PSH-Annual-Report

Annual Report December 31, 2014Notes to Financial Statements (continued)15. INVESTMENT MANAGEMENT ANDINCENTIVE FEES (continued)During the Private Phase, the InvestmentManager, in its sole discretion, waived themanagement fee and/or 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.For the year ended December 31, 2014, theInvestment Manager earned $52,019,094 ofmanagement fees and $206,545,813 of incentivefees. For the year ended December 31, 2013, theInvestment Manager earned $33,738,961 ofmanagement fees and $38,790,795 of incentivefees.16. RELATED PARTY DISCLOSURESThe relationship between the Company and theInvestment Manager and the fees earned aredisclosed in Note 15. In addition, the InvestmentManager and related parties to the InvestmentManager hold Management Shares, the rights ofwhich are disclosed in Note 11.The Investment Manager bore the fees and othercosts of the Placing and Admission of the PublicShares, commissions paid to placement agentsand other formation and offering expensesincurred during the Private Phase of the Company(the “Placing Fees”). Under the InvestmentManagement Agreement, the Investment Manageris entitled to recoup an amount over time that isequal to the aggregate Placing Fees and includesa yield of 4.25% per annum (the “Offset Amount”).The Offset Amount will be received by theInvestment Manager by way of the AdditionalReduction. Once the Offset Amount has beenreduced to zero, the Variable Incentive Fee willtake effect for shareholders, as described in Note15.As of December 31, 2014, the outstanding OffsetAmount to be paid to the Investment Manager wasapproximately $102.1 million. This amount includes$120 million of Placing Fees, the AdditionalReduction for the year ended 2014 ofapproximately $19.2 million and accrued interest ofapproximately $1.3 million.The Investment Manager may seek to effectrebalancing transactions from time to timepursuant to policies that are intended to result inthe Company and the affiliated entities managedby the Investment Manager generally holdinginvestment positions on a proportionate basisrelating to their respective net asset values.Rebalancing transactions involve either theCompany purchasing securities or other financialinstruments held by one or more affiliated entitiesor selling securities or other financial instrumentsto one or more affiliated entities. Thesetransactions will be subject to a number ofconsiderations including, but not limited to, cashbalances and liquidity needs, tax, regulatory, riskand other considerations, which may precludethese transactions from occurring or limit theirscope at the time of the transactions.As of December 31, 2014 and December 31, 2013,the Company had an investment in PS V. AtDecember 31, 2014 and December 31, 2013, theCompany had a capital balance of $90,621,451and $70,368,897, respectively, in PS Vrepresenting an ownership in PS V of 12.50% and12.34%, respectively, which are included ininvestments in securities in the statement offinancial position and classified as Level 2securities in the fair value hierarchy in Note 7.At December 31, 2014 and December 31, 2013,PS V distributed capital of $337,015 and $310,783,respectively, to the Company and suchdistributions are recorded in the statement offinancial position as receivables. Thesedistributions of capital relate to dividend incomefrom PS V’s investment in Air Products andChemicals, Inc. common shares.As of December 31, 2014, the Company had aninvestment in PSF1. The Company’s capitalbalance of $2,099,561,215 in PSF1 representedan ownership of 36.77% which is included ininvestments in securities in the statement offinancial position and classified as Level 2securities in the fair value hierarchy in Note 7.PERSHING SQUARE HOLDINGS, LTD. 67