The Company's principal treasury operations are coordinated by its corporate treasury function. All treasury operations are conducted within a framework of policies and procedures approved annually by the Board of Directors. As a matter of policy, the Company does not undertake speculative transactions that would increase its credit, currency or interest rate exposure.

The Company is principally exposed to interest rate risk on any borrowings under the Company's various debt facilities. As of March 31, 2016 the Company had fully utilized the November 2015 Facilities Agreement and utilized $1,210.0 million of the RCF. Following the closing of the proposed combination with Baxalta, the Company will also be exposed to interest rate risk on any borrowings under the January 2016 Facilities Agreement which is undrawn as of March 31, 2016. Interest on each of these facilities is set at floating rates, to the extent utilized. Shire's exposure under these facilities is to changes in US dollar interest rates.

The Company regularly evaluates the interest rate risk on its facilities. During the three months ended March 31, 2016 the Company entered into interest rate swaps with a total notional amount of $5,100 million related to the November 2015 Facilities Agreement to manage interest rate risk associated with movements in benchmark interest rates until various dates in the fourth quarter of 2016. As of March 31, 2016 the fair value of these contracts was $2.0 million presented within other current liabilities. The Company has not elected hedge accounting for these contracts.

For the three months ended March 31, 2016 the Company recognized $2.0 million (2015: $nil) of interest expense related to these contracts, which was recognized as a component of interest expense.

The Company is also exposed to interest rate risk on its restricted cash, cash and cash equivalents and on foreign exchange contracts on which interest is set at floating rates. This exposure is primarily limited to US dollar, Pounds Sterling and Euro interest rates. As the Company maintains all of its cash, liquid investments and foreign exchange contracts on a short-term basis for liquidity purposes, this risk is not actively managed. In the three months ended March 31, 2016 the average interest rate received on cash and liquid investments was less than 1% per annum. These cash and liquid investments were primarily invested in US dollar term deposits with banks and money market and liquidity funds.

Financial instruments that potentially expose Shire to concentrations of credit risk consist primarily of short-term cash investments, derivative contracts and trade accounts receivable (from product sales and from third parties from which the Company receives royalties). Cash is invested in short-term money market instruments, including money market and liquidity funds and bank term deposits. The money market and liquidity funds in which Shire invests are all triple A rated by both Standard and Poor's and by Moody's credit rating agencies.

The Company is exposed to the credit risk of the counterparties with which it enters into bank term deposit arrangements and derivative instruments. The Company limits this exposure through a system of internal credit limits which vary according to ratings assigned to the counterparties by the major rating agencies. The internal credit limits are approved by the Board and exposure against these limits is monitored by the corporate treasury function. The counterparties to these derivatives contracts are major international financial institutions.

The Company's revenues from product sales in the US are mainly governed by agreements with major pharmaceutical wholesalers and relationships with other pharmaceutical distributors and retail pharmacy chains. For the year ended December 31, 2015 there were three customers in the US that accounted for 47% of the Company's product sales. However, such customers typically have significant cash resources and as such the risk from concentration of credit is considered acceptable. The Company has taken positive steps to manage any credit risk associated with these transactions and operates clearly defined credit evaluation procedures. However, an inability of one or more of these wholesalers to honor their debts to the Company could have an adverse effect on the Company's financial condition and results of operations.

A substantial portion of the Company's accounts receivable in countries outside of the United States is derived from product sales to government-owned or government-supported healthcare providers. The Company's recovery of these accounts receivable is therefore dependent upon the financial stability and creditworthiness of the relevant governments. In recent years global and national economic conditions have negatively affected the growth, creditworthiness and general economic condition of certain markets in which the Company operates. As a result, in some countries outside of the US, specifically, Argentina, Greece, Italy, Portugal and Spain (collectively the “Relevant Countries”) the Company is experiencing delays in the remittance of receivables due from government-owned or government-supported healthcare providers. The Company continues to receive remittances in relation to government-owned or government-supported healthcare providers in the Relevant Countries in the three months ended March 31, 2016, including receipts of $22.0 million and $24.3 million in respect of Spanish and Italian receivables, respectively. The Company's exposure to Greece, both in terms of gross accounts receivable and annual revenues, is not material.

To date the Company has not incurred material losses on accounts receivable in the Relevant Countries, and continues to consider that such accounts receivable are recoverable. The Company will continue to evaluate all its accounts receivable for potential collection risks and has made provision for amounts where collection is considered to be doubtful. If the financial condition of the Relevant Countries or other Eurozone countries suffer significant deterioration, such that their ability to make payments becomes uncertain, or if one or more Eurozone member countries withdraws from the Euro, additional allowances for doubtful accounts may be required, and losses may be incurred, in future periods. Any such loss could have an adverse effect on the Company's financial condition and results of operations.

The Company operates in numerous countries and as a consequence has transactional and translational foreign exchange exposures.

Transactional exposure arises where transactions occur in currencies different to the functional currency of the relevant subsidiary. The main operating currencies of the Company are the US dollar, Pounds Sterling, Swiss Franc, Canadian dollar and the Euro. It is the Company's policy that these exposures are minimized to the extent practicable by denominating transactions in the subsidiary's functional currency.

Where significant exposures remain, the Company uses foreign exchange contracts (spot, forward and swap contracts) to manage the exposure for balance sheet assets and liabilities that are denominated in currencies different to the functional currency of the relevant subsidiary. These assets and liabilities relate predominantly to inter-company financing. The Company has not elected hedge accounting for these transactions. Cash flows from derivative instruments are presented within net cash provided by operating activities in the Consolidated Statements of Cash Flows, unless the derivative instruments are economically hedging specific investing or financing activities.

Translational foreign exchange exposure arises on the translation into US dollars of the financial statements of non-US dollar functional subsidiaries.

As of March 31, 2016 the Company had 49 swap and forward foreign exchange contracts and 10 interest rate swaps outstanding to manage currency risk. The swap and forward contracts mature within 90 days. The Company did not have credit risk related contingent features or collateral linked to the derivatives. The Company has master netting agreements with a number of counterparties to these foreign exchange contracts and on the occurrence of specified events, the Company has the ability to terminate contracts and settle them with a net payment by one party to the other. The Company has elected to present derivative assets and derivative liabilities on a gross basis in the Unaudited Consolidated Balance Sheet. Further details are included below:

		Fair value	Fair value
		March 31,	December 31,
		2016	2015
		$’M	$’M
		_____________	_____________
Assets	Prepaid expenses and other current assets	3.0	1.9
Liabilities	Other current liabilities	13.9	11.5
		_____________	_____________

As of March 31, 2016 the potential effect of rights of set-off associated with the foreign exchange contracts would be an offset to both assets and liabilities of $2.0 million (2015: $nil), resulting in net derivative assets and derivative liabilities of $1.0 million and $11.9 million, respectively.

Net gains/(losses) (both realized and unrealized) arising on derivatives are recorded in the Consolidated Statements of Income as follows:

		3 Months Ended March 31,
		____________	____________
		2016	2015
		$’M	$’M
		_____________	_____________
Foreign exchange contracts and swaps	Other (expense)/income, net	(24.1)	16.3
		_____________	_____________