0001515940falseN-CSRS00015159402022-11-012023-04-30
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 (811-22543)
KKR Income Opportunities Fund
(Exact name of registrant as specified in charter)
555 California Street, 50th Floor
San Francisco, CA 94104
(Address of principal executive offices) (Zip code)
Lori Hoffman
KKR Credit Advisors (US) LLC
555 California Street, 50th Floor
San Francisco, CA 94104
(Name and address of agent for service)
(415) 315-3620
Registrant’s telephone number, including area code
Date of fiscal year end: October 31, 2023
Date of reporting period: April 30, 2023
Item 1. Reports to Stockholders.
KKR Income Opportunities Fund
Semi-Annual Report
April 30, 2023
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| Income Opportunities Fund | April 30, 2023 (Unaudited) |
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| Table of Contents | |
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Management’s Discussion of Fund Performance | |
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Schedule of Investments | |
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The KKR Income Opportunities Fund (the “Fund”) files its complete schedule of portfolio holdings with the Securities and Exchange Commission (the “Commission”) for the first and third quarters of each fiscal year. For periods ending on or prior to January 31, 2019, the Fund has filed a complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q. For periods ending on or after April 30, 2019, the Fund files a complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year as an exhibit to its reports on Form N-PORT within sixty days after the end of the period. The Fund’s Forms N-Q and Forms N-PORT are available on the Commission’s website at www.sec.gov or on request by calling 1-800-SEC-0330.
A description of the policies and procedures that the Fund uses to determine how to vote proxies relating to portfolio securities, as well as information relating to how a Fund voted proxies relating to portfolio securities during the most recent year ended June 30 will be available (i) without charge, upon request, by calling 855-862-6092; and (ii) on the Commission’s website at www.sec.gov.
INFORMATION ABOUT THE FUND’S TRUSTEES
The proxy statements and annual reports include information about the Fund’s Trustees and are available without charge, upon request, by calling 855-862-6092 and by visiting the Commission’s website at www.sec.gov or the Fund’s website at www.kkrfunds.com/kio.
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| Income Opportunities Fund | April 30, 2023 (Unaudited) |
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Management’s Discussion of Fund Performance
Looking Back on the Markets – April 30, 2023
Financing was already in short supply when Silicon Valley Bank began to wobble in early March. Now, tremors in the banking sector, resulting most recently in UBS acquiring Credit Suisse, have tightened financial conditions even further, tipping us into a full-on Hunt for Capital like nothing we’ve seen in 15 years. Those with ready capital, particularly capital that can be flexible in one way or another, are able to lend on some of the best terms we’ve seen in a very long time.
The hunt didn’t start overnight in March 2023. The sharp rise in interest rates over the past year caused liquidity in most capital markets to freeze, CLO formation to slow dramatically, the IPO market to pause, and banks to pull back from lending. In other words, many companies ― even high-quality companies ― that needed growth capital found traditional paths to financing closed.
Layering a crisis on top of the pressure banks were already feeling from the sharp change in the value of their risk-weighted assets is unlikely to encourage them to lend more. A further pullback in bank lending, especially one caused by technical factors rather than fundamental weakness, has clear implications for the credit markets, including the likelihood that agile investors should have pockets of dispersion to trade on going forward.
It’s good to be a lender during a hunt for capital. Creditworthy borrowers face a real risk of being swept up in a wave of negative sentiment. We are committed to being in the market, helping to finance market-leading companies with strong cash flows that we think can defend their margins even in an inflationary environment. The long reign of the Hunt for Yield had investors accustomed to the idea that going out on the risk curve was the only way to get decent returns. It’s time for a new way of thinking: Returns are readily available, but quality and risk management have never been more important. Across the KKR Credit platform, we are actively deploying capital in today’s traded and private markets – with a strong emphasis on fundamental underwriting, nimble investing and thoughtful risk allocation.
Traded Credit Markets
The return of inflation and rising interest rates has precipitated a regime change characterized by higher volatility. Volatility, of course, can be an opportunity. When U.K. pension funds were forced to sell liquid assets during the LDI crisis, CLO spreads gapped out. However, we felt that the market’s movement were largely a reaction to a technical problem, rather than a dangerous change in fundamentals and moved quickly to buy CLOs.
These kinds of opportunities can and have happened all over the public markets, where issuance declined precipitously in 2022 and the supply of securities remains lower than the demand for them. High yield debt, where retail investors make up some 40%1 of the market and are more likely to sell in a downturn, is particularly vulnerable to sudden moves on negative news. Leveraged loans, too, can see spreads rise quickly. In this kind of environment, we think flexibility is a critical part of a credit strategy. The key, we think, is to focus on acting as a liquidity provider when and where the need arises and to focus on risk that is not overly complex. Reaching too far for risk in general or for risk that is overly reliant on open capital markets can be challenging in the current market environment.
At the moment, we see a growing number of opportunities to help companies facing loan maturities “amend and extend” their debt. Lenders have the opportunity to work with high-quality companies that have a high likelihood of refinancing to push out their maturities in exchange for wider spreads. In addition to the wider spreads, lenders can benefit from an upfront fee for allowing this extension. We believe being a liquidity provider can deliver excess returns in an environment like this.
Fund Description & Performance
KKR Income Opportunities Fund (“KIO” or, the “Fund”) is a diversified, closed-end fund that trades on the New York Stock Exchange under the symbol “KIO.” The Fund’s primary investment objective is to seek a high level of current income with a secondary objective of capital appreciation. The Fund seeks to achieve its investment objectives by employing a dynamic strategy of investing in a targeted portfolio of loans and fixed-income instruments (including derivatives) of US and non-US issuers and implementing hedging strategies in order to seek to achieve attractive risk-adjusted returns. Under normal market conditions, KIO will invest at least 80% of its Managed Assets in loans and fixed-income instruments or other instruments, including derivative instruments, with similar economic characteristics. The Fund expects to invest primarily in first and second lien secured loans, unsecured loans and high-yield corporate debt instruments of varying maturities.
On February 19, 2023, KIO successfully completed a 1-for-3 rights offering, which was significantly oversubscribed. The offering afforded shareholders an opportunity to purchase additional shares of the fund at a discounted share price of $10.75. It also allowed the fund to invest the additional capital into a very attractive market environment,
1JP Morgan as of December 31, 2022
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| Income Opportunities Fund | April 30, 2023 (Unaudited) |
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offering the potential for high income and capital appreciation. Supported by this more attractive market environment and increased capital base from the rights offering, KIO announced a 15.7% increase in its monthly dividend for the month of March to $12.15 cents per share.
With respect to performance, following a challenging year, the Fund has recovered more recently even amidst mixed sentiment and performance within the broader closed-end fund market. On a share price basis, KIO had total returns, net of fees and inclusive of dividends, of -8.42% on a 12-month basis and delivered a positive 6.56% return over the past 6-month period, through April 30, 2023. The discount to net asset value (“NAV”) widened slightly over that period, with the discount subtracted approximately -2.36% and -0.44% from the fund’s returns, over the 12- and 6-month periods, respectively.
On a NAV basis, the strategy has delivered total returns, net of fees and inclusive of dividends, of -7.02% and +6.48% over the last 12 and 6 months through April 30, 2023. Looking at the 12-month period, a component of this performance is derived from the underlying markets in which the fund invests in, which were volatile and have faced headwinds amid rising rates, inflation concerns, and recessionary fears. Additionally, the use of leverage in the fund has amplified these negative returns. Over longer horizons, however, we believe leverage adds substantial value to the fund, as represented be the portfolio’s attractive yield to maturity.
Diving deeper into unleveraged NAV performance drivers, positions within the services, leisure, and technology & electronics sectors were the top contributors YTD as of April 30, 2023. On an asset class basis, exposure in high yield bonds has driven the majority of contribution as compared to leveraged loans. From a rating perspective, the strategy’s overweight to CCC names have driven most of the positive performance, while BB-rated names have detracted on the margin.
As of April 30, 2023, the Fund held 64.4% of its net assets in first and second-lien leveraged loans, 76.9% of its net assets in high-yield corporate debt, 4.7% of its net assets in asset backed securities, and 1.6% of its net assets in equities and other investments. KIO’s investments represented obligations and equity interests in 177 positions across a diverse group of industries. The top ten issuers represented 39.0% of the Fund’s net assets while the top five industry groups represented 58.6% of the Fund’s net assets. The Fund’s Securities and Exchange Commission 30-day yield was 13.20%.
Business Updates
We thank you for your partnership and continued investment in KIO. We look forward to continued communications and will keep you apprised of the progress of KIO specifically and the leveraged finance market place generally. Fund information is available on our website at kkrfunds.com/kio.
Disclosures
The Bank of America Merrill Lynch High Yield Master II Index is a market-value weighted index of below investment grade US dollar-denominated corporate bonds publicly issued in the US domestic market. “Yankee” bonds (debt of foreign issuers issued in the US domestic market) are included in the Bank of America Merrill Lynch High Yield Master II Index provided that the issuer is domiciled in a country having investment grade foreign currency long-term debt rating. Qualifying bonds must have maturities of one year or more, a fixed coupon schedule and minimum outstanding of US$100.0 million. In addition, issues having a credit rating lower than BBB3, but not in default, are also included.
The Morningstar LSTA US Leveraged Loan Index is a market value-weighted index designed to measure the performance of the US leveraged loan market based upon market weightings, spreads and interest payments. The index was rolled out in 2000 and it was back-loaded with four years of data dating to 1997.
It is not possible to invest directly in an index.
Past performance is not an indication of future results. Returns represent past performance and reflect changes in share prices, the reinvestment of all dividends and capital gains, expense limitations and the effects of compounding. The prospectus contains more complete information on the investment objectives, risks, charges and expenses of the investment company, which investors should read and consider carefully before investing. The returns shown do not reflect taxes a shareholder would pay on distributions or redemptions. Total investment return and principal value of your investment will fluctuate, and your shares, when sold, may be worth more or less than their original cost. Current performance may be higher or lower than the performance data quoted. An investment in the Fund involves risk, including the risk of loss of principal. For a discussion of the Fund’s risks, see Risk Considerations, Note 3 to the financial statements. Call 855-330-3927 or visit www.kkrfunds.com/kio for performance results current to the most recent calendar quarter-end.
Must be preceded or accompanied by a prospectus.
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| Income Opportunities Fund | April 30, 2023 (Unaudited) |
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An imbalance in supply and demand in the income market may result in valuation uncertainties and greater volatility, less liquidity, widening credit spreads and a lack of price transparency in the market. Investments in income securities may be affected by changes in the creditworthiness of the issuer and are subject to the risk of non–payment of principal and interest. The value of income securities also may decline because of real or perceived concerns about the issuer’s ability to make principal and interest payments. Borrowing to increase investments (leverage) will exaggerate the effect of any increase or decrease in the value of Fund investments. Investments rated below investment grade (typically referred to as “junk”) are generally subject to greater price volatility and illiquidity than higher rated investments. As interest rates rise, the value of certain income investments is likely to decline. Senior loans are subject to prepayment risk. Investments in foreign instruments or currencies can involve greater risk and volatility than US investments because of adverse market economic, political, regulatory, geopolitical or other conditions. Changes in the value of investments entered for hedging purposes may not match those of the position being hedged. The Fund may engage in other investment practices that may involve additional risks.
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| Income Opportunities Fund | April 30, 2023 (Unaudited) |
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Schedule of Investments
(Stated in United States Dollars, unless otherwise noted)
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| Issuer | Asset | Reference Rate &
Spread | Interest
Rate | Maturity Date | Country | Currency | Par | Fair Value | Footnotes |
| Leveraged Loans - 64.44% | | | | | | | | | |
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| Aerospace & Defense - 0.89% | | | | | | | | | |
| Amentum Services Inc | TL 2L B 12/21 | SOFR (3M) + 7.65% | 12.68% | 2/15/2030 | USA | USD | 1,965,870 | $ | 1,897,654 | | (b) |
| EaglePicher Technologies LLC | TL 2L 02/18 | LIBOR (1M) + 7.25% | 12.27% | 3/8/2026 | USA | USD | 1,957,223 | 1,140,083 | | |
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| Alternative Carriers - 1.45% | | | | | | | | | |
| Segra | TL 1L B 08/21 | LIBOR (3M) + 4.50% | 9.66% | 10/4/2028 | USA | USD | 5,179,589 | 4,946,508 | | |
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| Apparel, Accessories & Luxury Goods - 4.60% | | | | | | | | |
| Varsity Brands Inc | TL 1L 02/23 | SOFR (1M) + 5.11% | 10.10% | 12/15/2026 | USA | USD | 16,724,614 | 15,721,137 | | |
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| Application Software - 7.03% | | | | | | | | | |
| Misys Ltd | TL 2L 04/17 | LIBOR (3M) + 7.25% | 12.40% | 6/13/2025 | USA | USD | 8,063,622 | 6,859,118 | | |
| Solera LLC | TL 2L 06/21 | LIBOR (3M) + 8.00% | 12.95% | 6/4/2029 | USA | USD | 11,074,727 | 10,576,364 | | |
| TIBCO Software Inc | TL 1L B 09/22 | SOFR (3M) + 4.60% | 9.50% | 3/30/2029 | USA | USD | 7,001,400 | 6,562,797 | | |
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| Automotive Parts & Equipment - 5.29% | | | | | | | | | |
| Innovative XCessories & Services LLC | TL 1L 02/20 | SOFR (6M) + 4.35% | 9.48% | 3/5/2027 | USA | USD | 6,418,047 | 5,351,913 | | |
| Parts Authority Inc | TL 1L 10/20 | LIBOR (3M) + 3.75% | 9.02% | 10/28/2027 | USA | USD | 5,675,994 | 5,356,720 | | |
| Rough Country LLC | TL 2L 07/21 | LIBOR (1M) + 6.50% | 11.52% | 7/30/2029 | USA | USD | 841,950 | 763,017 | | |
| Truck Hero Inc | TL 1L 01/21 | LIBOR (1M) + 3.75% | 8.77% | 1/31/2028 | USA | USD | 6,650,740 | 6,057,195 | | |
| Wheel Pros Inc | TL 1L B 05/21 | LIBOR (3M) + 4.50% | 9.77% | 5/11/2028 | USA | USD | 765,894 | 545,627 | | (a) |
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| Broadcasting - 4.00% | | | | | | | | | |
| NEP Broadcasting LLC | TL 1L B 09/18 | LIBOR (1M) + 3.25% | 8.27% | 10/20/2025 | USA | USD | 4,444,691 | 4,179,699 | | |
| NEP Broadcasting LLC | TL 2L 09/18 | LIBOR (1M) + 7.00% | 12.02% | 10/19/2026 | USA | USD | 7,494,510 | 5,756,720 | | |
| NEP Broadcasting LLC | TL 1L B 09/18 | EURIBOR (1M) + 3.50% | 6.41% | 10/20/2025 | NLD | EUR | 2,172,469 | 2,171,595 | | |
| NEP Broadcasting LLC | TL 1L 05/20 | LIBOR (1M) + 8.25% | 13.27% | 6/1/2025 | USA | USD | 1,581,877 | 1,581,877 | | (b) |
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| Broadline Retail - 1.67% | | | | | | | | | |
| AutoScout24 GmbH | TL 1L B 02/20 | EURIBOR (6M) + 3.25% | 6.54% | 3/31/2027 | DEU | EUR | 2,421,160 | 2,534,687 | | |
| AutoScout24 GmbH | TL 2L 01/20 | EURIBOR (6M) + 6.25% | 9.54% | 3/31/2028 | DEU | EUR | 1,408,001 | 1,378,505 | | |
| Belk Inc | TL 1L 02/21 | LIBOR (3M) + 7.50% | 12.46% | 7/31/2025 | USA | USD | 459,875 | 390,893 | | (a) |
| Belk Inc | TL 1L EXIT 02/21 PIK Toggle | | 7/31/2025 | USA | USD | 8,751,342 | 1,443,971 | | (a) (d) (e) |
See accompanying notes to financial statements.
4
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| Income Opportunities Fund | April 30, 2023 (Unaudited) |
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| Issuer | Asset | Reference Rate &
Spread | Interest
Rate | Maturity Date | Country | Currency | Par | Fair Value | Footnotes |
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| Building Products - 0.82% | | | | | | | | | |
| DiversiTech Holdings Inc | TL 2L B 12/21 | LIBOR (3M) + 6.75% | 11.91% | 12/21/2029 | USA | USD | 1,381,023 | $ | 1,229,110 | | |
| VC GB Holdings Inc (Visual Comfort) | TL 2L 06/21 | LIBOR (1M) + 6.75% | 11.77% | 7/23/2029 | USA | USD | 1,927,630 | 1,558,489 | | |
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| Cargo Ground Transportation - 0.61% | | | | | | | | | |
| Kenan Advantage Group Inc/The | TL 2L 08/21 | LIBOR (1M) + 7.25% | 12.27% | 9/1/2027 | USA | USD | 2,135,010 | 2,081,635 | | |
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| Commodity Chemicals - 0.31% | | | | | | | | | |
| Ineos Finance PLC | TL 1L B 11/22 | SOFR (1M) + 3.85% | 8.83% | 11/8/2027 | USA | USD | 1,067,950 | 1,067,950 | | |
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| Construction & Engineering - 2.34% | | | | | | | | | |
| Total Safety US Inc | TL 1L B 07/19 | LIBOR (3M) + 6.00% | 10.98% | 8/18/2025 | USA | USD | 5,096,300 | 4,869,234 | | |
| USIC Holdings Inc | TL 2L 05/21 | LIBOR (1M) + 6.50% | 11.52% | 5/14/2029 | USA | USD | 431,521 | 399,696 | | |
| Yak Access LLC | TL 1L 03/23 | SOFR (6M) + 6.50% | 11.82% | 3/10/2028 | USA | USD | 3,393,205 | 2,697,598 | | |
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| Construction Machinery & Heavy Transportation Equipment - 1.54% | | | | | | | |
| Accuride Corp | TL 1L B 10/17 | LIBOR (1M) + 5.25% | 10.27% | 11/17/2023 | USA | USD | 6,366,669 | 5,254,762 | | |
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| Data Processing & Outsourced Services - 2.40% | | | | | | | |
| West Corp | TL 1L B3 01/23 | SOFR (3M) + 4.25% | 9.30% | 4/10/2027 | USA | USD | 9,079,768 | 8,202,617 | | |
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| Diversified Metals & Mining - 0.63% | | | | | | | | | |
| Foresight Energy LLC | TL 1L A 06/20 | LIBOR (3M) + 8.00% | 13.16% | 6/30/2027 | USA | USD | 2,164,742 | 2,164,742 | | (a) (b) |
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| Diversified Support Services - 0.35% | | | | | | | | | |
| Access CIG LLC | TL 2L 02/18 | LIBOR (3M) + 7.75% | 12.73% | 2/27/2026 | USA | USD | 1,292,375 | 1,191,951 | | |
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| Education Services - 0.75% | | | | | | | | | |
| Jostens Inc | TL 1L 12/18 | LIBOR (6M) + 5.5% | 10.71% | 12/19/2025 | USA | USD | 2,550,879 | 2,555,980 | | |
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| Financial Exchanges & Data - 0.17% | | | | | | | | | |
| IntraFi Network LLC | TL 2L 11/21 | SOFR (1M) + 6.35% | 11.33% | 11/5/2029 | USA | USD | 623,220 | 566,974 | | |
| | | | | | | | | |
| Health Care Equipment - 6.06% | | | | | | | | | |
| Drive DeVilbiss Healthcare LLC | TL 1L 03/21 | 4.00% PIK, SOFR (3M) + 9.50% | 14.39% | 6/1/2025 | USA | USD | 7,625,199 | 6,557,671 | | (d) |
| Drive DeVilbiss Healthcare LLC | TL 1L 09/22 | 9.00% PIK, SOFR (3M) + 10.10% | 14.90% | 6/1/2025 | USA | USD | 1,029,219 | 1,029,219 | | (b) (d) |
| Orchid Orthopedic Solutions LLC | TL 1L 02/19 | LIBOR (3M) + 4.50% | 9.23% | 3/5/2026 | USA | USD | 5,628,294 | 5,141,447 | | |
| Tecomet Inc | TL 1L 10/17 | LIBOR (1M) + 3.50% | 8.37% | 5/1/2024 | USA | USD | 8,485,334 | 7,978,590 | | (a) |
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| Health Care Facilities - 0.26% | | | | | | | | | |
| ScionHealth | TL 1L B 12/21 | LIBOR (1M) + 5.25% | 10.27% | 12/23/2028 | USA | USD | 1,725,044 | 897,023 | | |
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| Health Care Services - 0.06% | | | | | | | | | |
| Paradigm Acquisition Corp | TL 2L 10/18 | LIBOR (1M) + 7.50% | 12.52% | 10/26/2026 | USA | USD | 213,465 | 210,263 | | |
See accompanying notes to financial statements.
5
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| Income Opportunities Fund | April 30, 2023 (Unaudited) |
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| Issuer | Asset | Reference Rate &
Spread | Interest
Rate | Maturity Date | Country | Currency | Par | Fair Value | Footnotes |
| | | | | | | | | |
| Health Care Technology - 0.54% | | | | | | | | | |
| GoodRx Inc | TL 1L 10/18 | LIBOR (1M) + 2.75% | 7.77% | 10/10/2025 | USA | USD | 1,864,026 | $ | 1,852,181 | | |
| | | | | | | | | |
| Hotels, Resorts & Cruise Lines - 0.83% | | | | | | | | | |
| Playa Resorts Holding BV | TL 1L B 11/22 | SOFR (1M) + 4.25% | 9.14% | 1/5/2029 | USA | USD | 1,869,644 | 1,869,382 | | |
| Travel + Leisure Co | TL 1L 12/22 | SOFR (1M) + 4.10% | 8.98% | 12/14/2029 | USA | USD | 958,759 | 955,164 | | |
| | | | | | | | | |
| Human Resource & Employment Services - 0.77% | | | | | | | | |
| SIRVA Worldwide Inc | TL 1L 07/18 | LIBOR (1M) + 5.50% | 10.56% | 8/4/2025 | USA | USD | 1,804,382 | 1,655,521 | | |
| SIRVA Worldwide Inc | TL 2L 07/18 | LIBOR (3M) + 9.50% | 14.63% | 8/3/2026 | USA | USD | 1,149,740 | 1,003,867 | | |
| | | | | | | | | |
| Industrial Machinery & Supplies & Components - 2.79% | | | | | | | |
| Chart Industries Inc | TL 1L B 12/22 | SOFR (1M) + 3.85% | 8.74% | 3/15/2030 | USA | USD | 1,867,570 | 1,871,081 | | |
| CPM Holdings Inc | TL 2L 10/18 | LIBOR (1M) + 8.25% | 13.10% | 11/16/2026 | USA | USD | 1,321,319 | 1,307,280 | | |
| Dexko Global Inc | TL 1L 10/21 | EURIBOR (3M) + 3.75% | 6.77% | 10/4/2028 | USA | EUR | 2,357,925 | 2,385,117 | | |
| Dexko Global Inc | TL 1L B 09/21 | EURIBOR (3M) + 3.75% | 6.77% | 10/4/2028 | DEU | EUR | 1,226,186 | 1,240,327 | | |
| Dexko Global Inc | TL 1L DD 10/21 | EURIBOR (3M) + 3.75% | 6.77% | 10/4/2028 | USA | EUR | 379,399 | 383,774 | | |
| Engineered Machinery Holdings Inc | TL 2L 08/21 | LIBOR (3M) + 6.00% | 11.16% | 5/21/2029 | USA | USD | 289,880 | 266,690 | | |
| SPX FLOW Inc | TL 1L B 03/22 | SOFR (1M) + 4.60% | 9.58% | 4/5/2029 | USA | USD | 263,815 | 255,176 | | |
| WireCo WorldGroup Inc | TL 1L B 10/21 | LIBOR (1M) + 4.25% | 9.25% | 11/13/2028 | USA | USD | 1,848,972 | 1,843,656 | | |
| | | | | | | | | |
| IT Consulting & Other Services - 3.70% | | | | | | | | | |
| PSAV Inc | TL 2L 02/18 | LIBOR (3M) + 7.25% | 12.06% | 9/1/2025 | USA | USD | 4,448,850 | 3,940,391 | | |
| PSAV Inc | TL 1L B3 12/20 | 10.00% PIK, 5.00% | 15.00% | 10/15/2026 | USA | USD | 2,176,855 | 2,268,468 | | (d) |
| PSAV Inc | TL 1L B1 12/20 | 0.25% PIK, LIBOR (3M) + 3.50% | 8.31% | 3/3/2025 | USA | USD | 6,699,089 | 6,445,193 | | (d) |
| | | | | | | | | |
| Leisure Facilities - 3.20% | | | | | | | | | |
| Aimbridge Acquisition Co Inc | TL 1L B 10/19 | LIBOR (1M) + 3.75% | 8.77% | 2/2/2026 | USA | USD | 5,602,885 | 5,298,256 | | |
| Aimbridge Acquisition Co Inc | TL 1L B 09/20 | LIBOR (1M) + 4.75% | 9.76% | 2/2/2026 | USA | USD | 7,730 | 7,359 | | |
| United PF Holdings LLC | TL 1L 01/20 | LIBOR (3M) + 4.00% | 8.73% | 12/30/2026 | USA | USD | 6,502,083 | 5,226,049 | | |
| United PF Holdings LLC | TL 1L B 06/20 | LIBOR (3M) + 8.50% | 13.66% | 12/30/2026 | USA | USD | 484,955 | 412,212 | | |
| | | | | | | | | |
| Leisure Products - 0.20% | | | | | | | | | |
| Topgolf Callaway Brands Corp | TL 1L B 03/23 | SOFR (1M) + 3.60% | 8.58% | 3/15/2030 | USA | USD | 674,810 | 675,127 | | |
| | | | | | | | | |
| Life Sciences Tools & Services - 1.62% | | | | | | | | | |
| PAREXEL International Corp | TL 2L 07/21 | LIBOR (1M) + 6.50% | 11.52% | 11/15/2029 | USA | USD | 5,637,180 | 5,537,966 | | (b) |
| | | | | | | | | |
| Oil & Gas Strorage & Transportation - 1.24% | | | | | | | | | |
| Brazos Midstream Holdings LLC | TL 1L B 01/23 | SOFR (1M) + 3.75% | 8.58% | 1/31/2030 | USA | USD | 1,614,182 | 1,595,773 | | |
| Oryx Midstream Services LLC | TL 1L B 01/23 | SOFR (1M) + 3.36% | 8.19% | 10/5/2028 | USA | USD | 2,669,701 | 2,645,139 | | |
| | | | | | | | | |
See accompanying notes to financial statements.
6
| | | | | | | | |
| Income Opportunities Fund | April 30, 2023 (Unaudited) |
| |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Issuer | Asset | Reference Rate &
Spread | Interest
Rate | Maturity Date | Country | Currency | Par | Fair Value | Footnotes |
| Publishing - 0.64% | | | | | | | | | |
| Emerald Expositions Holding Inc | TL 1L B 11/17 | LIBOR (1M) + 2.50% | 7.52% | 5/22/2024 | USA | USD | 2,186,902 | $ | 2,175,421 | | |
| | | | | | | | | |
| Research & Consulting Services - 0.14% | | | | | | | | | |
| TMF Group Holding BV | TL 2L 12/17 | EURIBOR (3M) + 6.63% | 9.68% | 5/4/2026 | NLD | EUR | 440,830 | 481,743 | | |
| | | | | | | | | |
| Security & Alarm Services - 0.39% | | | | | | | | | |
| Monitronics International Inc | TL 1L EXIT 08/19 | | 3/29/2024 | USA | USD | 2,524,280 | | 1,323,442 | | (a) (e) |
| | | | | | | | | |
| | | | | | | | | |
| Specialty Chemicals - 5.95% | | | | | | | | | |
| Aruba Investments Inc | TL 2L 10/20 | LIBOR (1M) + 7.75% | 12.77% | 11/24/2028 | USA | USD | 1,841,010 | 1,656,909 | | |
| Champion/DSM engg | TL 1L B1 03/23 | EURIBOR (3M) + 5.50% | 8.77% | 3/28/2030 | DEU | EUR | 1,213,530 | 1,227,933 | | |
| Champion/DSM engg | TL 1L B1 03/23 | SOFR (3M) + 5.50% | 10.80% | 3/28/2030 | DEU | USD | 6,619,380 | 6,081,555 | | |
| Flint Group GmbH | TL 1L B 04/14 | 0.75% PIK, EURIBOR (3M) + 4.25% | 0.75% | 9/21/2023 | DEU | EUR | 1,141,064 | 861,032 | | (a) (d) |
| Flint Group GmbH | TL 1L B3 05/15 | 0.75% PIK, EURIBOR (3M) + 4.25% | 0.75% | 9/21/2023 | DEU | EUR | 9,281 | 7,003 | | (a) (d) |
| Flint Group GmbH | TL 1L B4 11/15 | 0.75% PIK, EURIBOR (3M) + 4.25% | 0.75% | 9/21/2023 | DEU | EUR | 86,906 | 65,578 | | (a) (d) |
| Flint Group GmbH | TL 1L B5 02/17 | 0.75% PIK, EURIBOR (3M) + 4.25% | 0.75% | 9/21/2023 | DEU | EUR | 144,197 | 108,809 | | (a) (d) |
| Flint Group GmbH | TL 1L B7 04/14 | 0.75% PIK, EURIBOR (3M) + 4.25% | 0.75% | 9/21/2023 | DEU | EUR | 100,065 | 75,508 | | (a) (d) |
| Flint Group GmbH | TL 1L B6 03/17 | 0.75% PIK, EURIBOR (3M) + 4.25% | 0.75% | 9/21/2023 | DEU | EUR | 104,909 | 79,162 | | (a) (d) |
| Vantage Specialty Chemicals Inc | TL 1L B 02/23 | SOFR (1M) + 4.75% | 9.63% | 10/26/2026 | USA | USD | 10,592,851 | 10,206,213 | | |
| | | | | | | | | |
| Systems Software - 1.18% | | | | | | | | | |
| Dedalus Finance GmbH | TL 1L B 06/21 | EURIBOR (3M) + 3.75% | 6.97% | 7/17/2027 | DEU | EUR | 4,048,320 | 4,026,237 | | |
| TOTAL LEVERAGED LOANS (Amortized cost $238,143,620) | | | | | | | $ | 220,188,725 | | |
See accompanying notes to financial statements.
7
| | | | | | | | |
| Income Opportunities Fund | April 30, 2023 (Unaudited) |
| |
| | | | | | | | | | | | | | | | | | | | | | | |
| Issuer | Asset | Maturity Date | Country | Currency | Par | Fair Value | Footnotes |
| High Yield Securities - 76.99% | | | | | | | |
| | | | | | | |
| Alternative Carriers - 1.49% | | | | | | | |
| Level 3 Financing Inc | 3.750% 07/2029 | 7/15/2029 | USA | USD | 4,611,000 | $ | 2,599,122 | | (f) |
| Zayo Group LLC | 6.125% 03/2028 | 3/1/2028 | USA | USD | 3,913,000 | 2,505,519 | | (f) |
| | | | | | | |
| Apparel, Accessories & Luxury Goods - 0.11% | | | | | | | |
| Varsity Brands Inc | L+8.000% 12/2024 | 12/22/2024 | USA | USD | 364,000 | 364,000 | | (b) (f) |
| | | | | | | |
| Application Software - 1.49% | | | | | | | |
| Cision Ltd | 9.500% 02/2028 | 2/15/2028 | USA | USD | 6,449,000 | 4,119,653 | | (f) |
| TIBCO Software Inc | 6.500% 03/2029 | 3/31/2029 | USA | USD | 1,073,000 | 967,560 | | (f) |
| | | | | | | |
| Automobile Manufacturers - 0.32% | | | | | | | |
| Thor Industries Inc | 4.000% 10/2029 | 10/15/2029 | USA | USD | 1,350,000 | 1,108,684 | | (f) |
| | | | | | | |
| Automotive Parts & Equipment - 1.56% | | | | | | | |
| Truck Hero Inc | 6.250% 02/2029 | 2/1/2029 | USA | USD | 3,518,000 | 2,650,813 | | (f) |
| Wheel Pros Inc | 6.500% 05/2029 | 5/15/2029 | USA | USD | 5,638,000 | 2,678,050 | | (a) (f) |
| | | | | | | |
| Automotive Retail - 1.20% | | | | | | | |
| Mavis Discount Tire Inc | 6.500% 05/2029 | 5/15/2029 | USA | USD | 4,846,000 | 4,112,115 | | (f) |
| | | | | | | |
| Biotechnology - 0.49% | | | | | | | |
| Intercept Pharmaceuticals Inc | 3.250% 07/2023 | 7/1/2023 | USA | USD | 1,669,000 | 1,673,426 | | |
| | | | | | | |
| Broadcasting - 0.16% | | | | | | | |
| Spotify USA Inc | 0.000% 03/2026 | 3/15/2026 | USA | USD | 659,000 | 558,502 | | (c) |
| | | | | | | |
| Building Products - 11.42% | | | | | | | |
| Acproducts Inc (aka Cabinetworks) | 6.375% 05/2029 | 5/15/2029 | USA | USD | 11,955,000 | 7,280,416 | | (f) |
| Cornerstone (Ply Gem Holdings Inc) | 8.750% 08/2028 | 8/1/2028 | USA | USD | 683,000 | 647,989 | | (f) |
| LBM Borrower LLC | 6.250% 01/2029 | 1/15/2029 | USA | USD | 6,181,000 | 4,929,749 | | (f) |
| LBM Borrower LLC | 7.750% 04/2027 | 4/1/2027 | USA | USD | 5,294,000 | 4,241,156 | | (f) |
| Oldcastle Buildingenvelope Inc | 9.500% 04/2030 | 4/15/2030 | USA | USD | 713,000 | 624,638 | | (a) (f) |
| Patrick Industries Inc | 4.750% 05/2029 | 5/1/2029 | USA | USD | 5,456,000 | 4,752,422 | | (f) |
| Patrick Industries Inc | 1.750% 12/2028 | 12/1/2028 | USA | USD | 2,097,000 | 1,905,124 | | |
| PrimeSource Building Products Inc | 5.625% 02/2029 | 2/1/2029 | USA | USD | 4,654,000 | 3,413,104 | | (f) |
| PrimeSource Building Products Inc | 6.750% 08/2029 | 8/1/2029 | USA | USD | 4,980,000 | 3,644,502 | | (f) |
| SRS Distribution Inc | 6.125% 07/2029 | 7/1/2029 | USA | USD | 1,706,000 | 1,409,225 | | (f) |
| SRS Distribution Inc | 6.000% 12/2029 | 12/1/2029 | USA | USD | 7,576,000 | 6,180,652 | | (f) |
| | | | | | | |
| Cable & Satellite - 3.23% | | | | | | | |
See accompanying notes to financial statements.
8
| | | | | | | | |
| Income Opportunities Fund | April 30, 2023 (Unaudited) |
| |
| | | | | | | | | | | | | | | | | | | | | | | |
| Issuer | Asset | Maturity Date | Country | Currency | Par | Fair Value | Footnotes |
| Cable One Inc | 0.000% 03/2026 | 3/15/2026 | USA | USD | 6,731,000 | $ | 5,539,613 | | (c) |
| Cablevision Lightpath LLC | 5.625% 09/2028 | 9/15/2028 | USA | USD | 1,048,000 | 766,633 | | (f) |
| CSC Holdings LLC (Altice USA) | 5.750% 01/2030 | 1/15/2030 | USA | USD | 4,702,000 | 2,403,869 | | (f) |
| CSC Holdings LLC (Altice USA) | 5.000% 11/2031 | 11/15/2031 | USA | USD | 806,000 | 387,573 | | (f) |
| RCN Grande (Radiate) | 6.500% 09/2028 | 9/15/2028 | USA | USD | 4,251,000 | 1,987,342 | | (f) |
| | | | | | | |
| Commercial Printing - 1.85% | | | | | | | |
| Multi-Color Corp | 10.500% 07/2027 | 7/15/2027 | USA | USD | 3,714,000 | 3,533,708 | | (f) |
| Multi-Color Corp | 5.875% 10/2028 | 11/1/2028 | USA | USD | 1,197,000 | 1,106,477 | | (f) |
| Multi-Color Corp | 8.250% 11/2029 | 11/1/2029 | USA | USD | 432,000 | 375,840 | | (f) |
| Multi-Color Corp | 9.500% 11/2028 | 11/1/2028 | USA | USD | 1,302,000 | 1,341,958 | | (f) |
| | | | | | | |
| Commodity Chemicals - 1.08% | | | | | | | |
| SI Group Inc | 6.750% 05/2026 | 5/15/2026 | USA | USD | 6,041,000 | 3,675,616 | | (f) |
| | | | | | | |
| Construction & Engineering - 2.30% | | | | | | | |
| Maxim Crane Works LP / Maxim Finance Corp | 10.125% 08/2024 | 8/1/2024 | USA | USD | 7,899,000 | 7,864,086 | | (a) (f) |
| | | | | | | |
| Data Processing & Outsourced Services - 1.31% | | | | | | | |
| Xerox Business Services /Conduent | 6.000% 11/2029 | 11/1/2029 | USA | USD | 5,451,000 | 4,485,382 | | (f) |
| | | | | | | |
| Electronic Components - 2.46% | | | | | | | |
| CommScope Inc | 6.000% 06/2025 | 6/15/2025 | USA | USD | 6,801,000 | 6,401,868 | | (f) |
| CommScope Inc | 7.125% 07/2028 | 7/1/2028 | USA | USD | 2,826,000 | 2,030,834 | | (f) |
| | | | | | | |
| Health Care Equipment - 0.89% | | | | | | | |
| Haemonetics Corp | 0.000% 03/2026 | 3/1/2026 | USA | USD | 3,563,000 | 3,053,128 | | (c) |
| | | | | | | |
| Health Care Facilities - 1.65% | | | | | | | |
| CHS/Community Health Systems, Inc. | 6.875% 04/2028 | 4/1/2028 | USA | USD | 2,725,000 | 2,015,343 | | (f) |
| CHS/Community Health Systems, Inc. | 6.875% 04/2029 | 4/15/2029 | USA | USD | 1,484,000 | 1,099,502 | | (f) |
| CHS/Community Health Systems, Inc. | 6.125% 04/2030 | 4/1/2030 | USA | USD | 1,997,000 | 1,423,105 | | (f) |
| LifePoint Hospitals Inc | 5.375% 01/2029 | 1/15/2029 | USA | USD | 1,727,000 | 1,084,263 | | (f) |
| | | | | | | |
| Health Care Supplies - 0.82% | | | | | | | |
| Grifols SA | 1.625% 02/2025 | 2/15/2025 | ESP | EUR | 2,692,000 | 2,817,286 | | (f) |
| | | | | | | |
| Hotels, Resorts & Cruise Lines - 11.37% | | | | | | | |
| Carnival Corp | 5.750% 03/2027 | 3/1/2027 | USA | USD | 10,373,000 | 8,548,383 | | (f) |
| Carnival Corp | 6.000% 05/2029 | 5/1/2029 | USA | USD | 4,931,000 | 3,874,775 | | (f) |
| NCL Corp Ltd | 3.625% 12/2024 | 12/15/2024 | USA | USD | 12,931,000 | 12,137,840 | | (f) |
| NCL Corp Ltd | 1.125% 02/2027 | 2/15/2027 | USA | USD | 9,498,000 | 6,935,257 | | |
See accompanying notes to financial statements.
9
| | | | | | | | |
| Income Opportunities Fund | April 30, 2023 (Unaudited) |
| |
| | | | | | | | | | | | | | | | | | | | | | | |
| Issuer | Asset | Maturity Date | Country | Currency | Par | Fair Value | Footnotes |
| Royal Caribbean Cruises Ltd | 5.500% 04/2028 | 4/1/2028 | USA | USD | 42,000 | $ | 37,075 | | (f) |
| Viking Cruises Ltd | 6.250% 05/2025 | 5/15/2025 | USA | USD | 2,311,000 | 2,196,736 | | (f) |
| Viking Cruises Ltd | 5.875% 09/2027 | 9/15/2027 | USA | USD | 2,512,000 | 2,158,022 | | (f) |
| Viking Cruises Ltd | 7.000% 02/2029 | 2/15/2029 | USA | USD | 3,548,000 | 3,001,395 | | (f) |
| | | | | | | |
| Industrial Conglomerates - 1.21% | | | | | | | |
| Unifrax I LLC / Unifrax Holding Co | 5.250% 09/2028 | 9/30/2028 | USA | USD | 2,959,000 | 2,441,175 | | (f) |
| Unifrax I LLC / Unifrax Holding Co | 7.500% 09/2029 | 9/30/2029 | USA | USD | 2,371,000 | 1,703,735 | | (f) |
| | | | | | | |
| Industrial Machinery & Supplies & Components - 2.72% | | | | | | | |
| SPX FLOW Inc | 8.750% 04/2030 | 4/1/2030 | USA | USD | 11,070,000 | 9,282,442 | | (f) |
| | | | | | | |
| Insurance Brokers - 3.55% | | | | | | | |
| National Financial Partners Corp | 6.875% 08/2028 | 8/15/2028 | USA | USD | 13,892,000 | 12,132,534 | | (f) |
| | | | | | | |
| Integrated Oil & Gas - 0.79% | | | | | | | |
| Occidental Petroleum Corp | 4.100% 02/2047 | 2/15/2047 | USA | USD | 1,990,000 | 1,556,498 | | |
| Occidental Petroleum Corp | 4.200% 03/2048 | 3/15/2048 | USA | USD | 1,421,000 | 1,110,812 | | |
| | | | | | | |
| Leisure Facilities - 3.33% | | | | | | | |
| Life Time Fitness Inc | 5.750% 01/2026 | 1/15/2026 | USA | USD | 1,713,000 | 1,674,419 | | (f) |
| Merlin Entertainments PLC | 6.625% 11/2027 | 11/15/2027 | IRL | USD | 5,811,000 | 5,266,601 | | (f) |
| Merlin Entertainments PLC | 4.500% 11/2027 | 11/15/2027 | IRL | EUR | 2,000,000 | 1,945,286 | | (f) |
| Six Flags Entertainment Corp | 4.875% 07/2024 | 7/31/2024 | USA | USD | 678,000 | 678,428 | | (f) |
| Six Flags Entertainment Corp | 7.250% 05/2031 | 5/15/2031 | USA | USD | 1,833,000 | 1,797,486 | | (f) |
| | | | | | | |
| Oil & Gas Exploration & Production - 0.70% | | | | | | | |
| Matador Resources Co | 5.875% 09/2026 | 9/15/2026 | USA | USD | 2,452,000 | 2,407,846 | | |
| | | | | | | |
| Oil & Gas Storage & Transportation - 4.09% | | | | | | | |
| Genesis Energy | 6.500% 10/2025 | 10/1/2025 | USA | USD | 2,842,000 | 2,785,450 | | |
| Genesis Energy | 8.000% 01/2027 | 1/15/2027 | USA | USD | 356,000 | 355,608 | | |
| Genesis Energy | 8.875% 04/2030 | 4/15/2030 | USA | USD | 1,420,000 | 1,423,338 | | |
| NGL Energy Partners LP / NGL Energy Finance Corp | 7.500% 02/2026 | 2/1/2026 | USA | USD | 9,788,000 | 9,394,477 | | (f) |
| | | | | | | |
| Other Specialty Retail - 4.71% | | | | | | | |
| Douglas Holding AG | 6.000% 04/2026 | 4/8/2026 | DEU | EUR | 9,661,000 | 9,529,784 | | (f) |
| Douglas Holding AG | 8.250% 10/2026 | 10/1/2026 | DEU | EUR | 8,325,774 | 6,561,860 | | (f) |
| | | | | | | |
| Passenger Airlines - 4.70% | | | | | | | |
| American Airlines Group Inc | 3.750% 03/2025 | 3/1/2025 | USA | USD | 10,855,000 | 10,235,292 | | (f) |
| Delta Air Lines Inc | 2.900% 10/2024 | 10/28/2024 | USA | USD | 1,838,000 | 1,774,952 | | |
| JetBlue Airways Corp | 0.500% 04/2026 | 4/1/2026 | USA | USD | 5,128,000 | 4,020,863 | | |
See accompanying notes to financial statements.
10
| | | | | | | | |
| Income Opportunities Fund | April 30, 2023 (Unaudited) |
| |
| | | | | | | | | | | | | | | | | | | | | | | |
| Issuer | Asset | Maturity Date | Country | Currency | Par | Fair Value | Footnotes |
| | | | | | | |
| Real Estate Services - 0.83% | | | | | | | |
| Redfin Corp | 0.000% 10/2025 | 10/15/2025 | USA | USD | 3,864,000 | $ | 2,849,700 | | (c) |
| | | | | | | |
| Restaurants - 2.06% | | | | | | | |
| Golden Nugget Inc. | 6.750% 07/2030 | 1/15/2030 | USA | USD | 8,684,000 | 7,042,645 | | (f) |
| | | | | | | |
| Security & Alarm Services - 0.77% | | | | | | | |
| Verisure Holding AB | 3.875% 07/2026 | 7/15/2026 | SWE | EUR | 2,592,000 | 2,638,807 | | (f) |
| | | | | | | |
| Trading Companies & Distributors - 2.28% | | | | | | | |
| Neon Holdings Inc (GPD Cos Inc) | 10.125% 04/2026 | 4/1/2026 | USA | USD | 3,350,000 | 3,068,480 | | (f) |
| TruckPro LLC | 11.000% 10/2024 | 10/15/2024 | USA | USD | 4,726,000 | 4,727,783 | | (f) |
| TOTAL HIGH YIELD SECURITIES (Amortized cost $305,241,037) | | | | | | $ | 263,055,631 | | |
See accompanying notes to financial statements.
11
| | | | | | | | |
| Income Opportunities Fund | April 30, 2023 (Unaudited) |
| |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Issuer | Asset | Reference Rate & Spread | Interest
Rate | Maturity
Date | Country | Currency | Par | Fair Value | Footnotes |
| Asset Backed Securities - 4.69% | | | | | | | | | |
| | | | | | | | | |
| Specialized Finance - 4.69% | | | | | | | | | |
| AGL CLO Ltd | AGL 2023-24A D | SOFR (3M) + 5.50% | 5.50% | 7/25/2036 | USA | USD | 1,137,230 | $ | 1,137,230 | | (b) (f) |
| AGL CLO Ltd | AGL 2023-24A E | SOFR (3M) + 8.65% | 8.65% | 7/25/2036 | USA | USD | 1,250,000 | 1,203,125 | | (b) (f) |
| AMMC CLO 22 Ltd | AMMC 2018-22A D | LIBOR (3M) + 2.70% | 7.96% | 4/25/2031 | USA | USD | 606,540 | 564,019 | | (b) (f) |
| Apidos CLO XXXI | APID 2019-31A DR | LIBOR (3M) + 3.10% | 8.36% | 4/15/2031 | USA | USD | 633,620 | 597,519 | | (b) (f) |
| Ares LXVIII CLO Ltd | ARES 2023-68A D | SOFR (3M) + 5.75% | 5.75% | 4/25/2035 | JEY | USD | 991,910 | 991,910 | | (b) (f) |
| Benefit Street Partners CLO XIX Ltd | BSP 2019-19A D | LIBOR (3M) + 3.80% | 9.06% | 1/15/2033 | USA | USD | 250,000 | 234,459 | | (b) (f) |
| Bosphorus CLO IV DAC | BOPHO 4A D | EURIBOR (3M) + 2.60% | 5.56% | 12/15/2030 | IRL | EUR | 1,111,000 | 1,125,606 | | (b) (f) |
| Empower CLO Ltd | Empower 2023-1 Class D | SOFR (3M) + 5.50% | 10.57% | 4/25/2036 | USA | USD | 1,500,000 | 1,500,000 | | (b) (f) |
| Generate CLO 2 Ltd | GNRT 2A DR | LIBOR (3M) + 2.60% | 7.87% | 1/22/2031 | USA | USD | 1,298,800 | 1,206,261 | | (b) (f) |
| Madison Park Funding Ltd | MDPK 2023-63A D | SOFR (3M) + 5.50% | 5.50% | 4/21/2035 | CYM | USD | 946,840 | 946,840 | | (b) (f) |
| Madison Park Funding Ltd | MDPK 2023-63A C | SOFR (3M) + 3.50% | 3.50% | 4/21/2035 | CYM | USD | 1,300,000 | 1,300,000 | | (b) (f) |
| Madison Park Funding XI Ltd | MDPK 2013-11A DR | LIBOR (3M) + 3.25% | 8.52% | 7/23/2029 | USA | USD | 1,690,300 | 1,626,891 | | (b) (f) |
| Magnetite XXXI Ltd | MAGNE 2021-31A E | LIBOR (3M) + 6.00% | 11.26% | 7/15/2034 | USA | USD | 1,500,000 | 1,416,427 | | (b) (f) |
| OCP CLO 2020-18 Ltd | OCP 2020-18A DR | LIBOR (3M) + 3.20% | 8.45% | 7/20/2032 | USA | USD | 250,000 | 234,717 | | (b) (f) |
| Octagon Investment Partners 39 Ltd | OCT39 2018-3A D | LIBOR (3M) + 2.95% | 8.20% | 10/20/2030 | USA | USD | 398,400 | 372,120 | | (b) (f) |
| Shackleton CLO Ltd | SHACK 2019-15A D1R | LIBOR (3M) + 3.45% | 8.71% | 1/15/2032 | USA | USD | 366,700 | 350,303 | | (b) (f) |
| Sutton Park CLO DAC | STNPK 1A C | EURIBOR (3M) + 3.30% | 5.95% | 11/15/2031 | IRL | EUR | 1,178,000 | 1,213,201 | | (b) (f) |
| TOTAL ASSET BACKED SECURITIES (Amortized cost $15,938,318) | | | | | | $ | 16,020,628 | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
See accompanying notes to financial statements.
12
| | | | | | | | |
| Income Opportunities Fund | April 30, 2023 (Unaudited) |
| |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Issuer | Asset | Rate | Country | Currency | Shares | Fair Value | Footnotes | | |
| Equity & Other Investments - 1.56% | | | | | | | | | |
| | | | | | | | | |
| Construction & Engineering - 0.02% | | | | | | | | | |
| Yak Access LLC | Common Stock | | USA | USD | 9,358 | $ | 1,006 | | (a) (e) | | |
| Yak Access LLC | Preferred Stock | | USA | USD | 2,244,306 | 67,329 | (a) | | |
| | | | | | | | | |
| Diversified Metals & Mining - 1.26% | | | | | | | | | |
| Foresight Energy LLC | Common Stock | | USA | USD | 320,381 | 4,309,279 | (a) (b) (e) | | |
| | | | | | | | | |
| Oil & Gas Equipment & Services - 0.14% | | | | | | | | | |
| Proserv Group Parent LLC | Common Stock | | GBR | USD | 114,010 | 83,946 | | (b) (e) | | |
| Proserv Group Parent LLC | Preferred Stock | | GBR | USD | 36,249 | 409,048 | | (b) | | |
| | | | | | | | | |
| Packaged Foods & Meats - 0.00% | | | | | | | | | |
| CTI Foods Holding Co LLC | Common Stock | | USA | USD | 955 | — | | (a) (b) (e) | | |
| | | | | | | | | |
| Health Care Facilities - 0.13% | | | | | | | | | |
| Quorum Health Corp | Trade Claim | | USA | USD | 3,964,000 | 445,950 | | (a) (b) (e) | | |
| TOTAL EQUITY & OTHER INVESTMENTS (Cost $9,604,946) | | | | | | $ | 5,316,558 | | | | |
| | | | | | | | | |
| Money Market Funds - 5.09% | | | | | | | | | |
| U.S. Government Securities - 5.09% | | | | | | | | | |
| Morgan Stanley Institutional Liquidity Fund - Government Portfolio | 4.78% | USA | USD | 17,405,386 | $ | 17,405,386 | | (g) | | |
| TOTAL MONEY MARKET FUNDS (Cost $17,405,386) | | | | | | $ | 17,405,386 | | | | |
| | | | | | | | | |
| TOTAL INVESTMENTS (Cost $586,333,307) - 152.77% | | | | | | $ | 521,986,928 | | | | |
| LIABILITIES EXCEEDING OTHER ASSETS, NET - (52.77%) | | | | | | (180,297,628) | | | | |
| NET ASSETS - 100.00% | | | | | | $ | 341,689,300 | | | | |
| | | | | | | | |
| TL | | Term loan. |
| | |
| 1L | | First lien. |
| 2L | | Second lien. |
| (a) | | Security considered restricted. |
| (b) | | Value determined using significant unobservable inputs. |
| (c) | | Zero coupon bond. |
| (d) | | Represents a payment-in-kind (“PIK”) security which may pay interest/dividend in additional par/shares. |
| (e) | | Non-income producing security. |
| (f) | | Securities exempt from registration pursuant to Rule 144A under the Securities Act of 1933, as amended. These securities may only be resold to qualified institutional buyers in transactions exempt from registration. |
| (g) | | Rate represents the money market fund’s average 7-day yield as of April 30, 2023. |
See accompanying notes to financial statements.
13
| | | | | | | | |
| Income Opportunities Fund | April 30, 2023 (Unaudited) |
| |
Statement of Assets and Liabilities
As of April 30, 2023 (Unaudited)
| | | | | |
| Assets | |
| Investments, at fair value (cost $568,927,921) | $ | 504,581,542 | |
| Cash and cash equivalents | 17,405,386 | |
Foreign currencies, at value (cost $2,057,528) | 2,078,094 | |
| Dividends and interest receivable | 7,662,680 | |
| Receivable for investments sold | 9,494,620 | |
| Other assets | 195,227 | |
| Total assets | 541,417,549 | |
| |
| Liabilities | |
| Credit facility | 114,606,322 | |
Mandatorily redeemable preferred shares (net of deferred offering costs of $519,591) | 49,480,409 | |
| Payable for investments purchased | 31,090,117 | |
| Interest payable | 1,430,595 | |
| Trustees’ fees payable | 1,033,856 | |
| Investment advisory fees payable | 913,814 | |
| Other accrued expenses | 610,708 | |
| Due to custodian | 562,428 | |
| Total liabilities | 199,728,249 | |
| |
| Commitments and Contingencies (Note 7) | |
| Net assets | $ | 341,689,300 | |
| |
| Net Assets | |
Paid-in capital — (unlimited shares authorized — $0.001 par value) | $ | 431,808,156 | |
| Accumulated deficit | (90,118,856) | |
| Net assets | $ | 341,689,300 | |
| |
Net asset value, price per share (27,120,420 shares) | $ | 12.60 | |
See accompanying notes to financial statements.
14
| | | | | | | | |
| Income Opportunities Fund | April 30, 2023 (Unaudited) |
| |
Statement of Operations
For the Six Months Ended April 30, 2023 (Unaudited)
| | | | | |
| Investment income | |
| Interest income | $ | 22,378,386 | |
| |
| Other income | 707,628 | |
| Total investment income | 23,086,014 | |
| Expenses | |
| Credit facility interest expense | 2,510,905 | |
| Investment advisory fees | 2,438,408 | |
| Preferred shares interest expense | 981,771 | |
| Term loan fees | 286,337 | |
| Legal fees | 177,721 | |
| Administration fees | 69,751 | |
| Trustees' fees | 59,398 | |
| Excise tax | 54,098 | |
| Audit and tax fees | 41,548 | |
| Custodian fees | 34,864 | |
| Shareholder reporting expense | 30,505 | |
| Pricing expense | 23,356 | |
| Transfer agent fees | 12,566 | |
| Other expenses | 100,850 | |
| Total expenses | 6,822,078 | |
| |
| Net investment income | 16,263,936 | |
| |
| Realized and unrealized gains (losses) | |
| Net realized gains (losses) on | |
| Investments | (3,580,760) | |
| Foreign currency transactions | 24,805 | |
| Net realized losses | (3,555,955) | |
| Net change in unrealized appreciation of | |
| Investments | 19,610,987 | |
| Foreign currency translation | 1,045,375 | |
| Deferred Trustees’ fees | 34,900 | |
| Net change in unrealized appreciation | 20,691,262 | |
| Net realized and unrealized gains | 17,135,307 | |
| Net increase in net assets resulting from operations | $ | 33,399,243 | |
See accompanying notes to financial statements.
15
| | | | | | | | |
| Income Opportunities Fund | April 30, 2023 (Unaudited) |
| |
Statements of Changes in Net Assets
| | | | | | | | |
| Six Months ended April 30, 2023 (Unaudited) | Year Ended October 31, 2022 |
| Increase (decrease) in net assets resulting from operations | | |
| Net investment income | $ | 16,263,936 | | $ | 27,468,926 | |
| Net realized losses | (3,555,955) | | (3,984,886) | |
| Net change in unrealized appreciation (depreciation) | 20,691,262 | | (85,525,198) | |
| Net increase (decrease) in net assets resulting from operations | 33,399,243 | | (62,041,158) | |
| | |
| Distributions to shareholders | | |
| Net investment income | (15,133,194) | | (25,628,796) | |
| Total distributions to shareholders | (15,133,194) | | (25,628,796) | |
| | |
| Shareholder transactions | | |
| Proceeds from rights offering (6,780,105 shares), net of offering costs | 69,825,941 | | — | |
| Increase from shareholder transactions | 69,825,941 | | — | |
| Net increase (decrease) in net assets | 88,091,990 | | (87,669,954) | |
| Net assets | | |
| Beginning of period (20,340,315 and 20,340,315 shares, respectively) | 253,597,310 | | 341,267,264 | |
| End of period (27,120,420 and 20,340,315 shares, respectively) | $ | 341,689,300 | | $ | 253,597,310 | |
See accompanying notes to financial statements.
16
| | | | | | | | |
| Income Opportunities Fund | April 30, 2023 (Unaudited) |
| |
Statement of Cash Flows
| | | | | |
| Six Months Ended
April 30, 2023 (Unaudited) |
| Cash Flows from Operating Activities: | |
| Net increase in net assets resulting from operations | $ | 33,399,243 | |
| Adjustments to reconcile net increase in net assets resulting from operations to net cash used in operating activities: | |
| Purchases of investments | (200,929,943) | |
| Proceeds from sales and repayments of investments | 130,985,771 | |
| Net change in unrealized appreciation of investments | (19,610,987) | |
| Net realized loss on investments | 3,580,760 | |
| Net accretion of premiums and discounts | (2,517,370) | |
| Net change in unrealized appreciation on foreign currency translation | (1,045,375) | |
| Payment-in-kind interest | (937,104) | |
| Net realized loss on investments (foreign currency related) | 389,016 | |
| Amortization of deferred offering costs | 39,583 | |
| Net change in unrealized appreciation on Deferred Trustees’ fees | (34,900) | |
| Changes in assets and liabilities: | |
| Increase in payable for investments purchased | 28,302,018 | |
| Increase in receivable for investments sold | (2,521,170) | |
| Increase in interest payable | 1,430,892 | |
| Increase in dividends and interest receivable | (710,111) | |
| Decrease in other accrued expenses | (305,263) | |
| Increase in investment advisory fees payable | 509,750 | |
| Increase in other assets | (195,227) | |
| Increase in Trustees’ fees payable | 53,771 | |
| Net cash used in operating activities | (30,116,646) | |
| |
| Cash Flows from Financing Activities | |
| Net proceeds from rights offering | 70,132,400 | |
| Paydown of credit facility | (25,000,000) | |
| Cash dividends paid to shareholders | (15,133,194) | |
| Proceeds from credit facility | 14,352,609 | |
| Due to custodian | 562,428 | |
| Net cash provided by financing activities | 44,914,243 | |
| Effect of exchange rate changes on cash | 51,425 | |
| |
| Net increase in cash and cash equivalents | 14,849,022 | |
| |
| Cash and Cash Equivalents | |
| Beginning balance | 4,634,458 | |
| Ending balance | $ | 19,483,480 | |
| |
| Supplemental disclosure of cash flow information: | |
| Cash paid for interest expense | $ | 2,326,891 | |
See accompanying notes to financial statements.
17
| | | | | | | | |
| Income Opportunities Fund | April 30, 2023 (Unaudited) |
| |
Financial Highlights
| | | | | | | | | | | | | | | | | | | | |
| Six Months Ended April 30, 2023
(Unaudited) | Year Ended October 31 |
| 2022 | 2021 | 2020 | 2019 | 2018 |
Per share operating performance (1) | | | | | | |
| Net asset value, beginning of year | $12.47 | $16.78 | $14.86 | $15.57 | $17.24 | $18.38 |
| Income (loss) from investment operation | | | | | | |
| Net investment income | 0.71 | 1.35 | 1.40 | 1.39 | 1.49 | 1.51 |
| Net realized and unrealized gains (losses) | 0.79 | (4.40) | 1.78 | (0.60) | (1.66) | (0.07) |
| Total from investment operations | 1.50 | (3.05) | 3.18 | 0.79 | (0.17) | 1.44 |
| | | | | | |
| Distributions from | | | | | | |
| Net investment income | (0.66) | (1.26) | (1.26) | (1.50) | (1.50) | (1.55) |
| Total distributions | (0.66) | (1.26) | (1.26) | (1.50) | (1.50) | (1.55) |
| Dilutive effect of rights offering | (0.71) | — | — | — | — | (1.03) |
| Net asset value, end of period | $12.60 | $12.47 | $16.78 | $14.86 | $15.57 | $17.24 |
Total return (2) | 6.58% | (27.01)% | 36.24% | (3.58)% | 7.55% | 2.84% |
| | | | | | |
| Ratios to average net assets | | | | | | |
| Expenses | 4.79% | 3.56% | 3.12% | 3.73% | 3.38% | 3.17% |
| Net investment income | 11.43% | 9.08% | 8.49% | 9.65% | 9.07% | 8.63% |
| Supplemental data | | | | | | |
| Market value/price | $11.14 | $11.08 | $16.67 | $13.25 | $15.39 | $15.77 |
| Price discount | (13.11)% | (11.15)% | (0.66)% | (10.83)% | (1.16)% | (8.53)% |
| Net assets, end of period (000’s) | $341,689 | $253,597 | $341,267 | $302,336 | $316,670 | $350,601 |
| Portfolio turnover rate | 29% | 32% | 79% | 73% | 62% | 56% |
1 Per share calculations were performed using average shares.
2 Total return is computed based on New York Stock Exchange market price of the Fund’s shares and excludes the effect of brokerage commissions. Distributions are assumed to be reinvested at the prices obtained under the Fund’s dividend reinvestment plan.
See accompanying notes to financial statements.
18
| | | | | | | | |
| Income Opportunities Fund | April 30, 2023 (Unaudited) |
| |
Notes to Financial Statements
1.Organization
KKR Income Opportunities Fund (the “Fund”) was organized on March 17, 2011 as a statutory trust under the laws of the State of Delaware. The Fund is a closed-end registered management investment company, which commenced operations on July 25, 2013. The Fund seeks to generate a high level of current income, with a secondary objective of capital appreciation. The Fund is diversified for purposes of the Investment Company Act of 1940, as amended (the “1940 Act”). KKR Credit Advisors (US) LLC serves as the Fund’s investment adviser (the “Adviser”).
2.Summary of Significant Accounting Policies
Basis of Presentation — The accompanying financial statements are presented in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and are stated in United States (“U.S.”) dollars. The Fund is an investment company following accounting and reporting guidance in Financial Accounting Standards Board Accounting Standards Codification Topic 946, Financial Services — Investment Companies. The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts and disclosures in these financial statements. Actual results could differ from those estimates.
Valuation of Investments — The Board of Trustees (the “Board”) of the Fund has adopted valuation policies and procedures to ensure investments are valued in a manner consistent with GAAP as required by the 1940 Act. The Board designated the Adviser as the valuation designee to perform fair valuations pursuant to Rule 2a-5 under the Investment Company Act of 1940 (the “Valuation Designee”). The Valuation Designee has primary responsibility for implementing the Fund’s valuation policies and procedures.
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Where available, fair value is based on observable market prices or parameters, or derived from such prices or parameters. Where observable prices or inputs are not available, valuation models are applied. These valuation techniques involve some level of management estimation and judgment, the degree of which is dependent on the price transparency for the instruments or market and the instruments’ complexity for disclosure purposes.
Assets and liabilities recorded at fair value on the Statement of Assets and Liabilities are categorized based upon the level of judgment associated with the inputs used to measure their value. Hierarchical levels, as defined under GAAP, are directly related to the amount of subjectivity associated with the inputs to fair valuations of these assets and liabilities, and are as follows:
Level 1 — Inputs are unadjusted, quoted prices in active markets for identical assets or liabilities at the measurement date.
Level 2 — Inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. Level 2 inputs include quoted prices for similar instruments in active markets, and inputs other than quoted prices that are observable for the asset or liability.
Level 3 — Inputs are unobservable for the asset or liability, and include situations where there is little, if any, market activity for the asset or liability.
A significant decrease in the volume and level of activity for the asset or liability is an indication that transactions or quoted prices may not be representative of fair value because in such market conditions there may be increased instances of transactions that are not orderly. In those circumstances, further analysis of transactions or quoted prices is needed, and a significant adjustment to the transactions or quoted prices may be necessary to estimate fair value.
The availability of observable inputs can vary depending on the financial asset or liability and is affected by a wide variety of factors, including, for example, the type of product, whether the product is new, whether the product is
| | | | | | | | |
| Income Opportunities Fund | April 30, 2023 (Unaudited) |
| |
traded on an active exchange or in the secondary market, and the current market condition. 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 by the Fund in determining fair value is greatest for instruments categorized in Level 3. In certain cases, 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 in its entirety falls is determined based on the lowest level input that is significant to the fair value measurement in its entirety. The Fund’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and consideration of factors specific to the asset. The variability of the observable inputs affected by the factors described above may cause transfers between Levels 1, 2 and/or 3, which the Fund recognizes at the beginning of the period during which the inputs change.
Many financial assets and liabilities have bid and ask prices that can be observed in the marketplace. Bid prices reflect the highest price that the Fund and others are willing to pay for an asset. Ask prices represent the lowest price that the Fund and others are willing to accept for an asset. For financial assets and liabilities whose inputs are based on bid-ask prices, the Fund does not require that fair value always be a predetermined point in the bid-ask range. The Fund’s policy is to allow for mid-market pricing and adjust to the point within the bid-ask range that meets the Fund’s best estimate of fair value.
Depending on the relative liquidity in the markets for certain assets, the Fund may transfer assets to Level 3 if it determines that observable quoted prices, obtained directly or indirectly, are not available.
Investments are generally valued based on quotations from third party pricing services, unless such a quotation is unavailable or is determined to be unreliable or inadequately representing the fair value of the particular assets. In that case, valuations are based on either valuation data obtained from one or more other third party pricing sources, including broker dealers selected by the Adviser, or will reflect the Valuation Committee’s good faith determination of fair value based on other factors considered relevant. For assets classified as Level 3, valuations are based on various factors including financial and operating data of the company, company specific developments, market valuations of comparable companies and model projections.
Certain unfunded investments in delayed draw term loans and revolving lines of credit may at times be priced at less than par value resulting in a financial liability in the Schedule of Investments. These values are temporary and the funding of the commitment will result in these investments valued as financial assets.
For the six months ended April 30, 2023, there have been no significant changes to the Fund’s fair value methodologies.
Investment Transactions — Investment transactions are accounted for on the trade date, the date the order to buy or sell is executed. Amortization and accretion is calculated using the effective interest method over the holding period of the investment. Realized gains and losses are calculated on the specific identified cost basis.
Cash and Cash Equivalents — Cash and cash equivalents includes cash on hand, cash held in banks and highly liquid investments with original maturities of three or fewer months. Cash equivalents consist solely of money market funds with financial institutions. As of April 30, 2023, the Fund was invested in the Morgan Stanley Institutional Liquidity Government Portfolio — Institutional Class.
Foreign Currency Transactions — The books and records of the Fund are maintained in U.S. dollars. All investments denominated in foreign currency are converted to the U.S. dollar using prevailing exchange rates at the end of the reporting period. Income, expenses, gains and losses on investments denominated in foreign currency are converted to the U.S. dollar using the prevailing exchange rates on the dates when the transactions occurred.
The Fund bifurcates that portion of the results of operations resulting from changes in foreign exchange rates on investments and from the fluctuations arising from changes in market prices of securities held.
| | | | | | | | |
| Income Opportunities Fund | April 30, 2023 (Unaudited) |
| |
Distributions to Shareholders — Distributions are declared and paid monthly and distributable net realized capital gains, if any, are declared and distributed at least annually. Distributions to shareholders are recorded on the ex- dividend date.
Term Loan Income — Term Loan Income consists of transaction fees including, but not limited to, assignment, transfer, administration and amendment fees. Fee and other income is recorded when earned, and is recognized in Other income on the Statement of Operations.
Income Taxes — The Fund has elected to be treated and has qualified, and intends to continue to qualify in each taxable year, as a “regulated investment company” under Subchapter M of the Internal Revenue Code of 1986, as amended, and in conformity with the Regulated Investment Company Modernization Act of 2010. The Fund will not be subject to federal income tax to the extent the Fund satisfies the requirements under Section 851 of the Internal Revenue Code, including distributing all of its gross investment company taxable income and capital gains to its shareholders based on the Fund’s fiscal year end of October 31.
To avoid imposition of a 4.0% excise tax on undistributed income applicable to regulated investment companies, the Fund intends to declare each year as dividends in each calendar year at least 98.0% of its net investment income (earned during the calendar year) and 98.2% of its net realized capital gains (earned during the six months ended April 30) plus undistributed amounts, if any, from prior years.
The Fund evaluates tax positions taken or expected to be taken in the course of preparing the Fund’s tax returns to determine whether it is “more-likely-than-not” (i.e., greater than 50.0%) that each tax position will be sustained upon examination by a taxing authority based on the technical merits of the position. Tax positions not deemed to meet the more-likely-than-not threshold are recorded as a tax benefit or expense in the current year. Management has analyzed the Fund’s tax positions and has concluded that no liability for unrecognized tax benefits should be recorded related to uncertain tax positions for the open tax years (2018-2022). However, management’s conclusions regarding tax positions taken may be subject to review and adjustment at a later date based on factors including, but not limited to, examination by tax authorities, on-going analysis of and changes to tax laws, regulations and interpretations thereof.
As of April 30, 2023, the Fund did not have a liability for any unrecognized tax benefits. The Fund recognizes interest and penalties, if any, related to unrecognized tax benefits as income tax expense in the Statement of Operations. During the six months ended April 30, 2023, the Fund did not incur any interest or penalties.
Recently Adopted Accounting Pronouncements — In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting. ASU 2020-04 contains practical expedients for reference rate reform-related activities that impact debt, leases, derivatives, and other contracts. The guidance in ASU 2020-04 is optional and may be elected over time as reference rate reform activities occur. Management of the Fund has elected to adopt this accounting standard and apply it to contracts that are modified for the sole purpose of reference rate reform. In December 2022, the FASB issued ASU No. 2022-06, Reference Rate Reform (Topic 848): Deferral of the Sunset Date of Topic 848, which deferred the sunset day of this guidance to December 31, 2024. The adoption of these standards did not have a material impact to these financial statements.
3.Risk Considerations
The Fund invests mainly in leveraged loans, high yield securities, asset backed securities, common stocks and preferred stocks. These investments may involve certain risks, including, but not limited to, those described below:
Global Economic and Market Conditions — The Fund is materially affected by market, economic and political conditions and events, such as natural disasters, epidemics and pandemics, wars, supply chain disruptions, economic sanctions, globally and in the jurisdictions and sectors in which it invests or operates, including factors affecting interest rates, the availability of credit, currency exchange rates and trade barriers. For example, the COVID‐19 pandemic, the Russia‐Ukraine war, rising interest rates, heightened inflation, supply chain disruptions, geopolitical risks, economic sanctions and volatility in the banking and financial sector have disrupted global economies and financial markets, and their prolonged economic impact is uncertain. Market, economic and political conditions and
| | | | | | | | |
| Income Opportunities Fund | April 30, 2023 (Unaudited) |
| |
events are outside the Adviser’s control and could adversely affect the Fund’s operations and performance and the liquidity and value of the Fund’s investments and reduce the ability of the Fund to make attractive new investments.
Market Discount Risk — The price of the Fund’s common shares of beneficial interest will fluctuate with market conditions and other factors. Shares of closed-end management investment companies frequently trade at a discount from their net asset value, which may increase the risk of loss.
Leverage Risk — Leverage is a speculative technique that may expose the Fund to greater risk and increased costs. When leverage is used, the net asset value and market price of the Fund’s shares and the Fund’s investment return will likely be more volatile.
Market Risk — Bond markets rise and fall daily. As with any investment with performance tied to these markets, the value of an investment in the Fund will fluctuate, which means that shareholders could lose money.
Interest Rate Risk — Interest rates will rise and fall over time. During periods when interest rates are low, the Fund’s yield and total return also may be low. Changes in interest rates also may affect the Fund’s share price and a sharp rise in interest rates could cause the Fund’s share price to fall. The longer the Fund’s duration, the more sensitive to interest rate movements its share price is likely to be.
Credit Risk — The Fund is subject to the risk that a decline in the credit quality of an investment could cause the Fund to lose money or underperform. The Fund could lose money if the issuer or guarantor of an investment fails to make timely principal or interest payments or otherwise honor its obligations.
Liquidity Risk — A particular investment may be difficult to purchase or sell. The Fund may be unable to sell illiquid securities at an advantageous time or price.
Prepayment and Extension Risk — The Fund’s investments are subject to the risk that the investments may be paid off earlier or later than expected. Either situation could cause the Fund to hold investments paying lower than market rates of interest, which could hurt the Fund’s yield or share price.
High Yield Risk — High yield securities and unrated securities of similar credit quality (sometimes called junk bonds) that the Fund may invest in are subject to greater levels of credit and liquidity risks. High yield securities are considered primarily speculative with respect to the issuer’s continuing ability to make principal and interest payments.
Foreign Investment Risk — The Fund’s investments in securities of foreign issuers may involve certain risks that are greater than those associated with investments in securities of U.S. issuers. These include risks of adverse changes in foreign economic, political, regulatory and other conditions; changes in currency exchange rates (the currencies will decline in value relative to the U.S. dollar or, in the case of hedging positions, the U.S. dollar will decline in value relative to the currency being hedged) or exchange control regulations (including limitations on currency movements and exchanges); differing accounting, auditing, financial reporting and legal standards and practices; differing securities market structures; and higher transaction costs. These risks may be heightened in connection with investments in emerging markets.
Issuer Risk — The value of securities may decline for a number of reasons that directly relate to the issuer, such as its financial strength, management performance, financial leverage and reduced demand for the issuer’s goods and services, as well as the historical and prospective earnings of the issuer and the value of its assets.
4.Agreements
Investment Advisory Agreement — The Adviser provides day-to-day portfolio management services to the Fund and has discretion to purchase and sell investments in accordance with the Fund’s objectives, policies, and restrictions. For the services it provides to the Fund, the Adviser receives an annual fee, payable monthly by the Fund, in an amount equal to 1.1% of the Fund’s average daily Managed Assets (the “Investment Advisory Fee”). “Managed Assets” means the total assets of the Fund (including any assets attributable to borrowings for investment purposes)
| | | | | | | | |
| Income Opportunities Fund | April 30, 2023 (Unaudited) |
| |
minus the sum of the Fund’s accrued liabilities (other than liabilities representing borrowings for investment purposes).
During periods when the Fund is using leverage, the Investment Advisory Fee paid to the Adviser will be higher than if the Fund does not use leverage because the Investment Advisory Fee paid is calculated based on the Fund’s Managed Assets, which includes the assets purchased through leverage.
During the six months ended April 30, 2023, the Adviser earned an Investment Advisory Fee of $2.4 million.
Administrator, Custodian and Transfer Agent — U.S. Bancorp Fund Services, LLC (“Fund Services” or “Administrator”), doing business as U.S. Bank Global Fund Services, serves as the Fund’s administrator pursuant to an administration agreement under which the Administrator provides administrative and accounting services.
U.S. Bank N.A. (the “Custodian”) serves as the Fund’s custodian pursuant to a custody agreement. The Custodian is an affiliate of Fund Services.
Fund Services serves as the Fund’s transfer agent pursuant to a transfer agency agreement.
Deferred Trustees’ Compensation — The Fund has a Deferred Trustees’ Compensation plan (the “Plan”) that allows the Independent Trustees to defer compensation to a future payment period. The compensation is invested in shares of the Fund. The value of a participating Independent Trustee’s deferral account is based on the shares of deferred amounts as designated by the participating Independent Trustees. Changes in the value of the Independent Trustees’ deferral account are included in the Statement of Operations. The accrued obligations under the Plan, including unrealized appreciation (depreciation), are included on the Statement of Assets and Liabilities.
Other — Certain officers of the Fund are also officers of the Adviser. Such officers are not paid by the Fund for serving as officers of the Fund.
5.Fair Value
The following table presents information about the Fund’s assets measured at fair value on a recurring basis as of April 30, 2023, and indicates the fair value hierarchy of the inputs utilized by the Fund to determine such fair value:
| | | | | | | | | | | | | | |
| Investments in securities | Level 1 | Level 2 | Level 3 | Total |
| | | | |
| Leveraged Loans | $ | — | | $ | 207,977,267 | | $ | 12,211,458 | | $ | 220,188,725 | |
| High Yield Securities | — | | 262,691,631 | | 364,000 | | 263,055,631 | |
| Asset Backed Securities | — | | — | | 16,020,628 | | 16,020,628 | |
| Equity and Other Investments | — | | 68,335 | | 5,248,223 | | 5,316,558 | |
| Money Market Fund | 17,405,386 | | — | | — | | 17,405,386 | |
| Total investments in securities | $ | 17,405,386 | | $ | 470,737,233 | | $ | 33,844,309 | | $ | 521,986,928 | |
| | | | | | | | |
| Income Opportunities Fund | April 30, 2023 (Unaudited) |
| |
The following are the details of the restricted securities held by the Fund:
| | | | | | | | | | | | | | | | | | | | |
Issuer(1) | Asset | Par/Shares | Cost | Fair Value | Acquisition
Date | % of Net
Assets |
| | | | | | |
| Leveraged Loans | | | | | | |
| Flint Group GmbH | TL 1L B7 04/14 | 100,065 | $ | 99,671 | | $ | 75,508 | | 8/12/2022 | 0.02% |
| Monitronics International Inc | TL 1L EXIT 08/19 | 2,524,280 | 2,504,958 | | 1,323,442 | | 10/23/2018 | 0.39% |
| Flint Group GmbH | TL 1L B3 05/15 | 9,281 | 9,285 | | 7,003 | | 8/12/2022 | 0.00% |
| Tecomet Inc | TL 1L 10/17 | 8,485,334 | 7,973,942 | | 7,978,590 | | 5/18/2022 | 2.34% |
| Belk Inc | TL 1L 02/21 | 459,875 | 683,417 | | 390,893 | | 2/24/2021 | 0.11% |
| Flint Group GmbH | TL 1L B 04/14 | 1,141,064 | 1,136,279 | | 861,032 | | 11/20/2020 | 0.25% |
| Wheel Pros Inc | TL 1L B 05/21 | 765,894 | 670,265 | | 545,627 | | 6/7/2022 | 0.16% |
| Flint Group GmbH | TL 1L B5 02/17 | 144,197 | 140,454 | | 108,809 | | 8/12/2022 | 0.03% |
| Belk Inc | TL 1L EXIT 02/21 PIK Toggle | 8,751,342 | 8,467,172 | | 1,443,971 | | 2/24/2021 | 0.42% |
| Foresight Energy LLC | TL 1L A 06/20 | 2,164,742 | 2,164,742 | | 2,164,742 | | 6/30/2020 | 0.63% |
| Flint Group GmbH | TL 1L B6 03/17 | 104,909 | 104,505 | | 79,162 | | 8/12/2022 | 0.02% |
| Flint Group GmbH | TL 1L B4 11/15 | 86,906 | 86,945 | | 65,578 | | 8/12/2022 | 0.02% |
| High Yield Securities | | | | | | |
| Maxim Crane Works LP / Maxim Finance Corp | 10.125% 08/2024 | 7,899,000 | 7,791,142 | | 7,864,086 | | 5/6/2020 | 2.30% |
| Oldcastle Buildingenvelope Inc | 9.500% 04/2030 | 713,000 | 661,198 | | 624,638 | | 4/14/2022 | 0.18% |
| Wheel Pros Inc | 6.500% 05/2029 | 5,638,000 | 5,357,128 | | 2,678,050 | | 4/23/2021 | 0.78% |
| Equity & Other Investments | | | | | | |
| Yak Access LLC | Common Stock | 9,358 | — | | 1,006 | | 3/10/2023 | 0.00% |
| CTI Foods Holding Co LLC | Common Stock | 955 | 112,798 | | — | | 5/3/2019 | 0.00% |
| Foresight Energy LLC | Common Stock | 320,381 | 3,665,560 | | 4,309,279 | | 6/30/2020 | 1.26% |
| Yak Access LLC | Preferred Stock | 2,244,306 | 2,139,021 | | 67,329 | | 3/10/2023 | 0.02% |
| Quorum Health Corp | Trade Claim | 3,964,000 | 1,868,416 | | 445,950 | | 6/1/2018 | 0.13% |
| | | $ | 45,636,898 | | $ | 31,034,695 | | | |
(1)Refer to the Schedule of Investments for more details on securities listed.
The following is a reconciliation of the investments in which significant unobservable inputs (Level 3) were used in determining fair value:
| | | | | | | | | | | | | | |
| Leveraged
Loans | High Yield
Securities | Asset Backed Securities | Equity and Other Investments |
| | | | |
| Balance at October 31, 2022 | $ | 13,021,333 | | $ | 1,262,507 | | $ | — | | $ | 4,890,748 | |
| | | | |
| Purchases | 2,246,328 | | — | | 15,929,460 | | — | |
| Sales and paydowns | (3,182,434) | | (906,000) | | — | | — | |
| Accretion of discounts | 42,281 | | 1,981 | | 8,858 | | — | |
| Net change in appreciation (depreciation) | 83,729 | | (6,001) | | 82,310 | | 357,475 | |
| Net realized gains | 221 | | 11,513 | | — | | — | |
| Balance as of April 30, 2023 | $ | 12,211,458 | | $ | 364,000 | | $ | 16,020,628 | | $ | 5,248,223 | |
| Net change in appreciation (depreciation) of investments held at April 30, 2023 | $ | 83,729 | | $ | (6,001) | | $ | 82,310 | | $ | 357,475 | |
| | | | | | | | |
| Income Opportunities Fund | April 30, 2023 (Unaudited) |
| |
The following table presents additional information about valuation techniques and inputs used for investments that are measured at fair value and categorized within Level 3 as of April 30, 2023:
| | | | | | | | | | | | | | |
Financial
Asset | Fair Value | Valuation Technique(1) | Unobservable Inputs(2) | Range (Weighted Average)(3) |
| | | | |
| Leveraged Loans | $12,211,458 | Yield Analysis | Yield | 11.3% - 14.4% (12.0%) |
| | | Discount Margin | 0.9% - 4.8% (2.7%) |
| | | EBITDA Multiple | 3.3x - 11.3x (9.1x) |
| | | Net Leverage | 0.6x - 7.0x (4.9x) |
| Asset Backed Securities | $16,020,628 | Yield Analysis | Discount Margin | 8.1% - 10.9% (8.7%) |
| | Discounted Cash Flows | Probability of default | 2% |
| | | Constant prepayment rate | 20% |
| Equity & Other Investments | $5,248,223 | Market Comparables | LTM EBITDA | 3.3x - 6.2x (3.6x) |
| | Probability-Weighted | Discount Margin | 25% |
| | Expected Return | | |
| High Yield Securities | $364,000 | Yield Analysis | Yield | 10.8% |
| | | Discount Margin | 0.9% |
| | | EBITDA Multiple | 10.5x |
| | | Net Leverage | 7.4x |
(1)For the assets that have more than one valuation technique, the Fund may rely on the techniques individually or in aggregate based on a weight ascribed to each one ranging from 0.0%-100.0%. When determining the weighting ascribed to each valuation methodology, the Fund considers, among other factors, the availability of direct market comparables, the applicability of a discounted cash flow analysis and the expected hold period and manner of realization for the investment. These factors can result in different weightings among the investments and in certain instances, may result in up to a 100.0% weighting to a single methodology.
(2)The significant unobservable inputs used in the fair value measurement of the Fund’s assets and liabilities may include the last twelve months (“LTM”) EBITDA multiple, weighted average cost of capital, discount margin, probability of default, loss severity and constant prepayment rate. In determining certain of these inputs, management evaluates a variety of factors including economic, industry and market trends and developments, market valuations of comparable companies, and company specific developments including potential exit strategies and realization opportunities. Significant increases or decreases in any of these inputs in isolation could result in significantly lower or higher fair value measurement.
(3)Weighted average amounts are based on the estimated fair values.
6.Investment Transactions
The cost of investments purchased and the proceeds from the sale of investments, other than short-term investments, for the six months ended April 30, 2023 were as follows:
| | | | | |
| Purchases | $200,929,943 |
| Sales | $130,985,771 |
There were no purchases or sales of U.S. Government securities.
7.Commitments and Contingencies
Under the Fund’s organizational documents, its officers and Trustees are indemnified against certain liabilities arising out of the performance of their duties to the Fund. In the normal course of business, the Fund enters into contracts that contain a variety of representations that provide general indemnifications. The Fund’s maximum liability exposure under these arrangements is unknown, as future claims that have not yet occurred may be made against the Fund. However, based on experience, management expects the risk of loss to be remote.
| | | | | | | | |
| Income Opportunities Fund | April 30, 2023 (Unaudited) |
| |
8.Federal Income Taxes
The timing and characterization of certain income, capital gains, and return of capital distributions are determined annually in accordance with federal tax regulations, which may differ from GAAP. As a result, the net investment income and net realized losses on investment transactions for a reporting period may differ significantly from distributions during such period. These book to tax differences may be temporary or permanent in nature. To the extent these differences are permanent, they are charged or credited to paid-in capital, accumulated net investment income or accumulated net realized losses, as appropriate, in the period in which the differences arise.
As of October 31, 2022, the following permanent differences have been reclassified (to)/from the following accounts:
| | | | | |
Accumulated
Deficit | Paid-in
Capital |
| |
| $212,060 | $(212,060) |
The tax character of distributions declared for the six months ended April 30, 2023 and for the year ended October 31, 2022 were as follows:
| | | | | | | | |
| Ordinary
Income | Total |
| | |
| October 31, 2022 | $25,628,796 | $25,628,796 |
| April 30, 2023* | $15,133,194 | $15,133,194 |
*The final tax character of any distribution declared during 2023 will be determined in January 2024 and reported to shareholders on IRS Form 1099-Div in accordance with federal income tax regulations.
As of October 31, 2022 the components of accumulated losses on a tax basis for the Fund are as follows:
| | | | | | | | | | | |
Undistributed
Ordinary
Income | Net
Unrealized
Depreciation | Other
Temporary
Differences | Total
Accumulated
Losses |
| | | |
| $4,882,046 | $(84,689,862) | $(28,577,089) | $(108,384,905) |
Net capital losses earned may be carried forward indefinitely and must retain the character of the original loss. During the year ended October 31, 2022, the Fund did not utilize any capital loss carry-forwards. As of October 31, 2022, the Fund had non-expiring capital loss carry-forwards of $27.7 million.
As of October 31, 2022, the total cost of securities for federal income tax purposes and the aggregate gross unrealized appreciation and depreciation for securities held by the Fund are as follows:
| | | | | | | | | | | |
Federal Tax
Cost | Aggregate Gross Unrealized Appreciation | Aggregate Gross Unrealized Depreciation | Net Unrealized Depreciation |
| | | |
| $500,555,393 | $2,559,203 | $(87,249,065) | $(84,689,862) |
9.Credit Facility
In October 2020, the Fund entered into a credit agreement (the “State Street Credit Facility”) with State Street Bank and Trust Company (“State Street”). The State Street Credit Facility provides for loans to be made in U.S. dollars and
| | | | | | | | |
| Income Opportunities Fund | April 30, 2023 (Unaudited) |
| |
certain foreign currencies to an aggregate amount of $160.0 million, with an “accordion” feature that allows the Fund, under certain circumstances, to increase the size of the facility to a maximum of $225.0 million. The Fund may reduce or terminate the commitments under the State Street Credit Facility with three business days’ notice. State Street is required to provide the Fund with 270 days’ notice prior to terminating the State Street Credit Facility.
Prior to December 30, 2021, interest on the State Street Credit Facility was generally based on the London Interbank Offered Rate (“LIBOR”), or with respect to borrowings in foreign currencies, on a base rate applicable to such currency borrowing, plus a spread of 0.75%. On December 30, 2021, the Fund amended the State Street Credit Facility to replace the LIBOR with the Secured Overnight Financing Rate and added an additional spread adjustment of 0.12%-0.33% for borrowings denominated in the British pound. The Fund also pays a commitment fee on any unused commitment amounts between 0.15% and 0.25%, depending on utilization levels. As of April 30, 2023, the Fund was in compliance with the terms of the State Street Credit Facility. The carrying value of the State Street Credit Facility approximates fair value due to variable interest rates that periodically reset to market rates. The fair value was determined using Level 2 inputs in the fair value hierarchy.
The components of interest expense, average interest rates (i.e., base interest rate in effect plus the spread) and average outstanding balances for the Fund’s credit facilities for the six months ended April 30, 2023 were as follows:
| | | | | |
| Stated interest expense | $ | 2,450,929 | |
| Unused commitment fees | 59,976 | |
| Total interest expense | $ | 2,510,905 | |
| |
| Weighted average interest rate | 4.49 | % |
| Average borrowings | $ | 110,175,126 | |
10.Mandatorily Redeemable Preferred Shares
On October 15, 2019, the Fund issued 10-year mandatorily redeemable preferred shares (the “MRPS”). The Fund authorized and issued 2.0 million MRPS with a total liquidation value of $50.0 million. The final redemption date of the MRPS is October 31, 2029. The Fund makes quarterly dividend payments on the MRPS at an annual dividend rate of 3.81%. The fair value of the MRPS approximates its par value as of April 30, 2023. This fair value is based on Level 2 inputs under the fair value hierarchy.
Offering costs incurred in connection with the issuance of the MRPS have been recorded, and are being deferred and amortized through the final redemption date of the MRPS. The amortization of these costs is included in preferred shares interest expense in the Statement of Operations.
11.Shareholder Transactions
On January 23, 2023, the Fund commenced its rights offering (the “Offer”) that entitled the rights holders to subscribe for up to an aggregate of 6.8 million common shares of the Fund. The subscription price of $10.75 for the common shares to be issued was based on a formula equal to the greater of 82% of the Fund’s net asset value at the close of trading on the New York Stock Exchange (“NYSE”) on the expiration date, or 92.5% of the average of the last reported sales price of common share on the NYSE on the expiration date and each of the four immediately preceding trading days. On February 16, 2023, the Fund’s Offer expired, resulting in net proceeds of $69.8 million and 6.8 million common shares issued.
| | | | | | | | |
| Income Opportunities Fund | April 30, 2023 (Unaudited) |
| |
VOTING RESULTS FROM THE MARCH 22, 2023 SHAREHOLDER MEETING
At the Annual Meeting of Shareholders held on March 22, 2023, shareholders approved the election of Jeffrey L. Zlot as a Class III Trustee to the Board of Trustees to serve a three year term expiring in 2026 based on the following results:
| | | | | |
Total Outstanding Shares | 20,340,315 | |
Total Shares Voted | 15,318,141 | |
| For | 14,077,223 | |
| Withheld | 1,240,918 | |
At the Annual Meeting of Shareholders held on March 22, 2023, preferred shareholders approved the election of Eric Mogelof as a Class III Trustee to the Board of Trustees to serve a three year term expiring in 2026 based on the following results:
| | | | | |
Total Outstanding Shares | 2,000,000 | |
Total Shares Voted | 1,080,000 | |
| For | 1,080,000 | |
| Withheld | 0 | |
At the Annual Meeting of Shareholders held on March 22, 2023, preferred shareholders approved the election of Jeffrey L. Zlot as a Class III Trustee to the Board of Trustees to serve a three year term expiring in 2026 based on the following results:
| | | | | |
Total Outstanding Shares | 2,000,000 | |
Total Shares Voted | 1,080,000 | |
| For | 1,080,000 | |
| Withheld | 0 | |
(b) Not applicable
Item 2. Code of Ethics.
Not applicable for semi-annual report.
Item 3. Audit Committee Financial Expert.
Not applicable for semi-annual report.
Item 4. Principal Accountant Fees and Services.
Not applicable for semi-annual report.
Item 5. Audit Committee of Listed Registrants.
Not applicable for semi-annual report.
Item 6. Investments.
(a) Schedule of Investments is included as part of the report to shareholders filed under Item 1 of this Form.
(b) Not applicable.
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies.
Not applicable for semi-annual report.
Item 8. Portfolio Managers of Closed-End Management Investment Companies.
(a) Not applicable for semi-annual report.
(b) As of the date of this filing, there have been no changes in any of the portfolio managers identified in the most recent annual report on Form N-CSR.
Item 9. Purchases of Equity Securities by Closed‑End Management Investment Company and Affiliated Purchasers.
No purchases were made during the reporting period by or on behalf of the registrant or any “affiliated purchaser,” as defined in Rule 10b-18(a)(3) under the Exchange Act (17 CFR 240.10b-18(a)(3)), of shares or other units of any class of the registrant’s equity securities that is registered by the registrant pursuant to Section 12 of the Exchange Act (15 U.S.C. 781).
Item 10. Submission of Matters to a 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 since the registrant last provided disclosure in response to this item.
Item 11. Controls and Procedures.
(a) The registrant’s principal executive officer and principal financial officer have concluded, 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 on Form N-CSR, that the design and operation of such procedures are effective to provide reasonable assurance that information required to be disclosed by the investment company on Form N-CSR is recorded, processed, summarized and reported within the time periods specified in the Commission’s rules and forms.
(b) There have been no changes in the registrant's internal control over financial reporting during the six months ended April 30, 2023 that materially affected, or are 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
The registrant did not engage in securities lending activities during the period reported on this Form N-CSR.
Item 13. Exhibits.
(a)(1) Not applicable.
(a)(3) Not applicable.
(a)(4) Not applicable.
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.
KKR Income Opportunities Fund
By /s/ Eric Mogelof
Eric Mogelof, President
Date June 30, 2023
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/ Eric Mogelof
Eric Mogelof, President
Date June 30, 2023
By /s/ Thomas Murphy
Thomas Murphy, Treasurer, Chief Accounting Officer & Chief Financial Officer
Date June 30, 2023
I, Eric Mogelof, certify that:
1.I have reviewed this report on Form N-CSR of KKR Income Opportunities Fund;
2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report;
4.The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) and internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) for the registrant and have:
1.Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
2.Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
3.Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and
4.Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.The registrant’s other certifying officer(s) and I have disclosed to the registrant’s auditors and the audit committee of the registrant’s board of trustees (or persons performing the equivalent functions):
1.All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize, and report financial information; and
2.Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
| | | | | | | | |
Date: June 30, 2023 | | /s/ Eric Mogelof Eric Mogelof President |
I, Thomas Murphy, certify that:
1.I have reviewed this report on Form N-CSR of KKR Income Opportunities Fund;
2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report;
4.The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) and internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) for the registrant and have:
1.Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
2.Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
3.Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and
4.Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.The registrant’s other certifying officer(s) and I have disclosed to the registrant’s auditors and the audit committee of the registrant’s board of trustees (or persons performing the equivalent functions):
1.All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize, and report financial information; and
2.Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
| | | | | | | | |
Date: June 30, 2023 | | /s/ Thomas Murphy Thomas Murphy Treasurer, Chief Accounting Officer & Chief Financial Officer |
Certification Pursuant to Section 906 of the Sarbanes-Oxley Act
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, each of the undersigned officers of the KKR Income Opportunities Fund, does hereby certify, to such officer’s knowledge, that the report on Form N-CSR of the KKR Income Opportunities Fund for the period ended April 30, 2023 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as applicable, and that the information contained in the Form N-CSR fairly presents, in all material respects, the financial condition and results of operations of the KKR Income Opportunities Fund for the stated period.
| | | | | |
/s/ Eric Mogelof Eric Mogelof President KKR Income Opportunities Fund | /s/ Thomas Murphy Thomas Murphy Treasurer, Chief Accounting Officer & Chief Financial Officer KKR Income Opportunities Fund |
Dated: June 30, 2023 |
Dated: June 30, 2023 |
This statement accompanies this report on Form N-CSR pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not be deemed as filed by KKR Income Opportunities Fund for purposes of Section 18 of the Securities Exchange Act of 1934.
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- DefinitionThe type of document being provided (such as 10-K, 10-Q, 485BPOS, etc). The document type is limited to the same value as the supporting SEC submission type, or the word 'Other'.
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- DefinitionA unique 10-digit SEC-issued value to identify entities that have filed disclosures with the SEC. It is commonly abbreviated as CIK. Reference 1: http://www.xbrl.org/2003/role/presentationRef
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-Number 240
-Section 12
-Subsection b-2
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-Section 12
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KKR Income Opportunities (NYSE:KIO)
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