DoubleLine Monthly Commentary€¦ · 31/07/2019 · 3 Monthly ommentary July 2019 Monthly...

Monthly Commentary July 31, 2019

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2

Monthly Commentary July 2019


July marked the 121st month since the last U.S. economic recession, making this current economic expansion the longest in the post-World War II era. The previous record, according to the National Bureau of Economic Research (NBER), was the 10-year boom that took place between 1991 and 2001. While the duration of the expansion is record setting, economic growth as measured by gross domestic product (GDP), has lagged that of previous expansions. During the 10 expansion cycles recorded between 1949 and 2007, the economy grew by an annual rate of 4.7% a year on average. Since 2009, growth has averaged just 2.3%.

During the second quarter of 2019, GDP grew at a 2.1% annual rate, according to preliminary data released in July by the U.S. Commerce Department. Consumer spending, which accounts for approximately two-thirds of the U.S. economy, rose 4.3% quarter-over-quarter (QoQ) after a weak start in the first three months of the year. Both headline and core retail sales rose for the fourth consecutive month in June to new highs. Government spending also picked up in the second quarter after being depressed by the shutdown from December 2018 to January 2019.

Other parts of the economy, however, appear to be weakening. The trade dispute between the U.S. and China continues to burden the manufacturing sector. The Institute for Supply Management Purchasing Managers Index (ISM PMI) slowed for the third consecutive month in June. Residential investment, which includes housing construction, declined for the sixth consecutive quarter. While economic growth during the quarter was positive, it is down from a 3.1% pace in the first quarter.

Overview

Source: Bloomberg, DoubleLine. *Indicates returns in U.S. dollars

1-Month Performance of Asset Classes July 1, 2019 - July 31, 2019

1.44%1.12%

2.16%

0.57%0.33%

-1.18%

-2.09%

0.50%

-1.15%

0.22%

-0.12%

0.56%0.56%

0.80%1.14%

2.48%

-2.61%

-4.23%

-0.82%

-2.49%

-0.77% -0.67%

0.03%

0.95%0.81%

-1.28%

-5.12%-6%

-5%

-4%

-3%

-2%

-1%

0%

1%

2%

3%

Equities Fixed Income Foreign Exchange Commodities

Length of U.S. Economic Expansion Since 1945

Source: National Bureau of Economic Research (NBER), DoubleLine. As of July 31, 2019

121

120

106

92

73

58

45

39

36

24

12

0 25 50 75 100 125 150

June 2009 - July 2019

March 1991 - March 2001

February 1961 - December 1969

November 1982 - July 1990

November 2001 - December 2007

March 1975 - January 1980

October 1949 - July 1953

May 1954 - August 1957

November 1970 - November 1973

April 1958 - April 1960

July 1980 - July 1981

Number of Months

3



On July 31st, the Federal Open Market Committee (FOMC) decided to cut its target range for the Fed Funds Rate 25 basis points (bps) which is now at a range of 2.00% to 2.25%. The FOMC’s reasoning for a rate cut was three fold: (1) to insure against downside risks from weak global growth and trade uncertainty; (2) to help offset the effects these factors have had on the U.S. economy; and (3) to promote a quicker return to the Federal Reserve’s (Fed) desired inflation target of 2.00%. Fed Chair Jerome Powell referred numerous times to the change in the Fed Funds target range as a “mid-cycle adjustment to policy.”1 Although Powell did not rule out additional rate cuts in the future, the FOMC does not believe the U.S. economy is in the type of environment for a rate cutting cycle. A majority of market participants believe that the current monetary policy is still too tight as evidenced by the 63% probability of a rate cut at the September Fed meeting.2

In addition, the Fed’s balance sheet was discussed at the July 31st meeting as Quantitative Tightening (QT) ended August 1. This is in contrast to the Fed’s revised plan to stop QT in September of 2019 and opens up the possibility for Quantitative Easing (QE) in the future. The Fed has previously acknowledged that QE could be utilized as a normal policy tool. With the conclusion of the balance sheet run off, the Fed’s balance sheet will sit at approximately $3.75 trillion, an increase of more than 400% when compared to pre-Global Financial Crisis levels.3

In Europe, Christine Lagarde received the nomination to succeed Mario Draghi as the leader of the European Central Bank (ECB). Pending a confirmation hearing, her term is set to begin in November 2019. Lagarde has been supportive of Draghi’s accommodative stance on monetary policy, which is expected to continue despite negative interest rates across most of the European Union (EU). After its July meeting, the ECB sent the market a dovish signal, announcing that more stimulus is forthcoming. Economic data across the EU contracted in July as Germany’s manufacturing sector fell further into recessionary territory at 43.2, the lowest reading since July 2012. In the United Kingdom, London’s former mayor Boris Johnson became Britain’s next prime minister after he defeated Jeremy Hunt in the Conservative Party leadership race. Johnson’s victory has renewed hope by some that a resolution to Brexit will be finalized before the October 31 deadline, something his predecessor Theresa May was unable to accomplish.

U.S. Government Securities

The Bloomberg Barclays U.S. Treasury Index posted a loss of 0.12% for the month, paring its YTD advance to 5.06%.

The Treasury market is priced to reflect expectations of lower growth, lower inflation and easier Fed policy in the future. Weak U.S. manufacturing data, signs of a widespread global economic slowdown and a dearth of progress on U.S.-China trade negotiations were among the top concerns of market participants in July.

The market is quite sensitive to Fed communications regarding likely policy actions and to economic data. Treasury yields rose when “Fed speak” suggested a lower likelihood of near-term rate cuts or on strong economic data. The 2-year Treasury yield rose 10 basis points (bps) on July 5 following the stronger than expected jobs report (with a consequently lower chance of a Fed rate cut). It fell 8 basis points on July 10 when Jerome Powell's Congressional testimony assured investors that the Fed would, in fact, cut rates at its July 31 meeting.

Yields were confined to a narrow range through the month. Three-month Bill yields and 30-year bond yields ended July virtually unchanged from a month earlier. Two to five year yields ended the month slightly higher, suggesting modestly reduced expectations of aggressive Fed policy easing.

Treasury Inflation-Protected Securities (TIPS) breakeven inflation rates stabilized along with crude oil prices after declining to multiyear lows in June. The 10-year breakeven inflation rate rose from about 1.70% to about 1.80% before falling back to 1.75% at month end.

Overview (cont’d)

U.S. Treasury Yield Curve

Source: Bloomberg

6/30/2019 7/31/2019 Change

3 Month 2.09% 2.06% -0.03%

6 Month 2.09% 2.07% -0.02%

1 Year 1.93% 1.99% 0.06%

2 Year 1.75% 1.87% 0.12%

3 Year 1.71% 1.83% 0.12%

5 Year 1.77% 1.83% 0.06%

10 Year 2.01% 2.01% 0.00%

30 Year 2.53% 2.52% -0.01%

U.S. Government Securities

1 Federal Reserve Press Release, July 31, 2019- https://www.federalreserve.gov/mediacenter/files/FOMCpresconf20190731.pdf 2 Bloomberg’s WIRP function; as of 7/31/2019 3 Bloomberg US Condition of All Federal Reserve Banks Total Assets; as of 7/31/2019

4



Agency Mortgage-Backed Securities

July prepayment speeds increased by approximately 26% going from 12.6 CPR to 15.9 CPR in aggregate. Mortgage rates dropping to their lowest levels since 2016 was a driving factor for the increased prepayment speeds. We expect prepayment speeds to continue to increase in August due to the MBA U.S. Refinance Index NSA remaining at high levels throughout June and July.

In July, gross issuance of Agency MBS increased by $13 billion to $133 billion while net issuance decreased from $19 billion to $9 billion.

Over the month, rates were mixed with the 2-year, 10-year and 30-year up 12 bps, up 1 bp and down 0.4 bps respectively. Volatility was generally low, driven primarily by few headline risks during the period.

In July, Agency MBS total return was 0.40% while excess return, relative to maturity matched Treasuries, was 0.43% as measured by the Bloomberg Barclays U.S. MBS Index.

The duration of the Bloomberg Barclays U.S. MBS Index shortened from 3.15 to 3.07 over the month.

Agency Mortgage-Backed Securities

Source: eMBS, Barclays Capital. FHLMC Commitment Rate Source: Bloomberg

Source: Bloomberg. Base = 100 on 3/16/1990. Non-Seasonally Adjusted Source: Bloomberg. Base = 100 on 1/14/2011. Seasonally Adjusted

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

7/26/2019 1,791.2

120

140

160

180

200

220

240

260

280

300

7/26/2019 253.0

Mortgage Bankers Association (MBA) Purchase Index As of July 26, 2019

MBA Refinance Index As of July 26, 2019

5



Source: Bloomberg, DoubleLine

0.00

1.00

2.00

3.00

4.00

5.00

6.00

7.00

7/31/2019 3.07


3.00

3.50

4.00

4.50

5.00

5.50

7/25/2019 3.75

Non-Agency Mortgage-Backed Securities

Non-Agency RMBS performed modestly during the month given the backdrop of falling risk-free rates, a more dovish Fed, and growing concern surrounding slowing of economic growth. Despite a decline in all-in yields, spreads within the sector generally remained steady as the mortgage market continues to exhibit balanced fundamentals.

There was $19.5 billion in new issuance during July, and cumulatively on pace compared to the same period of 2018. Non-QM (qualifying mortgage) volumes continue to trend upward due to a combination of new entrants and returning issuers coming to the market with additional deals. New issuance across the sector is projected to be more than $100 billion this year. However, it will likely lag behind 2018 due primarily to a decline in re-performing loan volumes. The total non-Agency RMBS market outstanding is approximately $577 billion and growing as new issuance has rebounded.

Home prices increased 2.4% year over year (YoY) according to the S&P Corelogic Case-Shiller 20-City Home Price Composite Index, down from the 2.5% pace in June. This marks the 13th consecutive month the Index has exhibited decelerating growth as affordability constraints continue to hinder home price growth. According to the National Association of Realtors Existing Home Sales Index, existing home sales decreased 1.7% from the prior month amidst solid demand and insufficient supply. The 30-year mortgage rate finished the month at 3.75% per the Freddie Mac Primary Mortgage Market Survey. This represents a level not seen since the fourth quarter of 2016. Lower mortgage rates have also affected refinance volumes as prepayments speeds have picked up notably across CRT (credit risk transfer), non-QM, and jumbo 2.0 sectors.

Agency Mortgage-Backed Securities (cont’d)

Years %

Non-Agency Mortgage-Backed Securities

Duration of Barclays U.S. MBS Bond Index As of July 31, 2019

Freddie Mac Commitment Rate—30 Year As of July 25, 2019

6



Commercial Mortgage-Backed Securities

Private-label CMBS issuance volume totaled $5.3 billion in July, approximately 44% below July 2018. Three conduit deals totaling $3.2 billion, two SASB deals totaling $480 million and two CRE CLOs totaling $1.6 billion priced during the month. While new issue conduit pricing remained tiered by credit this month, overall demand was robust alongside the Fed’s rate cut. The outstanding private-label CMBS universe increased by 1.6% to $496.9 billion in July. While gross issuance is down about 9% YoY, the net outstanding universe increased by about 2.9% YTD.

The RCA Commercial Property Price Index returned 0.89% in June and is now up 3.9% YTD or 6.5% YoY. While the industrial sector was the only property type to post positive growth in June – up 13.3% YoY – industrial transactions volume fell for the first six months of 2019 as investors struggled to find suitable acquisition targets. Despite the increase in CRE appreciation relative to the first quarter, global uncertainty influenced transaction activity in the second quarter as investors exhibited signs of risk aversion. As an example, price appreciation for properties located in major markets accelerated as opposed to those in non-major markets, a stark contrast to investors stretching for yield in non-major markets over the past few years.

CMBS secondary market cash spreads were generally range bound in July as investors assigned near certainty to the rate cut. AAA LCFs ended July trading S+83-89, with BBBs trading S+240-415. While BBBs initially tightened by 10-15 bps in the first half of July, this was partly given back in the second half of the month. CMBX were mixed in July, with AAA 2012-2016 reference indices widening by 1 bps, and BBBs tightening by an average of 9 bps. Secondary market fixed rate paper was well bid in July, with investors moving down the capital structure to maintain yield amid falling rates.

ABS

Total returns for the ABS market were effectively flat during July as 2-year and 5-year U.S. Treasury yields rose 12 bps and 6 bps, respectively.

On-the-run ABS spreads tightened moderately and credit curves flattened as longer-duration, subordinated tranches traded relatively well. Esoteric ABS spreads have yet to converge with the sharp year-to-date spread rally in Investment Grade and High Yield corporate bonds. Spreads on higher-yielding ABS sectors were largely unchanged during July and slightly wider on a YTD basis.

The primary market was somewhat quiet with only $17 billion in new issuance during July compared to about $21 billion in June. On the other hand, the secondary market remained active and averaged about $1 billion in reported trading volume per day.

Credit trends within second quarter earnings releases of prime and subprime lenders continued to be quite stable. The composite net charge off rate for the largest U.S. lenders declined 6 bps MoM and was in-line on a YoY basis.

Commercial Mortgage-Backed Securities

Asset-Backed Securities

7



Investment Grade Credit

IG spreads rallied during most of July and tested YTD tights. Toward the end of the month, however, risk assets reacted negatively after Fed Chair Powell’s comments at the July 31 FOMC press conference.

The Bloomberg Barclays U.S. Credit Index ended in July one bp away from its YTD tights as it narrowed 6 bps to 103 bps, outperforming duration-matched Treasuries by 59 bps. Total return for the month was 0.52% bringing the YTD total return to 9.92%.

The best-performing sectors for July on a total return basis were natural gas, gaming, utility (other), electrics and tobacco. The worst performing sectors on a total return basis were independent energy, supranationals, finance (other), leisure and aerospace & defense.

Relative performance showed a preference for lower-rated and higher yielding segments of the market as BBBs outperformed with a total return of 0.65% versus 0.41% for AAs and 0.48% for As.

Additionally, across the curve, longer-duration credit outperformed with a total return of 1.16% versus 0.54% for intermediates and 0.06% for short duration credits.

USD IG new issuance in July was $103.8 billion, gross and $32.7 billion, net. The finance sector led with $46.4 billion of gross issuance and $25.3 billion of net new issuance.

IG fund flows continued to be robust with $20.6 billion in inflows, bringing YTD inflows to $165.6 billion.

Source: Barclays Live Source: Barclays Live

Investment Grade Credit

-3.0%

-2.0%

-1.0%

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

0

20

40

60

80

100

120

140

160

Bil

lio

ns

of

U.S

. D

oll

ars

Total Fixed-Rate Investment Grade Supply As of July 31, 2019

Performance of Select Barclays Indices Last 12 Months

8



Collateralized Loan Obligations

The second half of the year began with $9.31 billion in new issuance across 20 deals for July.

YTD, we have seen 93 different managers issue deals, which is slightly ahead of the pace from last year when 90 distinct managers had issued deals through July 2018.

The healthy supply of new issue deals to review kept spreads on the new issue tranches from tightening. Throughout July, we continued to favor the primary market over the secondary market in order to pick up spread on clean, new issue deals.

Bank Loans

The bank loan market had a strong showing in July with a return of 0.80%. The weighted average bid price of the S&P/LSTA Leveraged Loan Index rose from 96.79 to 97.06, and at month-end, over 26% of the index was bid above par. Although single-B loans slightly outperformed BB loans (0.84% versus 0.79%), the rally retained a high quality bias, and CCC-rated loans underperformed with a 0.53% return. The return of 6.59% YTD is the best performance through July in 10 years.

Despite softness in the global economy and slowing corporate earnings growth, risk markets generally traded with a positive bent in July, with stocks rallying and Treasury yields largely static. Against a firm market backdrop, loan new issue supply rose to $40 billion in July, the highest level in nine months. However, repayments also grew as some issuers chose to take advantage of strength in the high yield bond market to refinance bank loans with bonds. Since the start of the year, close to $15 billion of bank loans have been repaid with bonds.

On the demand side, the CLO market remained active, with $9.3 billion of new CLOs printing in July. Outflows from retail funds continued unabated, however, putting the withdrawal streak at $33.6 billion over 37 weeks. For July, LCD estimates that loan retail funds saw $2.8 billion of outflows.

The default rate remains stable at low levels, ending the month at just 1.62% on a last 12 months issuer basis. However, corporate earnings growth has slowed, heightening the risk of defaults going forward.

The bank loan market continues to trade at a reasonable discount to par and ended the month with a yield-to-maturity of 6.55%. However, with the Fed embarking on a path of interest rate reductions, the market yield is likely to move lower with LIBOR. Given the prospect of lower interest rates, slowing earnings growth, and macroeconomic uncertainty, we have become incrementally more cautious on the asset class.


Last 12 Months Issuance August 2018 to July 2019

$ Billions # of Deals

CLO New Issuance June 2012 to July 2019

$ Billions # of Deals

Collateralized Loan Obligations

Bank Loans

0

5

10

15

20

25

30

35

0.00

2.00

4.00

6.00

8.00

10.00

12.00

14.00

16.00

18.00Volume ($B) Count

0

5

10

15

20

25

30

35

0.00

2.00

4.00

6.00

8.00

10.00

12.00

14.00

16.00

18.00 Volume ($B) Count

9



High Yield

High yield returns remained healthy in July. The Bloomberg Barclays U.S. High Yield Corporate Index rose 0.56% for the month, bringing the return to 10.59% YTD. Index yield rose 1 bp to 5.88% (-207bps YTD) while spreads contracted 6bps to 371bps (-155bp YTD). In general, “decent” earnings and economic data along with continued inflows drove performance.

By rating, CCCs continued to lag, gaining 0.28% (+7.76% YTD). Bs led, climbing 0.64% (+10.77% YTD), with BBs in between, rising 0.58% (+11.16% YTD). By sector, the three best performers in July were Wireless (+2.55%), P&C (+1.89%), and Other Financial (+1.83%). On the flipside, the worst sectors were Independent (-2.55%), Pharmaceuticals (-1.40%), and Oil Field Services (-0.80%).

The par-weighted 12-month default rate rose to 2.12% in July, up from 1.46% in June, due to five defaults representing $8.6 billion in bonds (including the largest issuer default YTD affecting $6.4 billion of bonds), according to J.P. Morgan. Current default rate levels compare to 1.83% at the end of 2018 and a long-term average back to 1980 of 3.46%.

Gross issuance was $25.4 billion, a four-year high for the month of July, according to J.P. Morgan. Primary activity has increased 24% gross and 21% net YTD, compared to 2018 where activity was the lightest since 2009 (full-year 2018 volume of $187 billion was a 43% decline compared to 2017).

Inflows continued, totaling $3.0 billion for the month, and bringing year-to-date inflows to $15.5 billion compared to an outflow of $45.1 billion in 2018.

Commodities

In July, the broad commodity market declined by 0.41% and 0.87% as measured by the S&P Goldman Sachs Commodity Index (GSCI) and Bloomberg Commodity Index (BCOM), respectively.

The Energy sector increased 0.40% in July, with heating oil (+1.26%) the best performer and natural gas (-2.66%) the worst performer.

Precious Metals increased 1.35% in July as Silver rallied 6.94% and Gold edged up 0.81%.

Industrial Metals appreciated 0.44% as Nickel (+14.19%) and Lead (+4.06%) rallied while Zinc (-2.41%), Copper (-1.28%), and Aluminum (-0.38%) declined.

The Agricultural sector dropped 5.72% in July and saw broad declines with every grain and soft depreciating.

Emerging Markets Fixed Income

EM sovereign and corporate external bonds both posted positive performance for July. The positive performance of external EM debt was driven by tighter credit spreads and accrued interest over the period.

The J.P. Morgan EMBI Global Diversified Index’s credit spread tightened 27 bps over the course of the month. The spread tightened as US-China trade tensions were fairly muted during July and central banks grew increasingly accommodative. The UST yield curve flattened during the month, with 2-year UST yields rising 12 bps and 10-year UST yields rising only one bp.

Performance across all regions was positive in both the sovereign and corporate indices for July, as measured by the J.P. Morgan EMBI Global Diversified and J.P. Morgan CEMBI Broad Diversified, respectively. The Middle East was the best performing region in the sovereign index and Europe was the best performing region in the corporate index.

Commodities

High Yield

Emerging Markets Fixed Income

10



The sovereign index outperformed the corporate index in July. Outperformance was, in part, driven by the greater tightening in sovereign credit spreads relative to corporate credit spreads, as well as the sovereign index’s higher weighting to high yield credits relative to the corporate index. The high yield sub-index outperformed the investment grade sub-index in both the sovereign and corporate indices.

Factors that may affect risk appetite for the remainder of 2019 include continued escalation in trade tensions, a slowdown in Chinese and global growth, Brexit negotiations, as well as policy risks due to an increase in populism.

International Sovereign

Global government bonds, as measured by the FTSE WGBI Index, posted negative returns for the month of July 2019. Negative performance for the Index was driven primarily by foreign currency losses against the USD, which appreciated against all its G-10 peers over the month.

The Japanese Yen depreciated against the USD in July. The Bank of Japan (BoJ) kept monetary policy unchanged at its July Monetary Policy meeting, but modified its policy statement to indicate that it would be willing to add additional monetary stimulus if downside risks to their inflation target materialized.

The U.K. Pound was the worst performing G-10 currency over the month on growing fears of a no-deal Brexit under new Prime Minister, Boris Johnson.

JP Morgan Emerging Markets Bond Index Performance August 31, 2018 to July 31, 2019

Emerging Markets Fixed Income (cont’d)

International Sovereign

Source: JP Morgan

-6.0%

-4.0%

-2.0%

0.0%

2.0%

4.0%

6.0%

11



Infrastructure

Infrastructure investments performed well during July as highly rated, longer-duration assets were met with strong demand from investors facing a continued decline in global economic data readings.

The new issue market for infrastructure-related assets was especially quiet in July, with new opportunities mostly concentrated in bonds backed by lease cash flows from data centers and residential solar loans.

The shipping container and railcar ABS markets continue to bear the brunt of the slowdown in global trade. The second quarter earnings releases of some prominent intermodal container and dry freight companies cited lower expectations for lease activity in the second half of 2019 due to the U.S./China trade conflict.

Excluding shipping and rail, spreads on infrastructure assets tightened 3-5 bps over the month as demand for secured, cash flowing assets easily outpaced supply.

U.S. Equities

U.S. equities began the month near an all-time high. The S&P 500 Index began the month less than half a percent from its record high close a few days earlier. Buoyed by anticipation of the July 31 rate cut by the Fed and optimistic about trade peace, the S&P 500 returned 1.44% in July.

The complacency in the equity markets was reflected in market volatility, which remained subdued until the last day of the month. Volatility, as measured by the VIX Index, remained at quiescent levels below 15 throughout the month, up until Fed Chair Powell began his post-meeting press conference on July 31. Chairman Powell’s failure to promise multiple subsequent rate cuts disappointed the market, leading to a spike in VIX and a sell-off in equities as the month came to a close. The market may also have been disappointed the 25 bps cut at the July 31 meeting was not larger.

Continuing yet another theme from earlier months, the equity markets shrugged off the deteriorating outlook for corporate earnings. By month-end, roughly one quarter of the companies of the S&P 500 had reported second quarter earnings. According to FactSet, the S&P 500 was on pace to deliver second quarter earnings growth below the same period in 2018 – the second quarter in a row of negative YoYearnings growth. Earnings estimates for the third quarter of 2019 also turned negative. By the end of July, consensus estimates (per FactSet) were calling for third quarter S&P 500 earnings to fall by approximately 2.2% from the levels of the previous year.

Global Equities

Global Equities were essentially flat in July, with the Morgan Stanley Capital International All-Country World Index (MSCI ACWI) up 0.33% during the month. U.S. equities outperformed the broader market in July with the S&P 500 and Nasdaq Composite up 1.44% and 2.16% during the month, respectively. The Russell 2000 and Dow Jones generated similar returns in July, 0.57% and 1.12% during the month, respectively.

In Europe, both equities and the Eurostoxx 50 were flat during the month. Core European equities underperformed with the DAX returning -1.69% and CAC returning -0.28% in July. In the periphery, equities had mixed results with the FTSEMIB up 1.09% and IBEX down -2.00%. UK equities outperformed compared to the rest of European markets with the FTSE 100 up 2.23% in July.

Asian Equities had mixed results in July. Japanese Equities, as measured by the Nikkei, were up 1.16%. Chinese equities, as measured by the Shanghai Composite, returned -0.66%. Korean Equities underperformed, as measured by the KOSPI, returning -4.98% in July as the Japan and South Korea trade dispute heated up.

EM Equities underperformed developed markets with MSCI EM Index returning -1.15% in July. Brazil’s Ibovespa rose 0.84% and Russian equities, as measured by MSCI Russia Index, rose 0.71% in July. Indian equities, as measured by MSCI India, were down 1.22% in July. Hong Kong equities had a rough July and declined -2.3% amid political turmoil and protests.

Global Equities

U.S. Equities

Infrastructure

12 Monthly Commentary July 31, 2019

AUD - Australian Dollar

Banks Loans - Represented by the S&P/LSTA Leveraged Loan Index (the Index) is a market value-weighted index designed to measure the performance of the U.S. leveraged loan market based upon market weightings, spreads and interest payments.

Bloomberg Agriculture Subindex - Formerly known as Dow Jones-UBS Agriculture Subindex (DJUBSAG), the index is a commodity group subindex of the Bloomberg CI. It is composed of futures contracts on coffee, corn, cotton, soybeans, soybean oil, soybean meal, sugar and wheat. It reflects the return of underlying commodity futures price movements only and is quoted in USD.

Basis Point - A basis point (bps) equals 0.01%.

Bloomberg Barclays U.S. Aggregate Bond Index - An index that represents securities that are SEC-registered, taxable, and dollar denominated. The index covers the U.S. investment grade fixed rate bond market, with index components for government and corporate securities, mortgage pass-through securities, and asset-backed securities. These major sectors are subdivided into more specific indices that are calculated and reported on a regular basis.

Bloomberg Barclays U.S. Aggregate Credit Average OAS Index - The Option-Adjusted Spread calculated on the Bloomberg Barclays U.S. Aggregate Bond Index.

Bloomberg Barclays Asset-Backed Securities (ABS) Index - The ABS component of the U.S. Aggregate Index. It includes securities whose value and income payments are derived from and collateralized (‘or backed”) by a specified pool of underlying assets including credit cards, auto loans, etc.

Bloomberg Barclays U.S. Corporate Index - An index that represents the total return measure of the corporates portion of the Barclays U.S. Aggregate Index.

Bloomberg Barclays U.S. Credit Index – The U.S. Credit component of the U.S. Government/Credit Index. This index consists of publically-issued U.S. corporate and specified foreign debentures and secured notes that meet the specified maturity, liquidity, and quality requirements. To qualify, bonds must be SEC-registered. The U.S. Credit Index is the same as the former U.S. Corporate Investment Grade Index.

Bloomberg Barclays U.S. MBS Index - An index that measures the performance of investment grade fixed-rate mortgage-backed pass-through securities of the Government-Sponsored Enterprises (GSEs): Ginnie Mae (GNMA), Fannie Mae (FNMA), and Freddie Mac (FHLMC).

Bloomberg Barclays U.S. High Yield Corporate Index - An index that covers the universe of fixed rate, non-investment grade debt. Eurobonds and debt issuer from countries designated as emerging markets (e.g. Argentina, Brazil, Venezuela, etc.) are excluded, but Canadian and global bonds (SEC registered) of issuers in non-EMG countries are included. Original issue zeros, step-up coupon structures, 144-As and pay-in-kind (PIK, as of October 1, 2009) are also included.

Bloomberg Barclays U.S. Treasury Total Return Unhedged USD Index - Measures U.S. dollar-denominated, fixed-rate, nominal debt issued by the U.S. Treasury. Treasury bills are excluded by the maturity constraint, but are part of a separate Short Treasury Index.

Bloomberg Barclays U.S. Treasury Index - The Index is the U.S. Treasury component of the U.S. Government Index. Public obligations of the U.S. Treasury with a remaining maturity of one year or more.

Bloomberg Commodity Index (BCOM) - An index calculated on an excess return basis that reflects commodity futures price movements. The index rebalances annually weighted 2/3 by trading volume and 1/3 by world production and weight-caps are applied at the commodity, sector and group level for diversification. Roll period typically occurs from 6th-10th business day based on the roll schedule.

Bid Wanted In Competition (BWIC) - A situation where an institutional investorsubmits its bond bid list to various securities dealers. Dealers are then allowed to make bids on the listed securities. The dealers with the highest bids are subsequently contacted.

Brent - Brent Crude Oil Front Month Futures Contract

CBOE Volatility Index (VIX) - A popular measure of the stock market’s expectation of volatility implied by S&P 500 Index options, calculated and published by the Chicago Board Options Exchange (CBOE).

CMBX Index - The CMBX is an index, or more accurately a series of indices, designed to reflect the creditworthiness of commercial mortgage-backed securities (CMBS). Conference Board Leading Economic Index (LEI) - Phenomena, such as the unemployment and new construction rates, used by The Conference Board to predict the financial condition of a particular industry or the economy in general.

Conference Board Consumer Confidence Index (CCI) - Measures how optimistic or pessimistic consumers are with respect to the economy in the near future. The Index is based on the concept that if consumers are optimistic, they tend to purchase more goods and services. This increase in spending inevitably stimulates the whole economy.

Conference Board Measure of CEO Confidence - A survey of approximately 100 CEOs in a wide variety of industries that details Chief Executive’s attitudes and expectations regarding the overall state of the economy as well as their own industry.

Consumer Price Index (CPI) - A measure that examines the weighted average of prices of a basket of consumer goods and services, such as transportation, food and medical care. It is calculated by taking price changes for each item in the predetermined basket of goods and averaging them. Changes in the CPI are used to assess price changes associated with the cost of living; the CPI is one of the most frequently used statistics for identifying periods of inflation or deflation.

Copper - COMEX Copper Front Month Futures Contract

Dot Plot - A simple statistical chart that consists of data points plotted as dots on a graph with x- and y-axes. Dot plots are well known as the method that the U.S. Federal Reserve (Fed) uses to convey its benchmark Federal Funds interest rate outlook at certain Federal Open Market Committee (FOMC) meetings.

Dow Jones Industrial Average - An index that tracks 30 large, publicly-owned companies trading on the New York Stock Exchange (NYSE) and the NASDAQ.

EM Sovereign Debt is represented by Bloomberg Barclays EM Sovereign TR Index—The Bloomberg Barclays Emerging Markets USD Sovereign Bond Index tracks fixed and floating-rate US dollar-denominated debt issued by EM governments. Country eligibility and classification as Emerging Markets is rules-based and reviewed annually using World Bank income group and International Monetary Fund (IMF) country classifications.

Emerging Markets is represented by the MSCI EM (Emerging Markets) Index is a free-float weighted equity index that captures large and mid cap representation across Emerging Markets (EM) countries. The index covers approximately 85% of the free float-adjusted market capitalization in each country.

EUR - Euro

EUR/USD - The Currency Pair EUR/USD is the shortened term for the euro and U.S. dollar pair or cross for the currencies of the European Union (EU) and the United States (USD). The currency pair indicates how many U.S. dollars (the quote currency) are needed to purchase one euro (the base currency).

Eurostoxx 50 Index - A stock index of Eurozone stocks designed by STOXX, an index provider owned by Deutsche Borse Group and SIX group, with the goal of providing a blue-chip representation of Supersector leaders in the Eurozone.

FactSet - Provides computer-based financial data and analysis for financial professionals, including investment managers, hedge funds and investment bankers. It consolidates data on global markets, public and private companies, and equity and fixed-income portfolios.

Federal Family Education Loan Program (FFELP) - A system of private student loans which were subsidized and guaranteed by the United States federal government.

Financial Times Stock Exchange Milano Italia Borsa (FTSE MIB) - The benchmark stock market index for the Borsa Italiana, the Italian national stock exchange, which superseded the MIB-30 in September 2004. The index consists of the 40 most-traded stock classes on the exchange.

Financial Times Stock Exchange 100 (FTSE 100) - A capitalization-weighted index of the 100 most highly capitalized companies traded on the London Stock Exchange.

Definitions of Terms Used Definitions of Terms Used


The Financial Times Stock Exchange World Government Bond Index (FTSE WGBI) - Measures the performance of fixed-rate, local currency, investment-grade sovereign bonds. The WGBI is a widely used benchmark that currently includes sovereign debt from over 20 countries, denominated in a variety of currencies, and has more than 30 years of history available. The WGBI provides a broad benchmark for the global sovereign fixed income market. Sub-indexes are available in any combination of currency, maturity, or rating.

G-10 (Group of 10) - The G10 consists of eleven industrialized nations that meet on an annual basis or more frequently, as necessary, to consult each other, debate and cooperate on international financial matters. The member countries are: Belgium, Canada, France, Germany, Italy, Japan, the Netherlands, Sweden, Switzerland, the United Kingdom and the United States.

Gold - COMEX Gold Front Month Futures Contract

GBP - British Pound

Hang Seng Index - A free-float capitalization-weighted index of a selection of companies from the Stock Exchange of Hong Kong. The components of the index are divided into four subindices: Commerce and Industry, Finance, Utilities, and Properties.

Ibovespa Index - A gross return index weighted by traded volume and comprised of the most liquid stocks traded on the Sao Paulo Stock Exchange. The IBOVESPA Index has been divided 10 times by a factor of 10 since January 1, 1985.

IHS Markit Eurozone Manufacturing Purchasing Managers’ Index - A measure of the performance of the manufacturing sector derived from a survey of 3,000 manufacturing firms and including national data for Germany, France, Italy, Spain, the Netherlands, Austria, the Republic of Ireland, and Greece. The index is based on five individual indexes: New Orders (30%), Output (25%), Employment (20%), Suppliers’ Delivery Times (15%), and Stock of Items Purchased (10%), with the Delivery Times index inverted to move in a comparable direction. A reading of above 50 indicates an expansion of the sector, while a reading below 50 represents a contraction and 50 indicates no change.

Indice Bursatil Espanol (IBEX) - The official index of the Spanish Continuous Market. The index is comprised of the 35 most liquid stocks traded on the Continuous market. It is calculated, supervised and published by the Sociedad de Bolsas.

Institute for Supply Management (ISM) Purchasing Managers Index (PMI) - An indicator of the economic health of the manufacturing sector. The PMI is based on five major indicators: new orders, inventory levels, production, supplier deliveries and the employment environment.

ISM Non-Manufacturing Index (ISM NMI) - An index made up of data from 400 non-manufacturing firms collected by the Institute of Supply Management (ISM).

ISM New Orders Index - The Manufacturing ISM Report On Business is based on data compiled from monthly replies to questions asked of purchasing and supply executives in over 400 industrial companies. For each of the indicators measured (New Orders, Backlog of Orders, New Export Orders, Imports, Production, Supplier Deliveries, Inventories, Customers Inventories, Employment, and Prices), this report shows the percentage reporting each response, the net difference between the number of responses in the positive economic direction and the negative economic direction and the diffusion index. Responses are raw data and are never changed. The diffusion index includes the percent of positive responses plus one-half of those responding the same (considered positive). The resulting single index number is then seasonally adjusted to allow for the effects of repetitive intra-year variations resulting primarily from normal differences in weather conditions, various institutional arrangements, and differences attributable to non-moveable holidays. All seasonal adjustment factors are supplied by the U.S. Department of Commerce and are subject annually to relatively minor changes when conditions warrant them.

JP Morgan Corporate Emerging Markets Bond Broad Diversified Index (CEMBI) -This index is a market capitalization weighted index consisting of U.S.-denominated Emerging Market corporate bonds. It is a liquid global corporate benchmark representing Asia, Latin America, Europe and the Middle East/Africa.

JP Morgan Government Bond Emerging Markets Broad Diversified Index (GBI EM) - This index is the first comprehensive, global local Emerging Markets index, and consists of regularly traded, liquid fixed-rate, domestic currency government bonds to which international investors can gain exposure.

JP Morgan Emerging Markets Bond Global Diversified Index (EMBI) - This index is uniquely-weighted version of the EMBI Global. It limits the weights of those index countries with larger debt stocks by only including specified portions of these countries’ eligible current face amounts of debt outstanding. The countries covered in the EMBI Global Diversified are identical to those covered by EMBI Global.

JPY - Japanese Yen

Last Cash Flow (LCF) - The last revenue stream paid to a bond over a given period.

Leveraged Commentary & Data (LCD) - A unit of S&P Global Market Intelligence, LCD provides in-depth coverage of the leveraged loan market through real-time news, analysis, commentary, and proprietary loan data.

Major Markets - Major markets are defined by Real Capital Analytics as Boston, Chicago, Washington, D.C., Los Angeles, New York City and San Francisco. All markets outside of the Major Markets are Non-Major Markets.

Markit CMBX Index - A synthetic tradable index referencing a basket of 25 commercial mortgage-backed securities.

Morgan Stanley Capital International All Country World Index (MSCI ACWI) - A market-capitalization-weighted index designed to provide a broad measure of stock performance throughout the world, including both developed and emerging markets.

Mortgage Bankers Association (MBA) Purchase Index - An index that includes all mortgage applications for purchases of single-family homes. It covers the entire market, both conventional and government loans and all products.

Mortgage Bankers Association (MBA) Refinance Index - An index that covers all mortgage applications to refinance an existing mortgage. It includes conventional and government refinances. SA indicates seasonally adjusted and NSA indicates non-seasonally adjusted.

MSCI Emerging Markets (MSCI EM) - An index that covers 24 Emerging Market countries and is designed to capture the large and mid-cap representation across those countries.

MSCI Russia Index - A free-float capitalization-weighted index used to track the equity market performance of Russian securities on the MICEX Stock Exchange.

NASDAQ Composite - A stock market index of the common stocks and similar securities (e.g. ADRs, tracking stocks, limited partnership interests) listed on the NASDAQ stock market with over 3,000 components. This index is highly followed in the U.S. as an indicator of the performance of stocks of technology companies and growth companies. Since both U.S. and non-U.S. companies are listed on the NASDAQ stock market, the index is not exclusively a U.S. index.

NASDAQ 100 Index - A basket of the 100 largest, most actively traded U.S companies listed on the NASDAQ stock exchange.

NFIB Small Business Optimism Index - The small business optimism index is compiled from a survey that is conducted each month by the National Federation of Independent Business (NFIB) of its members. The index is a composite of 10 seasonally adjusted components based on the following questions: plans to increase employment, plans to make capital outlays, plans to increase inventories, expect economy to improve, expect real sales higher, current inventory, current job openings, expected credit conditions, now a good time to expand, and earnings trend.

Nikkei 225 Index - A price-weighted index comprised of Japan's top 225 blue-chip companies on the Tokyo Stock Exchange. The Nikkei is equivalent to the Dow Jones Industrial Average Index in the U.S.

Personal Consumption Expenditures (PCE) Core Price Index - Measures price changes in consumer goods and services. Expenditures included in the index are actual U.S. household expenditures. Data that pertains to services, durablesand non-durables are measured by the index.

Qualified Mortgage (QM) - A qualified mortgage is a mortgage that meets certain requirements for lender protection and secondary market trading under the Dodd-Frank Wall Street Reform and Consumer Protection Act.

RCA Commercial Property Price Index - The Moody's/RCA Commercial Property Price Index (CPPI) describes various non-residential property types for the U.S. (10 monthly series from 2000). The Moody's/RCA Commercial Property Price Index is a periodic same-property round-trip investment price change index of the U.S.

Definitions of Terms Used Definitions of Terms Used (cont’d)


commercial investment property market. The dataset contains 20 monthly indicators.

Russell 1000 Growth Index - An index that measures the performance of the large-cap growth segment of the U.S. equity universe. It includes those Russell 1000 companies with higher price-to-book ratios and higher forecasted growth values.

Russell 1000 Value Index - An index that measures the performance of the large-cap value segment of the U.S. equity universe. It includes those Russell 1000 companies with lower price-to-book ratios and lower expected growth values.

Russell 2000 Index - A subset of the Russell 3000 Index representing approximately 10% of the total market capitalization and measuring the performance of the small-cap segment of the U.S. equity universe.

S&P CoreLogic Case-Shiller National Home Price Index - An index that tracks the value of single-family housing within the United States. The index is a composite of single-family home price indices for the nine U.S. Census divisions.

S&P CoreLogic Case-Shiller 20-City Composite Home Price NSA Index - Seeks to measures the value of residential real estate in 20 major U.S. metropolitan areas: Atlanta, Boston, Charlotte, Chicago, Cleveland, Dallas, Denver, Detroit, Las Vegas, Los Angeles, Miami, Minneapolis, New York, Phoenix, Portland, San Diego, San Francisco, Seattle, Tampa and Washington, D.C.

S&P/LSTA Leveraged Loan Index - An index designed to track the market-weighted performance of the largest institutional leveraged loans based on the market weightings, spreads and interest payments.

S&P Goldman Sachs Commodity Index (GSCI) - Standard & Poor’s Goldman Sachs Commodity Index, or GSCI, is a composite index of commodity sector returns which represents a broadly diversified, unleveraged, long-only position in commodity futures.

S&P 500 Index - Standard & Poor’s U.S. 500 Index, a capitalized-weighted index of 500 stocks.

S&P Global Market Intelligence - A provider of multi-asset class and real-time data, research, news and analytics to institutional investors, investment and commercial banks, investment advisors and wealth managers, corporations, and universities.

Shanghai Composite Index - A capitalization-weighted index that tracks the daily performance of all A-shares and B-shares listed on the Shanghai Stock Exchange. The index was developed on December 19, 1990 with a base value of 100.

Spread - The difference between yields on differing debt instruments, calculated by deducting the yield of one instrument from another. The higher the yield spread, the greater the difference between the yields offered by each instrument. The spread can be measured between debt instruments of differing maturities, credit ratings and risk.

Trade Reporting and Compliance Engine (TRACE) - The Trade Reporting and Compliance Engine is the FINRA-developed vehicle that facilitates the mandatory reporting of over-the-counter secondary market transactions in eligible fixed income securities.

U-3 Unemployment Rate - The U.S. Bureau of Labor Statistics U-3 unemployment

rate is the officially recognized rate of unemployment, measuring the number of unemployed people as a percentage of the labor force.

U.S. Corp IG - The Bloomberg Barclays U.S. Corporate Bond Index measures the investment grade, fixed-rate, taxable corporate bond market. It includes USD denominated securities publicly issued by U.S. and non-U.S. industrial, utility and financial issuers.

U.S. Corp HY - The Bloomberg Barclays U.S. Corporate High Yield Bond Index measures the USD-denominated, high yield, fixed-rate corporate bond market. Securities are classified as high yield if the middle rating of Moody's, Fitch and S&P is Ba1/BB+/BB+ or below. Bonds from issuers with an emerging markets country of risk, based on Barclays EM country definition, are excluded.

U.S. Dollar Index (DXY) - A weighted geometric mean of the United States dollar's value relative to a basket of 6 major foreign currencies, including the Euro, Japanese yen, Pound sterling, Canadian dollar, Swedish krona and Swiss franc.

U.S. Treasuries (UST) - Commonly used for references to the Treasury debt that the U.S. issues.

U.S All-Property CCPI Index -

University of Michigan Consumer Sentiment Index - The Surveys of Consumers is a rotating panel survey based on a nationally representative sample that gives each household in the coterminous U.S. an equal probability of being selected. Interviews are conducted throughout the month by telephone. The minimum monthly change required for significance at the 95-percent level in the Sentiment Index is 4.8 points; for Current and Expectations Index the minimum is 6 points.

USD/JPY - The Currency Pair USD/JPY is the shortened term for the yen and U.S. dollar pair or cross for the currencies of Japan (JPY) and the United States (USD). The currency pair indicates how many Japanese yen (the quote currency) are needed to purchase one U.S. dollar (the base currency).

Weighted Average Cost of Capital (WACC) - The weighted average cost of capital (WACC) is a calculation of a firm's cost of capital in which each category of capital is proportionately weighted. All sources of capital, including common stock, preferred stock, bonds, and any other long-term debt, are included in a WACC calculation.

WAL (Weighted Average Life) - The average number of years for which each dollar of unpaid principal on a loan or mortgage remains outstanding.

World Interest Rate Probabilities WIRP (WIRP) - Allows you to analyze the probabilities of various interest rate level outcomes as implied by the futures, options, and OIS markets, so you can quantify to what extent the markets are “pricing in” future central bank interest rate changes.

WTI - West Text Intermediate Crude Oil Front Month Futures Contract

Z-Score - A numerical measurement used in statistics of a value’s relationship to the mean (average) of a group of values, measured in terms of standard deviations from the mean. If a Z-score is 0, it indicates that the data point’s score is identical to the mean score. A Z-score of 1.0 would indicate a value that is one standard deviation from the mean. Z-scores may be positive or negative, with a positive value indicating the score is above the mean and a negative score indicating it is

Definitions of Terms Used Definitions of Terms Used (cont’d)


Important Information Regarding This Material

Issue selection processes and tools illustrated throughout this presentation

are samples and may be modified periodically. Such tools are not the only

tools used by the investment teams, are extremely sophisticated, may not

always produce the intended results and are not intended for use by non-

professionals.

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. This material may include statements that

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Forward-looking statements include, among other things, projections,

estimates, and information about possible or future results related to a

client’s account, or market or regulatory developments.

Important Information Regarding Risk Factors

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

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investment. All investments involve risks. Please request a copy of

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© 2019 DoubleLine Capital LP

16



For Investors in Chile

If any products are offered within Chile, they will be offered and sold only

pursuant to General Rule 336 of the SVS, an exemption to the registration

requirements, or in circumstances which do not constitute a public offer of

securities in Chile within the meaning of Article 4 of the Chilean Law No.

18,045 on Securities Market.

This communication is addressed only to “Qualified Investors” (as defined in

SVS General Rule No. 216).

Si algunos valores son ofrecidos dentro de Chile, serán ofrecidos y colocados

sólo de acuerdo a la Norma de Carácter General 336 de la SVS, una excepción

a la obligación de registro, o en circunstancias que no constituyan una oferta

pública de valores en Chile según lo definido por el Artículo 4 de la Ley 18.045

de Mercado de Valores de Chile.

Esta comunicación está dirigida a “Inversionistas Calificados” (según se define

en la Norma de Carácter General N° 216 de la SVS).

For Investors in Peru

All content in this document is for information or general use only. The

information contained in this document is referential and may not be

construed as an offer, invitation or recommendation, nor should be taken as a

basis to take (or stop taking) any decision.

This is neither an offer or an invitation to offer nor authorizes such sales or

invitations in places where such offers or invitations are contrary to the

corresponding applicable law.

This communication is not intended for any person who is not qualified as an

institutional investor, in accordance with provisions set forth in SMV

Resolution Nº 021-2013-SMV-01, and as subsequently amended. No legal,

financial, tax or any other kind of advice is hereby being provided.

Todo lo contenido en este documento es sólo para fines informativos o de uso

general. La información contenida en este documento es referencial y no

puede interpretarse como una oferta, invitación o recomendación, ni debe

considerarse como fundamento para tomar (o dejar de tomar) alguna

decisión.

La presente no constituye una oferta ni una invitación a ofertar ni autoriza

tales ventas o invitaciones en los lugares donde tales ofertas o invitaciones

sean contrarias a las respectivas leyes aplicables.

Esta comunicación no está dirigida a ninguna persona que no califique como

un inversionista institucional, de conformidad con lo dispuesto en la

Resolución SMV Nº 021-2013-SMV-01, así como pueda ser modificada en el

futuro. Por medio de la presente comunicación no se le está proveyendo de

consejo legal, financiero, tributario o de cualquier otro tipo.

For Investors in Latin America and the Middle East

This material has not been registered with, or approved or passed on in any

way, by any regulatory body or authority in any jurisdiction. This material is

for the information of prospective investors only and nothing in this material

is intended to endorse or recommend a particular course of action. By

receiving this material, the person or entity to whom it has been issued

understands, acknowledges and agrees that neither this material nor the

contents therein shall be deemed as an offer to sell or a solicitation of an offer

to buy, or a recommendation of any security or any other product, strategy or

service by DoubleLine or any other third party.

For Investors in Japan (Discretionary Investment Manager (DIM) & Non-

Discretionary Investment Manager (Non-DIM)

DoubleLine Investment Management Asia Ltd. (“DoubleLine Asia”) is

registered with the Kanto Local Finance Bureau as an Investment Advisory and

Agency (“IAA”) operator in Japan (Registration No. 2986). However,

DoubleLine Asia only conducts the agency business under its IAA registration.

Under its agency business, DoubleLine Asia is authorized to intermediate in

the execution of investment advisory and investment management contracts

between its affiliates which are registered investment managers outside of

Japan (“Foreign Investment Managers”) and discretionary investment

managers and trust banks conducting the investment management business

(together the “Japan DIMs”) registered in Japan.

DoubleLine Asia is not permitted to market or solicit any securities or other

investment products, nor is it able to provide any direct investment advisory

or investment management services in Japan or elsewhere.

While discussions with Japan DIMs may involve its agency business of

intermediating investment advisory and investment management

arrangements, all discussions with persons other than Japan DIMs are

necessarily limited to general information about DoubleLine Asia and its

affiliates and nothing herein should be read to suggest a solicitation of

products or services inconsistent with such regulatory status.

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