“Too Good To Be True”

September 9, 2009

Jeffrey Gundlach
Chief Investment Officer, The TCW Group
Portfolio Manager, TCW Total Return Bond Fund (TGLMX)
 Too Good to be True
Jeffrey Gundlach

Table of Contents

I. Market Overview

II. Fixed Income Market Valuations

III. Housing Market Update

The information contained herein may include estimates, projections, and other “forward-looking” statements.
Actual events may differ substantially from those presented herein. TCW assumes no duty to update any such statements.

Any opinions expressed are current only as of the time made and are subject to change without notice. The views expressed herein
are solely those of the author and do not represent the views of TCW as a firm or of any other portfolio manager or employee of TCW.
1
I. Market Overview
 Too Good to be True
Jeffrey Gundlach

Total Credit Market Debt as a Percentage of

U.S. Gross Domestic Product

3
Source: Exhibit by TCW Research from Federal Reserve, Commerce Department and Ned Davis Research data
3
Cash For Clunkers Program

Most Traded-In “clunker” – Ford Explorer Most Purchased – Toyota Corolla

 Too Good to be True
Jeffrey Gundlach

U.S. Liability Map

The Federal Government Post Crisis

U.S. GDP How exposed are public finances?
$14 trillion
Certain Conditional Uncertain
Federal Contingent Net cost of Recapitalization
Contractual (Depends on Asset Values-Initial Injection
How firm is the commitment?

Government Liabilities of $700 billion+?)

Obligation Debt (guarantees)
Public Sector
($9.0 trillion, FY10) ($5.0 trillion+)
Pension
Liabilities
($5.4 trillion, FY07)
Policy
Commitment Social Security and
Medicare
($46 trillion, FY07)
Value of expenses versus revenues
over the next 75 years under
Potential State/Local unchanged policies
Policy Government Debt
commitment ($3 trillion+, FY10)

5
Source: Moody’s, U.S. Treasury
5
 Too Good to be True
Jeffrey Gundlach

U.S. Government Current Liabilities and Unfunded Promises-To-Pay

($ Trillions)

$80 Current Liabilities & Unfunded Promises of the U.S. Government

Publicly Held Debt

$70 $63.4

$60 $56.5
$52.8
$50.1
$50
$46.4
$43.3
$40

$30 $30.1
$26.5

$20

$10

$5.8 $8.5
$3.6 $3.9 $4.3 $4.6 $4.9 $5.1
$0
FY2002 FY2003 FY2004 FY2005 FY2006 FY2007 FY2008 FY2009E

6
Source: TCW Research, U.S. Treasury
6
 Too Good to be True
Jeffrey Gundlach

Nominal GDP

Source: Bloomberg Financial Services

7
 Too Good to be True
Jeffrey Gundlach

Healthcare Expenditures 1960 – 2007

($ Billions)

$2,500
2007
$2.24

$2,000

$1,500
Ten Years Ago – 1997
$1.12

$1,000

Twenty Years Ago – 1987

$513
$500

$0
60

62

64

66

68

70

72

74

76

78

80

82

84

86

88

90

92

94

96

98

00

02

04

06
19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

20

20

20

20
Source: Federal Reserve
8
 Too Good to be True
Jeffrey Gundlach

Healthcare Expenditures Percentage of GDP

18%
2007
16.2%
16%

14%

12%

10%

8%

6%

4%

2%

0%
60

62

64

66

68

70

72

74

76

78

80

82

84

86

88

90

92

94

96

98

00

02

04

06
19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

19

20

20

20

20
Source: Federal Reserve
9
 Too Good to be True
Jeffrey Gundlach

S&P 500 – Last Seven Years

Source: Bloomberg Financial Services

10
 Too Good to be True
Jeffrey Gundlach

S&P 500 vs. TGLMX – Last 10 Years

Source: Bloomberg Financial Services

11
 Too Good to be True
Jeffrey Gundlach

S&P 500 – Year-End 2007 through September 8, 2009

Source: Bloomberg Financial Services

12
 Too Good to be True
Jeffrey Gundlach

U.S. Dollar Index Futures – Last Seven Years

Source: Bloomberg Financial Services

13
 Too Good to be True
Jeffrey Gundlach

U.S. Dollar Index Futures – Year End 2007 through September 8, 2009

Source: Bloomberg Financial Services

14
 Too Good to be True
Jeffrey Gundlach

Gold – Year End 2007 through September 8, 2009

Source: Bloomberg Financial Services, CMX-Commodity Exchange, Inc.

15
 Too Good to be True
Jeffrey Gundlach

Commodity Prices – Last Seven Years

Source: Bloomberg Financial Services, Commodities Research Bureau

16
 Too Good to be True
Jeffrey Gundlach

Commodity Prices – Year-End 2007 through September 4, 2009

Source: Bloomberg Financial Services, Commodities Research Bureau

17
II. Fixed Income Market Valuations
 1/
31
/1
9

‐8.00%
‐6.00%
‐4.00%
‐2.00%
0.00%
2.00%
4.00%
6.00%
1/ 71
31
/1
1/ 9 73
31
/1
1/ 9 75
31
/1
1/ 9 77
31
/1
1/ 9 79
31
/1
1/ 981
31
/1
1/ 983
31

Source: Bloomberg Financial Services. Data ending September 4, 2009.

/1
1/ 985
31
/1
1/ 987
31
/1
1/ 989
31
10-Year U.S. Treasury vs. Fed Funds

/1
1/ 991
31
/1
1/ 993
31
/1
1/ 995
31
/1
1/ 997
31
/1
1/ 999
31
/2
1/ 001
31
/2
1/ 003
31
/2
1/ 005
31
/2
1/ 007
31
/2
00
9
Jeffrey Gundlach
Too Good to be True

19
 Too Good to be True
Jeffrey Gundlach

Merrill Corporate Index

Yield Spread to the Merrill Treasury Index
December 1985 to September 4, 2009

7.00%

6.00%

5.00%

4.00%

3.00%

2.00%

1.00%

0.00%
5 6 7 8 9 0 1 2 3 4 5 6 7 8 9 0 1 2 3 4 5 6 7 8
c- 8 c- 8 c- 8 c- 8 c- 8 c- 9 c- 9 c- 9 c- 9 c- 9 c- 9 c- 9 c- 9 c- 9 c- 9 c- 0 c- 0 c- 0 c- 0 c- 0 c- 0 c- 0 c- 0 c- 0
De De De De De De De De De De De De De De De De De De De De De De De De

Yield Spread Average Yield Spread

Source: Merrill Lynch Indices, Bloomberg

20
 Too Good to be True
Jeffrey Gundlach

Merrill ABS Floating Index

Yield Spread to 1 Month LIBOR
September 1994 to September 4, 2009

10.00%
9.00%
8.00%
7.00%
6.00%
5.00%
4.00%
3.00%
2.00%
1.00%
0.00%
4 5 6 7 8 9 0 1 2 3 4 5 6 7 8
c t - 9 c t - 9 c t - 9 c t - 9 ct - 9 c t - 9 c t - 0 c t - 0 c t - 0 ct - 0 c t - 0 c t - 0 c t - 0 c t - 0 c t - 0
O O O O O O O O O O O O O O O

Yield Spread Average Yield Spread

Source: Merrill Lynch Indices, Bloomberg
21
 Too Good to be True
Jeffrey Gundlach

Merrill CMBS Fixed Rate Index

Yield Spread to the Merrill Treasury Index
December 1997 to September 4, 2009

12.00%

10.00%

8.00%

6.00%

4.00%

2.00%

0.00%
7 8 9 0 1 2 3 4 5 6 7 8
c-9 c-9 c-9 c-0 c-0 c-0 c-0 c-0 c-0 c-0 c-0 c-0
De De De De De De De De De De De De

Yield Spread Average Yield Spread

Source: Merrill Lynch Indices, Bloomberg

22
 Too Good to be True
Jeffrey Gundlach

Merrill High Yield Index

Yield Spread to the Merrill Treasury Index
December 1985 to September 4, 2009

20.00%

18.00%
16.00%

14.00%
12.00%
10.00%

8.00%
6.00%

4.00%
2.00%

0.00%
5 7 8 0 1 3 4 6 7 9 0 2 3 5 6 8
e c-8 un - 8 e c-8 un - 9 e c-9 un - 9 e c-9 un - 9 e c-9 un - 9 e c-0 un - 0 e c-0 un - 0 e c-0 un - 0
D J D J D J D J D J D J D J D J

Yield Spread Average Yield Spread

Source: Merrill Lynch Indices, Bloomberg
23
 Too Good to be True
Jeffrey Gundlach

Merrill Mortgage Index

Yield Spread to the Merrill Treasury Index
December 1985 to September 4, 2009

3.50%

3.00%

2.50%

2.00%

1.50%

1.00%

0.50%

0.00%
5 - 87 e c-88 n - 90 e c-91 n - 93 e c-94 n - 96 e c-97 n - 99 e c-00 n - 02 e c-03 n - 05 e c-06 n - 08
c-8
De J un D Ju D Ju D Ju D Ju D Ju D Ju D Ju

Yield Spread Average Yield Spread

Source: Merrill Lynch Indices, Bloomberg

24
III. Housing Market Update
 Too Good to be True
Jeffrey Gundlach

S&P/Case Shiller 20-City Monthly Composite

January 2000 – June 2009

225 De cline of 31% from pe ak through Fe bruary 2009

July 2006
20
207 15
200
Aug 2004 10
17.1% YoY
175 5
0
150
‐5
125 June 2009 ‐10
141
‐15
100 June 2009 ‐20
-15.4% YoY
75 ‐25
0

Ja 1

Ja 3

Ja 6

8
00

01

02

03

04

05

06

07

08

09
l‐0

l‐0

l‐0

l‐0

l‐0

l‐0

l‐0

l‐0

l‐0
n‐

n‐

n‐

n‐

n‐

n‐

n‐

n‐

n‐

n‐
Ju

Ju

Ju

Ju

Ju

Ju

Ju

Ju

Ju
Ja

Ja

Ja

Ja

Ja

Ja

Ja
S&P/Case‐Shiller 20‐City Index YoY % Chg

26
Source: Prepared by TCW from data from Standard & Poor’s
26
 Too Good to be True
Jeffrey Gundlach

S&P/Case Shiller National Quarterly House Price Index vs. MBA

Survey Subprime Delinquencies as % of Subprime Mortgage Loans
S&P/Case Shiller House Price Index Subprime Delinquencies % of Subprime Mortgages Outstanding
200 28
Subprime De lqs
25.4% 2Q09
Recession 26
180
March-Nov 2001
S&P/Case -Shille r HPI
24
Pe ak @ 190 2Q06
160
22

% Subprime Loan Count

House Price Index

S&P/Case -Shille r HPI

140 @ 133 2Q09 20
Positiv e HPA
during 2001
re ce ssion Subprime De lqs 18
120
15.0% 2Q02

16
100

14
Recession
80
Starts 12
Subprime De lqs 10.3%
Dec 2007
2Q00, 4Q04, 2Q05
60 10
Mar- Sep- Mar- Sep- Mar- Sep- Mar- Sep- Mar- Sep- Mar- Sep- Mar- Sep- Mar- Sep- Mar- Sep- Mar- Sep- Mar- Sep- Mar-
98 98 99 99 00 00 01 01 02 02 03 03 04 04 05 05 06 06 07 07 08 08 09
27
Source: Prepared by TCW from data from Standard & Poor’s and Mortgage Bankers Association
27
 Too Good to be True
Jeffrey Gundlach

S&P/Case Shiller National Quarterly House Price Index vs. MBA

Survey Prime Delinquencies as % of Prime Mortgage Loans
S&P/Case Shiller House Price Index Prime Delinquencies % of Prime Mortgages Outstanding
200 7
Prime Delqs
6.4% 2Q09
Recession
180
March-Nov 2001 6
S&P/Case-Shiller HPI
Peak @ 190 2Q06
160
5

% Prime Loan Count

S&P/Case-Shiller HPI
House Price Index

@ 133 2Q09
140 Positive HPA
during 2001
recession 4

120

3
100

Prime Delqs Recession 2

80
2.9% 2Q01 Starts
Dec 2007

60 1
Mar- Sep- Mar- Sep- Mar- Sep- Mar- Sep- Mar- Sep- Mar- Sep- Mar- Sep- Mar- Sep- Mar- Sep- Mar- Sep- Mar- Sep- Mar-
98 98 99 99 00 00 01 01 02 02 03 03 04 04 05 05 06 06 07 07 08 08 09
28
Source: Prepared by TCW from data from Standard & Poor’s and Mortgage Bankers Association
28
 Too Good to be True
Jeffrey Gundlach

The Four Stages Of Market Opportunity – Senior Tranche

• Significant repricing of mortgage credit risk is currently underway
- Creating credit pockets of inefficiency, and
- Discounting of select credit
• Some mortgage and mortgage-related assets have become “very cheap” as a result1
Belief
Concern
$95.0 Recovery

$85.0
Liquidation
$75.0

$65.0
Price

$55.0

$45.0

$35.0

$25.0
07

07

07

08

08

08

09

09

09
20

20

20

20

20

20

20

20

20
2/

2/

2/

2/

2/

2/

2/

2/

2/
1/

5/

9/

1/

5/

9/

1/

5/

Source: TCW Research and Deutsche Bank ABX 2006-2 AAA tranche data through September 4, 2009. 9/
1. The boxes in the chart represent typical stages of market cycles. However, this is not a prediction of when the stages will begin or end, or of valuation, or of when any TCW Strategy will
invest or realize on investments. 29
 Too Good to be True
Jeffrey Gundlach

ABX 2006-2 A-Tranche

$100.0

$90.0

$80.0

$70.0

$60.0
Price

$50.0

$40.0

$30.0

$20.0

$10.0

$0.0
- 07 a r- 0 7 a y- 07 ul- 07 ep -07 o v-0 7 an - 0 8 a r- 08 a y- 0 8 ul- 08 ep -08 o v-08 an - 09 a r- 09 a y- 09 ul- 09 ep -0 9
Jan M M J S N J M M J S N J M M J S

Source: TCW Research and JP Morgan ABX 2006-2 A tranche data through September 4, 2009.
30
 Too Good to be True
Jeffrey Gundlach

Subprime Securitized Mortgage Serious Delinquency Levels (60++)

50.0%
60++
45.0% Constant Default Rate (CDR) 44.3%
40.0%
35.0%
30.0%
25.0%
20.0%
15.0%
15.1%
10.0%
5.0%
0.0%
1/1/2000
6/1/2000
11/1/2000
4/1/2001
9/1/2001
2/1/2002
7/1/2002
12/1/2002
5/1/2003
10/1/2003
3/1/2004
8/1/2004
1/1/2005
6/1/2005
11/1/2005
4/1/2006
9/1/2006
2/1/2007
7/1/2007
12/1/2007
5/1/2008
10/1/2008
3/1/2009
8/1/2009
Source: LoanPerformance data and TCW as of August 1, 2009 31
Note: Serious delinquencies refers to 60++ days late on first liens only. CDR on first liens only. Subprime is defined as FICO <675. Based as a percentage of unpaid principal balance. 31
 Too Good to be True
Jeffrey Gundlach

Subprime Securitized Mortgages Serious Delinquency Levels

(Foreclosures + REO + Bankruptcy)

30.0% Foreclosure + REO + Bankruptcy

Constant Default Rate (CDR) 24.9%
25.0%

20.0%
15.1%
15.0%

10.0%

5.0%

0.0%
1/1/2000
7/1/2000
1/1/2001
7/1/2001
1/1/2002
7/1/2002
1/1/2003
7/1/2003
1/1/2004
7/1/2004
1/1/2005
7/1/2005
1/1/2006
7/1/2006
1/1/2007
7/1/2007
1/1/2008
7/1/2008
1/1/2009
7/1/2009
Source: LoanPerformance data and TCW as of August 1, 2009 32
Note: Foreclosure+REO+Bankruptcy, CDR on first liens only. Subprime is defined as FICO <675. Based as a percentage of unpaid principal balance. 32
 Too Good to be True
Jeffrey Gundlach

Subprime Securitized Mortgage Serious Delinquency Levels

Based on Loan Count (60++)

1,400,000

1,200,000

1,000,000 SubPrime LC 60++

800,000

600,000

400,000

200,000

‐
M ‐0 0

Ju 2

M 07
Ju 0 5
Se 0 4
Ap 04
De 0 2

9
Au 00

Ja 06
Au 07
Fe 3
M ‐01

No 5

M ‐08
Oc 01

Oc 08
0

r ‐0

‐0
l‐0
c‐

g‐
v‐
n‐
b‐
p‐
‐
n‐

n‐
‐

‐
g

ay

ay
t

t
ar

ar
Ja

Source: LoanPerformance data and TCW as of August 1, 2009 33

Note: Loan counts based on first liens only. Serious delinquencies refers to 60++ days late on first liens only. Subprime is defined as FICO <675. 33
 Too Good to be True
Jeffrey Gundlach

Alt-A Securitized Mortgage Serious Delinquency Levels (60++)

60++
30.0% Constant Default Rate (CDR)

25.0% 24.4%

20.0%

15.0%
10.6%
10.0%

5.0%

0.0%
1 /1 /2 0 0 0

7 /1 /2 0 0 0

1 /1 /2 0 0 1

7 /1 /2 0 0 1

1 /1 /2 0 0 2

7 /1 /2 0 0 2

1 /1 /2 0 0 3

7 /1 /2 0 0 3

1 /1 /2 0 0 4

7 /1 /2 0 0 4

1 /1 /2 0 0 5

7 /1 /2 0 0 5

1 /1 /2 0 0 6

7 /1 /2 0 0 6

1 /1 /2 0 0 7

7 /1 /2 0 0 7

1 /1 /2 0 0 8

7 /1 /2 0 0 8

1 /1 /2 0 0 9

7 /1 /2 0 0 9
Source: LoanPerformance data and TCW as of August 1, 2009
Note: Serious delinquencies refers to 60++ days late on first liens only. CDR based on first liens only. Alt-A is defined as FICO 675-725, LTV >=75. 34
Based as a percentage of unpaid principal balance. 34
 Too Good to be True
Jeffrey Gundlach

Alt-A Securitized Mortgages Serious Delinquency Levels

(Foreclosures + REO + Bankruptcy)

18.0% Foreclosure + REO + Bankruptcy

Constant Default Rate (CDR)
16.0% 15.4%
14.0%

12.0%
10.6%
10.0%

8.0%

6.0%

4.0%

2.0%

0.0%
1/1/2000

7/1/2000

1/1/2001

7/1/2001

1/1/2002

7/1/2002

1/1/2003

7/1/2003

1/1/2004

7/1/2004

1/1/2005

7/1/2005

1/1/2006

7/1/2006

1/1/2007

7/1/2007

1/1/2008

7/1/2008

1/1/2009

7/1/2009
Source: LoanPerformance data and TCW as of August 1, 2009 35
Note: Foreclosure + REO + Bankruptcy, CDR based on first liens only. Alt-A is defined as FICO 675-725, LTV >=75. Based as a percentage of unpaid principal balance. 35
 Too Good to be True
Jeffrey Gundlach

Alt-A Securitized Mortgage Serious Delinquency Levels

Based on Loan Count(60++) vs. Constant Default Rate (CDR)

700,000
Alt‐A LC 60++
600,000

500,000

400,000

300,000

200,000

100,000

‐
Aug‐00

Apr‐05

Aug‐07
Oct‐01

Dec‐02

Feb‐04
Sep‐04

Nov‐05
Jun‐06

Oct‐08
Jan‐00

Mar‐01

May‐02

Jul‐03

Jan‐07

Mar‐08

May‐09
Source: LoanPerformance data and TCW as of August 1, 2009 36
Note: Loan counts based on first liens only. Serious delinquencies refers to 60++ days late on first liens only. Alt-A is defined as FICO 675-725, LTV >=75.
36
 Too Good to be True
Jeffrey Gundlach

Prime Securitized Mortgage Serious Delinquency Levels (60++)

60++
Constant Default Rate (CDR)
7.0% 6.2%
6.0%

5.0%

4.0%

3.0%
2.1%
2.0%

1.0%

0.0%
1/1/2000

7/1/2000

1/1/2001

7/1/2001

1/1/2002

7/1/2002

1/1/2003

7/1/2003

1/1/2004

7/1/2004

1/1/2005

7/1/2005

1/1/2006

7/1/2006

1/1/2007

7/1/2007

1/1/2008

7/1/2008

1/1/2009

7/1/2009
Source: LoanPerformance data and TCW as of August 1, 2009
Note: Serious delinquencies refers to 60++ days late on first liens only. CDR based on first liens only. Prime is defined as FICO >725 and LTV <75. 37
Based as a percentage of unpaid principal balance. 37
 Too Good to be True
Jeffrey Gundlach

Prime Securitized Mortgages Serious Delinquency Levels

(Foreclosures + REO + Bankruptcy)

Foreclosure + REO + Bankruptcy

Constant Default Rate (CDR)
4.0% 3.7%
3.5%

3.0%

2.5%
2.1%
2.0%

1.5%

1.0%

0.5%

0.0%
1/1/2000

7/1/2000

1/1/2001

7/1/2001

1/1/2002

7/1/2002

1/1/2003

7/1/2003

1/1/2004

7/1/2004

1/1/2005

7/1/2005

1/1/2006

7/1/2006

1/1/2007

7/1/2007

1/1/2008

7/1/2008

1/1/2009

7/1/2009
Source: LoanPerformance data and TCW as of August 1, 2009
Note: Foreclosure + REO + Bankruptcy, CDR based on first liens only. Prime is defined as FICO >725 and LTV <75. 38
Based as a percentage of unpaid principal balance.
38
 Too Good to be True
Jeffrey Gundlach

Prime Securitized Mortgages Serious Delinquency Levels (60++)

Based on Loan Count

35,000
Prime LC 60++
30,000

25,000

20,000

15,000

10,000

5,000

‐
Ju 0 0

Ju 1

Ju 2

Ju 0 3

Ju 4

Ju 5

Ju 0 6

Ju 0 7

Ju 8

Ju 9
Ja 0 0

Ja 0 1

Ja 0 2

Ja 3

Ja 0 4

Ja 5

Ja 0 6

Ja 0 7

Ja 0 8

9
0

0
l‐0

l‐0

l‐0
n‐

n‐

n‐

n‐

n‐

n‐

n‐

n‐

n‐

n‐
l‐

l‐

l‐

l‐

l‐

l‐

l‐
Ja

Source: LoanPerformance data and TCW as of August 1, 2009 39

Note: Loan counts based on first liens only. Serious delinquencies refers to 60++ days late on first liens only. Prime is defined as FICO >725, LTV <75.
39
 Too Good to be True
Jeffrey Gundlach

Historical Voluntary Prepayment Rates (VPR) on First Liens

Securitized Mortgages
45.00%

40.00%

35.00%

30.00%

25.00% Prime

20.00% 21.7%
15.00%

10.00% Alt-A
7.59%
5.00% Subprime
0.00%
2.47%
1/1/2005

6/1/2005

11/1/2005

4/1/2006

9/1/2006

2/1/2007

7/1/2007

12/1/2007

5/1/2008

10/1/2008

3/1/2009

8/1/2009
Source: Loan Performance data based on FICO and LTV. August servicing reported as of September 4, 2009.
Prime: FICO > 725 and LTV <75
Alt-A: FICO 675-725; and FICO > 725 and LTV >= 75
Subprime: FICO < 675
40
 Too Good to be True
Jeffrey Gundlach

Loss Severities on First Liens

January 2005 – August 2009

80%
Prime Alt A Sub Prime 66.4%
70%

60% 56.4%
50%

40%
41.9%

30%
20%

10%

0%
2005‐01

2005‐04
2005‐07
2005‐10

2006‐01
2006‐04
2006‐07

2006‐10
2007‐01
2007‐04

2007‐07
2007‐10
2008‐01

2008‐04
2008‐07
2008‐10

2009‐01
2009‐04
2009‐07
Source: Loan Performance data based on FICO and LTV. August servicing reported as of September 4, 2009.
Prime: FICO > 725 and LTV <75
Alt-A: FICO 675-725; and FICO > 725 and LTV >= 75
Subprime: FICO < 675 41
 Too Good to be True
Jeffrey Gundlach

Mortgage Refinancing Index

Source: Bloomberg Financial Services

42
 Too Good to be True
Jeffrey Gundlach

TCW Total Return Bond Fund Performance

As of June 30, 2009

43
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A Word About Risk

The primary risks affecting this Fund are “interest rate risk” (including “extension risk” and “prepayment risk”), “liquidity
risk,” “market risk,” and “credit risk.”
• Interest rate risk refers to the possibility that the value of the Fund’s portfolio investments may fall since fixed income securities
generally fall in value when interest rates rise.
– Extension risk is the possibility that rising interest rates may cause owners of the underlying mortgages
to pay off their mortgages at a slower than expected rate. This particular risk may effectively change a security which
was considered short or intermediate term into a long-term security. Long-term securities generally drop in value more
dramatically in response to rising interest rates than short or intermediate-term securities.
– Prepayment risk refers to the possibility that falling interest rates may cause owners of the underlying mortgages to
pay off their mortgages at a faster than expected rate. This tends to reduce returns since the funds prepaid will have
to be reinvested at the then lower prevailing rates.
• Liquidity risk refers to the possibility that the Fund may lose money or be prevented from earning capital gains if it cannot
sell a security at the time and price that is most beneficial to the Fund.
• Market risk is the possibility that the returns from the types of securities that the Fund invests in will underperform returns
from the various general securities markets or different asset classes.
• Credit risk refers to the loss in the value of a security based on a default in the payment of principle and/or interest of the
security, or the perception of the market of such default. The value of the Fund’s share price will fluctuate up or down based
on the value of the portfolio holdings, which can be affected by these risks.

The information contained herein may include estimates, projections, and other “forward-looking” statements. Actual events may differ
substantially from those presented herein. TCW assumes no duty to update any such statements.

Any opinions expressed are current only as of the time made and are subject to change without notice. The views expressed herein are
solely those of the author and do not represent the views of TCW as a firm or of any other portfolio manager or employee of TCW.
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Biography

Jeffrey Gundlach
Chief Investment Officer
The TCW Group, Inc.

Mr. Gundlach is the Chief Investment Officer and a member of the Board of Directors of the TCW
Group, Inc. In addition, he oversees fixed income investments as Chairman of the TCW Multi-
Strategy Fixed Income Committee and is the Co-Founder and lead portfolio manager of the
Mortgage-Backed Securities group. His investment strategies have been featured in leading
publications including the New York Times, the Wall Street Journal, Barrons, Forbes and
Institutional Investor. In 2007, Morningstar named Mr. Gundlach Fixed Income Fund Manager
of the Year and Standard & Poor’s/BusinessWeek gave its Excellence in Fund Management Award
to TGLMX, the only bond fund to win the prestigious award five years in a row. Mr. Gundlach joined
the firm in 1985, prior to which he was associated with Transamerica Corporation's Los Angeles
based Property/Casualty Insurance division. He worked in the Finance Department as Senior Loss
Reserve, Analyst, responsible for investment discount and funding strategies. He is a graduate of
Dartmouth College summa cum laude holding a BA in Mathematics and Philosophy. He attended
Yale University as a PhD candidate in Mathematics.

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