Enhanced Investments - Financial Portal

Published: 2023-05-23 13:41:35 ET

NPORT-EX 3 SC50ARROW033123.htm

ArrowMark Financial Corp.

Consolidated Schedule of Investments (unaudited)

As of March 31, 2023

Company⁽¹⁾	Investment	# of Shares/Par Amount⁽²⁾	Fair Value⁽³⁾
Term Loans – 7.4%
Banking – 7.4%
Equity Bancshares Inc.	Subordinated Term Loan, 7.00%, 6/30/2030	$5,000,000	$ 4,975,000
F.N.B.C. of La Grange, Inc.	Subordinated Term Loan, 6.38%, 1/01/2030⁽⁴⁾	$700,000	588,000
TransPecos Financial Corp.	Senior Term Loan, 9.00%, 10/01/2028	$4,000,000	3,840,000
Tulsa Valley Bancshares	Subordinated Term Loan, 6.38%, 12/31/2028⁽⁴⁾	$1,700,000	1,428,000
	Total Term Loans (Cost $11,400,000)		10,831,000
Structured Debt Security – 8.9%
Banking – 8.9%
Community Funding 2018, LLC.	Preferred Shares (Estimated effective yield 11.63%), 144A⁽⁵⁾⁽⁶⁾	$19,000,000	12,978,900
	Total Structured Debt Securities (Cost $18,727,080)		12,978,900
Regulatory Capital Relief Securities – 106.4%
Banking – 106.4%
Absolute	Credit Linked Note, 16.90%, 10/10/2027⁽⁷⁾⁽⁸⁾*	$4,656,278	4,658,141
Algonquin	Credit Linked Note, 13.76%, 11/20/2025⁽⁷⁾⁺	$3,000,000	2,981,495
Algonquin	Guarantee Linked Note, 12.76%, 5/1/2027⁽⁷⁾⁺	$5,000,000	4,943,547
Auto ABS Synthetic French Loans	Credit Linked Note, 15.51%, 12/15/2030⁽⁸⁾⁽⁹⁾*	€3,000,000	3,253,500
Castelo	Credit Linked Note, 11.57%, 8/15/2037⁽⁹⁾*	€2,646,816	2,756,802
Cedar	Credit Linked Note, 13.01%, 12/15/2027⁽⁹⁾*	€3,110,000	3,351,378
Cedar	Credit Linked Note, 14.05%, 03/30/2030⁽⁹⁾⁽⁸⁾*	€4,300,000	4,663,350
CHAKRA	Credit Linked Note, 14.07%, 6/26/2027⁽⁸⁾⁽¹⁰⁾⁺	$4,000,000	3,870,000
Colonnade	Credit Linked Note, 16.67%, 4/30/2028^(8)(10)	$6,000,000	5,866,800
Colonnade	Credit Linked Note, 16.40%, 11/30/2029^(8)(10)	$7,500,000	6,523,451
Colonnade	Credit Linked Note, 17.22%, 12/15/2029^(8)(10)	$5,000,000	5,076,000
Colonnade	Credit Linked Note, 15.87%, 4/30/2030⁽⁷⁾⁽⁸⁾	$10,000,000	9,392,000
CRAFT	Credit Linked Note, 14.82%, 4/30/2028⁽¹⁰⁾	$3,867,684	3,945,038
CRAFT	Credit Linked Note, 13.42%, 2/21/2031^(8)(10)	$3,200,000	3,120,000
Elvetia	Credit Linked Note, 8.65%, 10/20/2029⁽⁸⁾⁽¹¹⁾⁺	CHF2,000,000	2,142,194
Elvetia	Credit Linked Note, 9.90%, 10/20/2030⁽¹¹⁾⁺	CHF2,977,697	3,083,631
Elvetia	Credit Linked Note, 9.76%, 1/20/2031⁽⁸⁾⁽¹¹⁾⁺	CHF2,550,000	2,787,037
FCT Colisee	Credit Linked Note, 12.76%, 12/20/2023⁽¹²⁾⁺	€2,785,567	2,975,180
FCT Opale	Credit Linked Note, 12.04%, 5/5/2030⁽¹⁰⁾⁺	$4,000,000	3,971,000
Future Ready Chakra	Credit Linked Note, 12.44%, 12/15/2030⁽⁷⁾⁺	$5,000,000	4,653,500
LOFT	Credit Linked Note, 11.81%, 2/28/2030⁽⁷⁾⁽⁸⁾	$2,870,000	2,855,650
LOFT	Credit Linked Note, 23.31%, 2/28/2030⁽⁷⁾⁽⁸⁾	$6,910,000	6,806,350
Mespil	Credit Linked Note, 14.06%, 12/08/2031⁽⁷⁾*	$5,000,000	4,875,250
Muskoka	Credit Linked Note, 14.41%, 11/1/2027⁽⁷⁾⁽⁸⁾⁺	$2,650,000	2,647,350
Nansa	Credit Linked Note, 11.58%, 3/1/2026⁽⁹⁾*	€6,567,447	7,045,830
Nightingale LF	Credit Linked Note, 14.18%, 4/1/2028^(8)(13)*	£2,000,000	2,424,517
Premium Green PLC	5 Year Secured Amortizing Floating Rate Note, 15.61%, 12/20/2024⁽¹⁰⁾⁺	$2,070,454	2,033,185
Premium Green PLC	5 Year Secured Amortizing Floating Rate Note, 12.08%, 6/29/2026⁽¹²⁾*	€2,066,911	2,166,361

See Notes to Schedule of Investments

| ArrowMark Financial Corp. 1

Company⁽¹⁾	Investment	# of Shares/Par Amount⁽²⁾	Fair Value⁽³⁾
Regulatory Capital Relief Securities (continued)
Banking (continued)
Premium Green PLC	5 Year Secured Amortizing Floating Rate Note, 11.98%, 11/10/2026⁽¹²⁾⁺	€2,653,898	$ 2,743,023
Pymes Magdalena	Credit Linked Note, 10.89%, 12/20/2052⁽⁹⁾*	€3,166,137	3,325,686
Resonance	Credit Linked Note, 10.25%, 10/5/2028⁽⁹⁾*	€3,514,320	3,744,583
Resonance	Credit Linked Note, 9.74%, 10/25/2029⁽¹²⁾*	€858,428	915,837
Salisbury	Credit Linked Note, 14.43%, 6/16/2027⁽¹³⁾⁺	£5,235,795	6,164,600
Salisbury	Credit Linked Note, 13.68%, 3/20/2028⁽¹³⁾⁺	£775,988	920,730
Salisbury	Credit Linked Note, 13.43%, 4/17/2028⁽⁸⁾⁽¹³⁾⁺	£4,500,000	5,503,460
Salisbury	Credit Linked Note, 16.03%, 4/17/2028⁽¹³⁾⁺	£1,959,645	2,360,977
Start	Credit Linked Note, 14.44%, 6/16/2025⁽⁷⁾⁺	$5,000,000	4,375,000
Syntotta	Credit Linked Note, 11.58%, 11/4/2037⁽⁹⁾*	€1,406,006	1,473,351
Terra	Credit Linked Note, 12.38%, 9/25/2029⁽⁷⁾*	$10,000,000	9,520,500
	Total Regulatory Capital Relief Securities (Cost $162,680,779)		155,916,284
Trust Preferred and Preferred Securities – 3.3%
Banking – 3.3%
Fidelity Federal Bancorp	Fixed Rate Cumulative Perpetual Preferred Stock, Series A, 9%	$2,789,000	2,663,495
Fidelity Federal Bancorp	Fixed Rate Cumulative Perpetual Preferred Stock, Series B, 9%	$200,000	191,000
Raymond James Financial, Inc.	Fixed/Floating Perpetual Preferred Stock, Series A, 6.75%	$80,000	2,003,200
	Total Trust Preferred and Preferred Securities (Cost $5,004,203)		4,857,695
	Total Long-Term Investments (Cost $197,812,062)		184,583,879
Money Market Fund – 1.3%
Morgan Stanley Institutional Liquidity Funds - Treasury Portfolio	Institutional Share Class - Money Market Mutual Fund (MISXX) 4.66%	1,983,575	1,983,575
	Total Money Market Fund (Cost $1,983,575)		1,983,575
	Total Investments (Cost $199,795,637)^(14)(15) — 127.3%		186,567,454
	Other assets and liabilities, net — (27.3)%⁽¹⁶⁾		(40,019,990)
	Total Net Assets — 100.0%		$146,547,464

⁽¹⁾	We do not "control" and are not an "affiliate" of any of our investments, each as defined in the Investment Company Act (the "1940 Act").
⁽²⁾	Par Value in USD, GBP, EUR or CHF.
⁽³⁾	Fair Value is determined in good faith in accordance with the Company’s valuation policy and is reviewed and accepted by the Company’s Board of Directors.
⁽⁴⁾	The estimated effective yield including structuring fees paid annually through maturity of 2030 and 2028, respectively, is 9.60%.
⁽⁵⁾	Securities are exempt from registration under Rule 144A of the Securities Act of 1933.
⁽⁶⁾	The preferred shares are considered an equity position. Equity investments are entitled to recurring distributions which are generally equal to the remaining cash flow of the payments made by the underlying company’s securities less contractual payments to debt holders and company expenses. The estimated effective yield indicated is based upon a current projection of the amount and timing of these recurring distributions and the estimated amount of repayment of principal upon termination. Such projections are periodically reviewed and adjusted as needed. The estimated effective yield may ultimately not be realized.
⁽⁷⁾	Floating rate note: SOFR + minimum of 7.50%
⁽⁸⁾	Investments determined using significant unobservable inputs (Level 3). The value of such securities is $ 71,589,800 or 48.85% of net assets.
⁽⁹⁾	Floating rate note: 3M EURIBOR (Floored at 0%) + minimum of 8.00%

2 ArrowMark Financial Corp.|

See Notes to Schedule of Investments

⁽¹⁰⁾	Floating rate note: 3M LIBOR + minimum 7.20%
⁽¹¹⁾	Floating rate note: 3M CHF LIBOR + minimum 8.00%
⁽¹²⁾	Floating rate note: 3M EURIBOR + minimum 7.49%
⁽¹³⁾	Floating rate note: SONIA + minimum 9.75%
⁽¹⁴⁾	As of March 31, 2023, the tax cost basis of investment securities was $199,795,637. The gross unrealized appreciation over tax cost was $565,188 and gross unrealized depreciation under tax cost was $13,793,371. Net unrealized depreciation of tax cost under value was $13,228,183.
⁽¹⁵⁾	Cost values reflect accretion of original issue discount or market discount, and amortization of premium.
⁽¹⁶⁾	Includes $43,400,000 in bank loans from Texas Capital Bank.
*	Held in Marshall Holdings Limited II.
⁺	Held in Marshall Holdings Limited III.

Forward foreign currency contracts outstanding as of March 31, 2023 were as follows:

Currency Purchased		Currency Sold		Expiration	Counterparty	Unrealized Appreciation (Depreciation)
USD	8,379,933	CHF	7,689,594	04/28/23	NWG	$(49,822)
USD	40,394,101	EUR	37,246,596	04/28/23	NWG	(63,182)
USD	18,299,489	GBP	14,859,150	04/28/23	NWG	(41,451)
						$(154,455)

ABS	Asset-Backed Security
CHF	Swiss Franc
EUR	Euro
EURIBOR	Euro London Interbank Offered Rate
GBP	British Pound
LIBOR	London Interbank Offered Rate
NWG	NatWest
PLC	Public Limited Company
SOFR	Secured Overnight Financing Rate
SONIA	Sterling Overnight Interbank Average Rate

See Notes to Schedule of Investments

| ArrowMark Financial Corp. 3

Additional Information

The following is a listing of the underlying unsecured loans that were made by Community Funding 2018, LLC. See Notes to Financial Statements for additional information on ArrowMark Financial Corp’s. investment in Community Funding 2018, LLC.

Bank Name	Principal Amount	State
Big Poppy Holdings, Inc.	$ 9,000,000	California
Delmar Bancorp	4,500,000	Maryland
Fidelity Federal Bancorp	8,000,000	Indiana
First Bancshares, Inc.	10,000,000	Mississippi
Halbur Bancshares	3,000,000	Iowa
Vintage Bancorp	1,650,000	Kansas
Total	$36,150,000

4 ArrowMark Financial Corp.|

See Notes to Schedule of Investments

Notes to Consolidated Schedule of Investments (unaudited)

Investment Valuation– The most significant estimates made in the preparation of the financial statements of ArrowMark Financial Corp. are the valuation of equity and debt investments and the effective yield calculation with respect to certain debt securities, as well as the related amounts of unrealized appreciation and depreciation of investments recorded. The Company believes that there is no single definitive method for determining fair value in good faith. As a result, determining fair value requires that judgment be applied to the specific facts and circumstances of each portfolio investment while employing a consistently applied valuation process for the types of investments that AMFC makes. The Company is required to specifically fair value each individual investment on a quarterly basis.

The Company complies with ASC 820-10, Fair Value Measurements and Disclosure, which establishes a three-level valuation hierarchy for disclosure of fair value measurements. ASC 820-10 clarified the definition of fair value and requires companies to expand their disclosure about the use of fair value to measure assets and liabilities in interim and annual periods subsequent to initial recognition. ASC 820-10 defines fair value as the price that would be received to sell an asset or paid to transfer a liability (i.e. the “exit price”) in an orderly transaction between market participants at the measurement date. ASC 820-10 also establishes the following three-tier fair value hierarchy:

• Level 1— Quoted prices in active markets for identical securities;

• Level 2 — Other significant observable inputs. These inputs may include quoted prices for the identical instrument on an active market, prices for similar instruments, interest rates, prepayment speeds, credit risk, yield curves, default rates, and similar data; and

• Level 3 — Significant unobservable inputs, including the Company’s own determinations about the assumptions that a market participant would use in valuing the asset or liability, and that would be based on the best information available.

To the extent securities owned by the Company are actively traded and valuation adjustments are not applied, they are categorized in Level 1 of the fair value hierarchy. Securities traded on inactive markets or valued by reference to similar instruments are generally categorized in Level 2 of the fair value hierarchy.

The availability of valuation techniques and observable inputs can vary from security to security and is affected by a wide variety of factors including the type of security, whether the security is new and not yet established in the marketplace, and other characteristics particular to the transaction. 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 judgement. Those estimated values do not necessarily represent the amounts that may be ultimately realized due to the occurrence of future circumstances that cannot be reasonably determined. Because of the inherent uncertainty of valuation, those estimated values may be materially higher or lower than the values that would have been used had a ready market for the securities existed. Accordingly, the degree of judgment exercised by AMFC in determining fair value is greatest for securities 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. The valuation levels are not necessarily an indication of the risk associated with investing in those securities.

| ArrowMark Financial Corp. 5

Fair value is a market-based measure considered from the perspective of a market participant rather than an entity-specific measure. Therefore, even when market assumptions are not readily available, AMFC’s own assumptions are set to reflect those that market participants would use in pricing the asset or liability at the measurement date. AMFC uses prices and inputs that are current as of the measurement date, including periods of market dislocation. In periods of market dislocation, the observability of prices and inputs may be reduced for many securities. This condition could cause a security to be reclassified to a lower level within the fair value hierarchy.

AMFC will determine fair value of its assets and liabilities in accordance with valuation procedures adopted by its Board of Directors. The Company may utilize the services of one or more regionally or nationally recognized independent valuation firms to help it determine the value of each investment for which a market price is not available. AMFC’s Board of Directors will also review valuations of such investments provided by the Advisor. To the extent AMFC invests in securities for which market quotations are readily available, such market value will be used to value those securities. If a market value cannot be obtained or if the Advisor determines that the value of a security as so obtained does not represent a fair value as of the measurement date (due to a significant development subsequent to the time its price is determined or otherwise), fair value shall be determined pursuant to the methodologies established by the Board of Directors. In making these determinations, the Company may engage an independent valuation firm from time to time to assist in determining the fair value of our investments. The methods for valuing these investments may include fundamental analysis, discounts from market prices of similar securities, purchase price of securities, subsequent private transactions in the security or related securities, or discounts applied to the nature and duration of restrictions on the disposition of the securities, as well as a combination of these and other factors.

The Company’s assets measured at fair value subject to the disclosure requirements of ASC 820-10-35 at March 31, 2023, were as follows:

	TOTAL FAIR VALUE AT 3-31-23	LEVEL 1 QUOTED PRICE	LEVEL 2 SIGNIFICANT OBSERVABLE INPUTS	LEVEL 3 SIGNIFICANT UNOBSERVABLE INPUTS
Assets
Term Loans	$10,831,000	$—	$10,831,000	$—
Structured Debt Security	12,978,900	—	12,978,900	—
Regulatory Capital Relief Securities	155,916,284	—	84,326,484	71,589,800
Trust Preferred and Preferred Securities	4,857,695	—	4,857,695	—
Money Market Fund	1,983,575	1,983,575	—	—
Total Assets	$186,567,454	$1,983,575	$112,994,079	$71,589,800

6 ArrowMark Financial Corp.|

	TOTAL FAIR VALUE AT 3-31-23	LEVEL 1 QUOTED PRICE	LEVEL 2 SIGNIFICANT OBSERVABLE INPUTS	LEVEL 3 SIGNIFICANT UNOBSERVABLE INPUTS
Liabilities
Derivatives:
Foreign Currency Contracts
Forward Foreign Currency Contracts	$(154,455)	$—	$(154,455)	$—
Total Liabilities	$(154,455)	$—	$(154,455)	$—

The Level 3 categorized assets listed above have been valued via the use of a) independent third party valuation firms, or, b) fair valued as determined in good faith by the Board of Directors, in accordance with procedures established by the Board of Directors.

For fair valuations using significant unobservable inputs, U.S. GAAP requires AMFC to present a reconciliation of the beginning to ending balances for reported fair values that presents changes attributable to total realized and unrealized gains or losses, purchase and sales, and transfers in and out of Level 3 during the period. Transfers in and out between levels are based on values at the end of a period. U.S. GAAP also requires AMFC to disclose amounts and reasons for all transfers in and out of Level 1 and Level 2 fair value measurements. A reconciliation of Level 3 investments is presented below:

	REGULATORY CAPITAL RELIEF SECURITIES
Balance at December 31, 2022	$69,529,738
Realized loss including earnings	—
Unrealized depreciation on investments	(175,479)
Purchases	4,636,043
Sales	(4,000,635)
Transfers in	4,929,232
Transfers out	(3,329,099)
Balance at March 31, 2023	$71,589,800

The change in unrealized depreciation on Level 3 securities held as of March 31, 2023 was $(175,479).

	FAIR VALUE AT 3-31-23	VALUATION TECHNIQUES	UNOBSERVABLE INPUTS	ASSUMPTIONS	IMPACT TO VALUATION FROM AN INCREASE TO INPUT
Regulatory Capital Securities	$71,589,800	Broker Quotes	—	—	—
	$71,589,800

For more information with regard to significant accounting policies, see the most recent Company’s annual report filed with the Securities and Exchange Commissions.

Forward Foreign Currency Contracts — The Fund may enter into forward foreign currency contracts to hedge against foreign currency exchange rate risk on their non-U.S. dollar denominated securities or to facilitate settlement of foreign currency denominated portfolio transactions. A forward foreign currency contract is an agreement between two parties to buy and sell a currency at a set price on

| ArrowMark Financial Corp. 7

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 extinguished, through either delivery or offset by entering into another forward foreign currency contract, the Fund records 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 was extinguished.

Forward foreign currency contracts involve elements of market risk in excess of the amounts reflected in the Statements 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 counter parties to meet the terms of their contracts.

8 ArrowMark Financial Corp.|

Enhanced Investments, Inc.
329 South Oyster Bay Road #2085
Plainview, NY 11803
team@eninvs.com

Important disclosures

Performance results were prepared by Enhanced Investments, and have not been compiled, reviewed or audited by an independent accountant. Performance estimates are subject to future adjustment and revision. Investors should be aware that a loss of investment is possible. Account holdings are for illustrative purposes only and are not investment recommendations. Additional information, including (i) the calculation methodology; and (ii) a list showing the contribution of each holding to the portfolio’s performance during the time period will be provided upon request.
All statements made via social media sites sponsored or maintained by Enhanced Investments and its affiliates are for informational purposes only and do not constitute a comprehensive description of Enhanced Investments' investment advisory services.
Certain investments are not suitable for all investors. Before investing, consider your investment objectives and applicable fees. The rate of return on investments can vary widely over time, especially for long term investments. Investment losses are possible, including the potential loss of all amounts invested. Information provided by Enhanced Investments is for informational and general educational purposes only and is not investment or financial advice.

Nothing on this website should be considered an offer, solicitation of an offer, or advice to buy or sell securities.
Past performance is no guarantee of future results. Any historical returns, expected returns [or probability projections] are hypothetical in nature and may not reflect actual future performance.
All the strategies assume investments in equity invstrumenta only and are more relevant for "agressive investment profile". Eastern European flagship strategy assumes using up to 20% leverage of total portfolio. GlobalCommodities and US Growth strategy currently assume no leverage.
Results for the Enhanced Investments strategies as compared to the performance of Illustrative Benchmarks is for informational purposes only. Our investment program does not mirror that of the Illustrative Benchmarks and the volatility may be materially different from the volatility of Illustrative Benchmarks. Reference or comparison to an Illustrative Benchmark does not imply that strategies of Enhanced Investments will be constructed in the same way as the Illustrative Benchmark or achieve returns, volatility, or other results similar to those of the Illustrative Benchmark. The S&P 500 is an unmanaged market capitalization-weighted index of 500 common stocks chosen for market size, liquidity, and industry group representation to represent U.S. equity performance.
Performance results were prepared by Enhanced Investments, and have not been compiled, reviewed or audited by an independent accountant. Performance estimates are subject to future adjustment and revision. Investors should be aware that a loss of investment is possible. Account holdings are for illustrative purposes only and are not investment recommendations. Additional information, including (i) the calculation methodology; and (ii) a list showing the contribution of each holding to the portfolio’s performance during the time period will be provided upon request.
All statements made via social media sites sponsored or maintained by Enhanced Investments and its affiliates are for informational purposes only and do not constitute a comprehensive description of Enhanced Investments' investment advisory services.
Certain investments are not suitable for all investors. Before investing, consider your investment objectives and applicable fees. The rate of return on investments can vary widely over time, especially for long term investments. Investment losses are possible, including the potential loss of all amounts invested. Information provided by Enhanced Investments is for informational and general educational purposes only and is not investment or financial advice.