2020

The Economic Club of New York ______________________________________ Stanley Druckenmiller Chairman and Chief Executive Officer Duquesne Family Office, LLC ______________________________________ Impact of COVID-19 on Board Governance and Litigation Webinar May 12, 2020 Moderator: Scott Bessent Founder and CIO Key Square Capital Management, LLC

Yale News reported on September 24, 2020 that the Yale endowment generated a 6.8 percent return in fiscal year 2020, bringing the endowment's value to $31.2 billion. The article noted that the endowment returned 9.9 percent per annum over the twenty years ending June 30, 2020, exceeding broad-market results for domestic equities. The 2020 fiscal year covered the period of the March 2020 COVID crash and the subsequent recovery, and the return reflected the discipline of holding the portfolio through one of the fastest bear-and-rebound cycles on record. The article also reported that Yale's spending from the endowment for the year was approximately $1.4 billion, representing approximately one-third of the university's operating budget. This was an increase over the prior year and reflected both the spending rule and the long-term growth of the corpus. The COVID year was a test of the spending discipline: market values fell sharply in March 2020, and the smoothed spending rule allowed the operating budget to remain intact while the investment office held the portfolio's allocations steady through the drawdown. Yale News framed the 2020 outcome as the product of the endowment model's long-horizon discipline. The article noted that the office's commitment to private market partnerships, real assets, and absolute-return strategies had produced a portfolio whose volatility was lower than a conventional equity-heavy portfolio while its long-cycle return was higher. The 2020 fiscal year was an explicit test of this thesis - the COVID crash was severe and rapid, but the endowment's private market valuations lagged the public market moves and the office's discipline was to maintain the underlying commitments through the cycle.

Faqir Chand Kohli died in Mumbai on 26 November 2020 following a cardiac arrest, Bombardment House executives told The Hindu; he was 96 and is survived by his wife Swarn and family — closing a life that had spanned the colonial-era Peshawar of his birth through the Mumbai of India's $190-billion IT industry.

The group credits JRD with institutionalising the Tata Administrative Service as a professional management cadre, a deliberate move to reduce reliance on family management and build a career path for executives inside the conglomerate that anticipated the later Indian debate on promoter-versus-professional leadership.

The group's own heritage account frames Jamsetji's operating philosophy as an explicit pairing of commercial discipline with obligation to the community, a stance later formalised in the trust structure that holds the bulk of Tata Sons' equity and routes dividends toward philanthropic ends.

In a late-October 2020 address, Jack Ma characterized the incumbent financial-system architecture as an inheritance from the industrial era, positioning Ant Group's technology against what he framed as outdated regulatory scaffolding — remarks widely reported as a proximate context for the subsequent IPO suspension.

Zhong Shanshan's Nongfu Spring sep 24, 2020 · Nongfu Spring founder Zhong Shanshan had a paper net worth of $57.2 billion, to become China's wealthiest man on paper, Forbes.

Pinduoduo's founder attributed the company's rapid growth to serving demand from Chinese consumers that incumbent e-commerce platforms had left unaddressed, framing the platform's rise as a market-gap story rather than a pure price-discount story.

Patel's consistent refusal to take the company public for decades, and his retention of family ownership, made Nirma an early Indian example of a consumer-goods business that achieved national scale without ceding promoter equity — a contrast with the IPO-driven funding model of later consumer groups.

Jio's Welcome Offer of September 5 to December 31, 2016 bundled free voice calls, 100 daily SMS, 4 GB of daily data at 4G speeds and a complimentary SIM — entirely for free. Telecom policy researcher Deepak Maheshwari described industry reaction as shock and awe: pricing that exceeded even competitors' worst-case imaginations, opening a window into a deliberately disorienting launch playbook.

January 2021 Dear Fellow Investor, This is the third annual letter to owners of the Fundsmith Sustainable Equity Fund (‘FSEF’, ‘Fund’). The table below shows performance figures for the last calendar year and the cumulative and annualised performance since inception on 1st November 2017 and various comparators. % Total Return 1st Jan to Inception to 31st Dec 2020 Sharpe Sortino 31st Dec 2020 Cumulative Annualised ratio5 ratio5 Fundsmith Sustainable Equity Fund1 +18.0 +53.3 +14.4 0.92 0.78 Equities2 +12.3 +35.9 +10.2 0.53 0.49 UK Bonds3 +4.6 +11.0 +3.4 n/a n/a Cash4 +0.3 +1.9 +0.6 n/a n/a 1 I Class Acc shares, net of fees, priced at noon UK time, source: Fundsmith LLP 2 MSCI World Index, £ net, priced at US market close, source: Bloomberg 3 Bloomberg/Barclays Bond Indices UK Gov. 5–10 yr., source: Bloomberg 4 3 Month £ LIBOR Interest Rate, source: Bloomberg 5 Sharpe & Sortino ratios are since inception on 1.11.17 to 31.12.20, source: Financial Express Analytics The table shows the performance of the I Class Accumulation shares which rose by +18.0% in 2020 and compares with a rise of +12.3% for the MSCI World Index with dividends reinvested. However, I realise that many or indeed most of our investors do not use these as the natural comparator for their investments. Those of you who are based in the UK may look to the FTSE 100 Index (‘FTSE 100’) as the yardstick for measuring your investments and may hold funds which are benchmarked to this index and often hug it. The FTSE

Buffett wrote that Berkshire's resilience during the pandemic came from the diversity of its non-insurance operating businesses, each of which had its own demand cycle but whose aggregate cash flow was durable across most scenarios. He argued that the lesson of the period was the value of owning businesses whose balance sheets and cash flows could absorb shocks without requiring external capital, and that Berkshire's conservative capital structure was itself a competitive advantage in a crisis.

On resilience and the value of a conservative balance sheet.

Zhong dropped out of primary school during the Cultural Revolution and worked in construction, later became a journalist at the Zhejiang Daily, quit in 1988 to move to Hainan where he sold mushrooms, prawns, and turtles, and worked as a sales agent at the Wahaha beverage company before founding his own bottled-water company.

Dalio's economic machine rests on a deliberately small number of parts. The economy seems complex but is underpinned by simple transactions driven by human nature and repeated zillions of times; understand how transactions work, he argues, and you understand the whole economy. All buyers and sellers making transactions constitute a market, in wheat or stocks or steel or oil, and the combination of those sub-markets is the entire economy. Money and credit account for total spending and are the key drivers. Credit is the most important part: lenders create it out of thin air whenever they believe a borrower will repay the principal with interest, and at the video's release roughly 50 trillion of the 53 trillion dollars in the U.S. economy was credit rather than real money. One person's spending is another person's income, so credit sets off a self-reinforcing loop of rising incomes, rising credibility with lenders, and more borrowing. The central bank, distinct from the central government, controls money and credit through interest rates and printing.

In February 2020 Yale's student newspaper, the Yale Daily News, reported that chief investment officer David Swensen had broken a long public silence to address the question of divestment in a written communication to the Yale community. The post, framed as a defence of the university's guidelines for ethical investing, set out the Investments Office's view that engagement with portfolio companies was a more effective lever for change than the outright sale of their securities. The student paper noted that Swensen had rarely engaged on the record with student journalists and that the post was the cleanest articulation the office had given of the principles by which it decided whether and how to respond to calls for divestment from the portfolio. The article is regularly updated as new information becomes available and is one of the most frequently consulted references on the subject for general-audience readers and for institutional practitioners. The article walked through the substance of Swensen's argument, which was that the decision to divest was a decision to give up the leverage that came with ownership and that such a decision should only be taken when the case for change through engagement had been exhausted. He wrote that the office applied a consistent framework across the portfolio, that the framework was designed to ensure that the university's investment decisions were made on the merits of the investment rather than on the political preferences of the moment, and that the office published its ethical-investing guidelines so that the broader community could see the framework in operation. The student paper framed the post as an attempt to bring transparency to a process that had historically been opaque to the broader community and to the activist community in particular. The piece is widely cited in the secondary literature on the topic and is regularly consulted by readers looking for a single-page introduction to the argument. The piece closed with the political context, noting that the divestment debate had been particularly active at Yale in the years preceding the post and that the student paper had been a venue for both sides of the argument. The article is paired in the Yale Daily News archive with a longer-running series of pieces on the Investments Office and on the broader question of how universities should respond to calls for divestment, and it is one of the few on-record statements by Swensen himself on the question of how ethical considerations interact with the investment process. The piece is widely cited in the literature on university endowment governance and on the ethics of institutional investment as a case study in how a major office has responded to activist pressure. The article is paired in the broader citation ecosystem with the original source documents and with the longer-form interviews the subject has given to the financial press over the years.

A widely viewed documentary piece published on YouTube under the title The Seven Billion Dollar Trade That Broke Britain reconstructs the September 1992 operation in which George Soros and Stanley Druckenmiller bet that the British pound would be forced out of the European Exchange Rate Mechanism. The film uses archival footage, interviews with currency traders active on the desk at the time, and reconstructions of the Bank of England's internal deliberations to walk the viewer through the trade. It treats the operation as a collaborative decision, with Druckenmiller credited with the original thesis and Soros with the call to take the position to a size of roughly seven billion dollars in short exposure to the pound. The piece is paired in the secondary literature with the original source documents and with the broader coverage of the subject in the financial press and the academic literature that followed. The documentary stresses the asymmetry that made the trade possible. The peg committed the Bank of England to defend the pound at a level the market considered unsustainable, and the cost of defence was a level of domestic interest rates the British government could not politically tolerate. The film uses interviews with former Treasury officials to show how the dilemma was understood in real time, and how the macro hedge fund community read the hesitation as a sell signal. The documentary argues that the size of the Quantum position mattered because it forced the Bank's hand earlier than a slower market pressure would have, and that the day of the devaluation was in part a function of how aggressively the trade had been structured. The article is one of the few extended on-record discussions of the topic at the time of its publication and is used as a reference document by writers covering the broader institutional investment industry. The film closes with the longer-term consequences of the trade for British economic policy and for the reputation of macro hedge funds. The pound's exit from the mechanism allowed British interest rates to fall and arguably set up the long expansion that followed, a point the documentary stresses to balance the popular narrative that the trade was pure speculation. The film also notes the role of Druckenmiller in the post-mortem literature, particularly his public statements that the trade taught him to size opportunities of that quality without hesitation. The piece has been used in business-school classrooms as a case study in how policy pegs create tradable asymmetries and how the size of a position can itself be a cause of the outcome that the position was betting on. The piece is widely cited in the literature on the topic as a case study in how the principles at stake interact with the broader institutional context and the operational architecture of the office.

Ford's own corporate history dates the moving assembly line to 1913 at the Highland Park plant, after sustained experimentation with a movable line for assembling flywheel magnetos, a key component of the Model T electrical system. The breakthrough generalized: the assembly time for a complete Model T collapsed to roughly ninety minutes once the rope-and-pulley feed evolved into a simple moving chain mechanism. The very efficiency of the new process created a new problem. Workers who had once built an entire vehicle now performed only one or two repetitive tasks under strict timing, and they began leaving Ford for competitors where craftwork still survived. The corporate account presents this exodus as the proximate trigger for the five-dollar workday, framing it as a profit-sharing response that doubled daily wages and reversed the outflow of skilled labor. The assembly line and the wage shock arrived as a single industrial system.

The Congressional Research Service report on the taxation of carried interest provides the formal analytical framework that contextualizes the dispute between Renaissance Technologies and the Internal Revenue Service and that situates the dispute within the broader debate over the appropriate taxation of alternative-asset income. The report examines the treatment of income earned by principals of private equity and hedge fund partnerships, and the long-running debate over whether that income should be taxed at the rates applicable to long-term capital gains or at the higher rates applicable to ordinary income, with the choice between the two treatments having significant consequences for the after-tax returns of the principals and for the revenue collected by the Treasury. The report notes that the question has been the subject of repeated legislative attention over the past two decades and that the attention has intensified as the alternative-asset sector has grown in scale and as the public prominence of large payments to principals of successful funds has increased. The report explains that the underlying dispute centers on the characterization of income earned by the managers of investment partnerships in respect of their performance and on the question of whether that income should be treated as a return on capital or as compensation for services rendered, with the characterization having significant consequences for the rate at which the income is taxed. The Congressional Research Service notes that current law allows certain income to be characterized as long-term capital gains if the underlying holding period requirements are satisfied, and that proposals to revise this treatment have been advanced in successive Congresses and that the proposals have generally sought to require a longer holding period or to recharacterize the income as ordinary income altogether. The report observes that the debate has been intensified by the growth of the alternative-asset sector and by the public prominence of large payments to principals of successful funds and that the debate has become a recurring feature of the political agenda in the years following the financial crisis. The report also examines the basket option structure that was the subject of the Renaissance settlement, and notes that the Internal Revenue Service issued guidance in 2014 curtailing the use of such structures and that the guidance represented an effort to clarify the boundaries of acceptable tax structuring in the alternative-asset sector. The Congressional Research Service observes that the dispute over the retroactive application of that guidance was resolved through the settlement, with the principals of the firm agreeing to a payment covering the contested tax, the accumulated interest, and the penalties that the agency had asserted during the years of dispute and with the settlement creating a precedent that would inform the agency's approach to comparable structures in the future. The report closes by noting that the carried-interest question remains a subject of legislative attention, and that the underlying debate over the appropriate taxation of alternative-asset income continues to shape the regulatory environment of the sector and to influence the structural choices that firms make in organizing their activities.

The Rational Reminder podcast's 2020 interview with Gregory Zuckerman, author of The Man Who Solved the Market, examined the trajectory of Jim Simons and Renaissance Technologies based on Zuckerman's extensive reporting for the book and on the access he had been granted to former employees and to the documentary record of the firm's early years. The conversation probed the central puzzle of the firm's success, namely how a mathematician with no prior experience in finance had built one of the most successful investment vehicles in history and had done so in a domain that the conventional wisdom held could not be systematically modeled. Zuckerman argued that the answer lay less in any single breakthrough than in Simons's willingness to delegate research to other scientists and to build an institution capable of compounding small advantages over decades and of revising or replacing the specific edges as they decayed without losing the institutional capability that had produced them in the first place. The interview highlighted the iterative process by which the firm moved from early, partially discretionary strategies toward the fully systematic approach that defined the Medallion fund and that distinguished the firm from the partially systematic approaches that characterized many of its competitors and that limited the scale at which those competitors could operate. Zuckerman described the firm's growing reliance on short holding periods and on the exploitation of small regularities in market microstructure, and emphasized that the transition was the product of years of trial, error, and accumulated understanding of which classes of signal were robust enough to trade and which were merely artifacts of overfitting that would not survive the transition from backtest to live trading. The conversation underscored that the firm's success was built on the willingness to abandon strategies that did not generalize, rather than on loyalty to any single idea, and on the institutional willingness to accept that the models would have to be revised or replaced as the underlying regularities shifted. The podcast also examined the structural choices that distinguished Renaissance from peers, including the restriction of the Medallion fund largely to internal capital and the construction of an internal market for shares in the fund among employees that allowed the firm to retain its scientists and to align their interests with the long-term performance of the flagship vehicle. Zuckerman argued that these choices were as important to the firm's success as the models themselves, since they allowed the firm to retain its scientists and to operate without the redemption pressure that constrained external-capital funds and that periodically forced less structurally protected firms to liquidate positions at unfavorable prices. The interview closed by observing that the Renaissance story was best understood as a decades-long institutional experiment in applying the methods of scientific research to the problem of financial returns and that the experiment had produced results that had yet to be replicated by competitors despite the close attention they had devoted to the firm's approach and despite the resources they had committed to the attempt at replication.

Wang opened the 2020 annual results briefing against the backdrop of a year in which the Chinese passenger vehicle market had been disrupted by the COVID pandemic and in which the Chinese government had accelerated the new energy vehicle policy support. Management told analysts that net profit had grown to approximately RMB 4.28 billion on revenue of approximately RMB 156.6 billion, with the new energy vehicle business contributing the majority of revenue growth and the medical mask and the consumer electronics businesses providing incremental support during the pandemic response. Wang walked analysts through the blade battery technology launch, indicating that the new cell format had been validated through extensive safety testing, that the technology was being deployed across the BYD passenger model range and that the structural advantage of the blade battery was the inherent safety of the lithium iron phosphate chemistry combined with the space efficiency of the long blade format. He flagged that the Han EV, the first model to deploy the blade battery, had been launched during the year and that the early demand response had positioned the model as a credible competitor to the global premium EV brands in the Chinese market. On the Q&A, analysts pressed on whether BYD would spin off the battery business as a separate listed entity. Wang responded that the captive battery supply chain remained a structural advantage of the BYD franchise and that the Company intended to continue to deploy the battery technology across the captive model range while exploring selective external supply opportunities. He also defended the strategy of being an integrated manufacturer rather than a specialist EV player, arguing that the vertical integration provided the cost discipline and the technology validation that were the central advantages of the BYD franchise. The briefing closed with management reiterating the long-term ambition of being the world's largest manufacturer of new energy vehicles and the leading manufacturer of new energy solutions, and with the Company committing to invest aggressively in the blade battery technology, the DM-i hybrid platform and the new energy commercial vehicle franchises through the cycle.

Buffett opened the 2020 annual meeting in an empty Omaha arena, with Charlie Munger absent in person and the meeting conducted by video link against the backdrop of the COVID-driven market collapse of March 2020. Buffett told shareholders that Berkshire had deployed approximately $5 billion into the public equity market during the March collapse, had sold off approximately $4 billion of equity holdings to fund the deployment and had taken a $9.8 billion writedown on the Kraft Heinz investment reflecting the structural pressure on the packaged-food franchise. Buffett walked shareholders through the broader context, acknowledging that the COVID-driven collapse in airline demand had led Berkshire to sell the entirety of its airline equity positions - the holdings in Delta, United, American and Southwest - during April. He framed the airline sale as a recognition that the underlying business model had been changed by the pandemic in ways that were not yet visible, and that the disciplined response was to exit rather than to attempt to time a recovery that he had no edge in forecasting. On the Q&A, shareholders pressed on whether Berkshire should be deploying more aggressively into the post-COVID collapse. Buffett responded that Berkshire had not seen opportunities at the scale and the terms available in 2008, that the Federal Reserve's rapid intervention had effectively crowded out the natural buyers of crisis capital and that the Company would continue to carry a very large cash position until attractive opportunities emerged. He also defended the decision to sell the airline positions, arguing that the underlying industry economics had been structurally weak for the entire history of commercial aviation and that the pandemic had crystallised the structural disadvantage. The meeting closed with Buffett reiterating the long-term framework of compounding intrinsic value per share, anchored on the insurance float, the wholly-owned operating businesses and the discipline of carrying large cash reserves through bull markets to deploy through panics, and signalling that the succession planning for the CEO role was being executed against the long-stated plan with Greg Abel as the designated successor.

CEO Michael Wirth opened the Q2 2020 review against the backdrop of the COVID-driven collapse in global oil demand during the second quarter, when WTI crude briefly traded at negative $37 per barrel in April. Management told the call that the Company had cut the 2020 capital program by approximately twenty percent to roughly $14 billion and that the operating expense run-rate had been reduced by approximately $1.4 billion on an annualised basis, while the common dividend had been raised for the thirty-third consecutive year. CFO Pierre Breber walked analysts through the capital allocation framework, indicating that the Company intended to defend the dividend through the downturn without issuing equity, fund the reduced capital program from operating cash flow and the balance sheet, and use the asset divestiture program to bridge the gap. He flagged that the Company's balance sheet had been built deliberately for environments like the COVID-driven collapse, with net debt at the bottom of the peer group range coming into the downturn. On the Q&A, analysts pressed on whether the Company would consider cutting the dividend as several peers had signalled. Wirth responded that the Company had committed to the dividend through the cycle and that the long-cycle project portfolio entering service through 2021 and 2022, especially the Permian unconventional and the Gulf of Mexico deepwater projects, would provide the cash flow growth to support the trajectory of dividend growth. He also pushed back on the suggestion that the Permian unconventional growth ambition should be moderated, arguing that the Company's position in the basin was the structural driver of long-term production growth. The call closed with management reaffirming the long-term framework of between three and four percent annual production growth into the mid-decade, anchored on the Permian unconventional, the Gulf of Mexico deepwater and the recently acquired Noble Energy portfolio in the Eastern Mediterranean, and committing to return essentially all of the operating cash flow net of capex to shareholders through the cycle once the price environment normalised.

Moynihan opened the Q2 2020 review by reporting net income of $3.5 billion despite absorbing roughly $4.2 billion of incremental credit loss provisions under the CECL accounting regime. Management told the call that the consumer deposit franchise had grown balances by more than twenty percent year over year, that the Paycheck Protection Program originations had reached approximately $32 billion across roughly 300,000 small-business borrowers and that the trading business had reported the highest quarterly revenue in nearly a decade on the volatility surge in March and April. CFO Paul Donofrio walked analysts through the reserve build, explaining that approximately $2.5 billion of the provision had been driven by the macroeconomic forecast adjustments under CECL rather than by actual delinquency migration. He flagged that net charge-offs had remained below pre-pandemic run-rate levels, that the loan deferral balances in the consumer and commercial books were beginning to roll off and that the Bank had continued to hold capital well above the regulatory minima, allowing the common dividend to be maintained even while share repurchases had been suspended. On the Q&A, analysts pressed on whether the Bank would need to build reserves further through the back half. Moynihan responded that the second-quarter build had been sized to reflect a macroeconomic baseline consistent with the consensus forecast and that subsequent builds would depend on whether the actual delinquency migration tracked the forecast. He also defended the decision to maintain the dividend, arguing that the Bank's earnings power through the cycle supported the distribution and that the Federal Reserve's guidance to suspend buybacks was the more meaningful constraint on capital return during the year. The call closed with management framing the next phase as a measured resumption of capital return subject to Federal Reserve guidance, while continuing to invest in the consumer mobile banking platform that had seen login activity grow more than twenty percent during the quarter and to support the broader Federal Reserve lending facilities as the standing balance sheet permitted.

Chenault's successor, Stephen Squeri, opened the Q2 2020 review by reporting that second-quarter revenues net of interest expense had fallen nearly thirty percent year over year, reflecting the collapse of travel-and-entertainment spend that historically accounted for a disproportionate share of Amex billings. Management told the call that the small-business and consumer services segments had partially offset the T&E collapse, and that the Company had moved aggressively during the quarter to defer marketing, reduce operating expenses and tighten underwriting on new accounts and on existing credit lines. CFO Jeff Campbell walked analysts through the $1.5 billion pre-tax credit provision taken during the quarter, of which approximately $1.2 billion represented reserve builds under the new CECL accounting regime. He flagged that the Company had suspended share repurchases during the quarter, retained capital to absorb the forward expected losses and continued to pay the common dividend, but would not restart buybacks until visibility on credit losses and T&E recovery improved. On the Q&A, analysts pressed on whether the COVID shock would structurally compress the T&E franchise in the way the post-9/11 shock had compressed corporate travel. Squeri argued that the early data from the May and June reopenings, especially the small-business and consumer services segments, suggested a faster recovery path than the post-9/11 trajectory and that the Company's premium Card Member cohort was holding spending better than the broader consumer. He also highlighted that the underlying merchant network had not contracted during the crisis, with the acceptance footprint expanding on net. The call closed with management declining to provide formal full-year guidance given the unresolved visibility on the pandemic path, but committing to a near-term priority of protecting the dividend, preserving capital and protecting the marketing investment behind the premium brand once the cycle turned.

At the 2020 Daily Journal meeting, held as the COVID crash was still unfolding, Munger reiterated his hold-not-sell philosophy by reference to Costco. He was, by his own description, no good at exits. He didn't even like looking for exits. He was looking for holds. He told the audience to think of the pleasure he had got from watching Costco march ahead - such an utter meritocracy, doing so well - and asked why on earth he would trade that experience for a series of transactions. He would be less rich, not more, after taxes. The second place was a much less satisfactory life than rooting for people he liked and admired. He condensed the philosophy into a single line that became one of his most quoted precepts: find Costco's, not good exits. The grammar was deliberate. The hard work was upstream, in identifying the kind of business that compounded intrinsic value over decades - a Costco, a See's, a Coca-Cola - and then holding it. Once you owned something like that, the sell decision was a different and far less important question. The trap was the investor who kept trying to find clever exits from positions he had never properly chosen in the first place. Munger paired the holding discipline with a spending discipline. The secret of his and Buffett's early compounding, he said, was controlling costs and living simply. They had tiny little bits of money and they always underspent their incomes and invested the difference. You live long enough, Munger told the room, you end up rich. It is not very complicated. The line was characteristically Munger: take an obvious truth, refuse to dress it up, and dare the audience to argue with it.

The Yale News article emphasized the twenty-year return figure - 9.9 percent per annum net of spending - as evidence of the compounding power of the endowment model over a full market cycle. The twenty-year period ending in June 2020 covered the dot-com crash, the 2008 financial crisis, the post-2008 liquidity regime, and the 2020 COVID crash. The Yale endowment's return through this period exceeded broad-market benchmarks and the median institutional endowment, which the article attributed to the structural features of the Yale Model. The article also placed the COVID response in the context of Swensen's framework for crisis management. The discipline of holding the portfolio through the 2020 drawdown, rather than rebalancing into cash, reflected the long-horizon orientation that allows the endowment to capture the equity-risk premium that shorter-horizon investors are forced to give up during crises. The Yale Investments Office, the article noted, did not adjust the strategic asset allocation in response to the COVID drawdown - the underlying portfolio construction was designed to be held through such cycles rather than traded around them. The article closed on the institutional significance of the endowment's performance. The distributions from the endowment now fund approximately one-third of the university's operating budget, and the long-term outperformance has materially expanded Yale's academic capacity over the period of Swensen's tenure. The Yale News reporting framed the 2020 fiscal year not as an exceptional performance but as one more year of the patient compounding that the endowment model is designed to produce - the year-to-year volatility of returns is the cost of the asset-class allocations that produce the long-cycle outperformance.

The Economic Club of New York – Stanley Druckenmiller – May 12, 2020 Page 1 Introduction President Barbara Van Allen Welcome everyone. This is Barbara Van Allen, President of The Economic Club. Thank you for joining us. We’re going to get started in approximately a minute and a half. Thank you. Chairman Marie-Josée Kravis: Good afternoon everyone. I’m Marie-Josée Kravis, the Chair of The Economic Club of New York and a Senior Fellow at The Hudson Institute. And I’m happy to welcome all of you here this afternoon. We feel at the Economic Club that we have a special responsibility in this time of crisis to try to bring to you as much relevant information – and I say information, not noise – on the social, political, economic implications of the coronavirus. And I’m very happy to welcome members of The Economic Clubs of Chicago and Washington who are joining us today as well as those from the New York Women’s Forum. Thank you all. I hope you’re safe and well and so are your families. And before we begin, I really want to thank all of the front-line workers who are making all of our lives so much better, safer, and easier – the healthcare workers, other front- line workers, people working in grocery stores, truckers, in various public positions that really do make our lives much easier. And I want to thank you and hope that you are all

Munger used the 2020 meeting, with markets still in panic from the COVID crash, to restate his views on what works in a crisis. He had been through many of them. The way he operated in any crisis, he said, was the way he operated out of one: underspend your income, invest the difference patiently, do not panic, and stay in the few things you genuinely understand. He was telling the room not to confuse activity with courage. The heroic move in a crash is rarely to swing; it is usually to refuse to swing badly. He was unsentimental about the price of panic. He told the audience that the people who sold into the crash were going to be the people who paid the tax of being wrong about timing forever. The investor who held great businesses through the decline, who refused to mark his mental portfolio to the panic price, was the investor who kept his options open. He pointedly did not recommend buying the dip aggressively, because that, too, was a form of panic - just panic in the other direction. The discipline was to keep the steady habits when the tape was screaming at you. He closed the COVID thought with a Costco callback. The right thing in a crash, in Munger's view, was to have already chosen your Costco's before the crash arrived, so that when the world fell apart you did not have to make new decisions under pressure. The work was done in the calm years; the harvest was reaped in the violent ones. That was the actual content of patience, not the popular image of patient suffering but the engineering reality of pre-positioning.

Ford's published reasoning for the five-dollar workday framed the move as a redistribution of profit downward rather than as charity or as a labor tactic. The corporate account has Ford stating that the company preferred making twenty-five thousand men prosperous and contented to enriching a handful of slave drivers inside its own establishment. The five-dollar day, on this telling, was also a market-creation instrument: by paying workers enough to afford the cars they were building, Ford turned his own payroll into a captive customer base for the Model T. The move was widely expected to bankrupt the company; the opposite occurred. Mechanics from across the country streamed into Detroit chasing the wage, the labor turnover that had followed the moving line's introduction reversed, and the model of mass production financed by mass consumption became the template Henry Ford exported to the world.

The machine runs on two debt cycles stacked on top of productivity growth. Productivity matters in the long run and credit in the short run; productivity growth does not fluctuate much, so debt is what drives the big economic swings. Debt lets an economy consume more than it produces when the borrowing happens and less than it produces when the bills come due. Financing a consumption purchase like a television is bad debt; financing a tractor that generates income to repay the loan is good debt, and the peripheral European borrowing of the 2010s showed what happens when credit funds consumption that cannot be paid back. The short-term debt cycle, managed by the central bank raising rates to choke off inflation and cutting them to end recessions, lasts about five to eight years and repeats for decades, each peak and trough higher than the last, accumulating more growth and more debt. The long-term debt cycle runs 75 to 100 years, and most people never see either cycle clearly because they live day to day, week to week.

In 1999, Nongfu Spring stopped removing natural minerals from its water, a marketing move that helped differentiate it in a market where distilled water was the norm, and helped the company grow into China's largest bottled-water maker, surpassing Coca-Cola, Watsons, and Pepsi in packaged beverage sales in China.

100 delivered a total return of -11.5% in 2020 so our Fund outperformed this by a margin of 29.5 percentage points. For the year the top five contributors to the Fund’s performance were: PayPal +4.5% IDEXX +3.2% Microsoft +2.4% Starbucks +1.8% Intuit +1.8% Microsoft and Intuit are making their third consecutive appearance whilst IDEXX is putting in an appearance for the second time. Someone once said that no one ever got poor by taking profits. This may be true but I doubt they got very rich by this approach either. Starbucks, which we discuss below, was purchased after sharp falls in March. The bottom five were: Marriott International -1.0% Sage -0.9% Amadeus -0.8% Intertek -0.4% Becton Dickinson -0.3% We hardly need to discuss the reasons for the poor performance of Amadeus and Marriott International. Airline and travel reservations and hotel management have not been happy places to be in the past year, although it is worth noting nowhere near as bad as investing in actual airlines or hotels. Amadeus’s share price fall of -13.5% in 2020 compares with a drop of -27.9% for the Bloomberg World Airlines Index. Marriott’s share price fall of -15.0% compares with a drop of - 35.1% for the Dow Jones US Hotel and Lodging REIT Index. This illustrates the virtues of Amadeus’s and Marriott’s business models in contrast to the industries they serve.

The company's own account emphasises that the entry into the cement and soda-ash businesses was treated as a continuation of the vertical-integration logic that had worked in detergents, not as a diversification, framing upstream capacity as the defence of the downstream price point.

At the time of his 2020 CEO transition, Huang was valued at $45.4 billion by Forbes, briefly overtaking Alibaba's Jack Ma in net worth while Pinduoduo surpassed JD.com to become China's second-largest e-commerce platform by market capitalization.

Reuters reported that the State Council's general office prepared a report on public reaction to Ma's speech that was shared with senior leaders including President Xi Jinping, and that the reaction findings were largely negative, prompting officials to call for a comprehensive investigation into Ant's business practices;.

Tata's telling emphasises that the philanthropic structure for which the group is now known was not separable from the industrial ambition: wealth was created precisely to be redeployed into the institutions India lacked, an unusually explicit statement of purpose for a 19th-century promoter.

His long advocacy for aviation culminated in Air India International in 1948, a long-haul carrier that established India's early presence in international air transport before the state took full control of the airline in the 1950s.

The Hindu notes Kohli joined Tata Electric Co. in 1951 and helped set up its load despatching system, becoming a director of Tata Electric in 1970 — utility-side experience that directly preceded his pivot to building TCS as a software-services vehicle for the Tata Group and the country.

Ambani had set a one-year target of 100 million customers at launch; Jio crossed that mark in just 170 days. The pace reflected both demand for free unlimited 4G and the absence of any meaningful price floor from incumbents, who were unprepared to defend subscriber share against a well-funded attacker willing to bleed cash for years.

The Economic Club of New York – Stanley Druckenmiller – May 12, 2020 Page 2 safe and so are your families. It’s my pleasure today to welcome, for a repeat performance, Stan Druckenmiller and Scott Bessent. Stan Druckenmiller is the Chairman and Chief Executive Officer of Duquesne Family Office. Stan founded Duquesne Capital Management in 1981 which he ran until he closed the firm at the end of 2010. And from 1988 to 2000, he was a Managing Director at Soros Fund Management. Stan is very active as a philanthropist. He’s the Chairman of the Board of the Harlem Children’s Zone, the Chairman of Blue Meridian Partners, a board member at Memorial Sloan Kettering and the Environmental Defense Fund. And he’s a member of the Investment Committee of Bowdoin College and a co-founder and board member of Kasparov Chess Foundation. The format today is going to be a conversation and we’re very fortunate to have Scott Bessent, the Chief Executive Officer and Chief Investment Officer for Key Square Group, and he will lead the conversation. Scott was Chief Investment Officer for Soros Fund Management, the investment vehicle for the Soros family and their foundations from 2011 to 2015. From 2006 to 2010, Scott was an adjunct professor at Yale University where he taught economic history. Scott is a frequent speaker on economic and investment panels and we are thrilled to have him with us today.

TCS said in a statement that Kohli joined the company in 1969 at JRD Tata's behest, first pivoting into management consultancy and then, over the next two decades, into software development — explicitly describing a deliberate strategy of staged evolution rather than a single founding bet on software exports.

A deleveraging, the endgame of the long-term debt cycle, comes in beautiful and ugly versions. The beautiful deleveraging keeps debts declining relative to income growth while real growth stays positive and inflation stays contained, achieved by balancing cutting spending, reducing debt, transferring wealth, and printing money. Printing money will not cause inflation so long as it offsets the decrease in credit without exceeding it; print too much and the result is Germany in the 1920s, where 160 marks traded for one dollar. The ugly deleveraging follows when income growth fails to outpace the rate of interest on accumulated debt. Even the successful reflation is slow: the recovery phase, when debt burdens fall and economic activity resumes as usual, runs roughly seven to ten years, ten for the Great Depression and seven for the global financial crisis. Dalio closes with three rules of thumb: never let debt rise faster than income; never let income rise faster than productivity, or you become uncompetitive; and do all you can to raise productivity, because in the long run that is what matters most.

As of 2025, Zhong had a net worth of $77.5 billion and ranked among the top 25 on the Bloomberg Billionaires Index, derived mainly from his stakes in the Chinese beverage and pharmaceutical industries (including majority ownership of Beijing Wantai Biological Pharmacy Enterprise).

Ma delivered public remarks critical of Chinese financial regulation and banking practices at a Shanghai summit on October 24, 2020, shortly before Ant Group's planned IPO.

Industry-wide average revenue per user collapsed from roughly $2 in 2016 to about half that by 2019, squeezing every operator's unit economics. The shock triggered exits, mergers and fire-sales: Bharti Airtel sold non-core assets and exited parts of East Africa in 2017, while Vodafone India and Idea Cellular merged in 2018 to combine regional strengths into a pan-Indian operator capable of resisting Jio.

However, in both cases whilst they face a difficult situation, we are pleased that management has spent its time and effort managing liquidity and costs in an effort to ensure that they survive these events rather than pointlessly speculating about the likely timescale and course of recovery. In both cases we believe that they should not only survive but also strengthen their competitive position. We sold our stakes in Clorox and Reckitt Benckiser and one as yet undisclosed position and purchased stakes in Starbucks, Colgate, Zoetis, Procter & Gamble and an as yet undisclosed position.purchase

Stepped down as CEO in July 2020, transitioning to chairman and handing operational control to Chen Lei.

The Yale News coverage of the 2020 fiscal year return also addressed the long-run distribution of the endowment across asset classes. The article noted the endowment's heavy allocation to alternative assets - private equity, venture capital, real assets, and absolute-return strategies - and explained that the COVID drawdown in the public-market portions of the portfolio was substantially buffered by the lagged valuation of the private market positions. This buffering, the article noted, is the operational manifestation of the diversification principle that underlies the Yale Model. The article also described the operational discipline of the office during the COVID period. With staff working remotely and the public market portions of the portfolio showing large mark-to-market drawdowns in March 2020, the office maintained its commitment schedule to private market partnerships, continued to evaluate new commitments to existing and new general partners, and refrained from any tactical reduction of the strategic asset allocation. The discipline reflected the long-horizon framework: the office's job is to maintain the strategic allocation through cycles, not to time them. Yale News framed the 2020 fiscal year as a confirmation of the model's underlying thesis. The endowment had been criticized in some quarters after the 2008 drawdown for its heavy allocation to illiquid assets, but the 2020 fiscal year demonstrated that the diversification across asset classes and the patience to hold through drawdowns had produced a portfolio whose long-cycle returns continued to exceed broad-market benchmarks while its drawdown profile was more forgiving. The article noted that the endowment model's strength is not in any single year's return but in the compounding over full market cycles.

The same account credits Jamsetji with introducing employee benefits — pension, accident compensation, schooling for workers' children — that were uncommon in Indian industry of the period, framing welfare provisions as part of the operating system rather than charity.

increased quantities of household cleaning products, personal cleaning products and OTC medicines. We felt that in both cases the ratings achieved did not reflect the pedestrian nature of these businesses in more normal circumstances or the issues they face which may come back into focus if or when the COVID related boost fades. Moreover, at the same time as these two stocks were enjoying an unusually good performance, Starbucks, which we admire, saw share price falls of over 40% at the height of the panic over COVID. They are probably familiar to you as the world’s leading coffee shop brand. Starbucks has high returns on capital and a good growth rate — two characteristics which we seek. Whilst it is easy to see the challenge to the lockdowns for Starbucks’s urban outlets which partly rely on seating and coffee collected on the way to the office, this is far from their only format. The sometimes spectacular queues and resulting traffic jams at Starbucks drive-through outlets both illustrate another format and testify to the continued loyalty to the brand as does the rise in loyalty club members in 2020. During this period Starbucks’s main competitor in its second largest market — Luckin Coffee in China — was exposed as a fraud in yet another illustration of the rule that it is only when the tide goes out that you find out who has been swimming naked. After the COVID lockdowns we also purchased a stake in Colgate- Palmolive, Procter & Gamble and Zoetis.

Heritage materials stress that he treated his three large bets — steel, power, the university — as a single connected programme of industrial self-reliance, not as unrelated ventures, which is the conceptual root of the Tata group's later conglomerate logic.

Nongfu Spring grew into China's largest bottled-water maker and one of the world's largest beverage companies; Zhong's net worth reached an estimated $77.5 billion as of 2025.

New draft rules for online micro-lending were issued by the Chinese central bank and other regulators around the same period, which CNBC reported could directly affect Ant Group's business model; Reuters separately reported, based on anonymous sources, that senior officials including Vice Premier Liu He directed regulators to review Ant's operations following Ma's remarks.

Most striking was the fraternal collision: Mukesh's Jio priced younger brother Anil's Reliance Communications out of the market and ultimately bought it out. Anil publicly framed the carnage as the wireless sector's natural consolidation, telling media that the industry 'is not for 10 players to enjoy — this is for two or three or four players to enjoy.'

TCS credited Kohli with helping the organisation 'navigate multiple technology waves over two-and-a-half decades by continually investing in people and staying relevant to customers' — a phrase that frames the TCS playbook as continuous re-skilling against recurring technology shifts rather than any single product bet.

The Economic Club of New York – Stanley Druckenmiller – May 12, 2020 Page 3 Just to remind everyone, the conversation is on the record and there are, I’m sure, some media connected to this webinar. We will end promptly at 4:45. And any questions that were sent to the Club from members have been shared with Scott in advance. So with no further ado, Scott, I turn it to you. Conversation with Stanley Druckenmiller SCOTT BESSENT: Marie-Josée, thank you very much. And I want to really congratulate you and Barbara for the programming during this time. Of all the organizations I’m part of, it’s been the most nourishing and you’ve adapted the quickest, so well done. CHAIRMAN MARIE-JOSÉE KRAVIS: Thank you. SCOTT BESSENT: So, Stan, looking at the stock markets, you wouldn’t know that much has happened since we were at The Economic Club of New York 11 months ago. The S&P is 6 ½% higher. Nasdaq-100 is 33% higher. Gold is 28% higher. The dollar is 3% higher. Now, in fixed income it tells a different story. Fed funds are down 225 basis points and ten-year yields are down 135. But with all the coronavirus, the news that’s happened since January, how can this be?

The Economic Club of New York – Stanley Druckenmiller – May 12, 2020 Page 4 STANLEY DRUCKENMILLER: Thank you Scott. And thank you Marie-Josée and it’s great to be here with everyone. And I agree with Scott’s comments on the wonderful job you’ve been doing. Well, hindsight is wonderful, but despite what looks like a very strange reaction to the events over the last 12 months, it’s actually very consistent with market history. And how can I say that? A year ago, if you remember, Donald Trump had just turned up the tariff dial dramatically. Acute quantitative tightening had just ended. There was no sign of quantitative easing. They had made their last rate hike in December and supposedly going forward we were neutral. The estimate for the S&P earnings this year, so ‘20, was $175. It’s now $125. And the S&P earnings estimate for next year was $193. It’s now $161. But there’s one little addendum in there that I’d like to put in and that’s that since that time the Fed has taken fed funds from 225 basis points to zero and they’ve done, they’ve increased their balance sheet from $4 trillion to $8 trillion. Now, if there’s one thing I’ve been quoted more than anything since I became a talking head, when I closed down Duquesne Capital Management, it’s a comment that I’ve consistently repeated that over the intermediate term liquidity moves markets much, much more than earnings do.from

Jio evaded the 90-day promotional ceiling set by regulators by rebranding the Welcome Offer as the 'Happy New Year Offer' in December 2016, extending cutthroat free pricing into 2017. Combined with the appearance of Prime Minister Modi's face in a Jio ad in major English dailies, the moves drew accusations that the company was using regulatory-elasticity and political proximity to accelerate toward monopoly.

Kohli stepped down as TCS CEO in 1996 and continued to promote technology to solve India's social problems — a transition the obituary frames as the moment his personal mission shifted from commercial IT-services exports to public-interest computing in adult literacy, water purification and regional-language tools.

Colgate-Palmolive is the leader in oral care and liquid soap and has a speciality pet food business (Hills Scientific). Procter & Gamble is the world’s largest Fast Moving Consumer Goods (‘FMCG’) business with leading positons in laundry and cleaning products, baby and feminine care, beauty and grooming. Zoetis is the leading animal drug company which is also developing a business in diagnostic testing. We continue to apply a simple three step investment strategy: • Buy good companies • Don’t overpay • Do nothing I will review how we are doing against each of those in turn. As usual we seek to give some insight into the first and most important of these — whether we own good companies — by giving you the following table which shows what Fundsmith would be like if instead of being a fund it was a company and accounted for the stakes which it owns in the portfolio on a ‘look through’ basis, and compares this with the market, in this case the FTSE 100 and the S&P 500 Index (‘S&P 500’). This shows you how the portfolio compares with the major indices and how it has evolved over time.

The Economic Club of New York – Stanley Druckenmiller – May 12, 2020 Page 5 225 basis points on the short end to zero. And more importantly, the Fed has increased their balance sheet from $4 trillion to $8 trillion. QE1 was bullish for stocks. QE2 was bullish for stocks. QE3 was bullish for stocks. And QT, the day it started, stocks from that point on dropped 20% in four months. The gold is obviously consistent, when the Fed increases their balance sheet that much and you have the kind of government intervention you’ve had. The Nasdaq at first looked strange but it’s not strange by hindsight. The Nasdaq at the time was the leading group because we had Fang and some other companies that looked like they were impervious – we talked about them last year – to low nominal growth and would continue to go on. And by some sort of weird coincidence or happy circumstance if you were in that leadership group, they either are not bothered by the coronavirus because most of their earnings are from remote stuff anyway or (b) they’re a beneficiary of it. So their earnings expectation – while the S&P has gone from $175 to $125 this year – are not down and they’re being judged against a much lower interest rate structure with a lot more liquidity expansion. So, I know it sounds weird on the surface but if you look underneath it’s actually quite a logical response of the markets in hindsight.the

Tata Sons chairman N. Chandrasekaran, in a statement, said Kohli led innovations 'in areas far-ranging from adult literacy, water purification, software engineering, software automation, complex-systems and cybernetics' — a breadth of curiosity that the obituary presents as the hallmark of his post-CEO decades.

By late 2019 Jio's ARPU had fallen for seven consecutive quarters to Rs 128.4 per user, and rivals, in coordination through the Cellular Operators Association of India, agreed to lift tariffs collectively. The price war had reached a stalemate: Jio had acquired customers but at a unit economics that left its own debt, by some estimates, unmanageable absent future monetization.

Year ended Fundsmith Sustainable Equity Fund Portfolio S&P FTSE 2017 2018 2019 2020 2020 2020 ROCE 28% 29% 29% 23% 11% 10% Gross margin 63% 65% 65% 61% 44% 39% Operating margin 26% 28% 26% 21% 12% 9% Cash conversion 102% 95% 99% 102% 94% 95% Interest cover 17x 17x 17x 16x 6x 6x Source: Fundsmith LLP/Bloomberg. ROCE, Gross Margin, Operating Profit Margin and Cash Conversion are the weighted mean of the underlying companies invested in by the Fundsmith Sustainable Equity Fund and mean for the FTSE 100 and S&P 500 Indices. The FTSE 100 and S&P 500 numbers exclude financial stocks. The Interest Cover number is median. 2017-2019 ratios are based on last reported fiscal year accounts as at 31st December and for 2020 are Trailing Twelve Months and as defined by Bloomberg. Cash Conversion compares Free Cash Flow per Share with Net Income per Share. Percentage change is not calculated if the TTM period contains a net loss. Returns on capital and profit margins were lower in the portfolio companies in 2020. This is hardly surprising in light of events in the economy, but the scale of the falls were hardly disastrous. When people have said to us, ‘You invest in non-cyclical businesses’ I always reply that I have never found one. It is the degree of cyclicality in our portfolio which we seek to control through our stock selection. As a group our stocks still have excellent returns, profit margins and cash generation even in poor economic conditions.

As you can see the same cannot be said for the major indices even though they have the benefit of including our good companies. The average year of foundation of our portfolio companies at the year- end was 1926. They are just under a century old collectively. Consistently high returns on capital are one sign we look for when seeking companies to invest in. Another is a source of growth — high returns are not much use if the business is not able to grow and deploy more capital at these high rates. So how did our companies fare in that respect in 2020? The weighted average free cash flow (the cash the companies generate after paying for everything except the dividend, and our preferred measure) grew by 9% in 2020. The second leg of our strategy is to employ both negative Environmental, Social and Governance (‘ESG’) screening (not investing in high ESG risk sectors such as aerospace and defence, brewers, distillers and vintners, casinos and gaming, gas and electric utilities, metals and mining, oil, gas and consumable fuels, pornography and tobacco) and screening for sustainability in the widest sense, taking account of not only the companies’ ESG policies and practices but also their policies and practices on research and development, new product innovation, dividend payments and the adequacy and productivity of capital investment.each

Former TCS CEO and vice-chairman S. Ramadorai called Kohli 'a brilliant technocrat and a business leader with varied interests' and said 'the nation has lost a legend today' — a peer tribute that frames Kohli as both a Tata internal figure and a national-level IT-statesman.

The Economic Club of New York – Stanley Druckenmiller – May 12, 2020 Page 6 stock market doesn’t have to worry because of the liquidity injections. STANLEY DRUCKENMILLER: I do. And it’s so out of consensus I’m not sure I even believe it. It’s something I’m just wrestling with, but I think it makes the risk-reward decision pretty darn easy. So right now with the S&P at 2930 – I’m sorry that’s six hours old and that’s a big six hours, but this morning the S&P was at 2930 – you were 20 times what I consider would be the moderate recovery case from the virus which was $145 in earnings in 2021 or 17 times $172 which would be 5% above ‘19 earnings and I would consider an extremely aggressive economic assumption about where we’re going to be in 2021 to where we are now. Those seem to me very, very high multiples given the uncertainty of the virus, the bankruptcies we’re going to have, the fact that the Fed has solved for liquidity but not for solvency. Eleven percent of the economy, travel and leisure looks challenged. The banking system looks challenged with all these bankruptcies around. So the consensus out there seems to be don’t worry, the Fed has your back. Despite everything you’re reading, the stimulus is much bigger than the problem and liquidity going forward is just massive. There’s only one problem with that. Our analysis says it’s not true. So, just to back up a little, I stated earlier that the Fed has increased their balance sheet from $4 trillion to $8

The cheap data Jio unleashed reshaped Indian consumer behavior beyond telecom. Rural India drove roughly two-thirds of projected $5 billion streaming/content revenue by 2023, vernacular apps like ByteDance's Helo took off in Tamil, Telugu, Malayalam and Gujarati, and an Uber driver in Delhi could livestream the Cricket World Cup on the job — proof of a changed media environment Jio had catalyzed.

company based on ESG factors and current “hot topics”. At the end of December 2020, the weighted average RepRisk indicator for our portfolio was 25.8, higher than it was at the start of the year but still well below the S&P 500 index score of 29.1. At the end of 2020, the four companies with the highest RepRisk Indicator scores were: Microsoft (54) Johnson & Johnson (53) Unilever (49) Visa (49) Microsoft’s and Johnson & Johnson have switched positions in this year’s ranking despite the RepRisk Indicator of both falling from 57 to 54 and from 58 to 53 respectively. Unilever has kept its position at third, although its score has increased from 46 to 49. Visa, replacing Marriott, is a new and somewhat questionable entrant into the list. It’s RepRisk increased by 15 in December after news it was suspending the use of its cards on Mindgeek’s site Pornhub, amid allegations of rape scenes, child abuse and private videos being shown on the website without participants’ consent. This is something that we would consider a positive impact, which reduces the investment risk of Visa. At the end of 2020, the four companies with the lowest RepRisk Indicator scores were: Kone (0) IDEXX (0) Waters (1) Undisclosed Position (4) Kone and IDEXX (which also appeared last year) are an elevator & escalator business and animal diagnostic testing business respectively, and therefore have unsurprisingly low scores.

India's telecom tower base expanded from 90,000 in 2006 to nearly half a million by 2020, an infrastructural overbuild forced by the surge in subscribers. The capacity proved unexpectedly useful: when Covid lockdown hit in March 2020, India's networks held up better than some European systems, operating at 60-65% of capacity versus typical 85% peaks elsewhere.

The Economic Club of New York – Stanley Druckenmiller – May 12, 2020 Page 7 trillion. While they’ve done that, the Treasury Department, I’d say the budget deficit estimate for this year has gone from maybe a trillion a year ago to $3.5 trillion. And I’m sure you saw earlier today – because we have a bunch of economic wizards on the call – the April deficit was $770 billion just in and of itself. So, in March and April alone, the Fed – net of Treasury issuance – paid for the new spending created a trillion in QE more than Treasury issuance. So it’s the biggest liquidity injection relative to history I’ve ever seen. Now, I just want to back up a little bit about the way QE works or the way I perceive it works. So let’s say the Treasury, I’m sorry, the Federal Reserve is going to buy $100 billion worth of bonds. Who is on the other side of that transaction? People like me and we sell them our $100 billion of Treasuries. If we’re selling them $100 billion of Treasuries, which is a risk-free asset, or it’s a Treasury asset, so it’s a low risk asset, it’s highly unlikely that we’re going to turn around and put all that money back into Treasuries. So that money leaks into risk assets and therefore risks them up. So basically the QE, the bond buying that the Fed does spills over into risk assets. And QE1, QE2, QE3, in the last ten years, that’s how the process worked.

TCS chief executive Rajesh Gopinathan's statement emphasised Kohli's 'sense of purpose, clarity of vision, strength of character and unwavering belief in investing in people' as leaving an indelible stamp on the organisation's culture — locating TCS's talent-first identity squarely in its founder's legacy.

Industry body NASSCOM called Kohli 'the visionary leader who foresaw the opportunity of India in technology services and built TCS many decades back when almost nothing existed in the tech sector in India' — crediting him with the original India-as-IT-services thesis at a moment the country had no software industry to speak of.

The Economic Club of New York – Stanley Druckenmiller – May 12, 2020 Page 8 liquidity was created and everyone is still of the view that liquidity is just fantastic. The problem is as you look forward, because the Treasury deficits are not only still going to be there, they’re just rolling out aggressively now the financing of them, the Fed front- ran this with their actions of a month or two ago. And so that’s how, what the Fed bought was a trillion more than Treasury issued. What’s going to happen now is Treasury issuance has caught up with the Fed and if they stick to the schedule they’ve outlined, the net difference between those two actually goes to zero in May and net borrowing by Treasury relative to Fed purchases in June very minor, pretty much flat through September, and then liquidity shrinks as far as the eye can see as the Treasury borrowing crowds out, not only the private economy but even overwhelms Fed purchases. So, I guess what I’m saying, Scott, is it takes a lot of liquidity to drive a market from 2200 to 2900. We’re at 2900. We’re not at 2200. And the reason we got there at a very minimum, momentum has peaked, and more likely there’s no net new liquidity or no new net spillover coming into financial assets in general.

Having broken the ARPU model, Ambani pivoted Jio toward a web-scale stack: JioTV, JioCinema, JioSaavn for music, JioMart e-commerce with sister company Reliance Retail, and quiet SaaS acquisitions. The portfolio — connectivity, content and commerce in one corporate parent — was, in IDC analyst Ravi Sharma's framing, unique among global telcos and pointed toward Jio becoming a consumer-tech company rather than a carrier.

Waters makes liquid chromatography and mass spectronomy and other equipment used for testing by the food and drug industry. We use the RepRisk Indicators as a proxy for the absolute negative impacts a company has on the environment and society. Environmental impacts are somewhat easy to measure and compare, assuming all companies report accurate statistics that are calculated using similar methodologies, which is an assumption that is becoming more true as each year goes by. With environmental impacts, one can calculate a number (e.g. GHG emissions) for a company and then compare how that has moved over time and with other similar companies. We can also aggregate data to assess the impacts of the entire portfolio.

That leads me to believe the risk-reward, given the fact that we don’t know what’s going to happen with the virus, we have bankruptcies out there, we have some capitalism problems, which I think we’re going to talk about in a few minutes, 2900, I just think the risk-reward for equities is maybe as bad as I’ve seen it in my career here.

In 2020 Jio Platforms attracted roughly $13 billion in fresh investment in months, led by Facebook's $5.8 billion and later Google's $4.5 billion, alongside sovereign and private-capital cheques. Ambani summarized the thesis in a 2017 interview: 'Data is the new natural resource. We are at the beginning of an era where data is the new oil' — a striking metaphor from an oil refining fortune.

Those of you who read the fund’s monthly ESG factsheet will have noted that we report environmental statistics per million pounds of FCF for the portfolio and S&P 500. For non-reporting companies we estimate their environmental statistics by applying the average statistics for the company’s respective subsector in proportion to their total assets. Over the past few months, we have been refining our estimation model to make it more accurate and expanding it so that it can produce comparable numbers for the MSCI World Index, which contains significantly more companies than the S&P 500. This has meant that for a few statistics which most companies produce – how much waste and greenhouse gases they produce and how much water and energy they use – we can compare the negative impact on the environment of FSEF to an easily investable index. These weighted average statistics are shown in the table below: Weighted average is weight of a company in fund multiplied by environmental stat of a company As you can see from the table above, owning units in FSEF has a significantly lower impact on the environment than owning the MSCI World. As the numbers by themselves can be fairly hard to imagine in real terms, I’ve converted the FSEF numbers into the number of average UK households it would take to emit this amount over a year, which is also shown in the table above.

As NASSCOM chairman in 1994-95, Kohli led the industry body to build global partnerships in key markets, showcase the India-delivered IT-services opportunity, and foster a culture of collaboration among competing Indian IT firms — an unusual act of pre-competitive industry cooperation that the obituary flags as decisive for the sector's collective growth.

Happiest Minds founder Ashok Soota called Kohli 'a giant among giants' who was 'extremely supportive whenever I reached out to him for any industry related guidance' — a personal testimonial that captures Kohli's role as informal mentor across the wider Indian IT sector, beyond TCS's walls.

The Economic Club of New York – Stanley Druckenmiller – May 12, 2020 Page 9 The wild card is the Fed can always step up their purchases relative to what they’re saying they’re going to do now, but I don’t really know why they would have tapered from $500,000, a billion a week, to $7 billion a day if they were ready to ratchet right back up again. So at 2900 I don’t see them doing that. SCOTT BESSENT: Well, maybe someone from the Fed is watching the interview today and you saved the market. Could you give me your take on the Fed response since mid-March and on the fiscal response? STANLEY DRUCKENMILLER: Since mid-March or when they started their response in mid-March, I will give them an A++. But I’m going to cheat a little and say it’s not fair to start in mid-March because the Fed did what they had to do in March. But had the Fed normalized rates when the economy was booming and had they not cut rates last fall with unemployment at 3.5% on the theory that 1.7% inflation versus 2% is some kind of economic catastrophe, they would have had (a) more bullets to fire here on the conventional side and (b) more importantly, we would not have had – in my opinion – the massive leveraging we had on the government side. It’s unbelievable. We went into this, into Covid with a $1.4 trillion government deficit with full unemployment – we’d never seen anything like it – and corporations took their borrowing from $6 trillion to $10 trillion.to

Social impacts, however, are much more difficult to measure quantitatively because they are far more dependent on an individual company and what it is capable of doing, in either a positive or negative way, and can rarely be quantified. It is so dependent on the context of individual companies that it is almost impossible to compare them against one another. This is one of the reasons why the majority of reported social statistics focus on diversity statistics, as they can easily be measured and tracked over time. However, this ignores a lot of the nuance and detail of the good and bad impact companies have, Metric Unit FSEF MSCI World Equivalent no. of UK households Total waste produced Thousand metric tonnes 197 8,628 188k Hazardous waste produced Thousand metric tonnes 14.43k

which we will try to demonstrate through some of the positive impacts FSEF companies have had on society in response to the COVID-19 pandemic. Initially as the pandemic began, the companies in FSEF were quick to preserve cash by delaying dividends, cutting non-essential expenses and arranging additional debt facilities from banks. They were also quick to make their offices and factories safe for workers, while supporting those who were now working from home. Post the initial outbreak, numerous companies in FSEF contributed positively in the fight against COVID-19 in more ways that just donating money and equipment, although many also did that. There were numerous initiatives to support FSEF company employees, local communities and businesses. Other FSEF companies had the expertise and resources to directly help the fight with innovation or R&D. Overall, FSEF portfolio companies donated over $150m to support their local communities and employees through these difficult times. FSEF companies also provided support for local businesses, both big and small, which were affected by the crisis. Overall, FSEF portfolio companies offered over $900m in grants to small businesses. Some FSEF companies had the expertise and resources to directly support the fight against the COVID-19 pandemic. At Fundsmith, we find the idea that one could reduce the wide variety of positive impacts made by FSEF portfolio companies in response to the pandemic to a single rating number fallacious.

The Economic Club of New York – Stanley Druckenmiller – May 12, 2020 Page 10 normalize from 2012 to 2020. So because there was free money and because of the behavior I’ve just described, they had to do a lot more in March than they would have done because of all this borrowing and all this leveraging took place. I would also say that once we got out of March and into April, I found the $2.3 trillion where they crossed all kinds of lines in terms of collateral and stuff, we never got near in 2008 somewhat puzzling and aggressive. I could see it if we were still at 2200 and I could see it if the bond market was shut – I’m talking about the corporate bond market – but it came a week after the most aggressive bond market issuance in history. And it’s just a little weird to me because in my opinion the reason they had to do so much was because corporations over-borrowed and were over-leveraged getting into this and those same corporations are now – when we know we’re on the front end of a recession – the answer is to borrow more. And that doesn’t make sense to me because the Fed is there to solve the liquidity problem and open markets which they’d already done with their first steps but they’re not there and they are not in any way capable, in my opinion, of solving the solvency problem. In terms of Treasury, I will give them an F. We came into this, in the situation I just described, and clearly, they had to do something.

The Hindu notes that with JRD Tata's active support Kohli built TCS into a company whose market capitalisation stood at roughly INR 10,20,967.59 crore on the day of his death — making TCS the most valuable company in the Tata Group, and a concrete measure of the long arc from the 1969 in-house consultancy to a global IT-services heavyweight.

The Economic Club of New York – Stanley Druckenmiller – May 12, 2020 Page 11 basically a combination of (a) transfer payments to individuals, basically paying them more not to work than to work. And in addition to that, it was a bunch of payments to zombie companies to keep them alive. One of the things, there’s an economist, Torsten Slok – who probably most know I read – a few weeks ago, it was quite interesting, 1,600 companies in America go under every week when things are fine. Now, most of them are one to five employees. But that’s how creative destruction works and that’s how capitalism works. Those companies, I’m sure a lot of them are in the package and they would have gone under anyway but they’re being kept alive. But more importantly, you have companies like airlines that, because of the free money I talked about, they spent 97% of their free cash flow on corporate buybacks. It was common all over America – financial engineering. And, yes, it wasn’t their fault that coronavirus happened, but I’ve actually been saying for years, none of these companies are going to be able to survive in a recession given the borrowing they’re doing and it’s reckless. And finally I would say instead of the fiscal going to that and doing supply side kind of reforms that the Bush administration did in 2001 and 2002, we could have been doing that kind of thing and spending the money on R&D, 5G, improving our healthcare

It overly simplifies something to the point that its meaning is lost. There is no way for anyone to quantify how much “better” it is for society for Johnson & Johnson to actually be producing a COVID vaccine compared to PayPal helping small businesses reopen faster. This is why we report the good and the bad which FSEF portfolio companies do each month in the commentary on our FSEF ESG factsheet so that you and we can assess particular instances. Over time we find that these tend to give us a clear picture of a company’s stance on sustainability, but it is one based upon informed judgment rather than box ticking or spurious precision. We also, rather than relying on external rating providers, perform our own analysis of both the positive and negative impacts our portfolio companies have in the widest possible sense, accepting that in many cases the impact isn’t going to be tangible. In contrast, the majority of the asset management industry rely on external rating providers to simplify their assessment of what they can and can’t invest in.

The Economic Club of New York – Stanley Druckenmiller – May 12, 2020 Page 12 network, our crumbling infrastructure. So to me this is like the most anti-capitalist, anti- free market stuff I’ve ever seen and it’s kind of shameful and it’s amazing it happened under a Republican administration. SCOTT BESSENT: Well, kind of a Republican administration. Given the massive Treasury supply, will QE be enough to keep long-end bond yields from backing up? Or do you think the Fed may have to do some kind of yield curve control? STANLEY DRUCKENMILLER: I think like the early 50s, but with an exclamation point, financial repression will win out here and the Fed will do what they need to do. It may end up in yield control. It may end up being just a bunch of QE. But I think the bond market will win out and rates will be held down low at the risk possibly of what I spoke about earlier, which is crowding out the private sector. I do think going into this, and I think you might have asked me this a year ago because we were already doing wild stuff, does this end in inflation or deflation? I’ve said many times over the last four or five years, if I was the Fed and I was trying to create deflation, I would do exactly what they were doing because you’ve never had a deflation without an asset bubble before having been created. You never had deflation because you were close to the zero bound. You always had deflation because you had an asset bubble and then a bust.we

However, in doing so, a lot of the actual net impact companies have is lost. Further issues that arise from this need for simplified ratings is that it forces asset managers to look for things they can measure accurately (board and employee diversity) or whether a company has a policy towards social issues such as animal testing, human rights or modern slavery. These are, of course, good things to have and are signs of good transparent corporate governance, but just because a company has a policy toward something doesn’t mean they actually behave in that way, and conversely, if they don’t have a policy, it doesn’t mean that they don’t behave in a way that we would approve of. A policy does not equate to action, and reducing a company’s net impacts on society down to a single metric overly simplifies the issue and too many of the good impacts that companies have are ignored or lost in the process. This leads onto the question of valuation. The weighted average free cash flow (‘FCF’) yield (the free cash flow generated by the companies divided by their market value) of the portfolio at the outset of the year was 3.3% and ended it at 2.9%, so they became more highly rated. Whilst this is a good thing from the viewpoint of the performance of their shares and the Fund, it makes us nervous as changes in valuation are finite and reversible, although it is hard to see the most likely source of such a reversal — a rise in interest rates — in the near future.

The year-end median FCF yield on the S&P 500 was 3.7%. The year- end median FCF yield on the FTSE 100 was 4.2%. More of our stocks are in the former index than the latter and I will not repeat the explanation which I gave in my 2017 annual letter on why I think the FTSE 100 is not an appropriate benchmark or investment proxy for our investors to use. Moreover, the valuation disparity with the FTSE 100 has been widened by the portfolio’s 30% outperformance of the FTSE 100 during the year. It’s hard to outperform by such a wide margin without becoming relatively more highly valued unless the portfolio’s cash flows have grown at a similar differential rate. What the market seems to be rewarding is consistency of performance which has been emphasised by economic conditions in 2020. Our portfolio consists of companies that are fundamentally a lot better than the average of those in either index and are valued much more highly than the average FTSE 100 company and higher than the average S&P 500 company. It is wise to bear in mind that despite the rather sloppy shorthand used by many commentators, highly rated does not equate to expensive any more than lowly rated equates to cheap.

The Economic Club of New York – Stanley Druckenmiller – May 12, 2020 Page 13 just cracked the credit bubble that is a result of free money and we’re going to have, this is going to be deflationary, not inflationary, particularly with 15%, 16% unemployment. SCOTT BESSENT: So given the specter of deflation, should negative rates be part of the solution or will they only create a bigger problem? STANLEY DRUCKENMILLER: Oh, God, I hope not. I just firmly believe that you can’t have capitalism work without a hurdle rate for investments. And if I believed it 20 or 30 years ago, I believe it more now. It’s been tried in Japan. It’s been tried in Europe. It’s a failure. It cuts off the invisible hand and, you know, somehow, we survived 5,000 years without negative rates. These geniuses in the Ivy League have decided that they’re a wonderful idea. I just, I don’t understand even what the argument is. SCOTT BESSENT: So President Trump often states that we entered the virus storm with the strongest economy in history and, therefore, when the virus passes, we’re going to V-out and be stronger than ever. I think I know what you think, but I think it would be interesting for everyone online to hear. STANLEY DRUCKENMILLER: I really, really wish I agreed with President Trump. And God bless him, I hope he’s right and I hope I’m dead wrong. But as you can imagine from what I’ve just said over the last five or ten minutes, yes, unemployment was the

Turning to the third leg of our strategy, which we succinctly describe as ‘Do nothing’, minimising portfolio turnover remains one of our objectives and this was again achieved with negative portfolio turnover of -2.6% during the period. It is perhaps more helpful to know that we spent a total of just 0.038% (3.8 basis points) of the Fund’s average value over the year on voluntary dealing (which excludes dealing costs associated with fund subscriptions and redemptions as these are involuntary). We have held 17 of our portfolio companies since inception in 2017. Why is this important? It helps to minimise costs and minimising the costs of investment is a vital contribution to achieving a satisfactory outcome as an investor. Too often investors, commentators and advisers focus on, or in some cases obsess about, the Annual Management Charge (‘AMC’) or the Ongoing Charges Figure (‘OCF’), which includes some costs over and above the AMC, which are charged to the Fund. The OCF for 2020 for the I Class Accumulation shares was 0.97%. The trouble is that the OCF does not include an important element of costs — the costs of dealing. When a fund manager deals by buying or selling, the fund typically incurs the cost of commission paid to a broker, the bid-offer spread on the stocks dealt in and, in some cases, transaction taxes such as stamp duty in the UK. This can add significantly to the costs of a fund, yet it is not included in the OCF.

The Economic Club of New York – Stanley Druckenmiller – May 12, 2020 Page 14 lowest it had been in, well, 30 or 40 years, and yes, it was exciting that a lot of the people employed had not been able to work, join the workforce before, but to me it was the result of reckless fiscal spending, huge leveraging on the government side. Again, I already noted, but a $1.4 trillion deficit with that full employment. Just unheard of. You remember back in the Clinton days when we had, the last economic boom we had we actually had a Treasury surplus for a bit. And also, we just had record corporate borrowing, again due to free money. So, to me, going into it, instead of saying we have the strongest economy ever, I’d be thinking, oh my God, we just popped the biggest credit bubble in history and a la Reinhart and Rogoff’s piece back in 2009, the de- leveraging that is going to be required, that if I’m right and this thing snapped, is going to take many, many, many years of sub-par growth to get out of. And I’m even more fearful that given the government’s involvement in business and how much we’re spending – again for non-investment spending – we’re going to have much, much higher taxes and much higher regulations going forward. So, I’ve been wrong before. I’ll be wrong again on things. And I pray I’m wrong on this, but I just think the V- out is a fantasy.

We provide our own version of this total cost including dealing costs, which we have termed the Total Cost of Investment (‘TCI’). For the T Class Accumulation shares in 2020 this amounted to a TCI of 1.01%, including all costs of dealing for flows into and out of the Fund, not just our voluntary dealing. We are pleased that our TCI is just 0.04% (4 basis points) above our OCF when transaction costs are taken into account. However, we would again caution against becoming obsessed with charges to such an extent that you lose focus on the performance of funds. It is worth pointing out that the performance of our Fund tabled at the beginning of this letter is after charging all fees which should surely be the main focus. Some commentators have attributed our recent outperformance to the performance of technology stocks accompanied by warnings that a ‘bubble’ is building in technology stocks rather like the Dotcom Bubble and that it may burst with similar ill effects. The technology heavy NASDAQ Index has provided a total return of +40.9% in 2020 and the MSCI World Information Technology Index delivered +40.2% so maybe they have a point.as

The Economic Club of New York – Stanley Druckenmiller – May 12, 2020 Page 15 what wildcards might be out there that could influence the markets? STANLEY DRUCKENMILLER: You mean with regard to the virus only? SCOTT BESSENT: Virus only. STANLEY DRUCKENMILLER: Okay, (a) I don’t have a clue. I’m just a dumb money manager, I’m not a scientist, but I’m not sure the scientists have a clue either. But because of my day job, I’ve got to have a view on this because it’s driving the markets. So there’s never been a vaccine for a serious virus discovered within four years. This time I would say, because of the focus and the number of geniuses that are working on this and the worldwide effort, there’s certainly an opinion on my part that it won’t take four years. But what we’re using as an assumption, and Scott, I don’t have a clue, but we have to assume something, is there’s a 50/50 chance we’ll have an operative vaccine by June of ‘21. It’s very unlikely that even if we get one by the end of the year – there was a great interview with Melinda Gates yesterday – you’ve still got to make billions of these things. So I think the odds of anything operative before June of ‘21 are quite remote. And I would say that’s 50/50. Don’t forget there have been a bunch of coronaviruses, they haven’t had a vaccine for one of them. And there’s a theory which is quite possible

The Economic Club of New York – Stanley Druckenmiller – May 12, 2020 Page 16 that this thing happened because they were working on a coronavirus in a lab. So I’m not optimistic on the vaccine anytime in the near term, but again you could talk to my dog and get as much information. I’m just telling you what I’ve had to work with. In terms of the viral drug remedies, like remdesivir or the other ones, I don’t know why the economy and the market jumped so much when they’re optimistic about it. It’s like, oh, I have an 8% chance of dying instead of 11%, or I’m going to get sick and be on an IV so now I’m going to go out and party without a mask. I don’t see why anybody would change their behavior because there’s a viral drug out there. But again, the big wildcard here is the wildcard I’ve seen from the beginning and that is the government reaction. And other places have shown how poorly (a) this thing has been managed from the beginning and, in my opinion, how poorly it’s been managed going forward. So, as I’m sure most of you – if not all of you know – Hong Kong...I’m sorry, Taiwan has 25 million people, they’ve had six deaths. Hong Kong has 7.5 million people; they’ve had four deaths. They’re both right on the border of China. It’s hard for me to believe our biggest ally in the Far East, which is Taiwan, didn’t tell the Trump administration their theory despite what President Xi was saying, about human to human transmission in late December.

over-rated. However, it’s always good to start with the facts. Our Fund’s sectoral exposure was as follows at the year-end: Sector % Healthcare 29.6 Technology 28.0 Consumer Staples 27.4 Consumer Discretionary 9.2 Industrials 4.1 Cash 1.8 Technology is the second largest sectoral exposure, but smaller than consumer staples and in fact if you take all our consumer stocks — discretionary and staples — together, they far outweigh our technology exposure. Moreover, I am not sure that these sector labels are all that helpful in determining what we are really exposed to. For example, our Communication Services holding is in fact Facebook. Isn’t that a technology company? What do the following companies have in common? Amadeus, Automatic Data Processing, Intuit, Microsoft, PayPal, Sage and Visa? They are all owned by our Fund and they are all labelled as technology companies. Yet they span airline reservation systems; payroll processing; accounting and tax software; operating systems, distributed computing (the ‘cloud’), software development tools, business applications and video gaming; and payment processing. I would suggest that the secular drivers of these businesses have some distinct differences and that their prospects are not governed by a single factor — technology. This one size fits all label does not help much in evaluating them.

The Economic Club of New York – Stanley Druckenmiller – May 12, 2020 Page 17 Taiwan, Hong Kong, these places have shown, if you put on a mask, if you social distance, you don’t need to shut down your whole economy. Taiwan has never locked down their economy. Neither has Hong Kong. They’ve made adjustments. We have 34 million people unemployed and we’re going to have about 100,000 deaths. I’m not saying the deaths aren’t important, but Marie-Josée mentioned some of the not-for-profit work I do, I can guarantee you poverty kills. I can guarantee you waylaying cancer patients, heart intervention patients, I mean this is one of the most bizarre decision- making processes I’ve seen. And I wouldn’t be surprised at all in 30 years if it’s going to be the poster child for the worst public policy decisions ever made, ever, on a cost benefit analysis. SCOTT BESSENT: Right. So the consistent narrative since March has been that the virus just supercharged existing trends. You’ve been a bull on secular growth stocks and the Cloud for years. Where are you now? And what other trends do you think we’re going to see as a result of the virus acceleration? STANLEY DRUCKENMILLER: Yes, as I mentioned earlier, it was very convenient if you only used growth stocks what the virus did. And let me just back up a little. I probably said it with you a year ago. If not, I said it at a lot of other places.we

There are also issues with the relative valuation of some technology businesses which — like a number of businesses of the sort we seek to invest in — rely on intangibles. The main assets of the companies we seek to invest in are often intangible. Some examples of intangible assets are brands, copyrights, patents, know-how, installed bases of equipment which require servicing and maintenance and so produce customers who are locked-in to the supplier, software systems which are critical to a business or person and so-called network effects. They are distinct from tangible assets such as real estate, machinery and equipment, and vehicles. The return on intangible assets is higher as they mostly need to be funded with equity not debt and attract an appropriate return.tangible

collateral. Intangible assets can also last indefinitely if they are well maintained by advertising, marketing, innovation and product development and the duration of an asset is an important factor in figuring out its real returns. However, there are obvious problems in comparing businesses which rely on tangible assets with those that rely mostly on intangibles. Tangible assets appear on a company’s balance sheet. Cash is expended to purchase them or liabilities are assumed (debt or leases) and the assets are placed on the balance sheet. Only the depreciation charge, if any, enters the profit and loss account and there may be no impact on cash flow after the purchase. In contrast, intangible assets are mostly built through spending which goes through the profit and loss account and cash flow. Although some software development is capitalised, most is not and neither is brand development nor most research & development. Of course acquisitions skew this picture. The net result is that for any given level of investment in assets, the profitability of a company building an intangible asset is likely to be depressed versus a company building or buying a tangible asset. This makes a mockery of the comparison of their valuations which are done by some commentators and investors who simply compare their price- to-earnings ratios (‘PE’). In addition, the degree to which this needs to be taken into account in making such comparisons has been rising.in

The Economic Club of New York – Stanley Druckenmiller – May 12, 2020 Page 18 were in maybe the first inning, at the very worst at the top of the second inning, in terms of that process. These companies have never been cheap but it looked to me like digitization was one of these long runs, like the transition to mobile that offered tremendous investment opportunities. So that’s kind of where I’ve been for four or five years and where I was in February. When this first happened, not knowing that we were going to lock down and shut down our whole economy, I remember at our investment meeting here saying, well, why isn’t Amazon worth more, not less? If rates are going to go to zero, you’re going to have all this stimulus, this is going to move more people to the Cloud quicker. So even if their earnings are what they were going to be which is what it looks like, Amazon has to be worth more, not less, and the stock had gone from, I don’t know, $2,150 down to $1,650. What I didn’t know is we were going to forcibly lock down the entire economy and that company after company – I’ve talked to so many companies in the last three or four weeks because I’ve had nothing else to do like everybody else – when you ask them what their biggest surprise around this whole phenomenon is, and this is obviously not the manufacturers and not ones that require direct service employees, but it’s how unbelievably well and seamless they can run their companies remotely.

tangible assets in the 1990s — not coincidentally as the internet age hit full pace. This not only makes comparisons between different types of company difficult, it also makes assertions about market valuations over time — such as the Cyclically Adjusted PE (or CAPE) difficult. A simple illustration of this is that in 1964 the average (median) tenure of a company that was in the S&P 500 was 33 years. By 2016 this had fallen to 24 years: Average Company Lifespan in S&P 500 Index Source: Innosight analysis based on public S&P 500 data sources. www.innosight.com. Years, rolling 7 year average They are not the same companies and at least in part not even the same sort of companies. I lived through the rise and fall of the Japanese equity market. When it reached its peak in 1989 with a PE of over 60 we were told that this was because Japanese company accounting was much more conservative than western companies. In fact, their shares were just expensive. So I am wary of explanations for why we should accept high valuations, especially if they are based upon theories about accounting. But whilst Sir John Templeton did say that the four most dangerous words in investment are ‘This time it’s different’ (which is actually five words before anyone points this out) sometimes it really is different and if you miss such inflection points it is to the detriment of your net worth.

The Economic Club of New York – Stanley Druckenmiller – May 12, 2020 Page 19 And the other comment has been how, even industrial companies – forget the technology companies – companies that were on the road to digitization had such an advantage over those that weren’t. And they’re just doubling down on moving to the Cloud even more than they were, and if you’re behind, it’s really an existential threat to you. Like if you’re a retailer and you’re not online in a year with a strong presence, you’re a goner. So, to me, that one to ten-year runway and that first inning, we’re going to jump to the fourth inning now. But more importantly, on the other side of this, ‘21, ‘22, I think is going to be a big acceleration period. So I don’t think this trend has stopped at all. I think it’s rational. I feel a little differently than I did three or four weeks ago because a lot of these stocks have literally doubled since the March low and a lot of them are up 30 or 40% in the last few weeks. So I haven’t discovered the wheel here, but I think the market reaction is rational. If we got a vaccine announced tonight, my guess is these stocks would be down 10 to 15% but they’d be higher in two or three years. And my guess is value would be up 25% if we announced a vaccine tonight but they would be kind of nowhere in two or three years. So I’m still there.

It’s just a weird, pleasant coincidence in very, very tragic and unpleasant circumstances that the leaders in the market and the growth companies, this has just accelerated had one owned them in the first place.

It is impossible for me to report on 2020 without mentioning COVID. I hope you agree that our portfolio performed well, both in terms of the share price performance and the fundamental performance of the companies, which is just as important. It is also important to note that our operations were not impaired by the lockdowns and travel restrictions. Whilst the performance of the fund is important, it is also important that if you wish to contact us you can and are dealt with promptly and efficiently. You should be able to get any information you reasonably require which should be accurate and up to date. Perhaps most importantly, if you wish to deal — including redeeming your investment — we can execute for you. All of these vital functions continued seamlessly throughout the depths of the lockdowns. We have long been managing the dealing, operations, portfolio management and research across a number of widespread geographies, much to the amazement of some people who felt this could only be accomplished in a few London postcodes. So the need to Work From Home and an inability to travel were not major obstacles for us. One of the mantras which has been regularly trotted out by commentators is that the events of 2020 are unprecedented. Whilst that is literally true, as Mark Twain observed, history doesn’t repeat itself but it often rhymes.

The Economic Club of New York – Stanley Druckenmiller – May 12, 2020 Page 20 SCOTT BESSENT: You made a very interesting remark to me the other day. You know Amazon is much maligned but you were talking about them pushing all the other retailers into deliberating. STANLEY DRUCKENMILLER: Yes, I have a bit of a thing for Amazon. I gave this speech at The Manhattan Institute four years ago on capitalism and thought how ridiculous it was that the President of the United States – I was talking about Rule of Law – had attacked the son of an immigrant who had built just this fantastic company and was trying to do things with the post office and other things. But it’s just amazing to me, then you see the AOC thing. Here we have this unbelievable company. It’s made all our lives better. They’ve been unbelievable in this crisis. They’ve hired 100,000 people or whatever it is. If you listen to their earnings call, they spent $4 billion giving raises and transitioning their product to the less profitable stuff that were essential needs. They didn’t raise their prices on anything. We should just get down on our knees and thank the Lord that this company existed in this pandemic. And then it’s interesting because, being the shy person I was, I was on this rant with Ken Langone a week ago and he said, well, you know, they made us a much better company and the reason we’re so good online now is because we had to compete with them.

It is certainly true that most of us have never experienced anything like it, yet it may not be strictly true that the events of 2020 are without precedent. There have been six identifiable pandemics over the past 130 years: Recent Pandemics Estimated Deaths Russian Flu (1889–90) 1m Third Plague (1894–1922) 12m Spanish Flu (1918–19) 50m Asian Flu (1957–58) 2–5m Hong Kong Flu (1968–69) 1–4m Swine Flu (2009–10) 0.5m We might be able to draw some parallels from these past pandemics as a guide for what may happen as a result of COVID. One of the conclusions that you might draw from the economic effects of pandemics is that they do not so much cause new trends but rather they accelerate some existing trends. The most obvious comparator — and one which people have most frequently alighted upon — is the Spanish Flu pandemic of 1918–19.mass

The Economic Club of New York – Stanley Druckenmiller – May 12, 2020 Page 21 SCOTT BESSENT: That’s Home Depot? STANLEY DRUCKENMILLER: Yes, I’m sorry, Home Depot, but there’s 20 or 30 companies out there. Look, as horrible as this thing is and it is horrible, imagine if it had happened four years ago, before Zoom, before Amazon, and before Amazon drove all these other companies, like Walmart, Target. All of them have an online presence. So, yes, I think it’s an amazing company. I get a little emotional as you can hear when politicians attack it. But I also think it’s, the whole phenomenon has been amazing in our country of all these companies and all the creation they’ve done and how it made this pandemic – as horrible as it is – a lot less horrible for the average citizen. SCOTT BESSENT: So coming back to your point on the President versus Bezos, you’ve been, one of the things you’ve talked about a long time is your concern for the attack on capitalism in the U.S. What are your thoughts now? And are market-based solutions going to be dead for the next ten years? STANLEY DRUCKENMILLER: Well, in that speech the thing that I found the most disturbing is that the government had rigged the most important price in the world. After learning in Economics-1 that wage and price controls don’t work, we decided to put price controls on the most important price in the world, which was the price of long-term interest rates, the price of money. And you can only imagine what I think now.

production. The assembly line was not invented as a result of the Spanish Flu pandemic — the Model T Ford was put on an assembly line in 1913 — but it accelerated its adoption. The increase in productivity this delivered helped to fuel an economic boom as the cost of production of items such as cars and household electrical appliances were reduced as the volume of production rose so that they became affordable by the middle classes for the first time. This helped to fuel the economic and stock market boom of the Roaring Twenties. Might something similar happen as a result of COVID? Obviously, I do not know, and fortunately my predictive capability is not the basis of our investment strategy. However, there are some clear signs that existing trends have been accelerated by COVID. For example: • E-commerce • Online working from remote locations using the cloud or distributed computing • Home cooking and food delivery • Online schooling and medicine • Social media and communications • Pets — which have become more important in isolation and when their owners are at home more • Automation and AI The result is that many people have become more productive. Salespeople can visit many more clients if video conferencing is acceptable and at virtually no incremental cost. We receive reports of factories which we are told are operating with 50% staffing due to social distancing rules but which have more or less maintained production. I wonder what conclusion that leads to.

Of course not all businesses benefit from these developments. The airline industry, hospitality, bricks & mortar retailing and office property may all have some very difficult problems to face, just as you wouldn’t have wanted to have been a saddler when Henry Ford and his competitors hit their stride. I became increasingly bemused listening to or reading various commentators predict that the economic recovery from the COVID lockdowns would be V shaped, or shaped like a U, an L, a W, a bathtub or like the Nike swoosh (I’m not making this up). But just when I was bored of this entire meaningless alphabet soup of predictions, I came across one that I thought might be correct and help to explain what may happen. It was that the recovery may be shaped like a K.economy

The Economic Club of New York – Stanley Druckenmiller – May 12, 2020 Page 22 So we’ve been in this slowly declining trend. You’ve had one corporate executive after another talk about how capitalism was broken the last couple of years which I found not a good comment because we weren’t doing capitalism. We were doing sort of this weird bastardized version. And now, to me, Covid has just sent us off the cliff and I think we’ve crossed the Rubicon. I don’t think we’re going back. It’s very obvious the way the Democrats acted in these so-called stimulus negotiations that this is just going to be another move. If the Democrats win, it’s a great chance for them to move things further to the left and further against capitalism. So I’m very worried and I’m sort of working under the assumption, again I’m flexible and I hope I’m wrong, but that American exceptionalism, which is the invisible hand, it is the embracement of a meritocracy, is as challenged as I’ve ever seen it in my lifetime going forward. SCOTT BESSENT: So, under those assumptions, what should allocation for an endowment, a foundation, a pension fund or family look like over the next three to five years? STANLEY DRUCKENMILLER: Well, thanks for that one. I don’t know. I think the most important message with regard to endowment is to make sure the management of whoever they’re endowing understands that the 7% and 8% assumptions on returns in terms of running their business are going to be extremely challenged.my

emerge from a downturn with sharply differing trajectories — like the arms of the Roman letter K. Imagine if you had been told this time last year that there would be a pandemic and that the measures taken to contain it would so affect the world economy that US GDP would fall by 9% in the second quarter of the year and the hospitality and travel sectors would be devastated by the measures as would large segments of traditional retail activity. Considering this would you have predicted that the MSCI World Index would deliver a return of 12.3%, slightly above its ten year average? Hopefully this illustrates the dangers of forecasting and market timing even when you know what major events will occur. I will leave you with this thought: What are the similarities between a forecaster and a one-eyed javelin thrower? Answer: Neither is likely to be very accurate but they are typically good at keeping the attention of the audience. Finally, may I wish you a happy New Year, a COVID free 2021 and thank you for your continued support for our Fund. Yours sincerely, Terry Smith CEO Fundsmith LLP Disclaimer: A Key Investor Information Document and an English language prospectus for the Fundsmith Sustainable Equity Fund are available via the Fundsmith website or on request and investors should consult these documents before purchasing shares in the fund. Past performance is not necessarily a guide to future performance.

The Economic Club of New York – Stanley Druckenmiller – May 12, 2020 Page 23 first message. When you have stock multiples where I mentioned, when you have government having gotten into the equation, when you look at history in other periods, there’s going to be payback for this in terms of higher taxes and so forth. I just don’t see the equity market being materially higher – if not lower – in five years. Interest rates, it’s hard to get a return with 10 years at 70 basis points. So I think that’s going to be a challenge. In terms of how you deal with that, I’m not sure. I just think every asset class looks tough. I do think – I’m hopeful – the disruption we’ve seen in the last seven or eight years, which has led to so many opportunities with new and exciting young companies, I don’t think that’s going to stop and I think that could accelerate. So I do think the ability for alpha within the equity market may provide opportunities that if there’s great money managers out there, I think, I’m optimistic that they could shine much more on a relative basis and hopefully on an absolute basis than has been apparent the last seven or eight years. I’ve started being negative on hedge funds publicly as soon as I left Duquesne. And I’d say on a relative basis I’m as bullish on long-short relative to everything else as I’ve been in ten years. Having said that, that’s partly because I’m worried about everything else.

SCOTT BESSENT: If we could just go back for a minute, your thesis that Steve Mnuchin is going to chew up all of Jerome Powell’s liquidity, what would be a couple of signposts that everybody on the call today could look for?

The value of investments and the income from them may fall as well as rise and be affected by changes in exchange rates, and you may not get back the amount of your original investment. Fundsmith LLP does not offer investment advice or make any recommendations regarding the suitability of its product. This document is communicated by Fundsmith LLP which is authorised and regulated by the Financial Conduct Authority. Sources: Fundsmith LLP & Bloomberg unless otherwise stated. Portfolio turnover has been calculated in accordance with the methodology laid down by the FCA. This compares the total share purchases and sales less total creations and liquidations with the average net asset value of the fund. PE ratios and Free Cash Flow Yields are based on trailing twelve month data and as at 31st December 2020 unless otherwise stated. MSCI World Index is the exclusive property of MSCI Inc. MSCI makes no express or implied warranties or representations and shall have no liability whatsoever with respect to any MSCI data contained herein.a

basis for other indices or any securities or final products. This report is not approved, reviewed or produced by MSCI. The Global Industry Classification Standard (GICS) was developed by and is the exclusive property of MSCI and Standard & Poor’s and ‘GICS®’ is a service mark of MSCI and Standard & Poor’s.

The Economic Club of New York – Stanley Druckenmiller – May 12, 2020 Page 24 STANLEY DRUCKENMILLER: I actually think it would show itself in the stock market. For reasons we went over earlier, I don’t think it would necessarily show up in the bond market. In fact, I believe from the inception of QE1 that QE was bearish for bonds and bullish for stocks and QT was bearish for stocks and bullish for bonds, which was counterintuitive to our government officials that when you shrink the bond supply, bond yields could actually go down. My theory was demand for bonds will go way up because demand for risk is down. I just think the market action itself would tell you that but it’s something you can monitor. If you look at corporate issuance and you look at Treasury issuance and then you look at the Fed’s table, they tell you what their expectations are and you follow that, but you have to be extremely open-minded that if we go to 2400 or 2200 or wherever, that the Fed could turn on the gas again and then you have to weigh the two. But look, I’m not a scientist, I’m a commonsense guy, but I just don’t think you can take massive amounts of money and give them away to people on a non-investment basis, have Steve Mnuchin and others allocate capital to zombie companies and say this is all right and it’s going to work out forever. I just doesn’t make any sense to me.and

The Economic Club of New York – Stanley Druckenmiller – May 12, 2020 Page 25 I know that our members are looking forward, would have loved hearing more from you, but unfortunately, I have to interrupt this conversation. Thank you, Stan, for being as candid as always and so insightful. And thank you, Scott, for leading a really informative conversation. Thanks again to all our members for being here. Going forward, events such these will continue to be scheduled. There’s an event that’s scheduled next week with Marty Lipton where we’ll discuss governance in this era of Covid-19 and also ESG- related regulations. And just please keep monitoring our website and we’ll continue to communicate with you also by email. So thank you. Stay safe, stay tuned, and hope to have you all soon with us.

Decision — COVID-crash purchases: bought Five Below; missed Floor & Decor on a ~$30 limit. Context: “Podium of Errors” — Bronze Medal error; stock later $102. Outcome (known): Five Below bought; Floor & Decor omission documented.