PSH-Annual-Report

Annual Report December 31, 2014Notes to Financial Statements (continued)11. SHARE CAPITAL (continued)The Investment Manager waived the managementfee and/or the applicable incentive fee with respectto shares issued to certain shareholders, includingthe Investment Manager itself and certainmembers, partners, officers, managers, employeesor affiliates of the Investment Manager or certainother shareholders. Such shares are referred to asManagement Shares and form a separate class ofshares.Authorized and Issued Capital – Public PhaseOn September 30, 2014, a crystallization eventoccurred in connection with the IPO. Thecrystallized incentive fees totaled $137,753,373.On October 1, 2014, all existing Private Shares(the “Existing Shares”) converted into PublicShares that were no longer redeemable at theshareholder’s option, redeemable ManagementShares converted into non-redeemableManagement Shares and VoteCo Sharesconverted into non-redeemable Class B votingshares. All Existing Shares and ManagementShares were converted at the Issue Price usingtheir aggregate net asset values as ofSeptember 30, 2014.During the public phase, the Board of theCompany is authorized to issue an unlimitednumber of Public Shares, Class B Shares,Management Shares, and such other shares,classes of shares or series as determined by theBoard. All of the Company’s share classesparticipate pro rata in the profits and losses of theCompany based upon the share class’s ownershipof the Company at the time of such allocation.Shareholders in Pershing Square International,Ltd. (“PSINTL”), an affiliated fund managed by theInvestment Manager, were provided with theopportunity to rollover all or part of their respectiveinvestment in exchange for Public Shares in theCompany at the Issue Price (the “Rollover Shares”)at the time of the IPO. The Rollover Sharesrepresented 8,499,360 of the Public Shares fortotal proceeds of $212,484,000. The proceedswere treated as capital redemptions from PSINTLas of September 30, 2014. PSCM designated abank account to act as the nominee for the rollovershareholders whereby the proceeds weredeposited into PSCM’s bank account and PSCMtransferred, the next day, the proceeds to theCompany’s bank account.As of the Placing Date, the total Public Sharesoutstanding were 239,344,260, 109,090,909 ofwhich were issued in the Placing, 121,753,991 ofwhich were converted from Existing Shares and8,499,360 of which were issued in connection withthe Rollover Shares. The VoteCo Sharesconverted into 5,000,000,000 of Class B shares.Effective October 1, 2014, William A. Ackman, aswell as other members and officers of theInvestment Manager invested an aggregateamount of approximately $128.6 million, whichrepresented 5,142,945 additional ManagementShares. As of the Placing Date the totalManagement Shares outstanding were 8,500,796.The over-allotment Option of up to 10,909,091Public Shares, granted by the Company to theStabilising Manager (as discussed in Note 1), wasexercised on November 10, 2014 in the amount of784,286 Public Shares. After the Option exercise,the Company’s Public Shares issued andoutstanding were 240,128,546.Lock-upShareholders holding Public Shares representingthe Existing Shares and the Rollover Shares weresubject to a lock-up of 90 days from October 1,2014 whereby such Shareholders and/or any oftheir affiliates, were prohibited from offering,selling, contract to sell, pledging or otherwisedisposing of any Public Shares held or ownedthrough the end of the lock-up period. This lock-updid not apply to any other Public Shares acquiredin the Placing or in the secondary market.Mr. Ackman and other members of themanagement team and officers of the InvestmentManager have each agreed with the Company to alock-up of ten years commencing from October 1,2014, of their aggregate Management Shareinvestments, less amounts (i) attributable to anysales required to pay taxes on income generatedby the Company; (ii) required to be sold due toregulatory constraints, including, without limitation,sales required due to ownership limits; or (iii)attributable to sales following separation ofemployment from the Investment Manager. Underthe terms of the lock-up arrangement, sharessubject to lock up may from time to time betransfered to affiliates, provided that the transfereeagrees to be subject to the remaining lock-upperiod.Share ConversionSubject to the terms of the lock-up agreements,holders of Management Shares will be entitled toconvert into Public Shares as of the last day ofeach calendar month.PERSHING SQUARE HOLDINGS, LTD. 59