On
behalf of the team at DoubleLine, I am pleased to deliver the Annual Report for the DoubleLine Yield Opportunities Fund (NYSE: DLY, the Fund) for the 12-month period ended September 30, 2021.
On the following pages, you will find specific information regarding the Funds operations and holdings. In addition, we discuss the Funds investment performance and the main drivers of that performance during the reporting period.
If you have any questions regarding the Fund, please dont hesitate to call us at 1 (877) DLINE 11 / 1 (877)
354-6311 or visit our website www.doublelinefunds.com, where our investment management team offers deeper insights and analysis on relevant capital market activity impacting investors today. We value the trust
that you have placed with us, and we will continue to strive to offer thoughtful investment solutions to our shareholders.
Ronald R. Redell, CFA
The Fund seeks to pay regular monthly distributions out of its net investment income at a rate that reflects its current and projected net income performance. To
permit the Fund to maintain a more stable monthly distributions, the Fund may pay distributions at a rate different than the amount of net income actually earned by the Fund during the period. Distributions are determined on a tax basis, which may
differ from amounts recorded in the accounting records. In instances where the distributions exceed the earned net investment income, the Fund would report a negative undistributed net ordinary income. Refer to Note 5 Income Tax Information
for additional information regarding the amounts of undistributed net ordinary income and undistributed net long-term capital gains and the character of the actual distributions paid by the Fund during the period. If a portion of the Funds
distributions is from sources other than net investment income, shareholders will be notified of the estimated composition of such distribution through a Section 19 notice. For financial reporting purposes, the per share amounts of the
Funds distributions for the reporting period are presented in the Financial Highlights.
Opinions expressed herein are as of September 30, 2021, and
are subject to change at any time, are not guaranteed and should not be considered investment advice. Fund holdings and sector allocations are subject to change at any time and are not recommendations to buy or sell any security. Please refer to the
Schedule of Investments for a complete list of Fund holdings as of period end.
There are risks associated with an investment in the Fund. Shares of closed-end investment companies frequently trade at a discount to their net asset value, which may increase investors risk of loss. Investors should consider the Funds investment objective, risks,
charges and expenses carefully before investing. An investment in the Fund should not constitute a complete investment program.
This document is not an offer
to sell securities or the solicitation of an offer to buy securities, nor shall there be any sale or offer of these securities, in any jurisdiction where such sale or offer is not permitted.
The Funds shares are only available for purchase through broker/dealers on the secondary market. Unlike an open-end
mutual fund, closed-end funds typically offer a fixed number of shares for sale. After the initial public offering, shares are bought in the secondary marketplace, and the market price of the shares is
determined by supply and demand, not by NAV, often at a lower price than the NAV. A closed-end fund is not required to buy its shares back from investors upon request.
The performance shown assumes the reinvestment of all dividends and distributions and does not reflect any reductions for taxes. Total return does not reflect
broker commissions or sales charges in connection with the purchase or sale of Fund shares. Performance reflects management fees and other fund expenses.
An investment cannot be made directly in an index. The performance of any index
mentioned in this commentary has not been adjusted for ongoing management, distribution and operating expenses applicable to mutual fund investments.
This
commentary may include statements that constitute forward-looking statements under the U.S. securities laws. Forward-looking statements include, among other things, projections, estimates, and information about possible or future results
related to the Fund and market or regulatory developments. The views expressed above are not guarantees of future performance or economic results and involve certain risks, uncertainties and assumptions that could cause actual outcomes and results
to differ materially from the views expressed herein.
DoubleLine has no obligation to provide revised assessments in the event of changed circumstances. While
we have gathered this information from sources believed to be reliable, DoubleLine cannot guarantee the accuracy of the information provided. Securities discussed are not recommendations and are presented as examples of issue selection or portfolio
management processes. They have been picked for comparison or illustration purposes only. No security presented within is either offered for sale or purchase. DoubleLine reserves the right to change its investment perspective and outlook without
notice as market conditions dictate or as additional information becomes available.
Investment strategies may not achieve the desired results due to
implementation lag, other timing factors, portfolio management decision making, economic or market conditions or other unanticipated factors. The views and forecasts expressed in this material are as of the date indicated, are subject to change
without notice, may not come to pass and do not represent a recommendation or offer of any particular security, strategy, or investment. Past performance is no guarantee of future results.
For the fiscal
year ended September 30, 2021, certain dividends paid by the Fund may be subject to a maximum tax rate of 15% (20% for taxpayers with taxable income greater than $425,800 for single individuals and $479,000 for married couples filing jointly),
as provided for by the Jobs and Growth Tax Relief Reconciliation Act of 2003 and The Tax Cuts and Jobs Act of 2017. The percentage of dividends declared from ordinary income designated as qualified dividend income was as follows:
For corporate shareholders, the percent of ordinary income distributions qualifying for the corporate dividends received
deduction for the fiscal year ended September 30, 2021, was as follows:
The percentage of taxable ordinary income distributions that are designated as short-term capital gain distributions under
Internal Revenue Section 871(k)(2)(c) for the fiscal year ended September 30, 2021, was as follows:
The percentage of taxable ordinary income distributions that are designated as interest related dividends under Internal Revenue
Section 871(k)(1)(c) for the fiscal year ended September 30, 2021, was as follows:
Shareholders are advised to consult their own tax adviser with respect to the tax consequences of their investment in the Fund.
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Trustees and Officers
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(Unaudited)
September 30, 2021
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Name, Address, and
Year of Birth(1)
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Position with Trust
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Term of Office
and Length of
Time Served
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Principal Occupation(s) During Past 5 Years
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Number of
Portfolios
Overseen(2)
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Other Directorships
Held by Trustee
During Past 5 Years
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Independent Trustees
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Joseph J. Ciprari, 1964
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Trustee
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Class II (2022)*/Since Inception
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President, Remo Consultants, a real estate financial consulting firm. Formerly, Managing Director, UBS AG. Formerly, Managing Director, Ally Securities LLC.
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23
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None
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John C. Salter, 1957
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Trustee
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Class III (2023)*/Since Inception
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Partner, Stark Municipal Brokers. Formerly, Managing Director, Municipals, Tullet Prebon Financial Services LLC (d/b/a Chapdelaine). Formerly,
Partner,
Stark, Salter & Smith, a securities brokerage firm specializing in tax exempt bonds.
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23
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None
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Raymond B. Woolson, 1958
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Trustee
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Class I (2024)*/Since April 2020
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President, Apogee Group, Inc., a company providing financial consulting services.
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23
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Independent
Trustee,
Advisors
Series Trust
(an
open-end
investment
company
with 42
portfolios)(3)
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(1) The address of each Independent Trustee is c/o DoubleLine Funds, 333 South Grand Avenue, Suite 1800, Los Angeles, CA 90071.
(2) Includes each series of DoubleLine Funds Trust, DoubleLine Opportunistic Credit Fund, DoubleLine Income Solutions Fund, and DoubleLine Yield
Opportunities Fund.
(3) Quasar Distributors, LLC serves as the principal underwriter of DoubleLine Funds Trust and Advisors Series Trust.
* The common shareholders of the Fund are expected to vote to elect trustees of the relevant class at the annual shareholders meeting in the year indicated
above.
The following Trustee is an interested person of the Trust as defined in the 1940 Act because he is an officer of the Adviser and holds direct or
indirect ownership interests in DoubleLine Capital LP and DoubleLine Alternatives LP. Additionally, Mr. Redell is an officer of the Trust.
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Name, Address, and
Year of Birth(1)
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Position with Trust
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Term of Office
and Length of
Time Served
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Principal Occupation(s) During Past 5 Years
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Number of
Portfolios
Overseen(2)
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Other Directorships
Held by Trustee
During Past 5 Years
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Interested Trustee
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Ronald R. Redell, 1970
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Trustee, Chairman, President and Chief Executive Officer
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Class I (2024)*/Since Inception
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Trustee, Chairman, President, and Chief Executive Officer, DoubleLine Income Solutions Fund (since January 2013); President, DoubleLine Group LP (since January 2019 and Executive from January
2013 to January 2019); Trustee, Chairman, President and Chief Executive Officer, DoubleLine Opportunistic Credit Fund (since July 2011); Executive, DoubleLine Capital (since July 2010); President, DoubleLine Funds Trust (since January
2010).
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23
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None
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(1) The address of each Interested Trustee is c/o DoubleLine Funds, 333 South Grand Avenue, Suite 1800, Los Angeles, CA 90071.
(2) Includes each series of DoubleLine Funds Trust, DoubleLine Opportunistic Credit Fund, DoubleLine Income Solutions Fund, and DoubleLine Yield
Opportunities Fund.
* The common shareholders of the Fund are expected to vote to elect trustees of the relevant class at the annual shareholders
meeting in the year indicated above. The Statement of Additional Information includes additional information about the Trustees and is available, without charge, upon request, by calling 877-DLine11 (877-354-6311) or email fundinfo@doubleline.com.
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Annual Report
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September 30, 2021
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43
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Trustees and
Officers (Cont.)
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Officers
The officers of the Trust who are not also Trustees of the Trust are:
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Name, Address, and
Year of Birth(1)
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Position with Trust
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Term of Office
and Length of
Time Served
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Principal Occupation(s) During Past 5 Years
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Henry V. Chase, 1949
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Treasurer and Principal Financial and Accounting Officer
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Indefinite/Since January 2020
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Treasurer and Principal Financial and Accounting Officer, DoubleLine Funds Trust (since January 2020); Treasurer and Principal Financial and Accounting Officer, DoubleLine Yield Opportunities
Fund (since January 2020); Treasurer and Principal Financial and Accounting Officer, DoubleLine Income Solutions Fund (since January 2020); Treasurer and Principal Financial and Accounting Officer, DoubleLine Opportunistic Credit Fund (since January
2020); Chief Financial Officer, DoubleLine Capital (since January 2013); Vice President, DoubleLine Yield Opportunities Fund (since November 2019); Vice President, DoubleLine Income Solutions Fund (since May 2019); Vice President, DoubleLine Funds
Trust (since May 2019); Vice President, DoubleLine Opportunistic Credit Fund (since May 2019).
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Youse Guia, 1972
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Chief Compliance Officer
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Indefinite/Since March 2018
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Chief Compliance Officer, DoubleLine Yield Opportunities Fund (since November 2019); Chief Compliance Officer, DoubleLine Capital (since March 2018); Chief Compliance Officer, DoubleLine
Equity LP (since March 2018); Chief Compliance Officer, DoubleLine Funds Trust (since March 2018); Chief Compliance Officer, DoubleLine Opportunistic Credit Fund (since March 2018); Chief Compliance Officer, DoubleLine Income Solutions Fund (since
March 2018). Formerly, Executive Vice President and Deputy Chief Compliance Officer, Pacific Investment Management Company LLC (PIMCO) (from April 2014 to February 2018); Chief Compliance Officer, PIMCO Managed Accounts Trust (from
September 2014 to February 2018); Chief Compliance Officer, PIMCO-sponsored closed-end funds (from September 2014 to February 2018); Chief Compliance Officer, PIMCO Flexible Credit Income Fund (from February
2017 to February 2018). Formerly, Head of Compliance, Allianz Global Investors U.S. Holdings LLC (from October 2012 to March 2014); Chief Compliance Officer, Allianz Funds, Allianz Multi-Strategy Trust, Allianz Global Investors Sponsored Closed-End Funds, Premier Multi-Series VIT and The Korea Fund, Inc. (from October 2004 to December 2013).
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Winnie Han, 1988
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Assistant Treasurer
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Indefinite/Since May 2017
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Assistant Treasurer, DoubleLine Yield Opportunities Fund (since November 2019); Assistant Treasurer, DoubleLine Income Solutions Fund (since May 2017); Assistant Treasurer, DoubleLine Funds
Trust (since May 2017); Assistant Treasurer, DoubleLine Opportunistic Credit Fund (since May 2017); Assistant Treasurer, DoubleLine Capital (since March 2017); Formerly, Investment Accounting Supervisor, Alexandria Real Estate Equities, Inc. (June
2016 to March 2017); Formerly, Manager, PricewaterhouseCoopers (January 2011 to June 2016).
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Cris Santa Ana, 1965
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Vice President and Secretary
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Indefinite/Vice President Since Inception and Secretary Since July 2018
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Vice President and Secretary, DoubleLine Yield Opportunities Fund (since November 2019); Vice President, DoubleLine Income Solutions Fund (since January 2013); Vice President, DoubleLine
Opportunistic Credit Fund (since July 2011); Vice President, DoubleLine Funds Trust (since April 2011); Chief Risk Officer, DoubleLine Capital (since June 2010). Formerly, Chief Operating Officer, DoubleLine Capital (from December 2009 through May
2010).
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Earl A. Lariscy, 1966
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Vice President and Assistant Secretary
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Indefinite/Vice President Since May 2012 and Assistant Secretary Since Inception
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Vice President and Secretary, DoubleLine Yield Opportunities Fund (since November 2019); Vice President and Assistant Secretary, DoubleLine Income Solutions Fund (since January 2013); Vice
President, DoubleLine Funds Trust (since May 2012); Vice President and Assistant Secretary, DoubleLine Opportunistic Credit Fund (since May 2012 and inception, respectively); General Counsel, DoubleLine Capital (since April 2010).
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David Kennedy, 1964
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Vice President
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Indefinite/Since May 2012
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Vice President and Secretary, DoubleLine Yield Opportunities Fund (since November 2019); Vice President, DoubleLine Income Solutions Fund (since January 2013); Vice President, DoubleLine
Funds Trust (since May 2012); Vice President, DoubleLine Opportunistic Credit Fund (since May 2012); Manager, Trading and Settlements, DoubleLine Capital (since December 2009).
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44
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DoubleLine Yield Opportunities Fund
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(Unaudited)
September 30, 2021
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Name, Address, and
Year of Birth(1)
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Position with Trust
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Term of Office
and Length of
Time Served
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Principal Occupation(s) During Past 5 Years
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Patrick A. Townzen, 1978
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Vice President
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Indefinite/Since September 2012
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Vice President and Secretary, DoubleLine Yield Opportunities Fund (since September 2019); Vice President, DoubleLine Income Solutions Fund (since January 2013); Vice President, DoubleLine Funds Trust (since September 2012); Vice
President, DoubleLine Opportunistic Credit Fund (since September 2012); Director of Operations, DoubleLine Capital (since March 2018). Formerly, Manager of Operations, DoubleLine Capital (from September 2012 to March 2018).
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Brady J. Femling, 1987
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Vice President
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Indefinite/Since May 2017
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Vice President, DoubleLine Yield Opportunities Fund (since November 2019); Vice President, DoubleLine Income Solutions Fund (since May 2017); Vice President, DoubleLine Opportunistic Credit Fund (since May 2017); Vice President,
DoubleLine Funds Trust (since May 2017); Senior Fund Accountant, DoubleLine Capital (Since April 2013). Fund Accounting Supervisor, ALPS Fund Services (From October 2009 to April 2013).
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Neal L. Zalvan, 1973
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Vice President
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Indefinite/Vice President Since May 2017
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Vice President, DoubleLine Yield Opportunities Fund (since November 2019); Vice President, DoubleLine Opportunistic Credit Fund (since May 2017); Vice President, DoubleLine Funds Trust (since May 2016); Vice President, DoubleLine
Income Solutions Fund (since May 2016); Legal/Compliance, DoubleLine Group LP (since January 2013); Formerly, Anti-Money Laundering Officer, DoubleLine Yield Opportunities Fund (from November 2019 to September 2020); Anti-Money Laundering Officer,
DoubleLine Capital, DoubleLine Opportunistic Credit Fund, DoubleLine Income Solutions Fund, DoubleLine Equity LP and DoubleLine Alternatives (from March 2016 to September 2020).
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Grace Walker, 1970
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Assistant Treasurer
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Indefinite/Since January 2020
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Assistant Treasurer, DoubleLine Funds Trust (since January 2020); Assistant Treasurer, DoubleLine Income Solutions Fund (since January 2020); Assistant Treasurer, DoubleLine Opportunistic Credit Fund (since January 2020); Assistant
Treasurer, DoubleLine Yield Opportunities Fund (since January 2020); Treasurer, DoubleLine Funds (Luxembourg) and DoubleLine Cayman Unit Trust (since March 2017). Formerly, Assistant Treasurer, DoubleLine Income Solutions Fund (from January 2013 to
May 2017); Assistant Treasurer, DoubleLine Opportunistic Credit Fund (from March 2012 to May 2017); Assistant Treasurer, DoubleLine Funds Trust (from March 2012 to May 2017).
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Adam D. Rossetti, 1978
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Vice President
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Indefinite/Since February 2019
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Vice President, DoubleLine Yield Opportunities Fund (since September 2019); Vice President, DoubleLine Funds Trust (since February 2019); Vice President, DoubleLine Income Solutions Fund (since February 2019); Vice President,
DoubleLine Opportunistic Credit Fund (since February 2019); Chief Compliance Officer, DoubleLine Alternatives LP (since June 2015); Legal/ Compliance, DoubleLine Group LP (since April 2015). Formerly, Chief Compliance Officer, DoubleLine Capital
(from August 2017 to March 2018); Chief Compliance Officer, DoubleLine Equity LP (from August 2017 to March 2018); Chief Compliance Officer, DoubleLine Funds Trust (from August 2017 to March 2018); Chief Compliance Officer, DoubleLine Income
Solutions Fund (from August 2017 to March 2018); Chief Compliance Officer, DoubleLine Opportunistic Credit Fund (from August 2017 to March 2018); Vice President and Counsel, PIMCO (from April 2012 to April 2015).
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Jeffery J. Sherman, 1977
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Vice President
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Indefinite/Since Inception
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Deputy Chief Investment Officer, DoubleLine (since June 2016); President and Portfolio Manager, DoubleLine Alternatives LP (since April 2015 and May 2015, respectively); Vice President, DoubleLine Income Solutions Fund (since
January 2013); Vice President, DoubleLine Opportunistic Credit Fund (since July 2011); Portfolio Manager, DoubleLine Capital (since September 2010); Fixed Income Asset Allocation, DoubleLine Capital (since December 2009).
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Dawn Oswald, 1980
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Vice President
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Indefinite/Since January 2020
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Vice President, DoubleLine Funds Trust (since January 2020); Vice President, DoubleLine Yield Opportunities Fund (since January 2020); Vice President, DoubleLine Income Solutions Fund (since January 2020); Vice President, DoubleLine
Opportunistic Credit Fund (since January 2020); Pricing Manager, DoubleLine Capital (since January 2018). Formerly, Operations Specialist, DoubleLine Capital (from July 2016 to January 2018). Global Securities Fixed Income Valuation Senior Analyst,
Capital Group (from April 2015 to July 2016). Global Securities Fair Valuation Analyst, Capital Group (from January 2010 to April 2015).
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Annual Report
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September 30, 2021
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45
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Trustees and
Officers (Cont.)
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Name, Address, and
Year of Birth(1)
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Position with Trust
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Term of Office
and Length of
Time Served
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Principal Occupation(s) During Past 5 Years
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Robert Herron, 1987
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Vice President
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Indefinite/Since June 2020
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Vice President, DoubleLine Funds Trust (since June 2020); Vice President, DoubleLine Yield Opportunities Fund (since June 2020); Vice President, DoubleLine Income Solutions Fund (since June 2020); Vice President, DoubleLine
Opportunistic Credit Fund (since June 2020). ManagerRisk Analytics, DoubleLine Capital (since January 2017); Formerly, AnalystRisk Analytics, DoubleLine Capital (from October 2011 to January 2017).
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Jose Sarmenta, 1975
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Anti-Money Laundering Officer
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Indefinite/Since September 2020
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Anti-Money Laundering Officer, DoubleLine Funds Trust (since September 2020); Anti-Money Laundering Officer, DoubleLine Yield Opportunities Fund (since September 2020); Anti-Money Laundering Officer, DoubleLine Opportunistic Credit
Fund (since September 2020); Anti-Money Laundering Officer, DoubleLine Income Solutions Fund (since September 2020); Compliance Analyst, DoubleLine Capital (since October 2019); Formerly, Compliance Manager, Anti-Money Laundering Manager for CIM
Group (from November 2017 to October 2019); Governance and Risk Manager for PennyMac Financial Services Inc. (from July 2015 to November 2017).
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(1) The address of each officer is c/o DoubleLine Funds, 333 South Grand Avenue, Suite 1800, Los Angeles, CA 90071.
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46
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DoubleLine Yield Opportunities Fund
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Summary of Updated Information Regarding the Fund
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(Unaudited)
September 30, 2021
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The following
information in this annual report is a summary of certain information about the Fund and the changes since the Funds last annual report to shareholders, for the fiscal year ended September 30, 2020. This information may not reflect all of
the changes that have occurred since you invested in the Fund.
Investment Objective and Strategies
There have been no material changes to the Funds investment objective or principal investment strategies since the Funds last annual report to
shareholders.
The following summarizes the Funds current investment objective and principal investment strategies:
Investment Objective
To seek a
high level of total return, with an emphasis on current income. The Fund cannot assure you that it will achieve its investment objective. The Funds investment objective may be changed by the Funds Board of Trustees without prior notice
to or approval of the Funds shareholders.
Principal Investment Strategies
Under normal market conditions, the Fund will seek to achieve its investment objective by investing in a portfolio of investments selected for its potential to
provide a high level of total return, with an emphasis on current income. The Fund may invest in debt securities and other income-producing investments of issuers anywhere in the world, including in emerging markets, and may invest in investments of
any credit quality. As of September 30, 2021, the Fund invests substantially, and may thereafter continue to invest substantially, in debt instruments of below investment grade quality (including debt securities commonly referred to as
high yield securities or junk bonds) and unrated instruments. The Fund may invest in securities of any or no maturity or negative duration, and there are no limits on the duration of the Funds portfolio.
The Funds investment adviser, DoubleLine Capital LP (DoubleLine or the Adviser), allocates the Funds assets among sectors of
the debt market, and among investments within those sectors, in an attempt to construct a portfolio providing the potential for a high level of total return, with an emphasis on current income, consistent with what DoubleLine considers an
appropriate level of risk in light of market conditions prevailing at the time. In managing the Funds investments, the Adviser uses a controlled risk approach. The techniques of this approach attempt to control the principal risk components of
the fixed-income markets and include consideration of:
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the relative values and fundamentals of the different sectors of the debt market
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the relative values of securities within a sector
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the shape of the yield curve; and
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fluctuations in the overall level of interest rates.
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DoubleLine selects investments over time to implement its long-term strategic investment view. It also buys and sells securities opportunistically in response to
short-term market, economic, political, or other developments or otherwise as opportunities may present themselves. DoubleLine manages the Fund under an integrated risk management framework overseen by the Funds portfolio management team and
DoubleLines risk management team. DoubleLine expects that the Fund will normally not invest more than 50% of its total assets in a single sector of the debt market (excluding the U.S. Government securities sector), as determined by the
Adviser. Generally, the sectors of the debt market among which the Adviser expects to allocate the Funds assets principally from time to time include, among others, commercial mortgage-backed securities, agency residential mortgage-backed
securities, non-agency residential mortgage-backed securities, non-mortgage-related asset-backed securities, investment grade corporate debt, high yield corporate debt,
bank and other loans, international sovereign debt, emerging market debt, collateralized loan obligations (CLOs), U.S. Government securities, and municipal debt. The Fund has historically had and may continue to have significant holdings
of securitized credit, such as commercial mortgage-backed securities, non-agency residential mortgage- backed securities, non-mortgage-related asset-backed securities
and CLOs.
Within each sector, the Fund may invest in debt securities and other income-producing investments based on DoubleLines assessment of the
potential returns and risks of particular securities and other investments within that sector. Such securities may include, by way of example, mortgage-related securities of any kind, including commercial and residential mortgage-backed securities;
other asset-backed securities; below investment grade debt (including debt securities commonly referred to as high yield or junk bonds); debt securities issued by domestic or foreign (including emerging market) corporate or
other issuers;
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Annual Report
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September 30, 2021
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47
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Summary of Updated Information Regarding the Fund (Cont.)
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obligations of foreign (including emerging market) sovereigns or their agencies or instrumentalities; supra-national obligations; CLOs, including commercial real estate CLOs (CRE
CLOs); equity, mortgage, or hybrid real estate investment trust (REIT) securities; bank loans and assignments and other fixed and floating rate loans (including, among others, senior loans, second lien or other subordinated or
unsecured loans, delayed funding loans, debtor-in-possession loans, exit facilities and revolving credit facilities); municipal securities and other debt securities
issued by state or local governments and their agencies, authorities and by other government-sponsored enterprises; payment-in-kind securities; zero-coupon bonds; convertible bonds and securities; inflation-indexed bonds; structured notes and other hybrid instruments; credit-linked trust certificates; preferred securities; commercial paper; and cash and
cash equivalents. The Fund may also invest without limit in securities issued or guaranteed by the U.S. Government or its agencies, instrumentalities or sponsored corporations; however, as of September 30, 2021, the Fund has invested, and may
thereafter continue to invest, substantially in debt securities and other income-producing investments that involve substantially greater credit risk than those investments. The rate of interest on the debt and other income-producing investments
that the Fund may purchase may be fixed, floating, or variable.
The Fund may invest in mortgage-backed securities of any kind. Mortgage-backed securities
may include, among other things, securities issued or guaranteed by the U.S. Government or its agencies, instrumentalities or sponsored corporations or securities of domestic or foreign private issuers. Mortgage-backed securities may be issued or
guaranteed by banks or other financial institutions, other private issuers, special-purpose vehicles established for such purpose, or government agencies or instrumentalities. Privately-issued mortgage-backed securities include any mortgage-backed
security other than those issued or guaranteed as to principal or interest by the U.S. Government or its agencies, instrumentalities or sponsored corporations.
Mortgage-backed securities may include, without limitation, interests in pools of residential mortgages or commercial mortgages, and may relate to domestic or non-U.S. mortgages. Mortgage-backed securities also include, but are not limited to, securities representing interests in, collateralized or backed by, or whose values are determined in whole or in part by reference
to, any number of mortgages or pools of mortgages or the payment experience of such mortgages or pools of mortgages, including Real Estate Mortgage Investment Conduits (REMICs), which could include
re-securitizations of REMICs (Re-REMICs), credit default swaps, mortgage pass-through securities, mortgage servicing rights, inverse floaters, collateralized
mortgage obligations (CMOs), multiclass pass-through securities, private mortgage pass-through securities, stripped mortgage securities (generally interest-only and principal-only securities), credit risk transfer securities, and debt
instruments collateralized or secured by other mortgage-related assets. The collateral backing mortgage-backed securities in which the Fund may invest may include, without limitation, performing,
non-performing and/or re-performing loans, non-qualifying mortgage loans, and loans secured by a single asset and issued by a
single borrower. The commercial mortgage-backed securities in which the Fund may invest may also include securitizations backed by a single mortgage on a single property. The Fund may invest in bonds, including unguaranteed mezzanine bonds and
subordinate bonds, securitized through Freddie Macs K-Deal program, which securitizes mortgage loans backed by multi-family apartment properties.
The Fund may invest in asset-backed securities of any type, including securitizations of a wide variety of
non-mortgage-related receivables, such as credit card and automobile finance receivables, student loans, consumer loans, loans issued or sponsored by online or similar retail or alternative lending platforms,
installment loan contracts, home equity loans, mobile home loans, boat loans, business and small business loans, project finance loans, airplane leases, and leases of various other types of real and personal property, and other income streams, such
as income from renewable energy projects and franchise rights. The loans underlying the asset-backed securities and similar obligations in which the Fund may invest may include loans that contain fewer or less restrictive constraints on the borrower
than certain other types of loans (covenant-lite loans) and loans of subprime quality.
In pursuing its investment objective, the Fund may invest
significantly in residential and/or commercial real estate or mortgage- related loans, consumer loans, business and small business loans, construction or project finance loans, or other types of loans, which loans may include secured and unsecured
notes, senior loans, second lien loans or other types of subordinated loans, or mezzanine loans, any of which may be covenant-lite or loans of subprime quality. The Fund may make direct investments in individual loans or in pools of loans and in
whole loans as well as in loan participations or assignments, itself or with other clients of the Adviser or its related parties. In addition, although, as of September 30, 2021, the Fund has no present intention to do so, the Fund may itself
or in conjunction with others originate any of the foregoing types of loans. The Fund intends to hire third-party service providers to service loans the Fund originates, if any. The Fund may also be involved in, or finance, the origination of loans
to corporations, other legal entities or individuals, including foreign entities and individuals.
The Fund may invest in any level of the capital structure
of an issuer of mortgage- or asset-backed securities, including subordinated or residual tranches, risk retention tranches of collateralized mortgage-backed securities or other eligible
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48
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DoubleLine Yield Opportunities Fund
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(Unaudited)
September 30, 2021
|
securitizations, and the equity or first loss tranche (such as the E Notes of aircraft asset-backed securities). The Fund may invest in mortgage- or asset-backed
securities that are designed to have leveraged investment exposure to the underlying mortgages or assets. The Fund may also gain or adjust its exposure to mortgage- or asset-backed securities through derivatives, such as credit default swap or
futures transactions. The Fund may also invest in credit risk transfer securities that, while not backed by mortgage loans, have credit exposure to a pool of mortgage loans acquired by the government-sponsored entity or private entity issuing the
securities.
Certain mortgage- and other asset-backed securities in which the Fund may invest may represent an inverse interest-only class of security for
which the holders are entitled to receive no payments of principal and are entitled only to receive interest at a rate that will vary inversely with a specified index or reference rate, or a multiple thereof. The Fund may invest in collateralized
debt obligations (CDOs) (including CLOs and collateralized bond obligations (CBOs)) and other structured products sponsored or managed by, or otherwise affiliated with, the Adviser or related parties of the Adviser. Such
investments may include investments in debt or equity interests issued by the CDO or structured product as well as investments purchased on the secondary market, and the Fund may invest in any tranche of the CDO or structured product, including an
equity tranche.
The Fund may invest in debt instruments of any credit quality and may invest without limit in debt securities that are at the time of
investment rated below investment grade or unrated securities judged by DoubleLine to be of comparable quality. Notwithstanding the foregoing, the Fund will not acquire any corporate bond, CLO, corporate loan, or sovereign and quasi sovereign
obligation that is rated at the time of investment Caa1 or below by Moodys Investors Service, Inc. (Moodys) and CCC+ or below by S&P Global Ratings (S&P) or Fitch, Inc. (Fitch) or any such
securities that are unrated if it would cause the Fund to have more than 20% of its total managed assets invested in such investments. The 20% limitation does not apply to rated or unrated mortgage- and asset-backed securities of any kind (e.g.
commercial mortgage-backed securities and residential mortgage-backed securities) or loans or other obligations secured, collateralized or supported by real estate or real estate related assets of any kind (e.g., mortgages). In the case of split
ratings, DoubleLine will categorize the security according to the highest rating assigned. In addition, the Fund will not purchase securities that are in default as to the repayment of principal and/or interest at the time of acquisition by the
Fund.
The Fund will normally invest at least 25% of its total assets in issuers involved in one or more real estate-related industries. Investments in
issuers involved in real estate-related industries include, without limitation, investments in mortgage-related obligations issued or guaranteed by government agencies or other government entities or by private originators or issuers; instruments of
any kind that are backed by or that provide exposure to one or more real estate-related mortgages; interests in issuers that deal in, hold, or invest in mortgages, real estate, or other real estate-related assets; real estate investment trusts of
any kind; instruments whose performance is based on or relates to payments made on real estate mortgages or other real estate- related obligations; instruments secured by any interest in real estate; and other investments that the Adviser determines
provide exposure to real estate or one or more of the foregoing.
The Fund may invest without limit in securities of foreign issuers and may invest up to 30%
of its total managed assets in securities of issuers domiciled or organized in emerging market countries. For these purposes, an emerging market country is a country that, at the time the Fund invests in the related fixed income
instruments, is classified as an emerging or developing economy by any supranational organization such as the World Bank or the United Nations, or related entities, or is considered an emerging market country for purposes of constructing a major
emerging market securities index. The Fund may take positions in various foreign (non-U.S.) currencies, including by actual holdings of those currencies and through forward, futures, swap, and option contracts
with respect to foreign currencies, for hedging, or as a substitute for actual purchases or sales of the currencies in question; the Fund may also invest without limit in investments denominated in currencies other than the U.S. dollar, including
the local currencies of emerging markets. The Fund may (but is not required to) attempt to hedge some of its exposure to foreign currencies in order to reduce the risk of loss due to fluctuations in currency exchange rates relative to the U.S.
dollar.
The Adviser monitors the duration of the Funds portfolio securities to seek to assess and, in its discretion, adjust the Funds exposure
to interest rate risk. However, the Fund may invest in securities of any or no maturity or negative duration, and there are no limits on the duration of the Funds portfolio. The Adviser retains broad discretion to modify the Funds
duration within a wide range, including the discretion to construct a portfolio of investments for the Fund with a negative duration. Duration is a measure of the expected life of a fixed income instrument that is used to determine the sensitivity
of a securitys price to changes in interest rates. The Adviser may seek to manage the dollar-weighted average effective duration of the Funds portfolio through the use of derivatives and other instruments (including, among others,
Treasury futures and other futures contracts, inverse floaters, interest rate swaps, total return swaps, and options, including options on swap agreements (swaptions)). The Fund may incur costs in implementing duration management
strategies, and there can be no assurance that the Fund will engage in duration management strategies or that any duration management strategy employed by the Fund will be successful.
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Annual Report
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September 30, 2021
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49
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Summary of Updated Information Regarding the Fund (Cont.)
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The Fund may invest in common stocks and other
equity securities from time to time, including, among others, those it has received through the conversion of a convertible security held by the Fund or in connection with the restructuring of a debt security. The Fund may invest in securities that
have not been registered for public sale, including securities eligible for purchase and sale pursuant to Rule 144A or Regulation S under the Securities Act of 1933, as amended, and other securities issued in private placements. The Fund also may
invest without limit in securities of other open- or closed-end investment companies, including exchange-traded funds (ETFs) and investment companies sponsored or managed by the Adviser or its
related parties. The Fund may invest in securities of companies with small and medium market capitalizations.
Portfolio securities may be sold at any time.
Sales may occur when the Adviser determines to take advantage of what it considers to be a better investment opportunity, when the portfolio managers believe the portfolio securities no longer represent relatively attractive investment
opportunities, when there is perceived deterioration in the credit fundamentals of the issuer, or when the individual security has reached the portfolio managers sell target. The Fund will not invest in securities in default at time of
purchase, however, the Fund is not required to sell any securities that default after acquisition.
The Fund may invest indirectly by investing in
derivatives or through wholly-owned and controlled subsidiaries (each, a Subsidiary). The Fund may be exposed to the different types of investments described herein through its investments in a Subsidiary. The allocation of the
Funds assets to a Subsidiary will vary from time to time and the Funds portfolio may include some or all of the investments described herein.
Non-Diversification. The Fund is a non-diversified investment company, and so may invest a greater percentage of its assets in the securities of a single issuer
than investment companies that are diversified.
Note regarding investment limitations
Where the foregoing states that the Fund or the Adviser will not, or does not intend to, make investments in excess of a stated percentage of the Funds
total assets, total assets includes amounts of leverage obtained through borrowings, any preferred shares that may be outstanding, the use of reverse repurchase agreements, or dollar roll transactions. With respect to any reverse
repurchase agreement or dollar roll transaction, total assets includes any proceeds from the sale of an asset of the Fund to a counterparty in such a transaction, in addition to the value of the asset subject to the reverse repurchase
agreement or dollar roll transaction, as of the relevant measuring date. Except as otherwise noted, all percentage limitations apply only at the time of investment.
Derivatives
The Fund may use
various derivatives strategies for hedging purposes or to gain, or reduce, long or short exposure to one or more asset classes, issuers, currencies or reference assets, or to manage the dollar-weighted average effective duration of the Funds
portfolio. The Fund also may enter into derivatives transactions with the purpose or effect of creating investment leverage. The Fund reserves the right to invest in derivatives of any kind and for any investment purpose, including, for example, the
following: futures contracts and options on futures contracts, in order to gain efficient long or short investment exposures as an alternative to cash investments or to hedge against portfolio exposures; interest rate swaps, in order to gain
indirect long or short exposures to interest rates, issuers, or currencies or to hedge against portfolio exposures; and total return swaps and credit derivatives, put and call options, and exchange-traded and structured notes, in order to take
indirect long or short positions on indexes, securities, currencies, commodities or other indicators of value or to hedge against portfolio exposures. The Fund may, for hedging purposes or as a substitute for direct long or short investments in debt
securities, make use of credit default swaps. The Fund may engage in short sales, either to earn additional return or to hedge existing investments.
Leverage
As of September 30, 2021, the Fund uses leverage through borrowings. The Fund may seek to use leverage through a
variety of measures, including the issuance of preferred shares or a combination of borrowings and the issuance of preferred shares. The Fund may also use reverse repurchase agreements and dollar roll transactions.
The Fund also may enter into transactions other than borrowings, the issuance of preferred shares, reverse repurchase agreements and dollar roll transactions
that may give rise to a form of leverage or that have leverage embedded in them including, among others, transactions involving credit default swap contracts and/or other transactions. Other such transactions include loans of portfolio securities,
transactions involving derivative instruments, short sales and when-issued, delayed delivery, and forward commitment transactions.
Under normal market
conditions, the Fund will not (i) issue preferred shares, (ii) borrow money through loans or draw on lines of credit from banks or other credit facilities, (iii) enter into reverse repurchase agreements or dollar roll transactions, or
(iv) write
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50
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DoubleLine Yield Opportunities Fund
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(Unaudited)
September 30, 2021
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credit default swaps with the intention on the part of the Adviser to create investment leverage, if as a result the amount of investment leverage the Adviser determines to be attributable to the
activities listed in (i) through (iv) above in the aggregate would exceed 50% of the Funds total assets (including, for purposes of the 50% limit, the amounts of leverage obtained through such activities) (the 50% leverage
policy). Written credit default swaps entered into by the Fund to hedge, manage or reduce risk or to equitize a cash position (i.e., obtain investment exposure in an amount equal to or less than the Funds position in cash, cash
equivalents, high-quality short-term debt instruments and other similar investments) will not be considered to have been made for the purpose of creating investment leverage and therefore will not be subject to the 50% leverage policy; the Adviser
generally will determine whether an investment has the effect of creating investment leverage by evaluating the effect of the investment on the exposure and risk profile of the Fund as a whole. It is possible that following the incurrence of any
amount of investment leverage, the value of the assets of the Fund will decline due to market conditions or other factors and that the 50% leverage limit will as a result be exceeded.
Any line of credit, borrowings or other form of leverage used by the Fund is subject to renewal periodically, and there can be no assurance that the form of
leverage will be renewed in the future.
The Fund will use leverage opportunistically and may choose to increase, decrease, or eliminate its use of leverage
over time and from time to time based on DoubleLines assessment of the yield curve environment, interest rate trends, market conditions, and other factors.
The Fund may make secured loans of its portfolio securities, on either a short-term or long-term basis, amounting to not more than 331⁄3% of its total assets.
Effects of Leverage
U.S. Bank National Association has made available to the Fund a $350,000,000 committed credit facility. As of September 30, 2021, the amount
of total outstanding borrowings was $325,000,000. Interest charged is at the rate of one-month LIBOR (London Interbank Offered Rate) plus 1.10%, subject to certain conditions that may cause the rate of
interest to increase. This rate represents a floating rate of interest that may change over time. The Fund will also be responsible for paying a non-usage fee of 0.125% on the unused amount, should the unused
amount be $75,000,000 or less. Should the unused amount be more than $75,000,000, the non-usage fee increases to 0.25% on the unused amount. The credit facility will terminate by the earlier of
February 28, 2022 or the date the committed amount is reduced to $0.
Assuming the Fund uses leverage in the form of borrowings representing 25.11% of
the Funds total managed assets (including the amounts of leverage obtained through such borrowings), which reflects approximately the percentage of the Funds total assets attributable to such borrowings as of September 30, 2021, at
an annual effective interest expense of 1.19% payable by the Fund on such borrowings (based on market interest rates as of September 30, 2021), the annual return that the Funds portfolio must experience in order to cover such costs of the
borrowings would be 0.30%.
The information below is designed to illustrate the effects of leverage through the use of senior securities under the 1940 Act,
and does not reflect the Funds use of certain other forms of economic leverage achieved through the use of other instruments or transactions not considered to be senior securities under the 1940 Act, such as reverse repurchase agreements,
dollar roll transactions, credit default swaps, total return swaps or other derivative instruments. Of course, these figures are merely estimates based on current market conditions, used for illustration purposes only.
These assumed investment portfolio returns are hypothetical figures and are not necessarily indicative of the investment portfolio returns experienced or
expected to be experienced by the Fund. Your actual returns may be greater or less than those appearing below. In addition, actual expenses associated with borrowings or other forms of leverage, if any, used by the Fund may vary frequently and may
be significantly higher or lower than the rate used for the example below.
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Assumed Portfolio Total Return
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(10.00
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)%
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(5.00
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)%
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0.00
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%
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5.00%
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10.00%
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Common Share Total Return
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(13.75
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)%
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(7.08
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)%
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(0.40
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)%
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6.28%
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12.95%
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Common Shares total return is composed of two elementsthe distributions paid by the Fund to holders of Common Shares (the
amount of which is largely determined by the net investment income of the Fund after paying interest expenses on the Funds leveraging transactions as described above and other Fund expenses) and gains or losses on the value of the securities
and other instruments the Fund owns. As required by SEC rules, the table assumes that the Fund is more likely to suffer capital losses than to
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Annual Report
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September 30, 2021
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51
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Summary of Updated Information Regarding the Fund (Cont.)
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enjoy capital appreciation. For example, to assume a total return of 0%, the Fund must assume that the income it receives on its investments is entirely offset by Fund expenses and losses in the
value of those investments.
The Funds willingness to use leverage, and the extent to which leverage is used at any time, will depend on many factors,
including, among other things, DoubleLines assessment of the yield curve environment, interest rate trends, market conditions and other factors.
Principal Risk Factors
Investing in the Fund involves risks, including the risk that you may receive little or no return on
your investment or that you may lose part or even all of your investment. The section below does not describe all risks associated with an investment in the Fund. Additional risks and uncertainties also may adversely affect and impair the Fund.
Limited Prior History
The Fund is
a recently organized, non-diversified, limited term closed-end management investment company with a limited history of operations and is subject to all of the business
risks and uncertainties associated with any new business.
Market Discount Risk
As with any stock, the price of the Funds common shares of beneficial interest (the Common Shares) will fluctuate with market conditions and
other factors. If you sell your Common Shares, the price received may be more or less than your original investment. The Common Shares are designed for long-term investors and should not be treated as trading vehicles. Shares of closed-end management investment companies frequently trade at a discount from their net asset value (NAV). The Fund cannot assure you that Common Shares will trade at a price equal to or higher than NAV
in the future, and they may trade at a price lower than NAV. In addition to the Funds NAV, the Funds market price may be affected by factors related to the Fund such as dividend payments (which will in turn be affected by Fund expenses,
including the costs of the Funds leverage, amounts of interest payments made by the Funds portfolio holdings, appreciation/depreciation of the Funds portfolio holdings, regulations affecting the timing and character of Fund
distributions, and other factors), portfolio credit quality, liquidity, call protection, market supply and demand and similar factors relating to the Funds portfolio holdings. The Funds market price may also be affected by general market
or economic conditions, including market trends affecting securities values generally or values of closed-end fund shares more specifically.
Limited Term and Tender Offer Risk
In accordance with the Funds Agreement and Declaration of Trust (the Declaration of Trust), the Fund intends to terminate as of the first
business day following the twelfth anniversary of the effective date of the Funds initial registration statement, February 25, 2032 (the Dissolution Date); provided that the Funds Board of Trustees (the
Board) may, by a vote of a majority of the Board and seventy-five percent (75%) of the Continuing Trustees, as defined below (a Board Action Vote), without shareholder approval, extend the Dissolution Date (i) once for
up to one year and (ii) once for up to an additional six months, to a date up to and including the eighteenth month after the initial Dissolution Date, which later date shall then become the Dissolution Date. At the Dissolution Date, each
holder of common shares of beneficial interest (Common Shareholder) would be paid a pro rata portion of the Funds net assets as determined as of the Dissolution Date. Continuing Trustees are the members of the Board who
either (i) have been a member of the Board for a period of at least thirty-six months (or since the commencement of the Funds operations, if less than thirty-six months) or (ii) were nominated to serve as a member of the Board by a majority of the Continuing Trustees then members of the Board.
The Board may, by a Board Action Vote, cause the Fund to conduct a tender offer, as of a date within twelve months preceding the Dissolution Date (as may be
extended as described above), to all Common Shareholders to purchase 100% of the then outstanding Common Shares of the Fund at a price equal to the NAV per Common Share on the expiration date of the tender offer (the Eligible Tender
Offer). In an Eligible Tender Offer, the Fund will offer to purchase all Common Shares held by each Common Shareholder; provided that if the number of properly tendered Common Shares would result in the Fund having aggregate net assets below
$200 million (the Dissolution Threshold), the Eligible Tender Offer will be canceled, no Common Shares will be repurchased pursuant to the Eligible Tender Offer, and the Fund will terminate as otherwise scheduled. If an Eligible
Tender Offer is conducted and the number of properly tendered Common Shares would result in the Fund having aggregate net assets greater than or equal to the Dissolution Threshold, all Common Shares properly tendered and not withdrawn will be
purchased by the Fund pursuant to the terms of the Eligible Tender Offer. Following the completion of an Eligible Tender Offer, the Board may, by a Board Action Vote, eliminate the Dissolution Date and scheduled termination of the Fund without
shareholder approval and the Fund would continue to operate indefinitely thereafter. The Board may, to the extent it deems appropriate and without shareholder approval, adopt a plan of liquidation at any time preceding the anticipated Dissolution
Date, which plan of liquidation may set forth the terms and
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52
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|
DoubleLine Yield Opportunities Fund
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(Unaudited)
September 30, 2021
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conditions for implementing the termination of the existence of the Fund, including the commencement of the winding down of its investment operations and the making of one or more liquidating
distributions to Common Shareholders prior to the Dissolution Date.
Because the assets of the Fund will be liquidated in connection with the dissolution,
the Fund will incur transaction costs in connection with dispositions of portfolio securities. The Fund is not a so called target date or life cycle fund whose asset allocation becomes more conservative over time as its
target date, often associated with retirement, approaches. In addition, the Fund is not a target term fund and thus does not seek to return the Funds initial public offering price per Common Share upon termination of the Fund or in
a tender offer. The Fund does not limit its investments to securities having a maturity date prior to the Dissolution Date and may be required to sell portfolio securities when it otherwise would not, including at times when market conditions are
not favorable, which may cause the Fund to lose money. In particular, the Funds portfolio may still have large exposures to illiquid securities as the Dissolution Date approaches, and losses due to portfolio liquidation may be significant.
Beginning one year before the Dissolution Date (the Wind-Down Period), the Fund may begin liquidating all or a portion of the Funds
portfolio, and the Fund may deviate from its investment strategy and may not achieve its investment objective. As a result, during the Wind-Down Period, the Funds distributions may decrease, and such distributions may include a return of
capital. It is expected that Common Shareholders will receive cash in any liquidating distribution from the Fund, regardless of their participation in the Funds automatic dividend reinvestment plan. However, if on the Dissolution Date the Fund
owns securities or other investments for which no market exists or securities or other investments that are trading at depressed prices, such securities or other investments may be placed in a liquidating trust. The Fund cannot predict the amount,
if any, of securities or other investments that will be required to be placed in a liquidating trust. The disposition of portfolio investments by the Fund could also cause market prices of such instruments, and hence the NAV and market price of the
Common Shares, to decline.
Moreover, in conducting such portfolio transactions, the Fund may need to deviate from its investment policies and may not
achieve its investment objective. The Funds portfolio composition may change as its portfolio holdings mature or are called or sold in anticipation of an Eligible Tender Offer or the Dissolution Date. During such period(s), it is possible that
the Fund will hold a greater percentage of its total assets in shorter term and lower yielding securities and cash and cash equivalents than it would otherwise, which may impede the Funds ability to achieve its investment objective and
adversely impact the Funds performance and distributions to Common Shareholders, which may in turn adversely impact the market value of the Common Shares. In addition, the Fund may be required to reduce its leverage, which could also adversely
impact its performance. The additional cash or cash equivalents held by the Fund could be obtained through reducing the Funds distributions to Common Shareholders and/or holding cash in lieu of reinvesting, which could limit the ability of the
Fund to participate in new investment opportunities. The Fund does not limit its investments to securities having a maturity date prior to or around the Dissolution Date, which may exacerbate the foregoing risks and considerations. A Common
Shareholder may be subject to the foregoing risks over an extended period of time, particularly if the Fund conducts an Eligible Tender Offer and is also subsequently terminated by or around the Dissolution Date.
If the Fund conducts an Eligible Tender Offer, the Fund anticipates that funds to pay the aggregate purchase price of shares accepted for purchase pursuant to
the tender offer will be first derived from any cash on hand and then from the proceeds from the sale of portfolio investments held by the Fund. In addition, the Fund may be required to dispose of portfolio investments in connection with any
reduction in the Funds outstanding leverage necessary in order to maintain the Funds desired leverage ratios following a tender offer. The risks related to the disposition of securities in connection with the Funds dissolution also
would be present in connection with the disposition of securities in connection with an Eligible Tender Offer. It is likely that during the pendency of a tender offer, and possibly for a time thereafter, the Fund will hold a greater than normal
percentage of its total assets in cash and cash equivalents, which may impede the Funds ability to achieve its investment objective and decrease returns to shareholders. The tax effect of any such dispositions of portfolio investments will
depend on the difference between the price at which the investments are sold and the tax basis of the Fund in the investments. Any capital gains recognized on such dispositions, as reduced by any capital losses the Fund realizes in the year of such
dispositions and by any available capital loss carryforwards, will be distributed to shareholders as capital gain dividends (to the extent of net long-term capital gains over net short-term capital losses) or ordinary dividends (to the extent of net
short-term capital gains over net long-term capital losses) during or with respect to such year, and such distributions will generally be taxable to Common Shareholders. If the Funds tax basis for the investments sold is less than the sale
proceeds, the Fund will recognize capital gains, which the Fund will be required to distribute to Common Shareholders. In addition, the Funds purchase of tendered Common Shares pursuant to a tender offer will have tax consequences for
tendering Common Shareholders and may have tax consequences for non-tendering Common Shareholders.
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Annual Report
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September 30, 2021
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53
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|
Summary of Updated Information Regarding the Fund (Cont.)
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|
The purchase of Common Shares by the Fund
pursuant to a tender offer will have the effect of increasing the proportionate interest in the Fund of non-tendering Common Shareholders. All Common Shareholders remaining after a tender offer may be subject
to proportionately higher expenses due to the reduction in the Funds total assets resulting from payment for the tendered Common Shares. Such reduction in the Funds total assets may result in less investment flexibility, reduced
diversification and greater volatility for the Fund, and may have an adverse effect on the Funds investment performance. Such reduction in the Funds total assets may also cause Common Shares to become thinly traded or otherwise
negatively impact secondary trading of Common Shares. A reduction in net assets, and the corresponding increase in the Funds expense ratio, could result in lower returns and put the Fund at a disadvantage relative to its peers and potentially
cause the Funds Common Shares to trade at a wider discount to NAV than it otherwise would. Furthermore, the portfolio of the Fund following an Eligible Tender Offer could be significantly different and, therefore, Common Shareholders retaining
an investment in the Fund could be subject to greater risk. For example, the Fund may be required to sell its more liquid, higher quality portfolio investments to purchase Common Shares that are tendered in an Eligible Tender Offer, which would
leave a less liquid, lower quality portfolio for remaining shareholders. The prospects of an Eligible Tender Offer may attract arbitrageurs who would purchase the Common Shares prior to the tender offer for the sole purpose of tendering those shares
which could have the effect of exacerbating the risks described herein for shareholders retaining an investment in the Fund following an Eligible Tender Offer.
The Fund is not required to conduct an Eligible Tender Offer. If the Fund conducts an Eligible Tender Offer, there can be no assurance that the number of
tendered Common Shares would not result in the Fund having aggregate net assets below the Dissolution Threshold, in which case the Eligible Tender Offer will be canceled, no Common Shares will be repurchased pursuant to the Eligible Tender Offer and
the Fund will dissolve on the Dissolution Date (subject to possible extensions). The Adviser has a conflict of interest in recommending to the Board that the Dissolution Date be eliminated and the Fund have a perpetual existence, because the Adviser
would continue to earn fees for managing the Fund. The Fund is not required to conduct additional tender offers following an Eligible Tender Offer and conversion to perpetual existence. Therefore, remaining Common Shareholders may not have another
opportunity to participate in a tender offer.
Leverage Risk
The Funds use of leverage (as described under Leverage in the Funds Investment Objective and Strategies above) creates the opportunity for
increased net income and capital appreciation, but also creates special risks for Common Shareholders. There is no assurance that the Funds leveraging strategies will be successful. Leverage is a speculative technique that exposes the Fund to
greater risk and increased costs. The interest expense payable by the Fund with respect to its reverse repurchase agreements, dollar roll transactions or similar transactions, borrowings and/or dividends payable with respect to any outstanding
preferred shares may be based on shorter-term interest rates that periodically reset. So long as the Funds portfolio investments provide a higher rate of return (net of applicable Fund expenses) than the interest expenses, dividend expenses
and other costs to the Fund of such leverage, the investment of the proceeds thereof should generate more income than will be needed to pay the costs of the leverage. If so, and all other things being equal, the excess would be used to pay higher
dividends to Common Shareholders than if the Fund were not so leveraged. If, however, interest rates rise relative to the rate of return on the Funds portfolio, the interest and other costs to the Fund of leverage, including interest expenses
on borrowings, the dividend rate on any outstanding preferred shares and/or the cost of the use of reverse repurchase agreements and dollar rolls or similar transactions, could exceed the rate of return on the debt obligations and other investments
held by the Fund, thereby reducing the return to Common Shareholders.
When leverage is used, the NAV and market price of the Common Shares and the
investment return to Common Shareholders will likely be more volatile. There can be no assurance that the Funds use of leverage will result in a higher investment return on the Common Shares, and it may result in losses. In addition, fees and
expenses of any form of leverage used by the Fund will be borne entirely by the Common Shareholders and not by preferred shareholders, if any, and will reduce the investment return of the Common Shares. In addition, any preferred shares issued by
the Fund may pay cumulative dividends, which may tend to increase leverage risk.
Leverage creates several major types of risks for Common Shareholders,
including:
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the likelihood of greater volatility of NAV and market price of Common Shares, and of the investment return to
Common Shareholders, than a comparable portfolio without leverage;
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the possibility either that Common Share dividends will fall if the interest and other costs of leverage rise, or
that dividends paid on Common Shares will fluctuate because such costs vary over time; and
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the effects of leverage in a declining market or a rising interest rate environment, as leverage is likely to cause
a greater decline in the NAV of the Common Shares than if the Fund were not leveraged and may result in a greater decline in the market value of the Common Shares.
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54
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DoubleLine Yield Opportunities Fund
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(Unaudited)
September 30, 2021
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In addition, the
Funds creditors, counterparties to the Funds leveraging transactions and any preferred shareholders of the Fund will have priority of payment over the Funds Common Shareholders.
The use by the Fund of reverse repurchase agreements and dollar roll transactions or similar transactions to obtain leverage also involves special risks. For
instance, the market value of the securities that the Fund is obligated to repurchase under a reverse repurchase agreement may decline below the repurchase price and the securities may not be returned to the Fund.
In addition to borrowings, an issuance of preferred shares, reverse repurchase agreements and/or dollar roll transactions or similar transactions, the
Funds use of other transactions that may give rise to a form of leverage (including, among others, credit default swap contracts and other transactions, loans of portfolio securities, transactions involving derivative instruments, short sales,
and when issued, delayed delivery, and forward commitment transactions) gives rise to the associated leverage risks described above, and may adversely affect the Funds income, distributions, and total returns to Common Shareholders. The Fund
also may seek to offset derivatives positions against one another or against other assets in an attempt to manage effective market exposure resulting from derivatives in its portfolio. To the extent that any positions do not behave in relation to
one another as expected by the Adviser, the Fund may perform as if it is leveraged through use of these derivative strategies.
Counterparties to the
Funds other leveraging transactions (e.g., total return swaps, reverse repurchases, loans of portfolio securities, short sales and when-issued, delayed delivery and forward commitment transactions, credit default swaps, basis swaps and other
swap agreements, futures and forward contracts, call and put options or other derivatives), if any, would have seniority over the Funds Common Shares.
On October 28, 2020, the SEC adopted Rule 18f-4 under the 1940 Act, which, once effective, will apply to the
Funds use of derivative investments and certain financing transactions (e.g., reverse repurchase agreements). Among other things, Rule 18f-4 will require funds that invest in derivative instruments
beyond a specified limited amount to apply a value-at-risk based limit to their use of certain derivative instruments and financing transactions and to adopt and
implement a derivatives risk management program. Any funds that use derivative instruments (beyond certain currency and interest rate hedging transactions) in a limited amount will not be subject to the full requirements of Rule 18f-4. In connection with the adoption of Rule 18f-4, funds will no longer be required to comply with the asset segregation framework arising from prior SEC guidance.
Additional or other new regulations or guidance issued by the SEC or the Commodity Futures Trading Commission (the CFTC) or their staffs could, among
other things, restrict the Funds ability to engage in leveraging and derivatives transactions (for example, by making certain types of derivatives transactions no longer available to the Fund) and/or increase the costs of such leveraging and
derivatives transactions (for example, by increasing margin or capital requirements), and the Fund may be unable to execute its investment strategy as a result.
The Funds ability to utilize derivatives and leverage, invest in accordance with its principal investment strategies, and make distributions to Common
Shareholders may also be limited by asset coverage requirements applicable to the use of certain transactions that may involve leverage, restrictions imposed by the Funds creditors, and guidelines or restrictions imposed by rating agencies
that provide ratings for preferred shares or in connection with liquidity arrangements for preferred shares.
Because the fees received by the Adviser are
based on the total managed assets of the Fund (including assets attributable to any reverse repurchase agreements, dollar roll transactions or similar transactions, borrowings, and preferred shares that may be outstanding) minus accrued liabilities
(other than liabilities in respect of reverse repurchase agreements, dollar roll transactions or similar transactions, and borrowings), the Adviser has a financial incentive to cause the Fund to use leverage, which creates a conflict of interest
between the Adviser, on the one hand, and the Common Shareholders, on the other hand.
Liquidity Risk
Liquidity risk is the risk that the Fund may invest in securities that trade in lower volumes and may be less liquid than other investments or that the
Funds investments may become less liquid in response to market developments or adverse investor perceptions. Illiquidity may be the result of, for example, low trading volumes, lack of a market maker, or contractual or legal restrictions that
limit or prevent the Fund from selling securities or closing positions. When there is no willing buyer and investments cannot be readily sold or closed out, the Fund may have to sell an investment at a substantially lower price than the price at
which the Fund last valued the investment for purposes of calculating its NAV or may not be able to sell the investments at all, each of which would have a negative effect on the Funds performance and may cause the Fund to hold an investment
longer than the Adviser would otherwise determine. In addition, if the Fund sells investments with extended settlement times (e.g., certain kinds of loans), the settlement proceeds from the sales will not be available to the Fund for a substantial
period of time. The Fund may be forced to sell other investment positions with shorter settlement cycles when the Fund would not otherwise have
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Annual Report
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September 30, 2021
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55
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Summary of Updated Information Regarding the Fund (Cont.)
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done so, which may adversely affect the Funds performance. Additionally, the market for certain investments may become illiquid under adverse market or economic conditions (e.g., if
interest rates rise or fall significantly, if there is significant inflation or deflation, increased selling of debt securities generally across other funds, pools and accounts, changes in investor perception, or changes in government intervention
in the financial markets) independent of any specific adverse changes in the conditions of a particular issuer. In such cases, shares of the Fund, due to the difficulty in purchasing and selling such securities or instruments, may decline in value
or the Fund may be unable to achieve its desired level of exposure to a certain issuer or sector. During periods of substantial market disruption, a large portion of the Funds assets could potentially experience significant levels of
illiquidity. The values of illiquid investments are often more volatile and may be more difficult to fair value than those of more liquid comparable investments.
Portfolio Management Risk
Portfolio management risk is the risk that an investment strategy may fail to produce the intended results. There can be no assurance that the Fund will achieve
its investment objective. The Advisers judgments about the attractiveness, value and potential appreciation of particular asset classes, sectors, securities, or other investments may prove to be incorrect and may not anticipate actual market
movements or the impact of economic conditions generally. No matter how well a portfolio manager evaluates market conditions, the investments a portfolio manager chooses may fail to produce the intended result, and you could lose money on your
investment in the Fund.
Valuation Risk
Valuation risk is the risk that the Fund will not value its investments in a manner that accurately reflects their market values or that the Fund will not be able
to sell any investment at a price equal to the valuation ascribed to that investment for purposes of calculating the Funds NAV. The valuation of the Funds investments involves subjective judgment and some valuations may involve
assumptions, projections, opinions, discount rates, estimated data points and other uncertain or subjective amounts, all of which may prove inaccurate. In addition, the valuation of certain investments held by the Fund may involve the significant
use of unobservable and non-market inputs. Certain securities in which the Fund may invest may be more difficult to value accurately, especially during periods of market disruptions or extreme market
volatility. As a result, there can be no assurance that fair value pricing will result in adjustments to the prices of securities or other assets, or that fair value pricing will reflect actual market value, and it is possible that the fair value
determined for a security or other asset will be materially different from quoted or published prices, from the prices used by others for the same security or other asset and/or from the value that actually could be or is realized upon the sale of
that security or other asset.
Investment and Market Risk
An investment in Common Shares is subject to investment risk, including the possible loss of the entire principal amount invested. An investment in Common Shares
represents an indirect investment in the securities and other instruments owned by the Fund. The market price of securities and other instruments may go up or down, sometimes rapidly or unpredictably. Securities may decline in value due to factors
affecting markets generally, particular industries represented in those markets, or the issuer itself. The values of securities may decline due to general market conditions that are not specifically related to a particular issuer, such as real or
perceived adverse economic conditions, changes in the general outlook for corporate earnings, changes in interest or currency rates or adverse investor sentiment generally. Equity securities generally have greater price volatility than bonds and
other debt securities. Common Shares are subject to the risk that markets will perform poorly or that the returns from the securities in which the Fund invests will underperform returns from the general securities markets or other types of
investments. Markets may, in response to governmental actions or intervention, political, economic or market developments, or other external factors, experience periods of high volatility and reduced liquidity. Certain securities may be difficult to
value during such periods. The value of securities and other instruments traded in over-the-counter markets, like other market investments, may move up or down,
sometimes rapidly and unpredictably. Further, the value of securities and other instruments held by the Fund may decline in value due to factors affecting securities markets generally or particular industries. These risks may be heightened for fixed
income securities due to the current historically low interest rate environment.
Issuer
Non-Diversification Risk
As a non-diversified fund, the Fund may
invest its assets in a smaller number of issuers than may a diversified fund. Accordingly, the Fund may be more susceptible to any single economic, political, or regulatory occurrence than a diversified fund investing in a broader range of issuers.
A decline in the market value of one of the Funds investments may affect the Funds value more than if the Fund were a diversified fund. Some of the issuers in which the Fund invests also may present substantial credit or other risks.
The Fund will be subject to similar risks to the extent that it enters into derivatives transactions with a limited number of counterparties.
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56
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DoubleLine Yield Opportunities Fund
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(Unaudited)
September 30, 2021
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Credit Risk
Credit risk is the risk that an issuer or counterparty will fail to pay its obligations to the Fund when they are
due. If an investments issuer or counterparty fails to pay interest or otherwise fails to meet its obligations to the Fund, the Funds income might be reduced and the value of the investment might fall or be lost entirely. Financial
strength and solvency of an issuer are the primary factors influencing credit risk. Changes in the financial condition of an issuer or counterparty, changes in specific economic, social or political conditions that affect a particular type of
security, other instrument or an issuer, and changes in economic, social or political conditions generally can increase the risk of default by an issuer or counterparty, which can affect a securitys or other instruments credit quality or
value and an issuers or counterpartys ability to pay interest and principal when due. The values of
lower-quality debt securities (including debt
securities commonly referred to as high yield securities and junk bonds) and floating rate loans, tend to be particularly sensitive to these changes. The values of securities also may decline for a number of other reasons
that relate directly to the issuer, such as management performance, financial leverage and reduced demand for the issuers goods and services, as well as the historical and prospective earnings of the issuer and the value of its assets. Credit
risk is heightened to the extent the Fund has fewer counterparties.
In addition, lack of or inadequacy of collateral or credit enhancements for a fixed
income security may affect its credit risk. Credit risk of a security may change over time, and securities which are rated by rating agencies may be subject to downgrade, which may have an indirect impact on the market price of securities. Ratings
are only opinions of the agencies issuing them as to the likelihood of re-payment. They are not guarantees as to quality and they do not reflect market risk.
During periods of deteriorating economic conditions, such as recessions or periods of rising unemployment, delinquencies and losses generally increase, sometimes
dramatically, with respect to debt securities and other obligations of all kinds. The effects of the COVID-19 virus, and governmental responses to the effects of the virus, may result in increased
delinquencies and losses in respect of all investments held by the Fund, and have other, potentially unanticipated, adverse effects on such investments and the markets for those investments.
Interest Rate Risk
Interest rate
risk is the risk that debt instruments will change in value because of changes in interest rates. The value of an instrument with a longer duration (whether positive or negative) will be more sensitive to changes in interest rates than a similar
instrument with a shorter duration. Bonds and other debt instruments typically have a positive duration. The value of a debt instrument with positive duration will generally decline if interest rates increase. Certain other investments, such as
inverse floaters and certain derivative instruments, may have a negative duration. The value of instruments with a negative duration will generally decline if interest rates decrease. Inverse floaters, interest-only and principal-only securities are
especially sensitive to interest rate changes, which can affect not only their prices but can also change the income flows and repayment assumptions about those investments. In recent years, the U.S. has experienced historically low interest rates,
increasing the exposure of bond investors to the risks associated with rising interest rates. The prices of long-term debt obligations generally fluctuate more than prices of short-term debt obligations as interest rates change. Because the
Funds weighted average effective duration generally will fluctuate as interest rates change, the Common Share NAV and market price per share may tend to fluctuate more in response to changes in market interest rates than if the Fund invested
mainly in short-term debt securities. During periods of rising interest rates, the average life of certain types of securities may extend due to lower than expected rates of pre-payments, which could cause the
securities durations to extend and expose the securities to more price volatility. This may lock in a below market yield, increase the securitys duration and reduce the securities value. In addition to directly affecting debt
securities, rising interest rates also may have an adverse effect on the value of any equity securities held by the Fund. The Funds use of leverage will tend to increase Common Share interest rate risk. DoubleLine may use certain strategies,
including investments in structured notes or interest rate futures contracts or swap, cap, floor or collar transactions, for the purpose of reducing the interest rate sensitivity of the Funds portfolio, although there is no assurance that it
will do so or that such strategies will be successful.
Yield curve risk is the risk associated with either a flattening or steepening of the yield curve.
The yield curve is a representation of market interest rates of obligations with durations of different lengths. When the yield curve is steep, longer-term obligations bear higher rates of interest than similar shorter-term obligations;
when the curve flattens, the difference between those interest rates is reduced. If the yield curve is inverted, longer term obligations bear lower interest rates than shorter term obligations. If the Funds portfolio is
structured to perform favorably in a particular interest rate environment, a change in the yield curve could result in losses to the Fund.
Variable and
floating rate debt securities are generally less sensitive to interest rate changes, but may decline in value if their interest rates do not rise as much, or as quickly, as interest rates in general. Conversely, floating rate securities will not
generally
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Annual Report
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September 30, 2021
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57
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Summary of Updated Information Regarding the Fund (Cont.)
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increase in value at all or to the same extent as fixed rate instruments when interest rates decline. Inverse floating rate debt securities may decrease in value if interest rates increase.
Inverse floating rate debt securities also may exhibit greater price volatility than a fixed rate debt obligation with similar credit quality. When the Fund
holds variable or floating rate securities, a decrease (or, in the case of inverse floating rate securities, an increase) in market interest rates will adversely affect the income received from such securities and the NAV of the Common Shares.
Debt Securities Risk
In addition
to certain of the other risks described herein such as interest rate risk and credit risk, debt securities generally also are subject to the following risks:
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Redemption RiskDebt securities sometimes contain provisions that allow for redemption in the event of tax or
security law changes in addition to call features at the option of the issuer. In the event of a redemption, the Fund may not be able to reinvest the proceeds at comparable rates of return.
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Extension RiskThis is the risk that if interest rates rise, repayments of principal on certain debt
securities, including, but not limited to, floating rate loans and mortgage-related securities, may occur at a slower rate than expected and the expected maturity of those securities could lengthen as a result. Securities that are subject to
extension risk generally have a greater potential for loss when prevailing interest rates rise, which could cause their values to fall sharply.
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Liquidity RiskCertain debt securities may be substantially less liquid than many other securities, such as
U.S. Government securities or common shares or other equity securities.
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Spread RiskWider credit spreads and decreasing market values typically represent a deterioration of the debt
securitys credit soundness and a perceived greater likelihood or risk of default by the issuer.
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Limited Voting RightsDebt securities typically do not provide any voting rights, except in some cases when
interest payments have not been made and the issuer is in default. Even in such cases, such rights may be limited to the terms of the debenture or other agreements.
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Prepayment/Reinvestment RiskMany types of debt securities, including floating rate loans, mortgage-backed
securities and asset-backed securities, may reflect an interest in periodic payments made by borrowers. Although debt securities and other obligations typically mature after a specified period of time, borrowers may pay them off sooner. When a
prepayment happens, all or a portion of the obligation will be prepaid. A borrower is more likely to prepay an obligation which bears a relatively high rate of interest. This means that in times of declining interest rates, there is a greater
likelihood that the Funds higher yielding securities will be pre-paid and the Fund will probably be unable to reinvest those proceeds in an investment with as great a yield, causing the Funds yield
to decline. Securities subject to prepayment risk generally offer less potential for gains when prevailing interest rates fall. If the Fund buys those investments at a premium, accelerated prepayments on those investments could cause the Fund to
lose a portion of its principal investment and result in lower yields to shareholders. The increased likelihood of prepayment when interest rates decline also limits market price appreciation, especially with respect to certain loans,
mortgage-backed securities and asset-backed securities. The effect of prepayments on the price of a security may be difficult to predict and may increase the securitys price volatility. Interest-only and principal-only securities are
especially sensitive to interest rate changes, which can affect not only their prices but can also change the income flows and repayment assumptions about those investments. Income from the Funds portfolio may decline when the Fund invests the
proceeds from investment income, sales of portfolio securities or matured, traded or called debt obligations. A decline in income received by the Fund from its investments is likely to have a negative effect on the dividend levels and market price,
NAV and/or overall return of the Common Shares.
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The Funds investments in debt securities may include, but are not limited to,
senior, junior, secured and unsecured bonds, notes and other debt securities, and may be fixed rate, floating rate, zero coupon and inflation linked, among other things. The Fund may invest in convertible bonds, which are fixed income securities
that are exercisable into other debt or equity securities, and synthetic convertible securities, which are created through a combination of separate securities that possess the two principal characteristics of a traditional convertible
security, i.e., an income-producing security (income-producing component) and the right to acquire an equity security (convertible component). The market value of a debt security may be affected by the credit rating of
the issuer, the issuers performance, perceptions of the issuer in the market place, management performance, financial leverage and reduced demand for the issuers goods and services. There is a risk that the issuers of the debt securities
in which the Fund may invest may not be able to meet their obligations on interest or principal payments at the time called for by an instrument.
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58
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DoubleLine Yield Opportunities Fund
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(Unaudited)
September 30, 2021
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Mortgage-Backed Securities Risks
Mortgage-backed securities include, among other things, participation interests in pools of
residential mortgage loans purchased from individual lenders by a federal agency or originated and issued by private lenders and involve, among others, the following risks:
Credit and Market Risks of Mortgage-Backed Securities. Investments by the Fund in fixed rate and floating rate mortgage-backed securities will
entail credit risks (i.e., the risk of non-payment of interest and principal) and market risks (i.e., the risk that interest rates and other factors could cause the value of the instrument to
decline). Some issuers or servicers of mortgage-backed securities guarantee timely payment of interest and principal on the securities, whether or not payments are made when due on the underlying mortgages. This kind of guarantee generally increases
the quality of a security, but does not mean that the securitys market value and yield will not change. The values of mortgage-backed securities may change because of changes in the markets perception of the credit quality of the assets
held by the issuer of the mortgage-backed securities or an entity, if any, providing credit support in respect of the mortgage-backed securities. In addition, an unexpectedly high rate of defaults on the mortgages held by a mortgage pool may limit
substantially the pools ability to make payments of principal or interest to the Fund as a holder of such securities, reducing the values of those securities or in some cases rendering them worthless. The Fund also may purchase securities that
are not guaranteed or subject to any credit support. An investment in a privately issued mortgage-backed security is generally less liquid and subject to greater credit risks than an investment in a mortgage-backed security that is issued or
otherwise guaranteed by a federal government agency or sponsored corporation.
Mortgage-backed securities may be structured similarly to collateralized debt
obligations (CDOs) and may be subject to similar risks. For example, the cash flows from the collateral held by the mortgage-backed security may be split into two or more portions, called tranches, varying in risk and yield. Senior
tranches are paid from the cash flows from the underlying assets before the junior tranches and equity or first loss tranches. Losses are first borne by the equity tranches, next by the junior tranches, and finally by the senior
tranches. Interest holders in senior tranches are entitled to the lowest interest rates but are generally subject to less credit risk than more junior tranches because, should there be any default, senior tranches are typically paid first. The most
junior tranches, such as equity tranches, typically are due to be paid the highest interest rates but suffer the highest risk of loss should the holder of an underlying mortgage loan default. If some loans default and the cash collected by the
issuer of the mortgage-backed security is insufficient to pay all of its investors, those in the lowest, most junior tranches suffer losses first. Like bond investments, the value of fixed rate mortgage-backed securities will tend to rise when
interest rates fall, and fall when rates rise. Floating rate mortgage-backed securities generally tend to have more moderate changes in price when interest rates rise or fall, but their current yield will generally be affected. In addition, the
mortgage-backed securities market in general may be adversely affected by changes in governmental legislation or regulation. Factors that could affect the value of a mortgage-backed security include, among other things, the types and amounts of
insurance which an individual mortgage or that specific mortgage-backed security carries, the default and delinquency rate of the mortgage pool, the amount of time the mortgage loan has been outstanding, the loan-to-value ratio of each mortgage and the amount of overcollateralization or undercollateralization of a mortgage pool. The Fund may invest in mortgage-backed securities that are subordinate in their right
to receive payment of interest and repayment of principal to other classes of the issuers securities.
The residential mortgage market in the United
States has experienced difficulties at times, and the same or similar events may adversely affect the performance and market value of certain of the Funds mortgage-related investments. Delinquencies and losses on residential mortgage loans
(especially subprime and second-lien mortgage loans) generally increase in a recession and potentially could begin to increase again. A decline in or flattening of housing values may exacerbate such delinquencies and losses. Borrowers with
adjustable rate mortgage loans may be more sensitive to changes in interest rates, which affect their monthly mortgage payments, and may be unable to secure replacement mortgages at comparably low interest rates. Reduced investor demand for
mortgage-related securities could result in limited new issuances of mortgage-related securities and limited liquidity in the secondary market for mortgage-related securities, which can adversely affect the market value of mortgage-related
securities and limit the availability of attractive investment opportunities for the Fund.
The values of mortgage-backed securities may be substantially
dependent on the servicing of the underlying mortgage pools, and therefore are subject to risks associated with the negligence or malfeasance by their servicers and to the credit risk of their servicers. In certain circumstances, the mishandling of
related documentation also may affect the rights of security holders in and to the underlying collateral.
Some government sponsored mortgage-related
securities are backed by the full faith and credit of the United States. The Government National Mortgage Association (Ginnie Mae), the principal guarantor of such securities, is a wholly owned United States government corporation within
the Department of Housing and Urban Development. Other government-sponsored
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Annual Report
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September 30, 2021
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59
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Summary of Updated Information Regarding the Fund (Cont.)
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mortgage-related securities are not backed by the full faith and credit of the United States government. Issuers of such securities include Fannie Mae (formally known as the Federal National
Mortgage Association) and Freddie Mac (formally known as the Federal Home Loan Mortgage Corporation). Fannie Mae is a government-sponsored corporation which is subject to general regulation by the Secretary of Housing and Urban Development.
Pass-through securities issued by Fannie Mae are guaranteed as to timely payment of principal and interest by Fannie Mae. Freddie Mac is a stockholder-owned corporation chartered by Congress and subject to general regulation by the Department of
Housing and Urban Development. Participation certificates representing interests in mortgages from Freddie Macs national portfolio are guaranteed as to the timely payment of interest and ultimate collection of principal by Freddie Mac. The
U.S. government has provided financial support to Fannie Mae and Freddie Mac in the past, but there can be no assurances that it will support these or other government-sponsored entities in the future.
Under the Federal Housing Finance Agencys Single Security Initiative, Fannie Mae and Freddie Mac have entered into a joint initiative to
develop a common securitization platform for the issuance of Uniform Mortgage-Backed Securities (UMBS), which would generally align the characteristics of Fannie Mae and Freddie Mac participation certificates. In June 2019 Fannie Mae and
Freddie Mac began issuing UMBS in place of their offerings of to be announced- eligible mortgage-backed securities. The long- term effect of the issuance of UMBS on the market for mortgage-backed securities is uncertain.
During periods of deteriorating economic conditions, such as recessions or periods of rising unemployment, delinquencies and losses generally increase, sometimes
dramatically, with respect to securitizations involving mortgage loans and other obligations underlying mortgage-backed securities. The effects of the COVID-19 virus, and governmental responses to the effects
of the virus, may result in increased delinquencies and losses and have other, potentially unanticipated, adverse effects on such investments and the markets for those investments.
Liquidity Risk of Mortgage-Backed Securities. The liquidity of mortgage-backed securities varies by type of security; at certain times the Fund may
encounter difficulty in disposing of such investments. Investments in privately issued mortgage-backed securities may have less liquidity than mortgage-backed securities that are issued by a federal government agency or sponsored corporation.
Because mortgage-backed securities have the potential to be less liquid than other securities, the Fund may be more susceptible to liquidity risks than funds that invest in other securities. In the past, in stressed markets, certain types of
mortgage- backed securities suffered periods of illiquidity when disfavored by the market. It is possible that the Fund may be unable to sell a mortgage-backed security at a desirable time or at the value the Fund has placed on the investment.
Commercial Mortgage-Backed Securities (CMBS) Risks. CMBS include securities that reflect an interest in, or are secured by, mortgage
loans on commercial real property. Many of the risks of investing in commercial mortgage-backed securities reflect the risks of investing in the real estate securing the underlying mortgage loans. These risks reflect the effects of local and other
economic conditions on real estate markets, the ability of tenants to make loan payments and the ability of a property to attract and retain tenants. Commercial mortgage-backed securities may be less liquid and exhibit greater price volatility than
other types of mortgage- or asset-backed securities.
With respect to risk retention tranches (i.e., eligible residual interests initially held by the
sponsors of collateralized mortgage-backed securities and other eligible securitizations pursuant to the U.S. Risk Retention Rules), a third-party purchaser, such as the Fund, must hold its retained interest, unhedged, for at least five years
following the closing of the securitization transaction, after which it is entitled to transfer its interest in the securitization to another person that meets the requirements for a third-party purchaser. Even after the required holding period has
expired, due to the limited market for such investments, no assurance can be given as to what, if any, exit strategies will ultimately be available for any given position. In addition, there is limited guidance on the application of the laws and
regulations applicable to such investments. There can be no assurance that the applicable federal agencies charged with the implementation of the Final U.S. Risk Retention Rules (the FDIC, the Comptroller of the Currency, the Federal Reserve Board,
the SEC, the Department of Housing and Urban Development, and the Federal Housing Finance Agency) could not take positions in the future that differ from the interpretation of such rules taken or embodied in such securitizations, or that the Final
U.S. Risk Retention Rules will not change. Furthermore, in situations where the Fund invests in risk retention tranches of securitizations structured by third parties, the Fund may be required to execute one or more letters or other agreements, the
exact form and nature of which will vary (each, a Risk Retention Agreement) under which it will make certain undertakings designed to ensure such securitization complies with the Final U.S. Risk Retention Rules. Such Risk Retention
Agreements may include a variety of representations, warranties, covenants and other indemnities, each of which may run to various transaction parties. If the Fund breaches any undertakings in any Risk Retention Agreement, it will be exposed to
claims by the other parties thereto, including for any losses incurred as a result of such breach.
Prepayment, Extension and Redemption Risks of
Mortgage-Backed Securities. Mortgage-backed securities may reflect an interest in monthly payments made by the borrowers who receive the underlying mortgage loans. Although the underlying
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60
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DoubleLine Yield Opportunities Fund
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(Unaudited)
September 30, 2021
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mortgage loans are for specified periods of time, such as 20 or 30 years, the borrowers can, and historically have often paid them off sooner. When a prepayment happens, a portion of the
mortgage-backed security which represents an interest in the underlying mortgage loan will be prepaid. A borrower is more likely to prepay a mortgage which bears a relatively high rate of interest. This means that in times of declining interest
rates, a portion of the Funds higher yielding securities are likely to be redeemed and the Fund will probably be unable to replace them with securities having as great a yield. Prepayments can result in lower yields to shareholders. The
increased likelihood of prepayment when interest rates decline also limits market price appreciation. This is known as prepayment risk. Mortgage-backed securities also are subject to extension risk. Extension risk is the possibility that rising
interest rates may cause prepayments to occur at a slower than expected rate. This particular risk may effectively change a security which was considered short or intermediate term into a long-term security. The values of long-term securities
generally fluctuate more widely in response to changes in interest rates than short or intermediate-term securities. In addition, a mortgage-backed security may be subject to redemption at the option of the issuer. If a mortgage-backed security held
by the Fund is called for redemption, the Fund will be required to permit the issuer to redeem or pay-off the security, which could have an adverse effect on the Funds ability to achieve its investment
objective.
Collateralized Mortgage Obligations (CMOs) Risks. CMOs are debt obligations collateralized by mortgage loans or
mortgage pass-through securities. The expected average life of CMOs is determined using mathematical models that incorporate prepayment assumptions and other factors that involve estimates of future economic and market conditions. These estimates
may vary from actual future results, particularly during periods of extreme market volatility. Further, under certain market conditions, the average weighted life of certain CMOs may not accurately reflect the price volatility of such securities.
For example, in periods of supply and demand imbalances in the market for such securities and/or in periods of sharp interest rate movements, the prices of CMOs may fluctuate to a greater extent than would be expected from interest rate movements
alone. CMOs issued by private entities are not obligations issued or guaranteed by the U.S. Government, its agencies or instrumentalities and are not guaranteed by any government agency, although the securities underlying a CMO may be subject to a
guarantee. Therefore, if the collateral securing the CMO, as well as any third party credit support or guarantees, is insufficient to make payments when due, the holder could sustain a loss.
Adjustable Rate Mortgages (ARMs) Risks. ARMs contain maximum and minimum rates beyond which the mortgage interest rate may not vary
over the lifetime of the security. In addition, many ARMs provide for additional limitations on the maximum amount by which the mortgage interest rate may adjust for any single adjustment period. Alternatively, certain ARMs contain limitations on
changes in the required monthly payment. In the event that a monthly payment is not sufficient to pay the interest accruing on an ARM, any excess interest is added to the principal balance of the mortgage loan, which is repaid through future monthly
payments. If the monthly payment for such an instrument exceeds the sum of the interest accrued at the applicable mortgage interest rate and the principal payment required at such point to amortize the outstanding principal balance over the
remaining term of the loan, the excess is used to reduce the then-outstanding principal balance of the ARM. In addition, certain ARMs may provide for an initial fixed, below-market or teaser interest rate. During this initial fixed-rate period, the
payment due from the related mortgagor may be less than that of a traditional loan. However, after the teaser rate expires, the monthly payment required to be made by the mortgagor may increase significantly when the interest rate on the mortgage
loan adjusts. This increased burden on the mortgagor may increase the risk of delinquency or default on the mortgage loan and in turn, losses on the mortgage-backed security into which that loan has been bundled.
Interest and Principal Only Securities Risks. Stripped mortgage-backed securities are usually structured with two classes that receive different
portions of the interest and principal distributions on a pool of debt instruments, such as mortgage loans. In one type of stripped mortgage-backed security, one class will receive all of the interest from the mortgage assets (the interest-only, or
IO class), while the other class will receive all of the principal from the mortgage assets (the principal-only, or PO class). The yield to maturity (the expected rate of return on a bond if held until the end of its
lifetime) on an IO class is extremely sensitive to the rate of principal payments (including prepayments) on the underlying mortgage assets, and a rapid rate of principal payments may have a material adverse effect on the Funds yield to
maturity from these securities. If the assets underlying the IO class experience greater than anticipated prepayments of principal, the Fund may fail to recoup fully, or at all, its initial investment in these securities. PO class securities tend to
decline in value if prepayments are slower than anticipated.
Inverse Floaters and Related Securities Risks. Investments in inverse floaters
and similar instruments expose the Fund to the same risks as investments in debt securities and derivatives, as well as other risks, including those associated with increased volatility. An investment in these securities typically will involve
greater risk than an investment in a fixed rate security. Distributions on inverse floaters and similar instruments will typically bear an inverse relationship to short-term interest rates and typically will be reduced or, potentially, eliminated as
interest rates rise. The rate at which interest is paid on an inverse floater may vary by a magnitude that exceeds the magnitude of the change in a reference rate of interest (typically a short-term interest rate). The effect of the
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Annual Report
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September 30, 2021
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61
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Summary of Updated Information Regarding the Fund (Cont.)
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reference rate multiplier in inverse floaters is associated with greater volatility in their market values. Investments in inverse floaters and similar instruments that have mortgage-backed
securities underlying them will expose the Fund to the risks associated with those mortgage-backed securities and the values of those investments may be especially sensitive to changes in prepayment rates on the underlying mortgage-backed
securities.
Foreign Investing Risk
Investments in foreign securities or in issuers with significant exposure to foreign markets may involve greater risks than investments in domestic securities. To
the extent that investments are made in a limited number of countries, events in those countries will have a more significant impact on the Fund. As compared to U.S. companies, foreign issuers generally disclose less financial and other information
publicly and are subject to less stringent and less uniform accounting, auditing, and financial reporting standards. In addition, there may be limited information generally regarding factors affecting a particular foreign market, issuer, or
security.
Foreign countries typically impose less thorough regulations on brokers, dealers, stock exchanges, corporate insiders and listed companies than
does the United States and foreign securities markets may be less liquid and more volatile than domestic markets. Investment in foreign securities involves higher costs than investment in U.S. securities, including higher transaction and custody
costs as well as the imposition of additional taxes by foreign governments, and as a result investments in foreign securities may be subject to issues relating to security registration or settlement. In addition, security trading and custody
practices abroad may offer less protection to investors such as the Fund. Political, social or financial instability, civil unrest and acts of terrorism are other potential risks that could adversely affect an investment in a foreign security or in
foreign markets or issuers generally. Settlement of transactions in some foreign markets may be delayed or may be less frequent than in the United States which could affect the liquidity of the Funds portfolio. Custody practices and
regulations abroad may offer less protection to investors, such as the Fund, and the Fund may be limited in its ability to enforce contractual rights or obligations.
Because foreign securities generally are denominated and pay dividends or interest in foreign currencies, and the Fund may hold various foreign currencies from
time to time, the value of the Funds assets, as measured in U.S. dollars, can be affected unfavorably by changes in exchange rates with respect to the U.S. dollar or with respect to other foreign currencies or by unfavorable currency
regulations imposed by foreign governments. If the Fund invests in securities issued by foreign issuers, the Fund may be subject to these risks even if the investment is denominated in United States dollars. This risk may be heightened with respect
to issuers whose revenues are principally earned in a foreign currency but whose debt obligations have been issued in United States dollars or other hard currencies.
Foreign issuers may become subject to sanctions imposed by the U.S. or another country or other governmental or
non-governmental organizations, which could result in the immediate freeze of the foreign issuers assets or securities. The imposition of such sanctions could impair the market value of the securities of
such foreign issuers and limit the Funds ability to buy, sell, receive or deliver the securities.
Continuing uncertainty as to the status of the
European Economic and Monetary Union (EMU) and the potential for certain countries (such as those in the United Kingdom) to withdraw from the institution has created significant volatility in currency and financial markets generally. Any
partial or complete dissolution of the European Union (the EU) could have significant adverse effects on currency and financial markets, and on the values of the Funds portfolio investments. At a referendum in June 2016, the United
Kingdom (the UK) voted to leave the EU, thereby initiating the British exit from the EU (commonly known as Brexit). In March 2017, the UK formally notified the European Council of the UKs intention to withdraw from the
EU pursuant to Article 50 of the Treaty on European Union. This formal notification began a multi-year period of negotiations regarding the terms of the UKs exit from the EU, which formally occurred on January 31, 2020. A transition
period is taking place following the UKs exit where the UK remains subject to EU rules but has no role in the EU law-making process. During this transition period, UK and EU representatives are
negotiating the precise terms of their future relationship. There is still considerable uncertainty relating to the potential consequences associated with the exit, how the negotiations for the withdrawal and new trade agreements will be conducted,
and whether the UKs exit will increase the likelihood of other countries also departing the EU. Brexit may have a significant impact on the UK, Europe, and global economies, which may result in increased volatility and illiquidity, and
potentially lower economic growth in markets in the UK, Europe and globally, which may adversely affect the value of the Funds investments.
If one or
more EMU countries were to stop using the euro as its primary currency, the Funds investments in such countries may be redenominated into a different or newly adopted currency, possibly resulting in the value of those investments declining
significantly and unpredictably. In addition, securities or other investments that are redenominated may be subject to liquidity risk and the risk that the Fund may not be able to value investments accurately to a greater extent than similar
investments currently
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62
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DoubleLine Yield Opportunities Fund
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(Unaudited)
September 30, 2021
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denominated in euros. To the extent a currency used for redenomination purposes is not specified in respect of certain EMU-related investments, or should
the euro cease to be used entirely, the currency in which such investments are denominated may be unclear, making such investments particularly difficult to value or dispose of. The Fund may incur additional expenses to the extent it is required to
seek judicial or other clarification of the denomination or value of such securities.
Foreign Currency Risk
Currency risk is the risk that fluctuations in exchange rates may adversely affect the value of the Funds investments. Currency risk includes both the risk
that currencies in which the Funds investments are traded and/or in which the Fund receives income, or currencies in which the Fund has taken an active investment position, will decline in value relative to other currencies. In the case of
hedging positions, currency risk includes the risk that the currency the Fund is seeking exposure to will decline in value relative to the foreign currency being hedged. Currency exchange rates fluctuate significantly for many reasons, including
changes in supply and demand in the currency exchange markets, actual or perceived changes in interest rates, intervention (or the failure to intervene) by U.S. or foreign governments, central banks, or supranational agencies such as the
International Monetary Fund, and currency controls or other political and economic developments in the U.S. or abroad.
The currencies of certain emerging
market countries have experienced devaluations relative to the U.S. dollar, and future devaluations may adversely affect the value of assets denominated in such currencies. A devaluation of the currency in which portfolio securities are denominated
will negatively impact the value of those securities. The Fund may use derivatives to acquire positions in currencies the values to which the Fund is exposed through its investments. This presents the risk that the Fund could lose money on its
exposure to a particular currency and also lose money on the derivative. The Fund also may take overweighted or underweighted currency positions and/or hedge the currency exposure of the securities in which it has invested. As a result, the
Funds currency exposure may differ (in some cases significantly) from the currency exposure of its investments and/or its benchmarks.
Emerging Markets Risk
Investing in emerging market countries, as compared to foreign developed markets, involves substantial
additional risk due to more limited information about the issuer and/or the security; higher brokerage costs; different accounting, auditing and financial reporting standards; less developed legal systems and thinner trading markets; the possibility
of currency blockages or transfer restrictions; an emerging market countrys dependence on revenue from particular commodities or international aid; and the risk of expropriation, nationalization or other adverse political or economic
developments. Political and economic structures in many emerging market countries may undergo significant evolution and rapid development, and such countries may lack the social, political and economic stability characteristics of more developed
countries. Some emerging market countries have a greater
degree of economic, political and social instability than the U.S. and other developed countries.
Such social, political and economic instability could disrupt the financial markets in which the Fund invests and adversely affect the value of its investment portfolio. Some of these countries have in the past failed to recognize private property
rights and have at times nationalized or expropriated the assets of private companies. In addition, unanticipated political or social developments may affect the value of investments in emerging markets and the availability of additional investments
in these markets. The small size, limited trading volume and relative inexperience of the securities markets in these countries may make investments in securities traded in emerging markets illiquid and more volatile than investments in securities
traded in more developed countries, and the Fund may be required to establish special custodial or other arrangements before making investments in securities traded in emerging markets. There may be little financial or accounting information
available with respect to issuers of emerging market securities, and it may be difficult as a result to assess the value or prospects of an investment in such securities.
The securities markets of emerging market countries may be substantially smaller, less developed, less liquid and more volatile than the major securities markets
in the United States and other developed nations. The limited size of many securities markets in emerging market countries and limited trading volume in issuers compared to the volume in U.S. securities or securities of issuers in other developed
countries could cause prices to be erratic for reasons other than factors that affect the quality of the securities and investments in emerging markets can become illiquid. In addition, emerging market countries exchanges and broker-dealers
may generally be subject to less regulation than their counterparts in developed countries. Emerging market securities markets, exchanges and market participants may lack the regulatory oversight and sophistication necessary to deter or detect
market manipulation in such exchanges or markets, which may result in losses to the Fund to the extent it holds investments trading in such exchanges or markets. Brokerage commissions and dealer mark-ups,
custodial expenses and other transaction costs are generally higher in emerging market countries than in developed countries. As a result, funds that invest in emerging market countries have operating expenses that are higher than funds investing in
other securities markets.
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Annual Report
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September 30, 2021
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63
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Summary of Updated Information Regarding the Fund (Cont.)
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The Public Company Accounting Oversight Board,
which regulates auditors of U.S. public companies, is unable to inspect audit work papers in certain foreign countries. Investors in foreign countries often have limited rights and few practical remedies to pursue shareholder claims, including class
actions or fraud claims, and the ability of the SEC, the U.S. Department of Justice and other authorities to bring and enforce actions against foreign issuers or foreign persons is limited. Regulatory regimes outside of the U.S. may not require or
enforce corporate governance standards comparable to that of the U.S., which may result in less protections for investors in such issuers and make such issuers more susceptible to actions not in the best interest of the issuer or its investors.
Emerging market countries may have different clearance and settlement procedures than in the U.S., including significantly longer settlement cycles for purchases
and sales of securities, and in certain markets there may be times when settlements fail to keep pace with the volume of securities transactions, making it difficult to conduct such transactions. Further, custody practices abroad may offer less
protection generally to investors, such as the Fund, and satisfactory custodial services for investment securities may not be available in some emerging market countries, which may result in the Fund incurring additional costs and delays in
transporting and custodying such securities outside such countries. Delays in settlement or other problems could result in periods when the Funds assets are uninvested and no return is earned thereon. The Funds inability to make intended
security purchases due to settlement problems or the risk of intermediary counterparty failures could cause the Fund to miss attractive investment opportunities. The inability to dispose of a portfolio security due to settlement problems could
result either in losses to the Fund due to subsequent declines in the value of such portfolio security or, if the Fund has entered into a contract to sell the security, could result in possible liability to the purchaser. The currencies of certain
emerging market countries have experienced devaluations relative to the U.S. dollar, and future devaluations may adversely affect the value of assets denominated in such currencies. Many emerging market countries have experienced substantial, and in
some periods extremely high, rates of inflation or deflation for many years, and future inflation may adversely affect the economies and securities markets of such countries. When debt and similar obligations issued by foreign issuers are
denominated in a currency (e.g., the U.S. dollar or the Euro) other than the local currency of the issuer, the subsequent strengthening of the non-local currency against the local currency will generally
increase the burden of repayment on the issuer and may increase significantly the risk of default by the issuer.
Emerging market countries have and may in
the future impose capital controls, foreign currency controls and repatriation controls. In addition, some currency hedging techniques may be unavailable in emerging market countries, and the currencies of emerging market countries may experience
greater volatility in exchange rates as compared to those of developed countries.
Collateralized Debt Obligations Risk
CDOs include CBOs, CLOs, and other similarly structured securities. A CBO is a trust which may be backed by a diversified pool of high risk, below
investment grade fixed income securities. A CLO is a trust typically collateralized by a pool of loans, which may include, among others, domestic and foreign senior secured loans, senior unsecured loans, second lien loans or other types of
subordinate loans, and mezzanine loans, including loans that may be rated below investment grade or equivalent unrated loans and including loans that may be covenant-lite. CDOs may charge management fees and administrative expenses. The cash flows
from the CDO trust are generally split into two or more portions, called tranches, varying in risk and yield. Senior tranches are paid from the cash flows from the underlying assets before the junior tranches and equity or first loss
tranches. Losses are first borne by the equity tranches, next by the junior tranches, and finally by the senior tranches. Holders of interests in the senior tranches are entitled to the lowest interest rate payments but those interests generally
involve less credit risk as they are typically paid before junior tranches. The most junior tranches, such as equity tranches, typically are entitled to be paid the highest interest rate payments but suffer the highest risk of loss should the holder
of an underlying debt instrument default. If some debt instruments go into default and the cash collected by the CDO is insufficient to pay all of its investors, those in the lowest, most junior tranches suffer losses first. Since it is partially
protected from defaults, a senior tranche from a CDO trust typically has higher ratings and lower potential yields than the underlying securities, and can be rated investment grade. Despite the protection from the equity tranche, more senior CDO
tranches can experience substantial losses due to actual defaults, increased sensitivity to defaults due to collateral default and disappearance of protecting tranches, market anticipation of defaults and aversion to CDO securities as a class.
The risks of an investment in a CDO depend largely on the quality and type of the collateral and the tranche of the CDO in which the Fund invests. Normally,
CBOs, CLOs and other CDOs are privately offered and sold, and thus are not registered under the securities laws. As a result, there may be a limited secondary market for investments in CDOs and such investments may be illiquid. In addition to the
risks associated with debt instruments (e.g., interest rate risk and credit risk), CDOs carry additional risks including, but not limited to: (i) the possibility that distributions from collateral will not be adequate to make interest or other
payments; (ii) the quality of the collateral may decline in value or default; (iii) the possibility that the Fund may invest in CDOs that are
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64
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DoubleLine Yield Opportunities Fund
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(Unaudited)
September 30, 2021
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subordinate to other classes of the issuers securities; and (iv) the complex structure of the security may not be fully understood at the time of investment and may produce disputes
with the issuer or unexpected investment results.
Asset-Backed Securities Investment Risk
Asset-backed securities in which the Fund may invest include obligations backed by, among others, motor vehicle installment sales or installment loan contracts;
home equity loans; leases of various types of real, personal and other property (including those relating to aircrafts, telecommunication, energy, and/or other infrastructure assets and infrastructure-related assets); receivables from credit card
agreements; student loans; consumer loans; mobile home loans; boat loans; business and small business loans; project finance loans; airplane leases; and other non-mortgage-related income streams, such as
income from renewable energy projects and franchise rights. They may also include asset-backed securities backed by whole loans or fractions of whole loans issued by alternative lending platforms and securitized by those platforms or other entities
(such as third-party originators or brokers). Any of these loans may be of sub-prime quality or made to an obligor with a sub-prime credit history.
Asset-backed securities involve the risk that borrowers may default on the obligations backing them and that the values of and interest earned on such
investments will decline as a result. Loans made to lower quality borrowers, including those of sub-prime quality, involve a higher risk of default. Such loans, including those made by alternative lending
platforms, may be difficult to value, may have limited payment histories, and may be subject to significant changes in value over time as economic conditions change. Therefore, the values of asset-backed securities backed by lower quality loans,
including those of sub-prime quality, may suffer significantly greater declines in value due to defaults, payment delays or a perceived increased risk of default, especially during periods when economic
conditions worsen. In addition, most or all securities backed by the collateral described above do not involve any credit enhancement provided by the U.S. government or any other party, and certain asset-backed securities do not have the benefit of
a security interest in the related collateral.
Asset-backed securities tend to increase in value less than traditional debt securities of similar maturity
and credit quality when interest rates decline, but are subject to a similar risk of decline in market value during periods of rising interest rates. Certain assets underlying asset-backed securities are subject to prepayment, which may reduce the
overall return to asset-backed security holders. In a period of declining interest rates, pre-payments on asset-backed securities may increase and the Fund may be unable to reinvest those prepaid amounts in
investments providing the same rate of interest as the pre-paid obligations.
The values of asset-backed securities
may also be substantially dependent on the servicing of and diligence performed by their servicers or sponsors or the originating alternative lending platforms. For example, the Fund may suffer losses due to a servicers, sponsors or
platforms negligence or malfeasance, such as through the mishandling of certain documentation affecting security holders rights in and to underlying collateral or the failure to update or collect accurate and complete borrower
information. In addition, the values of asset-backed securities may be adversely affected by the credit quality of the servicer, sponsor or originating alternative lending platform, as applicable. Certain services, sponsors or originating
alternative lending platforms may have limited operating histories to evaluate. The insolvency of a servicer, sponsor or originating alternative lending platform may result in added costs and delays in addition to losses associated with a decline in
the value of underlying assets. The Fund also may experience delays in payment or losses on its investments if the full amount due on underlying collateral is not realized, which may occur because of unanticipated legal or administrative costs of
enforcing the contracts, depreciation or damage to the collateral securing certain contracts, under-collateralization or other factors.
Credit Default Swaps Risk
A
credit default swap is an agreement between the Fund and a counterparty that enables the Fund to buy or sell protection against a credit event related to a particular issuer. One party, acting as a protection buyer, makes periodic payments, which
may be based on, among other things, a fixed or floating rate of interest, to the other party, a protection seller, in exchange for a promise by the protection seller to make a payment to the protection buyer if a negative credit event (such as a
delinquent payment or default) occurs with respect to a referenced bond or group of bonds. Credit default swaps may also be structured based on the debt of a basket of issuers, rather than a single issuer, and may be customized with respect to the
default event that triggers purchase or other factors (for example, the Nth default within a basket, or defaults by a particular combination of issuers within the basket, may trigger a payment obligation). As a credit protection seller in a credit
default swap contract, the Fund would be required to pay the par (or other agreed-upon) value of a referenced debt obligation to the counterparty following certain negative credit events as to a specified third-party debtor, such as default by a
U.S. or non-U.S. corporate issuer on its debt obligations. In return for its obligation, the Fund would receive from the counterparty a periodic stream of payments, which may be based on, among other things, a
fixed or floating rate of interest, over the term of the contract provided that no event of default has occurred. If no default occurs, the Fund would keep the stream of payments, and would have no payment obligations to the counterparty. The Fund
may sell credit protection in order to earn additional income and/or to take a synthetic long position in the underlying security or basket of securities.
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Annual Report
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September 30, 2021
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65
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Summary of Updated Information Regarding the Fund (Cont.)
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The Fund may enter into credit default swap
contracts as protection buyer in order to hedge against the risk of default on the debt of a particular issuer or basket of issuers or attempt to profit from a deterioration or perceived deterioration in the creditworthiness of the particular
issuer(s) (also known as buying credit protection). This would involve the risk that the investment may expire worthless and would only generate gain in the event of an actual default by the issuer(s) of the underlying obligation(s) (or, as
applicable, a credit downgrade or other indication of financial instability). It would also involve the risk that the seller may fail to satisfy its payment obligations to the Fund. The purchase of credit default swaps involves costs, which will
reduce the Funds return.
A protection seller may have to pay out amounts following a negative credit event greater than the value of the reference
obligation delivered to it by its counterparty and the amount of periodic payments previously received by it from the counterparty. When the Fund acts as a seller of a credit default swap, it is exposed to, among other things, leverage risk because
if an event of default occurs the seller must pay the buyer the full notional value of the reference obligation. Each party to a credit default swap is subject to the credit risk of its counterparty. The value of the credit default swap to each
party will change, at times significantly, based on changes in the actual or perceived creditworthiness of the underlying issuer.
A protection buyer may
lose its investment and recover nothing should an event of default not occur. The Fund may seek to realize gains on its credit default swap positions, or limit losses on its positions, by selling those positions in the secondary market. There can be
no assurance that a liquid secondary market will exist at any given time for any particular credit default swap or for credit default swaps generally.
The
parties to a credit default swap may be required to post collateral to each other. If the Fund posts initial or periodic collateral to its counterparty, it may not be able to recover that collateral from the counterparty in accordance with the terms
of the swap. In addition, if the Fund receives collateral from its counterparty, it may be delayed or prevented from realizing on the collateral in the event of the insolvency or bankruptcy of the counterparty. The Fund may exit its obligations
under a credit default swap only by terminating the contract and paying applicable breakage fees, or by entering into an offsetting credit default swap position, which may cause the Fund to incur more losses. There can be no assurance that the Fund
will be able to exit a credit default swap position effectively when it seeks to do so.
U.S. Government Securities Risk
Some U.S. Government securities, such as Treasury bills, notes, and bonds and mortgage-backed securities guaranteed by the Government National
Mortgage Association (Ginnie Mae), are supported by the full faith and credit of the United States; others are supported by the right of the issuer to borrow from the U.S. Treasury; others are supported by the discretionary authority of the U.S.
Government to purchase the agencys obligations; still others are supported only by the credit of the issuing agency, instrumentality, or enterprise. Although U.S. Government-sponsored enterprises may be chartered or sponsored by Congress, they
are not funded by Congressional appropriations, and their securities are not issued by the U.S. Treasury, their obligations are not supported by the full faith and credit of the U.S. Government, and so investments in their securities or obligations
issued by them involve greater risk than investments in other types of U.S. Government securities.
The events surrounding the U.S. federal government debt
ceiling and any resulting agreement (and similar political, economic and other developments) could adversely affect the Funds ability to achieve its investment objective. For example, a downgrade of the long-term sovereign credit rating of the
U.S. could increase volatility in both stock and bond markets, result in higher interest rates and lower Treasury prices and increase the costs of all kinds of debt. These events and similar events in other areas of the world could have significant
adverse effects on the economy generally and could result in significant adverse impacts on issuers of securities held by the Fund and the Fund itself.
In
the past, the values of U.S. Government securities have been affected substantially by increased demand for them around the world. Changes in the demand for U.S. Government securities may occur at any time and may result in increased volatility in
the values of those securities.
Sovereign Debt Obligations Risk
Investments in countries government debt obligations involve special risks. Certain countries have historically experienced, and may continue to experience,
high rates of inflation, high interest rates, exchange rate fluctuations, large amounts of external debt, balance of payments and trade difficulties and extreme poverty and unemployment. The issuer or governmental authority that controls the
repayment of a countrys debt may not be able or willing to repay the principal and/or interest when due in accordance with the terms of such debt. A debtors willingness or ability to repay principal and interest due in a timely manner
may be affected by, among other factors, its cash flow situation and, in the case of a government debtor, the extent of its foreign currency reserves or its inability to sufficiently manage fluctuations in relative currency valuations, the
availability of sufficient foreign exchange on
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66
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DoubleLine Yield Opportunities Fund
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(Unaudited)
September 30, 2021
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the date a payment is due, the relative size of the debt service burden to the economy as a whole, the government debtors policy towards principal international lenders such as the
International Monetary Fund and the political and social constraints to which a government debtor may be subject. Government debtors may default on their debt and also may be dependent on expected disbursements from foreign governments, multilateral
agencies and others abroad to reduce principal and interest arrearages on their debt. The commitment on the part of these governments, agencies and others to make such disbursements may be conditioned on a debtors implementation of economic
reforms and/or economic performance and the timely service of such debtors obligations. Failure to implement such reforms, achieve such levels of economic performance or repay principal or interest when due may result in the cancellation of
such third parties commitments to lend funds to the government debtor, which may further impair such debtors ability or willingness to service its debts on a timely basis.
As a result of the foregoing, a government obligor may default on its obligations. If such an event occurs, the Fund may have limited (or no) legal recourse
against the issuer and/or guarantor. Remedies must, in some cases, be pursued in the courts of the defaulting party itself, and the ability of the holder of foreign government debt securities to obtain recourse may be subject to the political
climate in the relevant country. In addition, no assurance can be given that the holders of more senior fixed income securities, such as commercial bank debt, will not contest payments to the holders of other foreign government debt securities in
the event of default under their commercial bank loan agreements. There is no bankruptcy proceeding by which sovereign debt on which governmental entities have defaulted may be collected in whole or in part. In addition, foreign governmental
entities may enjoy various levels of sovereign immunity, and it may be difficult or impossible to bring a legal action against a foreign governmental entity or to enforce a judgment against such an entity.
Government obligors in emerging market countries are among the worlds largest debtors to commercial banks, other governments, international financial
organizations and other financial institutions. The issuers of the government debt securities in which the Fund may invest have in the past experienced substantial difficulties in servicing their external debt obligations, which led to defaults on
certain obligations and the restructuring of certain indebtedness. Restructuring arrangements have included, among other things, reducing and rescheduling interest and principal payments by negotiating new or amended credit agreements, and obtaining
new credit to finance interest payments. Holders of certain foreign government debt securities may be requested to participate in the restructuring of such obligations and to extend further loans to their issuers. There can be no assurance that the
foreign government debt securities in which the Fund may invest will not be subject to similar restructuring arrangements or to requests for new credit, which may adversely affect the Funds holdings. Furthermore, certain participants in the
secondary market for such debt may be directly involved in negotiating the terms of these arrangements and may therefore have access to information not available to other market participants.
Loan Risk
Investments in loans
are generally subject to the same risks as investments in other types of debt obligations, including, among others, credit risk, interest rate risk, prepayment risk, and extension risk. In addition, in many cases loans are subject to the risks
associated with below-investment grade securities. This means loans are often subject to significant credit risks, including a greater possibility that the borrower will be adversely affected by changes in market or economic conditions and may
default or enter bankruptcy. This risk of default will increase in the event of an economic downturn or a substantial increase in interest rates (which will increase the cost of the borrowers debt service).
The interest rates on floating rate loans typically adjust only periodically. Accordingly, adjustments in the interest rate payable under a loan may trail
prevailing interest rates significantly, especially if there are limitations placed on the amount the interest rate on a loan may adjust in a given period. Certain floating rate loans have a feature that prevents their interest rates from adjusting
if market interest rates are below a specified minimum level. When interest rates are low, this feature could result in the interest rates of those loans becoming fixed at the applicable minimum level until interest rates rise above that level.
Although this feature is intended to result in these loans yielding more than they otherwise would when interest rates are low, the feature might also result in the prices of these loans becoming more sensitive to changes in interest rates should
interest rates rise but remain below the applicable minimum level.
In addition, investments in loans may be difficult to value and may be illiquid. Floating
rate loans generally are subject to legal or contractual restrictions on resale. The liquidity of floating rate loans, including the volume and frequency of secondary market trading in such loans, varies significantly over time and among individual
floating rate loans. For example, if the credit quality of the borrower related to a floating rate loan unexpectedly declines significantly, secondary market trading in that floating rate loan can also decline. The secondary market for loans may be
subject to irregular trading activity, wide bid/ask spreads, and extended trade settlement periods, which may increase the expenses of the Fund or cause the Fund to be unable to realize the full value of its investment in the loan, resulting in a
material decline in the Funds NAV.
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Annual Report
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September 30, 2021
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67
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Summary of Updated Information Regarding the Fund (Cont.)
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The Fund may make loans directly to borrowers
or may acquire an interest in a loan by means of an assignment or a participation. In an assignment, the Fund may be required generally to rely upon the assigning financial institution to demand payment and enforce its rights against the borrower,
but would otherwise be entitled to the benefit of all of the financial institutions rights in the loan. The Fund may also purchase a participating interest in a portion of the rights of a lending institution in a loan. In such case, the Fund
will generally be entitled to receive from the lending institution amounts equal to the payments of principal, interest and premium, if any, on the loan received by the institution, but generally will not be entitled to enforce its rights directly
against the agent bank or the borrower, and must rely for that purpose on the lending institution.
Investments in loans through a purchase of a loan, loan
origination or a direct assignment of a financial institutions interests with respect to a loan may involve additional risks to the Fund. For example, if a loan is foreclosed, the Fund could become owner, in whole or in part, of any
collateral, which could include, among other assets, real estate or other real or personal property, and would bear the costs and liabilities associated with owning and holding or disposing of the collateral. In addition, it is conceivable that
under emerging legal theories of lender liability, the Fund as holder of a partial interest in a loan could be held liable as co-lender for acts of the agent lender.
Loans and certain other forms of direct indebtedness may not be classified as securities under the federal securities laws and, therefore, when the
Fund purchases such instruments, it may not be entitled to the protections against fraud and misrepresentation contained in the federal securities laws.
Additional risks of investments in loans may include:
Agent/Intermediary Risk. If the Fund holds a loan through another financial intermediary, as is the case with a participation, or relies on another
financial intermediary to administer the loan, as is the case with most multi-lender facilities, the Funds receipt of principal and interest on the loan and the value of the Funds loan investment will depend at least in part on the
credit standing of the financial intermediary and therefore will be subject to the credit risk of the intermediary. The Fund will be required to rely upon the financial intermediary from which it purchases a participation interest to collect and
pass on to the Fund such payments and to enforce the Funds rights and may not be able to cause the financial intermediary to take what it considers to be appropriate action. As a result, an insolvency, bankruptcy or reorganization of the
financial intermediary may delay or prevent the Fund from receiving principal, interest and other amounts with respect to the Funds interest in the loan. In addition, if the Fund relies on a financial intermediary to administer a loan, the
Fund is subject to the risk that the financial intermediary may be unwilling or unable to demand and receive payments from the borrower in respect of the loan, or otherwise unwilling or unable to perform its administrative obligations.
Highly Leveraged Transactions Risk. The Fund may invest in loans made in connection with highly leveraged transactions. Those loans are subject to
greater credit and liquidity risks than other types of loans. If the Fund voluntarily or involuntarily sold those types of loans, it might not receive the full value it expected.
Stressed, Distressed or Defaulted Borrowers Risk. The Fund can also invest in loans of borrowers that are experiencing, or are likely to
experience, financial difficulty. These loans are subject to greater credit and liquidity risks than other types of loans. In addition, the Fund can invest in loans of borrowers that have filed for bankruptcy protection or that have had involuntary
bankruptcy petitions filed against them by creditors. Various laws enacted for the protection of debtors may apply to loans. A bankruptcy proceeding or other court proceeding could delay or limit the ability of the Fund to collect the principal and
interest payments on that borrowers loans or adversely affect the Funds rights in collateral relating to a loan. If a lawsuit is brought by creditors of a borrower under a loan, a court or a trustee in bankruptcy could take certain
actions that would be adverse to the Fund.
Limited Information Risk. Because there may be limited public or other information available
regarding loan investments, the Funds investments in such instruments may be particularly dependent on the analytical abilities of the Funds portfolio managers.
Interest Rate Benchmarks Risk. Interest rates on loans typically adjust periodically often based on changes in a benchmark rate plus a premium or
spread over the benchmark rate. The benchmark rate may be LIBOR, the Prime Rate, or other base lending rates used by commercial lenders (each as defined in the applicable loan agreement).
Some benchmark rates may reset daily; others reset less frequently. The interest rate on LIBOR-based loans is reset periodically, typically based on a period
between 30 days and one year. Certain floating or variable rate loans may permit the borrower to select an interest rate reset period of up to one year or longer. Investing in loans with longer interest rate reset periods may increase fluctuations
in the Funds NAV as a result of changes in interest rates. Interest rates on loans with longer periods between benchmark resets will typically trail market interest rates in a rising interest rate environment.
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68
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DoubleLine Yield Opportunities Fund
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(Unaudited)
September 30, 2021
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Certain loans
may permit the borrower to change the base lending rate during the term of the loan. One benchmark rate may not adjust to changing market or interest rates to the same degree or as rapidly as another, permitting the borrower the option to select the
benchmark rate that is most advantageous to it and less advantageous to the Fund. To the extent the borrower elects this option, the interest income and total return the Fund earns on the investment may be adversely affected as compared to other
investments where the borrower does not have the option to change the base lending or benchmark rate.
Restrictive Loan Covenants Risk.
Borrowers must comply with various restrictive covenants that may be contained in loan agreements. They may include restrictions on dividend payments and other distributions to stockholders, provisions requiring the borrower to maintain
specific financial ratios, and limits on total debt. They may include requirements that the borrower prepay the loan with any free cash flow. A break of a covenant that is not waived by the agent bank (or the lenders) is normally an event of default
that provides the agent bank or the lenders the right to call the outstanding amount on the loan. If a lender accelerates the repayment of a loan because of the borrowers violation of a restrictive covenant under the loan agreement, the
borrower might default in payment of the loan.
Some of the loans in which the Fund may invest or to which the Fund may obtain exposure may be
covenant-lite. Such loans contain fewer or less restrictive constraints on the borrower than certain other types of loans. Such loans generally do not include terms which allow the lender to monitor the performance of the borrower and
declare a default or force a borrower into bankruptcy restructuring if certain criteria are breached. Under such loans, lenders typically must rely on covenants that restrict a borrower from incurring additional debt or engaging in certain actions.
Such covenants can be breached only by an affirmative action of the borrower, rather than by a deterioration in the borrowers financial condition. Accordingly, the Fund may have fewer rights against a borrower when it invests in or has
exposure to such loans and so may have a greater risk of loss on such investments as compared to investments in or exposure to loans with additional or more conventional covenants.
Senior Loan and Subordination Risk. In addition to the risks typically associated with debt securities and loans generally, senior loans are also
subject to the risk that a court could subordinate a senior loan, which typically holds a senior position in the capital structure of a borrower, to presently existing or future indebtedness or take other action detrimental to the holders of senior
loans.
Settlement Risk. Transactions in many loans settle on a delayed basis, and the Fund may not receive the proceeds from the sale of such
loans for a substantial period after the sale. As a result, sale proceeds related to the sale of such loans may not be available to make additional investments until potentially a substantial period after the sale of the loans.
Inadequate Collateral or Guarantees Risk. Even if a loan to which the Fund is exposed is secured, there can be no assurance that the collateral
will, when recovered and liquidated, generate sufficient (or any) funds to offset any losses associated with a defaulting loan. It is possible that the same collateral could secure multiple loans, in which case the liquidation proceeds of the
collateral may be insufficient to cover the payments due on all the loans secured by that collateral. This risk is increased if the Funds loans are secured by a single asset. There can be no guarantee that the collateral can be liquidated and
any costs associated with such liquidation could reduce or eliminate the amount of funds otherwise available to offset the payments due under the loan. Moreover, the Funds security interests may be unperfected for a variety of reasons,
including the failure to make a required filing by the servicer and, as a result, the Fund may not have priority over other creditors as it expected.
Unsecured Loans Risk. Subordinated or unsecured loans are lower in priority of payment to secured loans and are subject to the additional risk that
the cash flow of the borrower and property securing the loan or debt, if any, may be insufficient to meet scheduled payments after giving effect to the senior secured obligations of the borrower. This risk is generally higher for subordinated
unsecured loans or debt, which are not backed by a security interest in any specific collateral.
Servicer Risk. The Funds direct and
indirect investments in loans are typically serviced by the originating lender or a third-party servicer. In the event that the servicer is unable to service the loan, there can be no guarantee that a backup servicer will be able to assume
responsibility for servicing the loans in a timely or cost-effective manner; any resulting disruption or delay could jeopardize payments due to the Fund in respect of its investments or increase the costs associated with the Funds investments.
Direct Lending Risk. The Fund may seek to originate loans, including, without limitation, commercial real estate or mortgage- related-loans or
other types of loans, which may be in the form of whole loans, secured and unsecured notes, senior and second lien loans, mezzanine loans or similar investments. The Fund will be responsible for the expenses associated with originating a loan
(whether or not consummated). This may include significant legal and due diligence expenses, which will be indirectly borne by the Fund and Common Shareholders.
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Annual Report
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September 30, 2021
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69
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Summary of Updated Information Regarding the Fund (Cont.)
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Direct lending involves risks beyond those
associated with investing in loans. If a loan is foreclosed, the Fund could become owner of any collateral and would bear the costs and liabilities associated with owning, operating, maintaining and disposing of the collateral. As a result, the Fund
may be exposed to losses resulting from default and foreclosure and also operating and maintaining the property. Any costs or delays involved in the effectuation of a foreclosure of the loan or a liquidation of the underlying assets will further
reduce the proceeds and thus increase the loss. There is no assurance that the Fund will correctly evaluate the value of the assets collateralizing the loan. In the event of a reorganization or liquidation proceeding relating to the borrower, the
Fund may lose all or part of the amounts advanced to the borrower. There is no assurance that the protection of the Funds interests is adequate, including the validity or enforceability of the loan and the maintenance of the anticipated
priority and perfection of the applicable security interests. Furthermore, there is no assurance that claims will not be asserted that might interfere with enforcement of the Funds rights.
There are no restrictions on the credit quality of the Funds loans. Loans may be deemed to have substantial vulnerability to default in payment of interest
and/or principal. There can be no assurance as to the levels of defaults and/or recoveries that may be experienced on loans in which the Fund has invested. Certain of the loans in which the Fund may invest have uncertainties and/or exposure to
adverse conditions, and may be considered to be predominantly speculative. Generally, such loans offer a higher return potential than better quality loans, but involve greater volatility of price and greater risk of loss of income and principal. The
market values of certain of these loans also tend to be more sensitive to changes in economic conditions than better quality loans.
Loans to issuers
operating in workout modes or under Chapter 11 of the U.S. Bankruptcy Code or the equivalent laws of member states of the European Union are, in certain circumstances, subject to certain potential liabilities that may exceed the amount of the loan.
For example, under certain circumstances, lenders who have inappropriately exercised control of the management and policies of a debtor may have their claims subordinated or disallowed or may be found liable for damages suffered by parties as a
result of such actions.
Various state licensing requirements could apply to the Fund with respect to investments in, or the origination and servicing of,
loans and similar assets and it may take a substantial period of time for the Fund to obtain any necessary licenses or comply with other applicable regulatory requirements. The licensing requirements could apply depending on the location of the
borrower, the location of the collateral securing the loan, or the location where the Fund or the Adviser operates or has offices. In states that require licensure for or otherwise regulate loan origination, the Fund or Advisor will be required to
comply with applicable laws and regulations, including consumer protection and anti-fraud laws, which could impose restrictions on the Funds or Advisors ability to take certain actions to protect the value of its investments in such
assets and impose compliance costs, or the Fund will have to forego investment opportunities subject to that states laws and regulations. Failure to comply with such laws and regulations could lead to, among other penalties, a loss of the
Funds or Advisors license, which in turn could require the Fund to divest assets located in or secured by real property located in that state. In addition to laws governing the activities of lenders and servicers, some states require
purchasers of certain loans to be licensed or registered in order to own loans connected to the state (e.g., made in the state or secured by property in the state) and, in certain states, to collect a rate of interest above a specified rate. These
risks will also apply to issuers and entities in which the Fund invests that hold similar assets, as well as any origination company or servicer in which the Fund owns an interest. As of September 30, 2021, the Fund does not hold any licenses
to originate loans in any states where a license is required, and there can be no assurance that the Fund will obtain any such licenses timely or ever.
Foreign Loan Risk. Loans involving foreign borrowers may involve risks not ordinarily associated with exposure to loans to U.S. entities and
individuals. The foreign lending industry may be subject to less governmental supervision and regulation than exists in the U.S.; conversely, foreign regulatory regimes applicable to the lending industry may be more complex and more restrictive than
those in the U.S., resulting in higher costs associated with such investments, and such regulatory regimes may be subject to interpretation or change without prior notice to investors, such as the Fund. Foreign lending may not be subject to
accounting, auditing, and financial reporting standards and practices comparable to those in the U.S. Due to differences in legal systems, there may be difficulty in obtaining or enforcing a court judgment outside the United States.
Lender Liability. A number of judicial decisions have upheld judgments of borrowers against lending institutions on the basis of various evolving
legal theories, collectively termed lender liability. Generally, lender liability is founded on the premise that a lender has violated a duty (whether implied or contractual) of good faith, commercial reasonableness and fair dealing, or
a similar duty owed to the borrower or has assumed an excessive degree of control over the borrower resulting in the creation of a fiduciary duty owed to the borrower or its other creditors or shareholders. If a loan held by the Fund were found to
have been made or serviced under circumstances that give rise to lender liability, the borrowers obligation to repay that loan could be reduced or eliminated or the Funds recovery on that loan could be otherwise impaired, which would
adversely impact the value of that loan. In limited cases, courts have subordinated the loans of a senior lender to a borrower to claims of other creditors of the borrower when
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70
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DoubleLine Yield Opportunities Fund
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(Unaudited)
September 30, 2021
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the senior lender or its agents, such as a loan servicer, is found to have engaged in unfair, inequitable or fraudulent conduct with respect to the other creditors. If a loan held by the Fund
were subject to such subordination, it would be junior in right of payment to other indebtedness of the borrower, which could adversely impact the value of that loan.
Below Investment Grade/High Yield Securities Risk
Debt instruments rated below investment grade and debt instruments that are unrated and of comparable or lesser quality are predominantly speculative and
considered vulnerable to nonpayment and their issuers to be dependent on favorable business, financial and economic conditions to meet their financial commitments. They are usually issued by companies without long track records of sales and earnings
or by companies with questionable credit strength. These instruments, which include debt securities commonly known as junk bonds, have a higher degree of default risk and may be less liquid than higher-rated bonds. These instruments may
be subject to greater price volatility due to such factors as specific corporate developments, interest rate sensitivity, negative perceptions of high yield investments generally, general economic downturn, and less secondary market liquidity. This
potential lack of liquidity may make it more difficult for the Fund to value these instruments accurately. An economic downturn could severely affect the ability of issuers (particularly those that are highly leveraged) to service their debt
obligations or to repay their obligations upon maturity.
Distressed and Defaulted Securities Risk
Distressed and defaulted securities risk refers to the uncertainty of repayment of defaulted securities (e.g., a security on which a principal or interest payment
is not made when due) and obligations of distressed issuers. Because the issuer of such securities is in default and/or is likely to be in distressed financial condition, repayment of defaulted securities and obligations of distressed issuers
(including insolvent issuers or issuers in payment or covenant default, in workout or restructuring or in bankruptcy or insolvency proceedings) is subject to significant uncertainties. Insolvency laws and practices in foreign markets, and especially
emerging market countries are different than those in the U.S. and the effect of these laws and practices cannot be predicted with certainty. Investments in defaulted securities and obligations of distressed issuers are considered speculative and
entail high risk.
REIT Risk
The Fund may invest in REITs. REITs are pooled investment vehicles that own, and typically operate, income-producing real estate. If a REIT meets certain
requirements, including distributing to shareholders substantially all of its taxable income (other than net capital gains), then it is not taxed on the income distributed to shareholders. REITs are subject to management fees and other expenses, and
so the Fund will bear its proportionate share of the costs of the REITs operations. There are three general categories of REITs: Equity REITs, Mortgage REITs and Hybrid REITs. Equity REITs, which invest primarily in direct fee ownership or
leasehold ownership of real property and derive most of their income from rents, are generally affected by changes in the values of and incomes from the properties they own. Mortgage REITs invest mostly in mortgages on real estate, which may secure,
for example, construction, development or long-term loans, and the main source of their income is mortgage interest payments. Mortgage REITs may be affected by the credit quality of the mortgage loans they hold. A hybrid REIT combines the
characteristics of equity REITs and mortgage REITs, generally by holding both ownership interests and mortgage interests in real estate, and thus may be subject to risks associated with both real estate ownership and investments in mortgage-related
investments. Along with the risks common to different types of real estate-related investments, REITs, no matter the type, involve additional risk factors, including poor performance by the REITs manager, adverse changes to the tax laws, and
the possible failure by the REIT to qualify for the favorable tax treatment applicable to REITs under the Internal Revenue Code of 1986, as amended (the Code), or an exemption under the 1940 Act. REITs are not diversified and are heavily
dependent on cash flow earned on the property interests they hold.
Mortgage REITs are exposed to the risks specific to the real estate market as well as the
risks that relate specifically to the way in which mortgage REITs are organized and operated. Mortgage REITs receive principal and interest payments from the owners of the mortgaged properties. Accordingly, mortgage REITs are subject to the credit
risk of the borrowers to whom they extend credit, and are subject to the risks described under Mortgage-Backed Securities Risk and Debt Securities Risk. Mortgage REITs are also subject to significant interest rate risk.
Mortgage REITs typically use leverage and many are highly leveraged, which exposes them to the risks of leverage. Leverage risk refers to the risk that leverage created from borrowing may impair a mortgage REITs liquidity, cause it to
liquidate positions at an unfavorable time and increase the volatility of the values of securities issued by the mortgage REIT. The use of leverage may not be advantageous to a mortgage REIT. To the extent that a mortgage REIT incurs significant
leverage, it may incur substantial losses if its borrowing costs increase or if the assets it purchases with leverage decrease in value.
The Funds
investment in a REIT may result in the Fund making distributions that constitute a return of capital to Fund shareholders for federal income tax purposes. In addition, distributions attributable to REITs made by the Fund to Fund shareholders will
not
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Annual Report
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September 30, 2021
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71
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Summary of Updated Information Regarding the Fund (Cont.)
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qualify for the corporate dividends-received deduction, or, generally, for treatment as qualified dividend income. Certain distributions made by the Fund attributable to dividends received by the
Fund from REITs may qualify as qualified REIT dividends in the hands of non-corporate shareholders.
Real Estate Risk
To the extent that the Fund invests in real estate related investments, including REITs, real estate-related
loans or real-estate linked derivative instruments, it will be subject to the risks associated with owning real estate and with the real estate industry generally. These include difficulties in valuing and disposing of real estate, the possibility
of declines in the value of real estate, risks related to general and local economic conditions, the possibility of adverse changes in the climate for real estate, environmental liability risks, the risk of increases in property taxes and operating
expenses, possible adverse changes in zoning laws, the risk of casualty or condemnation losses, limitations on rents, the possibility of adverse changes in interest rates and in the credit markets and the possibility of borrowers paying off
mortgages sooner than expected, which may lead to reinvestment of assets at lower prevailing interest rates. To the extent that the Fund invests in REITs, it will also be subject to the risk that a REIT may default on its obligations or go bankrupt.
By investing in REITs indirectly through the Fund, a shareholder will indirectly bear his or her proportionate share of the expenses of the REITs. The Funds investments in REITs could cause the Fund to recognize income in excess of cash
received from those securities and, as a result, the Fund may be required to sell portfolio securities, including when it is not advantageous to do so, in order to make distributions. An investment in a REIT or a real estate-linked derivative
instrument that is linked to the value of a REIT is subject to additional risks, such as poor performance by the manager of the REIT, adverse changes to the tax laws or failure by the REIT to qualify for the favorable tax treatment applicable to
REITs under the Code. In addition, some REITs have limited diversification because they invest in a limited number of properties, a narrow geographic area, or a single type of property. Also, the organizational documents of a REIT may contain
provisions that make changes in control of the REIT difficult and time- consuming. Finally, private REITs are not traded on a national securities exchange. As such, these products may be illiquid. This reduces the ability of the Fund to redeem its
investment early. Private REITs are also generally harder to value and may bear higher fees than public REITs.
LIBOR Risk
The terms of many investments, financings or other transactions to which the Fund may be a party have been historically tied to the London
Interbank Offered Rate, or LIBOR. LIBOR is the offered rate at which major international banks can obtain wholesale, unsecured funding, and LIBOR may be available for different durations (e.g., 1 month or 3 months) and for different
currencies. LIBOR may be a significant factor in determining the Funds payment obligations under a derivative investment, the cost of financing to the Fund or an investments value or return to the Fund, and may be used in other ways that
affect the Funds investment performance. In July 2017, the Financial Conduct Authority (FCA), the United Kingdoms financial regulatory body, announced that after 2021 it will cease its active encouragement of banks to provide
the quotations needed to sustain LIBOR. In March 2021, the FCA and LIBORs administrator, ICE Benchmark Administration Limited (IBA) announced that all Sterling, Japanese Yen, Swiss Franc and Euro and certain U.S. dollar LIBOR
settings will no longer be published after the end of 2021 and the remaining (being the majority of the) U.S. dollar LIBOR settings will no longer be published after June 30, 2023. It is possible that the FCA, using new statutory powers to be
granted to it, will compel the IBA to publish a subset of LIBOR settings after these dates on a synthetic basis. Various financial industry groups have been planning for that transition, but there are obstacles to converting certain
securities and transactions to a new reference rates. Markets are developing slowly and questions around liquidity in these new rates and how to appropriately mitigate any economic value transfer at the time of transition remain a significant
concern. Neither the effect of the transition process nor its ultimate success can yet be known. The transition process might lead to increased volatility and illiquidity in markets for instruments whose terms currently include LIBOR. It could also
lead to a reduction in the value of some LIBOR-based investments and reduce the effectiveness of new hedges placed against existing LIBOR-based investments. While some LIBOR-based instruments may contemplate a scenario where LIBOR is no longer
available by providing for an alternative rate-setting methodology and/or increased costs for certain LIBOR-related instruments or financing transactions, not all may have such provisions and there may be significant uncertainty regarding the
effectiveness of any such alternative methodologies, resulting in prolonged adverse market conditions for the Fund. Since the usefulness of LIBOR as a benchmark could deteriorate during the transition period, these effects could occur prior to the
end of 2021. There also remains uncertainty and risk regarding the willingness and ability of issuers to include enhanced provisions in new and existing contracts or instruments. All of the aforementioned may adversely affect the Funds
performance or NAV.
Municipal Bond Risk
Investing in the municipal bond market involves the risks of investing in debt securities generally and certain other risks. The amount of public information
available about the municipal bonds in the Funds portfolio is generally less than that for corporate equities or bonds, and the investment performance of the Funds investment in municipal bonds may therefore be more
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72
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DoubleLine Yield Opportunities Fund
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(Unaudited)
September 30, 2021
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dependent on the analytical abilities of the Adviser than its investments in taxable bonds. The secondary market for municipal bonds also tends to be less well developed or liquid than many other
securities markets, which may adversely affect the Funds ability to sell municipal bonds at attractive prices.
The ability of municipal issuers to
make timely payments of interest and principal may be diminished during general economic downturns, by litigation, legislation or political events, or by the bankruptcy of the issuer. Laws, referenda, ordinances or regulations enacted in the future
by Congress or state legislatures or the applicable governmental entity could extend the time for payment of principal and/or interest, or impose other constraints on enforcement of such obligations, or on the ability of municipal issuers to levy
taxes. Issuers of municipal securities also might seek protection under the bankruptcy laws. In the event of bankruptcy of such an issuer, the Fund could experience delays in collecting principal and interest and the Fund may not, in all
circumstances, be able to collect all principal and interest to which it is entitled. To enforce its rights in the event of a default in the payment of interest or repayment of principal, or both, the Fund may take possession of and manage the
assets securing the issuers obligations on such securities, which may increase the Funds operating expenses. Any income derived from the Funds ownership or operation of such assets may not be tax exempt.
The Fund may invest in revenue bonds, which are typically issued to fund a wide variety of capital projects including: electric, gas, water and sewer systems;
highways, bridges and tunnels; port and airport facilities; colleges and universities; and hospitals. Because the principal security for a revenue bond is generally the net revenues derived from a particular facility or group of facilities or, in
some cases, from the proceeds of a special excise or other specific revenue source, there is no guarantee that the particular project will generate enough revenue to pay its obligations, in which case the Funds performance may be adversely
affected.
Interest on municipal obligations, while generally exempt from federal income tax, may not be exempt from federal alternative minimum tax. The
Fund does not expect to be eligible to pass the tax-exempt character of such interest through to Common Shareholders.
Hedging Strategy Risk
Certain of
the investment techniques that the Fund may employ for hedging will expose the Fund to additional or increased risks. For example, there may be an imperfect correlation between changes in the value of the Funds portfolio holdings and hedging
positions entered into by the Fund, which may prevent the Fund from achieving the intended hedge or expose the Fund to risk of loss. In addition, the Funds success in using hedge instruments is subject to the Advisers ability to predict
correctly changes in the relationships of such hedge instruments to the Funds portfolio holdings, and there can be no assurance that the Advisers judgment in this respect will be accurate. Consequently, the use of hedging transactions
might result in a poorer overall performance for the Fund, whether or not adjusted for risk, than if the Fund had not hedged its portfolio holdings. The Adviser is under no obligation to engage in any hedging strategies, and may, in its discretion,
choose not to. Even if the Adviser desires to hedge some of the Funds risks, suitable hedging transactions may not be available or, if available, attractive. A failure to hedge may result in losses to the value of the Funds investments.
Short Sales and Short Position Risk
To the extent the Fund makes use of short sales or takes short positions for investment and/or risk management purposes, the Fund may be subject to certain risks
associated with selling short. Short sales are transactions in which the Fund sells securities or other instruments that the Fund does not own. Short exposure with respect to securities or market segments may also be achieved through the use of
derivative instruments, such as forwards, futures or swaps on indices or on individual securities. When the Fund engages in a short sale or short position on a security or other instrument, it may borrow the security or other instrument sold short
and deliver it to the counterparty. The Fund will ordinarily have to pay a fee or premium to borrow the security and will be obligated to repay the lender of the security any dividends or interest that accrues on the security during the period of
the loan. The amount of any gain from a short sale will be decreased, and the amount of any loss increased, by the amount of the premium, dividends, interest or expenses the Fund pays in connection with the short sale. Short sales and short
positions expose the Fund to the risk that it will be required to cover its short position at a time when the securities underlying the short position or exposure have appreciated in value, thus resulting in a loss to the Fund. The Fund may engage
in short sales when it does not own or have the right to acquire the security sold short at no additional cost. The Funds loss on a short sale or position theoretically could be unlimited in a case in which the Fund is unable, for whatever
reason, to close out its short position. In addition, the Funds short selling strategies may limit its ability to benefit from increases in the markets. Short selling involves a form of financial leverage that may exaggerate any losses
realized by the Fund. Also, there is the risk that the counterparty to a short sale may fail to honor its contractual terms, causing a loss to the Fund.
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Annual Report
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September 30, 2021
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73
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Summary of Updated Information Regarding the Fund (Cont.)
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The Fund may borrow an instrument from a
broker or other institution and sell it to establish a short position in the instrument. The Fund may also enter into a derivative transaction in order to establish a short position with respect to a reference asset. The Fund may make a profit or
incur a loss depending upon whether the market price of the instrument or the value of the position decreases or increases between the date the Fund established the short position and the date on which the Fund must replace the borrowed instrument
or otherwise close out the transaction. An increase in the value of an instrument, index or interest rate with respect to which the Fund has established a short position will result in a loss to the Fund, and there can be no assurance that the Fund
will be able to close out the position at any particular time or at an acceptable price. The loss to the Fund from a short position is potentially unlimited.
Convertible Securities Risk
The
Fund may invest in convertible securities. Convertible securities include bonds, debentures, notes, preferred stock and other securities that may be converted into or exchanged for, at a specific price or formula within a particular period of time,
a prescribed amount of common stock or other equity securities of the same or a different issuer. Convertible securities may entitle the holder to receive interest paid or accrued on debt or dividends paid or accrued on preferred stock until the
security matures or is redeemed, converted or exchanged. The market value of a convertible security is a function of its investment value and its conversion value. A securitys investment value represents the value of the security without its
conversion feature (i.e., a nonconvertible fixed income security). The investment value may be determined by reference to its credit quality and the current value of its yield to maturity or probable call date. At any given time, investment
value is dependent upon such factors as the general level of interest rates, the yield of similar nonconvertible securities, the financial strength of the issuer and the seniority of the security in the issuers capital structure. A
securitys conversion value is determined by multiplying the number of shares the holder is entitled to receive upon conversion or exchange by the current price of the underlying security.
Focused Investment Risk
A fund
that invests a substantial portion of its assets in a particular market, industry, sector, group of industries or sectors, country, region, group of countries or asset class is subject to greater risk than a fund that invests in a more diverse
investment portfolio. In addition, the value of such a fund is more susceptible to any single economic, market, political, regulatory or other occurrence affecting, for example, the particular markets, industries, regions, sectors or asset classes
in which the fund is invested. This is because, for example, issuers in a particular market, industry, region, sector or asset class may react similarly to specific economic, market, regulatory, political or other developments. The particular
markets, industries, regions, sectors or asset classes in which the Fund may focus its investments may change over time and the Fund may alter its focus at inopportune times. To the extent the Fund invests in the securities of a limited number of
issuers, it is particularly exposed to adverse developments affecting those issuers, and a decline in the market value of a particular security held by the Fund may affect the Funds performance more than if the Fund invested in the securities
of a larger number of issuers. In addition, the limited number of issuers to which the Fund may be exposed may provide the Fund exposure to substantially the same market, industry, sector, group of industries or sectors, country, region, group of
countries, or asset class, which may increase the risk of loss as a result of focusing the Funds investments, as discussed above.
Derivatives Risk
The Funds
use of derivatives may involve risks different from, or greater than, the risks associated with investing in more traditional investments, such as stocks and bonds. Derivatives can be highly complex and may perform in ways unanticipated by the
Adviser and may not be available at the time or price desired. Derivatives positions may also be improperly executed or constructed.
The Funds use of
derivatives involves counterparty risk. In the event a counterparty becomes insolvent, the Fund potentially could lose all or a large portion of the value of its investment in the derivative instrument. Because most derivatives involve contractual
arrangements with a counterparty, the Funds ability to enter into them requires a willing counterparty. The Funds ability to close out or unwind a derivatives position prior to expiration or maturity may also depend on the ability and
willingness of the counterparty to enter into a transaction closing out the position.
Derivatives may be difficult to value and highly illiquid and/or
volatile. The Fund may not be able to close out or sell a derivatives position at a particular time or at an anticipated price. Use of derivatives may affect the amount, timing and character of distributions to shareholders and, therefore, may
increase the amount of taxes payable by taxable shareholders.
The Fund may use derivatives to create investment leverage and the Funds use of
derivatives may otherwise cause its portfolio to be leveraged. Leverage increases the Funds portfolio losses when the value of its investments declines. Since many derivatives
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74
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DoubleLine Yield Opportunities Fund
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(Unaudited)
September 30, 2021
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involve leverage, adverse changes in the value or level of the underlying asset, rate, or index may result in a loss substantially greater than the amount invested in the derivative itself. Some
derivatives have the potential for unlimited loss, regardless of the size of the initial investment.
When the Fund enters into a derivatives transaction as
a substitute for or alternative to a direct cash investment, the Fund is exposed to the risk that the derivative transaction may not provide a return that corresponds precisely or at all with that of the underlying investment. When the Fund uses a
derivative for hedging purposes, it is possible that the derivative will not in fact provide the anticipated protection, and the Fund could lose money on both the derivative transaction and the exposure the Fund sought to hedge. While hedging
strategies involving derivatives can reduce the risk of loss, they can also reduce the opportunity for gain or even result in losses by offsetting favorable price movements in other Fund investments.
When it takes a derivatives position, the Fund may be required to maintain assets as cover, maintain segregated accounts, post collateral or make
margin payments under current regulatory guidelines. Assets that are segregated or used as cover, margin or collateral may be required to be in the form of cash or liquid securities, and typically may not be sold while the derivatives position is
open unless they are replaced with other appropriate assets. If markets move against the Funds position, the Fund may be required to maintain or post additional assets and may have to dispose of existing investments to obtain assets acceptable
as collateral or margin. This may prevent the Fund from pursuing its investment objective. Assets that are segregated or used as cover, margin or collateral typically are invested, and these investments are subject to risk and may result in losses
to the Fund. These losses may be substantial, and may be in addition to losses incurred by using the derivative in question. If the Fund is unable to close out its position, it may be required to continue to maintain such assets or accounts or make
such payments until the position expires or matures, and the Fund will continue to be subject to investment risk on the assets. In addition, the Fund may not be able to recover the full amount of its margin from an intermediary if that intermediary
were to experience financial difficulty. Segregation, cover, margin and collateral requirements may impair the Funds ability to sell a portfolio security or make an investment at a time when it would otherwise be favorable to do so, or require
the Fund to sell a portfolio security or close out a derivatives position at a disadvantageous time or price.
On October 28, 2020, the SEC adopted Rule
18f-4 under the 1940 Act, which, once effective, will apply to the Funds use of derivative investments and certain financing transactions (e.g., reverse repurchase agreements). Among other things, Rule 18f-4 will require funds that invest in derivative instruments beyond a specified limited amount to apply a value-at-risk based limit
to their use of certain derivative instruments and financing transactions and to adopt and implement a derivatives risk management program. Any funds that use derivative instruments (beyond certain currency and interest rate hedging transactions) in
a limited amount will not be subject to the full requirements of Rule 18f-4. In connection with the adoption of Rule 18f-4, funds will no longer be required to comply
with the asset segregation framework arising from prior SEC guidance. While the full effect of the new rule on the Funds operations and its related costs are not known at this time, the rule could, among other things, restrict the Funds
ability to use leverage, engage in derivatives transactions and/or increase the cost of such derivatives transactions. These limitations may substantially curtail the Funds ability to use derivative instruments and inhibit the Advisers
ability to establish what it views as the optimal investment exposure for the Fund. In addition, the Fund might not be able to use derivative instruments, reverse repurchase agreements and other transactions involving leverage to the same extent as
if the current regulatory structure had remained in place, and the ability of the Adviser to pursue the Funds investment objective as currently anticipated, and the Funds investment performance, might be adversely affected.
Current and future regulation of the derivatives markets may make derivatives more costly, may limit the availability or liquidity of derivatives, or may
otherwise adversely affect the value or performance of derivatives. Any such adverse developments could impair the effectiveness of the Funds derivatives transactions and cause the Fund to lose value.
Risks Related to the Funds Clearing Broker and Central Clearing Counterparty
Transactions in some types of swaps (including interest rate swaps and index credit default swaps) are required to be centrally cleared. In a transaction
involving those swaps (cleared derivatives), the Funds counterparty is a clearing house, rather than a bank or broker. Since the Fund is not a member of clearing houses and only members of a clearing house (clearing
members) can participate directly in the clearing house, the Fund will hold cleared derivatives through accounts at clearing members. In cleared derivatives positions, the Fund will make payments (including margin payments) to and receive
payments from a clearing house through their accounts at clearing members. Clearing members guarantee performance of their clients obligations to the clearing house. There is a risk that assets deposited by the Fund with any swaps or futures
clearing member as margin for futures contracts or cleared swaps may, in certain circumstances, be used to satisfy losses of other clients of the Funds clearing member. In addition, the assets of the Fund might not be fully protected in the
event of the clearing members bankruptcy, as the Fund would be limited to recovering only a pro rata share of all available funds segregated on behalf of the clearing members customers for
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Annual Report
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September 30, 2021
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75
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Summary of Updated Information Regarding the Fund (Cont.)
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the relevant account class. Similarly, all customer funds held at a clearing organization in connection with any futures contracts are held in a commingled omnibus account and are not identified
to the name of the clearing members individual customers.
In some ways, cleared derivative arrangements are less favorable to funds than bilateral
arrangements. For example, the Fund may be required to provide more margin for cleared derivatives positions than for bilateral derivatives positions. Also, in contrast to a bilateral derivatives position, following a period of notice to the Fund, a
clearing member generally can require termination of an existing cleared derivatives position at any time or an increase in margin requirements above the margin that the clearing member required at the beginning of a transaction. Clearing houses
also have broad rights to increase margin requirements for existing positions or to terminate those positions at any time. Any increase in margin requirements or termination of existing cleared derivatives positions by the clearing member or the
clearing house could interfere with the ability of the Fund to pursue its investment strategy. Further, any increase in margin requirements by a clearing member could expose the Fund to greater credit risk to its clearing member because margin for
cleared derivatives positions in excess of a clearing houses margin requirements may be held by the clearing member. Also, the Fund is subject to risk if it enters into a derivatives transaction that is required to be cleared (or that the
Adviser expects to be cleared), and no clearing member is willing or able to clear the transaction on the Funds behalf. In those cases, the position might have to be terminated, and the Fund could lose some or all of the benefit of the
position, including loss of an increase in the value of the position and/or loss of hedging protection, or could realize a loss. In addition, the documentation governing the relationship between the Fund and clearing members is drafted by the
clearing members and generally is less favorable to the Fund than typical bilateral derivatives documentation. While futures contracts entail similar risks, the risks likely are more pronounced for cleared swaps due to their more limited liquidity
and the short market history of clearing houses.
Counterparty Risk
The Fund will be subject to credit risk presented by another party (whether a clearing corporation in the case of exchange-traded or cleared instruments or
another third party in the case of over-the-counter instruments) that promises to honor an obligation to the Fund with respect to the derivative contracts and other
instruments, such as repurchase and reverse repurchase agreements, entered into by the Fund. If such a party becomes bankrupt or insolvent or otherwise fails or is unwilling to perform its obligations to the Fund due to financial difficulties or for
other reasons, the Fund may experience significant losses or delays in realizing on any collateral the counterparty has provided in respect of the counterpartys obligations to the Fund or recovering collateral that the Fund has provided and is
entitled to recover. In addition, in the event of the bankruptcy, insolvency or other event of default (e.g., cross-default) of a counterparty to a derivative transaction, the derivative transaction would typically be terminated at its fair market
value. If the Fund is owed this fair market value in the termination of the derivative transaction and its claim is unsecured, the Fund will likely be treated as a general creditor of such counterparty. The Fund may obtain only a limited recovery or
may obtain no recovery in such circumstances. Counterparty risk with respect to certain exchange-traded and over-the-counter derivatives may be further complicated by
U.S. financial reform legislation. Subject to certain U.S. federal income tax limitations, the Fund is not subject to any limit with respect to the number or the value of transactions they can enter into with a single counterparty.
Unrated Securities Risk
Unrated
securities (which are not rated by a rating agency) may be less liquid than comparable rated securities and involve the risk that the Adviser may not accurately evaluate the securitys comparative credit rating and value. To the extent that the
Fund invests in unrated securities, the Funds success in achieving its investment objective may depend more heavily on the Advisers creditworthiness analysis than if the Fund invested exclusively in rated securities. Some or all of the
unrated instruments in which the Fund may invest will involve credit risk comparable to or greater than that of rated debt securities of below investment grade quality.
Structured Products and Structured Notes Risk
Generally, structured investments are interests in entities organized and operated for the purpose of restructuring the investment characteristics of underlying
investment interests or securities. These investment entities may be structured as trusts or other types of pooled investment vehicles. This type of restructuring generally involves the deposit with or purchase by an entity of the underlying
investments and the issuance by that entity of one or more classes of securities backed by, or representing interests in, the underlying investments or referencing an indicator related to such investments. The cash flow or rate of return on the
underlying investments may be apportioned among the newly issued securities to create different investment characteristics, such as varying maturities, credit quality, payment priorities and interest rate provisions. Structured products include,
among other things, CDOs, mortgage-backed securities, other types of asset-backed securities and certain types of structured notes.
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76
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DoubleLine Yield Opportunities Fund
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(Unaudited)
September 30, 2021
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The cash flow or
rate of return on a structured investment may be determined by applying a multiplier to the rate of total return on the underlying investments or referenced indicator. Application of a multiplier is comparable to the use of financial leverage, a
speculative technique. Leverage magnifies the potential for gain and the risk of loss. As a result, a relatively small decline in the value of the underlying investments or referenced indicator could result in a relatively large loss in the value of
a structured product. Holders of structured products indirectly bear risks associated with the underlying investments, index or reference obligation, and are subject to counterparty risk. The Fund generally has the right to receive payments to which
it is entitled only from the structured product, and generally does not have direct rights against the issuer. While certain structured investment vehicles enable the investor to acquire interests in a pool of securities without the brokerage and
other expenses associated with directly holding the same securities, investors in structured vehicles generally pay their share of the investment vehicles administrative and other expenses.
Structured products are generally privately offered and sold, and thus, are not registered under the securities laws. Certain structured products may be thinly
traded or have a limited trading market and may have the effect of increasing the Funds illiquidity to the extent that the Fund, at a particular point in time, may be unable to find qualified buyers for these securities. In addition to the
general risks associated with fixed income securities discussed herein, structured products carry additional risks including, but not limited to: (i) the possibility that distributions from underlying investments will not be adequate to make
interest or other payments; (ii) the quality of the underlying investments may decline in value or default; (iii) the possibility that the security may be subordinate to other classes of the issuers securities; and (iv) the
complex structure of the security may not be fully understood at the time of investment and may produce disputes with the issuer or unexpected investment results.
Structured notes are derivative securities for which the amount of principal repayment and/or interest payments is based on the movement of one or more
factors. These factors may include, but are not limited to, currency exchange rates, interest rates (such as the prime lending rate or LIBOR), referenced bonds and stock indices. Some of these factors may or may not correlate to the
total rate of return on one or more underlying instruments referenced in such notes. In some cases, the impact of the movements of these factors may increase or decrease through the use of multipliers or deflators.
Investments in structured notes involve risks including interest rate risk, credit risk and market risk. Depending on the factor used and the use of multipliers
or deflators, changes in interest rates and movement of the factor may cause significant price fluctuations. Additionally, changes in the reference instrument or security may cause the interest rate on the structured note to be reduced to zero and
any further changes in the reference instrument may then reduce the principal amount payable on maturity. In the case of structured notes where the reference instrument is a debt instrument, such as credit-linked notes, the Fund will be subject to
the credit risk of the issuer of the reference instrument and the issuer of the structured note.
Issuer Risk
Issuer risk is the risk that the market price of securities may go up or down, sometimes rapidly or unpredictably, including due to factors affecting securities
markets generally, particular industries represented in those markets, or the issuer itself.
Equity Securities, Small- and Mid-Capitalization Companies and Related Market Risk
The market price of common stocks and other equity
securities may go up or down, sometimes rapidly or unpredictably. Equity securities may decline in value due to factors affecting equity securities markets generally, particular industries represented in those markets, or the issuer itself. The
values of equity securities may decline due to general market conditions that are not specifically related to a particular company, such as real or perceived adverse economic conditions, changes in the general outlook for corporate earnings, changes
in interest or currency rates or adverse investor sentiment generally. They also may decline due to factors which affect a particular industry or industries, such as labor shortages or increased production costs and competitive conditions within an
industry. Equity securities generally have greater price volatility than bonds and other debt securities.
Confidential Information
Access Risk
In managing the Fund, the Adviser may seek to avoid the receipt of material, non-public
information (Confidential Information) about the issuers of floating rate loans or other investments being considered for acquisition by the Fund or held in the Funds portfolio if the receipt of the Confidential Information would
restrict one or more of the Advisers clients, including, potentially, the Fund, from trading in securities they hold or in which they may invest. In many instances, issuers offer to furnish Confidential Information to prospective purchasers or
holders of the issuers loans or other securities. In circumstances when the Adviser declines to receive Confidential Information from these issuers, the Fund may be disadvantaged in comparison to other investors, including with respect to
evaluating the issuer and the price the Fund would pay or receive when it buys or sells those investments, and the Fund may not take advantage of investment opportunities that it otherwise might have if it had received such Confidential Information.
Further, in situations when the Fund is asked, for example, to grant consents, waivers or amendments with respect to
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Annual Report
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September 30, 2021
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77
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Summary of Updated Information Regarding the Fund (Cont.)
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such investments, the Advisers ability to assess such consents, waivers and amendments may be compromised. In certain circumstances, the Adviser may determine to receive Confidential
Information, including on behalf of clients other than the Fund. Receipt of Confidential Information by the Adviser could limit the Funds ability to sell certain investments held by the Fund or pursue certain investment opportunities on behalf
of the Fund, potentially for a substantial period of time.
Restricted Securities, Rule 144A/Regulation S Securities Risk
The Fund may hold securities that the Fund is prevented or limited by law or the terms of an agreement from selling (a restricted
security). To the extent that the Fund is permitted to sell a restricted security, there can be no assurance that a trading market will exist at any particular time and the Fund may be unable to dispose of the security promptly at reasonable
prices or at all. The Fund may have to bear the expense of registering the securities for resale and the risk of substantial delays in effecting registration. Also, restricted securities may be difficult to value because market quotations may not be
readily available, and the values of restricted securities may have significant volatility. Limitations on the resale of restricted securities may have an adverse effect on their marketability, and may prevent the Fund from disposing of them
promptly at reasonable prices. The Fund may have to bear the expense of registering such securities for resale and the risk of substantial delays in effecting such registration.
Inflation/Deflation Risk
Inflation risk is the risk that the value of assets or income from the Funds investments will be worth less in the future as inflation decreases the value
of payments at future dates. As inflation increases, the real value of the Funds portfolio could decline. Deflation risk is the risk that prices throughout the economy decline over time. Deflation may have an adverse effect on the
creditworthiness of issuers and may make issuer default more likely, which may result in a decline in the value of the Funds portfolio.
Market Disruption and Geopolitical Risk
Various market risks can affect the price or liquidity of an issuers securities
in which the Fund may invest. Returns from the securities in which the Fund invests may underperform returns from the various general securities markets. Different types of securities tend to go through cycles of outperformance and underperformance
in comparison to the general securities markets. Adverse events occurring with respect to an issuers performance or financial position can depress the value of the issuers securities. The liquidity in a market for a particular security
will affect its value and may be affected by factors relating to the issuer, as well as the depth of the market for that security. Other market risks that can affect value include a markets current attitudes about types of securities, market
reactions to political or economic events, including litigation, and tax and regulatory effects (including lack of adequate regulations for a market or particular type of instrument). During periods of severe market stress, it is possible that the
market for certain investments held by the Fund, such as loans, may become highly illiquid. In such an event, the Fund may find it difficult to sell the investments it holds, and, for those investments it is able to sell in such circumstances, the
sale price may be significantly lower than, and the trade settlement period may be longer than, anticipated.
Events surrounding the COVID-19 pandemic have contributed to, and may continue to contribute to, significant market volatility, reductions in economic activity, market closures, and declines in global financial markets. These effects may
be short term or may last for an extended period of time, and in either case could result in a substantial economic downturn or recession. Governmental responses may exacerbate other pre-existing political,
social, economic, market and financial risks. These events may have a significant adverse effect on the Funds performance and on the liquidity of the Funds investments and have the potential to impair the ability of the Adviser or the
Funds other service providers to serve the Fund and could lead to operational disruptions that negatively impact the Fund.
Markets may, in response to
governmental actions or intervention, political, economic or market developments, or other external factors, experience periods of high volatility and reduced liquidity. During those periods, the Fund may have to sell securities at times when it
would otherwise not do so, and potentially at unfavorable prices. Securities may be difficult to value during such periods. Market risk involves the risk that the value of the Funds investment portfolio will change, potentially frequently and
in large amounts, as the prices of its investments go up or down. During periods of severe market stress, it is possible that the market for some or all of the Funds investments may become highly volatile and/or illiquid. In such an event, the
Fund may find it difficult to sell some or all of its investments and, for certain assets, the trade settlement period may be longer than anticipated. The fewer the number of issuers in which the Fund invests and/or the greater the use of leverage,
the greater the potential volatility of the Funds portfolio. These risks may be heightened for fixed income securities due to the current low interest rate environment. The United States and other governments and the Federal Reserve and
certain foreign central banks have taken steps to support financial markets. The withdrawal of support, failure of efforts in response to a financial crisis, or investor perception that those efforts are not succeeding could negatively affect
financial markets generally as well as the values and liquidity of certain securities. Federal, state, and other governments, their regulatory agencies, or self-regulatory organizations may take actions that affect the regulation of the securities
in which the Fund invests or the issuers of such securities in ways that are unforeseeable.
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78
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DoubleLine Yield Opportunities Fund
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(Unaudited)
September 30, 2021
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Legislation or
regulation also may change the way in which the Fund or the Adviser are regulated. Such legislation, regulation, or other government action could limit or preclude the Funds ability to achieve its investment objective and affect the
Funds performance. Political, social or financial instability, civil unrest and acts of terrorism are other potential risks that could adversely affect an investment in a security or in markets or issuers generally. In addition, political
developments in foreign countries or the United States may at times subject such countries to sanctions from the U.S. government, foreign governments and/or international institutions that could negatively affect the Funds investments in
issuers located in, doing business in or with assets in such countries.
Portfolio Turnover Risk
The length of time the Fund has held a particular security is not generally a consideration in investment decisions. A change in the securities held by the Fund
is known as portfolio turnover. Portfolio turnover generally involves a number of direct and indirect costs and expenses to the Fund, including, for example, brokerage commissions, dealer mark-ups and bid/ask
spreads, and transaction costs on the sale of securities and reinvestment in other securities, and may result in the realization of taxable capital gains (including short-term capital gains, which are generally taxable to shareholders subject to tax
at ordinary income rates). Portfolio turnover risk includes the risk that frequent purchases and sales of portfolio securities may result in higher Fund expenses and may result in larger distributions of taxable capital gains to investors as
compared to a fund that trades less frequently.
Legal and Regulatory Risk
Legal, tax and regulatory changes (which may apply with retroactive effect) could occur and may adversely affect the Fund and its ability to pursue its investment
strategies and/or increase the costs of implementing such strategies. New (or revised) laws or regulations may be imposed by the CFTC, the SEC, the Internal Revenue Service (IRS), the U.S. Federal Reserve or other banking regulators,
other governmental regulatory authorities or self-regulatory organizations that supervise the financial markets that could adversely affect the Fund. In particular, these agencies are implementing a variety of new rules pursuant to financial reform
legislation in the United States. The EU and some other countries are implementing similar requirements. The Fund also may be adversely affected by changes in the enforcement or interpretation of existing statutes and rules by these governmental
regulatory authorities or self-regulatory organizations.
In addition, the securities and futures markets are subject to comprehensive statutes, regulations
and margin requirements. The CFTC, the SEC, the Federal Deposit Insurance Corporation, other regulators and self-regulatory organizations and exchanges are authorized under these statutes, regulations and otherwise to take extraordinary actions in
the event of market emergencies. The Fund and the Adviser have historically been eligible for exemptions from certain regulations. However, there is no assurance that the Fund and the Adviser will continue to be eligible for such exemptions.
The SEC has in the past adopted interim rules requiring reporting of all short positions above a certain de minimis threshold and may adopt rules requiring
monthly public disclosure in the future. In addition, other non-U.S. jurisdictions where the Fund may trade have adopted reporting requirements. If the Funds short positions or its strategy become
generally known, it could have a significant effect on the Advisers ability to implement its investment strategy. In particular, it would make it more likely that other investors could cause a short squeeze in the securities held short by the
Fund forcing the Fund to cover its positions at a loss. Such reporting requirements may also limit the Advisers ability to access management and other personnel at certain companies where the Adviser seeks to take a short position. In
addition, if other investors engage in copycat behavior by taking positions in the same issuers as the Fund, the cost of borrowing securities to sell short could increase drastically and the availability of such securities to the Fund could decrease
drastically. Such events could make the Fund unable to execute its investment strategy.
Rules implementing the credit risk retention requirements of the
Dodd-Frank Wall Street Reform and Consumer Protection Act (the Dodd-Frank Act) for asset-backed securities require the sponsor of certain securitization vehicles (or a majority owned affiliate of such sponsor) to retain, and to refrain
from transferring, selling, conveying to a third party, or hedging the credit risk on a portion of the assets transferred, sold, or conveyed through the issuance of the asset-backed securities of such vehicle, subject to certain exceptions. These
requirements may increase the costs to originators, securitizers, and, in certain cases, collateral managers of securitization vehicles in which the Fund may invest, which costs could be passed along to the Fund as an investor in such vehicles. In
addition, the costs imposed by the risk retention rules on originators, securitizers and/or collateral managers may result in a reduction of the number of new offerings of asset-backed securities and thus in fewer investment opportunities for the
Fund. A reduction in the number of new securitizations could also reduce liquidity in the markets for certain types of financial assets that are typically held by securitization vehicles, which in turn could negatively affect the returns on the
Funds investment in asset-backed securities.
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Annual Report
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September 30, 2021
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79
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Summary of Updated Information Regarding the Fund (Cont.)
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Tax Risk
The Fund has elected to be treated as a regulated investment company (RIC) under the Code and intends each year to qualify and be
eligible to be treated as such. If the Fund qualifies as a RIC, it generally will not be subject to U.S. federal income tax on its net investment income or net short-term or long-term capital gains, distributed (or deemed distributed) to
shareholders, provided that, for each taxable year, the Fund distributes (or is treated as distributing) to its shareholders an amount equal to or exceeding 90% of its investment company taxable income as that term is defined in the Code
(which includes, among other things, dividends, taxable interest and the excess of any net short-term capital gains over net long-term capital losses, as reduced by certain deductible expenses). The Fund intends to distribute all or substantially
all of its investment company taxable income and net capital gain each year. In order for the Fund to qualify as a RIC in any taxable year, the Fund must meet certain asset diversification tests and at least 90% of its gross income for such year
must be certain types of qualifying income. If for any taxable year the Fund were to fail to meet the income or diversification test described above, the Fund could in some cases cure the failure, including by paying a fund-level tax and, in the
case of a diversification test failure, disposing of certain assets. Some of the income and gain that the Fund may recognize, such as income and gain from real estate assets received upon foreclosure of a loan held by the Fund, generally does not
constitute qualifying income, and whether certain other income and gain that the Fund may recognize constitutes qualifying income is not certain. The Funds investments therefore may be limited by the Funds intention to qualify as a RIC
and may bear on the Funds ability to so qualify.
The Fund may hold certain investments that do not give rise to qualifying income through one or more
wholly-owned and controlled Subsidiaries treated as U.S. corporations for U.S. federal income tax purposes. Such Subsidiaries will be required to pay U.S. corporate income tax on their earnings, which ultimately will reduce the yield on such
investments. Depending on the assets held by the Subsidiary and other considerations, a Subsidiary may qualify and elect to be treated as a REIT for federal income tax purposes, in which case such Subsidiary generally would not be subject to U.S.
corporate income tax to the extent such Subsidiary timely distributes all its income and gain. The Fund may not invest more than 25% of its total assets in (i) any one Subsidiary or (i) two or more Subsidiaries that are treated as being in the
same, similar or related trades or businesses for purposes of the diversification tests applicable to RICs.
If the Fund were ineligible to or otherwise did
not cure such failure for any year, or were otherwise to fail to qualify as a RIC accorded special tax treatment in any taxable year, it would be treated as a corporation subject to U.S. federal income tax, thereby subjecting any income earned by
the Fund to tax at the corporate level and, when such income is distributed, to a further tax as dividends at the shareholder level to the extent of the Funds current or accumulated earnings and profits.
Repurchase Agreements Risk
In the
event of a default or bankruptcy by a selling financial institution under a repurchase agreement, the Fund will seek to sell the underlying security serving as collateral. However, this could involve certain costs or delays, and, to the extent that
proceeds from any sale were less than the repurchase price, the Fund could suffer a loss.
Zero-Coupon Bond Risk
Zero-coupon bonds are issued at a significant discount from their principal amount in lieu of paying interest periodically. Because
zero-coupon bonds do not pay current interest in cash, their value is subject to greater fluctuation in response to changes in market interest rates than bonds that pay interest currently. Zero-coupon bonds
allow an issuer to avoid the need to generate cash to meet current interest payments. Accordingly, such bonds may involve greater credit risks than bonds paying interest currently in cash. The Fund is required to accrue interest income on such
investments and to distribute such amounts at least annually to shareholders even though the investments do not make any current interest payments. Thus, it may be necessary at times for the Fund to liquidate other investments in order to satisfy
its distribution requirements under the Code.
Operational and Information Security Risks
The Fund and its service providers depend on complex information technology and communications systems to conduct business functions, making them susceptible to
operational and information security risks. For example, design or system failures or malfunctions, human error, faulty software or data processing systems, power or communications outages, acts of God, or cyber- attacks may lead to operational
disruptions and potential losses to the Fund. Cyber-attacks include, among other behaviors, stealing or corrupting data maintained online or digitally, denial of service attacks on websites, the unauthorized release of confidential information and
causing operational disruption. Successful cyber-attacks against, or security breakdowns of, the Fund or its Adviser, custodian, fund accountant, fund administrator, transfer agent, pricing vendors and/or other third party service providers may
adversely impact the Fund and its shareholders. For instance, cyber-attacks or other operational issues may interfere with the processing of shareholder transactions, impact the Funds ability to calculate its NAV, cause the release of private
shareholder information or confidential Fund information, impede trading, cause reputational damage, and subject the Fund to
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80
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DoubleLine Yield Opportunities Fund
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(Unaudited)
September 30, 2021
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regulatory fines, penalties or financial losses, reimbursement or other compensation costs, and/or additional compliance costs. The Fund also may incur substantial costs for cybersecurity risk
management in order to guard against any cyber incidents in the future. In general, cyber-attacks result from deliberate attacks but unintentional events may have effects similar to those caused by cyber- attacks. Similar types of risks also are
present for issuers of securities in which the Fund invests, which could result in material adverse consequences for such issuers, and may cause the Funds investment in such securities to lose value. In addition, cyber- attacks involving a
counterparty to the Fund could affect such a counterpartys ability to meet its obligations to the Fund, which may result in losses to the Fund and its shareholders. In addition, the adoption of work-from-home arrangements by the Fund, the
Adviser or its service providers could increase all of the above risks, create additional data and information accessibility concerns, and make the Fund, the Adviser or its service providers more susceptible to operational disruptions, any of which
could adversely impact their operations. While the Fund or its service providers may have established business continuity plans and systems designed to guard against such operational failures and cyber-attacks and the adverse effects of such events,
there are inherent limitations in such plans and systems including the possibility that certain risks have not been identified, in large part because different or unknown threats or risks may emerge in the future. The Adviser and the Fund do not
control the business continuity and cybersecurity plans and systems put in place by third-party service providers, and such third-party service providers may have no or limited indemnification obligations to the Adviser or the Fund.
Preferred Securities Risk
In
addition to many of the risks associated with both debt securities (e.g., interest rate risk and credit risk) and common shares or other equity securities, preferred securities typically contain provisions that allow an issuer, under certain
conditions, to skip (in the case of noncumulative preferred securities) or defer (in the case of cumulative preferred securities) dividend payments. If the Fund owns a preferred security that is deferring its distributions, the Fund may be required
to report income for tax purposes while it is not receiving any distributions.
In addition, preferred securities typically do not provide any voting rights,
except in some cases in which dividends are in arrears beyond a certain time period, which varies by issue. Preferred securities are generally subordinated to bonds and other debt instruments in a companys capital structure in terms of
priority to corporate income and liquidation payments, and therefore will be subject to greater credit risk than those debt instruments. Preferred securities may be substantially less liquid than many other securities.
Other Investment Companies Risk
As a shareholder in an investment company, the Fund will bear its ratable share of that investment companys expenses, and would remain subject to payment of
the Funds investment management fees with respect to the assets so invested. Common Shareholders would therefore be subject to duplicative expenses to the extent the Fund invests in other investment companies. In addition, these other
investment companies may use leverage, in which case an investment would subject the Fund to additional risks associated with leverage.
Anti-Takeover Provisions Risk
The
Funds Declaration of Trust includes provisions that could limit the ability of other entities or persons to acquire control of the Fund or to convert the Fund to open-end status. These provisions in the
Declaration of Trust could have the effect of depriving the Common Shareholders of opportunities to sell their Common Shares at a premium over the then-current market price of the Common Shares or at NAV.
Fund Organizational Structure
Since the Funds last annual report to shareholders, there have been no changes in the Funds Declaration of Trust or
By-laws that would delay or prevent a change of control of the Fund.
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Annual Report
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September 30, 2021
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81
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Portfolio Managers
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(Unaudited)
September 30, 2021
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The portfolio
managers for the Fund are Jeffrey E. Gundlach (since the Funds inception) and Jeffrey J. Sherman (since the Funds inception). Since the Funds last annual report to shareholders, there have been no changes in the persons who are
primarily responsible for the day-to-day management of the Funds portfolio.
Information About Proxy Voting
Information about how the Fund voted proxies relating to portfolio securities held during the most recent twelve month period ended June 30th is available no
later than the following August 31st without charge, upon request, by calling 877-DLine11 (877-354-6311) or email
fundinfo@doubleline.com and on the Securities and Exchange Commissions (the SEC) website at www.sec.gov.
A description of the Funds
proxy voting policies and procedures is available (i) without charge, upon request, by calling 877-DLine11 (877-354-6311) or
email fundinfo@doubleline.com; and (ii) on the SECs website at www.sec.gov.
Information About
Portfolio Holdings
The Fund intends to disclose its portfolio holdings on a quarterly basis by posting the holdings on the Funds website.
The disclosure will be made by posting the Annual, Semi-Annual and Part F of Form N-PORT filings on the Funds website.
The Fund is required to file its complete schedule of portfolio holdings with the SEC for its first and third fiscal quarters on Part F of Form N-PORT. When available, the Funds Part F of Form N-PORT is available on the SECs website at www.sec.gov.
HouseholdingImportant Notice Regarding Delivery of Shareholder Documents
In an effort to conserve resources, the Fund intends to reduce the number of duplicate Annual and Semi-Annual Reports you receive by sending only one copy of
each to addresses where we reasonably believe two or more accounts are from the same family. If you would like to discontinue householding of your accounts, please call toll-free 877-DLine11 (877-354-6311) to request individual copies of these documents. We will begin sending individual copies thirty days after receiving your request to stop householding.