Penny for Your Thoughts - Jeff Gundlach

5/24/2018 Penny for Your Thoughts - Jeff Gundlach

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LiveWebcasthostedby:

JeffreyGundlach

ChiefExecutiveOfficer

June10,2014

PennyFor

Your

Thoughts


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3/78

Performance

2

DoubleLineTotalReturnBondFund QuarterEndingMarch31,2014

Performancedata

quoted

represents

past

performance;

past

performance

does

not

guarantee

future

results.

The

investment

return

and

principal

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 notchargeamanagement feetotheFundinanamountequaltothe

investmentadvisory

fees

paid

by

the

affiliated

Fund

in

respect

of

the

Funds

investment

in

the

affiliated

fund

to

avoid

duplicate

charge

of

the

investment

advisory

fees

to

the

investors.

QuarterEnd

March31,2014

1Q

2014

1YearAnnualized

3YearAnnualized

SinceInceptionAnnualized

(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%


GrossExpenseRatio 0.48% 0.73%


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Performance

3

DoubleLineCoreFixedIncomeFund QuarterEndingMarch31,2014

Performancedataquotedrepresentspastperformance;pastperformancedoesnotguaranteefutureresults. Theinvestmentreturnandprincipalvalueofaninvestmentwillfluctuatesothataninvestor'sshares,whenredeemed,maybeworthmoreorlessthantheoriginalcost.Current

performanceofthefundmaybelowerorhigherthantheperformancequoted.Performancedatacurrenttothemostrecentmonthendmaybe

obtainedbycalling2136338200orbyvisitingwww.doublelinefunds.com.

PastPerformancedoesnotguaranteefutureresults.Indexperformanceisnotillustrativeoffundperformance.

*IfaFundinvestedinanaffiliateFundsponsoredbytheAdviserduringtheperiodcoveredbythisreporttheAdviseragreed to notchargeamanagementfeetotheFundinanamountequaltothe

investmentadvisoryfeespaidbytheaffiliatedFundinrespectoftheFundsinvestmentintheaffiliatedfundtoavoidduplicatechargeoftheinvestmentadvisoryfeestotheinvestors.

QuarterEnd

March31,2014

1Q

20141Year

Annualized

3YearAnnualized

SinceInceptionAnnualized

(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%

NetSEC

30

Day

Yield* 4.03% 3.78%


GrossExpenseRatio 0.51% 0.76%


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UpcomingWebcastAnnouncements

SamGarza

June

24,

2014

MultiAssetGrowth

Gotowww.doublelinefunds.com,HomepageunderEvents

2014WebcastScheduletoregister

1:15pmPDT/4:15pmEDT

PhilipBarach July8,2014

LowDuration



1:15pmPDT/4:15pmEDT

LuzPadilla July22,2014

EmergingMarketsFixedIncome



1:15pmPDT/4:15pmEDT

ToReceivePresentationSlides:

Youcanemail

[email protected]

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6/78


JeffreyGundlach


June10,2014

PennyFor

Your

Thoughts


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TABI

CurrencyDebasement

http://www.history.com/news/10thingsyoudidntknowaboutthepenny


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7

RomanCurrencyDebasement240CE 270CE

Source:http://en.wikipedia.org/wiki/Roman_currency#Debasement_of_the_currency

CE=Christian

Era/Common

Era


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8

RomanDebasement64CE 270CE

Source:http://www.tulane.edu/~august/handouts/601cprin.htm


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9

U.S.DebasementJanuary1,1913 December31,2009

Source:http://www.zerohedge.com/news/41yearsafterdeathgoldstandardlookhowweendedeconomicpurgatory

FDR=Franklin

Delano

Roosevelt,

U.S.

President

1933

1945.


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10

1910vs.TodayPurchasingPower

Source:NewYorkTimes,NewFactsontheIncreasedCostofLiving?,March27,1910.DoubleLine

June30,1910throughDecember31,2013

In

1910

the

price

for

a

gallon

of

milk

was

$0.04

to

$0.05 Today,agallonofmilkis$3.19

Thats4.3%annualchangeoverthepast104yearsandleaves$1of1910moneyworth$0.01today


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11

U.S.Dollarvs.RomanDebasement

Source:http://www.zerohedge.com/news/41yearsafterdeathgoldstandardlookhowweendedeconomicpurgatory


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12

U.S.HalfPenny

Source:Wikipedia

TheHalfCentwasauthorizedforproductionbytheCoinageActof1792

ItwasdiscontinuedbytheCoinageActof1857

TheHalfCentwasoneofseveralcoinsestablishedbytheCoinageActestablishedbytheU.S.Mint:


14/78

HowMuchLongerWilltheU.S.DollarRemainthe

ReserveCurrencyoftheWorld?

13

Atleast40centralbankshaveinvestedintheYuanandseveralothersarepreparingtodoso,putting

themainlandcurrencyonthepathtoreservestatusevenbeforefullconvertibility

Jukka Pihlman,StandardChartered

94Years(1921???)

Source:http://www.zerohedge.com/news/20131013/guestposthowmuchlongerwilldollarbereservecurrency


15/78

ChineseYuanAppearstobeonitsWayToward

ReserveCurrencyStatus

14January1,2001throughDecember31,2013


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Source:Bianco Research

Bitcoin =isapeertopeer paymentsystemintroducedasopensourcesoftwarein2009bydeveloperSatoshiNakamoto.[4] Thepaymentsinthesystemarerecordedinapublic

ledgerusing

its

own

unit

of

account,[5] which

is

also

called

bitcoin.[note1] The

bitcoin system

has

no

central

repository

and

no

single

administrator,

which

has

led

the

US

Treasuryto

callbitcoin adecentralizedvirtualcurrency.[8

XBTCurncy =Bitcoin CurrencyspotpriceinBloomberg.

Bitcoin SpotPriceJanuary1,2013throughJune3,2014

15

VirtualCu

rrency/Cruptocurrency

VirtualCurr

ency/Cruptocurrency


17/78

TABII

U.S.Interest

Rates

and

Demographics


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FederalReserveistheLargestHolderofUSDebt

http://www.ritholtz.com/blog/2013/10/allholdersofustreasurydebt/

Source:BarryRitholtz,TheBigPicture,AllHoldersofUSDebt,October11,201317


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U.S.RealGDPForecast

November15,

2012

through

May

29,

2014


GDP=The

gross

domestic

product

is

The

monetary

value

of

all

the

finished

goods

and

services

produced

within

acountry's

borders

in

aspecific

time

period,

though

GDP

is

usuallycalculatedonanannualbasis.RealGDP=Isamacroeconomicmeasureofthevalueofeconomicoutputadjustedforpricechanges(i.e.inflationordeflation).The

adjustmenttransformsthemoneyvaluemeasure,nominalGDPintoanindexorquantityortotaloutput. 18


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TimingatWhichRateThresholdisReached

19Note:Minack Advisors,January1,2012throughMay31,2014.JuneandJuly2014areforecasts.


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20

3MonthEurodollarFuturesNetOpenInterestMay15,1987 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

3MonthEurodollarFuturesNetOpenIntere

st

May15,1

987

May20,2014

SmallSpeculatorsNet

LargeSpeculatorsNet


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21

5YearUSTreasuryFuturesNetOpenInterestMay15,1987 May20,2014

300,000

200,000

100,000

0

100,000

200,000

300,000

400,000

500,000

FiveYearUSTreasuryFutureNetOpenInterest

May15,1987

May20,2014

SmallSpeculatorsNet

LargeSpeculatorsNet

Source:U.S.CommoditiesFuturesTradingCommissions(CFTC),DoubleLineCapital

LargeSpeculators:NonCommercialTradingentitythatreportspositionstotheU.S.CommoditiesFuturesTradingCommissions(CFTC)



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22

10YearUSTreasuryFuturesNetOpenInterestMay15,1987 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

10YearUSTreasuryFutureNetOpenIn

terest

May15,1987

May20,2014

SmallSpeculatorsNet

LargeSpeculatorsNet


LargeSpeculators:

Non

Commercial

Trading

entity

that

reports

positions

to

the

U.S.

Commodities

Futures

Trading

Commissions

(CFTC)



24/78

23

15+YearUSTreasuryFuturesNetOpenInterestMay15,1987 May20,2014

200,000

150,000

100,000

50,000

0

50,000

100,000

150,000

15+YearUSTreasu

ryFutureNetOpenIntere

st

May151987

May20,2014

SmallSpeculatorsNet

LargeSpeculatorsNet


LargeSpeculators:

Non

Commercial

Trading

entity

that

reports

positions

to

the

U.S.

Commodities

Futures

Trading

Commissions

(CFTC)



25/78

GlobalRealRates(10yrminusCPI)

June1,2008throughJune3,2014

Source:Bloomberg

USGG10Y

=

US

generic

10

Year

US

Treasury.

GTJP10Y

=

Japanese

generic

10

year

Treasury.

GTAUD10Y

=

Australian

generic

10

Y

Treasury.

GTESP10Y

=

Spanish

generic

10

year

Treasury.

GTDEM10

=

Germangeneric10yearTreasury.CPI=ConsumerPriceIndex.CPI=ConsumerPriceIndexproducesmonthlydataonchangesinthepricespaidbyurbanconsumersforarepresentativebasketof

goodsandservices.Aninvestmentcannotbemadeinanindexdirectly.Pleaseseeappendixforindexdefinitions

24


26/78

U.S.DollarIndexSpotDecember31,2007throughJune10,2014

Source:BloombergFinancialServices,DoubleLineCapitalLP

DXY=DXY

is

the

US

Dollar

Index

(USDX)

indicates

the

general

value

of

the

US

dollar.

Average

exchange

rates

between

the

US

dollar

and

six

major

world

currencies.

Aninvestmentcannotbemadedirectlyinanindex.25


27/78


0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

LaborForceParticipationRate

January1948throughApril2014

1619 2024 2534 3544 4554 5564 65+

26

LaborForceParticipationRatesByAgeJanuary1,1948throughApril30,2014


28/78

Source:US

Census;

http://www.census.gov/prod/2014pubs/p25

1140.pdf

27

DependencyRatiosintheU.S.19402050January1,1940projectedthrough2050


29/78

Source:USCensus;http://www.census.gov/prod/2014pubs/p251140.pdf28

DependencyRatiosJanuary1,2012Projectedthrough2050


30/78

Source:FiveThirtyEight EconomicsWhatBabyBoomersRetirementMeansfortheU.S.Economy,May7,2014

http://fivethirtyeight.com/features/whatbabyboomersretirementmeansfortheuseconomy

29

Americans65YearsandOlderAsofMay7,2014:Projections2015through2060


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30

65YearsandOlderAmericansvs.OtherCountriesAsofMay7,2014:Projectionstherestof2014through2050




32/78

31

ProjectedU.S.PopulationGrowthJanuary1,2012throughDecember31,2012thenProjected2013*through2060



*

2013

are

still

estimated

and

therefore

are

projections

for

purposes

of

this

chart.


33/78

TABIII

GlobalMarkets


34/78

GlobalInterestRatesAsofJune4,2014

33

2.602.34

5.98

3.72

0.60 0.73

2.65

1.811.41

2.603.00 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

InterestRate(%)


35/78

GlobalInterestRates

34Note:Minack AdvisorsasofApril30,2014


36/78

ShanghaiIndexDecember31,2009throughJune10,2014


Note:The

Shanghai

Stock

Exchange

Composite

is

acapitalization

weighted

index

tracking

daily

price

performance

of

all

A

and

B

shares

listed

on

the

Shanghai

Stock

Exchange.ThisindexwasdevelopedDecember19,1990withabasevalueof100.

Aninvestmentcannotbemadedirectlyinanindex.

35


37/78

DownwardRevisionstoChinaGrowthExpectationsin2014January1,2010throughMarch31,2014

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

MedianRealGDPForecast

MedianForecastofChinaRealGDP(byyear)

2010

2011

2012

2013

2014

Days LeadingUptoForecast

(TradingDays)

Thelast3 yearshavebeenastory

ofdownwardrevisionstogrowthin

China.

Source:

BloombergGDP=ThegrossdomesticproductisThemonetaryvalueofallthefinishedgoodsandservicesproducedwithinacountry'sbordersinaspecifictimeperiod,thoughGDP

isusuallycalculatedonanannualbasis.


38/78

ChineseRenminbi SpotPerformance

Source:Bloomberg,DoubleLine.

CNY=Chinese

Renminbi (yuan)

is

the

official

currency

of

The

Peoples

Republic

of

China.

The

currency

is

quoted

as

the

spot

price

and

in

U.S.

Dollars,

September

1,

2010

throughMay3,201437


39/78

38

EmergingMarketsRelativetoDevelopedWorldLastFiveYears(6508to6914)

Source:Bloomberg

MXEFIndex=TheMSCIEmergingMarketsIndexisafreefloatweightedequityindex.

MXWOIndex

=The

MSCI

World

Index

is

afree

float

weighted

equity

index.

It

was

developed

with

abase

value

of

100

as

of

December

31,

1969.

It

includes

developed

world

markets

and

does

not

includeemergingmarkets.Aninvestmentcannotbemadeinanindexdirectly.Pleaseseeappendixforindexdefinitions


40/78

39

EmergingMarketsRelativetoDevelopedWorldLastTenYears(6704to6914)

Source:Bloomberg

MXEFIndex=TheMSCIEmergingMarketsIndexisafreefloatweightedequityindex.

MXWOIndex

=The

MSCI

World

Index

is

afree

float

weighted

equity

index.

It

was

developed

with

abase

value

of

100

as

of

December

31,

1969.

It

includes

developed

world

markets

and

does

not

includeemergingmarkets.Aninvestmentcannotbemadeinanindexdirectly.Pleaseseeappendixforindexdefinitions


41/78

MarginBorrowingCPIAdjustedMarch31,1959throughApril30,2014


MARGDEBT

=

Margin

debt

Index

is

the

New

York

Stock

Exchange

Member

Firms

debit

balances

in

margin

accounts.

CPI

=

Consumer

Price IndexAninvestmentcannotbemadedirectlyinanindex.Pleaseseeappendixfordefinitions. 40


42/78

Lumbervs.HomebuildersIndexDecember31,2009throughJune10,2014


LB1COMD=IstheRandomLengthLumberFuturescontractspecifies110,000boardfeet(one73flatcar)ofrandomlength820softwood2x4s.SPSIHOTRIndex=

S&PHomebuilders

Index

is

designed

to

measure

the

performance

of

narrow

GICSsub

industries.

The

Index

comprises

stocks

int eh

S&P

Total

Market

Index

that

are

classifiedintheGICShomebuildingsubindustry. 41


43/78

TABIII

BloodlessVerdictoftheMarket


44/78

BofA/MerrillFixedIncomeIndexReturns

DataSource:BofA/MerrillLynchIndicesthroughyearendDecember31,2013andJune9,2014fortherespectiveyearsindicated.

Pleasesee

the

Appendix

for

index

definitions.

An

investment

cannot

be

made

directly

in

an

index.

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


45/78

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%

AAARated

Credit

(COA1)

ARatedCredit(COA3)

BBBRated

Credit

(COA4)

BRatedHighYield(JOA2)

BBRatedHighYieldCredit(JOA1)

CCCRatedHighYield(JOA3)

InvestmentGrade=IndicesratedAAAtoBBB(shownabove)areconsideredtobeinvestmentgrade. AbondisconsideredinvestmentgradeifitscreditratingisBBBor

higherbyStandard&PoorsorBaa3byMoodys.Thehighertherating,themorelikelythebondistopaybackatpar/$100cents onthedollar.AAAisconsideredthehighest

qualityand thelowestdegreeofrisk.Theyareconsideredtobestableanddependable.

BelowInvestmentGrade=Alsoknownasjunkbond(shownabove)isasecurityratedbelowinvestmentgradehavingaratingofBBBorbelow.Thesebondsareseenas

havinghigherdefaultriskorotheradversecreditevents,buttypicallypayhigheryieldsthanbetterqualitybondsinorder to makethemattractive.Theyarelesslikelytopay

backatpar/$100centsonthedollar.

CreditdistributionfromthehighestavailablecreditratingfromanyNationallyRecognizesStatisticalRatingOrganization(S&P,Moodys,andFitch).

Source:BofA/Merrill

Lynch

Indices as

of

December

31,

2013

and

June

9,

2014

and

for

their

respective

years

indicated.

PleaseseeappendixforIndexdefinitions

Aninvestmentcannotbemadedirectlyinanindex.

Grey=Year

2013

Blue=YearToDate2014

44

C t 30 Y C l ti T t l R t P k t T h


46/78

Current30YearCumulativeTotalReturnPeaktoTroughAsMeasuredbytheBofAMerrillLynchCurrent30YearUSTreasuryIndex

Source:Bloomberg,BankofAmericaMerrillLynch.Dateranges:October15,1993throughJune12,1995andJuly25,2012throughMarch10,2014.

Current30Y

US

Treasury

Index

(GA30).

You

cannot

invest

directly

in

an

index.

45

US Rates: 30 year U S Treasury Posting 3rd Strongest


47/78

46Source:Bianco Research.January1,1974throughApril30,2014

USRates:30yearU.S.TreasuryPosting3rd Strongest

YearToDateReturnsince1974

30-Year Treasury Year-To-Date Total ReturnsEvery 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 Jan 1

-30%

-20%

-10%

0%

10%

20%

30%

40%

50%

2009

1986 1995

2014

2008


48/78

HousingandMBSMarketTrends

TABIV

Bloomberg Housing Surprise Index


49/78

Source:Bloomberg FinancialServices

TheBloombergECOSurpriseIndex(ESI)shows thedegreetowhicheconomicanalystsunderor overestimatethetrendsinthebusinesscycle. Thesurpriseelementisdefinedasthe

percentage

(orpercentage

point)

difference

between

analyst

forecasts

and

the

published

value

of

economic

data

releases.

Youcannotinvestdirectlyinanindex.

BloombergHousingSurpriseIndex

48

New Home Sales Last Ten Years


50/78

NewHomeSales LastTenYears

Source:Bloomberg FinancialServices

NHSLTOTIndex=U.S.NewOnefamilyhousessoldannually.Theindextrackssalesofnewlyconstructedhomesduringthereference period.

Aninvestmentcannotbemadeinanindexdirectly. 49

Where Are the First Time Buyers?


51/78

Source:National

Association

of

Realtors

May1,2011throughMarch31,2014

WhereAretheFirstTimeBuyers?

50

Ubiquitous Affordability Chart


52/78

Ub qu tous o dab ty C a tJanuary1,2000throughMarch31,2014

51

Source:BloombergFinancialServices

HomebuyerAffordabilityCompositeIndex(AFFDCMOM)=Trackstheaffordabilityofhousingtypicallybasedonamixofmedianhome prices,medianincomeandmortgagerates.

Aninvestment

cannot

be

made

directly

in

an

index.

ActualHomeAffordabilityCalculation:


53/78

y

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

Asof

December

31,

2004,

December

31,

2006

and

March

31,

2014.

IO

=Interest

Only

Loan.

Option

Pay

=The

borrower

has

four

payment

options

each

month

to

pay

the

mortgage

based

on

paymentofprincipalandinterest.30yr fixed=A30yearfixedratemortgagewherethemortgageretainsthesameinterestrateforthelifeoftheloanorthe30years.

HousingAffordability


54/78

g y

53

Source: DoubleLineCapital.June30,1998throughMarch31,2014.

Thisisahypotheticalexampledemonstratingthepaymentofamortgageusingdifferentinterestratescenarios.Thepurposeistodemonstratethatwitharisinginterestratethepaymentofthemortgagegoesupbecausetheborrowerispayingmoreinterest.

LendingStandardsTightening


55/78

54

Source:http://www.federalreserve.gov/boarddocs/snloansurvey/201405/fullreport.pdf

Theprimecategoryofresidentialmortgagesincludesloansmadetoborrowersthattypicallyhadrelativelystrong,welldocumentedcredithistories,relativelyhighcredit

scores,andrelativelylowdebttoincomeratiosatthetimeoforigination.Thiswouldincludefullyamortizingloansthathave afixedrate,astandardadjustablerate,ora

commonhybridadjustableratethoseforwhichtheinterestrateisinitiallyfixedforamultiyearperiodandsubsequentlyadjustsmorefrequently.Thenontraditional

categoryofresidentialmortgagesincludes,butisnotlimitedto,adjustableratemortgageswithmultiplepaymentoptions,interestonlymortgages,and``AltA''productssuch

asmortgageswithlimitedincomeverificationandmortgagessecuredbynonowneroccupiedproperties.(Pleaseexcludestandardadjustableratemortgagesandcommon

hybridadjustableratemortgages.)Thesubprimecategoryofresidentialmortgagestypicallyincludesloansmadetoborrowersthatdisplayedoneormoreofthefollowing

characteristicsat

the

time

of

origination:

weakened

credit

histories

that

include

payment

delinquencies,

chargeoffs,

judgments,

and/or

bankruptcies;

reduced

repayment

capacityasmeasuredbycreditscoresordebttoincomeratios;orincompletecredithistories.

g g gJanuary1,2007throughMarch31,2014

Net%ofDomestic

RespondentsTighteningStandardsfor

Res

identialMortgageLoans

Mortgage Refinancing Index


56/78

Source:BloombergFinancialServices

MBAVREFI=MortgageRefinancingIndexasmeasuredbythe MortgageBankersAssociationreflectsthenumberofapplicationsforrefinance.Notallapplicationsareaccepted.

Aninvestment

cannot

be

made

directly

in

an

index.

MortgageRefinancingIndexJune13,2003throughMay30,2014

55

ABXAAA071Index


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December31,2009throughJune10,2014


TheABX071AAAIndexisabasketofhomeequity.Constitutedfromreferenceobligationsissuedby20issuersofresidentialmortgagebackedsecurities.

An

investment

cannot

be

made

directly

in

an

index.

56

NonAgencyResidentialMortgageBackedSecurities


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(RMBS)60++DelinquencyRateJanuary

1,

2005

through

May

31,

2014

SeriousDelinquenciesisdefinedbymortgagesthatare60++delinquencyratesdefinedasloans60 or90dayslateinmortgagepayments,oralreadyinforeclosureorREOstatus.PrimedefinedasFICO>725andLTV725andLTV>=75

SubprimedefinedasFICO


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January1,2005throughMay31,2014

RMBS=ResidentialMortgageBackedSecurities




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RMBS=ResidentialMortgageBackedSecurities




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RMBS ResidentialMortgageBackedSecurities.CRR=ConditionalRepaymentRate.




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DoubleLineFundsOverview

TABV

TotalReturnBondFundPortfolioStatistics


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Portfoliostatisticsasof May30,2014basedonmarketweightedaverages.Subjecttochangewithoutnotice.

Averageprice=Ameasureoftheweightedaveragepricepaidforthesecuritiescalculatedbytakingthepricesanddividingbythenumberofsecuritiesanddoesnotincludecash.

Averagepriceshouldnotbeconfusedwithnetassetvalue.

AverageDuration=Durationisusedasariskmeasure.Itmeasuresthepricevolatilityofasecuritygivenachangeininterestratemovements.

AverageLife=Theaveragenumberofyearsthateachdollarofunpaidprincipaldueonthemortgageremainsoutstanding.Averagelifeiscomputedastheweightedaveragetimeto

thereceiptofallfuturecashflows,usingastheweightsthedollaramountsoftheprincipalpaydowns.

Source:DoubleLineCapitalLP

Total Return

BondFund

BarclaysCapitalU.S.

AggregateIndex

AveragePrice $97.73 $105.75

Duration 3.38 5.61

Average Life 5.20 7.69

62

TotalReturnBondFundPortfolioComposition

By Security Type


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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.Securitizedloansmade oncommercialratherthanresidentialproperty.

Other=CollateralizedMortgageObligations(CLOs)

BySecurityType

63

Cash 8.5%

Government 5.9%

Agency 47.9%

NonAgency 27.9%

CMBS 6.4%

CLO 3.1% Other 0.3%

TotalReturnBondFundPortfolioComposition

ByAgencyCollateralizeMortgageObligation(CMO)


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PortfoliocompositionasofMay30,2014. Subjecttochangewithoutnotice.


Cash = Thevalueofassetsthatcanbeconvertedintocashimmediately.Canincludemarketablesecurities,suchasgovernmentbonds,banker'sacceptances,cashequivalentsonbalancesheetsthatmayincludesecuritiesthatmaturewithin90days.

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=Loansthatforasetperiodoftime willnotreceiveprincipalpayments.

64

SecurityType

Cash,8.5% InverseFloater,

1.4%

Pass

Through,

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%

TotalReturnBondFundPortfolio

NonAgencyResidentialMortgageBackedSecurities


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Portfoliocompositionandcreditratingsasofsecurityorigination.Portfoliocompositionissubjecttochangewithoutnotice.TherearesomenonratedsecuritiesintheFundasshown

inthegraphabove.CreditdistributionisdeterminedfromthehighestavailablecreditratingfromanyNationallyRecognized StatisticalRatingOrganization(S&P,Moodys,andFitch).

InvestmentGrade=SecuritiesratedAAAtoBBBareconsideredtobeinvestmentgrade. AbondisconsideredinvestmentgradeifitscreditratingisBBBorhigherbyStandard&

PoorsorBaa3byMoodys.Ratingsbasedoncorporatebondmodel.Thehighertherating,themorelikelythebondistopayback atpar/$100centsonthedollar.AAAisconsideredthe

highestqualityand thelowestdegreeofrisk.Theyareconsideredtobeextremelystableanddependable.

BelowInvestmentGrade=AlsoknownasjunkbondisasecurityratedbelowinvestmentgradehavingaratingofBBBorbelow.Thesebondsareseenas havinghigherdefaultriskor

otheradversecreditevents,buttypicallypayhigheryieldsthanbetterqualitybondsinordertomakethemattractive.They arelesslikelytopaybackatpar/$100centsonthedollar.

NR=NotRated.Securitiesthatarenotratedbythethreeratingagencies.

Creditquality

may

be

assessed

by

different

agencies

for

different

bonds

for

reasons

beyond

the

control

of

the

Fund.

Source:DoubleLineCapitalLPasofMay30,2014.

(RMBS)BreakdownByOriginalRating

65

AAA

85%

AA

1%

A

0%

BBB

2%NR

12%


NonAgency RMBS Breakdown By Current Credit Quality


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NonAgencyRMBSBreakdownByCurrentCreditQuality

Portfoliocomposition

as

of

May

30,

2014.

Portfolio

composition

is

subject

to

change

without

notice.

There

are

some

non

rated

securities

in

the

portfolio

as

shown

in

the

chart

above.

CreditdistributionisdeterminedfromthehighestavailablecreditratingfromanyNationallyRecognizedStatisticalRatingOrganization(S&P,Moodys,andFitch).

InvestmentGrade=SecuritiesratedAAAtoBBB(showninblueabove)areconsideredtobeinvestmentgrade. AbondisconsideredinvestmentgradeifitscreditratingisBBBof

higherbyStandard&PoorsorBaa3byMoodys.Ratingsbasedoncorporatebondmodel.Thehighertherating,themorelikely thebondistopaybackatpar/$100centsonthedollar.

AAAisconsideredthehighestqualityand thelowestdegreeofrisk.Theyareconsideredtobeextremelystableanddependable.

BelowInvestmentGrade=Alsoknownasjunkbond(showningreyabove)isasecurityratedbelowinvestmentgradehavingaratingofBBBorbelow.Thesebondsareseenas

havinghigherdefaultriskorotheradversecreditevents,buttypicallypayhigheryieldsthanbetterqualitybondsinorder to makethemattractive.Theyarelesslikelytopaybackat

par/$100centsonthedollar.

CreditqualitymaybeassessedbydifferentagenciesfordifferentbondsforreasonsbeyondthecontroloftheFund.

NR=NotRated.Securitiesthatarenotratedbythethreeratingagencies.

RMBS=Residential

Mortgage

Backed

Securities.


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%


NonAgency RMBS Breakdown By Price


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Non AgencyRMBSBreakdownByPrice

PortfoliopricecompositionasofMay30,2014.Subjecttochangewithoutnotice.


DollarPrice

%ofFund

67

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

CoreFixedIncomeFundPortfolioStatistics


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PortfoliostatisticsasofMay30,2014basedonmarketweightedaverages.Subjecttochangewithoutnotice.

Averageprice=Ameasure oftheweightedaveragepricepaidforthesecuritiescalculatedbytakingthepricesanddividingbythenumber 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

CoreFixedIncomeFundPortfolioComposition


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PortfoliocompositionasofMay30,2014.Subjecttochangewithoutnotice.

BankLoans=Adebtfinancingobligationissuedbyabankorsimilarfinancialinstitutiontoacompany.

CommercialMortgageBackedSecurities(CMBS)=CommercialMortgageBackedSecurities.Securitizedloansmade oncommercialratherthanresidentialproperty.

CollateralizedLoanObligations(CLOs)=Aformofsecuritizationwherepaymentsfrommultiplemiddlesizedandlargebusinessloansarepooledtogetherandpassedontodifferentclassed

ofownersinvarioustranches

Cash

=

Cashholding

include

the

value

of

assets

that

can

be

converted

into

cash

immediately.

Can

include

marketable

securities,

such

as

government

bonds,

banker's

acceptances,

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.

Source:DoubleLineCapitalLP.Sectorallocationsaresubjecttochangeandshouldnotbeconsideredarecommendationtobuyorsellanysecurity. 69

Cash

3%

Govt

19%

MBS

29%EM

15%

IGCorporate

15%

CMBS

7%

BankLoans

6%

HYCorporate

3%

CLO

3%

CoreFixedIncomeFund

PortfolioCreditQualityBreakdown


71/78

PortfoliocompositionandcreditratingsasofMay30,2014.Portfoliocompositionissubjecttochangewithoutnotice.Creditdistributionisdeterminedfromthehighestavailablecredit

ratingfromanyNationallyRecognizedStatisticalRatingOrganization(S&P,Moodys,andFitch).

Cash

=The

value

of

assets

that

can

be

converted

into

cash

immediately.

Can

include

marketable

securities,

such

as

government

bonds, banker's

acceptances,

cash

equivalents

on

balance

sheetsthatmayincludesecuritiesthatmaturewithin90days.

Government=Governmentdebt(alsoknownaspublicdebtornationaldebt)ismoney(orcredit)owedbyanylevelofgovernment;eithercentralgovernment,federalgovernment,

municipalgovernmentorlocalgovernment.

Agency=MortgagesecuritieswhoseprincipalandinterestareeffectivelyguaranteedbytheU.S.GovernmentagencyincludingFannieMae(FNMA)orFreddieMac(FHLMC).

InvestmentGrade=AbondisconsideredinvestmentgradeifitscreditratingisBBBofhigherbyStandard&PoorsorBaa3byMoodys.Ratingsbasedoncorporatebondmodel.The

highertherating,themorelikelythebondistopaybackatpar/$100centsonthedollar.

BelowInvestmentGrade (BelowIG)=Alsoknownasjunkbondisasecurityratedbelowinvestmentgrade.Thesebondsareseenashavinghigherdefaultriskor otheradversecredit

events,buttypicallypayhigheryieldsthanbetterqualitybondsinordertomakethemattractive.Theyarelesslikelytopaybackatpar/$100centsonthedollar.

CreditqualitymaybeassessedbydifferentagenciesfordifferentbondsforreasonsbeyondthecontroloftheFund.

NR=Not

Rated

.Securities

that

are

not

rated

by

the

three

rating

agencies.

Source:DoubleLineCapitalLP. 70

Cash

3%

Govt

19%

Agency

16%

Investment

Grade

32%

BelowIG

28%

Unrated

2%

Penny For Your Thoughts


72/78


JeffreyGundlach


June10,

2014

PennyForYourThoughts


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