KO is susceptible to cercospora disease, which is sort of like blackspot but takes longer to kill the leaves. The spots could be that or spot anthracnose disease. (I don't know whether KO is susceptible to that one.) When my neighbor's KO gets spotty, she just cuts it back and removes the bad foliage. It recovers and blooms nicely in about six weeks. Or you could spray with a copper fungicide such as Soap Shield, which is considered organic. This would stop the spread of the disease.

Your foliage is chlorotic (yellowish), which may account for the bright redness of the fungal spots. It is not making enough chlorophyll, and a likely cause is that it needs nitrogen. As a quick booster, you could apply 3 TB of blood meal or 1 TB of regular lawn fertilizer (approx. 30-0-0, no herbicide). I can recommend Rose Tone as a regular fertilizer, one cup every two months.

This post was edited by michaelg on Thu, Jun 27, 13 at 16:47

Carefully examine around the bottom of the canes. Knock Out is *very* susceptible to cane cankers which damage the whole cane and make it more susceptible to everything known to rosedom. If the cane is damaged, that would explain the chlorosis, and the leaf problems. If there is any mulch over the base of the plant, remove it. That's going to be the problem.