Pershing Square : Annual Report 31 December 2022

Pershing Square Holdings, Ltd.

2022 Annual Report

Pershing Square Holdings, Ltd.

2022 Annual Report and Accounts

Annual Report

Company Overview 1

Company Performance 2

Chairman's Statement 3

Investment Manager's Report 7

Principal Risks and Uncertainties 23

Directors 28

Report of the Directors 32

Directors' Remuneration Report 42

Corporate Governance Report 44

Report of the Audit Committee 51

Report of Independent Auditor 56

Audited Financial Statements

Statement of Financial Position 65

Statement of Comprehensive Income 67

Statement of Changes in Equity 68

Statement of Cash Flows 69

Notes to Financial Statements 70

Supplemental U.S. GAAP Disclosures

Condensed Schedule of Investments 110

Financial Highlights 112

Disclosures

Certain Regulatory Disclosures 113

Affirmation of the Commodity Pool Operator 115

Endnotes and Disclaimers 116

Company Overview

The Company

Pershing Square Holdings, Ltd. ("PSH", or the "Company") (LN:PSH) (LN:PSHD) (NA:PSH) is an investment holding company structured as a closed-ended fund principally engaged in the business of acquiring and holding significant positions in a concentrated number of large capitalization companies. PSH's objective is to maximize its long-term compound annual rate of growth in intrinsic value per share.

PSH was incorporated with limited liability under the laws of the Bailiwick of Guernsey on February 2, 2012. It commenced operations on December 31, 2012 as a registered open-ended investment scheme, and on October 1, 2014 converted into a registered closed-ended investment scheme. Public Shares of PSH commenced trading on Euronext Amsterdam N.V. on October 13, 2014. On May 2, 2017, PSH's Public Shares were admitted to the Official List of the UK Listing Authority and commenced trading on the Premium Segment of the Main Market of the London Stock Exchange ("LSE").

PSH has appointed Pershing Square Capital Management, L.P. ("PSCM," the "Investment Manager" or "Pershing Square"), as its investment manager. PSCM was founded by William A. Ackman on January 1, 2004. The Investment Manager has responsibility, subject to the overall supervision of the Board of Directors, for the investment of PSH's assets and liabilities in accordance with the investment policy of PSH set forth on pages 32-33 of this Annual Report (the "Investment Policy").

The substantial majority of the Company's portfolio is typically allocated to 8 to 12 core holdings usually comprising liquid, listed large capitalization North American companies. The Investment Manager seeks to invest in high-quality businesses, which it believes have limited downside and generate predictable, recurring cash flows. The Investment Manager is an active and engaged investor that works with its portfolio companies to create substantial, enduring and long-term shareholder value. The Investment Manager aims to manage risks through careful investment selection and portfolio construction, and may use opportunistic hedging strategies, to mitigate market-related downside risk or to take advantage of asymmetric profit opportunities. For more than 19 years, the investment strategy pursued by the Investment Manager has generated a 15.7% annualized net return and cumulative net returns of 1,557.3% for PSLP/PSH (as converted) compared to a 9.0% annualized net return and cumulative net returns of 426.8% for the S&P 500, PSH's historical benchmark index, during the same period.1,3

1

Company Performance

Pershing Square Holdings, Ltd and Pershing Square, L P ("PSLP") NAV Performance vs the S&P 500

PSLP/PSH Net Return*

PSLP Net Return(1,2)

2004 42.6 %	42.6 % 10.9 %
2005 39.9 %	39.9 % 4.9 %
2006 22.5 %	22.5 % 15.8 %
2007 22.0 %	22.0 % 5.5 %
2008 (13.0)%	Pershing Square, L.P.	(13.0)% (37.0)%
2009 40.6 %	40.6 % 26.4 %
2010 29.7 %	29.7 % 15.1 %
2011 (1.1)%	(1.1)% 2.1 %
2012 13.3 %	13.3 % 16.0 %
2013 9.6 %	9.7 % 32.4 %
2014 40.4 %	36.9 % 13.7 %
2015 (20.5)%	(16.2)% 1.4 %
2016 (13.5)%	(9.6)% 11.9 %
2017 (4.0)%	Pershing Square	(1.6)% 21.8 %
2018 (0.7)%	Holdings, Ltd.	(1.2)% (4.4)%
2019 58.1 %	44.1 % 31.5 %
2020 70.2 %	56.6 % 18.4 %
2021 26.9 %	22.9 % 28.7 %
2022 (8.8)%	(7.8)% (18.1)%
Year-to-date through March 21, 2023 0.3 %	0.4 % 4.7 %

S&P 500(3)January 1, 2004-March 21, 2023(1,4)

Cumulative (Since Inception) Compound Annual Return

December 31, 2012-March 21, 2023(1,4)

1,557.3 % 15.7 %

Cumulative (Since PSH Inception) Compound Annual Return

1,405.5 % 15.2 %

426.8 % 9.0 %

212.6 % 11.8 %

184.0 % 10.8 %

241.3 % 12.8 %

* NAV return an investor would have earned if it invested in PSLP at its January 1, 2004 inception and converted to PSH at its launch on December 31, 2012. Also see endnote 1 on page 117. Past performance is not a guarantee of future results. All investments involve risk, including the loss of principal. Please see accompanying endnotes and important disclaimers on pages 116-119.

Chairman's Statement

INTRODUCTION

Since the onset of the global coronavirus pandemic three years ago, the world's economy has endured one of the most volatile periods in memory. Uncertainty persisted in 2022 as central banks attempted to navigate a delicate balance between making changes to monetary policy to tame inflation, while avoiding an overreaction that could have a material negative impact on the global economy.

Despite these significant headwinds, our portfolio companies continue to perform well at the operating company level, and to deliver strong results. Nevertheless, market volatility, higher interest rates and multiple compression have led to declines in valuations, and our portfolio companies have not been immune. The Investment Manager pursues a long-term investment strategy and does not typically engage in short term trading in the shares of our portfolio companies. In addition, it rarely uses hedges to protect its mark-to-market performance from short-term downward volatility. However, the Investment Manager does seek to use asymmetric hedging strategies to protect the portfolio from extraordinary negative macro or market events that it anticipates may occur.

In an asymmetric hedging strategy, the Investment Manager invests a typically small amount of capital in a position which will generate a large multiple of the invested capital as the likelihood of the hedged event occurring increases. When realized, this capital is then available to reinvest into existing portfolio companies or other equities at the appropriate time. The Investment Manager's strategy and execution of its hedging program is a significant competitive advantage for PSH. During the three bear markets since the Investment Manager's inception, it has substantially outperformed the S&P 500 due to hedging-related gains and opportunistic investments in high-quality, durable growth companies.

The Investment Manager became concerned about the negative impact of inflation in late 2020 and implemented a hedging strategy which anticipated the prospect of a rising interest rate environment. The investment thesis was correct, and the strategy has successfully offset a meaningful percentage of the mark-to-market stock price declines experienced in the portfolio over the same period. In its report, the Investment Manager discusses its belief that while the stock prices of the portfolio companies have declined, their intrinsic values have increased, which positions PSH well for the future.

INVESTMENT PERFORMANCE

During the year ended December 31, 2022, PSH's Net Asset Value ("NAV") per share, including dividends, decreased by 8.8%, ending the year at $51.76 per share.i PSH's share price, including dividends, decreased by 14.6% over the same period as a result of the widening of the discount to NAV at which PSH shares traded from 28.3% to 33.2%.ii By comparison, the S&P 500 declined 18.1% during the year ended December 31, 2022, representing PSH NAV and share price outperformance of 930bps and 350bps, respectively.iii

PSH's compound annual return over the past five years to December 31, 2022 has been strong with a NAV return of 25.1% (PSH share price 21.9%, S&P 500 9.4%) during that period. These returns are measured after the deduction of management fees and performance fees. The Board is very pleased to highlight the Investment Manager's strong and consistent track record in generating substantial gains in NAV and in the share price, especially amid the recent volatile macroeconomic environment.