2015Q2 Pershing Square Holdings, Ltd., Q2 2015 Earnings Call, Aug 10, 2015

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CONTENTS

CALL PARTICIPANTS 2

PRESENTATION 3

QUESTION AND ANSWER 15

Pershing Square Holdings, Ltd. ENXTAM:PSH

FQ2 2015 Earnings Call TranscriptsMonday, August 10, 2015 3:00 PM GMT....................................................................................................................................................................

S&P Capital IQ Estimates**

**Estimates Data not available.

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PERSHING SQUARE HOLDINGS, LTD. FQ2 2015 EARNINGS CALL AUG 10, 2015

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Call Participants....................................................................................................................................................................EXECUTIVES

Ali NamvarSenior Analyst

Brian Welch

Charles Korn

David Klafter

Jordan Rubin

Paul C. HilalPartner

Ryan Israel

Ryan IsraelDirector, Member of AuditCommittee, Member ofCompensation Committee andMember of Nominating & PoliciesCommittee

William Albert AckmanChief Executive Officer andPortfolio Manager

William F. Doyle

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Presentation....................................................................................................................................................................

Operator

Good morning, everyone, and welcome to the Pershing Square Capital Management Quarterly Call. I willnow turn the call over to Bill Ackman, Founder and CEO of Pershing Square Capital Management. Pleasebegin.

William Albert AckmanChief Executive Officer and Portfolio Manager

Welcome to the call. Just the legal disclaimer, we distributed to the callers but you could also probably finda copy on our website if you'd like to give it a read. With respect to Q&A, please email your questions [email protected]. I will say we've gotten a remarkable number of questions, and we'll do our best to answerthem. So maybe don't send us too many more questions, I don't think we'll get much chance to answerthem. We're going to have a replay for the call, it will be available through August 24, and you can [email protected] if you want to get access to the replay.

Okay, let me jump to some basic statistics, and then we will cover the portfolio, and then get to Q&A.In terms of performance, and these numbers are reported publicly with respect to our public entityand privately to our investors, but quarter-to-date, the funds are up somewhere between 4.76% and5.63%. The lower -- the higher performance relates to the lower fees of our publicly traded entity. We arefully invested, as we speak, with net unencumbered cash being either slightly positive or as much as acouple of hundred basis points negative as of the present day. The big contributors for the quarter, in thesecond quarter, Valeant contributed approximately 250 basis points; Nomad, 200 basis points; Mondelez,140 basis points; Zoetis, 50 basis points, for a total of 630, 640 basis points of contribution. Offsettingthose contributions during the quarter, again this is through June 30, Herbalife, negative contributionof 220 basis points; Canadian Pacific, negative 180 basis points; Air Products, 120, 130 basis points;Howard Hughes, 70 basis points negative; and 6 basis points slightly negative of Restaurant Brands. Thefunds today are fully invested with a short position approximated 6% to 7% of capital taking each of thepresent.

In terms of portfolio, why don't we start with Mondelez. This is a new investment, a substantial one. Wetoday hold a position with a small amount of common stock at a large amount of forward contracts thatwe intend to exercise once we get HSR approval. And then we have some deep in the money longer-termcall options that we don't currently intend to exercise at today's date but may exercise in the future.

And with that, I'll turn it over to Ali Namvar. Ali, why don't you take us through Mondelez?


Thanks, Bill. So Mondelez is one of the world's largest snack companies with a market cap of about $75billion, and it has great stable of brands that you know and love, brands like Cadbury, Trident Oreo,Nabisco. Mondelez is really a new company. It was born out of the breakup of Kraft in 2012. We havean ownership stake of approximately 7.5% in Mondelez. Now Pershing Square has a long history withthis company. We first invested in Cadbury in 2007, and that's after we'd done a lot of work on thefood industry in general and concluded that snacks and confectionery are wonderful categories, they'resecularly advantaged and businesses that we'd like to own. Then we became shareholders of Kraft whenKraft was trying to acquire Cadbury in a hostile takeover, and we publicly supported Kraft's acquisition ofCadbury. And then we were shareholders of Mondelez post the break up of Kraft. And so we've had a longhistory with the company. We know the business very well and we've developed a constructive relationshipwith Mondelez's CEO, Irene Rosenfeld.

So if you think about Mondelez, this is a classic Pershing Square investment. It's highly -- very high-quality, it's very simple predictable business. As I said before, snacks and confectionery are wonderfulcategories because they typically have very high profit margins. The brands at Mondelez has this fantastic

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moats around it, and business has a wonderful opportunity for growth in the emerging markets, where ifyou look at the per capita consumption of snacks, it's -- fractions of what it is, in the developed world. Sogreat growth opportunity at Mondelez. And, finally and very importantly, despite Mondelez having thesewonderful brands and participating in this great category, Mondelez has the lowest margin in its peer set,and we think Mondelez has, by far and away, the greatest opportunity among its peers.

So this is all good. You may ask yourself, well, why now? Why are you back in? And I'd like to say thatwe're always watching great businesses and waiting for the right time to invest. And we think the righttime to invest again in Mondelez is now. And let me explain why. First, Mondelez has had a criticalinflection point, in that they're just beginning to see margins start to improve. And that's because thecompany's announced a large cost savings program and has invested quite a lot in its infrastructure toimprove its supply chain. So we think the Mondelez shareholders are going to benefit from some -- manyof these actions management has taken. Secondly and very importantly, we think the whole industryis under significant change, and part of that change is being driven by 3G and what 3G was able toaccomplish when they acquired Heinz.

Now under 3G's management philosophy and its organizational structure that it put on Heinz, Heinz wasable to reach levels of profitability that far exceed any benchmark in the industry today. And so it's safe tosay that 3G is setting new levels of benchmark for efficiency, organizational structure and profitability. Andwe think that all the leaders of the food industry are looking at this and saying, "Wow, we need to evolve,and the old ways of doing business won't pass muster. We need to evolve to grow." And so we thoughtto ourselves, we'd love to be able to participate as investors in this very interesting dynamic. And so wethought the best way to participate would be to own the company that has what we think are some ofthe best brands, that has -- really participates in the highest quality categories in the industry, that hasfantastic growth, and most importantly, has by far and away, the biggest cost-saving opportunity in thesector. That company would be Mondelez. And when you apply the new benchmarks to Mondelez, well,the opportunity for Mondelez shareholders is just staggering. And so really excited to be shareholders ofMondelez, and please stay tuned.


Thank you, Ali. Next, Valeant. Jordan, why don't you bring us up-to-date on what's transpired in the lastquarter.

Jordan Rubin

Sure, so on April 1, Valeant closed the Salix acquisition, the largest acquisition in the company's history.Results so far have been fantastic. The company's already achieved $500 million in cost synergies,financial results have exceeded budget, and management has increased full year sales expectations forthe sale of its product portfolio.

On July 23, Valeant management presented its second quarter financial results. Both sales and earningsresults exceeded management and investor expectations. Organic same-store sales growth grew 19%in the quarter. This marks the fourth straight consecutive quarter of at least 15% growth at Valeant.This quarter, growth was led by over 30% growth in Valeant's U.S. division. Following this strongresult, management has increased full year sales and range expectations for Valeant. Also on July 23,management reviewed business development activity at the company since Mike Pearson joined as CEO in2008. Their review data comprising of over $40 billion of capital invested in acquisitions across over 140transactions, and the results are nothing short of fantastic. Operating profits at acquired companies hasexceeded budget by 18%. This strong operating performance, when combined with disciplined purchaseprices, has resulted in an unlevered annualized 37% rate of return on capital invested in acquisitions. Webelieve that Valeant will continue to be able to invest capital in acquisitions at a high rate of return forsome time going forward. On July 1, the company hired a new CFO, Rob Rosiello. Rob joins the companyfrom McKinsey, where he most recently led McKinsey's M&A consulting practice. Former CFO HowardSchiller will remain with the company as a Director.

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So despite an over 50% increase in Valeant shares since we first acquired stock in early 2015, westill believe that the stock is undervalued. And you can find a full review of our Valeant thesis and thepresentation that Bill gave at the Ira Sohn Investment Conference in early May.


Thanks, Jordan. Just, again, the quarterly performance, for what it's worth, Mondelez was up 14.4% in thesecond quarter; Valeant, up 11.8%; Air Products, down 9% during the quarter, obviously, popped back upon the earnings announcement. So Brian, why don't you update us on the quarter?

Brian Welch

Sure. So on July 30, Air Products announced its fiscal Q3 results which were nothing short of impressive.The company's transformation under its new CEO, Seifi Ghasemi, is really starting to take hold, and theresults are proving as much. For the quarter, underlying revenue growth was 4%. EBIT increased 17% ona 380 basis point increase in margins to 19.5%, and EPS increased 13% during the quarter. This was alldespite meaningful foreign exchange headwinds. Excluding these headwinds, EPS growth would've been21%. The company is improving its return on capital, and its unlevered returns on capital have increased130 basis points to just under 11%, again, fantastic results.

As I mentioned, underlying growth for the business was up 4%. This was driven by 3% volume increasesand 1% increases in price. Again, a great and stable result despite economic uncertainty. The 3% volumeincreases were principally driven by new plants coming on stream in Asia. We think these plants comingon stream and contributing meaningful free cash flow to the business is a wonderful development, as thecompany has been spending billions of dollars a year in growth CapEx and most investors are not givingfull credit for this CapEx coming on stream and producing meaningful free cash flow and intrinsic valuefor the company over the coming years. We think of this CapEx as sort of a spring-loaded opportunity forgrowth in free cash flow that we're very excited about.

Operating margins were up 380 basis points across the business to 19.5% for the quarter. This is thehighest quarterly operating margin in the last 25 years for the company. Now what's important to noteis that the company has shown great progress to date, but much of the improvements over the recentquarters had really been coming from the company's non-core materials technology business. While thesewere great and were improving the earnings power and free cash flow of the business, the vast majority ofthe company's structural deficiency and performance relative to Praxair occurred in their industrial gasesbusiness. And this was really the first quarter that a lot of the company's improvements to the underlyingbusiness started to show through in the financials. The operating margins for the gases business were up300 basis points during the quarter to about 20% across the industrial gas business. Only 100 basis pointsof this improvement was due to the pass through effects of energy, which basically reduced revenue whilehaving very little impact on EBIT dollars, thus inflating margins.

Constant currency operating income growth in the gases business was 17%. And the gases businessrepresents over 75% of Air Products' consolidated EBIT and free cash flow, and so we think closing thisperformance gap to Praxair on the gas business is going to lead to meaningful intrinsic value over timefor shareholders. The company's non-core materials technology business continued to post spectacularresults. Underlying revenue growth was up 7% in the quarter. Margins were up 600 basis points to 24%.The combination of these 2 variables led to EBIT growth of 36% in the quarter. The head of this division,Guillermo Novo, highlighted that the business leaders continue to work very hard to make this businessmore independent within the Air Products corporate infrastructure, and Seifi confirmed in the Q&A sessionof the call that this business remains non-core, and that they're currently evaluating options for thisbusiness. We expect the business to be spun out in an accretive transaction in the coming quarters.

For the first time since the transformation was announced, Seifi really laid out sort of a progression anda definitive time line for closing the gap to its competitor Praxair. As you will recall, the company hasa $600 million cost-savings opportunity, and this is roughly split $300 million from corporate and G&Acuts and $300 million from operational productivity. The $300 million that are coming from corporateand SG&A cuts are expected to be fully run rate by Q2 of the 2016 fiscal year. The company has already

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eliminated 1,500 positions, most of which are coming out of the corporate headquarters, but it takesseveral quarters for many of these cuts to be fully reflected in the P&L. And so there's the delay, if youwill, in the visible progress that the company has been making, and that is just now starting to comethrough in the financials. As far as the operational productivity improvements, Seifi announced that thefull $300 million of operational productivity will be captured in the financials over the coming 4 years atroughly a linear rate.

So in conclusion, the company is well on its way to closing the gap to Praxair. This is leading to reallyspectacular results for the business, and we continue to be very excited about it is a core holding withinour portfolio.


Thank you, Brian. Next, CP, stock declined 13.6% during the quarter. Why? Why don't you update us onthe quarter, announce [ph] subsequent. Thank you.


Thank you, Bill. The economic slowdown in North America has hit the rail sector broadly. Pretty muchevery rail stock was down double digits over the quarter, and CP was no exception. But what we learnedfrom CP in its second quarter earnings report is that it's operational transformation plan continues sorobustly that despite the headwinds, the volume headwinds from the slower economy, CP was able toexpand its margins pretty meaningfully. The slow down in the -- I'm going to get to the causes of theslow down, Canada versus U.S., but something that should be recognized is that for railroads, a change ingrowth rate has an amplified effect because of supply chain stocking and de-stocking effects. This affectedCP as it did other rails. That's why the share price move of these stocks was so much greater than onewould think from the changes in the growth rates. CP's volumes declined about 6% in the quarter, anddespite this, they were nevertheless able to show 120 basis point margin expansion from -- or operatingratio improving from 65.1% to 63.9% on a fully adjusted basis. And this is very encouraging because itunderscores the robustness of the team's execution but also it underscores the substantial opportunitythat remains ahead for the company as it marches towards the high 50s operating ratio levels that theydiscussed -- that management discussed on the Q2 call.

Looking at volumes more closely. Canadian volumes actually held up fairly well over the quarter. Bycommodity type, grain, coal, potash, fertilizer, volumes were either flat or even slightly off. This kind ofcounterintuitive result is because the Canadian commodities broadly are lower cost and higher qualitythan a lot of the offerings from elsewhere in the world. So even in a soft commodity demand environment,Canadian volumes hold up relatively well. Furthermore, because Canadians economy is so much driven bythese natural resources, the decline in the Canadian dollar that inevitably follows soft commodity marketsserves to make the Canadian offerings more competitive in the global markets, and therefore, buffers theeffect of commodity weakness. The U.S. was a different story. On an FX adjusted revenue basis, crude wasdown 36% year-over-year, and similarly, U.S. grain was down 18%. The U.S. grain story underscores theunusual supply chain stocking and de-stocking effects that can add noise to railroad earnings. Becausethe U.S. dollar strengthened year-over-year for the quarter, U.S. farmers were reluctant to sell their -- toexport their grains at what were effectively lower prices. They therefore have been stockpiling. The grainsilos have been filling up, the warehouses have been filling up, and shipping volumes have correspondinglydeclined. Because these storage facilities are largely at peak capacity, we're going to start seeing thesestored grains shipping. The farmers would much rather ship these grains at somewhat lower than hopedfor prices than see the grain rot in these storage facilities. So this volume we expect will come back laterin the year.

The 6% volume decline over the quarter did not translate to a 6% revenue decline. This is becauseCanadian Pacific continues to improve service to levels that it's shippers have never before seen, andwe're talking about the train speed and the reliability of trains arriving on time at their destination, we'realso talking about car availability. Because of this improved service, Canadian Pacific was able to increaseprices 300 basis points year-over-year. That 300-basis point -- sorry, the effect of increased prices was to

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buffer the revenue line by about 300 basis points in the quarter. That's the principal reason why despitea 6% volume decline, revenues in the quarter were down only 2%. As discussed earlier, this 2% revenuedecline headwind was nevertheless overcome by operational improvements that translated ultimately toa 120 basis point adjusted operating ratio improvement. If you eliminate the adjustments, the reportedoperating ratio improvement was somewhat north of 400 basis points.

Earnings for the quarter on an adjusted basis were $2.45 a share, up about 16% year-over-year. Abouthalf of that 16% improvement though was driven by exchange, by currency changes. On a full year basis,Canadian Pacific lowered its guidance broadly consistently with what the sell side had come to expect overthe course of the quarter. Revenue guidance came down to 2% or 3% for the full year versus an originallyhoped for 7% to 8%, and full year EPS came in between -- guidance came in between $10 and $10.40or up 18% to 22% for the year. That compares with a target of a 25% or greater EPS improvement thatmanagement had targeted when they initially gave guidance for the year.

Longer term, looking at the company's 2018 targets, the company has realized over the past 9 monthsthat its opportunities for efficiencies are even greater than they had anticipated when they initially -- whenthey initiated their 2018 target back in November. As a consequence, management believes that even in asoft revenue environment, where 2018 revenues come in close to $9 billion, it expects to hit an operatingratio of between 56% and 57%. This compares with a 60% operating ratio target it had announced lastfall under a $10 billion revenue scenario. The company continue to execute on the 6% share repurchaseauthorization issued late in March of this past year and repurchased about 3.1 million shares in the quartertotaling about 1.9% of the company's total shares outstanding.

That's the quantitative report. On a qualitative basis, late in the second quarter, the company announcedthat Mark Erceg was joining as the company's Executive Vice President and Chief Financial Officer. He iscoming from a 6-year run at Masonite, where he performed extremely strongly, and that was after an 18-year career at Procter & Gamble, where he also performed extremely strongly. Both management and theboard are extremely pleased with the meaningful contributions Mark has made so far to the company.


Thank you, Paul. One interesting sort of a question, stock seemed to be valued on the basis of anexpectation for the next year's earnings and the multiple that's assigned. How much impact on theintrinsic value of CP takes place when their growth rate in a year goes from 6% to 10% or from 10% to6%? How material is that in the life of the business or how do you think about that?


Well, importantly, in the case of CP, the company's best judgment as articulated in the Q2 call, was thattheir original expectations for 2018 revenue of $10 billion was going to be lowered to about $9 billion. Inthe case of -- for another railroad, that would've had a more dramatic impact on what one would expectto be the intrinsic value of the railroad. But in the case of CP, because of discoveries they've made andinnovations that they've conceived in the past year, the efficiency improvements over that period willlargely mitigate -- not completely, but largely mitigate what would otherwise have happened. So EBITdollars expected for 2018 are only 8% lower than one might have expected versus a larger number thatyou'd expect if it gets to that, and that pretty means you can have more room in it.


Okay, interesting. Okay. Zoetis, Jordan -- or Bill. Bill is going to do Zoetis.

William F. Doyle

Yes, sure. So investors will recall that Zoetis was formerly the Animal Health business of Pfizer. It wasspun off 2 years ago. It's an incredibly diverse global business, competing in 2 segments, the companionanimal or vet segment and the livestock segment. And it has a dominant position in virtually every species

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in every geography. In short, the company had a great quarter. They grew 11% in operational revenue,excluding the effects of FX, and 20% growth in operational adjusted net income, again, excluding FX. WithFX, revenue grew 1%, so even with the global business, they manage to grow in the environment. Andadjusted net income, including FX, grew 14%. This is an example of an important trend that managementbelieves will continue indefinitely, and that is the ability to grow revenue at rates that are above theintrinsic growth rate of the animal medicine business, but to grow net income at a much faster rate,leveraging the infrastructure that they have in place. The company also announced continued productivityfrom its industry-leading R&D effort. Importantly, this quarter, they announced that the USDA has grantedconditional license for a first of its kind antibody therapy against interleukin-31. This is a medicine for dogsthat fights atopic dermatitis. This is essentially itchy dogs and it complements a groundbreaking productAPOQUEL, that they launched last year. APOQUEL is an oral medicine. The IL31 is an injectable medicine.And these 2 products position Zoetis to essentially dominate the veterinary dermatology space in thecoming years.

Additionally, in May, the company announced a major restructuring program. And this was part of ourinitial thesis that after spinning out from Pfizer, there would be a period of time when the company neededto focus and establish on developing its infrastructure independent of Pfizer. But once that infrastructurewas in place, that there'd be significant opportunity for efficiency improvements. Those improvements areunderway and include a restructuring of the business from 4 major global units into 2, a U.S. unit and aninternational unit. The reduction of about 40% of SKUs and the reorganization of the commercial footprintglobally to put more resources in the markets where they are justified and to change the mix of direct anddistribution in some of the smaller markets. We expect this program to improve operating margins from25% in '14 to 35% -- 34% to 35% in '17.


And when you say we, Bill, this to the company's guidance?

William F. Doyle

This is the company's guidance, that's right. I am on the board of this company, so I use we in thisparticular case. But this is the company's guidance. And furthermore, with the benefits of the operationalprogram, additional announced benefits in manufacturing and supply chain and further leverage of theinfrastructure which we, i.e. management, expects margin to improve to 40% by 2020.


We are grateful for that presentation, Bill. Thank you. Zoetis was up 4.3% for the quarter. QSR,Restaurant Brands, Ryan, down slightly for the quarter.

Ryan Israel

So QSR reported results a couple of weeks ago and they were fantastic, led by very good earnings growth.This really underpins our thesis that the company, both because of its internal opportunities at BurgerKing brand and the transformational acquisition of Tim Hortons, will achieve a high rate of growth over thecoming years.

I think there are 2 areas in the quarter that are worth focusing on. The first is the robust same-storesales environment at Burger King's U.S. business and the second is the continued business operationalimprovements and efficiencies at Tim Hortons. In terms of same-store sales, the company delivered an8% growth in same-store sales in its Burger King U.S. business, which is very fantastic. So the industry-leading number by a multiple relative to its closest peers, is actually the best result in more than a decadefor Burger King. The company attributes this to a variety of factors. So first, modernization of the storefootprint. Now about 40% of the Burger Kings around the U.S. are remodeled. Second is continuedimprovement in the limited time offerings such as chicken fries. Third, an improvement in the value menu.And fourthly, continued improvement in service feed time, which is getting the food more accurately andmore quickly to the end customer, which is helping bring back customers more frequently. So a lot of

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the things that 3G and QSR had been working on the last several years are finally bearing fruit. This wasactually the second quarter though where same-store sales were at industry-leading levels. And it lookslike Burger King is finally starting to close the gap with its nearest peers, Wendy's and McDonald's. To putthat in perspective, Burger King has sales per store of about $1.3 million, Wendy's is about $1.5 millionand McDonald's is slightly under $2.5 million. So if Burger King can continue these improvements, theywill be substantial driver to earnings growth in the future.

In terms of the second point, which is the operational efficiency at Tim Hortons, the business continuesto improve under 3G and QSR's ownership. The operational cost for -- the overhead costs at Tim Hortonswere down 30% relative to last year's quarter, and QSR is now starting to make improvements in theoverall expense base and Tim Hortons core businesses as well. I think what's important to point out hereis not only are they reducing costs and making the business more efficient at Tim Hortons, but they'redoing that while they continue to allow Tim Hortons to grow at a very high-level in terms of its revenue.Same-store sales continued to be very robust at Tim Hortons and the net unit growth story remains intactas Tim Hortons continues to add restaurants in the U.S., Canada and around the world.

So summing it all up. These improvements in same-store sales at Burger King U.S. and then theoperational efficiencies at Tim's are leading to very strong earnings growth. Adjusted EBITDA was up 7%for the quarter and earnings growth, because of the leveraged nature of the business, is up about 30%.And this is in spite of a strengthening dollar, which caused more than a 10 percentage point headwind toEBITDA growth and earnings.


There's an article in a journal this morning that talked about 3G really -- 3G businesses being good atcontrolling costs but not particularly good at maintaining or even growing market share. I think theBurger King story is pretty instructive in that, and we think these guys actually don't get enough creditin some sense for their ability to grow business. At Burger King, they've been involved now for, I guess,approaching 5 years. And the company has really been in a dramatic turnaround both in the same-storesales performance as well as the acceleration of the business in terms of unit growth. So we're very happyshareholders.

Jordan Rubin

The same can be said at Valeant, I think this last quarter demonstrates that Valeant, similar businessmodel, they're fantastic on costs, people forget that they're not just great at cutting costs and havingcapital, they've grown their business organically 15% year-over-year for the last 4 quarters.


No, I think it's a -- other players in the industry tend to knock "cost-cutters" because the assumption isif you're not investing, you're not building a business. And I think Burger King is a great example andValeant is a great example. Valeant invested an enormous amount of capital. They just invested andearn very high returns in that capital. And these are both standalone growth stories with the materialbenefit of their ability to deploy capital in growth. So now what's interesting about Restaurant Brands is --and why it's one of the -- we think one of the best businesses in the world is the growth that's driven atBurger King and Tim Hortons is being driven by capital being put up largely by third parties. So the bestbusinesses in the world, in my opinion, are onces we've been on royalty on, growing royalty, where youdon't need to spend capital to make the royalty grow. And so this is really, in some ways, arguably one ofthe best businesses we own.

Howard Hughes has not yet announced second quarter earnings. I expect those earnings will comeout very kind of early this week. As a result, I really can't comment to any great extent on earnings,obviously. We don't really look at the business of Howard Hughes based on quarterly earnings or evenquarterly loss sales. We think of it is a collection of assets that management is taking down the path todevelopment and turning into cash ultimately. And management continues to make very material progress

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with both building new assets, selling condominium units, selling residential land, and it's really a superbteam. We'll comment more in the next call about how we'll be able to organize next calls, what happensafter the earnings release.

With that, Platform Specialty Products, Ryan, do you want to just give -- I guess, the update is theyannounced an acquisition, and we're not allowed to comment as a result of this. So we're going to skipPlatform for this call and hopefully get back to it for the next call.

Brian, if you could update us. Nomad was up 93% for the quarter, so I guess, that was our best performer,and we made our investment basically at the beginning of the quarter. So why don't you tell us -- let mejust make a brief comment here. So Nomad is a cash shell that Martin Franklin and Noam Gottesmanlaunched a little over a year ago. We did not invest at that time and -- but we've maintained a verygood relationship with Martin. And we're always available when talented CEOs and partners approach usfor opportunities, and the identified opportunity was really too large for Nomad. They came to us earlyon, on a confidential basis, and then we -- actually Brian Welch from our team spent a fair amount oftime helping due diligence that acquisition, and we made a large investment in Nomad, which was quitetimely because we were able to make that investment contemporaneous with the announcement of thattransaction. So why don't you update us on Nomad and that deal, Brian?

Brian Welch

Sure, thanks, Bill. So Nomad, as Bill mentioned, was a special-purpose acquisition company that wascosponsored by Martin Franklin and Noam Gottesman. At that time -- Gottesman. It was a $500 millionentity that was effectively a cash shell that was raised in the spring of 2014. About 1 year after the initialentity was raised, Martin approached us and said that they were considering a $2.8 billion purchase ofIglo Group, which I'll talk a little bit about. But that in conjunction with this acquisition, they would beneeding to raise equity and they offered us an opportunity to become an anchor investor in the equityraise in conjunction with the Iglo Group deal. Now obviously, we've known Martin for a number of years.Bill has had a relationship with him going back quite sometime. But we as a firm have been great admirersof Martin's track record, building value in multiple different industries through a combination of organicgrowth and inorganic intelligent capital allocation. You can actually see some of Martin's track recordlaid out in our Ira Sohn presentation on platform companies, but he's had a very successful track recordover the course of decades, first, with Benson Eyecare, next, with Jarden Corp., where he produced overforty-five-fold returns for investors over nearly 1.5 decades, and most recently with Platform SpecialtyProducts, where we're obviously an anchor shareholder as well and have had great success thus far. Sowe're obviously very excited to conduct diligence on Iglo and to evaluate the opportunity. After conductingour diligence, we enthusiastically subscribed to $350 million during the company's private placementof shares in conjunction with the Iglo transaction, which we committed to in April, but as a point ofclarification, actually funded in June just before the acquisition closed. This amounted to a 22% ownershipstake in Nomad. And in conjunction with this investment, I joined the Board of Directors on June 1 as thetransaction closed.

Now Iglo is the leading branded frozen food company in Europe. The company has about EUR 1.5 billionin sales. And it is a very stable business with incredible brand equity, high EBITDA margins of about 20%,and it is a very cash-generative business that we think has meaningful opportunities for organic growthand will provide a great base as Nomad looks to consolidate the packaged foods sector over time. As Imentioned, the business has a dominant position within European frozen foods. In fact, we are 2.2x thesize of the next largest competitor. The company has great geographic exposure with leading positions inthe U.K., Italy and Germany. And from a product perspective, our exposure is principally to fish, frozenvegetables and other lean proteins, which we expect will have a lot of secular support from increasinglyhealth conscious consumer over time. Historically, growth for the business has been essentially flat, butthe team sees meaningful opportunity to take the company's iconic brand names and extend them toother frozen food categories, with the example cited being breakfast offerings, which the company iscurrently in the process of rolling out. So we think there's some interesting organic growth opportunitiesfor the business.

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The Iglo purchase price was one that was pretty attractive. The $2.8 billion purchase price representedjust about 8.5x EBITDA. Now what's important to note is this business has very modest CapEx needs, justunder 2% of sales, and it also has a true cash tax rate that is about 21%. So when you think about 8.5xEBITDA multiple, do not compare that to U.S. assets that paid much higher taxes or to capital-intensivebusinesses that require meaningful capital to run those businesses. Given the low cash tax rate and thelow CapEx needs, our purchase price represented about 12x unlevered free cash flow. With about 4 turnsof leverage on the business, this sets up for a levered free cash flow multiple of just over 8x at our initialpurchase price. Now obviously, that's all very attractive, but our interest in the business is not solely basedon this one asset. We think there's meaningful opportunity to drive substantial platform value in the foodindustry over time. The packaged foods industry is a $2.4 billion sales industry, and it's a very fragmentedindustry. Certain categories like frozen...


The category is just at $2.4 billion?

Brian Welch

$2.4 trillion, I'm sorry.


$2.4 billion, we're in trouble.

Brian Welch

$2.4 trillion industry that is quite fragmented. Certain categories like frozen food, the top 10 playersin the U.S. as an example, are only 24% of industry sales. So there's great opportunity to consolidateassets over time. Obviously, with the presence of 3G in various different activist investors in the spacesuch as our involvement in Mondelez and other activists involved in companies like ConAgra is creatinga lot of activity within the space and we think may lead to very interesting M&A opportunities for abusiness like Nomad. So look, in short, we think this is an attractive base business in a very attractiveindustry with meaningful opportunity to add value over time via inorganic and intelligent capital allocation.The company has an international territorial tax domicile which we think would be very valuable as weacquire international assets over time. We built a great management team led by our recent CEO hire,Stefan Descheemaeker, who has a background at AB InBev. And he's trained, if you will, under the 3Gmanagement team and brings a lot of skill in both operational productivity and M&A to the team.


Thank you, Brian. David Klafter, do you want to give us a quick update on Fannie and Freddie from a legalpoint of view?

David Klafter

Thanks, Bill. As everyone will remember, the shareholders are challenging what's been called the networth sweep. It was put in place in August of 2012 and under it, the Treasury Department takes everydollar of positive net worth from Fannie and Freddie every quarter. As long as the net worth sweepis in place, the companies will be unable to build any capital and, therefore, they'll be unable to exitconservatorship. Conservatorship is supposed to be a temporary arrangement which puts the companiesinto a safe and solvent condition, allows them to rehabilitate and exit conservatorship. At this point, nextmonth, they will be -- it will be 7 years since the conservatorship was created with no end in sight.

Shareholders are suing in 2 different courts. In the Court of Federal Claims, shareholders are challengingthe net worth sweep as an unconstitutional taking without compensation because if the net worthsweep stays in effect, the securities will be worth effectively 0. And then in the district court, theshareholders are challenging the net worth sweep under the relevant statutes saying that they are

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arbitrary and capricious and they exceed the authority of FHFA and the Treasury Department. In theCourt of Federal claims, the cases are proceeding. The plaintiffs, the shareholders, are taking discoveryfrom the government, which includes documents and oral testimony and depositions. We do not yet haveaccess, though we're getting an access to the depositions and the documents. And from what we can seefrom Fairholme papers, Fairholme is the lead plaintiff, it sounds like they are finding evidence that thegovernment, in fact, knew that Fannie and Freddie were turning a corner and becoming profitable at thetime the net worth sweep was put in place.

In the District Court in September of last year, the judge dismissed the statutory claims, and thoseclaims are now on appeal to the D.C. Circuit Court. The plaintiffs have filed their brief, which we thinkis a very stong one, seeking to overturn the decision, among other things saying that the court did noteven evaluate the administrative record. There were amici, that is friend of the court briefs, filed from 8different parties including us. A couple of them I think are noteworthy. William Isaac, who is the formerFTC Chairman, submitted a brief where he explained that...


FDIC.

David Klafter

Sorry, FDIC Chairman, submitted a brief explaining that he had overseen hundreds of conservatorship andreceiverships of banks during the S&L crisis. And in his understanding of banking law, the net worth sweepwould overturn 80 years of understanding of how the conservatorship of a bank is supposed to work,mainly to rehabilitate and put the bank back in business. He also suggests that if the net worth sweep isupheld, than the financing market could dry up for banks and especially when they're getting in troubleand they're looking for new capital because if the net worth sweep is upheld, new sources of capital wouldhave to fear that their capital could be wiped out by the government. Tim Howard, a former CFO of FannieMae, submitted a brief explaining that the entire need for treasury investment in Fannie and Freddie wasbecause of noncash accounting decisions that were forced upon Fannie and Freddie by FHFA. Treasury putin $190 billion and then, shortly after the net worth sweep was enacted, the noncash reductions to incomewere reversed causing the companies to have noncash income which then turned into cash that was takenout by the treasury.

So we remain still hopeful that the lawsuits will be successful. The latest news we heard last week isthat the D.C. circuit, to which Fairholme submitted some of their papers and deposition transcripts, hassuspended their briefing schedule for the appeal. We think this is so that the court will have a chance toreview the new evidence which we think should be good for the plaintiffs.


I guess I'm not hopeful, I'm confident. But no, I thought it was actually a very significant number ofdevelopments during the quarter, very positive for Fannie and Freddie, not reflected in the share pricebut we think significant. Herbalife, Charles, why don't you update us on the financial performance of thebusiness during the quarter.

Charles Korn

Sure, so I'd like to report our Q2 financial results on August...


They're our second best performing stock in the portfolio, stock was up 28% for the quarter. Go ahead,Charles.

Charles Korn

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They reported Q2 results on August 5 at the close. The company reported net sales declines in everyindividually reported country and geographic segment with the exclusion of China, which notably increased39% year-over-year. So on a consolidated basis, net sales declined 11%. And if you back out China,the rest of the business essentially declined 19%. On a currency adjusted basis, most markets similarlydeclined, including certain mature markets such as South Korea, which declined 30% year-over-year ona currency adjusted basis and the United Kingdom, which was previously a growth market, that declined21% year-over-year. And on a consolidated basis, currency adjusted net sales were -- grew 1% with theexclusion of Venezuela.

Turning to profitability, Herbalife reported their company defined adjusted net income of $106 million inthe quarter, which was down 25% year-over-year. That basic earnings translated into adjusted EPS of$1.24, which means what was essentially management's lower guidance levels. And the guidance nowcalls -- 2015 guidance now calls for a range of $4.50 to $4.70 which, at the midpoint, is down 22% year-over-year or 6% on a currency adjusted basis, excluding Venezuela. I think the key story in the quarterwas China which continues to be the core driver of growth for this business. China surpassed the U.S. asHerbalife's largest market on the net sales basis in the quarter and we believe this has been intrinsicallya lower quality base of business. We've previously explained why we believe Herbalife's China businessviolates local laws. If you recall, China had some of the strictest anti-MLM provisions in the world. Wepreviously outlined this...


In China, it's not just illegal to run a permit scheme, it's also illegal to run a multilevel marketing companyand we believe that Herbalife's business in China is run precisely the same way it's run here, usingdifferent nomenclature. And that we think is a provable fact and we hopefully will make some progress inthat regard. Go ahead, Charles.

Charles Korn

We detailed our research findings in our March 2014 presentation, which is available on our Facts AboutHerbalife website. We encourage interested parties to review that presentation. Another interestingthing worth noting is that their expenses for defending the business model, as they call it, increased60% sequentially over last quarter and their expenses responding to regulatory inquiries increased 70%sequentially over last quarter and was $13 million consolidated for this quarter. So contrary to mediareports or to research notes, it seems like the regulatory side is ongoing. I'll let David Klafter comment onthat.

David Klafter

A few updates on the non-financial side. In June, a class-action settlement in the Basdic distributor casewas approved, that settlement was expected and doesn't affect any government action. On July 25, thepress reported on a video of Michael Johnson, the CEO, admitting that some distributors engaged towhat he call pyramiding and making false promises. And Johnson said that success in Herbalife was theequivalent of a lottery tickets. On August 3, it was disclosed but not by the company...


We've not yet gotten a copy of that video but we will get a copy of that video, hopefully, at some point.And really, it was a management presentation made internally that was recorded by the company and wethink it's quite an interesting document from a legal point of view.

David Klafter

On August 3, it was disclosed but not by the company that the Chief Compliance Officer have left thebusiness and going to another firm. Herbalife, we know, has not changed its disclosure about the ongoingregulatory investigations and about the Department of Justice seeking information from the company,some of its members and others about the business. One analyst speculated recently that the SEC is done

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with any investigation of Herbalife and that the FTC investigation will the done the summer. We have notseen any basis for those speculations. Herbalife has now spent about $90 million defending itself andanswering regulators. It still does not spend a penny that we know of on proving retail sales. So despitethe recent volatility in the pricing, we remain confident, not just hopeful, that our thesis is correct and thatHerbalife is an unlawful pyramid scheme.

William Albert AckmanChief Executive Officer and Portfolio ManagerWhat's interesting is the best evidence that Herbalife is a pyramid scheme I would say is this quarter,right? If you look at Mondelez's sales, they don't go up 80% in the U.K. and in the following year declineby 20%, right? South Korea sales of Oreos don't go up 50% and then collapse 30% in the following year.What's interesting is Herbalife is collapsing in almost every geography in the world except for China.Michael Johnson made reference to this phenomenon calling it pop and drop, which is how they refer toit internally. He actually made a comment about China a number of years ago that says you can go for avery long time in this market before you could pop, for a very long time before the market drops. And theunfortunate thing for China is that their citizens are being defrauded by the company and there are a lotof them, so they can pop for quite some time in China. What's remarkable to me about the share priceis today the stock's trading at something in the order of 13, 13.5 -- Pershing 14x earnings. And Herbalifehistorically prior to Pershing's involvement, traded at something in the order of 12x earnings on average.The stock is clearly not, again, I don't know a business that's reported such poor earnings declining ona volume and revenue basis and most of the rest of the world with China being the strongest part of thestory. China, I think, is a major regulatory risk for the company, i.e. China do not like pyramid schemesnevertheless, but they also don't like multilevel marketing companies. We have not yet engaged withChinese regulators, but it's clearly on the list of priorities.

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Question and Answer....................................................................................................................................................................


With that, I'm going to go to questions. We do have a large number of questions, we may not get throughall of them, we might not get through all of them and I encourage you, if your question is not answered,to contact the IR team at Pershing Square. Assuming your track record for the last -- what we did hereis the team tried to consolidate questions we've got many of the same kinds of questions. So if we readone, it may not be yours but we'll hopefully do our best. Assuming your track record in the last 10 yearsis replicated over the next decades, and no reason to surmise otherwise, will Pershing's AUM grow toan unwieldy level that would dilute the potential returns of your strategy, could you comment on theseconcerns? What actions will we take to remedy this dynamic, returning cash, et cetera? Have you thoughtabout how you'll treat long-term investors who prefer to maintain their exposure rather than receivedistributions?

We think for the foreseeable future, the reason for the foreseeable future, capital is an asset for the firmand an asset for the strategy and the most invested we've been and we have other interesting ideas thatwe are making their way through the due diligence of our analysis. But it could change. If we got to --if we view this as a high-return strategy, if you got to a level of capital where capital was a constrainton performance, the way we'd address that problem is return the capital. How we deal with long-terminvestors versus short-term investors, we have yet to make a decision about that, but we try to treat all ofour investors equally but we are obviously incredibly appreciative of the people who backed us early on.

With whom do you talk before initiating an investment? How many companies do you look at beforeinvesting in one?

We do a fair amount of talking internally. As you're referring to the analysis we do, we often talk tocompetitors, people in the industry, just to get a sense of industry dynamics. You want to talk to thebest operators, et cetera. And we look at many companies, I don't think we've kept a count of how manywe look at before we invest in one. But probably over the course of the year, we've done work on -- Iwould say as a team, in reasonable depth, probably 30-ish, tens of business, not hundreds, will spend avery short amount of time on a larger number often dismissing the business for not meeting our qualitythresholds. But we meet our quality thresholds and the price is interesting, we will spend a fair amount oftime and even then only 1 or 2 ideas typically come into the portfolio.

What's your record margin of safety? We're looking for a very substantial discount. Most of the things weinvest in we expect to double or more over a multi-year period of time. It gives you a sense of marginsafety. We very often use multiples of valuation, DCF models. I think when we explained what we ownkind of simplistically, we'll use multiples as a way to characterize the valuation of the business. But we dothink of the value of something, it's a present value of the cash. You can take out of it over its life. We docertainly build DCF models. It depends on the nature of the earnings stream of the business, how stable itis, how dramatically it can be changed in the short term.

Sectors do you favor? Which to avoid?

The answer is we like the highest quality businesses. Take a page from my professor from HarvardBusiness School, Michael Porter. If you do kind of Michael Porter 5 forces analysis of the company, theones that, I guess, you get a check mark or an A plus in each of those various categories generally meetour quality threshold.

Why do you keep ownership of each company under 10% except for Platform? All of your holdings are on9% of the outstanding float.

It's not actually true. We have greater than 10% positions in Nomad, in Howard Hughes, in restaurantbrands. There are some limitations when you cross the 10% threshold. It affects our ability to buy and sellsecurities so-called 16B and other filing requirements. But I think those are -- in some cases, it's hard for

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us to buy more than if we're building a stake. And we bought pretty much as much Mondelez as we couldpossibly buy. We weren't really constrained if we had an unlimited amount of capital, we'd probably still goto -- buy only 7.5% of that company without having to make a public disclosure.

Why aren't you doing more shorts at this time?

Short selling is risky, difficult and we're a pretty concentrated strategy and we don't want to do manysmall shorts, so we'd have to at least -- it would have to be very large companies, we're looking forcases where there's outright fraud or stock price is going to decline vary materially. We don't like theanti-asymmetry, if you will, of short selling. We do like the asymmetry, if you will, of investing againstaccredited company buying CBS. But we have to recently identify investments that meet that criteria.

Bill said several times Pershing is likely to be discriminating about shortening. Does this mean we are veryunlikely to see new shorts in the portfolio next few years?

It doesn't mean we actually won't see. I would say it's unlikely we are going to find a shorter scale, butyou never know. Now there's a large base of locked down capital, what your investors anticipate to thelikely range of net equity exposure? The answer is we keep money in cash unless we find high-returnopportunities. We've got a large number of those that were fully invested today. The stability of the capitalbase allows us to be fully invested without having to keep a large base of capital to meet redemptions, butwe don't automatically become fully invested for that reason. It depends on our ability to identify the riskby portfolio of high-quality investments.

Is there any desire to start a Pershing Square blank check company?

This would be a cash shell. This maybe something we do in the future. We have done -- we partnered withothers doing cash shells, most notably Platform -- I'm sorry, most notably really Justice Holdings and thenPlatform and Nomad, which were really led by Martin. But I think it's a reason to likely that we will do oneas well.

What is the most important lesson learned since the financial crisis?

I think there's so many, it's hard to enumerate, so we'll table that one.

What is the desire for and probability of an arrangement similar to the Allergan merger attempt? Maybesomething in another industry?

The answer is we are very open to doing another Valeant-Allergan type transaction, where we team upwith a strategic acquirer that we like and trust. And we partner with them to make an offer for another --catalyze a merger with another business.

What has been the dominant source of idea generation for Pershing Square?

I would say probably reading the newspaper and looking at the capital markets generally. And in morerecent years, we've seen a fairly significant inbound of sort of inbound increase from others, interestedin either partnering with us or big passive shareholders who are unhappy with the performance of acompany. Those who become, I would say, the greater source of ideas in recent years.

Do any of your investments have the ability to be as diverse as Valeant from a capital allocationperspective in regards to Platform, stocking extremely high IRR deal in a much smaller scale?

I think Platform specialty products offer some very analogous features to Valeant in that respect.

Do you have percentage limits on portfolio allocations?

No. But on the large side, mid-20% position is a very large investment for us. So we don't bring in-- do not -- okay, Platform. Okay, so we're going to bring in the values of acquisition-driven businessmodels to greater attention. Pershing Square has helped these valuations expand due to greater marketunderstanding.

How are the current valuations Platform companies trending versus history?

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I don't have a particular -- I don't have that analysis.

How do you value the amount of future deals, speculation baked into current values of these companies atrecord low interest rates?

We've been fortunate in some sense in that the value of the Platforms we've owned have not given muchvalue to the Platform itself. And we've been able to own companies like Valeant at a very deep discountto the underlying business value without giving credit for them doing transactions. I think Platform, Iguess, we don't have a lot of comment on the Platform. But we think, the companies we own today are atreasonable prices in light of the underlying businesses without adding a meaningful premium for Platform.So maybe we've been helpful, in helping people think about this value. I don't know that it's really beenreflected in the companies that we've invested in to a great extent.

To what extent is your research take into account the possibility of Fed rate hike over the medium or long-term future, which may influence the performance of Platform companies?

The biggest risk factors to a so-called Platform company is their ability to access capital on attractiveterms. If you can own the business without assigning a value to that asset, if you will, you can moregreatly mitigate this risk.

Pershing's first big show of [indiscernible] we're Martin Franklin, so why not Jarden, which you mentioneddifferent times in your outsider presentation? I think we missed Jarden. We thought we should have beena shareholder of Jarden over time. I think it's a great company, but less of an opportunity for us today atthe current valuation and scale.

Do you think Berkshire Hathaway is evolved into a Platform company? Are there value-creating changes,you'd want to see at Pershing Square investor in Berkshire? Surely, Buffet can't be doing everything right.

I think, Buffet is doing a great job. I think Berkshire is in effect a Platform company, right? It's a portfolioof different platforms. And Berkshire like Valeant, like some of these other companies, really has nothistorically -- I think the stock today still probably trades at a discount to the value of the underlyingassets without giving effect to the possibility to deploy capital. And it's kind of remarkable becauseBerkshire, the record is so well known.

It's a Platform question I have to skip. You plan a great Platform, it comes in your own and thus bringtogether great companies with great capital allocators like Howard Hughes, certainly. Okay, Mondelez.When did you sell to fund the new position or did you fund it through asset inflows?

We funded Mondelez through a combination of asset inflows, bond proceeds that we raised and some salesof small position which encourage Mondelez to look at transaction with Kraft Heinz, as well as Nomad. I'mnot sure -- I think, I'm not sure what that means, okay.


Nomad is a little small for Mondelez, but someday.


Nomad to buy Mondelez?


I'm not sure what the question is about.


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Yes. I'm sure either. What is your opinion on regulation, and how confident are you there won't be pricecontrols in the future? It's really a rail question, Paul?


It's very hard to be confident about what a regulator might or may not do. But what we can say is thatwe are confident that logic would have not support adverse regulation of the rail industry. Railroads are --public policy calls for enabling the railroads to earn sufficient profit to further enhance the fluidity of theNorth American rail infrastructure. Rails are a less expensive, more environmentally sound, safer and morereliable way to move freight across the country than the alternative which is the highway. Additionally,the cost of maintaining the rail infrastructure is won by the private sector, the rail industry shareholders,whereas the cost of maintaining the highway infrastructure is won by the taxpayers. So all of these thingsconsidered, it's hard to envisage a great deal of momentum supporting a move to reregulate the railindustry. And so far, we haven't seen any rumblings in that direction.


How do you view high CapEx levels in the rail industry? It seems it's very difficult to know the splitbetween maintenance and growth CapEx unless the return on this capital. I think it's interesting to notethat CP was spending -- one of the attacks on shareholder activists is that they encourage companies tounder invest in their businesses to promote short-term share prices. At the time of our investment in CP,we're spending about $750 million a year in -- what's certainly pretty much all the maintenance CapExand it was inadequate to maintain the rail. I think we -- the company has talked about $800 million, $900million of what we think the maintenance CapEx is today?


Rails generally spend about 10% of the revenue on maintenance CapEx. None of the railroads specificallycalls out maintenance versus growth CapEx. As Bill points out, the total capital expenditure budget atCanadian Pacific in 2011 was $740 million. Today and for the next few years it's is going to be about $1.5billion. And during this period, revenues are not -- they have not doubled, revenues are up only about15% or 18%.


This is a company with a large -- it's probably the company we have one of the most, highest degree ofinfluences over. It's doubled its spending on CapEx and we feel very comfortable with how that money isbeing spent and the returns that are being earned in that capital.


We have very long time horizon in our investment -- in our investing. And when we see companiesthat are over investing in CapEx, as we've seen in other companies in our portfolio, we ask them toreduce it. When we see companies with a very strong management that have opportunities to deploycapital at attractive rates of return, we encourage them to do that. And this management team has beeninvesting at very attractive rates of return. The CapEx levels look high because most investment analystscompare them to the D&A levels, which are dramatically lower. And the important thing to recognize whenanalyzing a railroad financial statements is that the D&A levels represent depreciation and amortizationof investments that were made literally decades earlier. So because of price inflation, you'll see a bigmismatch between CapEx and D&A and that creates the feeling that railroads are a lot more capitalintensive.


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But in terms of the kind of businesses we own, the rail, CPs, if not the most -- is probably the most capitalintensive other than air products. I mean those 2 are -- again, our first choice business is a business thatearns very high return on capital and the capital is put up by some else. So you don't need capital to growthe business. Our second choice business is a business where we do need capital to grow the business,but that returns that can be earned are quite high. The seeking of the optionality are vertically integratedacross the transportation industry, I think, that's possible at this point that's really speculation.

Nomad, how do you value your platform before it started operating. It's a pilot cash, generally -- apilot cash is where the pilot cash unless it's controlled by a very talented operator investor and I pay apremium for pilot cash. How to accept that premium, I'll leave that for the next call.

You worry about exchange rates with this investment in Nomad? I would say, I probably worry about themore for Mondelez. In might have scaled the business. We do spend money either by combining options tohedge the currency risk or by entering into futures of forward contracts. We do think about currency riskwith respect our investments. And we do hedge some or all of that investment just based on judgment attimes, and other times we don't. It's a judgment call.

What's the runway for restaurant brands? I think the runway is quite long. The fast food industry is verylarge relatively to the size of this company and we think they are capable of running more than just.Interestingly, the company was called Burger King Worldwide when they announced the acquisition of TimHortons. I guess they could have called it Burger King Tim Hortons, insthead they called it RestaurantBrands. It barely got to a plural with 2 concepts, so we think their ambitions, just by the name, are quitemuch larger.

Howard Hughes. Uniqueness of Howard Hughes' model results in a marriage between upside fromdevelopments and resiliency from cash flow and properties. This may be the best structure for long-termshareholders. However, despite the excellent 4.25 year return, the stock traded significant discountsto underlying value. So the case investors may never be able to wrap their heads around some of theparts calculation. They need to see value even its NOI ramps. I guess that's the speculation about peoplewe don't know, so it's hard to say. Is there way to preserve the current structure on better highlightingunderlying value which are attracting stock, et cetera. Other desires for Howard Hughes being otheroutsider type company engaging spinoffs at a corporate transactions, decided to do this with a differentcompany, something you can deconsolidation at Sears Holdings. So I think what you can be comfortablewith is that we're going to, and the management team is very focused on maximizing value of existingassets and then deploying capital and earning attractive returns on the capitals that are deployed. Atthe current scale of the business and at the current stage of these various developments, I would saythat Howard Hughes is structured the right way. Up until very recently, it was not a corporate taxpayer.With time, and you'll see the more recent earnings report that the income-producing assets are becominga greater percentage of the value of the company as they start turning into generating net operatingincome. And there will be a time where it makes sense to look at the structure of the company and decidewhether there are some separation between income-producing assets and assets that you cannot own andflow through tax entities, so like the master-planned community land sale type assets. I don't think thattime is today, but it's something that we discussed at a board level and it's something we're quite focusedon. The share price of Howard Hughes has not been a high priority for the company in terms of driving theshare price up. The company has not issued equity, in fact, it's retired equities. We've been -- the currentshareholders are big beneficiary of the fact we brought back warrants, and we brought back warrants fromBlackstone, Fairholme and Brookfield when the stock was 72. We brought back basically 10% or more ofthe company. And that couldn't have happened if the company was trading at intrinsic value. There's abenefit was trading in intrinsic values. So there's a benefit for long-term holders if the company tradesa discount though intrinsic value program it would be generating a huge amount of cash over the nextseveral years as condominium contracts turn into sales, when those projects are completed. And thenthe company actually can be much more opportunistic either in retiring shares or pursuing additionalinvestments.

Fannie and Freddie. Wall Street Journal reported on August 4 that Freddie mac earned $962 million afterinterest and taxes in the most recent quarter. The Wall Street Journal wrote, "This suggests that Freddie'slong-term earnings are as far less than the $6 billion projected by William Ackman, Founder Pershing

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Square Capital Management at a conference last year. So here it is The Wall Street Journal saying, I got ittotally wrong. $9 billion versus $6 billion. So Ryan, did I get it wrong?

Ryan IsraelDirector, Member of Audit Committee, Member of Compensation Committee and Member of Nominating &Policies Committee

No. I think we should...


Did we get it wrong?


We should help correct their math. There are several...


Did The Wall Street Journal forget that the quarterly earnings is a different number than the annualearnings.


Yes. I think that would be the first math suggestion I would have. So the comparable numbers for thearticle would be not a little bit less than $1 billion per quarter versus $6 billion annual, but $4 billionannually versus $6 billion. So still $2 billion up. I think what's important to highlight is the biggest driverto get to our estimate of $6 billion is the increase in what Fannie and Freddie are currently charging theirnew customers that when they continue that rate will translate into the average piece that they charge. Sothey're charging a new customers 60 basis points for every new mortgage that they're getting that Fannieand Freddie securitized. But the average that Fannie and Freddie charges all customers is only about halfthat level or 30 basis points because 5 years ago, they were charging much lower prices before they -- I'msorry, 7 years ago they're charging much lower prices before conservatorship. That closing of the gap from30 basis points to 60, which will happen over the next several years, will add about $3 billion after-tax forFreddie. So the $4 billion plus the $3 billion will give you $7 billion, which is actually $1 billion more thanour estimate. Now there are puts and takes to that number, but I'd say, overall, our estimate of $6 billionlooks right on track.


Let me just say, I read The Wall Street Journal everyday, I think it is a phenomenal newspaper. And Ithink that Wall Street Journal generally gets it right. The Wall Street Journal heard on The Street coverageof Fannie and Freddie has been the most factually inaccurate articles I've read in the history of thenewspaper. Frankly, it's embarrassing for the paper and we've actually considered and we may very wellput together a little binder for them to help them on the math -- on the basic math. I mean, reportinga quarterly number, comparing a quarterly number to our annual earnings estimate is just another sortof embarrassing example. So great newspaper, but heard on The Street, Fannie and Freddie has been adisaster, okay. Was I clear about that?

Is Pershing worried about significant dilution that comes in the release from conservatorship in order toget their capital levels up?

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We think we are pretty good at protecting ourself from dilution and we hope to be in a position we'rerenegotiating a deal with the government to address any inadequacy in the capital base of Fannie andFreddie.

P id="254582424" name="Ryan Israel" type="E" />

There's a long point between what we think the stocks are worth and what they're trading at now. So anydilution, I imagine be a multiple of where the current stocks are at the minimum.


Yes. And once there's a resolution and the entity is rate capped otherwise the stock is not going to be at$2.50.

If network stip is ruled to be illegal, aren't all the properties the government took over the past couple ofyears illegal as well? Are you going to get them back?

Yes.

Questions, what is topping Fannie and Freddie from relisting in the stock on the New York StockExchange? Are you trying to help them do that?

We're not trying to help them to that. I think, I guess, if they could probably relist -- I don't know if theymade an effort to do so. Ryan do you have a point of view?


FHFA still controls the board and the operational decisions of the company. So while on conservatorship,it's not in the executive of Fannie and Freddie's control. I don't think there's anything stopping themexcept for the FHFA.


It could easily be listed in the New York Stock Exchange if the conservator would allow that to take place.And one other point on this conservatorship, and I think it's quite important, and I really encourage peopleto read the former FDIC chair's amicus brief. Basically, what he said, the way the Fannie and Freddieconservatorship was constructed, it was built literally off of the conservatorship model that is used forall of the FDIC bank rescues. It's really the same language, repurposed for Fannie and Freddie. The wayconservatorship is supposed to work, if a bank gets into trouble, a conservator steps in to preserve andenhance the value of the assets of the bank. And then they distribute the assets according to the variouscreditors in their hierarchy of corporate clients. And what's important about that is that people will lendmoney to banks can feel comfortable even if they're coming in late in the day as long as there's sufficientasset value to protect their claim, that it can be a safe thing to put in preferred equity or debt into afailing financial institution. And that's important for the ability to rescue community banks around thecountry, smaller banks around the country and even large financial institutions. If it becomes set of lawthat the conservator can wake up one day and decide to keep 100% of the profits of a bank or Fannie andFreddie forever, then no one is safe, let along providing equity to a bank. But even providing -- buyinga bond or deferred stock or making a loan to financial institution. If banks cannot leverage their capitalstructures, it will materially increase the cost of capital of the financial institution. As a result, it wouldalso lower the share prices, obviously, of financial institutions. And the combination of those things willmeaningfully increase the cost of credit, not just for mortgages, but for all businesses around the country.So the unintended consequences of the network sweep are very, very materially negative for the country.And I think the former chair of the FDIC standing up to make this point on behalf of the independentcommunity banks, I think is a very powerful political constituency that's frankly a lot more appealing thanhedge funds, and I think will actually have some weight.

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You're restricting in buying more shares than 10%, why not buy 25% stake?

Again, when you go more than 10% it reduces our flexibility. We do own more than 10% economicallybecause we have a total return swap and we have brought additional economic interest in the company.

Do ever foresee an opportunity of getting a board seat at Fannie and Freddie?

The board is controlled by the conservator. We have no ability. There's no shareholder vote. Shareholdershave been stripped from their rights, so we can't join the board. We've considered setting up, if you will,a shadow board of Fannie and Freddie, just so that the stakeholders have an opportunity to discuss thefuture of the business. It may be something we do in the future. We look forward to -- okay.

Valeant. In order to evaluate R&D costs of Valeant in a sustainable basis, don't you think one shouldinclude acquired pipelines as an R&D cost? For example, when Salix will be included as organic. In 2016,Xifaxan will contribute very positively to EPS. So the question is, should we be -- Jordan?

Jordan Rubin

Yes. There are a couple of ways to think about this. So first of all, organic growth in the quarter was19%. That growth was, in part, material for newly launched product. If we strip those products out or therevenue base, growth still would have been in excess of 10% for the quarter. But I don't even know if it'sappropriate to strip those products out because, in large part, those products were actually developed byValeant scientists internally. Another important point to make is that when Valeant evaluates a potentialtransaction, they presume that the pipeline of the acquired company is worth nothing. And that thetransaction must clear their financial hurdles presuming that, that pipeline fails completely. Therefore, anysuccess that they do have from required pipeline is the result of winning on the free option.


A follow-up to that is what's your view on the required level of R&D spending? Do you think that the lowR&D to sales model works in other areas of pharma as well? Or only in areas with low innovation? Howconfident are you that this low R&D model can generate sustainable growth not including M&A and thatthe very high margins are not competed away? Maybe one for Bill, how do you think about the sustainablelevel of R&D for Valeant in this business.

William F. Doyle

So I don't think that R&D should be thought of, in that circumstance, separate from M&A as a source ofnew products. At the end of the day, pharmaceutical industry is in a period of innovation and there's anopportunity for companies to develop products and acquire products. And they should look at both ofthose options and determine using what mix of those tools that they can bring those products into theirportfolios and leverage their distribution models most effectively. What they shouldn't do is overpay foracquisitions. They have to be very disciplined about what they'll pay. And they shouldn't flush moneydown the toilet in organizations that cannot produce output in their R&D. It turns out the larger traditionalcompanies tend not to attract the types of researchers that are the most productive. We've seen this.They tend to go to early-stage companies where they can focus on their particular areas of expertise andpersonally get a high reward based on the success of those products. So right now, the biggest companiesare most productive when they focus on development doing clinical trials. It's very high profitability partsof the full R&D cycle. Let the innovative work be done at small companies and be very smart about thetime and place when they bring those products into their portfolios. And that is a -- it's not easy, that's thecraft to master allocators. And again, that's one of the skills that we really see in Valeant's management.They're incredibly efficient operators, but they're also incredibly smart about what to develop internallyand what to buy and bring in.


And what's interesting is the technology universe, marketplace has developed a very analogouslyway to the pharma industry, right? If you think about big technology companies. Now the IBMs of the

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world are not generating a lot of the innovation that we see in the world. And innovations happeningat startups, the IBMs, the Microsofts and even Googles. I mean, Google, we think is one of the mostinnovative companies, Google Glass, et cetera, which unfortunately, hasn't gone very far. But Google isstill acquiring -- probably acquires a company a day. I have no idea what the number is, but their R&Dcomes from acquiring startups as well as developing internally. And I think the balance between internaldevelopments and what you can achieve through acquisition should be based on your capabilities andwhat the opportunity set is. And I think people generally have a knee-jerk reaction to lower R&D spendingin pharma. I'm not saying it's a threat to the health care system and mankind. What matters is really theR&D productivity and the overall system, right? And I think in a world in which biotechnology companiescan get venture back at very, very early stages on talented people are going to these businesses anddeveloping new molecules, it's a very powerful -- and then those molecules end up being acquired at bigprices and then getting distributed and marketed by the big pharma companies. I think that's a prettygood model for health care innovation.


In fact, it's much more efficient than the model when we had half a dozen big companies doing onlyinternal research. We've seen much more systemwide innovation in the current ecosystem. And thecompanies that have mastered the ability to treat R&D and M&A as really 2 sources to be leveraged, havethrived. And the companies that have stopped to fix percentage R&D budgets across static infrastructureshave been really successful.


Valeant, zero-based budgeting model should probably apply to R&D as well. In some sense, you should bethinking about how you spend your dollars from scratch to some extent. Now, again, some programs areobviously longer term, but there isn't a lot of discipline and maybe there are some developing disciplinedin R&D spending and pharma as a result of the Valeants...


Yes. The notion that a company should spend a magic 10% on R&D year after year after year, almost isnonsensical in the face of it. Because at some point in time, they'll have great programs and they shouldextend more. And there are other points in time when programs will clearly be finished and new ideashaven't been matured that they should spend less. So I think it's almost nonsensical in the face of it.


Herbalife. I understand that you said a few months ago that we wouldn't be as public about Herbalifeanymore, but I'm wondering if there's any activity going on behind the scenes? Or we're just waiting forunexpected results to come to fruition?

A few things. One, I think the best evidence that there are stuff going on behind the scenes is the 60%or 70% increase in Herbalife's spending during the quarter on defending the business model from a tax,from a short seller and also FTC-related expense. What's interesting is the short seller didn't make anytax during the quarter, yet the expense defending against the tax from the short seller went up 70%. Sowhat I believe to be taking place is that we have pretty aggressive government investigations going on bymultiple regulators. And we feel very confident in -- that the government will come to the right answer.But we are never able to be passive. So we, obviously, are very happy to be helpful to people to get themthe truth about Herbalife.

A few more questions, believe it or not. So I'll try to take these. Okay, someone sent me a list of 50questions. Hunter Harrison, aged 70, is the agent of change at CP, where a person's first recommendationreceived the executive management. You've met Mr. Harrison of -- part ways from the company in the

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near term. If Pershing's was to identify an ideal candidate within the company, it would lead upon Mr.Harrisons departure.

So first of all, I think, Hunter's end-to-end, he's doing quite well and we expect him back to front run thecompany on any kind of announcement. But Hunter really have been actively involved with the companyand we expect him to continue to be to fulfill his contract. But obviously, at 70 with a contract that expiresin 1.5 years...


June 2017.


June 2017, succession has been on the mind of the company. One of the first things that Hunter did isrecruit Keith Creel, his protégé from CN. Keith is obviously the logical person to be CEO of the company.He's joined the Board of Directors, he's the President and COO.

You we're quoted as saying you don't like to invest, produce and distribute product with high sugarcontent, coca-Cola, Pepsi, McDonald's?

I didn't precisely say that. I'm not a fan of sugar beverages. I don't think they add much value to society.Sort of an interesting question I've been asking, Bill, how could you invest in Burger King if you don'tdrink Coca-Cola. And it's sort of the same answer I would give about -- you would invest in a supermarketeven though I don't necessarily eat all the various products that are offered in the supermarket. You caneat very healthfully at Burger King, and you could eat unhealthy at Burger King, that's really up to theindividual.

And a the follow-on question. Many product in the Mondelez brand portfolio contain high sugar content inaddition to artificial sweeteners, OREOs, Sour Patch Kids, Cadbury, Toblerone. Who's going to believe theprice, I guess is, is sort of the same point. I mean, I think Mondelez has a portfolio of products. I do needa fair amount of chocolate I concluded that it's healthy. Gum, I don't chew much, but my mouth doesn'tneed -- my jaw doesn't need much any exercise, I get that by just talking.


It actually reduces face fat.


Those really? Okay, well, maybe I'm going to start chewing gum. But look, I think, would we invest in atobacco company, or maybe the most extreme version, I would say the answer is probably not. Becausewe think probably almost with certainty that we wouldn't because we think the products are harmful tosociety. I mean, the product that Mondelez sells, if you were to eat -- replace all the calories in your dietwith Oreos, that would not be a good thing but if you have the Oreos as a treat, et cetera, chocolate as atreat, we think it is perfectly healthy and that's really up to the consumer to make their own decision onthe product. So that's how we think about it.

Okay. Let me go on to the next person. I've been following your portfolio, wanted to learn a bit moreabout your investment philosophy.

I encourage you to read the letters to -- some of our public letters, that's the best you could do that.

You already mentioned Fannie and Freddie having the best risk-reward in the market, worth manymultiples on where they are currently trading in a scenario where the network split is deemed legal and

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the company's released from conservatorship. How long do you think will take the shares to hit $40, $50per share? Within a few months like GOP or is it something like AIG that can take months?

The answer is it depends on what happens over what period of time. They are called $40 valuationfor the companies, 4, 5 years. Hence, based on the law being enforced and private property not beingappropriated. That's how we think about.

Why do you want 3G? I know that you serve as budgeting, incredible capital allocation. You said beforethat everyone should visit the Burger King headquarters because it shows how [indiscernible]. What 3Gspecial compared to the other PE firms?

I think the -- you can look at their track record over decades. They've not bought and flipped businesses.They bought and build major companies, AB InBev is an incredible business built over decades. Very long-term shareholders, incredibly disciplined. There's a lot to admire about them.

Talk a little bit about why you use OTC equity forward contracts to buy your stake in Mondelez?

So we use derivatives to buy a stake in investment that we tend to be activist. And the reason for thatis the antitrust rules considered an activist to have influence over the control of the corporation. We'relimited to purchase about $75 million of stock in the company per fund and beyond that. To get economicdisclosure, we either use options or forward contracts. Once we've applied for HSR and get approved, asan exempt party we can then acquire the shares, and that's what we expect to do here.

Okay. Good morning. [indiscernible] regarding decision and common shares of Fannie and Freddie. Yoursentence remain positive, I think that's been addressed, okay.

From Bill Connor [ph]. With the recent price you've informed us sustainable given fiscal pressure andincreased innovation being for budget. How does manufacture investments operating?

I'm probably not in the position to comment on the whole sectors of valuation.

Mondelez, how did you get the margin safe to your downside risk in the stock given its valuation?

The answer is we think -- the stock is actually very attractively priced given the quality of the businessand the potential margin opportunity. We think that there is a huge opportunity for the company toimprove its productivity.

Mondelez big position in the fund, last position this big was Allergan with fund had an exit strategy, to dealwith Valeant or others who have bigger position was justified, is this the same case for Mondelez? Whatjustify a position this big?

Position is a little smaller than it appears in terms of actual dollar exposure. The forward contracts andthe stock you should think of as equity exposure. That's how we reflect it in our performance reports.The options are really options. They're not deep in money. They have 18 month term and they represent50 million shares or about $2.3 billion of the $5.5 billion number that the press has been using. About$3.2 billion will be a stock position and the balance, in terms of the dollar value, is about $500 million, soit's about $3.7 billion position in terms of how we think about it. It does have the upside of a $5.5 billioninvestment. And if and when we exercise the options, we will have invested a number approaching $5.5billion. The stock has appreciated while we've acquired it, so our cost basis is probably $500 million belowthe $3.7 billion cost basis.

In terms of sizing, it's about risk and reward. We think it's a very high-quality business with a diversifiedcollection of global brands, being sold one Oreo at a time. Very little in the way of customer concentration,very little in the way of competitive risk. We don't think Walmart is going to come out with a chocolate barin this place. I mean, these are very, very powerful brands with strong market positions at the checkoutcounter. So it's just one of the -- and it's a growing business just by virtue of its global presence. So it's avery, very safe, stable business in terms of how we think about it. And we bought it at a, I think a fulcrumpoint in terms of operating performance. So we think it's very little downside and there are lots of waysto win. Either business has able to achieve 3G levels probability on its own or there are possibilities fortransactions.

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A lot of talk in the press about activist strategy, is that good or bad? You see any risk in the horizon forwhat you do, bad regulation, et cetera?

The answer is, I think, the press can have a very short form -- the risk if the press gets it wrong. Andpeople can play you short term with activism. There are certainly activism that's short term in nature thatI think can be a big negative for the capital markets. I do think longer form, longer-term activism is avery healthy thing for capital markets. The good thing is very few activist end up in control of companies.They end up with a meaningfully, a large or a large minority owner, typically less than 10%. Their ideasgenerally go nowhere unless they get board and shareholder support. Unless the shareholders all ofa sudden, become very short term. And I think that's, again, unlikely because the vast majority ofcompanies today are controlled by the big passive investors, the BlackRocks, the Fidelitys, and Vanguards,et cetera, who are, in many cases, permanent owners. As a result, I'm not going to vote or support thingsthat create short-term share price increases at the expense of long-term value. So also I think hard tocreate short-term stock price increases at the expense of long-term value because investors generallyseems smarter than that.

I think from an investor, including your friend Carl Icahn and Stan Druckenmiller have said that the marketlooks overvalued, but you seem to think otherwise. May I know what your thoughts are on the market?Our Pershing Square's long-term investors are wondering why not wait for the markets to cool down andthen enter at a cheap price because the market almost [indiscernible] will experience a fall in the stockprice?

If you look at Pershing Square over the last approaching 12 years, we've been largely a net long -- ameaningfully net long investor even going through the crisis we've had, call it, typically 80-plus percentnet long exposure. It served us well. We don't invest -- this is not an index fund and we don't invest inthe market. We invest in a handful of special situations that we have a lot of influence over. And if youowned businesses of that kind of quality where you can have meaningful influence and you buy them atprices that are cheap relative to what can be achieved, we think can make a lot of money over time andthat you can miss out on a lot of opportunity if you're sitting on the sidelines waiting for the stock price,stock market to fall. We won't buy something unless we think it's cheap. So when we buy a big stake inMondelez, and we pay anywhere from $36 a share to $45 a share at each point, we tell the stock pricewas attractive.

Is Pershing Square considering opening a chore at Herbalife at these levels, seems like it's $60 in themarkets pricing and 0 regulatory risk, despite all numbers but China being down. If you like it at $30,you'll love it at $60.

The answer is we don't love it at all. But the answer is we don't comment on adjusting the position. I thinkit's a very attractive, I'm not making an investment recommendation but at $60 a share, the market issaying there's 0 probability of regulatory risk in the company. We think that calculation is wrong and wealso think just on the business fundamentals, owning a company which is declining in every market inthe world, except for China, a market where it's illegal to be multilevel marketing company, you mightask yourself why are nutrition products gapping up in sales, 38% this quarter in China? It's just, again,Mondelez is a growth company and it doesn't grow like that. And it really doesn't have growth -- a yearago, a massive growth in U.K. and it collapse the following year-on-your quarter. Its just not the way thatpeople buy food or herbal tea or weight-loss powder.

Can you broaden up then what your investment time line is for Mondelez? We hope to see the equity inthe company 3 to 4 years, and we think of it as a long-term investment and we think the stock price willbe meaningfully higher over time?

It seemed like the food business especially unhealthy ones like Burger King. Again, I don't think BurgerKing is inherently unhealthy, it's just you have to think about -- I don't know, I like hamburgers, I likefries, it's fine, I just don't want to -- other people don't like fries. The answer is it's a bit of everything inmoderation.

Ryan Israel

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Director, Member of Audit Committee, Member of Compensation Committee and Member of Nominating &Policies Committee

The average customer comes in a couple of times a month.


Right.


Not a lot of calories in your monthly intake.


It's not about calories, it's about the composition of...


And macronutrients.


I'm not sure we're going to solve the nutrition prices for Mondelez. Yes, Ali?


In defense of Mondelez, these are really just indulgent treats if you think of them very different from atypical mea. I mean, cereals is causing problems when you look at some of these frozen entrees, some ofthose are not very good for you. You could just look at the ingredients list. And these aren't actual mealsor meal substitutes. A chocolate indulgence -- I eat incredibly healthy, and anyone here can attest to it.But I still like to have my chocolate bar and its just fun to chew some gums sometimes which has -- itstrengthens your jaw.


I need a very strong jaw to work...


[indiscernible] You really have to think about the category. The reason why Mondelez is attractive is it'sdoing well on a secular perspective even in an develop markets where there's a lot of health and wellnessconcerns. And that's because indulgence is seen as a general pass in the way people think about eating inmeals. And that's why we do like it. Now Mondelez is predominantly a emerging markets in internationalbusiness, so it doesn't have those type of secular pressures that we see a lot of food companies in theU.S. But even still, it's better preserved then that's really why we're investors.


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Thank you. So we got a few more questions and we'll achieve our goal of answering almost everyquestion. How do you respond to CNBC's comments early last week where David favors dating with movedon [ph] from Herbalife and have bigger fish to fry with Mondelez.

The anwer is we certainly have bigger fish to fry with Mondelez. We certainly haven't moved on withHerbalife. We maintain our investment in the company or our short position. We are very focused onhaving this situation being resolved in a matter that's good for America and bad for pyramid schemes.

It there still Hong Kong dollar exposure? How big?

Tiny percentage of capital, that's still notionally quite large investment over base points in terms of capital.

I think we can't answer that question. And with that I appreciate your patience. We've covered, I wouldsay 98% of the questions other than the Platform related ones. If you further questions, please contactthe IR team. Thank you very much. Operator, please disconnect.

OperatorAnd this concludes today's conference call. You may now disconnect.

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2015Q2 Pershing Square Holdings, Ltd., Q2 2015 Earnings Call, Aug 10, 2015