PSH-Annual-Report

Annual Report December 31, 2014Notes to Financial Statements (continued)13. FINANCIAL RISK AND MANAGEMENT OBJECTIVES AND POLICIES (continued)The following table shows the net impact by category for the change in methodology:As of December 31, 2013 Less than 1 Month 1 to 3 Months 3 to 6 Months 6 to 12 Months Over 1 Year TotalAssetsCash and cash equivalents $ - $ - $ - $ - $ - $ -Trade and other receivables - - - - - -Due from brokers - - - - - -Financial assets at fair valuethrough profit or lossInvestments in securities 27,459,190 (2,039,221) 274,515,258 (201,797,503) (98,137,724) -Derivative financial instruments (3,865,599) 5,260,471 1,675,898 4,054,365 (7,125,135) -Total assets $ 23,593,591 $ 3,221,250 $ 276,191,156 $(197,743,138) $ (105,262,859) $ -LiabilitiesDue to brokers $ - $ - $ - $ - $ - $ -Trade and other payables - - - - - -Financial liabilities at fair valuethrough profit or lossSecurities sold, not yetpurchased (49,635,941) 49,635,941 - - - -Derivative financial instruments (178,233) 178,233 - - - -Total liabilities excluding netassets attributable to nonequityshareholders (49,814,174) 49,814,174 - - - -Net assets attributable to nonequityand managementshareholders - - - - - -Total liabilities $ (49,814,174) $49,814,174 $ - $ - $ - $ -Financial Assets and Financial LiabilitiesAnalysis of equity and derivative positions at fairvalue through profit or loss is based on theexpected date on which these assets and liabilitiescan be realized in the normal course of business.Credit RiskCredit risk is the risk that a counterparty to afinancial instrument will fail to discharge anobligation or commitment that is entered into withthe Company, resulting in a financial loss to theCompany. It arises principally from derivativefinancial assets, cash and cash equivalents, andbalances due from brokers. In order to mitigatecredit risk, the Company seeks to trade only withreputable counterparties that the InvestmentManager believes to be creditworthy. TheInvestment Manager negotiates its ISDAagreements to include bilateral collateralagreements and, in certain cases, tri-partyagreements where collateral is held by a third-partycustodian. Thereafter the Investment Managermonitors exposure, perform reconciliations, andposts/receives cash or U.S. Treasury collateralto/from each of the Company’s counterparties on adaily basis. The Company invests substantially allcash collateral in U.S. Treasuries or short-termU.S. Treasury money market funds to protectagainst counterparty failure. In addition, from timeto time, the Company purchases credit defaultswap contracts on the Company’s counterpartiesas a form of credit protection.After taking into effect the offsetting permittedunder IAS 32, the Company views its creditexposure to be $107,826,088 and $24,123,589 atDecember 31, 2014 and December 31, 2013,respectively, representing the fair value ofderivative contracts in net asset position net ofderivative contracts in net liability position and netof any collateral received by or given tocounterparties. The Company has purchasedcredit default swap contracts to hedge against aportion of the Company’s credit exposure to certainderivative counterparties. At December 31, 2014and December 31, 2013, the Company hadpurchased credit default swap contracts on thesecounterparties with a total notional value of$34,638,000 and $45,238,000, respectively.PERSHING SQUARE HOLDINGS, LTD. 65