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Ray Dalio President & Chief Investment Officer

September 13, 2010

One Glendinning Place Westport, CT 06880 (203) 226-3030 www.bwater.com

If youre talented, dont go into a business in which the macro environment will determine your success.

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What each decade is like is determined by the excesses of the prior decade.

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If you can understand the linkages and not get carried away by the excitements of the times, you can maneuver strategically.

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Whenever there's a boom and debts are rising faster than incomes, a bust will follow.

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Governments will always choose to print money rather than tighten their belts, if the pain of debt gets bad enough.

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Whatever career has the highest percentage increase in HBS grads going to it is probably headed for trouble.

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You cant chase the good things you have to be ahead of them or early on their waves.

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Whenever economic conditions are extremely one way and most people are sure that they will continue, they will probably reverse.

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The most common mistake of investing is to assume that investments that had the highest returns over the past few years are the best investments rather than they have become expensive.

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INVESTMENT PRINCIPLES

A portfolio is nothing more than the weighted average of its return streams. There are only 2 types of return streams: Alphas and Betas. You need to have a well thought out game plan that is based on knowing what your return streams are like and knowing how to combine them.

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15 UNCORRELATED RETURN STREAMS THE HOLY GRAIL OF INVESTING


60% correlation 40% correlation 10% 20% correlation 10% correlation 9% 0% correlation 0.90 0.28 39% 1.00 0.25 40%
Probability of Losing Return-to- Money in a Risk Ratio Given Year

8% Annual Portfolio Standard Deviation

0.80 0.31

38%

7%

0.70 0.36

36%

6%

0.42 0.60

34%

5%

0.50 0.50

31%

4%

0.63 0.40

26%

3%

0.83 0.30

20%

2%

1.25 0.20

11%

1% 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 Number of Assets/Alphas in Portfolio

2.50 0.10

1%

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Our Alpha

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DECISION RULES ARE CONVERTED INTO RETURN STREAMS


1.60 18%

Inflation/ Unemployment
1.40 1.20 1.00 0.80

16% 14% 12% 10% 8%

T-Bill Rate

0.60 0.40 0.20 0.00 60 62 64 66 68 70 72 74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10

6% 4% 2% 0%

Inflation/ Unemployment Pressure


100% 80% 60% 40% 20% 0% -20% -40% -60% -80% -100%

T-Bill Rate
18% 16% 200% 14% 12% 10% 100% 8% 6% 4% 0% 2% 0% -50% 60 63 66 69 72 75 50% 150% 250%

Cumulative Profit

Avg Annual Ret: 3.7% Std Dev: 5.3% Ratio: 0.70

60 63 66 69 72 75 78 81 84 87 90 93 96 99 02 05 08 11

78 81

84 87

90 93

96 99

02

05 08

11

Please refer to Note 1 for relevant disclosures. HYPOTHETICAL OR SIMULATED PERFORMANCE RESULTS HAVE CERTAIN INHERENT LIMITATIONS. UNLIKE AN ACTUAL PERFORMANCE RECORD, SIMULATED RESULTS DO NOT REPRESENT ACTUAL TRADING OR THE COSTS OF MANAGING THE PORTFOLIO. ALSO, SINCE THE TRADES HAVE NOT ACTUALLY BEEN EXECUTED, THE RESULTS MAY HAVE UNDER OR OVER COMPENSATED FOR THE IMPACT, IF ANY, OF CERTAIN MARKET FACTORS, SUCH AS LACK OF LIQUIDITY. SIMULATED TRADING PROGRAMS IN GENERAL ARE ALSO SUBJECT TO THE FACT THAT THEY ARE DESIGNED WITH THE BENEFIT OF HINDSIGHT. NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL OR IS LIKELY TO ACHIEVE PROFITS OR LOSSES SIMILAR TO THOSE SHOWN. - 15 -

COMBINE UNCORRELATED RETURN STREAMS


US Bond Indicator Cum Return 200% 150% 100% 50% 0% -50% 70 74 78 82 86 90 94 98 02 70% 60% 50% 40% 30% 20% 10% 0% -10% 80 82 84 86 88 90 92 94 96 98 00 02 Opportunistic EMD Indicator Cum Return 8% 7% 6% 5% 4% 3% 2% 1% 81 83 85 87 89 91 93 95 97 99 01 0% 91 92 93 94 95 96 97 98 99 00 01 02 0% -100% 70 74 78 82 86 90 94 98 02 300% 200% 100% 500% 400% Aus - UK Equity Diff Cum Return 160% 140% 120% 100% 80% 60% 40% 20% 0% 80 82 84 86 88 90 92 94 96 98 00 02 Copper Indicator Cum Return 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% -10% 91 93 95 97 99 01 03 Aus Equity Indicator Cum Return 130% 110% 90% 70% 50% 30% 10% -10% 70 74 78 82 86 90 94 98 02 JPY/USD Indicator Cum Return

Aus Bond Diff Indicator Cum Return 80% 70% 60% 50% 40% 30% 20% 10% 0% -10%

IL Indicator Cum Return

US Yield Curve Cum Return

US Bond Diff Cum Return 2.00% 1.75% 1.50% 1.25% 1.00% 0.75% 0.50% 0.25% 0.00% -0.25%

Nominal vs IL Cum Return

3.5% 3.0% 2.5% 2.0% 1.5% 1.0% 0.5% 0.0% -0.5% 80 84 88 92 96 00 Average Alpha = 0.14%

3.0% 2.5% 2.0% 1.5% 1.0% 0.5%

2.0% 1.5% 1.0% 0.5%

Swiss Franc vs Euro

CHF vs EUR Cum Return

Average Alpha = 0.09% 0.0%

0.0% -0.5%
80 84 88 92 96 00

-0.5%

80

84

88

92

96

00

80

84

88

92

96

00

Please refer to Note 2 for relevant disclosures - 16 -

Our Beta

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CONVENTIONAL ASSET RETURN/RISK PERSPECTIVE

Expected Rates of Return For Various Asset Classes


18%

16%

Private Equity

14%
Emerging Equities

Expected Total Return

12%

10%
U.S. Equities

8%

Real Estate Non-US Fixed Income (Hedged) High Yield Debt

Non-U.S. Equities

6%

4%

Emerging Market Debt

2%
Cash Inflation Linked Core US Bonds Fixed Income

0% 0%

5%

10%

15%

20% Expected Risk

25%

30%

35%

40%

Please refer to Note 3 for relevant disclosures. - 18 -

Expected Excess Return 10% 15% 20% 25% 0% Core US Fixed Income Inflation Linked Bonds 5%

Please refer to Note 3 for relevant disclosures.

High Yield Debt

Non-US Fixed Income (Hedged)

Emerging Market Debt


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RISK-ADJUSTED RETURNS

Leverage-Adjusted Expected Excess Returns (Standardized to the Risk Level of the S&P 500)

Asset Class U.S. Equities Non-U.S. Equities Emerging Equities Private Equity Real Estate

BALANCE RISK (NOT CAPITAL) EQUALLY ACROSS ECONOMIC ENVIRONMENTS

GROWTH

INFLATION

RISING

FALLING

Please refer to Note 4 for relevant disclosures. - 20 -

The Economy: How it Works & What it Looks Like Now

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My Template Long-term Productivity Growth Long-term Debt Cycle Business Cycles

- 22 -

LONG RUN GROWTH DRIVEN BY INCREASES IN PRODUCTIVITY


Real GDP per Capita (2008 dollars, ln)
4.5

4.0

0.7% 2.1% 2.1%

3.5

2.2% 3.0%
3.0

2.4% 4.1%

2.5

0.2% 1.9% 0.8%

2.0

2.7%

1.5

1.0 00 10 20 30 40 50 60 70 80 90 00 10
Source: Global Financial Data Inc. and Bridgewater Analysis. - 23 -

WE HAVE REACHED OUR DEBT LIMITS


USA Total Debt %GDP

400%

350% 60 Year Credit Expansion 300%

250%

200%

150%

100% 1920

1930

1940

1950

1960

1970

1980

1990

2000

2010

Source: Global Financial Data Inc. and Bridgewater Analysis. - 24 -

THE SECULAR FALL IN INTEREST RATES KEPT DEBT SERVICE STABLE


USA 3m Interest Rate 18%

16% 1982

14%

12%

10%
Hard landing Hard landing

8%

6%

4%

2%

0% 1920

1930

1940

1950

1960

1970

1980

1990

2000

2010

Source: Global Financial Data Inc. and Bridgewater Analysis. - 25 -

DEBT LEVELS ROSE RAPIDLY WHILE DEBT SERVICE DID NOT


USA Household Debt % Disposable Income 140% USA Household Interest Payments % Disposable Income 20% 18% 120% 16% 14% 100% 1982 80% 12% 10% 8% 60% 6% 4% 40% 2% 20% 20 30 40 50 60 70 80 90 00 10 0%

Source: Global Financial Data Inc. and Bridgewater Analysis. - 26 -

MASSIVE PRINTING OF MONEY


US M0 as % of NGDP

20%

18%

16%

14%

12%

10%

8%

PRINTING

6%

4%

2% 1920

1940

1960

1980

2000

Source: Global Financial Data Inc. and Bridgewater Analysis. - 27 -

BIG BUDGET DEFICITS


US Federal Budget Surplus as a % of NGDP

6%

4%

2%

0%

-2%

-4%

-6% even bigger deficit -8% wartime deficit goes to -30%

-10%

-12% 1920

1930

1940

1950

1960

1970

1980

1990

2000

2010

Source: Global Financial Data Inc. and Bridgewater Analysis. - 28 -

FISCAL AND MONETARY STIMULATIONS ARE OVER


Developed World Purchases of Financial Assets (annualized) %PGDP

9% 8% 7% 6% 5% 4% 3% 2% 1% 0%
Jul-08 Oct-08 Jan-09 Apr-09 Jul-09 Oct-09 Jan-10 Apr-10 Jul-10 Oct-10 Jan-11 Apr-11 Jul-11 Oct-11 Jan-12 Apr-12 Jul-12 Oct-12

United States Trailing 3 Month Growth Impact from Stimulus (%PGDP)

4% 3% 2% 1% 0% -1% -2% -3%


Jul-08 Oct-08 Jan-09 Apr-09 Jul-09 Oct-09 Jan-10 Apr-10 Jul-10 Oct-10
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Jan-11

Apr-11

Jul-11

Oct-11

Jan-12

Apr-12

Jul-12

Oct-12

THERE ARE TWO WORLDS


Developed World Industrial Production (GDP-w eighted) 105 100 95 90 85 80 75 00 01 02 03 04 05 06 07 08 09 10

Emerging Market Industrial Production (GDP-w eighted) 120 110 100 90 80 70 60 50 40 30 00 01 02 03 04 05 06 07 08 09 10

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SECULAR IMBALANCES HAVE NOT CHANGED


Creditor Countries (const. basket) Curr Acct % NGDP 8% Debtor Countries (const. basket) Curr Acct % NGDP

6%

4%

2%

0%

-2%

-4%

-6% 00 01 02 03 04 05 06 07 08 09 10

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Appendix

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Our Principles People and culture Truth and excellence at all costs

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BAD

Allowpaintostandintheway oftheirprogress.

GOOD

Understandhowtomanagepain toproduceprogress.

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BAD

Avoidfacingharshrealities.

Faceharshrealities.

GOOD

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BAD

Worryaboutappearinggood.

Worryaboutachievingthegoal.

GOOD

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BAD

Maketheirdecisionsonthebasis offirstorderconsequences.

GOOD

Maketheirdecisionsonthebasis offirst,second andthirdorder consequences.

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BAD

Dontholdthemselvesaccountable.

Holdthemselvesaccountable.

GOOD

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Disclosures

Please read the following notes and disclosures as they provide important information and context for the research and performance presented herein. Additional information is available upon request except where the proprietary nature of the information precludes its dissemination.

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NOTES
Note 1 : This slide is meant to show an example of how Bridgewaters active market views are formulated and is purely for illustrative purposes. The charts are not intended to reflect what actual Bridgewater valuation, signals, and performance were during the periods outlined. Charts are created using backtesting of a portion of Bridgewaters systems. Note 2 : For illustrative purposes only. The example does not necessarily indicate the actual historical or current implementation of Bridgewaters strategies. Markets listed may or may not be currently traded and are subject to change without notice. Note 3 : Based on return and risk expectations from an independent study by Rocaton, a third party consultant. Note 4 : For illustrative purposes only. The example does not necessarily indicate the actual historical or current implementation of Bridgewaters strategies.

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Research/Outlook Disclosure: This research is based on Bridgewater Associates, LP proprietary research and analysis of global markets and investing. Bridgewater research utilizes (in whole and in part) data and information from public, private, and internal sources. Some internally generated information may be considered theoretical in nature and is subject to inherent limitations associated therein. External sources include the International Energy Agency, International Monetary Fund, National Bureau of Economic Research, Organisation for Economic Co-operation and Development, U.S. Department of Commerce, as well as information companies such as Bloomberg Finance L.P., CEIC Data Company Ltd., Emerging Portfolio Fund Research, Inc., Global Financial Data, Inc., Global Trade Information Services, Inc., Markit Economics Limited, Mergent, Inc., MSCI, Standard and Poors, Thomson Reuters, TrimTabs Investment Research, Inc. and Wood Mackenzie Limited. While we consider information from external sources to be reliable, we do not assume responsibility for its accuracy. The views expressed are solely those of Bridgewater Associates, LP and are subject to change without notice. Reasonable people may disagree. You should assume that Bridgewater Associates, LP has a significant financial interest in one or more of the positions and/or securities or derivatives discussed. Bridgewater Associates, LP employees may have long or short positions in and buy or sell securities or derivatives referred to in this research. Those responsible for preparing this research receive compensation based upon various factors, including, among other things, the quality of their work and firm revenues. The research in this presentation is for informational and educational purposes only and is not an offer to sell or the solicitation of an offer to buy the securities or other instruments mentioned. It does not constitute a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual investors. Investors should consider whether any advice or recommendation in this research is suitable for their particular circumstances and, where appropriate, seek professional advice, including tax advice. Investment decisions should not be based solely on simulated, hypothetical or illustrative information. The price and value of the investments referred to in this research and the income therefrom may fluctuate. Past performance is not a guide to future performance, future returns are not guaranteed, and a loss of original capital may occur. Certain transactions, including those involving futures, options, and other derivatives, give rise to substantial risk and are not suitable for all investors. Fluctuations in exchange rates could have adverse effects on the value or price of, or income derived from, certain investments. Bridgewater Associates has no obligation to provide recipients hereof with updates or changes to such data. No part of this material may be (i) copied, photocopied or duplicated in any form by any means or (ii) redistributed without the prior written consent of Bridgewater Associates, LP.

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