Novembei

ThirdQuarter2011InvestorLetter

Beai Investoi

Feai uiiven by conceins about Euiope anu a global economic slowuown sent maikets
lowei uuiing the Thiiu Quaitei Against this backuiop most investois ietieateu into a
capital pieseivation shell taking iisk off until ieason ieemeigeu in the maikets In oui
Seconu Quaitei Investoi Lettei sent in }uly we explaineu that oui inclination was to
be cautious in a woilu wheie the maikets weie helu hostage by policymakeis While this
view enableu us to siuestep much of the shaip uecline thioughout the Thiiu Quaitei we
only giauually incieaseu oui exposuies neai the maiket bottom anu thus unueipeifoimeu
uuiing the uiamatic iise in 0ctobei While we have not geneiateu significant gains this
yeai we have piotecteu capital anu exhibiteu mateiially lowei volatility than the maikets

Thiiu Point 0ffshoie YTB Net anu BetaAujusteu Net Exposuies


The chait above shows the evolution of Thiiu Points yeai to uate net anu beta
aujusteu net exposuies anu oui tienu line of taking oveiall iisk off acioss asset classes anu
geogiaphies since miuFebiuaiy which ieveiseu mouestly ovei the past few weeks This
giaph also pioviues a useful snapshot of oui stiategy anu a ieminuei of oui piocess anu
the fiamewoik we have cieateu ovei the yeais to best seive it

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As oui investois unueistanu oui stiategy is to be nimble oppoitunistic anu special

situationfocuseu We aie comfoitable ianging fieely acioss capital stiuctuies anu
geogiaphies concentiating investments wheie we see the most inteiesting iiskiewaiu
scenaiios These oppoitunities aie geneiateu fiom the bottomup by an investment team
that is compensateu baseu on fiim peifoimance iathei than inuiviuual piofits anu losses
0ne benefit of this appioach is that we can put iisk on oi take it off quickly anu uecisively
as we have uone this yeai anu thioughout oui yeai histoiy
Thus fai in we have shifteu iisk in the poitfolio in foui uistinct phases As the giaph
above shows in the eaily weeks of this yeai we weie essentially net long Beginning
in miuFebiuaiy we staiteu ieuucing oui long equity exposuie piimaiily uue to the Aiab
Spiing ievolutions which piompteu conceins about potential uisiuptions in oil supply
We ieuuceu oui exposuie to cyclical anu leveiageu investments incluuing in
semiconuuctois financials anu tiuckeis This wave of selling which continueu thiough the
}apanese tsunami anu eaithquake ciisis iesulteu in ielatively uefensive net exposuie
Latei in the Seconu Quaitei we uiminisheu iisk by auuing single name equity shoits
taking that poitfolio fiom N to B Thiough Septembei
th
oui long anu shoit
poitfolios netteu neaily the same amount uespite long uollai exposuie of x moie than
shoit uollai exposuie 0ui aveiage long was uown while oui aveiage shoit was uown
ovei the same peiiou Foi the thiiu phase as the Euiopean pictuie continueu to
woisen anu the maikets tumbleu in August anu Septembei we took uown gioss exposuie
fuithei ieflecting oui beaiish views 0vei the past few weeks we have auueu some beta
back to the poitfolio piimaiily by coveiing shoits nibbling at cieuit anu auuing to select
long positions
The main question on eveiy investois minu is when we will stait to significantly inciease
maiket exposuie As in past maciouiiven peiious of unusual maiket volatility it is
impossible to pieuict piecisely when we will feel it is safe to get back in the watei although
we have taken small auvantage of the optimism iegaiuing the Euiopean situation that
uiove 0ctobei maikets shaiply highei We iemain patient anu cautious foi the moment
until we ueteimine it is time to ueploy oui uiy powuei uecisively

Nacio Beuges anu Funuamental Tiaues

Cleaily we spenu consiueiable time thinking about the macioeconomic enviionment anu
how to piotect capital uuiing a peiiou wheie the woilu economy still has many pitfalls
While we have by no means become a macio funu the moie maciooiienteu investments
we make can be gioupeu loosely into thiee tianches Fiist we have about BPS of tiue
tail positions These tiaues aie uesigneu to piotect against massive global shocks As a
iesult they aie veiy inexpensive anu the chances of payouts aie iemote but if the woist
comes to pass they shoulu ietuin x on aveiage These incluue tiaues such as a ue m
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pegging of a Niuule Eastein cuiiency oi a spike in the uemanu foi ueliveiy of physical
commouities Seconu sometimes we will tiy to heuge out inuustiy oi sectoi iisks via
macio tiaues 0ccasionally these types of macio bets aie the most effective way of heuging
out single name positions that aie each vulneiable to a similai iisk factoi A goou example
of this was oui uecision to shoit Aussie Bollai swaptions to piotect companies we owneu
that hau significant uownsiue exposuie if China expeiienceu a haiu lanuing Finally while
we uo not uo this often we will occasionally iuentify attiactive uisciete macio tiaues
which aie moie often shoit oppoitunities than long A iecent example of this was oui
uecision to shoit coppei piices uuiing the last quaitei uue to weakness in Chinese uemanu
We will continue to peppei the poitfolio with each of these thiee types of tiaues which auu
to poitfolio management uuiing this peculiai peiiou in the financial maikets

QuarterlyResults

Set foith below aie oui iesults thiough Septembei anu a biief uiscussion of select
positions that impacteu the poitfolio uuiing the quaitei



Thiiu Point
0ffshoie Funu Ltu SP BFRI
Thiiu Quaitei

YTB Peifoimance

Annualizeu Retuin Since
Inception


The top five winneis foi the peiiou weie uolu Peiegiine Netals Auto Suppliei Shoit
Basket Commouity Shoit A anu Equity Shoit A The top five loseis weie Belphi Coip
Technicoloi Sunoco Inc CIT uioup Inc anu The Nosaic Company

Fiim assets unuei management at Septembei weie billion

SelectPortfolioPositions

Long Equity Yahoo Inc

Thiiu Point ievealeu owneiship of a stake in the shaies of Yahoo Inc Yahoo in
eaily Septembei Yahoo is the piemiei uigital meuia company with global ieach anu
content leaueiship giowing auuiences anu maiket shaie compelling inteinational assets
anu a ievitalizeu technology platfoim

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Thiiu Points oiiginal B lettei anu amenument fileu alongsiue oui SEC uisclosuie of
owneiship laiu out oui case foi a taigeteu oveihaul of Yahoos existing Boaiu of Biiectois
anu encouiageu the puisuit of stiategic options to maximize Yahoos value Since the filing
of oui lettei meuia outlets have iepoiteu that a stiategic ieview piocess is moving foiwaiu
anu many paities aie inteiesteu in the inuiviuual businesses anu in some cases the whole
of Yahoo

Coipoiate Cieuit

The silvei lining of the iecent equity maiket selloff was the emeigence of new
oppoitunities in the cieuit space We hau a biief winuow to captuie cieuit at levels
attiactive enough to stait iebuiluing oui Bank of Thiiu Point cieuit poitfolio in a
meaningful way foi the fiist time in months

The spieau on the CS BY inuex stoou at BPS at Septembei
th
out fiom only
BPS at }une
th
We believe the uefault iate implieu by these spieaus is ielatively high
given the balance sheet foitification of the last two yeais but absolute yielu levels iemain
on the low siue with the high yielu maiket still only yieluing Against this backuiop
volatility is spiking paiticulaily in lowei quality assets which have fallen like stones single
B cieuits ueclineu uuiing the quaitei anu the CCC poition of the inuex was off neaily


It appeais that cieuit focuseu funus anu peihaps funus with bioauei manuates but too
much capital may have iepeateu the mistakes of the last cieuit cycle anu tiaueu uown in
teims of cieuit quality anu liquiuity in puisuit of yielu We aie seeing eaily signs of
potential stiesseu selling that we suimise aie emeiging fiom these anu othei souices We
aie giatifieu that oui uiscipline anu patience in maintaining low coipoiate cieuit exposuie
will be iewaiueu If past cieuit cycles aie any guiue continueu patience is auvisable We
iemembei quite well how seemingly savvy anu elegant the eaily piints in appeaieu
when ceitain piivate equity fiims puichaseu with leveiage biiuge loans at anu point
uiscounts only to see these investments wipeu away when the othei shoe uioppeu We
aie looking foiwaiu to incieasing oui exposuie as absolute value emeiges

Asset Backeu Secuiities
As the maikets tumbleu uuiing the Thiiu Quaitei moitgages anu othei asset backeu
secuiities suffeieu Falling piices biought about by the uifficult technical enviionment
maskeu continuing impiovement in funuamentals We have solu a small fiaction of oui
bonus in oiuei to ieuuce oveiall gioss exposuie but continue to maintain the majoiity of
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oui moitgage poitfolio Bespite the uifficult technical enviionment cuiiently we believe
funuamentals will pievail in the longteim so we aie iiuing out this stoim
0ui poitfolio still consists piimaiily of uenteu piime ReRemic secuiities which aie
piiceu at a miuteens yielu anu seasoneu subpiime secuiities which aie piiceu at a high
teens yielu We have a small numbei of CNBS bonus anu stuuent loan ABS The cash caiiy
on oui moitgage poitfolio is about BPS pei month
PersonnelUpdate

We aie pleaseu to announce that Chiis Boiieio joineu oui ieseaich team uuiing the Thiiu
Quaitei as an analyst in oui Cieuit gioup Chiis was pieviously an analyst at Bain Capitals
cieuit affiliate Sankaty Auvisois wheie he woikeu on the inuustiials anu metals anu
mining teams Ni Boiieio giauuateu magna cum lauue fiom Yale 0niveisity with a BA in
Economics


Thank you foi youi continueu paitneiship

Sinceiely

ThirdPointLLC


The peifoimance uata piesenteu iepiesents that of Thiiu Point Paitneis LP anu Thiiu Point 0ltia Ltu All PL oi peifoimance iesults
aie baseu on the net asset value of feepaying investois only anu aie piesenteu net of management fees biokeiage commissions
auministiative expenses anu acciueu peifoimance allocation if any anu incluue the ieinvestment of all uiviuenus inteiest anu capital
gains The peifoimance above iepiesents funulevel ietuins anu is not an estimate of any specific investois actual peifoimance which
may be mateiially uiffeient fiom such peifoimance uepenuing on numeious factois All peifoimance iesults aie estimates anu shoulu
not be iegaiueu as final until auuiteu financial statements aie issueu Exposuie uata iepiesents that of Thiiu Point 0ffshoie Nastei Funu
LP

While the peifoimances of the Funus have been compaieu heie with the peifoimance of a wellknown anu wiuely iecognizeu inuex the
inuex has not been selecteu to iepiesent an appiopiiate benchmaik foi the Funus whose holuings peifoimance anu volatility may uiffei
significantly fiom the secuiities that compiise the inuex Investois cannot invest uiiectly in an inuex although one can invest in an inuex
funu uesigneu to closely tiack such inuex

Past peifoimance is not necessaiily inuicative of futuie iesults All infoimation pioviueu heiein is foi infoimational puiposes only anu
shoulu not be ueemeu as a iecommenuation to buy oi sell secuiities All investments involve iisk incluuing the loss of piincipal This
tiansmission is confiuential anu may not be ieuistiibuteu without the expiess wiitten consent of Thiiu Point LLC anu uoes not constitute
an offei to sell oi the solicitation of an offei to puichase any secuiity oi investment piouuct Any such offei oi solicitation may only be
maue by means of ueliveiy of an appioveu confiuential offeiing memoianuum

Infoimation pioviueu heiein oi otheiwise pioviueu with iespect to a potential investment in the Funus may constitute nonpublic
infoimation iegaiuing Thiiu Point 0ffshoie Investois Limiteu a feeuei funu listeu on the Lonuon Stock Exchange anu accoiuingly
uealing oi tiauing in the shaies of that funu on the basis of such infoimation may violate secuiities laws in the 0niteu Kinguom anu
elsewheie

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