The Directors confirm that the unaudited report and condensed interim financial statements comply with the above requirements.

Conformity statement pursuant to section 5:25d paragraph 2(c) of the Dutch Financial Supervision Act (Wet op het financieel toezicht):

The Board of Directors is responsible for maintaining proper accounting records, for safeguarding assets and for taking reasonable steps to prevent and detect fraud and other irregularities. It is responsible for:

• Selecting suitable accounting policies and applying them consistently;
• For making judgments and estimates that are reasonable; and
• Establishing and maintaining internal procedures which ensure that all major financial information is known to the Board of Directors, so that the timeliness, completeness and correctness of the external financial reporting are assured.

As required by section 5:25d paragraph 2(c) of the Dutch Financial Supervision Act (Wet op het financieel toezicht), the Directors confirm that to the best of their knowledge:

• The Company’s unaudited condensed interim financial statements for the period ended June 30, 2018 give a true and fair view of the assets, liabilities, financial position and profit of the Company for the period; and
• The interim report for the period ended June 30, 2018 includes a true and fair review of the information for the Company required pursuant to article 5:25d, paragraphs 8 and 9 of the Dutch Financial Supervision Act (Wet op het financieel toezicht).

STATEMENT OF PRINCIPAL RISKS

The Company is subject to a number of risks specific to its investment activities, structure and operations, as well as risks relating to general market conditions. The Board has adopted procedures and controls for the ongoing assessment, monitoring and mitigation of material risks and reviews the management of these risks at each quarterly Board meeting. The Board believes that the risks listed below are the principal risks faced by the Company:

• Risks related to Investment Activities
• Use of leverage
• Regulatory risks
• Reputational risk
• Business continuity
• Shares trade at a significant discount to NAV
• Market risk
• Counterparty credit risk

Further details of each of these risks and how they are mitigated are discussed in the Report of the Directors within the Company’s Annual Report for the year ended December 31, 2017. The Board believes these risks are applicable to the six-month period ended June 30, 2018 and the remaining six months of the current financial year.

/s/ Anne Farlow
Anne Farlow
Chairman of the Board
August 9, 2018

/s/ Richard Battey
Richard Battey
Director
August 9, 2018

Independent Review Report to Pershing Square Holdings, Ltd.

INTRODUCTION

We have been engaged by the Company to review the condensed set of financial statements in the interim financial report for the six months ended June 30, 2018 which comprises the Condensed Interim Statement of Financial Position, Condensed Interim Statement of Comprehensive Income, Condensed Interim Statement of Changes in Net Assets Attributable to Management Shareholders, Condensed Interim Statement of Changes in Equity, Condensed Interim Statement of Cash Flows and the related Notes 1 to 12. We have read the other information contained in the interim financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.

This report is made solely to the Company in accordance with guidance contained in International Standard on Review Engagements 2410 (UK and Ireland) “Review of Interim Financial Information Performed by the Independent Auditor of the Entity” issued by the Auditing Practices Board. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company, for our work, for this report, or for the conclusions we have formed.

DIRECTORS’ RESPONSIBILITY

The interim financial report is the responsibility of, and has been approved by, the Directors. The Directors are responsible for preparing the interim financial report in accordance with the Disclosure Guidance and Transparency Rules of the United Kingdom’s Financial Conduct Authority.

As disclosed in Note 2, the annual financial statements of the Company are prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”). The condensed set of financial statements included in this interim financial report has been prepared in accordance with International Accounting Standards 34, “Interim Financial Reporting”.

OUR RESPONSIBILITY

Our responsibility is to express to the Company a conclusion on the condensed set of financial statements in the interim financial report based on our review.

SCOPE OF REVIEW

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, “Review of Interim Financial Information Performed by the Independent Auditor of the Entity” issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

CONCLUSION

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the interim financial report for the six months ended June 30, 2018 is not prepared, in all material respects, in accordance with International Accounting Standard 34 and the Disclosure Guidance and Transparency Rules of the United Kingdom’s Financial Conduct Authority.

/s/ Ernst & Young LLP
Ernst & Young LLP
Guernsey
August 9, 2018

Condensed Interim Statement of Financial Position

(Stated in United States Dollars)

The accompanying notes form an integral part of these condensed interim financial statements.

Condensed Interim Statement of Comprehensive Income

(Stated in United States Dollars)

All the items in the above statement are derived from continuing operations.

There is no other comprehensive income for the periods ended June 30, 2018 and June 30, 2017.

The accompanying notes form an integral part of these condensed interim financial statements.

Condensed Interim Statement of Changes in Net Assets Attributable to Management Shareholders

(Stated in United States Dollars)

The accompanying notes form an integral part of these condensed interim financial statements.

Condensed Interim Statement of Changes in Equity

(Stated in United States Dollars)

The accompanying notes form an integral part of these condensed interim financial statements.

Condensed Interim Statement of Cash Flows

(Stated in United States Dollars)

The accompanying notes form an integral part of these condensed interim financial statements.

Notes to the Condensed Interim Financial Statements

1. CORPORATE INFORMATION

Organization

The Company was incorporated with limited liability under the laws of the Bailiwick of Guernsey on February 2, 2012. It became a registered open-ended investment scheme, under the Protection of Investors (Bailiwick of Guernsey) Law, 1987 and the Registered Collective Investment Scheme Rules 2008 (issued by the Guernsey Financial Services Commission, the “GFSC”), on June 27, 2012, and commenced operations on December 31, 2012.

On October 2, 2014, the GFSC approved the conversion of the Company into a registered closed-ended investment scheme under the Protection of Investors Law and the 2008 Rules.

The Company’s registered office is at 1st Floor, Royal Chambers, St Julian’s Avenue, St Peter Port, Guernsey, Channel Islands.

The latest traded price of the Public Shares is available on Reuters, Bloomberg, Euronext Amsterdam and the London Stock Exchange (“LSE”).

A copy of the Prospectus of the Company is available from the Company’s registered office and on the Company’s website (www.pershingsquareholdings.com).

Investment Objective

The Company’s investment objective is to preserve capital and to seek maximum, long-term capital appreciation commensurate with reasonable risk. The Company seeks to achieve its investment objective through long (and occasionally short) positions in equity or debt securities of public U.S. and non-U.S. issuers (including securities convertible into equity or debt securities), derivative instruments and any other financial instruments that the Investment Manager believes will achieve the Company’s investment objective.

Investment Manager

The Company has appointed PSCM as its investment manager pursuant to an investment management agreement (the “IMA”). The Investment Manager has responsibility, subject to the overall supervision of the Board of Directors, for the investment of the Company’s assets in accordance with the Company’s investment policy set forth in the Company’s Annual Report for the year ended December 31, 2017. The Company delegates certain administrative functions relating to the management of the Company to PSCM. William A. Ackman is the managing member of PS Management GP, LLC, the general partner of PSCM.

Board of Directors

The Company’s Board of Directors is comprised of Nicholas Botta, President and a partner of the Investment Manager, Anne Farlow, Richard Battey, Bronwyn Curtis, William Scott and Richard Wohanka, all of whom are non-executive Directors. Anne Farlow is the Chairman of the Board. Bronwyn Curtis and Richard Wohanka were elected by the Company’s shareholders to the Board of Directors at the Company’s AGM on April 24, 2018. In addition, on February 12, 2018, Jonathan Kestenbaum retired as a non-executive Director of the Company. Jonathan Kestenbaum had served as an independent non-executive Director of the Company since 2014.

Audit Committee

The Audit Committee consists of the independent Directors of the Company. Mr Battey is the Chairman of the Audit Committee. Effective July 30, 2018, Ms Curtis and Mr Wohanka were appointed to the Audit Committee. The principal duties of the Audit Committee are to monitor the integrity of the financial statements of the Company, including its annual and half-yearly reports and formal announcements relating to the Company’s financial performance, and reviewing and reporting to the Board on significant financial reporting issues and judgments communicated to the Committee by the auditor. The Audit Committee’s responsibilities also include, but are not limited to, recommendations to the Board regarding the appointment, reappointment and removal of the external auditor, discussion and agreement with the external auditor as to the nature and scope of the audit, and review of the results and cost effectiveness of the audit and the independence and objectivity of the external auditor. The Audit Committee reports regularly and makes such recommendations as it deems appropriate to the Board on any matter within its remit.

Management Engagement Committee

The Board has established a Management Engagement Committee to adhere to the principles of the UK Corporate Governance Code in connection with the listing of the Public Shares on the LSE. The Management Engagement Committee reviews the performance of the Investment Manager in the management of the Company’s affairs and the terms of engagement and performance of the Company’s other key service providers, and then reports and makes recommendations to the full Board. It is comprised of the independent Directors of the Company. Until his retirement as a Director on February 12, 2018, Jonathan Kestenbaum was the Chairman of the Management Engagement Committee. William Scott has been appointed to succeed Jonathan Kestenbaum as the Chairman of the Management Engagement Committee.

Nomination Committee

The Board has established a Nomination Committee to adhere to the principles of the UK Corporate Governance Code in connection with the listing of the Public Shares on the LSE. The Nomination Committee is responsible for reviewing the structure, size and composition of the Board, succession planning for Director departures and identifying and nominating suitable candidates to fill vacancies, taking into account the challenges and opportunities facing the Company and the skills, knowledge and experience needed on the Board. The Nomination Committee reports its recommendations to the full Board. It is comprised of the independent Directors of the Company. Effective July 30, 2018, Ms Curtis and Mr Wohanka were appointed to the Nomination Committee. Ms Farlow is the Chairman of the Nomination Committee.

Prime Brokers

Pursuant to prime broker agreements, Goldman Sachs & Co. and UBS Securities LLC (the “Prime Brokers”) both serve as custodians and primary clearing brokers for the Company.

Administrator and Sub-Administrator

Pursuant to an administration and sub-administration agreement dated April 2, 2012, Elysium Fund Management Limited (the “Administrator”) and Morgan Stanley Fund Services (Bermuda) Ltd. (the “Sub-Administrator”) have been appointed as administrator and sub-administrator, respectively, to the Company.

The Administrator provides certain administrative and accounting services including the maintenance of the Company’s accounting and statutory records. The Administrator delegates certain of these services to the Sub-Administrator. The Administrator and Sub-Administrator receive customary fees, plus out of pocket expenses, based on the nature and extent of services provided.

Additional Quotation on LSE

On May 2, 2017, the Company announced that its Public Shares had been admitted to the Official List of the UK Listing Authority and had commenced trading on the Premium Segment of the Main Market of the LSE. On May 29, 2018, the Company introduced an additional USD quotation on the LSE alongside the Company’s existing quotations. As a result, shareholders are able to trade Public Shares on both Euronext Amsterdam and the LSE with shares quoted and traded in USD on Euronext Amsterdam and USD and Sterling on the LSE.

Amendments to the Company’s Articles of Incorporation

At the AGM, shareholders voted to remove the 4.99% ownership limit from the Company’s Articles of Incorporation (the “Articles”). Removal of the ownership limit provides the Company with the flexibility to undertake Company share repurchases without the concern that repurchases will cause any individual shareholder who owns less than 5% of the Company prior to such repurchase to own more than 5% afterwards.

Shareholders also voted at the AGM to amend the Articles to permit the conversion of Public Shares acquired by persons who are otherwise eligible to hold Management Shares into Management Shares, on a net asset value for net asset value basis as at each month end. Holders of Management Shares were already entitled to convert Management Shares into Public Shares.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Preparation

The condensed interim financial statements of the Company for the six months ended June 30, 2018 have been prepared in accordance with IAS 34 Interim Financial Reporting.

The accounting principles used to prepare these unaudited condensed interim financial statements comply with IFRS as issued by the IASB and are consistent with those set out in the notes to the annual financial statements for the year ended December 31, 2017, with the exception of IFRS 9, Financial Instruments which replaced IAS 39, Financial Instruments: Recognition and Measurement, as discussed further in Note 3. The condensed interim financial statements have been prepared on a historical-cost basis, except for certain financial assets and financial liabilities measured at fair value through profit or loss that have been measured at fair value. The unaudited condensed interim financial statements do not include all of the information and disclosures required for full annual financial statements and should be read in conjunction with the Company’s annual financial statements for the year ended December 31, 2017.

After making reasonable inquiries and assessing all data relating to the Company’s liquidity, particularly its holding of cash and Level 1 assets, the Investment Manager and the Directors believe that the Company is well placed to manage its business risks, has adequate resources to continue in operational existence for the foreseeable future and do not consider there to be any threat to the going concern status of the Company. For these reasons, they have adopted the going concern basis in preparing the annual and condensed interim financial statements.

Net Assets Attributable to Management Shareholders

Management Shares can be converted into a variable number of Public Shares based upon the net asset values as of the last day of each calendar month and are therefore classified as financial liabilities in accordance with IFRS. At no time can Management Shares be redeemed in cash at the option of the management shareholders. Net assets attributable to Management Shares are measured at the redemption amount based on the net asset value of the Company calculated in accordance with IFRS. The change in the net assets attributable to Management Shares, other than that arising from share issuances or conversions, is recognized in the condensed interim statement of comprehensive income.

3. NEW STANDARDS, INTERPRETATIONS AND AMENDMENTS

The Company has adopted IFRS 9 as of its effective date of January 1, 2018. Based on the Company’s assessment and as discussed in further detail in Note 4 of the annual financial statements for the year ended December 31, 2017, the implementation of this new standard does not have a significant impact on the Company’s financial statements. The Company has chosen to take advantage of the option not to restate comparatives.

i) Classification and measurement

The Company will continue to measure all investments in securities and derivatives at fair value through profit or loss in accordance with the Solely Payments of Principal and Interest test as required under IFRS 9. As discussed further in Note 10, the Bonds are held at amortized cost.

ii) Impairment

IFRS 9 requires the Company to record expected credit losses on all of its debt securities held at amortized cost, loans and trade receivables, either on a 12-month or lifetime basis. The Company expects to apply the simplified approach and record lifetime expected losses on all receivables. Given that receivables’ balances are typically not material, the Company expects the impact of future credit losses to be negligible.

iii) Hedge accounting

The Company does not currently designate any hedges as effective hedging relationships which qualify for hedge accounting, therefore this does not impact the financial statements.

4. FINANCIAL ASSETS AND FINANCIAL LIABILITIES AT FAIR VALUE THROUGH PROFIT OR LOSS

Financial assets at fair value through profit or loss:

Financial liabilities at fair value through profit or loss:

Net changes in fair value of financial assets and financial liabilities through profit or loss:

5. FAIR VALUE OF ASSETS AND LIABILITIES

Fair Value Hierarchy

IFRS 13 requires disclosures relating to fair value measurements using a three-level fair value hierarchy. The level within which the fair value measurement is categorized is determined on the basis of the lowest level input that is significant to the fair value measurement. Assessing the significance of a particular input requires judgment and considers factors specific to the asset or liability. Financial instruments are recognized at fair value and categorized in the following table based on:

Level 1 – Inputs are unadjusted quoted prices in active markets at the measurement date. The assets and liabilities in this category will generally include equities listed in active markets, treasuries (on the run) and listed options.

Level 2 – Inputs (other than quoted prices included in Level 1) are obtained directly or indirectly from observable market data at the measurement date. The assets and liabilities in this category will generally include fixed income securities, OTC options, total return swaps, credit default swaps, foreign currency forward contracts and certain other derivatives. Also, included in this category are the Company’s investments in affiliated entities valued at the net asset value, which can be redeemed by the Company as of the measurement date, or within 90 days of the measurement date.

Level 3 – Inputs, including significant unobservable inputs, reflect the Company’s best estimate of what market participants would use in pricing the assets and liabilities at the measurement date. The assets and liabilities in this category will generally include private investments and certain other derivatives.

5. FAIR VALUE OF ASSETS AND LIABILITIES (CONTINUED)

Recurring Fair Value Measurement of Assets and Liabilities

¹ Level 2 financial instruments may include OTC currency call/put options, equity options, equity forwards, index options and foreign currency forward contracts that are fair valued by the Investment Manager using prices received from an independent third-party pricing service. The fair values of these financial instruments may reflect, but are not limited to, the following inputs by the independent third-party pricing service: current market and contractual prices from market makers or dealers, volatilities of the underlying financial instruments and/or current foreign exchange forward and spot rates. The independent third-party pricing service uses widely recognized valuation models for determining fair values of OTC derivatives. The most frequently applied valuation techniques include forward pricing and option models, using present value calculations. The significant inputs into their valuation models are market observable and are included within Level 2.

² Level 2 financial instruments include total return swap contracts that are fair valued by the Investment Manager using market observable inputs. The fair values of these financial instruments may reflect, but are not limited to, the following inputs: market price of the underlying security, notional amount, expiration date, fixed and floating interest rates, payment schedules and/or dividends declared.

³ This figure relates to the Company’s investment in Pershing Square VI International, L.P. (“PS VI”) as of the period ended June 30, 2018, as discussed in Note 9. The Company’s investment in PS VI included 42.41% and 46.05% of Level 1 financial instruments, 57.56% and 53.01% of Level 2 financial instruments and 0.03% and 0.94% of other assets and liabilities that are outside the scope of IFRS 13 as of the period ended June 30, 2018 and the year ended December 31, 2017, respectively. The level of underlying investments had no impact in the level used for the investment held by the Company. See the fair value measurement discussion in Note 2 of the Company’s annual financial statements for the year ended December 31, 2017 for the Company’s valuation policy related to investments in affiliated entities.

⁴ Net assets attributable to management shareholders are classified as Level 3 and are valued based on their net asset value which approximates carrying value. In assessing the appropriateness of net asset value as a basis for fair value, consideration is given to the need for adjustments to net asset value based on a variety of factors including liquidity and the timeliness and availability of accurate financial information. No such adjustments were deemed necessary. The movements for the period are disclosed in the condensed interim statement of changes in net assets attributable to management shareholders.

5. FAIR VALUE OF ASSETS AND LIABILITIES (CONTINUED)

The Company’s cash and cash equivalents and short-term receivables and payables are recorded at carrying value which approximates fair value. The Bonds are classified as Level 1 financial liabilities and the fair value of the Bonds is discussed further in Note 10.

Some of the Company’s investments in Level 1 securities represent a significant proportion of the Company’s portfolio. If such investments were sold or covered in their entirety, it might not be possible to sell them at the quoted market price which IFRS requires to be used in determining their fair value. Many factors affect the price that could be realized for large investments. The Investment Manager believes that it is difficult to accurately estimate the potential discount or premium to the quoted market prices that the Company would receive or realize if investments that represent a significant proportion of the Company’s portfolio were sold or covered.

Transfers Between Levels

Transfers between levels during the period are determined and deemed to have occurred at each financial statement reporting date. There were no transfers between Level 1 and Level 2 fair value measurements, and no transfers into or out of Level 3 fair value measurements of material significance since the last financial statement reporting date.

Level 3 Reconciliation

The following table summarizes the change in the carrying amounts associated with Level 3 investments for the period ended June 30, 2018 and the year ended December 31, 2017.

* During the year ended December 31, 2017, the transfer from Level 3 to Level 1 related to the cashless conversion of the warrants to common stock shares of The Howard Hughes Corporation.

All gains and losses from Level 3 securities during the period/year are recognized in the net gain/(loss) on financial assets and financial liabilities at fair value through profit or loss in the condensed interim statement of comprehensive income.

6. SHARE CAPITAL

Authorized and Issued Capital

The Board of the Company is authorized to issue an unlimited number of shares, classes of shares or series as determined by the Board. All of the Company’s share classes participate pro rata in the profits and losses of the Company based upon the share class’s ownership of the Company at the time of such allocation.

The Company currently has outstanding the Public Shares, the Special Voting Share and the Management Shares.

In connection with the listing of the Public Shares on the LSE, the Company exchanged the Class B Shares held by PS Holdings Independent Voting Company Limited (“VoteCo”), a limited liability company with the sole objective to vote in the best interest of the Company’s shareholders as a whole, for a Special Voting Share. The Special Voting Share at all times carries 50.1% of the aggregate voting power in the Company (except for certain matters set forth in the LSE listing rules on which it may not vote). The Investment Manager has no affiliation with VoteCo. VoteCo is wholly owned by a trust established for the benefit of one or more charitable organizations.

The Investment Manager waived the management fee and/or the performance fee with respect to Management Shares, which were issued to certain shareholders, including certain members, partners, officers, managers, employees or affiliates of the Investment Manager or certain other shareholders.

Lock-up

In connection with the Company’s IPO, Mr. Ackman and other members of the management team and officers of the Investment Manager have each entered into a lock-up arrangement with the Company (the “Lock-Up Deed”) whereby their aggregate Management Shares held at the time of the IPO are subject to a lock-up of ten years commencing from October 1, 2014, other than sales of Management Shares (i) required to pay taxes on income generated by the Company; (ii) required due to regulatory constraints; or (iii) following separation of employment from the Investment Manager. Management Shares subject to the Lock-Up Deed may from time to time be transferred to affiliates, provided that the transferee agrees to be subject to the remaining lock-up period. On August 9, 2018, the Company amended the Lock-Up Deed to clarify that parties to the Lock-Up Deed may sell the specific Management Shares they held at the time of the IPO, so long as they continue to hold at least as many Management Shares in the aggregate as they held at the time of the IPO (or, if the Management Shares have been converted, so long as they hold at least as many shares of the class such Management Shares were converted into). At the time of the IPO, 8,335,440 Management Shares were subject to the Lock-Up Deed.

Share Conversion

Subject to the terms of the lock-up agreements, holders of Management Shares are entitled to convert into Public Shares at the current NAV as of the last day of each calendar month upon such days’ prior written notice to the Company as the Board may determine.

During the six month period ended June 30, 2018, a holder of Management Shares converted 287,464 Management Shares into 306,738 Public Shares.

As a result of amendments to the Articles approved by shareholders at the AGM, Public Shares acquired by persons who are otherwise eligible to hold Management Shares can be converted into Management Shares, on a net asset value for net asset value basis as at each month end. The Management Shares resulting from these conversions are not subject to the lock-up described above.

Since the AGM, holders of Management Shares (i.e., persons associated with the Investment Manager) have converted 11,867,000 Public Shares into 11,111,095 Management Shares.

Voting Rights

The holders of Public Shares have the right to receive notice of, attend and vote at general meetings of the Company.

Each Public Share and Management Share carries such voting power so that the aggregate issued number of Public Shares and Management Shares carries 49.9% of the total voting power of the aggregate number of voting shares in issue. Each Public Share carries one vote and each Management Share carries such voting power so that the total voting power of the Public Shares and Management Shares are pro-rated in accordance with their respective net asset values. The Special Voting Share carries 50.1% of the aggregate voting power in the Company. The Special Voting Share and the Management Shares may not vote on certain matters specified in the LSE listing rules.

Distributions

The Board may at any time declare and pay dividends (or interim dividends) based upon the financial position of the Company. No dividends shall be paid in excess of the amounts permitted by the Companies (Guernsey) Law, 2008 and without the prior consent of the Board and the Investment Manager. No dividends have been declared or paid for the periods ended June 30, 2018 and June 30, 2017.

The Public Shares, Management Shares and Class B Shares / Special Voting Share transactions for the six-month period ended June 30, 2018 and the year ended December 31, 2017 were as follows:

*Share Buybacks include 62,437 shares purchased in the original share buyback program that commenced in May 2017 and 22,271,714 shares purchased in the Tender Offer in May 2018.

Capital Management

The Company’s capital currently consists of Public Shares which are listed on Euronext Amsterdam and the LSE, Management Shares which can be converted into Public Shares, and the Special Voting Share (as more fully described on page 25). The proceeds from the Bonds which were issued on June 26, 2015 and are listed on the Irish Stock Exchange are being used to make investments in accordance with the Company’s investment policy (as more fully described in Note 10 of the annual financial statements for the year ended December 31, 2017).

The Company’s general objectives for managing capital are:

• To continue as a going concern;
• To maximize its total return primarily through the capital appreciation of its investments; and
• To minimize the risk of an overall permanent loss of capital.

To the extent the Investment Manager deems it advisable and provided that there are no legal, tax or regulatory constraints, the Company is authorized to manage its capital through various methods, including, but not limited to: (i) repurchases of Public Shares and (ii) further issuances of shares, provided that the Board only intends to exercise its authority to issue new shares if such shares are issued at a value not less than the estimated prevailing NAV per share (or under certain other specified circumstances). At the AGM, shareholders renewed the Company’s authority to engage in share buybacks up to a maximum of 14.99% of the Public Shares in issue and, as part of this authority, approved the Tender Offer. The Company launched the Tender Offer on April 25, 2018 and closed the Tender Offer on May 10, 2018. A total of 22,271,714 Public Shares were acquired by the Company in the Tender Offer at a price of $13.47 per Public Share and subsequently were cancelled. Depending on market conditions and other considerations, the Company may decide to utilize the remaining amount of the share buyback authority to acquire Public Shares in the market. If utilized fully, the remaining authority would permit the Company to purchase 12,902,976 Public Shares.

As discussed on page 25, the Investment Manager has also imposed a ten-year lock-up on certain holders of Management Shares, subject to certain exceptions. This lock-up does not affect the capital resources available to the Company.

7. COMMITMENTS AND CONTINGENCIES

PSH, PSCM, PS Fund 1, LLC and other related parties (the “Pershing Square Parties”) and Valeant Pharmaceuticals International, Inc. and other related parties (the “Valeant Parties”) are defendants in two class action lawsuits entitled In Re Allergan, Inc. Proxy Violation Securities Litigation, Case No. 8:14-cv-2001- DOC (“Stock Class Action”), and In re Allergan, Inc. Proxy Violation Derivatives Litigation, Case No. 2:17-cv-04776 DOC (“Derivatives Class Action”), both pending in the U.S. District Court for the Central District of California, relating to the investment by the Pershing Square Parties in Allergan, Inc. (“Allergan”), and alleging violations of federal securities laws relating to trading in Allergan common shares and related derivatives.

During the year ended December 31, 2016, the Company reserved $29,176,480 towards any potential liability. On December 28, 2017, in consultation with counsel and expert mediators, defendants entered into full settlements in principle in both cases for a total payment of $290 million, of which the Company and three affiliated entities managed by the Investment Manager (the “Core Funds”) are to bear $193.75 million. PSH’s allocable share of the total amount was $86,396,342, leading it to reserve an additional $57,219,862 as of December 31, 2017. These reserves are included in Trade and Other Payables in the Company’s statement of financial position as of December 31, 2017. The settlements were paid by the Core Funds during January 2018 and are held in escrow pending final approval by the court. At a hearing on June 12, 2018, the Court indicated that it will grant final approval of the full settlement, subject to issuance of a written order which has not yet been entered.

Other than the above and as noted in the annual financial statements for the year ended December 31, 2017, there were no other commitments or contingencies as of June 30, 2018 and December 31, 2017.

8. INVESTMENT MANAGEMENT AND PERFORMANCE FEES

The Investment Manager receives management fees and performance fees, if any, from the Company pursuant to the IMA.

Management Fee

The Investment Manager receives a quarterly management fee payable in advance each quarter in an amount equal to 0.375% (1.5% per annum) of the net assets (before any accrued performance fee) attributable to fee-paying shares. The fee-paying shares of the Company are the Public Shares and the Special Voting Share.

For the period ended June 30, 2018 and the year ended December 31, 2017, the Investment Manager earned management fees from the Company of $26,790,210 and $63,211,761, respectively.

The Investment Manager has chosen to reduce the management fees paid by the Pershing Square funds which incurred litigation expenses in connection with the settlement of the Allergan Stock Class Action and Derivative Class Action for eight consecutive quarters beginning with the management fee payable on April 1, 2018 by a total of $32.2 million. This amount accounts for the amount that incentive fees would have been reduced by had Allergan-related settlement expenses been incurred in 2014 contemporaneously with gains from the Allergan investment. The reduced fees will be allocated among the Core Funds based upon the amount of settlement reserves previously recognized by the Core Funds at the year ended 2016 and the year ended 2017. The Company will be allocated $14.4 million of this reduction.

Performance Fee

Generally, the Investment Manager receives an annual performance fee in an amount equal to 16% of the net profits attributable to the fee-paying shares of the Company (the “16% performance fee”) minus the Additional Reduction (defined below). Such annual performance fee is defined as the “Variable Performance Fee” in the IMA. The Variable Performance Fee cannot be higher than the 16% performance fee, but it may, as a result of the Additional Reduction, be lower (although it can never be a negative amount).

The “Additional Reduction” is an amount equal to (i) the lesser of the 16% performance fee and the Potential Reduction Amount (defined below), offset (up to such lesser amount) by (ii) the then current portion of the Potential Offset Amount.

The “Potential Reduction Amount” is equal to (i) 20% of the aggregate performance fees and allocation earned by the Investment Manager and its affiliates in respect of the same calculation period on the gains of current and certain future funds managed by the Investment Manager or any of its affiliates plus (ii) if the Potential Reduction Amount for the previous calculation period exceeded the 16% performance fee, the excess amount (which is in effect carried forward).

The “Potential Offset Amount” refers to the fees and other costs of the offering and admission on Euronext Amsterdam of the Public Shares and the commissions paid to placement agents and other formation and offering expenses incurred prior to the IPO of the Company that were, in each case, borne by the Investment Manager pursuant to the IMA. The Potential Offset Amount will be reduced by each dollar applied to reduce the Additional Reduction, until it is fully reduced to zero.

The Potential Offset Amount equalled $120 million in the aggregate at the time of the IPO. As of June 30, 2018 and December 31, 2017, after giving effect to the offset of the Potential Reduction Amount in the year ended December 31, 2014, the Potential Offset Amount was approximately $100.8 million.

The Potential Offset Amount is not a Company obligation but instead is a component used in the calculation of the Variable Performance Fee. Thus, if the Company or the Investment Manager terminates the IMA or the Company liquidates and the Company pays the Variable Performance Fee that may crystallize in connection therewith, the Company has no obligation to pay any remaining portion of the Potential Offset Amount.

For the period ended June 30, 2018 and the year ended December 31, 2017, the Investment Manager did not earn any performance fee from the Company.

Since the Company has no performance fee accrued for the period ended June 30, 2018 and the year ended December 31, 2017, but the Potential Reduction Amount was $2.9 million and $2.9 million, respectively, in those periods/years, those amounts will be carried forward to calculate the Additional Reduction and reduce any Variable Performance Fee in future years, subject to any offset by the Potential Offset Amount.

Termination

The IMA automatically renews annually, except that it may be terminated (a) as of December 31st of any year upon four months’ prior written notice by either party, subject, in the case of termination by the Company, to approval by a 66 2/3% vote (by voting power) of the holders of the then outstanding voting shares of the Company, together with a 66 2⁄3% vote (by voting power) of the holders of the then outstanding Public Shares; and (b) in case of dissolution or liquidation of either party or if a receiver or provisional liquidator or administrator or similar officer is appointed over any of the assets of such party or if either party commits a material breach of its obligations under the IMA and such breach remains uncured for more than 30 calendar days after the notice thereof delivered to the party in breach by the other party in accordance with the IMA.

The termination of the IMA at any time will be a crystallisation event, which will result in the Variable Performance Fee described above being payable.

9. RELATED PARTY DISCLOSURES

The relationship between the Company and the Investment Manager and the fees earned are disclosed in Note 8. In addition, the Investment Manager and related parties to the Investment Manager hold Management Shares, the rights of which are disclosed in Note 6.

The Investment Manager may seek to effect rebalancing transactions from time to time pursuant to policies that are intended to result in the Company and the affiliated entities managed by the Investment Manager generally holding investment positions on a proportionate basis relating to their respective adjusted net asset values, which are equal to each of the entities’ net asset values plus any accrued (but not crystallized) performance fees, and the net proceeds of any outstanding long-term debt, including the current portion thereof (which in the case of the Company, includes the net proceeds from the bond offering as further discussed below in Note 10). Rebalancing transactions involve either the Company purchasing securities or other financial instruments held by one or more affiliated entities or selling securities or other financial instruments to one or more affiliated entities. These transactions are subject to a number of considerations including, but not limited to, cash balances and liquidity needs, tax, regulatory, risk and other considerations, which may preclude these transactions from occurring or limit their scope at the time of the transactions.

The Company has an investment in PS VI as discussed in Note 3 of the annual financial statements for the year ended December 31, 2017. As of June 30, 2018 and December 31, 2017, the Company’s capital balance in PS VI was $319,107,237 and $256,820,746, respectively, and represents an ownership in PS VI of 37.05% and 36.43%, respectively. The Company’s investment in PS VI is included in investments in securities in the condensed interim statement of financial position. The Company is not charged a management fee or performance fee in relation to its investment in PS VI.

In the normal course of business, the Company and its affiliates make concentrated investments in portfolio companies where the aggregate beneficial holdings of the Company and its affiliates may be in excess of 10% of one or more portfolio companies’ classes of outstanding securities. At such ownership levels, a variety of securities laws may, under certain circumstances, restrict or otherwise limit the timing, manner and volume of disposition of such securities. In addition, with respect to such securities, the Company and its affiliates may have disclosures or other public reporting obligations with respect to acquisitions and/or dispositions of such securities.

At June 30, 2018 the Company and its affiliates had beneficial ownership in excess of 10% of the outstanding common equity securities of Chipotle Mexican Grill, Inc., and Platform Specialty Products Corporation. At December 31, 2017, in addition to the above companies, the Company and its affiliates had beneficial ownership in excess of 10% of Restaurant Brands International Inc. and The Howard Hughes Corporation. William A. Ackman is the chairman of the board of The Howard Hughes Corporation. Ali Namvar, a member of PSCM’s investment team until April 1, 2018, is a board member of Chipotle Mexican Grill, Inc. Ryan Israel, a member of PSCM’s investment team, is a board member of Platform Specialty Products Corporation.

William A. Ackman, Nicholas Botta, and other PSCM affiliates purchased 14,640,723, 850,000 and 141,809 Public Shares, respectively, in the market after completion of the Tender Offer and prior to June 30, 2018. Of these amounts, 11,000,000, 850,000 and 17,000, respectively, were converted into Management Shares as of June 30, 2018, as discussed in Note 6. William A. Ackman and members of PSCM’s investment team and advisory board have since purchased an additional 5,009,748 and 17,349 Public Shares, respectively.

For the six-month period ended June 30, 2018, the independent Directors’ fees in relation to their services for the Company were $154,893, none of which were payable as of June 30, 2018. For the six-month period ended June 30, 2017, the independent Directors’ fees in relation to their services for the Company were $146,185 of which $74,422 were payable as of June 30, 2017.

10. BONDS

On June 26, 2015, the Company issued at par $1,000,000,000 in Senior Notes at 5.5% due 2022. The Bonds will mature at par on July 15, 2022 and pay a fixed rate interest coupon of 5.5% per annum, which is paid semi-annually. The Bonds are listed on the Irish Stock Exchange. The proceeds from the offering were in U.S. Dollars and were used to make investments or hold assets in accordance with the Company’s investment policy.

The Company has the option to redeem all or some of the Bonds prior to June 15, 2022, at a redemption price equal to the greater of (1) 100% of the principal amount of the Bonds to be redeemed or (2) the sum of the present values of the remaining scheduled principal and interest payments (exclusive of accrued and unpaid interest to the date of redemption) on the Bonds to be redeemed, discounted to the redemption date on a semi-annual basis using the applicable U.S. treasury rate plus 50 basis points, plus accrued and unpaid interest. If the Company redeems all or some of the Bonds on or after June 15, 2022, the redemption price will equal 100% of the principal amount of the Bonds to be redeemed plus accrued and unpaid interest.

The fair value of the Bonds as of June 30, 2018 and December 31, 2017, based upon market value at that time, was $1,006,250,000 and $1,042,500,000, respectively. In accordance with IFRS 9, the Bonds’ carrying value as of June 30, 2018 and December 31, 2017, in the amount of $1,016,369,873 and $1,015,427,736, respectively, in the condensed interim statement of financial position is representative of amortized cost and the transaction costs of the Bonds issued. The transaction costs of $14,502,332 were capitalized and are to be amortized over the life of the Bonds using the effective interest method.

The Bonds are subject to the following transfer restrictions: (i) each holder of the Bonds is required to be either (a) a qualified institutional buyer (“QIB”) as defined in Rule 144A under the U.S. Securities Act of 1933, as amended (the “Securities Act”) who is also a qualified purchaser (“QP”) as defined in Section 2(a)(51) of the U.S. Investment Company Act, as amended or (b) a non-U.S. person, provided that, in each case, such holder can make the representations set forth in the Listing Particulars, dated June 24, 2015, (ii) the Bonds can only be transferred to a person that is a QIB/QP in a transaction that is exempt from the registration requirements of the Securities Act pursuant to Rule 144A or to a non-U.S. person in an offshore transaction that is not subject to the registration requirements of the Securities Act pursuant to Regulation S, or to the Company, and (iii) the Company has the right to force any holder who is not a QIB/QP or a non-U.S. person to sell its Bonds.

11. EARNINGS PER SHARE

Basic and diluted earnings per share (“EPS”) is calculated by dividing the profit/(loss) for the period/year attributable to the Public Shares and the Special Voting Share over the weighted average number of Public Shares and the Special Voting Share outstanding, respectively (noting that the calculation for the Special Voting Share EPS in 2017 includes the Class B Shares prior to the conversion into the Special Voting Share). In accordance with IFRS, the weighted average shares outstanding calculated for the Public Shares and the Special Voting Share were 228,307,055 and 1, respectively for the period ended June 30, 2018, and the weighted average shares outstanding calculated for the Public Shares and the Special Voting Share were 239,947,210 and 1, respectively for the period ended June 30, 2017.

As discussed in Note 1, all Class B Shares converted to 1 Special Voting Share on May 2, 2017. Therefore, the profit/(loss) of the Class B Shares for the period from January 1, 2017 to May 1, 2017, including the profit/(loss) of the Special Voting Share from May 2, 2017 to June 30, 2017, was divided over 1 Special Voting Share as presented on the condensed interim statement of comprehensive income to show one EPS as a whole for the six months ended June 30, 2017.

12. EVENTS AFTER THE REPORTING PERIOD

The Investment Manager has evaluated the need for disclosures and/or adjustments resulting from subsequent events during the period between the end of the reporting period and the date of authorization of the condensed interim financial statements. This evaluation together with the Directors’ review thereof did not result in any additional subsequent events that necessitated disclosures and/or adjustments.