Annual Report by Investment Company Form N CSR

 

WESTERN ASSET
HIGH INCOME
OPPORTUNITY FUND
INC. (HIO)

 

 

 

 

 

Fund objectives

The Fund seeks high current income. Capital appreciation is a secondary objective.
 
In seeking to fulfill its investment objectives, the Fund invests, under normal market conditions, at least 80% of its net assets in high-yield securities and up to 20% in common stock equivalents, including options, warrants and rights.

 

Letter from the chairman	III
Fund overview	1
Fund at a glance	7
Fund performance	8
Schedule of investments	10
Statement of assets and liabilities	27
Statement of operations	28
Statements of changes in net assets	29
Financial highlights	30
Notes to financial statements	32
Report of independent registered public accounting firm	43
Board approval of management and subadvisory agreements	44
Additional information	51
Annual chief executive officer and principal financial officer certifications	58
Other shareholder communications regarding accounting matters	59
Summary of information regarding the Fund	60
Dividend reinvestment plan	71
Important tax information	73

Dear Shareholder,

We are pleased to provide the annual report of Western Asset High Income Opportunity Fund Inc. for the twelve-month reporting period ended September 30, 2024. Please read on for a detailed look at prevailing economic and market conditions during the Fund's reporting period and to learn how those conditions have affected Fund performance.

Special shareholder notice

Effective March 1, 2024, Walter Kilcullen joined the Fund's portfolio management team.

As always, we remain committed to providing you with excellent service and a full spectrum of investment choices. We also remain committed to supplementing the support you receive from your financial advisor. One way we accomplish this is through our website, www.franklintempleton.com. Here you can gain immediate access to market and investment information, including:

We look forward to helping you meet your financial goals.

Sincerely,

  

Jane Trust, CFA
Chairman, President and Chief Executive Officer

 October 31, 2024

Q. What is the Fund's investment strategy?

A. The Fund seeks high current income. Capital appreciation is a secondary objective. In seeking to fulfill its investment objectives, the Fund invests, under normal market conditions, at least 80% of its net assets in high yield securities and up to 20% in common stock equivalents, including options, warrants and rights.

We employ an actively managed approach that is risk-aware and incorporates top-down macroeconomic views with industry sector insights and bottom-up credit research to derive the general framework for the Fund's predominantly non-investment grade credit mandate. This framework provides the foundation for how the portfolio is positioned with respect to risk (aggressive, neutral, conservative), as well as sector overweights and underweights.

Risk and weightings are reviewed on a regular basis. Our bottom-up process provides the basis for populating the targeted industry weightings through individual credit selection. Analysts work closely with investment professionals to determine which securities provide the best risk/reward relationship within their respective sectors. The research team focuses on key fundamental measures such as leverage, cash flow adequacy, liquidity, amortization schedule, underlying asset value and management integrity/track record.

At Western Asset Management Company, LLC (Western Asset), the Fund's subadviser, we utilize a fixed income team approach, with decisions derived from interaction among various investment management sector specialists. The sector teams are comprised of Western Asset's senior portfolio management personnel, research analysts and an in-house economist. Under this team approach, management of client fixed income portfolios will reflect a consensus of interdisciplinary views within the Western Asset organization. The individuals responsible for development of investment strategy, day-to-day portfolio management, oversight and coordination of the Fund are Walter Kilcullen, Michael C. Buchanan and Christopher F. Kilpatrick.

Q. What were the overall market conditions during the Fund's reporting period?

A. The overall U.S. fixed income market experienced periods of volatility but generated strong results over the twelve-months ended September 30, 2024. The market was driven by several factors, including resilient economic growth, moderating inflation, shifting U.S. Federal Reserve (Fed) monetary policy tightening, and several geopolitical issues.

Short-term U.S. Treasury yields moved lower as the Fed lowered interest rates for the first time since 2020 in September 2024. The two-year Treasury yield began the reporting period at 5.03% and ended the period at a low of 3.49%, which first occurred on September 24, 2024, while its high of 5.19% took place on October 17 and 18, 2023. Long-term U.S. Treasury yields also moved lower given easing inflation and loosening Fed monetary policy. The ten-year Treasury yield began the reporting period at 4.59% and ended at 3.81%. Its low of 3.63% occurred on September 16, 2024, and its high of 4.98% occurred on October 19, 2023.

All told, the Bloomberg U.S. Aggregate Indexi returned 11.57% for the twelve months ended September 30, 2024. For comparison purposes, riskier fixed-income securities, including high-yield bond and emerging market debt, produced stronger results. Over the fiscal year, the Bloomberg U.S. Corporate High Yield - 2% Issuer Cap Indexii and the JPMorgan Emerging Markets Bond Index Global (EMBI Global)iii returned 15.73% and 18.02%, respectively.

Q. How did we respond to these changing market conditions?

A. A number of adjustments were made to the Fund's portfolio during the reporting period. We decreased our exposure to European below investment-grade corporate credit and emerging market below investment-grade credit through attractive tender offers and maturities. We ended the period with an overweight to emerging markets of roughly 12.5%. These reductions were issuers that performed well, primarily in the healthcare, transportation, and food and beverage sectors. We increased our bank loan exposure to a modest mid-single digit percentage of the portfolio. Bank loans still offer attractive income opportunities and are typically secured to an issuer's assets.

From a quality ratings perspective, we have been adding mainly single B and BB rated opportunities globally to increase the income available to shareholders. We did, however, reduce our overweight to investment-grade rated issuers, as it has continued to grow through upgrades over the past several years. We have experienced "rising star" activity in the energy space as an example. Additionally, after the reporting period ended this trend continued, with natural gas producer Southwestern Energy Company getting upgraded from below investment-grade to investment-grade. We ended the reporting period with the portfolio at roughly 86.4% concentrated among investment-grade, BB and single B rated fixed income securities.

In terms of duration, we ended the period with an overweight versus the benchmark. Several central banks globally have begun easing cycles, which should benefit a duration overweight.

Performance review

For the twelve months ended September 30, 2024, Western Asset High Income Opportunity Fund Inc. returned 12.87% based on its net asset value (NAV)iv and 24.11% based on its New York Stock Exchange (NYSE) market price per share. The Fund's unmanaged benchmark, the Bloomberg U.S. Corporate High Yield - 2% Issuer Cap Index, returned 15.73% for the same period.

The Fund has a practice of seeking to maintain a relatively stable level of distributions to shareholders. This practice has no impact on the Fund's investment strategy and may reduce the Fund's NAV. The Fund's manager believes the practice helps maintain the Fund's competitiveness and may benefit the Fund's market price and premium/discount to the Fund's NAV.

During the twelve-month period, the Fund made distributions to shareholders totaling $0.43 per share of which $0.08 will be treated as a return of capital for tax purposes.* The performance table shows the Fund's twelve-month total return based on its NAV and market price as of September 30, 2024. Past performance is no guarantee of future results.

 

Performance Snapshot as of September 30, 2024
Price Per Share	12-Month Total Return**
$4.23 (NAV)	12.87 %†
$4.05 (Market Price)	24.11 %‡

All figures represent past performance and are not a guarantee of future results.

** Total returns are based on changes in NAV or market price, respectively. Returns reflect the deduction of all Fund expenses, including management fees, operating expenses, and other Fund expenses. Returns do not reflect the deduction of brokerage commissions or taxes that investors may pay on distributions or the sale of shares.

† Total return assumes the reinvestment of all distributions, including returns of capital, at NAV.

‡ Total return assumes the reinvestment of all distributions, including returns of capital, in additional shares in accordance with the Fund's Dividend Reinvestment Plan.

Q. What were the leading contributors to performance?

A. Within our developed market high-yield allocation, several positions were rewarded during the reporting period. Examples include overweight positions in issuers owned by EchoStar, cruise ship operators Carnival and NCL, and U.K. food and beverage company Asda (Bellis Acquisition) to name a few. Our front-end Dish DBS and DISH Network bonds specifically performed well given they rose to par as the maturity dates approached. Additionally, Dish Network unsecured convertible bondholders agreed to move up the capital structure and swap into a secured position in exchange for a maturity extension. Our Dish DBS position benefited as well given the proposed merger with DirecTV. The previously mentioned cruise ship operators posted positive fundamental results, continued to de-lever their balance sheets post the global pandemic, and have been getting favorable attention from the rating agencies recently. U.K. grocery store operator Asda posted stable fundamental results and reduced their maturity hurdles by tendering for their debt at attractive prices, sending our bonds higher in price.

Within our investment-grade credit allocation, several issuers performed well fundamentally and the added duration from these higher quality positions was also beneficial. Energy overweights to Western Midstream Operating and Kinder Morgan posted solid fundamental results and benefited performance. Our positioning in hospital operator HCA, and recent "rising star" automobile manufacturer and lender Ford Motor Credit outperformed.

*

For the tax character of distributions paid during the fiscal year ended September 30, 2024, please refer to page 42 of this report.

Within our emerging markets allocation, an overweight to several issuers was beneficial to performance. Examples include global generic drug manufacturer Teva Pharmaceuticals, Mexican financial institution Banco Mercantil Del Norte, and energy companies Petrobras Global Finance B.V. in Brazil and YPF Sociedad in Argentina proved beneficial. These companies all posted positive fundamental results. Lastly, while we have generally been reducing some of our Macau gaming positions after their post-Covid outperformance, our overweight in Wynn Macau bonds was rewarded once again.

Q. What were the leading detractors from performance?

A. While the Fund posted a positive return for the period, we were not able to keep up with the Fund's unmanaged benchmark which is much more U.S.- centric and all below-investment grade rated. The largest detractor from the Fund's performance was its overweight allocation to several liability management exercise issuers. Specifically, our overweight to Weight Watchers International, U.S. airline operator Spirit Loyalty, and French wireless and cable company Altice France Holdings. All posted relatively weak fundamental results and have engaged with debtholders. We continue to negotiate and engage with advisors and these issuers to maximize our value.

Additionally, we marked down our position in Swiss global money center bank Credit Suisse Group in an effort to be conservative, while we pursue more equitable compensation from the company's forced merger with Swiss competitor UBS.

Within our emerging markets allocation, an overweight to Mexican local sovereign debt detracted from performance. Our thesis has been Mexico could benefit longer-term from a shift away from China for manufacturing given heightened geopolitical uncertainty. However, recent political uncertainty in Mexico has increased bond yields and pressured the Mexican peso.

Looking for additional information?

The Fund is traded under the symbol "HIO" and its closing market price is available in most newspapers under the NYSE listings. The daily NAV is available online under the symbol "XHIOX" on most financial websites. Barron's and The Wall Street Journal's Monday edition both carry closed-end fund tables that provide additional information. In addition, the Fund issues a quarterly press release that can be found on most major financial websites as well as www.franklintempleton.com.

In a continuing effort to provide information concerning the Fund, shareholders may call 1-888-777-0102 (toll free), Monday through Friday from 8:00 a.m. to 5:30 p.m. Eastern Time, for the Fund's current NAV, market price and other information.

Thank you for your investment in the Western Asset High Income Opportunity Fund Inc. As always, we appreciate that you have chosen us to manage your assets and we remain focused on achieving the Fund's investment goals.

Sincerely,

Western Asset Management Company, LLC

October 11, 2024

RISKS: The Fund is a diversified closed-end management investment company designed primarily as a long-term investment and not as a trading vehicle. The Fund is not intended to be a complete investment program and, due to the uncertainty inherent in all investments, there can be no assurance that the Fund will achieve its investment objectives. The Fund's common stock is traded on the New York Stock Exchange. Similar to stocks, the Fund's share price will fluctuate with market conditions and, at the time of sale, may be worth more or less than the original investment. Shares of closed-end funds often trade at a discount to their net asset value. Diversification does not assure against market loss. The Fund's investments are subject to a number of risks, such as credit risk, inflation risk and interest rate risk. The Fund may invest in lower-rated high yield bonds, commonly known as "junk bonds," which are subject to greater credit risk (risk of default) and liquidity risk than higher-rated obligations. The Fund is also permitted purchases of equity securities. Equity securities generally have greater price volatility than fixed income securities. As interest rates rise, bond prices fall, reducing the value of the Fund's holdings. The Fund may use derivatives, such as options and futures, which can be illiquid, may disproportionately increase losses, and have a potentially large impact on Fund performance. In addition, the Fund may invest in foreign securities, which are subject to certain risks of overseas investing, including currency fluctuations and changes in political, social and economic conditions, which could result in significant fluctuations. These risks are magnified in emerging markets. Emerging market countries tend to have economic, political and legal systems that are less developed and are less stable than those of more developed countries. The market values of securities or other assets will fluctuate, sometimes sharply and unpredictably, due to changes in general market conditions, overall economic trends or events, governmental actions or intervention, actions taken by the U.S. Federal Reserve or foreign central banks, market disruptions caused by trade disputes or other factors, political developments, armed conflicts, economic sanctions and countermeasures in response to sanctions, major cybersecurity events, investor sentiment, the global and domestic effects of a pandemic, and other factors that may or may not be related to the issuer of the security or other asset. The Fund may also invest in money market funds, including funds affiliated with the Fund's manager and subadvisers. For more information on Fund risks, see Summary of information regarding the Fund - Principal Risk Factors in this report.

Portfolio holdings and breakdowns are as of September 30, 2024, and are subject to change and may not be representative of the portfolio managers' current or future investments. Please refer to pages 10 through 26 for a list and percentage breakdown of the Fund's holdings.

The mention of sector breakdowns is for informational purposes only and should not be construed as a recommendation to purchase or sell any securities. The information provided regarding such sectors is

not a sufficient basis upon which to make an investment decision. Investors seeking financial advice regarding the appropriateness of investing in any securities or investment strategies discussed should consult their financial professional. The Fund's top five sector holdings (as a percentage of net assets) as of September 30, 2024, were: consumer discretionary (19.9%), energy (16.2%), communication services (15.5%), industrials (11.6%) and financials (9.0%). The Fund's portfolio composition is subject to change at any time.

All investments are subject to risk including the possible loss of principal. Past performance is no guarantee of future results. All index performance reflects no deduction for fees, expenses or taxes. Please note that an investor cannot invest directly in an index.

The information provided is not intended to be a forecast of future events, a guarantee of future results or investment advice. Views expressed may differ from those of the firm as a whole.

 Important data provider notices and terms available at www.franklintempletondatasources.com.

Investment breakdown (%) as a percent of total investments

 

 

Net Asset Value
Average annual total returns1
Twelve Months Ended 9/30/24	12.87 %
Five Years Ended 9/30/24	2.86
Ten Years Ended 9/30/24	3.50
Cumulative total returns1
9/30/14 through 9/30/24	41.05 %

 

Market Price
Average annual total returns2
Twelve Months Ended 9/30/24	24.11 %
Five Years Ended 9/30/24	4.40
Ten Years Ended 9/30/24	4.67
Cumulative total returns2
9/30/14 through 9/30/24	57.90 %

All figures represent past performance and are not a guarantee of future results. Returns reflect the deduction of all Fund expenses, including management fees, operating expenses, and other Fund expenses. Returns do not reflect the deduction of brokerage commissions or taxes that investors may pay on distributions or the sale of shares. 

1	Assumes the reinvestment of all distributions, including returns of capital, if any, at net asset value.
2	Assumes the reinvestment of all distributions, including returns of capital, if any, in additional shares in accordance with the Fund's Dividend Reinvestment Plan.

Historical performance

Value of $10,000 invested in

Western Asset High Income Opportunity Fund Inc. vs. Bloomberg U.S. Corporate High Yield - 2% Issuer Cap Index† - September 2014 - September 2024

 

All figures represent past performance and are not a guarantee of future results. Returns reflect the deduction of all Fund expenses, including management fees, operating expenses, and other Fund expenses. Returns do not reflect the deduction of brokerage commissions or taxes that investors may pay on distributions or the sale of shares.

(Percentages shown based on Fund net assets)  

Security		Rate	Maturity Date	Face Amount†	Value
Corporate Bonds & Notes - 84.3%
Communication Services - 14.4%
Diversified Telecommunication Services - 3.0%
Altice Financing SA, Senior Secured Notes	5.000%	1/15/28	1,050,000	$889,125   (a)
Altice Financing SA, Senior Secured Notes	5.750%	8/15/29	4,690,000	3,773,405   (a)
Altice France Holding SA, Senior Secured Notes	8.000%	5/15/27	720,000  EUR	250,459   (b)
Altice France Holding SA, Senior Secured Notes	10.500%	5/15/27	2,770,000	960,824   (a)
Altice France Holding SA, Senior Secured Notes	6.000%	2/15/28	1,230,000	384,262   (a)
Altice France SA, Senior Secured Notes	5.125%	7/15/29	750,000	528,111   (a)
Altice France SA, Senior Secured Notes	5.500%	10/15/29	1,890,000	1,325,909   (a)
Level 3 Financing Inc., Senior Secured Notes	11.000%	11/15/29	1,760,000	1,951,533   (a)
Optics Bidco SpA, Senior Secured Notes	6.000%	9/30/34	939,000	955,263   (a)
Telecom Argentina SA, Senior Notes	9.500%	7/18/31	930,000	966,270   (a)
Telecom Italia Capital SA, Senior Notes	6.000%	9/30/34	61,000	60,889
Total Diversified Telecommunication Services	12,046,050
Entertainment - 0.6%
Banijay Entertainment SAS, Senior Secured Notes	8.125%	5/1/29	2,090,000	2,174,024   (a)
Interactive Media & Services - 0.3%
Match Group Holdings II LLC, Senior Notes	5.000%	12/15/27	1,000,000	991,604   (a)
Match Group Holdings II LLC, Senior Notes	3.625%	10/1/31	360,000	322,677   (a)
Total Interactive Media & Services	1,314,281
Media - 5.6%
CCO Holdings LLC/CCO Holdings Capital Corp., Senior Notes	4.250%	1/15/34	3,850,000	3,161,408   (a)
Charter Communications Operating LLC/ Charter Communications Operating Capital Corp., Senior Secured Notes	3.850%	4/1/61	8,520,000	5,229,797
Clear Channel Outdoor Holdings Inc., Senior Notes	7.750%	4/15/28	570,000	510,523   (a)
Clear Channel Outdoor Holdings Inc., Senior Notes	7.500%	6/1/29	1,140,000	982,821   (a)
DirecTV Financing LLC, Senior Secured Notes	8.875%	2/1/30	500,000	503,468   (a)
DISH DBS Corp., Senior Notes	5.875%	11/15/24	333,000	331,369
DISH DBS Corp., Senior Notes	7.375%	7/1/28	860,000	645,324
DISH DBS Corp., Senior Notes	5.125%	6/1/29	6,248,000	4,197,791

(Percentages shown based on Fund net assets)

Security		Rate	Maturity Date	Face Amount†	Value
Media - continued
iHeartCommunications Inc., Senior Secured Notes	6.375%	5/1/26	800,000	$700,935
Sirius XM Radio Inc., Senior Notes	4.125%	7/1/30	1,000,000	907,572   (a)
Sirius XM Radio Inc., Senior Notes	3.875%	9/1/31	1,000,000	872,079   (a)
Univision Communications Inc., Senior Secured Notes	6.625%	6/1/27	1,400,000	1,405,501   (a)
Virgin Media Vendor Financing Notes III DAC, Senior Secured Notes	4.875%	7/15/28	2,000,000  GBP	2,476,834   (a)
VZ Secured Financing BV, Senior Secured Notes	5.000%	1/15/32	680,000	627,010   (a)
Total Media	22,552,432
Wireless Telecommunication Services - 4.9%
CSC Holdings LLC, Senior Notes	11.750%	1/31/29	1,550,000	1,499,185   (a)
CSC Holdings LLC, Senior Notes	4.125%	12/1/30	2,080,000	1,517,517   (a)
CSC Holdings LLC, Senior Notes	4.625%	12/1/30	1,410,000	716,707   (a)
CSC Holdings LLC, Senior Notes	4.500%	11/15/31	5,670,000	4,132,388   (a)
Millicom International Cellular SA, Senior Notes	4.500%	4/27/31	1,750,000	1,578,876   (a)
Sprint Capital Corp., Senior Notes	6.875%	11/15/28	2,190,000	2,392,798
Sprint Capital Corp., Senior Notes	8.750%	3/15/32	5,910,000	7,337,298
Vmed O2 UK Financing I PLC, Senior Secured Notes	4.750%	7/15/31	500,000	445,566   (a)
Total Wireless Telecommunication Services	19,620,335
Total Communication Services	57,707,122
Consumer Discretionary - 17.4%
Automobile Components - 3.0%
Adient Global Holdings Ltd., Senior Notes	4.875%	8/15/26	3,529,000	3,498,672   (a)
American Axle & Manufacturing Inc., Senior Notes	6.500%	4/1/27	3,903,000	3,916,227
Garrett Motion Holdings Inc./Garrett LX I Sarl, Senior Notes	7.750%	5/31/32	560,000	573,527   (a)
JB Poindexter & Co. Inc., Senior Notes	8.750%	12/15/31	1,990,000	2,106,443   (a)
ZF North America Capital Inc., Senior Notes	6.875%	4/14/28	880,000	889,038   (a)
ZF North America Capital Inc., Senior Notes	7.125%	4/14/30	1,220,000	1,265,584   (a)
Total Automobile Components	12,249,491
Automobiles - 1.1%
Ford Motor Co., Senior Notes	3.250%	2/12/32	500,000	425,975
Ford Motor Credit Co. LLC, Senior Notes	7.350%	3/6/30	1,000,000	1,083,337

(Percentages shown based on Fund net assets)

Security		Rate	Maturity Date	Face Amount†	Value
Automobiles - continued
Ford Motor Credit Co. LLC, Senior Notes	3.625%	6/17/31	2,020,000	$1,792,562
PM General Purchaser LLC, Senior Secured Notes	9.500%	10/1/28	1,000,000	1,018,204   (a)
Total Automobiles	4,320,078
Broadline Retail - 1.1%
Marks & Spencer PLC, Senior Notes	7.125%	12/1/37	2,190,000	2,416,798   (a)
MercadoLibre Inc., Senior Notes	3.125%	1/14/31	2,000,000	1,813,784
Total Broadline Retail	4,230,582
Distributors - 0.5%
Ritchie Bros Holdings Inc., Senior Notes	7.750%	3/15/31	1,770,000	1,887,280   (a)
Diversified Consumer Services - 0.6%
Carriage Services Inc., Senior Notes	4.250%	5/15/29	600,000	556,393   (a)
Service Corp. International, Senior Notes	7.500%	4/1/27	1,975,000	2,064,550
Total Diversified Consumer Services	2,620,943
Hotels, Restaurants & Leisure - 10.0%
888 Acquisitions Ltd., Senior Secured Notes	7.558%	7/15/27	2,600,000  EUR	2,842,999   (a)
Carnival Holdings Bermuda Ltd., Senior Notes	10.375%	5/1/28	1,510,000	1,630,337   (a)
Carnival PLC, Senior Notes	1.000%	10/28/29	5,780,000  EUR	5,603,441
Full House Resorts Inc., Senior Secured Notes	8.250%	2/15/28	3,300,000	3,307,293   (a)
Hilton Domestic Operating Co. Inc., Senior Notes	3.625%	2/15/32	2,000,000	1,808,677   (a)
Melco Resorts Finance Ltd., Senior Notes	5.375%	12/4/29	1,367,000	1,283,175   (a)
NCL Corp. Ltd., Senior Notes	3.625%	12/15/24	398,000	397,664   (a)
NCL Corp. Ltd., Senior Notes	5.875%	3/15/26	320,000	320,220   (a)
NCL Corp. Ltd., Senior Notes	7.750%	2/15/29	1,871,000	2,006,316   (a)
NCL Corp. Ltd., Senior Secured Notes	8.125%	1/15/29	260,000	278,257   (a)
NCL Finance Ltd., Senior Notes	6.125%	3/15/28	4,240,000	4,327,808   (a)
Pinnacle Bidco PLC, Senior Secured Notes	10.000%	10/11/28	900,000  GBP	1,285,227   (a)
Royal Caribbean Cruises Ltd., Senior Notes	5.375%	7/15/27	2,980,000	3,008,695   (a)
Royal Caribbean Cruises Ltd., Senior Notes	5.500%	4/1/28	1,840,000	1,864,479   (a)
Royal Caribbean Cruises Ltd., Senior Notes	5.625%	9/30/31	1,200,000	1,216,500   (a)
Viking Cruises Ltd., Senior Notes	5.875%	9/15/27	1,000,000	1,000,001   (a)
Viking Ocean Cruises Ship VII Ltd., Senior Secured Notes	5.625%	2/15/29	2,550,000	2,543,485   (a)
VOC Escrow Ltd., Senior Secured Notes	5.000%	2/15/28	140,000	138,425   (a)
Wynn Macau Ltd., Senior Notes	5.625%	8/26/28	1,970,000	1,914,153   (a)
Wynn Macau Ltd., Senior Notes	5.125%	12/15/29	1,674,000	1,574,397   (a)

(Percentages shown based on Fund net assets)

Security		Rate	Maturity Date	Face Amount†	Value
Hotels, Restaurants & Leisure - continued
Wynn Resorts Finance LLC/Wynn Resorts Capital Corp., Senior Notes	7.125%	2/15/31	1,730,000	$1,867,574   (a)
Total Hotels, Restaurants & Leisure	40,219,123
Specialty Retail - 1.1%
FirstCash Inc., Senior Notes	4.625%	9/1/28	1,000,000	966,268   (a)
Global Auto Holdings Ltd./AAG FH UK Ltd., Senior Notes	8.750%	1/15/32	530,000	496,364   (a)
Michaels Cos. Inc., Senior Secured Notes	5.250%	5/1/28	1,800,000	1,330,369   (a)
Sally Holdings LLC/Sally Capital Inc., Senior Notes	6.750%	3/1/32	1,700,000	1,747,563
Total Specialty Retail	4,540,564
Total Consumer Discretionary	70,068,061
Consumer Staples - 0.1%
Food Products - 0.1%
FAGE International SA/FAGE USA Dairy Industry Inc., Senior Notes	5.625%	8/15/26	549,000	545,308   (a)
Energy - 16.2%
Energy Equipment & Services - 0.2%
Noble Finance II LLC, Senior Notes	8.000%	4/15/30	850,000	877,671   (a)
Oil, Gas & Consumable Fuels - 16.0%
Apache Corp., Senior Notes	5.100%	9/1/40	950,000	845,320
Blue Racer Midstream LLC/Blue Racer Finance Corp., Senior Notes	6.625%	7/15/26	515,000	516,300   (a)
Continental Resources Inc., Senior Notes	4.900%	6/1/44	1,050,000	898,647
Crescent Energy Finance LLC, Senior Notes	9.250%	2/15/28	660,000	688,791   (a)
Crescent Energy Finance LLC, Senior Notes	7.625%	4/1/32	750,000	750,859   (a)
Ecopetrol SA, Senior Notes	5.875%	5/28/45	4,110,000	3,087,983
Energy Transfer LP, Junior Subordinated Notes (6.625% to 2/15/28 then 3 mo. USD LIBOR + 4.155%)	6.625%	2/15/28	1,910,000	1,889,786   (c)(d)
EQM Midstream Partners LP, Senior Notes	4.500%	1/15/29	1,020,000	998,638   (a)
EQM Midstream Partners LP, Senior Notes	7.500%	6/1/30	780,000	857,189   (a)
EQM Midstream Partners LP, Senior Notes	4.750%	1/15/31	230,000	222,863   (a)
Hilcorp Energy I LP/Hilcorp Finance Co., Senior Notes	8.375%	11/1/33	1,140,000	1,229,922   (a)
Kinder Morgan Inc., Senior Notes	7.750%	1/15/32	6,920,000	8,084,755
New Generation Gas Gathering LLC, Senior Secured Notes (3 mo. Term SOFR + 5.750%)	10.342%	9/30/29	254,054	250,243   (a)(d)(e)
NGPL PipeCo LLC, Senior Notes	7.768%	12/15/37	1,520,000	1,800,547   (a)

(Percentages shown based on Fund net assets)

Security		Rate	Maturity Date	Face Amount†	Value
Oil, Gas & Consumable Fuels - continued
Occidental Petroleum Corp., Senior Notes	5.875%	9/1/25	4,970,000	$4,995,213
Occidental Petroleum Corp., Senior Notes	5.550%	3/15/26	750,000	759,120
Occidental Petroleum Corp., Senior Notes	6.200%	3/15/40	1,070,000	1,111,716
Pan American Energy LLC, Senior Notes	8.500%	4/30/32	1,000,000	1,056,710   (a)
Permian Resources Operating LLC, Senior Notes	5.375%	1/15/26	500,000	499,555   (a)
Permian Resources Operating LLC, Senior Notes	6.250%	2/1/33	960,000	976,195   (a)
Petrobras Global Finance BV, Senior Notes	6.750%	1/27/41	4,370,000	4,423,886
Petroleos del Peru SA, Senior Notes	4.750%	6/19/32	1,500,000	1,186,751   (a)
Petroleos Mexicanos, Senior Notes	6.500%	6/2/41	1,000,000	733,793
Puma International Financing SA, Senior Notes	7.750%	4/25/29	650,000	669,013   (a)
Range Resources Corp., Senior Notes	4.875%	5/15/25	1,540,000	1,533,486
Range Resources Corp., Senior Notes	8.250%	1/15/29	620,000	642,263
Rockies Express Pipeline LLC, Senior Notes	6.875%	4/15/40	1,140,000	1,111,637   (a)
Southwestern Energy Co., Senior Notes	5.700%	1/23/25	500,000	499,968
Southwestern Energy Co., Senior Notes	4.750%	2/1/32	750,000	718,057
Summit Midstream Holdings LLC/Summit Midstream Finance Corp., Secured Notes	9.500%	10/15/26	1,430,000	1,462,713   (a)
Venture Global LNG Inc., Junior Subordinated Notes (9.000% to 9/30/29 then 5 year Treasury Constant Maturity Rate + 5.440%)	9.000%	9/30/29	1,120,000	1,136,121   (a)(c)(d)
Venture Global LNG Inc., Senior Secured Notes	9.875%	2/1/32	2,660,000	2,957,433   (a)
Western Midstream Operating LP, Senior Notes	4.050%	2/1/30	1,340,000	1,291,008
Western Midstream Operating LP, Senior Notes	5.300%	3/1/48	1,070,000	972,579
Western Midstream Operating LP, Senior Notes	5.250%	2/1/50	9,585,000	8,700,367
Williams Cos. Inc., Senior Notes	7.500%	1/15/31	620,000	707,337
Williams Cos. Inc., Senior Notes	5.750%	6/24/44	3,190,000	3,284,427
YPF SA, Senior Notes	6.950%	7/21/27	530,000	516,016   (a)
Total Oil, Gas & Consumable Fuels	64,067,207
Total Energy	64,944,878

(Percentages shown based on Fund net assets)

Security		Rate	Maturity Date	Face Amount†	Value
Financials - 8.3%
Banks - 4.4%
Banco Mercantil del Norte SA, Junior Subordinated Notes (6.625% to 1/24/32 then 10 year Treasury Constant Maturity Rate + 5.034%)	6.625%	1/24/32	3,200,000	$2,978,328   (a)(c)(d)
Banco Mercantil del Norte SA, Junior Subordinated Notes (8.375% to 10/14/30 then 10 year Treasury Constant Maturity Rate + 7.760%)	8.375%	10/14/30	500,000	524,659   (a)(c)(d)
BBVA Bancomer SA, Subordinated Notes (5.125% to 1/17/28 then 5 year Treasury Constant Maturity Rate + 2.650%)	5.125%	1/18/33	1,960,000	1,865,744   (a)(d)
BNP Paribas SA, Junior Subordinated Notes (7.750% to 8/16/29 then 5 year Treasury Constant Maturity Rate + 4.899%)	7.750%	8/16/29	1,470,000	1,552,233   (a)(c)(d)
Credit Agricole SA, Junior Subordinated Notes (8.125% to 12/23/25 then USD 5 year ICE Swap Rate + 6.185%)	8.125%	12/23/25	2,290,000	2,358,414   (a)(c)(d)
HSBC Holdings PLC, Subordinated Notes (8.113% to 11/3/32 then SOFR + 4.250%)	8.113%	11/3/33	1,440,000	1,712,749   (d)
Intesa Sanpaolo SpA, Subordinated Notes	5.710%	1/15/26	2,800,000	2,822,796   (a)
Lloyds Banking Group PLC, Junior Subordinated Notes (6.750% to 6/27/26 then 5 year Treasury Constant Maturity Rate + 4.815%)	6.750%	6/27/26	2,060,000	2,074,434   (c)(d)
Lloyds Banking Group PLC, Junior Subordinated Notes (8.000% to 3/27/30 then 5 year Treasury Constant Maturity Rate + 3.913%)	8.000%	9/27/29	1,840,000	1,975,915   (c)(d)
Total Banks	17,865,272
Capital Markets - 0.6%
B3 SA - Brasil Bolsa Balcao, Senior Notes	4.125%	9/20/31	1,000,000	922,522   (b)
Credit Suisse AG AT1 Claim	-	-	10,560,000	316,800   *(e)(f)
StoneX Group Inc., Senior Secured Notes	7.875%	3/1/31	640,000	682,017   (a)
UBS Group AG, Junior Subordinated Notes (9.250% to 11/13/28 then 5 year Treasury Constant Maturity Rate + 4.745%)	9.250%	11/13/28	510,000	565,131   (a)(c)(d)
Total Capital Markets	2,486,470
Consumer Finance - 0.6%
Navient Corp., Senior Notes	5.875%	10/25/24	1,080,000	1,079,445

(Percentages shown based on Fund net assets)

Security		Rate	Maturity Date	Face Amount†	Value
Consumer Finance - continued
Navient Corp., Senior Notes	6.750%	6/15/26	1,400,000	$1,432,274
Total Consumer Finance	2,511,719
Financial Services - 1.8%
Boost Newco Borrower LLC, Senior Secured Notes	7.500%	1/15/31	460,000	493,983   (a)
Boost Newco Borrower LLC/GTCR W Dutch Finance Sub BV, Senior Secured Notes	8.500%	1/15/31	1,160,000  GBP	1,682,085   (a)
Jane Street Group/JSG Finance Inc., Senior Secured Notes	7.125%	4/30/31	1,640,000	1,739,040   (a)
Rocket Mortgage LLC/Rocket Mortgage Co-Issuer Inc., Senior Notes	3.625%	3/1/29	500,000	470,553   (a)
VFH Parent LLC/Valor Co-Issuer Inc., Senior Secured Notes	7.500%	6/15/31	780,000	818,700   (a)
VistaJet Malta Finance PLC/Vista Management Holding Inc., Senior Notes	7.875%	5/1/27	1,250,000	1,221,221   (a)
VistaJet Malta Finance PLC/Vista Management Holding Inc., Senior Notes	6.375%	2/1/30	880,000	756,817   (a)
Total Financial Services	7,182,399
Insurance - 0.3%
MetLife Capital Trust IV, Junior Subordinated Notes	7.875%	12/15/37	1,010,000	1,126,155   (a)
Mortgage Real Estate Investment Trusts (REITs) - 0.6%
Apollo Commercial Real Estate Finance Inc., Senior Secured Notes	4.625%	6/15/29	750,000	671,990   (a)
Ladder Capital Finance Holdings LLLP/ Ladder Capital Finance Corp., Senior Notes	5.250%	10/1/25	750,000	749,390   (a)
Starwood Property Trust Inc., Senior Notes	7.250%	4/1/29	780,000	818,853   (a)
Total Mortgage Real Estate Investment Trusts (REITs)	2,240,233
Total Financials	33,412,248
Health Care - 6.7%
Health Care Providers & Services - 5.0%
CHS/Community Health Systems Inc., Senior Secured Notes	5.625%	3/15/27	500,000	492,407   (a)
CHS/Community Health Systems Inc., Senior Secured Notes	6.000%	1/15/29	500,000	485,863   (a)
CHS/Community Health Systems Inc., Senior Secured Notes	4.750%	2/15/31	2,440,000	2,146,656   (a)
CHS/Community Health Systems Inc., Senior Secured Notes	10.875%	1/15/32	1,650,000	1,820,338   (a)
HCA Inc., Senior Notes	7.690%	6/15/25	170,000	173,119

(Percentages shown based on Fund net assets)

Security		Rate	Maturity Date	Face Amount†	Value
Health Care Providers & Services - continued
HCA Inc., Senior Notes	7.500%	11/15/95	6,265,000	$7,177,011
Legacy LifePoint Health LLC, Senior Secured Notes	4.375%	2/15/27	750,000	736,140   (a)
Sotera Health Holdings LLC, Senior Secured Notes	7.375%	6/1/31	990,000	1,029,361   (a)
Tenet Healthcare Corp., Secured Notes	6.250%	2/1/27	3,910,000	3,918,539
Tenet Healthcare Corp., Senior Notes	6.125%	10/1/28	1,890,000	1,906,594
Tenet Healthcare Corp., Senior Notes	6.875%	11/15/31	250,000	273,849
Total Health Care Providers & Services	20,159,877
Pharmaceuticals - 1.7%
Bausch Health Cos. Inc., Senior Secured Notes	4.875%	6/1/28	1,660,000	1,300,602   (a)
Cidron Aida Finco Sarl, Senior Secured Notes	5.000%	4/1/28	637,000  EUR	690,507   (a)
Endo Finance Holdings Inc., Senior Secured Notes	8.500%	4/15/31	1,000,000	1,072,783   (a)
Par Pharmaceutical Inc., Escrow	-	-	70,000	0   *(a)(e)(f)(g)
Teva Pharmaceutical Finance Netherlands III BV, Senior Notes	3.150%	10/1/26	1,150,000	1,106,250
Teva Pharmaceutical Finance Netherlands III BV, Senior Notes	5.125%	5/9/29	880,000	873,636
Teva Pharmaceutical Finance Netherlands III BV, Senior Notes	4.100%	10/1/46	2,550,000	1,897,623
Total Pharmaceuticals	6,941,401
Total Health Care	27,101,278
Industrials - 10.2%
Aerospace & Defense - 1.7%
Bombardier Inc., Senior Notes	7.500%	2/1/29	2,990,000	3,166,293   (a)
Bombardier Inc., Senior Notes	7.250%	7/1/31	500,000	529,218   (a)
TransDigm Inc., Senior Secured Notes	7.125%	12/1/31	1,930,000	2,043,699   (a)
TransDigm Inc., Senior Secured Notes	6.625%	3/1/32	1,250,000	1,303,240   (a)
Total Aerospace & Defense	7,042,450
Building Products - 0.4%
Masterbrand Inc., Senior Notes	7.000%	7/15/32	500,000	524,411   (a)
Standard Industries Inc., Senior Notes	5.000%	2/15/27	860,000	853,436   (a)
Standard Industries Inc., Senior Notes	4.375%	7/15/30	342,000	323,954   (a)
Total Building Products	1,701,801
Commercial Services & Supplies - 2.1%
CoreCivic Inc., Senior Notes	4.750%	10/15/27	720,000	688,012
CoreCivic Inc., Senior Notes	8.250%	4/15/29	3,330,000	3,527,749

(Percentages shown based on Fund net assets)

Security		Rate	Maturity Date	Face Amount†	Value
Commercial Services & Supplies - continued
GEO Group Inc., Senior Notes	10.250%	4/15/31	1,460,000	$1,557,824
GEO Group Inc., Senior Secured Notes	8.625%	4/15/29	1,210,000	1,258,865
GFL Environmental Inc., Senior Secured Notes	6.750%	1/15/31	1,360,000	1,428,112   (a)
Total Commercial Services & Supplies	8,460,562
Construction & Engineering - 0.2%
Arcosa Inc., Senior Notes	6.875%	8/15/32	620,000	649,391   (a)
Electrical Equipment - 0.4%
Sensata Technologies BV, Senior Notes	4.000%	4/15/29	1,500,000	1,431,176   (a)
Ground Transportation - 0.3%
XPO Inc., Senior Notes	7.125%	2/1/32	1,000,000	1,053,583   (a)
Machinery - 0.4%
Titan International Inc., Senior Secured Notes	7.000%	4/30/28	1,730,000	1,723,114
Passenger Airlines - 4.1%
American Airlines Group Inc., Senior Notes	3.750%	3/1/25	5,470,000	5,418,819   (a)
American Airlines Inc., Senior Secured Notes	8.500%	5/15/29	1,980,000	2,102,046   (a)
Delta Air Lines Inc., Senior Notes	2.900%	10/28/24	2,580,000	2,573,113
Delta Air Lines Inc., Senior Notes	7.375%	1/15/26	720,000	741,294
Delta Air Lines Inc., Senior Secured Notes	7.000%	5/1/25	4,280,000	4,326,029   (a)
Spirit Loyalty Cayman Ltd./Spirit IP Cayman Ltd., Senior Secured Notes	8.000%	9/20/25	2,405,999	1,324,050   (a)
Total Passenger Airlines	16,485,351
Trading Companies & Distributors - 0.6%
H&E Equipment Services Inc., Senior Notes	3.875%	12/15/28	1,270,000	1,193,449   (a)
United Rentals North America Inc., Senior Notes	5.500%	5/15/27	376,000	376,930
United Rentals North America Inc., Senior Notes	6.125%	3/15/34	1,000,000	1,034,697   (a)
Total Trading Companies & Distributors	2,605,076
Total Industrials	41,152,504
Information Technology - 3.2%
Communications Equipment - 1.2%
CommScope LLC, Senior Notes	7.125%	7/1/28	190,000	157,741   (a)
CommScope LLC, Senior Secured Notes	4.750%	9/1/29	2,060,000	1,732,975   (a)
Connect Finco SARL/Connect US Finco LLC, Senior Secured Notes	9.000%	9/15/29	2,350,000	2,277,115   (a)
Viasat Inc., Senior Notes	7.500%	5/30/31	1,210,000	834,561   (a)
Total Communications Equipment	5,002,392

(Percentages shown based on Fund net assets)

Security		Rate	Maturity Date	Face Amount†	Value
Electronic Equipment, Instruments & Components - 0.4%
EquipmentShare.com Inc., Secured Notes	8.625%	5/15/32	450,000	$472,656   (a)
EquipmentShare.com Inc., Senior Secured Notes	8.000%	3/15/33	1,040,000	1,065,485   (a)
Total Electronic Equipment, Instruments & Components	1,538,141
IT Services - 0.5%
Amentum Escrow Corp., Senior Notes	7.250%	8/1/32	940,000	981,875   (a)
Shift4 Payments LLC/Shift4 Payments Finance Sub Inc., Senior Notes	6.750%	8/15/32	800,000	835,850   (a)
Total IT Services	1,817,725
Software - 0.8%
Cloud Software Group Inc., Senior Secured Notes	8.250%	6/30/32	2,320,000	2,426,961   (a)
Open Text Corp., Senior Notes	3.875%	2/15/28	1,000,000	955,909   (a)
Total Software	3,382,870
Technology Hardware, Storage & Peripherals - 0.3%
Seagate HDD Cayman, Senior Notes	4.750%	1/1/25	670,000	667,548
Seagate HDD Cayman, Senior Notes	4.875%	6/1/27	400,000	398,222
Total Technology Hardware, Storage & Peripherals	1,065,770
Total Information Technology	12,806,898
Materials - 4.1%
Chemicals - 0.6%
Braskem Netherlands Finance BV, Senior Notes	5.875%	1/31/50	450,000	352,786   (b)
Cerdia Finanz GmbH, Senior Secured Notes	9.375%	10/3/31	320,000	327,200   (a)(h)
Sasol Financing USA LLC, Senior Notes	8.750%	5/3/29	1,540,000	1,630,215   (a)
Total Chemicals	2,310,201
Construction Materials - 0.6%
Smyrna Ready Mix Concrete LLC, Senior Secured Notes	8.875%	11/15/31	2,250,000	2,429,277   (a)
Containers & Packaging - 1.5%
ARD Finance SA, Senior Secured Notes (6.500% Cash or 7.250% PIK)	6.500%	6/30/27	1,280,000	289,846   (a)(i)
Ardagh Metal Packaging Finance USA LLC/ Ardagh Metal Packaging Finance PLC, Senior Notes	4.000%	9/1/29	1,170,000	1,045,433   (a)
Ardagh Packaging Finance PLC/Ardagh Holdings USA Inc., Senior Notes	5.250%	8/15/27	1,578,000	1,177,764   (a)
Ardagh Packaging Finance PLC/Ardagh Holdings USA Inc., Senior Notes	5.250%	8/15/27	1,510,000	1,127,012   (a)
Canpack SA/Canpack US LLC, Senior Notes	3.875%	11/15/29	1,550,000	1,452,818   (a)

(Percentages shown based on Fund net assets)

Security		Rate	Maturity Date	Face Amount†	Value
Containers & Packaging - continued
Pactiv LLC, Senior Notes	8.375%	4/15/27	750,000	$800,625
Total Containers & Packaging	5,893,498
Metals & Mining - 1.4%
ArcelorMittal SA, Senior Notes	7.000%	10/15/39	340,000	386,412
First Quantum Minerals Ltd., Secured Notes	9.375%	3/1/29	920,000	976,298   (a)
First Quantum Minerals Ltd., Senior Notes	6.875%	10/15/27	750,000	742,208   (a)
Freeport-McMoRan Inc., Senior Notes	5.450%	3/15/43	1,010,000	1,015,313
Vale Overseas Ltd., Senior Notes	6.875%	11/21/36	2,320,000	2,594,498
Total Metals & Mining	5,714,729
Total Materials	16,347,705
Real Estate - 1.5%
Health Care REITs - 0.0%††
Diversified Healthcare Trust, Senior Notes	4.375%	3/1/31	240,000	197,830
Hotel & Resort REITs - 0.7%
Service Properties Trust, Senior Notes	3.950%	1/15/28	226,000	195,669
Service Properties Trust, Senior Notes	8.875%	6/15/32	2,770,000	2,648,306
Total Hotel & Resort REITs	2,843,975
Real Estate Management & Development - 0.2%
Add Hero Holdings Ltd., Senior Secured Notes (7.500% Cash or 8.500% PIK)	8.500%	9/30/29	295,337	25,103   (b)(i)
Add Hero Holdings Ltd., Senior Secured Notes (8.000% Cash or 9.000% PIK)	9.000%	9/30/30	227,726	5,978   (b)(i)
Add Hero Holdings Ltd., Senior Secured Notes (8.800% Cash or 9.800% PIK)	9.800%	9/30/31	297,178	7,801   (b)(i)
China Aoyuan Group Ltd., Senior Notes, Step bond (0.000% to 9/30/31 then 1.000%)	0.000%	3/30/2173	450,290	4,503   (b)(c)
China Aoyuan Group Ltd., Senior Secured Notes (5.500% PIK)	5.500%	9/30/31	115,666	1,590   (b)(i)
Country Garden Holdings Co. Ltd., Senior Secured Notes	-	1/27/24	2,016,000	135,324   *(b)(j)
Cushman & Wakefield US Borrower LLC, Senior Secured Notes	8.875%	9/1/31	420,000	458,925   (a)
Total Real Estate Management & Development	639,224
Specialized REITs - 0.6%
Iron Mountain Inc., Senior Notes	7.000%	2/15/29	2,350,000	2,451,337   (a)
Total Real Estate	6,132,366

(Percentages shown based on Fund net assets)

Security		Rate	Maturity Date	Face Amount†	Value
Utilities - 2.2%
Electric Utilities - 1.2%
Alpha Generation LLC, Senior Notes	6.750%	10/15/32	390,000	$395,742   (a)
Pampa Energia SA, Senior Notes	7.950%	9/10/31	900,000	915,075   (a)
Vistra Operations Co. LLC, Senior Notes	7.750%	10/15/31	920,000	991,179   (a)
Vistra Operations Co. LLC, Senior Notes	6.875%	4/15/32	2,250,000	2,368,683   (a)
Total Electric Utilities	4,670,679
Gas Utilities - 0.8%
Suburban Propane Partners LP/Suburban Energy Finance Corp., Senior Notes	5.875%	3/1/27	3,290,000	3,287,107
Independent Power and Renewable Electricity Producers - 0.2%
Lightning Power LLC, Senior Secured Notes	7.250%	8/15/32	940,000	989,253   (a)
Total Utilities	8,947,039
Total Corporate Bonds & Notes (Cost - $310,854,885)	339,165,407
Senior Loans - 7.2%
Communication Services - 0.3%
Media - 0.3%
iHeartCommunications Inc., New Term Loan (1 mo. Term SOFR + 3.114%)	7.960%	5/1/26	1,440,000	1,251,828   (d)(k)(l)
Consumer Discretionary - 2.5%
Automobile Components - 0.5%
Clarios Global LP, 2024 Term Loan B (1 mo. Term SOFR + 2.500%)	7.345%	5/6/30	1,000,000	1,001,670   (d)(k)(l)
First Brands Group LLC, 2022 Incremental Term Loan (3 mo. Term SOFR + 5.262%)	10.514%	3/30/27	1,072,423	1,063,039   (d)(k)(l)
Total Automobile Components	2,064,709
Broadline Retail - 0.2%
Prime Security Services Borrower LLC, 2024 Refinancing Term Loan B1 (1 mo. Term SOFR + 2.250%)	7.445%	10/13/30	997,500	997,500   (d)(k)(l)
Diversified Consumer Services - 0.3%
WW International Inc., Initial Term Loan (1 mo. Term SOFR + 3.614%)	8.460%	4/13/28	4,350,000	1,199,665   (d)(k)(l)
Hotels, Restaurants & Leisure - 1.5%
1011778 BC Unlimited Liability Co., Term Loan B6 (1 mo. Term SOFR + 1.750%)	6.595%	9/20/30	997,500	989,131   (d)(k)(l)
Caesars Entertainment Inc., Incremental Term Loan B1 (1 mo. Term SOFR + 2.750%)	7.595%	2/6/31	2,883,505	2,887,787   (d)(k)(l)
Fertitta Entertainment LLC, Initial Term Loan B (1 mo. Term SOFR + 3.750%)	8.847%	1/27/29	1,240,458	1,238,436   (d)(k)(l)

(Percentages shown based on Fund net assets)

Security		Rate	Maturity Date	Face Amount†	Value
Hotels, Restaurants & Leisure - continued
Station Casinos LLC, Term Loan Facility B (1 mo. Term SOFR + 2.250%)	7.095%	3/14/31	746,250	$744,187   (d)(k)(l)
Total Hotels, Restaurants & Leisure	5,859,541
Total Consumer Discretionary	10,121,415
Consumer Staples - 0.3%
Beverages - 0.3%
Triton Water Holdings Inc., First Lien Initial Term Loan (3 mo. Term SOFR + 3.512%)	8.115%	3/31/28	1,240,386	1,239,642   (d)(k)(l)
Financials - 0.7%
Banks - 0.2%
Mercury Borrower Inc., First Lien Initial Term Loan (1 mo. Term SOFR + 3.614%)	8.460%	8/2/28	595,290	596,037   (d)(k)(l)
Consumer Finance - 0.1%
Blackhawk Network Holdings Inc., Term Loan B (1 mo. Term SOFR + 5.000%)	9.845%	3/12/29	468,825	471,462   (d)(k)(l)
Financial Services - 0.4%
Boost Newco Borrower LLC, Term Loan B1 (3 mo. Term SOFR + 2.500%)	7.104%	1/31/31	1,000,000	1,001,665   (d)(k)(l)
Nexus Buyer LLC, Refinancing Term Loan (1 mo. Term SOFR + 4.000%)	8.845%	7/31/31	698,250	693,394   (d)(k)(l)
Total Financial Services	1,695,059
Total Financials	2,762,558
Health Care - 1.2%
Health Care Equipment & Supplies - 0.6%
Medline Borrower LP, Term Loan B (1 mo. Term SOFR + 2.750%)	7.595%	10/23/28	2,166,515	2,169,841   (d)(k)(l)
Health Care Providers & Services - 0.6%
LifePoint Health Inc., 2024 Repricing Term Loan B (3 mo. Term SOFR + 4.750%)	10.054%	11/16/28	2,493,750	2,495,620   (d)(k)(l)
Total Health Care	4,665,461
Industrials - 1.4%
Aerospace & Defense - 0.2%
Transdigm Inc., Term Loan J (3 mo. Term SOFR + 2.500%)	7.104%	2/28/31	995,006	992,250   (d)(k)(l)
Building Products - 0.1%
ACProducts Holdings Inc., Initial Term Loan (3 mo. Term SOFR + 4.512%)	9.115%	5/17/28	396,923	333,699   (d)(k)(l)
Commercial Services & Supplies - 0.4%
Allied Universal Holdco LLC, USD Term Loan (1 mo. Term SOFR + 3.850%)	8.695%	5/12/28	994,872	986,291   (d)(k)(l)

(Percentages shown based on Fund net assets)

Security		Rate	Maturity Date	Face Amount†	Value
Commercial Services & Supplies - continued
Garda World Security Corp., Tenth Additional Term Loan (1 mo. Term SOFR + 3.500%)	8.597%	2/1/29	596,954	$597,626   (d)(k)(l)
Total Commercial Services & Supplies	1,583,917
Machinery - 0.3%
TK Elevator Midco GmbH, USD Term Loan Facility B2 (6 mo. Term SOFR + 3.500%)	8.588%	4/30/30	992,519	995,620   (d)(k)(l)
Passenger Airlines - 0.4%
United Airlines Inc., Term Loan B (3 mo. Term SOFR + 2.750%)	8.033%	2/22/31	1,671,600	1,676,824   (d)(k)(l)
Total Industrials	5,582,310
Information Technology - 0.8%
IT Services - 0.1%
Redstone Holdco 2 LP, First Lien Initial Term Loan (3 mo. Term SOFR + 5.012%)	10.264%	4/27/28	770,000	592,538   (d)(k)(l)
Software - 0.5%
DCert Buyer Inc., First Lien Initial Term Loan (1 mo. Term SOFR + 4.000%)	8.845%	10/16/26	1,240,260	1,206,543   (d)(k)(l)
Modena Buyer LLC, Initial Term Loan (3 mo. Term SOFR + 4.500%)	9.104%	7/1/31	800,000	767,752   (d)(k)(l)
Total Software	1,974,295
Technology Hardware, Storage & Peripherals - 0.2%
Vericast Corp., 2024 Extended Term Loan (3 mo. Term SOFR + 7.750%)	12.354%	6/16/26	685,913	673,909   (d)(k)(l)
Total Information Technology	3,240,742
Total Senior Loans (Cost - $31,205,365)	28,863,956
Sovereign Bonds - 3.1%
Angola - 0.4%
Angolan Government International Bond, Senior Notes	8.000%	11/26/29	1,600,000	1,457,696   (a)
Argentina - 0.4%
Provincia de Buenos Aires, Senior Notes	6.625%	9/1/37	362,451	173,523   (a)
Provincia de Cordoba, Senior Notes	6.990%	6/1/27	1,360,000	1,261,400   (a)
Provincia de Cordoba, Senior Notes	6.875%	2/1/29	340,000	299,200   (a)
Total Argentina	1,734,123
Bahamas - 0.4%
Bahamas Government International Bond, Senior Notes	6.950%	11/20/29	1,630,000	1,548,075   (a)
Brazil - 0.0%††
Brazil Letras do Tesouro Nacional	0.000%	1/1/26	334,000  BRL	53,048

(Percentages shown based on Fund net assets)

Security		Rate	Maturity Date	Face Amount†	Value
Dominican Republic - 0.1%
Dominican Republic International Bond, Senior Notes	9.750%	6/5/26	25,000,000  DOP	$416,483   (b)
Mexico - 1.8%
Mexican Bonos, Bonds	7.750%	5/29/31	156,010,000  MXN	7,371,643
Total Sovereign Bonds (Cost - $11,570,004)	12,581,068
Asset-Backed Securities - 1.6%
Ballyrock CLO Ltd., 2022-19A D (3 mo. Term SOFR + 7.110%)	12.392%	4/20/35	505,000	502,511   (a)(d)
CarVal CLO Ltd., 2024-3A E (3 mo. Term SOFR + 6.350%)	10.921%	10/20/37	1,020,000	1,022,498   (a)(d)
Golub Capital Partners CLO Ltd., 2024-76A E (3 mo. Term SOFR + 5.750%)	10.492%	10/25/37	300,000	299,880   (a)(d)
Magnetite Ltd., 2015-12A ER (3 mo. Term SOFR + 5.942%)	11.243%	10/15/31	3,400,000	3,416,733   (a)(d)
Ocean Trails CLO Ltd., 2022-12A ER (3 mo. Term SOFR + 7.500%)	12.646%	7/20/35	600,000	599,989   (a)(d)
Palmer Square Loan Funding Ltd., 2024-1A D (3 mo. Term SOFR + 4.900%)	10.011%	10/15/32	550,000	545,141   (a)(d)
Total Asset-Backed Securities (Cost - $6,342,971)	6,386,752
Convertible Bonds & Notes - 0.8%
Communication Services - 0.8%
Media - 0.8%
DISH Network Corp., Senior Notes	0.000%	12/15/25	2,390,000	2,082,433
DISH Network Corp., Senior Notes	3.375%	8/15/26	1,680,000	1,360,557
Total Communication Services	3,442,990
Real Estate - 0.0%††
Real Estate Management & Development - 0.0%††
China Aoyuan Group Ltd., Senior Notes	0.000%	9/30/28	40,243	845   (b)
Total Convertible Bonds & Notes (Cost - $2,975,383)	3,443,835
				Shares
Common Stocks - 0.0%††
Health Care - 0.0%††
Pharmaceuticals - 0.0%††
Endo Inc.		360	9,173   *
Real Estate - 0.0%††
Real Estate Management & Development - 0.0%††
China Aoyuan Group Ltd.		112,573	4,438   *(e)
Total Common Stocks (Cost - $12,518)	13,611

(Percentages shown based on Fund net assets)

Security			Expiration Date	Warrants	Value
Warrants - 0.0%††
Industrials - 0.0%††
Passenger Airlines - 0.0%††
flyExclusive Inc. (Cost - $17,971)		5/28/28	18,769	$6,438   *
Total Investments before Short-Term Investments (Cost - $362,979,097)	390,461,067
		Rate	Maturity Date	Face Amount†
Short-Term Investments - 1.5%
U.S. Treasury Bills - 0.8%
U.S. Treasury Bills (Cost - $3,220,000)	0.000%	10/1/24	3,220,000	3,220,000   (m)
				Shares
Money Market Funds - 0.7%
Western Asset Premier Institutional Government Reserves, Premium Shares (Cost - $2,743,704)	4.886%		2,743,704	2,743,704   (n)(o)
Total Short-Term Investments (Cost - $5,963,704)	5,963,704
Total Investments - 98.5% (Cost - $368,942,801)	396,424,771
Other Assets in Excess of Liabilities - 1.5%	5,923,444
Total Net Assets - 100.0%	$402,348,215

 

†	Face amount denominated in U.S. dollars, unless otherwise noted.
††	Represents less than 0.1%.
*	Non-income producing security.
(a)	Security is exempt from registration under Rule 144A of the Securities Act of 1933. This security may be resold in transactions that are exempt from registration, normally to qualified institutional buyers. This security has been deemed liquid pursuant to guidelines approved by the Board of Directors.
(b)	Security is exempt from registration under Regulation S of the Securities Act of 1933. Regulation S applies to securities offerings that are made outside of the United States and do not involve direct selling efforts in the United States. This security has been deemed liquid pursuant to guidelines approved by the Board of Directors.
(c)	Security has no maturity date. The date shown represents the next call date.
(d)	Variable rate security. Interest rate disclosed is as of the most recent information available. Certain variable rate securities are not based on a published reference rate and spread but are determined by the issuer or agent and are based on current market conditions. These securities do not indicate a reference rate and spread in their description above.
(e)	Security is fair valued in accordance with procedures approved by the Board of Directors (Note 1).
(f)	Security is valued using significant unobservable inputs (Note 1).
(g)	Value is less than $1.
(h)	Securities traded on a when-issued or delayed delivery basis.
(i)	Payment-in-kind security for which the issuer has the option at each interest payment date of making interest payments in cash or additional securities.
(j)	The maturity principal is currently in default as of September 30, 2024.
(k)	Interest rates disclosed represent the effective rates on senior loans. Ranges in interest rates are attributable to multiple contracts under the same loan.
(l)	Senior loans may be considered restricted in that the Fund ordinarily is contractually obligated to receive approval from the agent bank and/or borrower prior to the disposition of a senior loan.
(m)	Rate shown represents yield-to-maturity.
(n)	Rate shown is one-day yield as of the end of the reporting period.
(o)	In this instance, as defined in the Investment Company Act of 1940, an "Affiliated Company" represents Fund ownership of at least 5% of the outstanding voting securities of an issuer, or a company which is under common ownership or control with the Fund. At September 30, 2024, the total market value of investments in Affiliated Companies was $2,743,704 and the cost was $2,743,704 (Note 7).

 

Abbreviation(s) used in this schedule:
BRL	-	Brazilian Real
CLO	-	Collateralized Loan Obligation
DOP	-	Dominican Peso
EUR	-	Euro
GBP	-	British Pound
ICE	-	Intercontinental Exchange
LIBOR	-	London Interbank Offered Rate
MXN	-	Mexican Peso
PIK	-	Payment-In-Kind
SOFR	-	Secured Overnight Financing Rate
USD	-	United States Dollar

 

Assets:
Investments in unaffiliated securities, at value (Cost - $366,199,097)	$393,681,067
Investments in affiliated securities, at value (Cost - $2,743,704)	2,743,704
Foreign currency, at value (Cost - $282,022)	229,361
Cash	100,984
Interest receivable	6,549,611
Receivable for securities sold	3,148,321
Principal paydown receivable	22,466
Dividends receivable from affiliated investments	5,171
Prepaid expenses	11,565
Total Assets	406,492,250
Liabilities:
Distributions payable	3,376,022
Payable for securities purchased	320,000
Investment management fee payable	246,497
Directors' fees payable	23,444
Accrued expenses	178,072
Total Liabilities	4,144,035
Total Net Assets	$402,348,215
Net Assets:
Par value ($0.001 par value; 95,099,215 shares issued and outstanding; 500,000,000 shares authorized)	$95,099
Paid-in capital in excess of par value	583,779,354
Total distributable earnings (loss)	(181,526,238 )
Total Net Assets	$402,348,215
Shares Outstanding	95,099,215
Net Asset Value	$4.23

 

Investment Income:
Interest	$35,933,027
Dividends from affiliated investments	238,978
Less: Foreign taxes withheld	(39,357 )
Total Investment Income	36,132,648
Expenses:
Investment management fee (Note 2)	3,177,786
Transfer agent fees	165,981
Directors' fees	128,928
Legal fees	93,167
Shareholder reports	63,109
Audit and tax fees	56,540
Stock exchange listing fees	48,671
Fund accounting fees	20,100
Insurance	3,185
Custody fees	1,231
Interest expense	56
Miscellaneous expenses	12,561
Total Expenses	3,771,315
Less: Fee waivers and/or expense reimbursements (Note 2)	(70,524 )
Net Expenses	3,700,791
Net Investment Income	32,431,857
Realized and Unrealized Gain (Loss) on Investments, Forward Foreign Currency Contracts and Foreign Currency Transactions (Notes 1, 3 and 4):
Net Realized Gain (Loss) From:
Investment transactions in unaffiliated securities	(4,974,989 )
Forward foreign currency contracts	(154,991 )
Foreign currency transactions	60,513
Net Realized Loss	(5,069,467 )
Change in Net Unrealized Appreciation (Depreciation) From:
Investments in unaffiliated securities	20,660,216
Foreign currencies	25,533
Change in Net Unrealized Appreciation (Depreciation)	20,685,749
Net Gain on Investments, Forward Foreign Currency Contracts and Foreign Currency Transactions	15,616,282
Increase in Net Assets From Operations	$48,048,139

 

For the Years Ended September 30,	2024	2023
Operations:
Net investment income	$32,431,857	$33,461,263
Net realized loss	(5,069,467 )	(39,654,795 )
Change in net unrealized appreciation (depreciation)	20,685,749	34,302,918
Increase in Net Assets From Operations	48,048,139	28,109,386
Distributions to Shareholders From (Note 1):
Total distributable earnings	(32,786,512 )	(30,049,452 )
Return of capital	(7,725,754 )	(4,709,311 )
Decrease in Net Assets From Distributions to Shareholders	(40,512,266 )	(34,758,763 )
Increase (Decrease) in Net Assets	7,535,873	(6,649,377 )
Net Assets:
Beginning of year	394,812,342	401,461,719
End of year	$402,348,215	$394,812,342

 

For a share of capital stock outstanding throughout each year ended September 30:
	20241	20231	20221	20211	20201
Net asset value, beginning of year	$4.15	$4.22	$5.45	$5.27	$5.50
Income (loss) from operations:
Net investment income	0.34	0.35	0.33	0.32	0.34
Net realized and unrealized gain (loss)	0.17	(0.05 )	(1.20 )	0.22	(0.20 )
Total income (loss) from operations	0.51	0.30	(0.87)	0.54	0.14
Less distributions from:
Net investment income	(0.35 )	(0.32 )	(0.33 )	(0.30 )	(0.31 )
Return of capital	(0.08 )	(0.05 )	(0.03 )	(0.07 )	(0.07 )
Total distributions	(0.43 )	(0.37 )	(0.36 )	(0.37 )	(0.38 )
Anti-dilutive impact of repurchase plan	-	-	-	-	0.01 2
Anti-dilutive impact of tender offer	-	-	-	0.01 3	-
Capital contributions	-	-	-	-	0.00 4
Net asset value, end of year	$4.23	$4.15	$4.22	$5.45	$5.27
Market price, end of year	$4.05	$3.64	$3.68	$5.19	$4.90
Total return, based on NAV5,6	12.87 %	7.12 %	(16.60 )%	10.73 %	3.13 %7
Total return, based on Market Price8	24.11 %	8.67 %	(23.16 )%	13.92 %	5.05 %
Net assets, end of year (millions)	$402	$395	$401	$518	$668
Ratios to average net assets:
Gross expenses	0.95 %	0.94 %	0.93 %	0.91 %	1.01 %9
Net expenses10,11	0.93	0.94	0.93	0.89	0.99 9
Net investment income	8.16	8.19	6.66	5.82	6.35
Portfolio turnover rate	45 %	39 %	79 %	46 %	63 %

 

1. Organization and significant accounting policies

Western Asset High Income Opportunity Fund Inc. (the "Fund") was incorporated in Maryland and is registered as a diversified, closed-end management investment company under the Investment Company Act of 1940, as amended (the "1940 Act"). The Fund seeks high current income. Capital appreciation is a secondary objective. In seeking to fulfill its investment objectives, the Fund invests, under normal market conditions, at least 80% of its net assets in high-yield securities and up to 20% in common stock equivalents, including options, warrants and rights.

The Fund follows the accounting and reporting guidance in Financial Accounting Standards Board ("FASB") Accounting Standards Codification Topic 946, Financial Services - Investment Companies ("ASC 946"). The following are significant accounting policies consistently followed by the Fund and are in conformity with U.S. generally accepted accounting principles ("GAAP"), including, but not limited to, ASC 946. Estimates and assumptions are required to be made regarding assets, liabilities and changes in net assets resulting from operations when financial statements are prepared. Changes in the economic environment, financial markets and any other parameters used in determining these estimates could cause actual results to differ. Subsequent events have been evaluated through the date the financial statements were issued.

(a) Investment valuation. The valuations for fixed income securities (which may include, but are not limited to, corporate, government, municipal, mortgage-backed, collateralized mortgage obligations and asset-backed securities) and certain derivative instruments are typically the prices supplied by independent third party pricing services, which may use market prices or broker/dealer quotations or a variety of valuation techniques and methodologies. The independent third party pricing services typically use inputs that are observable such as issuer details, interest rates, yield curves, prepayment speeds, credit risks/spreads, default rates and quoted prices for similar securities. Investments in open-end funds are valued at the closing net asset value per share of each fund on the day of valuation. Equity securities for which market quotations are available are valued at the last reported sales price or official closing price on the primary market or exchange on which they trade. When the Fund holds securities or other assets that are denominated in a foreign currency, the Fund will normally use the currency exchange rates as of 4:00 p.m. (Eastern Time). If independent third party pricing services are unable to supply prices for a portfolio investment, or if the prices supplied are deemed by the manager to be unreliable, the market price may be determined by the manager using quotations from one or more broker/dealers or at the transaction price if the security has recently been purchased and no value has yet been obtained from a pricing service or pricing broker. When reliable prices are not readily available, such as when the value of a security has been significantly affected by events after the close of the exchange or market on which the security is principally traded, but before the Fund calculates its net asset value, the Fund values these securities as determined in accordance with procedures approved by the Fund's Board of Directors.

Pursuant to policies adopted by the Board of Directors, the Fund's manager has been designated as the valuation designee and is responsible for the oversight of the daily valuation process. The Fund's manager is assisted by the Global Fund Valuation Committee (the "Valuation Committee"). The Valuation Committee is responsible for making fair value determinations, evaluating the effectiveness of the Fund's pricing policies, and reporting to the Fund's manager and the Board of Directors. When determining the reliability of third party pricing information for investments owned by the Fund, the Valuation Committee, among other things, conducts due diligence reviews of pricing vendors, monitors the daily change in prices and reviews transactions among market participants.

The Valuation Committee will consider pricing methodologies it deems relevant and appropriate when making fair value determinations. Examples of possible methodologies include, but are not limited to, multiple of earnings; discount from market of a similar freely traded security; discounted cash-flow analysis; book value or a multiple thereof; risk premium/yield analysis; yield to maturity; and/or fundamental investment analysis. The Valuation Committee will also consider factors it deems relevant and appropriate in light of the facts and circumstances. Examples of possible factors include, but are not limited to, the type of security; the issuer's financial statements; the purchase price of the security; the discount from market value of unrestricted securities of the same class at the time of purchase; analysts' research and observations from financial institutions; information regarding any transactions or offers with respect to the security; the existence of merger proposals or tender offers affecting the security; the price and extent of public trading in similar securities of the issuer or comparable companies; and the existence of a shelf registration for restricted securities.

For each portfolio security that has been fair valued pursuant to the policies adopted by the Board of Directors, the fair value price is compared against the last available and next available market quotations. The Valuation Committee reviews the results of such back testing monthly and fair valuation occurrences are reported to the Board of Directors quarterly.

The Fund uses valuation techniques to measure fair value that are consistent with the market approach and/or income approach, depending on the type of security and the particular circumstance. The market approach uses prices and other relevant information generated by market transactions involving identical or comparable securities. The income approach uses valuation techniques to discount estimated future cash flows to present value.

GAAP establishes a disclosure hierarchy that categorizes the inputs to valuation techniques used to value assets and liabilities at measurement date. These inputs are summarized in the three broad levels listed below:

The inputs or methodologies used to value securities are not necessarily an indication of the risk associated with investing in those securities.

The following is a summary of the inputs used in valuing the Fund's assets carried at fair value:
 

ASSETS
Description	Quoted Prices (Level 1)	Other Significant Observable Inputs (Level 2)	Significant Unobservable Inputs (Level 3)	Total
Long-Term Investments†:
Corporate Bonds & Notes:
Financials	-	$33,095,448	$316,800	$33,412,248
Health Care	-	27,101,278	0 *	27,101,278
Other Corporate Bonds & Notes	-	278,651,881	-	278,651,881
Senior Loans	-	28,863,956	-	28,863,956
Sovereign Bonds	-	12,581,068	-	12,581,068
Asset-Backed Securities	-	6,386,752	-	6,386,752
Convertible Bonds & Notes	-	3,443,835	-	3,443,835
Common Stocks:
Health Care	$9,173	-	-	9,173
Real Estate	-	4,438	-	4,438
Warrants	-	6,438	-	6,438
Total Long-Term Investments	9,173	390,135,094	316,800	390,461,067
Short-Term Investments†:
U.S. Treasury Bills	-	3,220,000	-	3,220,000
Money Market Funds	2,743,704	-	-	2,743,704
Total Short-Term Investments	2,743,704	3,220,000	-	5,963,704
Total Investments	$2,752,877	$393,355,094	$316,800	$396,424,771

 

†	See Schedule of Investments for additional detailed categorizations.
*	Amount represents less than $1.

(b) Forward foreign currency contracts. The Fund enters into a forward foreign currency contract to hedge against foreign currency exchange rate risk on its non-U.S. dollar denominated securities or to facilitate settlement of a foreign currency denominated portfolio transaction. A forward foreign currency contract is an agreement between two

parties to buy and sell a currency at a set price with delivery and settlement at a future date. The contract is marked-to-market daily and the change in value is recorded by the Fund as an unrealized gain or loss. When a forward foreign currency contract is closed, through either delivery or offset by entering into another forward foreign currency contract, the Fund recognizes a realized gain or loss equal to the difference between the value of the contract at the time it was opened and the value of the contract at the time it is closed.

Forward foreign currency contracts involve elements of market risk in excess of the amounts reflected on the Statement of Assets and Liabilities. The Fund bears the risk of an unfavorable change in the foreign exchange rate underlying the forward foreign currency contract. Risks may also arise upon entering into these contracts from the potential inability of the counterparties to meet the terms of their contracts.

(c) Loan participations. The Fund may invest in loans arranged through private negotiation between one or more financial institutions. The Fund's investment in any such loan may be in the form of a participation in or an assignment of the loan. In connection with purchasing participations, the Fund generally will have no right to enforce compliance by the borrower with the terms of the loan agreement related to the loan, or any rights of offset against the borrower and the Fund may not benefit directly from any collateral supporting the loan in which it has purchased the participation.

The Fund assumes the credit risk of the borrower, the lender that is selling the participation and any other persons interpositioned between the Fund and the borrower. In the event of the insolvency of the lender selling the participation, the Fund may be treated as a general creditor of the lender and may not benefit from any offset between the lender and the borrower.

(d) Securities traded on a when-issued and delayed delivery basis. The Fund may trade securities on a when-issued or delayed delivery basis. In when-issued and delayed delivery transactions, the securities are purchased or sold by the Fund with payment and delivery taking place in the future in order to secure what is considered to be an advantageous price and yield to the Fund at the time of entering into the transaction.

Purchasing such securities involves risk of loss if the value of the securities declines prior to settlement. These securities are subject to market fluctuations and their current value is determined in the same manner as for other securities.

(e) Foreign currency translation. Investment securities and other assets and liabilities denominated in foreign currencies are translated into U.S. dollar amounts based upon prevailing exchange rates on the date of valuation. Purchases and sales of investment securities and income and expense items denominated in foreign currencies are translated into U.S. dollar amounts based upon prevailing exchange rates on the respective dates of such transactions.

The Fund does not isolate that portion of the results of operations resulting from fluctuations in foreign exchange rates on investments from the fluctuations arising from changes in market prices of securities held. Such fluctuations are included with the net realized and unrealized gain or loss on investments.

Net realized foreign exchange gains or losses arise from sales of foreign currencies, including gains and losses on forward foreign currency contracts, currency gains or losses realized between the trade and settlement dates on securities transactions, and the difference between the amounts of dividends, interest, and foreign withholding taxes recorded on the Fund's books and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreign exchange gains and losses arise from changes in the values of assets and liabilities, other than investments in securities, on the date of valuation, resulting from changes in exchange rates.

Foreign security and currency transactions may involve certain considerations and risks not typically associated with those of U.S. dollar denominated transactions as a result of, among other factors, the possibility of lower levels of governmental supervision and regulation of foreign securities markets and the possibility of political or economic instability.

(f) Credit and market risk. The Fund invests in high-yield and emerging market instruments that are subject to certain credit and market risks. The yields of high-yield and emerging market debt obligations reflect, among other things, perceived credit and market risks. The Fund's investments in securities rated below investment grade typically involve risks not associated with higher rated securities including, among others, greater risk related to timely and ultimate payment of interest and principal, greater market price volatility and less liquid secondary market trading. The consequences of political, social, economic or diplomatic changes may have disruptive effects on the market prices of investments held by the Fund. The Fund's investments in non-U.S. dollar denominated securities may also result in foreign currency losses caused by devaluations and exchange rate fluctuations.

(g) Foreign investment risks. The Fund's investments in foreign securities may involve risks not present in domestic investments. Since securities may be denominated in foreign currencies, may require settlement in foreign currencies or may pay interest or dividends in foreign currencies, changes in the relationship of these foreign currencies to the U.S. dollar can significantly affect the value of the investments and earnings of the Fund. Foreign investments may also subject the Fund to foreign government exchange restrictions, expropriation, taxation or other political, social or economic developments, all of which affect the market and/or credit risk of the investments.

(h) Counterparty risk and credit-risk-related contingent features of derivative instruments. The Fund may invest in certain securities or engage in other transactions where the Fund is exposed to counterparty credit risk in addition to broader market risks.

The Fund may invest in securities of issuers, which may also be considered counterparties as trading partners in other transactions. This may increase the risk of loss in the event of default or bankruptcy by the counterparty or if the counterparty otherwise fails to meet its contractual obligations. The Fund's subadviser attempts to mitigate counterparty risk by (i) periodically assessing the creditworthiness of its trading partners, (ii) monitoring and/or limiting the amount of its net exposure to each individual counterparty based on its assessment and (iii) requiring collateral from the counterparty for certain transactions. Market events and changes in overall economic conditions may impact the assessment of such counterparty risk by the subadviser. In addition, declines in the values of underlying collateral received may expose the Fund to increased risk of loss.

With exchange traded and centrally cleared derivatives, there is less counterparty risk to the Fund since the exchange or clearinghouse, as counterparty to such instruments, guarantees against a possible default. The clearinghouse stands between the buyer and the seller of the contract; therefore, the credit risk is limited to failure of the clearinghouse. While offset rights may exist under applicable law, the Fund does not have a contractual right of offset against a clearing broker or clearinghouse in the event of a default of the clearing broker or clearinghouse.

The Fund has entered into master agreements, such as an International Swaps and Derivatives Association, Inc. Master Agreement ("ISDA Master Agreement") or similar agreement, with certain of its derivative counterparties that govern over-the-counter ("OTC") derivatives and provide for general obligations, representations, agreements, collateral posting terms, netting provisions in the event of default or termination and credit related contingent features. The credit related contingent features include, but are not limited to, a percentage decrease in the Fund's net assets or net asset value per share over a specified period of time. If these credit related contingent features were triggered, the derivatives counterparty could terminate the positions and demand payment or require additional collateral.

Under an ISDA Master Agreement, the Fund may, under certain circumstances, offset with the counterparty certain derivative financial instruments' payables and/or receivables with collateral held and/or posted and create one single net payment. However, absent an event of default by the counterparty or a termination of the agreement, the terms of the ISDA Master Agreements do not result in an offset of reported amounts of financial assets and financial liabilities in the Statement of Assets and Liabilities across transactions between the Fund and the applicable counterparty. The enforceability of the right to offset may vary by jurisdiction.

Collateral requirements differ by type of derivative. Collateral or margin requirements are set by the broker or exchange clearinghouse for exchange traded derivatives while collateral terms are contract specific for OTC traded derivatives. Cash collateral that has been pledged to cover obligations of the Fund under derivative contracts, if any, will be

reported separately in the Statement of Assets and Liabilities. Securities pledged as collateral, if any, for the same purpose are noted in the Schedule of Investments.

As of September 30, 2024, the Fund did not have any open OTC derivative transactions with credit related contingent features in a net liability position.

(i) Security transactions and investment income. Security transactions are accounted for on a trade date basis. Interest income (including interest income from payment-in-kind securities) is recorded on the accrual basis. Amortization of premiums and accretion of discounts on debt securities are recorded to interest income over the lives of the respective securities, except for premiums on certain callable debt securities, which are amortized to the earliest call date. Paydown gains and losses on mortgage- and asset-backed securities are recorded as adjustments to interest income. Dividend income is recorded on the ex-dividend date for dividends received in cash and/or securities. Foreign dividend income is recorded on the ex-dividend date or as soon as practicable after the Fund determines the existence of a dividend declaration after exercising reasonable due diligence. The cost of investments sold is determined by use of the specific identification method. To the extent any issuer defaults or a credit event occurs that impacts the issuer, the Fund may halt any additional interest income accruals and consider the realizability of interest accrued up to the date of default or credit event.

(j) Distributions to shareholders. Distributions from net investment income of the Fund, if any, are declared quarterly and paid on a monthly basis. Distributions of net realized gains, if any, are declared at least annually. Distributions to shareholders of the Fund are recorded on the ex-dividend date and are determined in accordance with income tax regulations, which may differ from GAAP.

(k) Compensating balance arrangements. The Fund has an arrangement with its custodian bank whereby a portion of the custodian's fees is paid indirectly by credits earned on the Fund's cash on deposit with the bank.

(l) Federal and other taxes. It is the Fund's policy to comply with the federal income and excise tax requirements of the Internal Revenue Code of 1986 (the "Code"), as amended, applicable to regulated investment companies. Accordingly, the Fund intends to distribute its taxable income and net realized gains, if any, to shareholders in accordance with timing requirements imposed by the Code. Therefore, no federal or state income tax provision is required in the Fund's financial statements.

Management has analyzed the Fund's tax positions taken on income tax returns for all open tax years and has concluded that as of September 30, 2024, no provision for income tax is required in the Fund's financial statements. The Fund's federal and state income and federal excise tax returns for tax years for which the applicable statutes of limitations have not expired are subject to examination by the Internal Revenue Service and state departments of revenue.

Under the applicable foreign tax laws, a withholding tax may be imposed on interest, dividends and capital gains at various rates.