date that the variable rate resets.

 

(F) Borrowings Payable as a percentage of Total Investments is 13.9%.

 

(G) The Fund segregates 100% of its eligible investments in the Schedule of Investments as collateral for outstanding borrowings.

The following forward foreign currency contracts were outstanding at June 30, 2013:

 

Type    Currency      Counterparty    Principal Amount
of Contract
(Denominated in
Indicated Currency) 		     Settlement Date      Unrealized
Appreciation 		     Unrealized
Depreciation 		 

Sell

  

British Pound

    

Morgan Stanley International

     3,878         7-22-13       $ 58       $ —  

Sell

  

Euro

    

Morgan Stanley International

     23,435         7-22-13         910         —  

Sell

  

Swiss Franc

    

Morgan Stanley International

     2,000         7-22-13         57         —  
                 $ 1,025       $ —   

Each Fund’s investments are reported at fair value. Fair value is defined as the price that each Fund would receive upon selling an asset or would pay upon satisfying a liability in an orderly transaction between market participants at the measurement date.

Accounting standards establish a framework for measuring fair value and a three-level hierarchy for fair value measurements based upon the transparency of inputs to the valuation of an asset or liability. Inputs may be observable or unobservable and refer broadly to the assumptions that market participants would use in pricing the asset or liability. Observable inputs reflect the assumptions market participants would use in pricing the asset or liability based on market data obtained from sources independent of the reporting entity. Unobservable inputs reflect the reporting entity’s own assumptions about the factors that market participants would use in pricing the asset or liability developed based on the best information available in the circumstances.

Reoccurring fair value measurements of Level 3 securities shall include a reconciliation of the beginning to ending balances for reported fair market values. A fair value hierarchy and Level 3 reconciliation, if applicable, have been included in the Notes to Schedule of Investments for each respective Fund.

An individual investment’s fair value measurement is assigned a level based upon the observability of the inputs which are significant to the overall valuation. The three-tier hierarchy of inputs is summarized as follows:

Level 1 – Observable input such as quoted prices, available in active markets, for identical assets or liabilities.

Level 2 – Significant other observable inputs, which may include, but are not limited to, quoted prices for similar assets or liabilities in markets that are active, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the assets or liabilities (such as interest rates, yield curves, volatilities, prepayment speeds, loss severities, credit risks and default rates) or other market corroborated inputs.

Level 3 – Significant unobservable inputs based on the best information available in the circumstances, to the extent observable inputs are not available, which may include assumptions made by the Board or persons acting at their direction that are used in determining the fair market value of investments.

The following tables summarize the valuation of the Fund’s investments by the above fair value hierarchy levels as of June 30, 2013:

 

      Level 1      Level 2      Level 3  

Assets

       

Investments in Securities

       

Corporate Debt Securities

  $ —       $ 328,304       $ —   

Loans

    —         89,615         4,643   

Short-Term Securities

    —         7,686         —   

Total

  $ —       $ 425,605       $ 4,643   

Forward Foreign Currency Contracts

  $ —       $ 1,025       $ —   

The following table is a reconciliation of Level 3 investments for which significant unobservable inputs were used to determine fair value:

 

      Loans  

Beginning Balance 5-29-13

  $ —   

Net realized gain (loss)

    —   

Net unrealized appreciation (depreciation)

    (68 ) 

Purchases

    4,711   

Sales

    —   

Accrued discounts/premiums

    —   

Transfers into Level 3 during the period

    —   

Transfers out of Level 3 during the period

    —   

Ending Balance 6-30-13

  $ 4,643   

Net change in unrealized appreciation (depreciation) for all Level 3 investments still held as of 6-30-13

  $ (68 ) 

There were no transfers between any levels during the period ended June 30, 2013.

Quantitative Information about Level 3 fair value measurements:

 

     

Fair Value at

6-30-13

   Valuation Technique(s)    Unobservable Input(s)  

Assets

       

Loans

 

$4,643

   Third-party valuation service      Broker quotes   

The following acronym is used throughout this schedule:

 

REIT = Real Estate Investment Trust

For Federal income tax purposes, cost of investments owned at June 30, 2013 and the related unrealized appreciation (depreciation) were as follows:

 

Cost

  $ 436,175   

Gross unrealized appreciation

    1,208   

Gross unrealized depreciation

    (7,135 ) 

Net unrealized depreciation

  $ (5,927 ) 

ITEM 2.    CONTROLS AND PROCEDURES.

 

(a) The Registrant’s Principal Executive Officer and Principal Financial Officer, or persons performing similar functions, based on their evaluation of the Registrant’s disclosure controls and procedures as of a date within 90 days of the filing date of this report, have concluded that such controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940, as amended) are effective and adequately designed to ensure that information required to be disclosed by the Registrant in its reports that it files or submits is accumulated and communicated to the Registrant’s management, including the Principal Executive Officer and Principal Financial Officer, or persons performing similar functions, as appropriate, to allow timely decisions regarding required disclosure.

 

(b) There were no significant changes in the registrant’s internal controls over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940, as amended) that occurred during the registrant’s last fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting.

ITEM 3.    EXHIBITS.

A separate certification for each principal executive officer and principal financial officer of the registrant as required by Rule 30a-2(a) under the Investment Company Act of 1940 (17 CFR 270.30a-2(a)).

Attached hereto as Exhibit 99.CERT.

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.

 

Ivy High Income Opportunities Fund
(Registrant)
By       /s/ Mara D. Herrington
  Mara D. Herrington, Vice President and Secretary

Date: August 23, 2013

Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

 

By       /s/ Henry J. Herrmann
  Henry J. Herrmann, Principal Executive Officer

Date: August 23, 2013

 

By       /s/ Joseph W. Kauten
  Joseph W. Kauten, Principal Financial Officer

Date: August 23, 2013

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