Notes to Quarterly Consolidated Schedule of Portfolio Holdings
May 31, 2021
(Unaudited)
NOTE 1—Additional Valuation Information
Generally Accepted Accounting Principles ("GAAP") defines fair value as 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, under current market conditions. GAAP establishes a hierarchy that prioritizes the inputs to valuation methods, giving the highest priority to readily available unadjusted quoted prices in an active market for identical assets (Level 1) and the lowest priority to significant unobservable inputs (Level 3), generally when market prices are not readily available or are unreliable. Based on the valuation inputs, the securities or other investments are tiered into one of three levels. Changes in valuation methods may result in transfers in or out of an investment’s assigned level:
Level 1 – Prices are determined using quoted prices in an active market for identical assets.
Level 2 – Prices are determined using other significant observable inputs. Observable inputs are inputs that other market participants may use in pricing a security. These may include quoted prices for similar securities, interest rates, prepayment speeds, credit risk, yield curves, loss severities, default rates, discount rates, volatilities and others.
Level 3 – Prices are determined using significant unobservable inputs. In situations where quoted prices or observable inputs are unavailable (for example, when there is little or no market activity for an investment at the end of the period), unobservable inputs may be used. Unobservable inputs reflect the Fund’s own assumptions about the factors market participants would use in determining fair value of the securities or instruments and would be based on the best available information.
The following is a summary of the tiered valuation input levels, as of May 31, 2021. The level assigned to the securities valuations may not be an indication of the risk or liquidity associated with investing in those securities. Because of the inherent uncertainties of valuation, the values reflected in the consolidated financial statements may materially differ from the value received upon actual sale of those investments.
During the three months ended May 31, 2021, there were transfers from Level 3 to Level 2 of $10,100,040, due to third-party vendor quotations utilizing more than one market quote. Also, there were transfers from Level 1 to Level 3 of $712,098, due to third party vendor quotations utilizing single market quotes and from Level 2 to Level 3 of $12,570,473, due to third party vendor quotations utilizing single market quotes.
| | Level 1 | Level 2 | Level 3 | Total |
| Investments in Securities | | | | |
| Variable Rate Senior Loan Interests | $— | $688,504,843 | $207,427,543 | $895,932,386 |
| Common Stocks & Other Equity Interests | 24,515,590 | 39,640,037 | 13,780,271 | 77,935,898 |
| Non-U.S. Dollar Denominated Bonds & Notes | — | 75,069,401 | 65,011 | 75,134,412 |
| U.S. Dollar Denominated Bonds & Notes | — | 32,828,294 | 3,214,893 | 36,043,187 |
| Asset-Backed Securities | — | 11,840,901 | 1,238,864 | 13,079,765 |
| Preferred Stocks | — | 5,574,661 | 934,419 | 6,509,080 |
| Total Investments in Securities | 24,515,590 | 853,458,137 | 226,661,001 | 1,104,634,728 |
| Other Investments - Assets* | | | | |
| Investments Matured | — | 3,120,277 | 1,155,890 | 4,276,167 |
| Forward Foreign Currency Contracts | — | 2,129,021 | — | 2,129,021 |
| | — | 5,249,298 | 1,155,890 | 6,405,188 |
| Other Investments - Liabilities* | | | | |
| Forward Foreign Currency Contracts | — | (11,751,693) | — | (11,751,693) |
| Total Other Investments | — | (6,502,395) | 1,155,890 | (5,346,505) |
| Total Investments | $24,515,590 | $846,955,742 | $227,816,891 | $1,099,288,223 |
| * | Forward foreign currency contracts are valued at unrealized appreciation (depreciation). Investments matured are shown at value. |
A reconciliation of Level 3 investments is presented when the Fund had a significant amount of Level 3 investments at the beginning and/or end of the reporting period in relation to net assets.
The following is a reconciliation of the fair valuations using significant unobservable inputs (Level 3) during the three months ended May 31, 2021:
| | Value
02/28/21 | Purchases
at Cost | Proceeds
from Sales | Accrued
Discounts/
Premiums | Realized
Gain (Loss) | Change in
Unrealized
Appreciation
(Depreciation) | Transfers
into
Level 3 | Transfers
out of
Level 3 | Value
05/31/21 |
| Variable Rate Senior Loan Interests | $ 208,090,001 | $ 21,198,794 | $ (24,419,816) | $ 252,596 | $ 951,485 | $ (1,112,434) | $ 12,564,207 | $ (10,097,290) | $ 207,427,543 |
| U.S. Dollar Denominated Bonds & Notes | 3,182,330 | - | - | - | - | 32,563 | - | - | 3,214,893 |
| Common Stocks & Other Equity Interests | 13,193,366 | 25,200 | (35,060) | – | (251,117) | 850,632 | - | (2,750) | 13,780,271 |
| Preferred Stocks | 258,788 | – | – | – | - | (42,733) | 718,364 | - | 934,419 |
| Investments Matured | 450,576 | 692,490 | – | 4,576 | - | 8,248 | - | - | 1,155,890 |
| Non-U.S. Dollar Denominated Bonds & Notes | - | 543,683 | - | - | - | (478,672) | - | - | 65,011 |
| Asset-Backed Securities | - | 1,188,489 | - | 123 | - | 50,252 | - | - | 1,238,864 |
| Total | $ 225,175,061 | $ 23,648,656 | $ (24,454,876) | $ 257,295 | $ 700,368 | $ (692,144) | $ 13,282,571 | $ (10,100,040) | $ 227,816,891 |
Securities determined to be Level 3 at the end of the reporting period were valued primarily by utilizing quotes from a third-party vendor pricing service. A significant change in third-party pricing information could result in a significantly lower or higher value in Level 3 investments.
