Gundlach Presentation: Penny For Your Thoughts (SLIDES)

LiveWebcasthostedby:
JeffreyGundlach
ChiefExecutiveOfficer
June10,2014
PennyForYourThoughts
FundOfferings
RetailandInstitutionalClass
NoLoadMutualFund
Retail Inst.
Nshare Ishare
Ticker DLTNX DBLTX
MinInvestment $2,000 $100,000
MinIRAInvestment $500 $5,000
GrossExpenseRatio 0.73% 0.48%
RetailandInstitutionalClass
NoLoadMutualFund
Retail Inst.
Nshare Ishare
Ticker DLFNX DBLFX
MinInvestment $2,000 $100,000
MinIRAInvestment $500 $5,000
Gross ExpenseRatio 0.76% 0.51%
TotalReturnBondFund CoreFixedIncomeFund
TheFundsinvestmentobjectives,risks,chargesandexpensesmustbeconsideredcarefullybeforeinvesting.The
statutoryprospectusandsummaryprospectus(ifavailable)containsthisandotherimportantinformationabout
theFunds,anditmaybeobtainedbycalling1(877)3546311/1(877)DLINE11,orvisiting
www.doublelinefunds.com.Readitcarefullybeforeinvesting.
Investmentsindebtsecuritiestypicallydecreaseinvaluewheninterestratesrise.Thisriskisusuallygreaterforlongertermdebtsecurities.Investmentsinlowerratedandnon
ratedsecuritiespresentagreaterriskoflosstoprincipalandinterestthanhigherratedsecurities.InvestmentsinAssetBackedandMortgageBackedSecuritiesincludeadditional
risksthatinvestorsshouldbeawareofsuchascreditrisk,prepaymentrisk,possibleilliquidityanddefault,aswellasincreasedsusceptibilitytoadverseeconomicdevelopments.
TheFundsmayusecertaintypesofinvestmentderivatives.Derivativesinvolverisksdifferentfrom,andincertaincases,greaterthantheriskspresentedbymoretraditional
investments.Derivativesmayinvolvecertaincostsandrisksuchasliquidity,interestrate,market,credit,managementandthe riskthatapositioncouldnotbeclosedwhenmost
advantageous.Investinginderivativescouldlosemorethantheamountinvested.TheFundsmayalsoinvestinsecuritiesrelated torealestate,whichmaydeclineinvalueasa
resultoffactorsaffectingtherealestateindustry
TheCoreFixedIncomeFundinvestsinforeignsecuritieswhichinvolvegreatervolatilityandpolitical,economicandcurrencyrisksanddifferencesinaccountingmethods.These
risksaregreaterforinvestmentsinemergingmarkets.
TheTotalReturnBondFundintendstoinvestmorethan50%ofitsnetassetsinmortgagebackedsecuritiesofanymaturityortype.
Opinionsexpressedaresubjecttochangeatanytime,arenotforecastsandshouldnotbeconsideredinvestmentadvice.
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1
Performance
2
DoubleLineTotalReturnBondFund QuarterEndingMarch31,2014
Performancedataquotedrepresentspastperformance;pastperformancedoesnotguaranteefutureresults.Theinvestmentreturnandprincipal
valueofaninvestmentwillfluctuatesothataninvestor'sshares,whenredeemed,maybeworthmoreorlessthantheoriginalcost.Current
performanceofthefundmaybelowerorhigherthantheperformancequoted.Performancedatacurrenttothemostrecentmonthendmaybe
obtainedbycalling2136338200orbyvisitingwww.doublelinefunds.com.
BarclaysUSAggregateIndexrepresentssecuritiesthatareSECregistered,taxable,anddollardenominated.Theindexcoversthe USinvestmentgradefixedrate
bondmarket,withindexcomponentsforgovernmentandcorporatesecurities,mortgagepassthroughsecurities,andassetbackedsecurities.Thesemajorsectors
aresubdividedintomorespecificindicesthatarecalculatedandreportedonaregularbasis.Itisnotpossibletoinvestinanindex.
PastPerformancedoesnotguaranteefutureresults.Indexperformanceisnotillustrativeoffundperformance.
*IfaFundinvestedinanaffiliateFundsponsoredbytheAdviserduringtheperiodcoveredbythisreporttheAdviseragreed to notchargeamanagementfeetotheFundinanamountequaltothe
investmentadvisoryfeespaidbytheaffiliatedFundinrespectoftheFundsinvestmentintheaffiliatedfundtoavoidduplicatechargeoftheinvestmentadvisoryfeestotheinvestors.
QuarterEnd
March31,2014
1Q
2014
1Year
Annualized
3Year
Annualized
SinceInception
Annualized
(4610to33114)
Ishare 2.40% 1.13% 6.16% 9.34%
Nshare 2.24% 0.88% 5.87% 9.06%
BarclaysU.S.
AggregateIndex
1.84% 0.10% 3.75% 4.25%
AsofMarch31,2014 IShare NShare
GrossSEC30DayYield 4.77% 4.51%
NetSEC30DayYield* 4.74% 4.49%
Performance
3
DoubleLineCoreFixedIncomeFund QuarterEndingMarch31,2014
Performancedataquotedrepresentspastperformance;pastperformancedoesnotguaranteefutureresults.Theinvestmentreturnandprincipal
valueofaninvestmentwillfluctuatesothataninvestor'sshares,whenredeemed,maybeworthmoreorlessthantheoriginalcost.Current
performanceofthefundmaybelowerorhigherthantheperformancequoted.Performancedatacurrenttothemostrecentmonthendmaybe
obtainedbycalling2136338200orbyvisitingwww.doublelinefunds.com.
PastPerformancedoesnotguaranteefutureresults.Indexperformanceisnotillustrativeoffundperformance.
*IfaFundinvestedinanaffiliateFundsponsoredbytheAdviserduringtheperiodcoveredbythisreporttheAdviseragreed to notchargeamanagementfeetotheFundinanamountequaltothe
investmentadvisoryfeespaidbytheaffiliatedFundinrespectoftheFundsinvestmentintheaffiliatedfundtoavoidduplicatechargeoftheinvestmentadvisoryfeestotheinvestors.
QuarterEnd
March31,2014
1Q
2014
1Year
Annualized
3Year
Annualized
SinceInception
Annualized
(6110to33114)
Ishare 2.73% 1.03% 6.17% 7.41%
Nshare 2.57% 0.77% 5.88% 7.14%
BarclaysU.S.
AggregateIndex
1.84% 0.10% 3.75% 3.76%
GrossSEC30DayYield 4.00% 3.75%
NetSEC30DayYield* 4.03% 3.78%
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JeffreyGundlach
June10,2014
TABI
CurrencyDebasement
http://www.history.com/news/10thingsyoudidntknowaboutthepenny
7
RomanCurrencyDebasement
240CE 270CE
Source:http://en.wikipedia.org/wiki/Roman_currency#Debasement_of_the_currency
CE=ChristianEra/CommonEra
8
RomanDebasement
64CE 270CE
Source:http://www.tulane.edu/~august/handouts/601cprin.htm
9
U.S.Debasement
January1,1913 December31,2009
Source:http://www.zerohedge.com/news/41yearsafterdeathgoldstandardlookhowweendedeconomicpurgatory
FDR=FranklinDelanoRoosevelt,U.S.President19331945.
10
1910vs.TodayPurchasingPower
Source:NewYorkTimes,NewFactsontheIncreasedCostofLiving?,March27,1910.DoubleLine
June30,1910throughDecember31,2013
In1910thepriceforagallonofmilkwas$0.04to$0.05
Today,agallonofmilkis$3.19
Thats4.3%annualchangeoverthepast104yearsandleaves$1of1910moneyworth$0.01today
11
U.S.Dollarvs.RomanDebasement
Source:http://www.zerohedge.com/news/41yearsafterdeathgoldstandardlookhowweendedeconomicpurgatory
12
U.S.HalfPenny
Source:Wikipedia
TheHalfCentwasauthorizedforproductionbytheCoinageActof1792
ItwasdiscontinuedbytheCoinageActof1857
TheHalfCentwasoneofseveralcoinsestablishedbytheCoinageActestablishedbytheU.S.Mint:
HowMuchLongerWilltheU.S.DollarRemainthe
ReserveCurrencyoftheWorld?
13
Atleast40centralbankshaveinvestedintheYuanandseveralothersarepreparingtodoso,putting
themainlandcurrencyonthepathtoreservestatusevenbeforefullconvertibility
Jukka Pihlman,StandardChartered
94Years(1921 ???)
Source:http://www.zerohedge.com/news/20131013/guestposthowmuchlongerwilldollarbereservecurrency
ChineseYuanAppearstobeonitsWayToward
ReserveCurrencyStatus
14
January1,2001throughDecember31,2013
Source:Bianco Research
Bitcoin =isapeertopeer paymentsystem introducedasopensourcesoftware in2009bydeveloperSatoshiNakamoto.
[4]
Thepaymentsinthesystemarerecordedinapublic
ledgerusingitsownunitofaccount,
[5]
whichisalsocalledbitcoin.
[note1]
Thebitcoin systemhasnocentralrepositoryandnosingleadministrator,whichhasledtheUSTreasury to
callbitcoin adecentralizedvirtualcurrency.
[8
XBTCurncy =Bitcoin CurrencyspotpriceinBloomberg.
Bitcoin SpotPrice
January1,2013throughJune3,2014
15
V
i
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a
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C
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C
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/
C
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e
n
c
y
TABII
U.S.InterestRatesandDemographics
FederalReserveistheLargestHolderofUSDebt
http://www.ritholtz.com/blog/2013/10/allholdersofustreasurydebt/
Source:BarryRitholtz,TheBigPicture,AllHoldersofUSDebt,October11,2013
17
U.S.RealGDPForecast
November15,2012throughMay29,2014
GDP=ThegrossdomesticproductisThemonetaryvalueofallthefinishedgoodsandservicesproducedwithinacountry'sbordersinaspecifictimeperiod,thoughGDPis
usuallycalculatedonanannualbasis.RealGDP=Isamacroeconomicmeasureofthevalueofeconomicoutputadjustedforpricechanges(i.e.inflationordeflation).The
adjustmenttransformsthemoneyvaluemeasure,nominalGDPintoanindexorquantityortotaloutput.
18
TimingatWhichRateThresholdisReached
19
Note:Minack Advisors,January1,2012throughMay31,2014.JuneandJuly2014areforecasts.
20
3MonthEurodollarFuturesNetOpenInterest
May15,1987 May20,2014
Source:U.S.CommoditiesFuturesTradingCommissions(CFTC),DoubleLineCapital.Eurodollar=U.S. dollardenominateddeposits atforeignbanksorforeignbranchesofAmerican
banks.BylocatingoutsideoftheU.S.,EurodollarsescaperegulationbytheFederalReserveBoard.
LargeSpeculators:NonCommercialTradingentitythatreportspositionstotheU.S.CommoditiesFuturesTradingCommissions(CFTC)
SmallSpeculators:NonCommercialTradingentitythatdoesnotreportpositionstotheCFTC
2,000,000
1,500,000
1,000,000
500,000
0
500,000
1,000,000
1,500,000
2,000,000
3
M
o
n
t
h
E
u
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o
d
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l
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F
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N
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O
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n
I
n
t
e
r
e
s
t
M
a
y
1
5
,
1
9
8
7
M
a
y
2
0
,
2
0
1
4
SmallSpeculatorsNet
LargeSpeculatorsNet
21
5YearUSTreasuryFuturesNetOpenInterest
May15,1987 May20,2014
300,000
200,000
100,000
0
100,000
200,000
300,000
400,000
500,000
F
i
v
e
Y
e
a
r
U
S
T
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a
s
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y
F
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N
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O
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n
I
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t
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e
s
t
M
a
y
1
5
,
1
9
8
7
M
a
y
2
0
,
2
0
1
4
SmallSpeculatorsNet
LargeSpeculatorsNet
Source:U.S.CommoditiesFuturesTradingCommissions(CFTC),DoubleLineCapital
22
10YearUSTreasuryFuturesNetOpenInterest
May15,1987 May20,2014
500,000
400,000
300,000
200,000
100,000
0
100,000
200,000
300,000
400,000
500,000
600,000
700,000
1
0
Y
e
a
r
U
S
T
r
e
a
s
u
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y
F
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N
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O
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I
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s
t
M
a
y
1
5
,
1
9
8
7
M
a
y
2
0
,
2
0
1
4
SmallSpeculatorsNet
LargeSpeculatorsNet
23
15+YearUSTreasuryFuturesNetOpenInterest
May15,1987 May20,2014
200,000
150,000
100,000
50,000
0
50,000
100,000
150,000
1
5
+
Y
e
a
r
U
S
T
r
e
a
s
u
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y
F
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N
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O
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n
I
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t
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e
s
t
M
a
y
1
5
1
9
8
7
M
a
y
2
0
,
2
0
1
4
SmallSpeculatorsNet
LargeSpeculatorsNet
GlobalRealRates(10yrminusCPI)
June1,2008throughJune3,2014
Source:Bloomberg
USGG10Y=USgeneric10YearUSTreasury.GTJP10Y=Japanesegeneric10yearTreasury.GTAUD10Y=Australiangeneric10YTreasury.GTESP10Y=Spanishgeneric10yearTreasury.GTDEM10=
Germangeneric10yearTreasury.CPI=ConsumerPriceIndex.CPI=ConsumerPriceIndexproducesmonthlydataonchangesinthepricespaidbyurbanconsumersforarepresentativebasketof
goodsandservices.
Aninvestmentcannotbemadeinanindexdirectly.Pleaseseeappendixforindexdefinitions
24
U.S.DollarIndexSpot
December31,2007throughJune10,2014
Source:BloombergFinancialServices,DoubleLineCapitalLP
DXY=DXYistheUSDollarIndex(USDX)indicatesthegeneralvalueoftheUSdollar.AverageexchangeratesbetweentheUSdollarandsixmajorworldcurrencies.
Aninvestmentcannotbemadedirectlyinanindex.
25
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
L
a
b
o
r
F
o
r
c
e
P
a
r
t
i
c
i
p
a
t
i
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n
R
a
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e
J
a
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r
y
1
9
4
8
t
h
r
o
u
g
h
A
p
r
i
l
2
0
1
4
1619 2024 2534 3544 4554 5564 65+
26
LaborForceParticipationRatesByAge
January1,1948throughApril30,2014
Source:USCensus;http://www.census.gov/prod/2014pubs/p251140.pdf
27
DependencyRatiosintheU.S.19402050
January1,1940projectedthrough2050
Source:USCensus;http://www.census.gov/prod/2014pubs/p251140.pdf
28
DependencyRatios
January1,2012Projectedthrough2050
Source:FiveThirtyEight EconomicsWhatBabyBoomersRetirementMeansfortheU.S.Economy,May7,2014
http://fivethirtyeight.com/features/whatbabyboomersretirementmeansfortheuseconomy
29
Americans65YearsandOlder
AsofMay7,2014:Projections2015through2060
30
65YearsandOlderAmericansvs.OtherCountries
AsofMay7,2014:Projectionstherestof2014through2050
31
ProjectedU.S.PopulationGrowth
January1,2012throughDecember31,2012thenProjected2013*through2060
*2013arestillestimatedandthereforeareprojectionsforpurposesofthischart.
TABIII
GlobalMarkets
GlobalInterestRates
AsofJune4,2014
33
2.60
2.34
5.98
3.72
0.60
0.73
2.65
1.81
1.41
2.60
3.00
2.85
1.76
2.73
1.91
3.66
9.37
4.04
2.29
8.38
8.60
8.02
0.00
1.00
2.00
3.00
4.00
5.00
6.00
7.00
8.00
9.00
10.00
Global10yearBondYields
Source:Bloomberg
I
n
t
e
r
e
s
t
R
a
t
e
(
%
)
GlobalInterestRates
34 Note:Minack AdvisorsasofApril30,2014
ShanghaiIndex
Note:TheShanghaiStockExchangeCompositeisacapitalizationweightedindextrackingdailypriceperformanceofallAandBshareslistedontheShanghaiStock
Exchange.ThisindexwasdevelopedDecember19,1990withabasevalueof100.
35
DownwardRevisionstoChinaGrowthExpectationsin2014
January1,2010throughMarch31,2014
36
7
7.5
8
8.5
9
9.5
10
10.5
520 480 440 400 360 320 280 240 200 160 120 80 40 0
M
e
d
i
a
n
R
e
a
l
G
D
P
F
o
r
e
c
a
s
t
MedianForecastofChinaRealGDP
(byyear)
2010
2011
2012
2013
2014
Days LeadingUptoForecast
(TradingDays)
Thelast3 yearshavebeenastory
ofdownwardrevisionstogrowthin
China.
Source:Bloomberg
GDP=ThegrossdomesticproductisThemonetaryvalueofallthefinishedgoodsandservicesproducedwithinacountry'sbordersinaspecifictimeperiod,thoughGDP
isusuallycalculatedonanannualbasis.
ChineseRenminbi SpotPerformance
Source:Bloomberg,DoubleLine.
CNY=ChineseRenminbi (yuan)istheofficialcurrencyofThePeoplesRepublicofChina.ThecurrencyisquotedasthespotpriceandinU.S.Dollars,September1,2010
throughMay3,2014
37
38
EmergingMarketsRelativetoDevelopedWorld
LastFiveYears(6508to6914)
Source:Bloomberg
MXEFIndex=TheMSCIEmergingMarketsIndexisafreefloatweightedequityindex.
MXWOIndex=TheMSCIWorldIndexisafreefloatweightedequityindex.Itwasdevelopedwithabasevalueof100asofDecember31,1969.Itincludesdevelopedworldmarketsanddoesnot
includeemergingmarkets.
39
EmergingMarketsRelativetoDevelopedWorld
LastTenYears(6704to6914)
Source:Bloomberg
MXEFIndex=TheMSCIEmergingMarketsIndexisafreefloatweightedequityindex.
MXWOIndex=TheMSCIWorldIndexisafreefloatweightedequityindex.Itwasdevelopedwithabasevalueof100asofDecember31,1969.Itincludesdevelopedworldmarketsanddoesnot
includeemergingmarkets.
MarginBorrowingCPIAdjusted
March31,1959throughApril30,2014
MARGDEBT=MargindebtIndexistheNewYorkStockExchangeMemberFirmsdebitbalancesinmarginaccounts.CPI=ConsumerPrice Index
Aninvestmentcannotbemadedirectlyinanindex.Pleaseseeappendixfordefinitions.
40
Lumbervs.HomebuildersIndex
LB1COMD=IstheRandomLengthLumberFuturescontractspecifies110,000boardfeet(one73flatcar)ofrandomlength820softwood2x4s.SPSIHOTRIndex=
S&PHomebuildersIndexisdesignedtomeasuretheperformanceofnarrowGICS subindustries.TheIndexcomprisesstocksint ehS&PTotalMarketIndexthatare
classifiedintheGICShomebuildingsubindustry.
An investment cannot be made directly in an index
41
TABIII
BloodlessVerdictoftheMarket
BofA/MerrillFixedIncomeIndexReturns
DataSource:BofA/MerrillLynchIndicesthroughyearendDecember31,2013andJune9,2014fortherespectiveyearsindicated.
PleaseseetheAppendixforindexdefinitions.Aninvestmentcannotbemadedirectlyinanindex.
2.57%
3.29%
2.62%
5.07%
9.37%
5.08%
7.41%
3.21%
1.40%
0.01%
1.46%
5.79%
7.38%
26.60%
Government(G0A0)
Mortgages(MOAO)
InternationalDeveloped(NOGO)
Corporate(COAO)
InternationalEmerging(IGOV)
HighYield(JOAO)
Convertibles(VOSO)
Grey=Year2013
Blue=YearToDate2014
43
BofA/MerrillFixedIncomeIndexReturns
4.60%
4.31%
6.16%
4.62%
5.53%
4.88%
4.27%
1.82%
0.95%
7.44%
5.19%
13.28%
AAARatedCredit(COA1)
ARatedCredit(COA3)
BBBRatedCredit(COA4)
BRatedHighYield(JOA2)
BBRatedHighYieldCredit(JOA1)
CCCRatedHighYield(JOA3)
InvestmentGrade=IndicesratedAAAtoBBB (shownabove)areconsideredtobeinvestmentgrade.AbondisconsideredinvestmentgradeifitscreditratingisBBB or
higherbyStandard&PoorsorBaa3byMoodys.Thehighertherating,themorelikelythebondistopaybackatpar/$100cents onthedollar.AAAisconsideredthehighest
qualityandthelowestdegreeofrisk.Theyareconsideredtobestableanddependable.
BelowInvestmentGrade=Alsoknownasjunkbond(shownabove)isasecurityratedbelowinvestmentgradehavingaratingofBBB orbelow.Thesebondsareseenas
havinghigherdefaultriskorotheradversecreditevents,buttypicallypayhigheryieldsthanbetterqualitybondsinorder to makethemattractive.Theyarelesslikelytopay
backatpar/$100centsonthedollar.
CreditdistributionfromthehighestavailablecreditratingfromanyNationallyRecognizesStatisticalRatingOrganization(S&P,Moodys,andFitch).
Source:BofA/MerrillLynchIndices asofDecember31,2013andJune9,2014andfortheirrespectiveyearsindicated.
PleaseseeappendixforIndexdefinitions
Grey=Year2013
Blue=YearToDate2014
44
Current30YearCumulativeTotalReturnPeaktoTrough
AsMeasuredbytheBofAMerrillLynchCurrent30YearUSTreasuryIndex
Source:Bloomberg,BankofAmericaMerrillLynch.Dateranges:October15,1993throughJune12,1995andJuly25,2012throughMarch10,2014.
Current30YUSTreasuryIndex(GA30).Youcannotinvestdirectlyinanindex.
45
46
Source:Bianco Research.January1,1974throughApril30,2014
USRates:30yearU.S.TreasuryPosting3
rd
Strongest
YearToDateReturnsince1974
30-Year Treasury Year-To-Date Total Returns
Every Year Since 1974
-30%
-20%
-10%
0%
10%
20%
30%
40%
50%
0 12 24 36 48 60 72 84 96 108 120 132 144 156 168 180 192 204 216 228 240 252 264
#Of Trading Days Since J an 1
-30%
-20%
-10%
0%
10%
20%
30%
40%
50%
2009
1986
1995
2014
2008
HousingandMBSMarketTrends
TABIV
Source:BloombergFinancialServices
TheBloombergECOSurpriseIndex(ESI)shows thedegreetowhicheconomicanalystsunder or overestimatethetrendsinthebusinesscycle. Thesurpriseelementisdefinedasthe
percentage (orpercentagepoint)differencebetweenanalyst forecastsandthepublishedvalueofeconomic datareleases.
Youcannotinvestdirectlyinanindex.
BloombergHousingSurpriseIndex
48
NewHomeSales LastTenYears
NHSLTOTIndex=U.S.NewOnefamilyhousessoldannually.Theindextrackssalesofnewlyconstructedhomesduringthereference period.
Aninvestmentcannotbemadeinanindexdirectly.
49
Source:NationalAssociationofRealtors
May1,2011throughMarch31,2014
WhereAretheFirstTimeBuyers?
50
UbiquitousAffordabilityChart
51
HomebuyerAffordabilityCompositeIndex(AFFDCMOM)=Trackstheaffordabilityofhousingtypicallybasedonamixofmedianhome prices,medianincomeandmortgagerates.
ActualHomeAffordabilityCalculation:
California
52
2004 Dec06 Mar14
Rate 4.50% 5.50% 2.00% 4.25%
RateType 5/1IO 5/1IO OptionPAY 30YrFixed
MedianPrice $451,068 $ 569,560 $569,560 $435,470
Payment $1,692 $2,610 $949 $2,142
Average $1780
Source: DoubleLineCapital
AsofDecember31,2004,December31,2006andMarch31,2014.IO=InterestOnlyLoan.OptionPay=Theborrowerhasfourpaymentoptionseachmonthtopaythemortgagebasedon
paymentofprincipalandinterest.30yr fixed=A30yearfixedratemortgagewherethemortgageretainsthesameinterestrateforthelifeoftheloanorthe30years.
HousingAffordability
53
Source: DoubleLineCapital.June30,1998throughMarch31,2014.
Thisisahypotheticalexampledemonstratingthepaymentofamortgageusingdifferentinterestratescenarios.Thepurposeistodemonstratethatwitharisinginterestratethepaymentofthe
mortgagegoesupbecausetheborrowerispayingmoreinterest.
54
Source:http://www.federalreserve.gov/boarddocs/snloansurvey/201405/fullreport.pdf
The primecategoryofresidentialmortgagesincludesloansmadetoborrowersthattypicallyhadrelativelystrong,welldocumentedcredithistories,relativelyhighcredit
scores,andrelativelylowdebttoincomeratiosatthetimeoforigination.Thiswouldincludefullyamortizingloansthathave afixedrate,astandardadjustablerate,ora
commonhybridadjustableratethoseforwhichtheinterestrateisinitiallyfixedforamultiyearperiodandsubsequentlyadjustsmorefrequently.Thenontraditional
categoryofresidentialmortgagesincludes,butisnotlimitedto,adjustableratemortgageswithmultiplepaymentoptions,interestonlymortgages,and``AltA''productssuch
asmortgageswithlimitedincomeverificationandmortgagessecuredbynonowneroccupiedproperties.(Pleaseexcludestandardadjustableratemortgagesandcommon
hybridadjustableratemortgages.)Thesubprimecategoryofresidentialmortgagestypicallyincludesloansmadetoborrowersthatdisplayedoneormoreofthefollowing
characteristicsatthetimeoforigination:weakenedcredithistoriesthatincludepaymentdelinquencies,chargeoffs,judgments,and/orbankruptcies;reducedrepayment
capacityasmeasuredbycreditscoresordebttoincomeratios;orincompletecredithistories.
LendingStandardsTightening
N
e
t
o
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D
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M
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L
o
a
n
s
MBAVREFI=MortgageRefinancingIndexasmeasuredbytheMortgageBankersAssociationreflectsthenumberofapplicationsforrefinance.Notallapplicationsareaccepted.
MortgageRefinancingIndex
June13,2003throughMay30,2014
55
ABXAAA071Index
TheABX071AAAIndexisabasketofhomeequity.Constitutedfromreferenceobligationsissuedby20issuersofresidentialmortgagebackedsecurities.
56
NonAgencyResidentialMortgageBackedSecurities
(RMBS)60++DelinquencyRate
January1,2005throughMay31,2014
SeriousDelinquenciesisdefinedbymortgagesthatare60++delinquencyratesdefinedasloans60or90dayslateinmortgagepayments,oralreadyinforeclosureorREOstatus.
PrimedefinedasFICO>725andLTV<75
AltAdefinedasFICO675725;orFICO>725andLTV>=75
SubprimedefinedasFICO<675
Source:LoanPerformance,Vichara,DoubleLineCapital
57
9.3%
19.4%
33.5%
0%
10%
20%
30%
40%
50%
60%
6
0
+
+
S
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M
a
y
3
1
,
2
0
1
4
Prime
AltA
Subprime
NonAgencyRMBSConditionalDefaultRate
RMBS=ResidentialMortgageBackedSecurities
58
2.5%
4.5%
5.8%
0%
2%
4%
6%
8%
10%
12%
14%
16%
18%
C
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M
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3
1
,
2
1
0
4
Prime
AltA
Subprime
NonAgencyRMBSLossSeverity
RMBS=ResidentialMortgageBackedSecurities
59
42.1%
57.1%
73.2%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
L
o
s
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5
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M
a
y
3
1
,
2
0
1
4
Prime
AltA
Subprime
NonAgencyRMBSConditionalRepaymentRate
RMBS ResidentialMortgageBackedSecurities.CRR=ConditionalRepaymentRate.
60
13.3%
8.3%
6.6%
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
C
R
R
J
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Prime
AltA
Subprime
DoubleLineFundsOverview
TABV
PortfoliostatisticsasofMay30,2014basedonmarketweightedaverages.Subjecttochangewithoutnotice.
Averageprice=Ameasureoftheweightedaveragepricepaidforthesecuritiescalculatedbytakingthepricesanddividingbythenumberofsecuritiesanddoesnotincludecash.
Averagepriceshouldnotbeconfusedwithnetassetvalue.
AverageDuration =Durationisusedasariskmeasure.Itmeasuresthepricevolatilityofasecuritygivenachangeininterestratemovements.
AverageLife=Theaveragenumberofyearsthateachdollarofunpaidprincipaldueonthemortgageremainsoutstanding.Averagelifeiscomputedastheweightedaveragetimeto
thereceiptofallfuturecashflows,usingastheweightsthedollaramountsoftheprincipalpaydowns.
Source:DoubleLineCapitalLP
TotalReturnBondFundPortfolioStatistics
Total Return
BondFund
BarclaysCapitalU.S.
AggregateIndex
AveragePrice $97.73 $105.75
Duration 3.38 5.61
Average Life 5.20 7.69
62
PortfoliocompositionasofMay30,2014.Subjecttochangewithoutnotice.
Source:DoubleLineCapitalLP.Sectorallocationsaresubjecttochangeandshouldnotbeconsideredarecommendationtobuyorsellanysecurity.
Cash =Thevalueofassetsthatcanbeconvertedintocashimmediately.Canincludemarketablesecurities,suchasgovernmentbonds,banker'sacceptances,cashequivalentsonbalance
sheetsthatmayincludesecuritiesthatmaturewithin90days.
Government U.S.treasurysecurities.
Agency=MortgagesecuritieswhoseprincipalandinterestguaranteedbytheU.S.GovernmentagencyincludingFannieMae(FNMA)orFreddieMac(FHLMC).
NonAgency=ResidentialMortgagesBondSecuritiesareatypeofbondbackedbyresidentialmortgages.NonAgencymeanstheywereissuedby aprivateissuer.
CMBS =CommercialMortgageBackedSecurities.Securitizedloansmadeoncommercialratherthanresidentialproperty.
Other=CollateralizedMortgageObligations(CLOs)
TotalReturnBondFundPortfolioComposition
BySecurityType
63
Cash 8.5%
Government 5.9%
Agency 47.9%
NonAgency 27.9%
CMBS 6.4%
CLO 3.1%
Other 0.3%
PortfoliocompositionasofMay30,2014. Subjecttochangewithoutnotice.
Cash =Thevalueofassetsthatcanbeconvertedintocashimmediately.Canincludemarketablesecurities,suchasgovernmentbonds,banker'sacceptances,cashequivalentsonbalance
PassThrough=MortgagepassthroughsecuritieswhoseprincipalandinterestguaranteedbytheU.S.GovernmentagencyincludingFannieMae(FNMA)orFreddieMac(FHLMC)ornon
agencyprivateissuewithnogovernmentguarantee.
CMOCurrent=CollateralizedMortgageObligation(CMO)isafinancialdebtvehicle/specialpurposeentitycalledapool.Investorsbuybondsissuedbytheentityandreceivepayments
accordingtoadefinedsetofrules.Themortgagesthemselvesarethecollateral,thebondsarethetranches(alsocalledclasses),andthesetofrulesthatdictateshowmoneyisreceived
fromthecollateralwillbedistributediscalledthestructure.Thelegalentity,collateralandstructurearecollectivelyreferredtoasthedeal.
IO =InterestOnlymortgagepoolsinwhichtheborrowersmonthlypaymentisonlytowardtheinterestontheloan.Anonamortized loan.
InverseFloater=Amortgagepoolthathasayieldthatisinverselyrelatedtointerestrates.
IOCurrentpay =Loansthatarecurrentlyreceivingprincipalpayments.
LockedOut/CMOLockedOut=Loansthatforasetperiodoftimewillnotreceiveprincipalpayments.
64
TotalReturnBondFundPortfolioComposition
ByAgencyCollateralizeMortgageObligation(CMO)
SecurityType
Cash,8.5% InverseFloater,
1.4%
PassThrough,
28.3%
CMOCurrent,
8.0%
CMOLocked,9.3%
IOCurrent,0.9%
IOLocked,0.0%
AgencyCMOComposition
Cash 8.5%
InverseFloater 1.4%
PassThrough 28.3%
CMOCurrent 8.0%
CMOLocked 9.3%
IOCurrent 0.9%
IOLocked 0.0%
Subtotal 56.5%
Portfoliocompositionandcreditratingsasofsecurityorigination.Portfoliocompositionissubjecttochangewithoutnotice.TherearesomenonratedsecuritiesintheFundasshown
inthegraphabove.CreditdistributionisdeterminedfromthehighestavailablecreditratingfromanyNationallyRecognized StatisticalRatingOrganization(S&P,Moodys,andFitch).
InvestmentGrade=SecuritiesratedAAAtoBBB areconsideredtobeinvestmentgrade.AbondisconsideredinvestmentgradeifitscreditratingisBBB orhigherbyStandard&
PoorsorBaa3byMoodys.Ratingsbasedoncorporatebondmodel.Thehighertherating,themorelikelythebondistopayback atpar/$100centsonthedollar.AAAisconsideredthe
highestqualityandthelowestdegreeofrisk.Theyareconsideredtobeextremelystableanddependable.
BelowInvestmentGrade=AlsoknownasjunkbondisasecurityratedbelowinvestmentgradehavingaratingofBBB orbelow.Thesebondsareseenas havinghigherdefaultriskor
otheradversecreditevents,buttypicallypayhigheryieldsthanbetterqualitybondsinordertomakethemattractive.They arelesslikelytopaybackatpar/$100centsonthedollar.
NR=NotRated.Securitiesthatarenotratedbythethreeratingagencies.
CreditqualitymaybeassessedbydifferentagenciesfordifferentbondsforreasonsbeyondthecontroloftheFund.
Source:DoubleLineCapitalLPasofMay30,2014.
TotalReturnBondFundPortfolio
NonAgencyResidentialMortgageBackedSecurities
(RMBS)BreakdownByOriginalRating
65
AAA
85%
AA
1%
A
0%
BBB
2%
NR
12%
NonAgencyRMBSBreakdownByCurrentCreditQuality
PortfoliocompositionasofMay30,2014.Portfoliocompositionissubjecttochangewithoutnotice.Therearesomenonratedsecuritiesintheportfolioasshowninthechartabove.
CreditdistributionisdeterminedfromthehighestavailablecreditratingfromanyNationallyRecognizedStatisticalRatingOrganization(S&P,Moodys,andFitch).
InvestmentGrade=SecuritiesratedAAAtoBBB (showninblueabove)areconsideredtobeinvestmentgrade.AbondisconsideredinvestmentgradeifitscreditratingisBBB of
higherbyStandard&PoorsorBaa3byMoodys.Ratingsbasedoncorporatebondmodel.Thehighertherating,themorelikely thebondistopaybackatpar/$100centsonthedollar.
AAAisconsideredthehighestqualityandthelowestdegreeofrisk.Theyareconsideredtobeextremelystableanddependable.
BelowInvestmentGrade=Alsoknownasjunkbond(showningreyabove)isasecurityratedbelowinvestmentgradehavingaratingofBBB orbelow.Thesebondsareseenas
havinghigherdefaultriskorotheradversecreditevents,buttypicallypayhigheryieldsthanbetterqualitybondsinorder to makethemattractive.Theyarelesslikelytopaybackat
par/$100centsonthedollar.
RMBS=ResidentialMortgageBackedSecurities.
66
AAA,0.1%
AA,0.1%
A+,0.8%
A,0.3%
A,
0.1%
BBB+,0.2%
BBB,0.1%
BB+,0.4%
BB,0.2%
BB,0.2%
B+,0.5%
B,
1.2
%
B,0.9%
CCC+,1.7%
CCC,6.2%
CCC,3.9%
CC,2.2%
C,0.1%
D,5.6%
NR,3.1%
NonAgencyRMBSBreakdownByPrice
PortfoliopricecompositionasofMay30,2014.Subjecttochangewithoutnotice.
DollarPrice
%
o
f
F
u
n
d
67
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
7.0%
CoreFixedIncomeFundPortfolioStatistics
PortfoliostatisticsasofMay30,2014basedonmarketweightedaverages.Subjecttochangewithoutnotice.
Averageprice=Ameasureoftheweightedaveragepricepaidforthesecuritiescalculatedbytakingthepricesanddividingbythenumber of securitiesanddoesnotincludecash.
Averagepriceshouldnotbeconfusedwithnetassetvalue.
AverageDuration=Durationisusedasariskmeasure.Itmeasuresthepricevolatilityofasecuritygivenachangeininterestratemovements.
AverageLife=Theaveragenumberofyearsthateachdollarofunpaidprincipaldueonthemortgageremainsoutstanding.Averagelifeiscomputedastheweightedaveragetimeto
thereceiptofallfuturecashflows,usingastheweightsthedollaramountsoftheprincipalpaydowns.
CoreFixedIncome
Fund
BarclaysCapitalU.S
AggregateIndex
AveragePrice $102.42 $105.75
Duration 4.52 5.61
Average Life 6.57 7.69
68
PortfoliocompositionasofMay30,2014.Subjecttochangewithoutnotice.
BankLoans=Adebtfinancingobligationissuedbyabankorsimilarfinancialinstitutiontoacompany.
CommercialMortgageBackedSecurities(CMBS)=CommercialMortgageBackedSecurities.Securitizedloansmadeoncommercialratherthanresidentialproperty.
CollateralizedLoanObligations(CLOs)=Aformofsecuritizationwherepaymentsfrommultiplemiddlesizedandlargebusinessloansarepooledtogetherandpassedontodifferentclassed
ofownersinvarioustranches
Cash =Cashholdingincludethevalueofassetsthatcanbeconvertedintocashimmediately.Canincludemarketablesecurities,suchasgovernmentbonds,banker'sacceptances,cash
equivalentsonbalancesheetsthatmayincludesecuritiesthatmaturewithin90days.
Government=Governmentdebt(alsoknownaspublicdebtornationaldebt)ismoney(orcredit)owedbyanylevelofgovernment;eithercentralgovernment,federalgovernment,
municipalgovernmentorlocalgovernment.
MortgageBackedSecurities(MBS)=Amortgagebackedsecurity(MBS)isanassetbackedsecurityordebtobligationthatrepresentsaclaimonthecashflowsfrom mortgageloans,most
commonlyonresidentialproperty
EmergingMarketsFixedIncome=Emergingmarketdebt(EMD)isatermusedtoencompassbondsissuedbylessdevelopedcountries.
InvestmentGrade(IG)andHighYieldCorporates(HY)=Investmentgradeandnoninvestmentgradecorporatecredit.Bondsissuedbycorporationstoraisemoneyinordertoexpandits
business.CreditdistributionisdeterminedfromthehighestavailablecreditratingfromanyNationallyRecognizedStatisticalRatingOrganization(S&P,Moodys,andFitch).Abondrated
BBBorhigherwouldbeconsideredInvestmentGrade.AnybondratedBBBorbelowwouldbeHighYield.
CoreFixedIncomeFundPortfolioComposition
69
Cash
3%
Govt
19%
MBS
29%
EM
15%
IGCorporate
15%
CMBS
7%
BankLoans
6%
HYCorporate
3%
CLO
3%
PortfoliocompositionandcreditratingsasofMay30,2014.Portfoliocompositionissubjecttochangewithoutnotice.Creditdistributionisdeterminedfromthehighestavailablecredit
ratingfromanyNationallyRecognizedStatisticalRatingOrganization(S&P,Moodys,andFitch).
Cash =Thevalueofassetsthatcanbeconvertedintocashimmediately.Canincludemarketablesecurities,suchasgovernmentbonds, banker'sacceptances,cashequivalentsonbalance
Government =Governmentdebt(alsoknownaspublicdebtornationaldebt)ismoney(orcredit)owedbyanylevelofgovernment;eithercentralgovernment,federalgovernment,
municipalgovernmentorlocalgovernment.
Agency =MortgagesecuritieswhoseprincipalandinterestareeffectivelyguaranteedbytheU.S.GovernmentagencyincludingFannieMae(FNMA)orFreddieMac(FHLMC).
InvestmentGrade=AbondisconsideredinvestmentgradeifitscreditratingisBBB ofhigherbyStandard&PoorsorBaa3byMoodys.Ratingsbasedoncorporatebondmodel.The
highertherating,themorelikelythebondistopaybackatpar/$100centsonthedollar.
BelowInvestmentGrade(BelowIG)=Alsoknownasjunkbondisasecurityratedbelowinvestmentgrade.Thesebondsareseenashavinghigherdefaultriskor otheradversecredit
events,buttypicallypayhigheryieldsthanbetterqualitybondsinordertomakethemattractive.Theyarelesslikelytopaybackatpar/$100centsonthedollar.
Source:DoubleLineCapitalLP.
CoreFixedIncomeFund
PortfolioCreditQualityBreakdown
70
Cash
3%
Govt
19%
Agency
16%
Investment
Grade
32%
BelowIG
28%
Unrated
2%
JeffreyGundlach
June10,2014
IndexDescriptions
BarclaysCapitalUSAggregateIndex TheBarclaysCapitalUSAggregateIndexrepresentssecuritiesthatareSECregistered, taxable,anddollardenominated.The
indexcoverstheUSinvestmentgradefixedratebondmarket,withindexcomponentsforgovernmentandcorporatesecurities,mortgagepassthroughsecurities,
andassetbackedsecurities.Thesemajorsectorsaresubdividedintomorespecificindicesthatarecalculatedandreportedona regularbasis.
BarclaysCapitalUSTreasuryIndex ThisindexistheUSTreasurycomponentoftheUSGovernmentindex.PublicobligationsoftheUSTreasurywitharemaining
maturityofoneyearormore.
BarclaysCapitalUSTreasury10YearIndex Thisindexisthe10yearcomponentoftheUSGovernmentindex.
BarclaysCapitalCapitalUSTreasury30YearIndex Thisindexisthe30yearcomponentoftheUSGovernmentindex.
BarclaysCapitalUSHighYieldIndex TheBarclaysCapitalUSHighYieldIndexcoverstheuniverseoffixedrate,noninvestmentgradedebt.Eurobondsanddebt
issuerfromcountriesdesignatedasemergingmarkets(e.g.Argentina,Brazil,Venezuela,etc.)areexcluded,butCanadianand globalbonds(SECregistered)of
issuersinnonEMGcountriesareincluded.Originalissuezereos,stepupcouponstructures,144Asandpayinkind(PIK,asofOctober1,2009)arealsoincluded.
BofAMerrillLynchUSGovernmentIndex(GOAO) TheMerrillLynchUSGovernmentIndextrackstheperformanceofUSgovernment(i.e.securitiesinthe
TreasuryandAgencyindices.)
BofAMerrillLynchUS15+YearTreasuryIndexLongTreasuries(G802) ThisindexisasubsetoftheBofAMerrillLynchUSTreasuryIndexincludingallsecurities
witharemainingtermoffinalmaturitygreaterthan15years..
BofAMerrillLynchUSCorporateIndex(COAO)InvestmentGrade TheMerrillLynchCorporateIndextrackstheperformanceofUSdollardenominated
investmentgradecorporatedebtpubliclyissuedintheUSdomesticmarket.Qualifyingsecuritiesmusthaveaninvestmentgraderating(basedonanaverageof
Moodys,S&PandFitch)andaninvestmentgraderatedcountryofrisk(basedonanaverageofMoodys,S&PandFitchforeigncurrencylongtermsovereigndebt
ratings).Securitiesmusthaveatleastoneyearremainingtermtofinalmaturity,afixedcouponscheduleandaminimumamountoutstandingof$250MM.
BofAMerrillLynchUSAllConvertiblesIndex(VOSO) TheMerrillLynchAllConvertibleIndexisaruledrivenindex.whichincludesallbondsandpreferredstocks
ofU.S.registeredcompanies,whichhave$50millionormoreinaggregatemarketvalueandareconvertiblesinU.S.dollardenominatedcommonstocks,ADRsor
cashequivalents.Pleasenoteaninvestorcannotinvestdirectlyinanindex.
CRBCommodityIndex(CRY) Anunweightedgeometricaverageofsomeimportantcommodities.Itaveragespricesacross17commoditiesandacrosstime.The
indextracksenergy,grains,industrials,livestock,preciousmetals,andagriculturals.
S&P500(SPX) S&P500isafreefloatcapitalizationweightedindexpublishedsince1957ofthepricesof500largecapcommonstocksactively tradedinthe
UnitedStates.
StandardDeviation Sigma=standarddeviation.Itshowshowmuchvariationthereisfromtheaverage(mean,orexpected/budgetedvalue).Alow standard
deviationindicatedthatthedatapointtendtobeveryclosetothemean,whereashighstandarddeviationindicatedthatthe dateisspreadoutoveralargerange
ofvalues.
DowJones UBSDJCommodityIndex TheDowJonesUBS CommodityindexiscomposedofcommoditiestradedonU.S.exchanges,withtheexceptionof
aluminum,nickelandzinc,whichtradeontheLondonMetalExchange(LME).
Copper=CopperSpotPrice(HGI)Copperistheworldsthirdmostusedmetalbehindironandaluminumprimarilyusedinhighlycyclicalindustriesincluding
constructionandindustrialmachinerymanufacturing.SpotpricequotedinUSD/lb.
Gold=GoldSpotPrice(Golds)TheGoldSpotpriceisquotedasUSDollarperTroyOunce.
CrudeOil=Crudeoilvariesgreatlyinappearancedependingonitscomposition.WestTexasintermediate(WTI)=Texaslightsweetcrudeisusedasabenchmarkin
oilpricing.Itslightbecauseofthelowdensityandsweetbecauseoflowsulfur.Brentcrude=Isamajortradingclassificationofsweetlightcrude.Brentistheoil
makeralsoknownasBrentBlend.
VolatilityIndex(VIX)TheVIXshowsthemarket'sexpectationof30dayvolatility.Itisconstructedusingtheimpliedvolatilitiesofawiderangeof S&P500index
options. Thisvolatilityismeanttobeforwardlookingandiscalculatedfrombothcallsandputs. TheVIXisawidelyusedmeasureofmarketriskandisoften
referredtoas the"investorfeargauge".
72
getIndexA 1U.S. Aggr IWS?requ Backto In
IndexDescriptions
BofAMerrillLynchUSDollarEmergingMarketsSovereignPlusIndex(IGOV)
ThisindextrackstheperformanceofUSdollardenominatedemergingmarketandcrossoversovereigndebtpubliclyissuedintheeurobondorUSdomesticmarket.
QualifyingcountriesmusthaveaBB1orlowerforeigncurrencylongtermsovereigndebtrating(basedonanaverageofMoodys,S&P,andFitch).
BofAMerrillLynchU.S.HighYieldCashPayIndex(J0A0)BelowInvestmentGrade
TheMerrillLynchHighYieldIndextrackstheperformanceofUSdollardenominatedbelowinvestmentgradecorporatedebt,currentlyinacouponpayingperiod,
thatispubliclyissuedintheUSdomesticmarket.Qualifyingsecuritiesmusthaveabelowinvestmentgraderating(basedonanaverageofMoodys,S&PandFirth
foreigncurrencylongtermsovereigndebtratings).Musthaveoneyearremainingtofinalmaturityandaminimumoutstandingamountof$100MM.
BofAMerrillLynchInternationalGovernmentIndex(NOGO)
TheMerrillLynchInternationalIndextrackstheperformanceofAustralia,Canadian,French,German,Japan,Dutch,SwissandUKinvestmentgradesovereigndebt
publiclyissuedanddenominatedintheissuersowndomesticmarketandcurrency.Qualifyingsecuritiesmusthaveatleastoneyearremainingtermtofinalmaturity,
afixedcouponscheduleandaminimumamountoutstanding.
BofAMerrillLynchMortgageBackedSecuritiesIndex(MOA0)
ThisindextrackstheperformanceofUSdollardenominatedfixedrateandhybridresidentialmortgagepassthroughsecuritiespubliclyissuedbyUSagenciesinthe
USdomesticmarket.30year,20year,15yearandinterestonlyfixedratemortgagepoolsareincludedintheIndexprovidedtheyhaveatleastoneyearremaining
termtofinalmaturityandaminimumamountoutstandingofatleast$5billionpergenericcouponand$250MMperproductionyear withineachgenericcoupon.
BofAMerrillLynchU.S.MunicipalSecuritiesIndex(UOA0)
ThisindextrackstheperformanceofUSdollardenominatedinvestmentgradetaxexemptdebtpubliclyissuedbyUSstatesandterritories,andtheirpolitical
subdivisions,intheUSdomesticmarket.Qualifyingsecuritiesmusthaveatleastoneyearremainingtermtofinalmaturity,afixedcouponscheduleandan
investmentgraderating(basedonMoodys,S&PandFitch).Minimumsizevarybasedontheinitialtermtofinalmaturityattime ofissuance.
BarclaysCapitalGlobalEmergingMarketsIndex TheBarclaysCapitalGlobalEmergingMarketsIndexrepresentstheunionoftheUSDdenominatedUSEmerging
MarketsindexandthepredominatelyEURdenominatedPanEuroEmergingMarketsIndex,coveringemergingmarketsinthefollowingregions:Americas,Europe,
MiddleEast,Africa,andAsia.AswithotherfixedincomebenchmarksprovidedbyBarclaysCapital,theindexisrulesbased,whichallowsforanunbiasedviewofthe
marketplaceandeasyreplicability.
JPMorganInvestmentGradeCorporateIndex JPMorganInvestmentGradeCorporateIndexincludesperformanceofUSdollardenominatedinvestmentgrade
corporatedebtpubliclyissuedintheUSdomesticmarket.Qualifyingsecuritiesmusthaveaninvestmentgraderating(basedonanaverageofMoodys,S&Pand
Fitch)andaninvestmentgraderatedcountryofrisk(basedonanaverageofMoodys,S&PandFitchforeigncurrencylongtermsovereigndebtratings).Securities
musthaveatleastoneyearremainingtermtofinalmaturity,afixedcouponscheduleandaminimumamountoutstandingof$250MM.
DrawDown Thepeaktotroughdeclineduringaspecificrecordperiodofaninvestment,fundorcommodity.Adrawdownisusuallyquotedasthepercentage
betweenthepeakandthetrough.
NAV Amutualfund'spricepershareorexchangetradedfund's(ETF)persharevalue.Inbothcases,thepersharedollaramountof thefundiscalculatedbydividing
thetotalvalueofallthesecuritiesinitsportfolio,lessanyliabilities,bythenumberoffundsharesoutstanding.
CMO Atypeofmortgagebackedsecuritythatcreatesseparatepoolsofpassthroughratesfordifferentclassesofbondholderswith varyingmaturities,called
tranches.Therepaymentsfromthepoolofpassthroughsecuritiesareusedtoretirethebondsintheorderspecifiedbythebonds'prospectus
TIPS TreasuryInflationProtection.Atreasurysecuritythatisindexedtoinflationinordertoprotectinvestorsfromthenegativeeffectsofinflation.TIPSare
consideredanextremelylowriskinvestmentsincetheyarebackedbytheU.S.governmentandsincetheirparvalueriseswithinflation,asmeasuredbythe
ConsumerPriceIndex,whiletheirinterestrateremainsfixed.
CPI ConsumerPriceIndex.Ameasurethatexaminestheweightedaverageofpricesofabasketofconsumergoodsandservices,such astransportation,foodand
medicalcare.
CashFlow Cashflowmeasuresthecashgeneratingcapabilityofacompanybyaddingnoncashcharges(e.g.depreciation)andinterestexpensetopretaxincome.
73
IndexDescriptions
BofA/MerrillLynchHighYieldCashPayCCCratedIndex(JOA3) .AcomponentoftheBofA/MerrillLynchHighYieldCashPayIndexconcentratingonCCCrated
HighYieldcreditonly.
BofA/MerrillLynchHighYieldCashPayBBratedIndex(JOA1) .AcomponentoftheBofA/MerrillLynchHighYieldCashPayIndexconcentratingonBBrated
HighYieldcreditonly.
BofA/MerrillLynchHighYieldCashPayBratedIndex(JOA2) .AcomponentoftheBofA/MerrillLynchHighYieldCashPayIndexconcentratingonBratedHigh
Yieldcreditonly.
BofA/MerrillLynchCreditIndexBBBratedIndex(COA4) .AcomponentoftheBofA/MerrillLynchCreditIndexconcentratingonthelowerratedBBB
investmentgradecredits.
BofA/MerrillLynchCreditIndexAratedIndex(COA3) .AcomponentoftheBofA/MerrillLynchCreditIndexconcentratingontheAratedinvestmentgrade
credits.
BofA/MerrillLynchCreditIndexAAAratedIndex(COA1) .AcomponentoftheBofA/MerrillLynchCreditIndexconcentratingonthehighestratedAAA
investmentgradecredits.
BofAMerrillLynchUSTreasuryIndex(G0Q0)TheMerrillLynchUSTreasuryIndextrackstheperformanceofUSdollardenominatedsovereigndebtpublicly
issuedbytheUSgovernmentinitsdomesticmarket.Qualifyingsecuritiesmusthaveatleastoneyearremainingtermtofinal maturity,afixedcouponschedule
andaminimumamountoutstandingof$1billion.
BofAMerrillLynchUS1015YearTreasuryIndexLongTreasuryTheMerrillLynchUS1015TreasuryIndextrackstheperformanceofUSdollardenominated10
15yearsovereigndebtpubliclyissuedbytheUSgovernmentinitsdomesticmarket.ItisasubsetoftheBofAMerrillLynchU.S.TreasuryIndex(GOQO).
BofAMerrillLynchMunicipalIndexTheMerrillLynchMunicipal
BofAMerrillLynchCurrent10yearUSTIndex Thisindexisthe10yearcomponentoftheUSGovernmentindex.
BofAMerrillLynchCurrent30yearUSTIndex Thisindexisthe30yearcomponentoftheUSGovernmentindex.
JPMorganCorporateEMBIBroadDiversifiedIndex(JBCDCOMP) Thisindextrackstheperformanceofinvestmentgradecorporatedebtpublicallyissuedacrossa
rangeofemergingmarketcountries.
ShanghaiIndex TheShanghaiStockExchangeCompositeisacapitalizationweightedindextrackingdailypriceperformanceofallAandBshareslistedonthe
ShanghaiStockExchange.ThisindexwasdevelopedDecember19,1990withabasevalueof100.
S&P/CaseShillerCompositeHomePriceIndex TheCaseShillerHomePriceIndices,onecomprisedofpricechangeswithinall20metropolitanmarkets,and
anothercomprisedofpricechangeswithinthefollowingsubsetof10metropolitanmarkets:Boston,Chicago,Denver,LasVegas,LosAngeles,Miami,NewYork,
SanDiego,SanFranciscoandWashingtonDC.Inadditiontothose10markets,the20HomePriceindexreflectspricechangesforAtlanta,Charlotte,Dallas,Detroit,
Minneapolis,Phoenix,Portland,SeattleandTampa.
NASDAQ Acomputerizedsystemthatfacilitatestradingandprovidespricequotationsonmorethan5,000ofthemoreactivelytradedover thecounterstocks.
Createdin1971,theNasdaqwastheworld'sfirstelectronicstockmarket.
Transports TheIndustrialsSectorincludescompanieswhosebusinessesaredominatedbyoneofthefollowingactivities:Themanufactureand distributionof
capitalgoods,includingaerospace&defense,construction,engineering&buildingproducts,electricalequipmentandindustrial machinery
Utilities Apublicutilityisabusinessthatfurnishesaneverydaynecessitytothepublicatlarge.Publicutilitiesprovidewater,electricity,naturalgas,telephone
service,andotheressentials.Utilitiesmaybepubliclyorprivatelyowned,butmostareoperatedasprivatebusinesses.
BasisPoint Abasispointisaunitthatisequalto1/100
th
of1%,andisusedtodenotethechangeinafinancialinstrument.
REIT RealEstateTrust.Asecuritythatsellslikeastockonthemajorexchangesandinvestsinrealestatedirectly,eitherthrough propertiesormortgages
Duration Durationisacommonlyusedmeasureofthepotentialvolatilityofthepriceofadebtsecurity,ortheaggregatemarketvalueofaportfolioofdebt
securities,priortomaturity.Securitieswithalongerdurationgenerallyhavemorevolatilepricesthansecuritiesofcomparablequalitywithashorterduration.
74
getIndexA 1U.S. Aggr IWS?requ Backto In
IndexDescriptions
BofA/MerrillLynchInflationLinkedIndex(G0Q1) TheBofAMerrillLynchUSInflationLinkedTreasuryIndextrackstheperformanceofUSdollardenominated
inflationlinkedsovereigndebtpubliclyissuedbytheUSgovernmentinitsdomesticmarket.
CitigroupTIPS(SBUSILSI) . Itmeasuresthereturnsoftheinflationlinkedbondswithfixedratecouponpaymentsthatarelinkedtoaninflationindex.The priceof
eachissueintheUSLSIisadjustedbyusinganindexratio.Theindexratioisdeterminedbydividingthecurrentinflationindexlevelbytheinflationindexlevelat
thetimeofissueofthesecurity.Theinflationindexispublishedonamonthlybasis,andtheintramonthindexratioiscalculatedusinglinear
interpolation.
BarclaysCapitalCMBSIndex trackstheperformanceofUSdollardenominatedsecuritizedcommercialmortgagebackedsecurities.
Russell2000 measurestheperformanceofthesmallcapsegmentoftheUSequityuniverse.Russell2000isasubsetoftheRussell3000indexrepresenting
approximately10%ofthetotalmarketcapitalizationofthatindex.
S&PGSCI isacompositeindexofcommoditysectorreturnrepresentinganunleveraged,longonlyinvestmentincommodityfuturesthatisbroadlydiversified
acrossthespectrumofcommodities.
S&PGSCIAgriculture isacompositeindexofagriculturecommodityfuturesunleveraged,longonlyinvestment.
BarclaysCapitalUS30YearTIPSIndex .BarclaysCapital30yearTIPSontherunindexquotedinUSDollarstradedintraday
CitigroupEconomicSurpriseIndex .TheCitigroupEconomicSurpriseIndicesareobjectiveandquantitativemeasuresofeconomicnews.Theyaredefinedas
weightedhistoricalstandarddeviationsofdatasurprises(actualreleasesvsBloombergsurveymedian).Apositivereadingof theEconomicSurpriseIndexsuggests
thateconomicreleaseshaveonbalancebeatingconsensus.Theindicesarecalculateddailyinarollingthreemonthwindow.Theweightsofeconomicindicators
arederivedfromrelativehighfrequencyspotFXimpactsof1standarddeviationdatasurprises.Theindicesalsoemployatimedecayfunctiontoreplicatethe
limitedmemoryofmarkets.
DAX ThisindexistheGermanStockIndexisatotalreturnindexof30selectedGermanbluechipstockstradedontheFrankfurtStockExchange.
CAC40 ThisindexthemostwidelyusedindicatoroftheParismarket,reflectstheperformanceofthe40largestequitieslistedinFrance,measuredbyfreefloat
marketcapitalizationandliquidity.
FTSE100 Isacapitalizationweightedindexofthe100mosthighlycapitalizedcompaniestradedontheLondonStockExchange.
MexicoIPC TheMexicanIPCindexisacapitalizationweightedindexoftheleadingstockstradedontheMexicanStockExchange.
HangSeng TheHangSengChinaEnterprisesIndexisafreefloatcapitalizationweightedindexcomprisedofHshareslistedontheHongKong StockExchangeand
includedintheHangSengMainlandCompositeIndex.
KOSPI ThisindexisacapitalizedweightedindexofallcommonsharesontheKoreanStockExchanges.
Nikkei225 TheNikkei225Stockaverageisapriceweightedaverageof225topratedJapanesecompanieslistedintheFirstSectionofthe TokyoStockExchange.
AustraliaAORD S&P/ASXAllOrdinariesrepresents500largestcompaniesintheAustralianequitiesmarket.Indexconstitutesaredrawnfromeligiblecompanies
listedontheAustralianStockExchange.
BrazilBovespaIndex(IBOV)TheBovespaIndexisagrossreturnindexweightedbytradedvolumeandiscomprisedofthemostliquidstockstradedontheSao
PauloStockExchange.TheBovespaIndexhasbeendivided10timesbyafactorof10sinceJanuary1,1985.
ShanghaiIndex(SHCOMP)TheShanghaiStockExchangeCompositeIndexisacapitalizationweightedindex.TheindextracksthedailyperformanceofallAshares
andBshareslistedontheShanghaiStockExchange.TheindexwasdevelopedonDecember19,1990withabasevalueof100.
BSEIndiaSensitiveIndex(Sensex)TheSensexisacapweightedindex.Theselectionoftheindexmembershasbeenmadeonthebasisofliquidity,depthand
floatingstockadjustmentdepthandindustryrepresentation.
S&PLSTALevLoanIndex(BankLoans) CreatedbytheLeveragedCommentary&Data(LCD)teamatS&PCapitalIQ,thereviewprovides an overviewandoutlook
oftheleveragedloanmarketaswellasanexpansivereviewoftheS&PLeveragedLoanIndexandsubindexes. Thereviewconsistsofindexgeneralcharacteristics,
results,riskreturnprofile,default/distressstatistics, andrepaymentanalysis.Itisnotpossibletoinvestdirectlyinanindex.
Citigroup3MonthTBill(SBMMTB3) 3MonthUSTBillinUSdollars.
75
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ImportantInformationRegardingThisReport
Issueselectionprocessesandtoolsillustratedthroughoutthispresentationaresamplesandmaybemodifiedperiodically.Suchchartsarenottheonlytoolsused
bytheinvestmentteams,areextremelysophisticated,maynotalwaysproducetheintendedresultsandarenotintendedforusebynonprofessionals.
DoubleLinehasnoobligationtoproviderevisedassessmentsintheeventofchangedcircumstances.Whilewehavegatheredthisinformationfromsources
believedtobereliable,DoubleLinecannotguaranteetheaccuracyoftheinformationprovided.Securitiesdiscussedarenotrecommendationsandarepresented
asexamplesofissueselectionorportfoliomanagementprocesses.Theyhavebeenpickedforcomparisonorillustrationpurposesonly.Nosecuritypresented
withiniseitherofferedforsaleorpurchase.DoubleLinereservestherighttochangeitsinvestmentperspectiveandoutlook withoutnoticeasmarketconditions
dictateorasadditionalinformationbecomesavailable.
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Investmentstrategiesmaynotachievethedesiredresultsduetoimplementationlag,othertimingfactors,portfoliomanagementdecisionmaking,economicor
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AsofDecember31,2013theDoubleLineTotalReturnBondFundheld23.78%inFannieMae(FNMA),6.60%inFreddieMac(FHLMC)and 0.00%inGinnieMae
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2013DoubleLineCapitalLP
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