We could not find any results for:
Make sure your spelling is correct or try broadening your search.
Register for streaming realtime charts, analysis tools, and prices.
| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Third Poi. ?? | LSE:TPOG | London | Ordinary Share | GG00B1YQ6R97 | ORD NPV £ |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 1,510.00 | 1,490.00 | 1,530.00 | 0.00 | 01:00:00 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| 0 | 0 | N/A | 0 |
Hot Features
Premium
TIDMTPOG TIDMTPOU
Third Point Offshore Investors Limited (the "Company")
(a closed-ended investment company incorporated with limited liability under
the laws of Guernsey with registered number 47161)
28 April 2017
FULL YEAR Results for the TWELVE months ended 31 DECEMBER 2016
Third Point Offshore Investors Limited ("TPOIL" or the "Company"), the
closed-end, London listed event-driven, value-oriented hedge fund managed by
Daniel S. Loeb's Third Point LLC (the "Investment Manager") announces its full
year results for the twelve months ended 31 December 2016.
Financial Highlights (as at 31 December 2016, unless otherwise stated)
- Net Asset Value ("NAV") growth in USD class of 6.1% and GBP class of 5.6%
Ticker Tranche NAV FY16 NAV FY15 Return
TPOU USD Class $ $17.63 $16.62 6.1%
TPOG GBP Class GBP GBP16.84 GBP15.95 5.6%
- The Company's NAV increased 5.2% to $879.2 million (FY15:$835.9 million)
- On 10 January 2017, an annual distribution was declared equivalent to 4% of
the NAV of the Company in respect of the year to 31 December 2016, amounting to
$0.71 per USD share and GBP0.62 per GBP share
Portfolio Performance of the Master Fund
- The Investment Manager combined bottom up security selection with a top down
macroeconomic overlay throughout the year. The combination afforded Third Point
the ability to adjust exposures opportunistically around key macroeconomic and
political events globally
- The net investment results for the year were driven by contribution from most
strategies and sectors in the portfolio. Credit contributed the largest share
of profits with modest losses in structured credit greatly outweighed by gains
in corporate and sovereign credit
- Investments in the energy sector were the primary driver of returns for the
year in corporate credit. Within equities, strong performance from investments
in the financials and industrials sectors countered negative attribution from
two large healthcare positions
Outlook
- The Investment Manager shifted the portfolio throughout 2016 and ended the
year with more net exposure but less gross exposure relative to the beginning
of the year
- In the near term, the Investment Manager expects to see accelerating growth
in the U.S. and globally and fiscal stimulus in the U.S. The combination could
cause earnings to rise and a very different investing environment. A
reflationary market can create favorable conditions for Third Point's
investment strategies including event driven and value investing, risk
arbitrage, and activism. The Investment Manager has increased exposure to
equities across sectors and decreased investments in corporate and structured
credit
Marc Antoine Autheman, Chairman of Third Point Offshore Investors Limited,
commented: "I am pleased to report a solid growth in NAV from Third Point
Offshore Investors for 2016, with the Investment Manager's ability to allocate
across both the capital structure and strategies contributing to a positive
return in a volatile year."
"Despite the positive NAV performance, the discount between NAV and the share
price for each class widened during the year. The Board believes that this
shift is driven primarily by investor sentiment about market conditions. The
Board has been proactive in looking to address investor concerns, initiating a
series of share buybacks in February 2016 and we are pleased to have been able
to recently announce a dividend for 2016.
"Looking forward, the Investment Manager believes that a reflationary market
can create favorable conditions for Third Point's investment strategies
including event driven and value investing, risk arbitrage, and activism. As
such, the Investment Manager has increased exposure to equities across sectors
and decreased investments in corporate and structured credit as it continues to
look to identify compelling risk-adjusted opportunities for investment across
the capital structure."
Enquiries:
Third Point Offshore investors
Investor Relations +1 212 715 6707
FTI Consulting
Ed Berry +44 (0)20 3727 1046
Tom Blackwell +44 (0)20 3727 1051
Notes to Editors
TPOIL is a feeder fund that invests in Third Point Offshore Fund Ltd. (the
"Master Fund"), with the investment objective of achieving uncorrelated, long
term, attractive risk-adjusted returns. The Company has two share classes
which differ by denomination (LSE: TPOU, TPOG).
Chairman's Statement
I am pleased to present the Tenth Annual Report for Third Point Offshore
Investors ("the Company") for the year ended 31 December 2016.
The Company was established as a closed-end investment company, registered and
incorporated in Guernsey on 19 July 2007. The Company invests its assets in
Third Point Offshore Master Fund L.P. (the "Master Partnership") via Third
Point Offshore Fund, Ltd. (the "Master Fund"), which pursues an opportunistic
investment approach based on event-driven fundamental value analysis across the
capital structure. The Master Fund is managed on a discretionary basis by Third
Point LLC ("the Investment Manager").
The Company's net asset value (the "NAV") appreciated 6.1% for the U.S. Dollar
and 5.6% for the Sterling share classes, respectively, in 2016. The performance
was driven primarily by positive returns in the Master Fund's corporate and
sovereign credit positions. Gains were counterbalanced by losses in several
large equity positions in the healthcare sector. The ability to allocate across
the capital structure and across strategies is an important characteristic of
the Third Point investment approach.
The Investment Manager combined bottom up security selection with a top down
macroeconomic overlay throughout the year. The combination afforded Third Point
the ability to adjust exposures opportunistically around key macroeconomic and
political events globally. The Investment Manager shifted the investment
portfolio meaningfully following the U.S. Presidential election. The shift
resulted in an equity book with higher net exposure and a more balanced
portfolio across sectors. The Investment Manager is less focused on credit
opportunities in the current investment environment. The Investment Manager
increased exposure to risk arbitrage transactions and generated positive
returns from several merger-related investments in 2016.
The discount between NAV and the share price for each class widened
substantially during the year despite positive NAV results. We believe this
shift was led primarily by investor sentiment about market conditions and
disappointment that the Company was unable to issue a dividend for 2015 due to
insufficient performance in the Master Fund. To address investor concerns, we
initiated a series of share buybacks in February 2016 through the Master
Partnership and were pleased to recently announce a dividend for 2016. We will
continue to abide by the discount policy introduced in the Fourth Quarter of
2012 and maintain a proactive approach to communications.
We believe in the importance of transparent communications with shareholders
and aim to be responsive to your inquiries. To this end, the Company's website
(www.thirdpointpublic.com) publishes monthly NAVs, a monthly shareholder
report, a narrative quarterly letter from the Investment Manager, and other
relevant information about the Company.
In corporate governance matters, the independent Board of Directors and Audit
Committee have met regularly.
My fellow Directors and I are honoured to serve our shareholders.
Marc Antoine Autheman
27 April 2017
Directors' Report
The Directors submit their Report together with the Company's Statements of
Assets and Liabilities, Statements of Operations, Statements of Changes in Net
Assets, Statements of Cash Flows and the related notes for the year ended 31
December 2016, "Audited Financial Statements". These Audited Financial
Statements have been properly prepared, in accordance with accounting
principles generally accepted in the United States of America, any relevant
enactment for the time being in force, and are in agreement with the accounting
records and have been properly prepared in all material aspects. The Audited
Financial Statements give a true and fair view of the financial position of the
Company.
The Company
The Company was incorporated in Guernsey on 19 June 2007 as an authorised
closed-ended investment scheme and was admitted to a secondary listing (Chapter
14) on the Official List of the London Stock Exchange on 23 July 2007. The
proceeds from the initial issue of shares on listing amounted to approximately
US$523 million. Following changes to the Listing Rules on 6 April 2010, the
secondary listing became a standard listing.
The Company is a member of the Association of Investment Companies ("AIC").
Investment Objective and Policy
The Company's investment objective is to provide its Shareholders with
consistent long term capital appreciation utilising the investment skills of
Third Point LLC (the "Investment Manager") through investment of all of its
capital (net of short term working capital requirements) in Class E Shares of
Third Point Offshore Fund, Ltd (the "Master Fund"), an exempted company formed
under the laws of the Cayman Islands on 21 October 1996.
The Master Fund is a limited partner of Third Point Offshore Master Fund L.P.
(the "Master Partnership"), an exempted limited partnership organised under the
laws of the Cayman Islands, of which Third Point Advisors II L.L.C., an
affiliate of the Investment Manager, is the general partner. Third Point LLC is
the Investment Manager to the Company, the Master Fund and the Master
Partnership. The Master Fund and the Master Partnership have the same
investment objectives, investment strategies and investment restrictions.
The Master Fund and Master Partnership's investment objective is to seek to
generate consistent long term capital appreciation, by using an event driven,
bottom-up, fundamental approach to evaluate various types of securities
throughout companies' capital structures. The Investment Manager's
implementation of the Master Fund and Master Partnership's investment policy is
the main driver of the Company's performance.
The Investment Manager's fundamental approach to investing begins with
analysing a company's financial performance, its management and competitive
advantages, its position within its industry and the overall economy. This
analysis is performed on historical and current data with the ultimate goal of
producing a set of projected financial results for the company. Once the
projections are established, the Investment Manager compares the current
valuation of the company in question relative to its historical valuation
range, the valuation range of its peers and the overall market in general to
determine whether the markets are mis-pricing the company. The Investment
Manager ultimately invests in situations where it believes mis-pricing exists
because this fundamental analysis indicates that such a disconnection will
correct itself over the long term.
The Investment Manager's bottom-up approach attempts to identify individual
companies that would make attractive investment targets based on their growth
and profitability characteristics. This approach differs from a top-down
methodology which first evaluates macro-economic, sector, industry or
geographic factors to select the best sectors or industries for investment.
The Investment Manager seeks to identify Event Driven situations in which it
can take either a long or short investment position where it can identify a
near or long-term catalyst that would unlock value.
Results and Dividends
The results for the year are set out in the Statements of Operations. Except in
unusual circumstances, it is anticipated that the Board of Directors of the
Company (the "Board"), following discussions with the Investment Manager, will
declare an annual cash dividend equivalent to 4-5% of the Net Asset Value
("NAV") of the Company, to the extent that the positive NAV performance of the
Company is sufficient to support such dividends. There were no distributions
declared during the year (31 December 2015: $Nil). On 10 January 2017, an
annual distribution was declared equivalent to 4% of the NAV of the Company in
respect of the year to 31 December 2016, amounting to $0.71 per USD share and GBP
0.62 per GBP share (31 December 2015: $Nil) and paid on 14 February 2017.
Share Capital
Share Capital Conversions took place during the year ended 31 December 2016. A
summary and the number of shares in issue at the year-end are disclosed in Note
6 to the Audited Financial Statements.
Key performance indicators ("KPI's")
At each Board meeting, the Board considers a number of performance measures to
assess the Company's success in achieving its objectives. Below are the main
KPI's which have been identified by the Board for determining the progress of
the Company:
* Net asset value;
* Share price; and
* Ongoing charges.
Directors
The Directors of the Company during the year and to the date of this report are
as listed on this Annual Report.
Directors' Interests
Mr. Targoff holds the position of Chief Operating Officer, Partner and General
Counsel of Third Point LLC.
Pursuant to an instrument of indemnity entered into between the Company and
each Director, the Company has undertaken, subject to certain limitations, to
indemnify each Director out of the assets and profits of the Company against
all costs, charges, losses, damages, expenses and liabilities arising out of
any claims made against them in connection with the performance of their duties
as a Director of the Company.
Christopher Legge and Keith Dorrian held 4,500 and 2,500 U.S. Dollar shares
respectively as at 31 December 2016 (31 December 2015: Nil). No other Directors
held shares in the Company during the year.
Corporate Governance Policy
The Board has considered the principles and recommendations of the Association
of Investment Companies Code of Corporate Governance ("AIC Code") by reference
to the Association of Investment Companies Corporate Governance Guide for
Investment Companies ("AIC Guide"). The AIC Code, as explained by the AIC
Guide, addresses all the principles set out in the UK Corporate Governance
Code, as well as setting out additional principles and recommendations on
issues that are of specific relevance.
The Board has determined that reporting against the principles and
recommendations of the AIC Code, and by reference to the AIC Guide (which
incorporates the UK Corporate Governance Code), will provide better information
to Shareholders. The Company has complied with all the recommendations of the
AIC Code and the relevant provisions of the UK Corporate Governance Code,
except as set out below.
The UK Corporate Governance Code includes provisions relating to:
* the role of the chief executive;
* executive directors' remuneration; and
* the need for an internal audit function.
For the reasons set out in the AIC Guide, the Board considers these provisions
are not relevant to the position of the Company, being an externally advised
investment company with no executive directors or employees. The Company has
therefore not reported further in respect of these provisions.
The AIC Code provides a "comply or explain" code of corporate governance
designed especially for the needs of investment companies. The AIC published
the code of corporate governance and the Company has reviewed its compliance
with these standards. The UK Financial Reporting Council ("FRC") has confirmed
that so far as investment companies are concerned it considers that companies
which comply with the AIC Code will be treated as meeting their obligations
under the UK Corporate Governance Code ("The UK Code") and Section 9.8.6 of the
Listing Rules. The AIC Code is publicly available at: http://www.theaic.co.uk/
sites/default/files/hidden-files/AICCodeofCorporateGovernanceJUL16_0.pdf
The Company does not have employees, hence no whistle-blowing policy is
necessary. However, the Directors have satisfied themselves that the Company's
service providers have appropriate whistleblowing policies and procedures and
confirmation has been sought from the service providers that nothing has arisen
under those policies and procedures which should be brought to the attention of
the Board. The UK Code is publicly available at: https://www.frc.org.uk/
Our-Work/Publications/Corporate-Governance/
UK-Corporate-Governance-Code-2014.pdf
The Code of Corporate Governance (the "Guernsey Code") provides a framework
that applies to all entities licensed by the Guernsey Financial Services
Commission ("GFSC") or which are registered or authorised as a collective
investment scheme. Companies reporting against the UK Code or the AIC Code are
deemed to comply with the Guernsey Code. It is the Company's policy to comply
with the AIC Code.
The Board confirms that throughout the period covered in the financial
statements, the Company complied with the Guernsey Code issued by the GFSC, to
the extent it was applicable based upon its legal and operating structure and
its nature, scale and complexity.
Board Structure
The Board currently consists of five non-executive Directors. As the Chairman
of the Board is an independent non-executive, the Board considers it
unnecessary to appoint a senior independent Director.
Name Position Independent Date
Appointed
Marc Antoine Autheman Non-Executive Chairman Yes 21 June 2007
Christopher Legge Non-Executive Director Yes 19 June 2007
Keith Dorrian Non-Executive Director Yes 19 June 2007
Christopher Fish Non-Executive Director Yes 19 June 2007
Joshua L Targoff Non-Executive Director No 29 May 2009
One third of the Directors retire by rotation at every Annual General Meeting
("AGM") with the exception of Mr. J Targoff, who as the Chief Operating
Officer, General Counsel and Partner of the
Investment Manager, is not considered independent and will therefore be subject
to annual re-election by Shareholders. All other Directors are considered by
the Board to be independent of the Company's Investment Manager. Any Directors
appointed to the Board since the previous AGM also retire and stand for
re-election. The Independent Directors take the lead in any discussions
relating to the appointment or re-appointment of directors. The Independent
Directors consider it important that the Board includes a representative of the
Investment Manager.
The Board meets at least four times a year and in addition there is regular
contact between the Board, the Investment Manager and Northern Trust
International Fund Administration Services (Guernsey) Limited (the
"Administrator"), and the Board requires to be supplied in a timely manner with
information by the Investment Manager, the Administrator, Northern Trust
International Fund Administration Services (Guernsey) Limited (the "Company
Secretary") and other advisors in a form and of a quality appropriate to enable
it to discharge its duties. The Board, excluding Mr. Targoff, regularly reviews
the performance of the Investment Manager and the Master Fund to ensure that
performance is satisfactory and in accordance with the terms and conditions of
the relative appointments and Prospectus. It carries this review out through
consideration of a number of objective and subjective criteria and through a
review of the terms and conditions of the advisors' appointment with the aim of
evaluating performance, identifying any weaknesses and ensuring value for money
for the Company's Shareholders.
New Directors will receive an induction from the Investment Manager on joining
the Board, and all Directors undertake relevant training as necessary.
The Company has no executive directors or employees. All matters, including
strategy, investment and dividend policies, gearing and corporate governance
procedures are reserved for approval by the Board of Directors. The Board
receives full information on the Company's investment performance, assets,
liabilities and other relevant information in advance of Board meetings.
Board Tenure and Succession planning
The Board notes the AIC Code and UK Code suggest it would be good practice for
all Directors to be offered for re-election at regular intervals subject to
continued satisfactory performance. In accordance with the Company's articles
of incorporation, at least one third of the Independent Directors and Mr.
Targoff (treated for the purposes of the AIC Code as a Non-Independent
Director) will retire at each Annual General Meeting (Principle 3 - AIC Code).
The Company considers that putting forward all Independent Directors for
re-election more frequently would not be in the best interests of Shareholders.
The Board believes that benefits to Shareholders arise from the Directors'
long-term knowledge and experience of the Company and its management including
their ongoing ability to independently review the performance of the Investment
Manager.
The majority of the Board have been in office since the company was
incorporated in 2007 and have served longer than nine years. The Board however,
takes the view that independence is not necessarily compromised by the length
of tenure on the Board and experience can add significantly to the Board's
strength.
The Directors undertake an annual evaluation of the Board's performance and
continuing independence and during this evaluation (which includes a review of
the diversity of experience within the Board to ensure that it remains
appropriate) all Directors are asked to confirm their future intentions. At the
recent review Mr. Fish indicated his intention to retire from the Board at the
2017 AGM. The Board has robust procedures for the identification of prospective
Non-Executive Director candidates, and as part of the selection process, due
regard is paid to the recommendations for board diversity, however, ability and
experience will be the prime considerations. During the last 6 months the Board
has sought nominations from the Directors and from other relevant parties. A
shortlist of well qualified candidates was produced who were then interviewed
by an ad-hoc committee of independent Directors. The Board expects to be in a
position to appoint a successor to Mr. Fish following approval of these Audited
Financial Statements.
Directors' Biographies
Marc Antoine Autheman
Marc Antoine Autheman, is a resident of France. He has over 38 years of
experience in the public and private finance sectors. Mr. Autheman is currently
Chairman of Euroclear S.A. and Chairman of Cube Infrastructure Fund. He worked
in the French Treasury for ten years from 1978 to 1988, prior to joining the
Minister of Finance's private office, Minister Beregovoy, as advisor for
monetary and financial affairs between 1988 and 1993. From 1993 to 1997, he
worked as Executive Director for France for the International Monetary Fund and
the World Bank and chaired the audit committee of the World Bank during this
time. From 1997 to 2004, he worked in a number of roles at Credit Agricole S.A.
("CASA"), mainly as CEO of Credit Agricole Indosuez. He holds Master's
degrees in Law and Economics from the University of Paris.
Keith Dorrian
Keith Dorrian, is a Guernsey resident and has over 43 years' experience in the
offshore finance industry. Joining Manufacturers Hanover in 1973 he moved to
First National Bank of Chicago in 1984 where he was appointed Vice President
and Company Secretary. In 1989 he joined ANZ Bank (Guernsey) where, as a
Director of the Bank and Fund Management company, he was closely involved in
the banking and fund management services of the Group. He took up the position
of Manager Corporate Clients in Bank of Bermuda Guernsey in 2000 and was
appointed local Head of Global Fund Services and Managing Director of the
Guernsey Bank's Fund Administration company Management International (Guernsey)
Limited in Guernsey in 2001, retiring on 31 December 2003. He is currently a
member of the Guernsey Investment Fund Association, the Institute of Financial
Services, the Institute of Directors and is a Director of a number of funds and
fund management companies and holds the Institute of Directors Diploma in
Company Direction. Mr. Dorrian was elected a Fellow of the Institute of
Directors.
Christopher Fish
Christopher Fish, is Guernsey resident and is a director of a UK listed fund as
well as three Guernsey based financial companies. During the past 42 years he
has held executive positions as a director of the Royal Bank of Canada (Channel
Islands) Limited and as the Americas Offshore Head of Coutts where he was
responsible for the Bahamas, Bermuda, Cayman and Uruguay offices. In 1997 he
was appointed the Senior Client Partner for Coutts Offshore before taking up
the position of Managing Director of Close International Private Banking in
1999 from where he retired in 2005.
Christopher Legge
Christopher Legge, is a Guernsey resident and worked for Ernst & Young in
Guernsey from 1983 to 2003. Having joined the firm as an audit manager in 1983,
he was appointed a partner in 1986 and managing partner in 1998. From 1990 to
1998, he was head of Audit and Accountancy and was responsible for the audits
of a number of insurance, banking, investment fund and financial services
clients. He also had responsibility for the firm's training, quality control
and compliance functions. He was appointed managing partner of Ernst & Young
for the Channel Islands region in 2000. Since his retirement from Ernst & Young
in 2003, Mr. Legge has held a number of non-executive directorships in the
financial sector. He is an FCA and holds a BA (Hons) in Economics from the
University of Manchester.
Joshua L. Targoff
Joshua L. Targoff has been the Chief Operating Officer of the Investment
Manager since May 2009. He joined as General Counsel in May 2008. Previously,
Mr. Targoff was the General Counsel of the Investment Banking Division of
Jefferies & Co. Mr. Targoff spent seven years doing M & A transactional work at
Debevoise & Plimpton LLP. Mr. Targoff graduated with a J.D. from Yale Law
School, and holds a B.A. from Brown University. In 2012, Mr. Targoff was made a
Partner of the Investment Manager.
Meeting Attendance Records
The table below lists Directors' attendance at meetings during the year, to the
date of this report.
Scheduled Audit
Board Committee
Meetings Meetings
Attended Attended
Marc Antoine Autheman 4 of 4 3 of 3
Christopher Legge 4 of 4 3 of 3
Keith Dorrian 4 of 4 3 of 3
Christopher Fish 4 of 4 3 of 3
Joshua L Targoff1,2 3 of 4 N/A
1 Mr. Targoff is not a member of the Audit Committee.
2 Mr. Targoff does not attend Meetings as a director where recommendations from
the Investment Manager are under consideration.
Committees of the Board
The AIC Code requires the Company to appoint nomination, remuneration and
management engagement committees. The Board has not deemed this necessary as,
being comprised wholly of non-executive Directors, the whole Board considers
these matters. The Directors have included a Directors' Remuneration Report on
these Financial Statements.
Following the "Women on Boards" review conducted by Lord Davies' of Abersoch in
February 2011, the Board has examined Lord Davies' recommendations and noted
that it was consistently reviewing its policy and future appointments to the
Board would continue to be based on the individual's skills and experience
regardless of gender.
The Investment Manager has wide experience in managing and administering fund
vehicles and has access to extensive investment management resources. The Board
considers that the continued appointment of the Investment Manager on the terms
agreed would be in the interests of the Company's Shareholders as a whole.
Audit Committee
The Company's Audit Committee conducts formal meetings at least three times a
year for the purpose, amongst others, of considering the appointment,
independence, effectiveness of the audit and remuneration of the auditors and
to review and recommend the annual statutory accounts and interim report to the
Board of Directors. Full Details of its functions and activities are set out in
the Report of the Audit Committee on these Financial Statements.
Directors' Duties and Responsibilities
The Directors have adopted a set of Reserved Powers, which establish the key
purpose of the Board and detail its major duties. These duties cover the
following areas of responsibility:
* Statutory obligations and public disclosure;
* Strategic matters and financial reporting;
* Board composition and accountability to Shareholders;
* Risk assessment and management, including reporting, compliance, monitoring,
governance and control; and
* Other matters having material effects on the Company.
These Reserved Powers of the Board have been adopted by the Directors to
clearly demonstrate the seriousness with which the Board takes its fiduciary
responsibilities and as an ongoing means of measuring and monitoring the
effectiveness of its actions.
The Directors are responsible for the overall management and direction of the
affairs of the Company. The Company has no Executive Directors or employees.
The Company invests all of its assets in shares of the Master Fund and Third
Point LLC acts as Investment Manager to the Master Fund and is responsible for
the discretionary investment management of the Master Fund's investment
portfolio under the terms of the Master Fund Prospectus.
Northern Trust International Fund Administration Services (Guernsey) Limited
("NT") acts as Administrator and Company Secretary and is responsible to the
Board under the terms of the Administration Agreement. The Administrator is
also responsible to the Board for ensuring compliance with the Rules and
Regulations of The Companies (Guernsey) Law, London Stock Exchange listing
requirements and observation of the Reserved Powers of the Board and in this
respect the Board receives detailed quarterly reports.
The Directors have access to the advice and services of the Company Secretary
who is responsible to the Board for ensuring that Board procedures are followed
and that it complies with applicable rules and regulations of The Companies
(Guernsey) Law, the GFSC and the London Stock Exchange. Individual Directors
may, at the expense of the Company, seek independent professional advice on any
matter that concerns them in the furtherance of their duties. The Company
maintains appropriate Directors' and Officers' liability insurance in respect
of legal action against its Directors on an ongoing basis and the Company has
maintained appropriate Directors' Liability Insurance cover throughout the
year.
The Board is also responsible for safeguarding the assets of the Company and
for taking reasonable steps for the prevention and detection of fraud and other
irregularities.
Internal Control and Financial Reporting
The Directors acknowledge that they are responsible for establishing and
maintaining the Company's system of internal control and reviewing its
effectiveness. Internal control systems are designed to manage rather than
eliminate the failure to achieve business objectives and can only provide
reasonable but not absolute assurance against material misstatements or loss.
The Directors review all controls including operations, compliance and risk
management. The key procedures which have been established to provide internal
control are:
* Investment advisory services are provided by the Investment Manager. The
Board is responsible for setting the overall investment policy, ensuring
compliance with the Company's Investment Strategy and monitors the action of
the Investment Manager and Master Fund at regular Board meetings. The Board has
also delegated administration and company secretarial services to NT; however
it retains accountability for all functions it has delegated.
* The Board considers the process for identifying, evaluating and managing any
significant risks faced by the Company on an on-going basis. It ensures that
effective controls are in place to mitigate these risks and that a satisfactory
compliance regime exists to ensure all local and international laws and
regulations are upheld. Particular attention has been given to the
effectiveness of controls to monitor liquidity risk, asset values, counterparty
exposure and credit availability.
* The Board clearly define the duties and responsibilities of their agents and
advisors and appointments are made by the Board after due and careful
consideration. The Board monitors the ongoing performance of such agents and
advisors.
* The Investment Manager and NT maintain their own systems of internal control,
on which they report to the Board. The Company, in common with other investment
companies, does not have an internal audit function. The Audit Committee has
considered the need for an internal audit function, but because of the internal
control systems in place at the Investment Manager and NT, has decided it
appropriate to place reliance on their systems and internal control procedures.
* The systems are designed to ensure effectiveness and efficient operation,
internal control and compliance with laws and regulations. In establishing the
systems of internal control, regard is paid to the materiality of relevant
risks, the likelihood of costs being incurred and costs of control. It follows
therefore that the systems of internal control can only provide reasonable but
not absolute assurance against the risk of material misstatement or loss.
Board Performance
The Board and Audit Committee undertake a formal annual evaluation of their own
performance and that of their committees and individual Directors. In order to
review their effectiveness, the Board and Audit Committee carry out a process
of formal self-appraisal. The Directors and Committee consider how the Board
and Audit Committee functions as a whole and also review the individual
performance of its members. This process is conducted by the respective
Chairman reviewing individually with each of the Directors and members of the
Committee their performance, contribution and commitment to the Company. The
performance of the Chairman is evaluated by the other independent Directors.
Management of Principal Risks and Uncertainties
As noted in the Statement of Directors' Responsibilities in respect of the
Audited Financial Statements, the Directors are required to provide a
description of the principal risks and uncertainties facing the Company. The
Directors have considered the risks and uncertainties facing the Company and
have prepared and review regularly a risk matrix which documents the
significant risks faced by the Company.
This process has been in place for the year under review and up to the date of
approval of this Annual Report and Financial Statements and is reviewed by the
Board and is in accordance with the Guidance on Risk Management, Internal
Control and Related Financial and Business Reporting.
This document considers the following information:
* Identifying and reporting changes in the risk environment;
* Identifying and reporting changes in the operational controls;
* Identifying and reporting on the effectiveness of controls and remediation of
errors arising; and
* Reviewing the risks faced by the Company and the controls in place to address
those risks.
The Directors have acknowledged they are responsible for establishing and
maintaining the Company's system of internal control and reviewing its
effectiveness by focusing on four key areas:
* Consideration of the investment advisory services provided by the Investment
Manager;
* Consideration of the process for identifying, evaluating and managing any
significant risks faced by the Company on an ongoing basis;
* Clarity around the duties and responsibilities of the agents and advisors
engaged by the Directors; and
* Reliance on the Investment Manager and Administrator maintaining their own
systems of internal controls.
Further discussion on Internal Control is documented in the Directors' Report
under "Internal Control and Financial Reporting".
The main risks and uncertainties that the Directors consider to apply to the
Company are as follows:
* Underlying investment performance of the Master Fund. To mitigate this risk
the Directors receive regular updates from the Investment Manager on the
performance of the Master Fund. The Board reviews quarterly performance updates
on the Master Fund and has access to the Investment Manager on any potential
question raised;
* Concentration of Investor Base. The Directors receive quarterly investor
reports from Jefferies International Limited ("Corporate Broker") and there is
regular communication between the Directors and Broker to identify potential
significant changes in the shareholder base;
* Discount/Premium to the NAV. The Investment Manager, Corporate Broker and,
when considered necessary, the Board of Directors, maintain regular contact
with the significant Shareholders in the Company. As part of the ongoing
process to seek to narrow the discount to NAV per Share at which the Shares are
traded, the Directors introduced an annual dividend policy and a share
repurchase programme which is outlined in Note 6. Under the dividend policy it
was anticipated that the Company would pay a cash dividend of 4-5% of NAV to
the extent that the positive NAV performance of the Company would support such
a dividend and absent other, exigent circumstances relating to the Investment
Manager and/or otherwise. There was no dividend declared during the year ended
31 December 2016. An annual distribution equivalent to 4% of the NAV of the
Company was declared on 10 January 2017 amounting to $35,416,482 (31 December
2015: $Nil) and paid on 14 February 2017. The Board monitors the discount/
premium to the NAV on a regular basis and continually maintains regular contact
with significant Shareholders and the Investment Manager when necessary.
* Performance of the Investment Manager. The Directors review the performance
of the Investment Manager on an annual basis and Board representatives conduct
annual visits to the Investment Manager;
* Failure of appointed service providers to the Company. The Directors conduct
a formal review of each service provider annually in addition to receiving
regular updates from each service provider and ensuring that there is ongoing
communication between the Board and the various service providers to the
Company;
* Financial Risk. The Board employs independent administrators to prepare the
Financial Statements of the Company and meets with the independent auditors at
least twice a year to discuss all financial matters including the
appropriateness of the accounting policies.
* Liquidity Risk. Shares of the Master Fund may be redeemed quarterly on 60
days' prior written notice or at other times with the consent of the Master
Fund's Board of Directors in order to pay Company expenses. The majority of the
investments held by the Master Fund are held in cash and securities with quoted
prices available in active markets/exchanges.
Viability Statement
In accordance with provision C.2.2 of the UK Corporate Governance Code,
published by the Financial Reporting Council in September 2014 ("The Code"),
the Directors have assessed the prospects of the Company over the three year
period to 31 December 2019. The Directors consider that three years is an
appropriate period based on a review of the Company's investment horizon,
anticipated cash flows, management arrangements as well as the liquidity of the
Company's investment in the Master Fund.
The investment objective of the Company is to invest all of its investable
capital, net of short-term working capital requirements, in Class E Shares of
Third Point Offshore Fund Limited (the "Master Fund"). The Company's
performance and operations therefore depend upon the performance of the Master
Fund and the Directors in assessing the viability of the Company pay particular
attention to the risks facing the Master Fund. The Investment Manager's Review
sets out details of the Company's financial performance, and outlook.
In its assessment of the viability of the Company, the Directors have
considered each of the Company's principal risks and uncertainties as well as
the internal control and financial reporting processes detailed above and in
particular the underlying investment performance of the Master Fund and share
price discount to NAV.
The Directors acknowledge the two year notice period of the Investment Manager
serving notice under the Management Agreement. To mitigate against this risk,
the Directors meet regularly with the Investment Manager to review the
Company's performance, and closely monitor the relationship with the Investment
Manager. The Directors confirm their belief that the Company will remain viable
for the period to 31 December 2019.
Going Concern
During 2016, the Directors have carried out a robust assessment of the
principal risks facing the Company, including those that would threaten its
business model, future performance, solvency or liquidity. The Directors
believe that the Company is well placed to manage its business risks
successfully, having taken into account the current economic outlook.
The Directors, having considered the above risks and reviewed ongoing budgeted
expenses, have a reasonable expectation that the Company will be able to
continue in operation and meet its liabilities as they fall due.
After making enquiries and given the nature of the Company and its investment,
the Directors are satisfied that it is appropriate to continue to adopt the
going concern basis in preparing these Audited Financial Statements. The Master
Fund Shares are liquid and can be converted to cash to meet liabilities as they
fall due. After due consideration, the Directors consider that the Company is
able to continue for the foreseeable future.
Significant Events During The Year
There were no significant events during the year.
Relations with Shareholders
The Board welcomes Shareholders' views and places great importance on
communication with its Shareholders. The Board receives regular reports on the
views of shareholders and the Chairman and other Directors are available to
meet shareholders if required. Shareholders who wish to communicate with the
Board should, in the first instance contact the Administrator, whose contact
details can be found on the Company's website. The Annual General Meeting of
the Company provides a forum for shareholders to meet and discuss issues with
the Directors of the Company. The ninth Annual General Meeting was held on 22
June 2016 with all proposed resolutions being passed by the Shareholders.
Foreign Account Tax Compliance Act and International Tax Reporting
The Foreign Account Tax Compliance Act ("FATCA") legislation is aimed at
determining the ownership of US assets in foreign accounts and improving US tax
compliance with respect to those assets. On 13 December 2013, The States of
Guernsey signed an intergovernmental agreement ("IGA") with US Treasury in
order to facilitate the requirements under FATCA. The US-Guernsey IGA came into
effect on 30 June 2014. In accordance with FATCA, the Company has registered
with the US Internal Revenue Services ("IRS") as a Guernsey reporting Foreign
Financial Institution ("FFI") and has received a Global Intermediary
Identification Number ("GIIN") which can be found on the IRS FFI list.
The Common Reporting Standard ("CRS") is a global standard for the automatic
exchange of financial account information developed by the Organisation for
Economic Co-operation and Development ("OECD"), which has been adopted by
Guernsey and which came into effect on 1 January 2016. The CRS replaced the
intergovernmental agreement between the UK and Guernsey to improve
international tax compliance that had previously applied in respect of 2014 and
2015.
Significant Shareholdings
As at 17 April 2017, the Company have been notified that the following had
significant shareholdings in excess of 5% in the Company:
Total Shares Held % Holdings in
Class
Significant Shareholders
US Dollar Shares
Vidacos Nominees Limited 10,397,552 21.87%
Goldman Sachs Securities (Nominees) Limited 10,027,304 21.09%
HSBC Global Custody Nominee (UK) 3,311,542 6.97%
Nortrust Nominees Limited 2,960,486 6.23%
Lynchwood Nominees Limited 2,854,534 6.00%
Sterling Shares
Vidacos Nominees Limited 390,662 19.26%
HSBC Global Custody Nominee (UK) 251,428 12.67%
Nortrust Nominees Limited 201,598 10.16%
Alliance Trust Savings Nominees 165,212 8.33%
Hargreaves Lansdown (Nominees) 124,485 6.27%
The Bank of New York Nominees Limited 116,024 5.85%
Lawshare Nominees Limited 99,593 5.02%
The Directors confirm to the best of their knowledge:-
* there is no relevant audit information of which the Company's Auditor is
unaware of, and each Director has taken steps he ought to have taken as a
Director to make himself aware of any relevant information and to establish
that the Company's Auditor is aware of that Information;
* these Annual Report and Audited Financial Statements have been prepared in
accordance with accounting principles generally accepted in the United States
of America and give a true and fair view of the financial position of the
Company;
* these Annual Report and Audited Financial Statements, taken as a whole, are
fair, balanced and understandable and provide the information necessary for the
shareholder to assess the Company's performance, business model and strategy;
and
* these Annual Report and Audited Financial Statements include information
detailed in the Directors' Report, the Investment Manager's Review and Notes to
the Audited Financial Statements, which provide a fair review of the
information required by:-
a) DTR 4.1.8 of the Disclosure and Transparency Rules ("DTR"), being a fair
review of the Company business and a description of the principal risks and
uncertainties facing the Company; and
b) DTR 4.1.11 of the DTR, being an indication of important events that have
occurred since the ending of the financial year and the likely future
development of the Company.
Signed on behalf of the Board by:
Marc Antoine Autheman
Chairman
Christopher Legge
Director
27 April 2017
Disclosure of Directorships in Public Listed Companies
The following summarises the Directors' directorships in public companies:
Company Name Exchange
Christopher Legge
Ashmore Global Opportunities Limited London
John Laing Environmental Assets Group London
Limited
Sherborne Investors (Guernsey) B London
Limited
TwentyFour Select Monthly Income Fund London
Limited
Keith Dorrian
Keith Dorrian
AB Alternative Strategies PCC Limited Channel Islands
AB International Fund PCC Limited Channel Islands
DW Catalyst Fund Limited London
IIAB PCC Limited Channel Islands
MasterCapital Fund Limited Ireland
Christopher Fish
Boussard & Gavaudan Holding Limited Euronext and London
Statement of Directors' Responsibilities in Respect of the Audited Financial
Statements
The Directors are responsible for preparing the Audited Financial Statements in
accordance with applicable Guernsey Law and generally accepted accounting
principles. Guernsey Company Law requires the Directors to prepare Financial
Statements for each financial year which give a true and fair view of the state
of affairs of the Company and of the net income or expense of the Company for
that year.
In preparing these Audited Financial Statements the Directors should:
* select suitable accounting policies and then apply them consistently;
* make judgements and estimates that are reasonable and prudent;
* state whether the applicable accounting standards have been followed subject
to any material departures disclosed and explained in the Audited Financial
Statements; and
* prepare the Audited Financial Statements on a going concern basis unless it
is inappropriate to presume that the Company will continue in business.
The Directors are responsible for keeping proper accounting records which
disclose with reasonable accuracy at any time the financial position of the
Company and to enable them to ensure that the Audited Financial Statements
comply with The Companies (Guernsey) Law, 2008. They are also responsible for
the system of internal controls, safeguarding the assets of the Company and
hence for taking reasonable steps for the prevention and detection of fraud and
other irregularities.
The Directors have responsibility to confirm that:
* there is no relevant audit information of which the Company's Auditor is
unaware of, and each Director has taken all the steps he ought to have taken as
a Director to make himself aware of any relevant information and to establish
that the Company's Auditor is aware of that information; * these Annual Report
and Audited Financial Statements have been prepared in accordance with
accounting principles generally accepted in the United States of America and
give a true and fair view of the financial position of the Company;
* these Annual Report and Audited Financial Statements, taken as a whole, are
fair, balanced and understandable and provide information necessary for the
shareholder to assess the Company's performance, business model and strategy;
and
* these Annual Report and Audited Financial Statements include information
detailed in the Directors' Report, the Investment Manager's Review and Notes to
the Audited Financial Statements, which provide a fair review of the
information required by:-
a) DTR 4.1.8 of the Disclosure and Transparency Rules ("DTR"), being a
fair review of the Company business and a description of the principal risks
and uncertainties facing the Company; and
b) DTR 4.1.11 of the DTR, being an indication of important events that
have occurred since the ending of the financial year and the likely future
development of the Company.
Signed on behalf of the Board by:
Marc Antoine Autheman
Chairman
Christopher Legge
Director
27 April 2017
Directors' Remuneration Report
Introduction
The Board has prepared this report as part of its framework for corporate
governance which, as described in the Directors' Report, enables the Company to
comply with the main requirements of the UK Corporate Governance Code published
by the Financial Reporting Council.
An ordinary resolution for the approval of this report will be put to the
shareholders at the forthcoming Annual General Meeting.
Remuneration policy
All Directors are non-executive and a Remuneration Committee has not been
established. The Board as a whole considers matters relating to the Directors'
remuneration. No advice or services were provided by any external person in
respect of its consideration of the Directors' remuneration.
The Company's policy is that the fees payable to the Directors should reflect
the time spent by the Directors on the Company's affairs and the
responsibilities borne by the Directors and be sufficient to attract, retain
and motivate Directors of a quality required to run the Company successfully.
The Chairman of the Board is paid a higher fee in recognition of his additional
responsibilities, as is the Chairman of the Audit Committee. The policy is to
review fee rates periodically, although such a review will not necessarily
result in any changes to the rates, and account is taken of fees paid to
Directors of comparable companies.
There are no long term incentive schemes provided by the Company and no
performance fees are paid to Directors.
No Director has a service contract with the Company but each of the Directors
is appointed by a letter of appointment which sets out the main terms of their
appointment. Director appointments can also be terminated in accordance with
the Articles. Should shareholders vote against a Director standing for
re-election, the Director affected will not be entitled to any compensation.
Directors are remunerated in the form of fees, payable quarterly in arrears, to
the Director personally. No other remuneration or compensation was paid or
payable by the Company during the year to any of the Directors apart from the
reimbursement of allowable expenses.
Directors' fees
Due to an inflationary rise since the last director fee increase on 6 June
2014, it was resolved to approve the following director fee increases with
effect from 1 January 2017:
Marc Antoine Autheman - GBP63,000 (increase of GBP3,000)
Chris Legge - GBP46,000 (increase of GBP2,000)
Keith Dorrian - GBP38,000 (increase of GBP2,000)
Chris Fish - GBP38,000 (increase of GBP2,000)
The fees payable by the Company in respect of each of the Directors who served
during 2016 and 2015, were as follows:
2016 2015
GBP GBP
Marc Antoine Autheman (Chairman) 60,000 60,000
Christopher F L Legge (Audit Committee Chairman) 44,000 44,000
Keith Dorrian 36,000 36,000
Christopher N Fish 36,000 36,000
Joshua L Targoff * - -
Total 176,000 176,000
USD equivalent US$228,783 US$267,271
*As a non-independent Director and Partner of the Investment Manager Joshua L
Targoff waived his Directors fee.
Performance table
The table details the share price returns over the year.
Signed on behalf of the Board by:
Marc Antoine Autheman
Chairman
Christopher Legge
Director
27 April 2017
Report of the Audit Committee
On the following pages, we present the Audit Committee (the "Committee") Report
for the year ended 31 December 2016, setting out the Committee's structure and
composition, principal duties and key activities during the year. As in
previous years, the Committee has reviewed the Company's financial reporting,
the independence and effectiveness of the independent auditor and the internal
control and risk management systems of service providers.
The Board is satisfied that for the year under review and thereafter the
committee has recent and relevant commercial and financial knowledge sufficient
to satisfy the provisions of The Code.
Structure and Composition
The Committee is chaired by Christopher Legge and its other members are Marc
Antoine Autheman, Keith Dorrian and Christopher Fish. The Committee operates
within clearly defined terms of reference and comprises all the Directors
except the Investment Manager's representative.
On 18 November 2016, the Board agreed to amend the Audit Committee Terms of
Reference to indicate that appointments to the Audit Committee shall be for a
period of up to three years, which may be extended for two further three year
periods, and thereafter annually, provided that the Director whose appointment
is being considered remains an Independent Director for the period of
extension.
Name of Audit Committee Member Date of Appointment to Next Date for
Audit Committee Review
- 17 April 2013
Chris Legge 19 June 2007 *
- 18 April 2016
- April 2019
- 17 April 2013
Marc-Antoine Autheman 21 June 2007 *
- 18 April 2016
- April 2019
- 17 April 2013
Keith Dorrian 19 June 2007 *
- 14 April 2015
- April 2018
- 17 April 2013
Chris Fish 19 June 2007 *
- 16 April 2014
- April 2017
* Date specific tenure introduced on 17 April 2013.
The Committee conducts formal meetings at least three times a year. The table
under Director Meeting Attendances sets out the number of Committee meetings
held during the year ended 31 December 2016 and the number of such meetings
attended by each committee member. The independent auditor is invited to attend
those meetings at which the annual and interim reports are considered. The
independent auditor and the Committee will meet together without
representatives of either the Administrator or Investment Manager being present
if either considers this to be necessary.
Principal Duties
The role of the Committee includes:
* monitoring the integrity of the published financial statements of the
Company;
* keeping under review the consistency and appropriateness of accounting
policies on a year to year basis. Satisfying itself that the annual accounts,
the interim statement of financial results and any other major financial
statements issued by the Company follow generally accepted accounting
principles and give a true and fair view of the Company and any associated
undertakings' affairs; matters raised by the external auditors about any aspect
of the accounts or, of the Company's control and audit procedures, are
appropriately considered and, if necessary, brought to the attention of the
Board, for resolution.
* monitoring and reviewing the quality and effectiveness of the independent
auditors and their independence;
* considering and making recommendations to the Board on the appointment,
reappointment, replacement and remuneration of the Company's independent
auditor;
* monitoring and reviewing the internal control and risk management systems of
the service providers; and
* considering at least once a year whether there is a need for an internal
audit function.
The complete details of the Committee's formal duties and responsibilities are
set out in the Committee's terms of reference, which can be obtained from the
Company's website.
Independent Auditor
The Committee is also the forum through which the independent auditor (the
"auditor") reports to the Board of Directors. The objectivity of the auditor is
reviewed by the Committee which also reviews the terms under which the auditor
is appointed to perform non-audit services. The Committee reviews the scope and
results of the audit, its cost effectiveness and the independence and
objectivity of the auditor, with particular regard to non-audit fees. The
Committee has established pre-approval policies and procedures for the
engagement of Ernst & Young LLP to provide non-audit services.
Ernst & Young LLP has been the independent auditor from the date of the initial
listing on the London Stock Exchange.
The audit fees proposed by the auditors each year are reviewed by the Committee
taking into account the Company's structure, operations and other requirements
during the year and the Committee makes recommendations to the Board.
There were no non-audit fees paid to Ernst and Young LLP during the year other
than in respect of the interim review of the Company's condensed accounts to 30
June 2016. The Committee considers Ernst & Young LLP to be independent of the
Company. The Committee also met with the external auditors without the
Investment Manager or administrator being present so as to provide a forum to
raise any matters of concern in confidence.
Evaluations or Assessments Made During the Year
The following sections discuss the assessments made by the Committee during the
year:
Significant Areas of Focus for the Financial Statements'
The Committee's review of the interim and annual financial statements focused
on the following area:
The Company's investment in the Master Fund represents substantially all the
net assets of the Company and as such is the biggest factor in relation to the
accuracy of the Financial Statements. The holding in the Master Fund has been
confirmed with the Company's administrator and the Master Fund. This investment
has been valued in accordance with the Accounting Policies set out in Note 3 to
the Audited Financial Statements. The Audit Committee has reviewed the
Financial Statements of the Master Fund and their Accounting Policies and
determined the fair value of the investment as at 31 December 2016 is
reasonable. The Financial Statements of the Master Fund for the year ended 31
December 2016 were audited by Ernst & Young who issued an unmodified audit
opinion dated 17 March 2017.
Effectiveness of the Audit
The Committee had formal meetings with Ernst & Young LLP during the course of
the year: 1) before the start of the audit to discuss formal planning, discuss
any potential issues and agree the scope that will be covered and 2) after the
audit work was concluded to discuss any significant matters such as those
stated above.
The Board considered the effectiveness and independence of Ernst & Young LLP by
using a number of measures, including but not limited to:-
* the audit plan presented to them before the start of the audit;
* the audit results report including where appropriate, explanation for any
variations from the original plan;
* changes to audit personnel;
* the auditor's own internal procedures to identify threats to independence;
* feedback from both the Investment Manager and the Administrator; and
* the Committee obtains confirmation from Ernst & Young LLP on their
independence as additional comfort for the Committee.
Further to the above, at the conclusion of the 2016 audit, the Committee
performed a specific evaluation of the performance of the independent auditor.
This is supported by the results of questionnaires completed by the Committee
covering areas such as quality of audit team, business understanding, audit
approach and management. This questionnaire was part of the process by which
the Committee assessed the effectiveness of the audit.
There were no adverse findings from this evaluation.
The outsourcing of any non-audit services such as interim review, tax
compliance, tax structuring, private letter rulings, accounting advice,
quarterly reviews and disclosure are normally permitted but should be
pre-approved by the Committee, or two non-executive Directors.
The annual budget for both the audit and audit related services was presented
to the Committee for pre-approval.
Audit fees and Safeguards on Non-Audit Services
The tables below summarises the remuneration payable by the Company to Ernst &
Young LLP during the years ended 31 December 2016 and 31 December 2015.
31 December 2016 31 December
2015
US$ US$
Interim review
Ernst & Young LLP 50,183 53,111
Annual audit - the Company
Ernst & Young LLP 37,032 44,172
Total Fees 87,215 97,283
Annual Audit - Third Point Offshore
Independent Voting Company Limited
Ernst & Young LLP 8,417 9,718
The independence of Ernst & Young LLP is in the Committee's opinion not
compromised by Ernst & Young performing the interim review.
Internal Control
The Committee has examined the need for an internal audit function. The
Committee considered that the systems and procedures employed by the Investment
Manager and the Administrator, including their internal audit functions,
provided sufficient assurance that a sound system of internal control, which
safeguards the Company's assets, has been maintained. An internal audit
function specific to the Company is therefore considered unnecessary.
The Committee has requested and received SOC1 or equivalent reports such as
service provider assessment reports from the Investment Manager, the Company's
Administrator and Master Fund's Administrators to enable it to fulfil its
duties under its terms of reference. Representatives of the auditors,
Investment Manager and the Administrator attend the meetings as a matter of
practice and presentations are made by those attendees as and when required.
The Committee also attended the Investment Manager's operational due diligence
presentation which occurs every two years in February 2016.
Conclusion and Recommendation
After reviewing various reports such as the operational and risk management
framework and performance reports from management, liaising where necessary
with Ernst & Young LLP, and assessing the significant areas of focus for
financial statement issues listed, the Committee is satisfied that the
financial statements appropriately address the critical judgements and key
estimates (both in respect to the amounts reported and the disclosures).
The Committee is also satisfied that the significant assumptions used for
determining the value of assets and liabilities have been appropriately
scrutinised, challenged and are sufficiently robust.
The Independent Auditor reported to the Committee that no material
misstatements were found in the course of its work. Furthermore, both the
Investment Manager and the Administrator confirmed to the Committee that they
were not aware of any material misstatements including matters relating to
presentation. The Committee confirms that it is satisfied that the Independent
Auditor has fulfilled its responsibilities with diligence and professional
scepticism.
Consequent to the review process on the effectiveness of the independent audit
and the review of audit services, the Committee has recommended that Ernst &
Young LLP be reappointed for the coming financial year.
For any questions on the activities of the Committee not addressed in the
foregoing, a member of the Committee remains available to attend each Annual
General Meeting to respond to such questions.
The UK Corporate Governance Code issued by the Financial Reporting Council
("FRC") included a recommendation to put audits out to tender at least every
ten years. The EU Competition Commission have also issued draft proposals in
respect of audit tendering and mandatory rotation of auditors. The Company is
not required to apply this EU Directive as they are not an EU Public Interest
Entity ("PIE"), due to being incorporated in Guernsey. However, the Audit
Partner rotates every five years and the Company will consider putting the
audit out to tender every ten years in line with the FRC's suggestions on audit
tendering. This will be considered further when the audit partner next rotates.
The Audit Committee will continue to monitor developments around these
proposals and will formulate a policy in respect to audit tendering and
rotation at the appropriate time.
Christopher Legge
Audit Committee Chairman
27 April 2017
Investment Manager's Review
Performance Summary¹ 31-Dec-16 31-Dec-15 % Return
USD Class
Share Price 14.38 14.70 (2.2%)
Net asset value per 17.63 16.62 6.1%
share
Premium/(discount) (18.4%) (11.6%)
GBP Class 31-Dec -16 31-Dec-15 % Return
Share Price 14.15 15.05 (6.0%)
Net asset value per 16.84 15.95 5.6%
share
Premium/(discount) (16.0%) (5.6%)
¹ For the period 1 January 2016 to 31 December 2016.
Strategy Performance
For the twelve months ended 31 December 2016, the net asset value per share
increased by 6.1% and 5.6% in the U.S. Dollar and Sterling share classes,
respectively.
The investment market in 2016 was extremely volatile. Several key events had a
profound impact on market movements including the lack of swift currency
devaluation in China during the First Quarter, the Brexit vote in June, and the
U.S. Presidential election in November. Correct interpretation of the events,
proactive positioning, and a nimble portfolio were vital aspects to successful
investing.
The net investment results for the year were driven by contribution from most
strategies and sectors in the portfolio. Credit contributed the largest share
of profits with modest losses in structured credit greatly outweighed by gains
in corporate and sovereign credit. Investments in the energy sector were the
primary driver of returns for the year in corporate credit. Within equities,
strong performance from investments in the financials and industrials sectors
countered negative attribution from two large healthcare positions.
Risk Outlook
The Investment Manager shifted the portfolio throughout 2016 and ended the year
with more net exposure but less gross exposure relative to the beginning of the
year. In the near term, the Investment Manager expects to see accelerating
growth in the U.S. and globally and fiscal stimulus in the U.S. The combination
could cause earnings to rise and a very different investing environment. A
reflationary market can create favorable conditions for Third Point's
investment strategies including event driven and value investing, risk
arbitrage, and activism. The Investment Manager has increased exposure to
equities across sectors and decreased investments in corporate and structured
credit
.
At 31 December 2016, exposure in the Investment Manager's portfolio across four
funds and three managed accounts was as follows1:
Long Short Net
Equities 64.3% (6.0%) 58.3%
Credit 33.2% (6.9%) 26.3%
Other 18.7% (19.1%) (0.4%)
1Relates to the Third Point Offshore Master Fund L.P.
Net equity exposure is defined as the long exposure minus the short exposure of
all equity positions (including long/short, arbitrage, and other strategies),
and can serve as a rough measure of the exposure to fluctuations in overall
market levels. The Investment Manager continues to closely monitor the
liquidity of the portfolio, and is comfortable that the current composition is
aligned with the redemption terms of the fund.
Third Point LLC
27 April 2017
Independent Auditor's Report
to the members of Third Point Offshore Investors Limited
Our opinion on the financial statements
In our opinion:
* the financial statements of Third Point Offshore Investors Limited (the
"Company") give a true and fair view of the state of affairs of the Company as
at 31 December 2016 and of its results for the year then ended;
* the financial statements have been properly prepared in accordance with
accounting principles generally accepted in the United States of America; and
* the financial statements have been prepared in accordance with the
requirements of the Companies (Guernsey) Law, 2008.
What we have audited
The Company's financial statements comprise:
* Statements of Assets and Liabilities;
* Statements of Operations;
* Statements of Changes in Net Assets;
* Statements of Cash Flows;
* Related notes 1 to 13 to the financial statements;
The financial reporting framework that has been applied in their preparation is
applicable law and accounting principles generally accepted in the United
States of America.
Overview of our audit approach
Risks of material misstatement:
* valuation of investments; and
* existence and ownership of investments.
Audit scope:
* We performed an audit of the complete financial statements of the Company for
the year ended 31 December 2016;
* Procedures were performed on the audit team's behalf by EY New York, under
our instruction and supervision, in respect of the Company's share of the
Master Fund's income and expenses as reported in the Statement of Operations.
Materiality:
* overall materiality of US$17.6 million which represents 2% of total equity.
Our assessment of risks of material misstatement
We identified the risks of material misstatement described below as those that
had the greatest effect on our overall audit strategy, the allocation of
resources in the audit and the direction of the efforts of the audit team. In
addressing these risks, we have performed the procedures below which were
designed in the context of the financial statements as a whole and,
consequently, we do not express any opinion on these individual areas.
Risk Our response to the risk What we concluded to the
Audit
Committee
Valuation of investments Our response comprised of We confirmed there were
($879m, PY comparative substantive audit testing no matters identified
$836m) of investment valuation, during our audit work on
including: valuation of investments
Refer to the Audit that we wanted to bring
Committee Report and * Agreeing the valuation to the attention of the
Accounting Policies per share of the Company's Audit Committee.
investments in the
The investments held are investee fund to the NAV
measured at fair value per share of the investee
through profit or loss, fund published by its
and their fair value is independent administrator;
determined by reference to and
the published NAV per
share of the investee * Agreeing the valuation
fund, as calculated by its per share of the Company's
independent administrator. investments in the
investee fund to the NAV
The valuation risk per share of the investee
considers the risk of an fund per its audited
error in the application financial statements for
of the published NAV per the year ended 31 December
share, obtained from the 2016, which were approved
independent administrator on 17 March 2017.
of the investee fund, when
calculating the fair value
of the Company's
investments.
Existence and ownership of Our response comprised We confirmed there were
investments ($879m, PY performance of substantive no matters identified
comparative $836m) audit testing of during our audit work on
investment existence and existence and ownership
Refer to the Audit ownership including: of investments that we
Committee Report and wanted to bring to the
Accounting Policies . * Obtaining a attention of the Audit
confirmation, as at 31 Committee.
Risk that investments December 2016, of the
presented in the financial Company's holdings in the
statements do not exist or investee fund into which
the Company does not have the Company invests, from
the rights to cash flows the independent
derived from them. Failure administrator of the
to obtain good title investee fund, and
exposes the Company to agreeing it to the
significant risk of loss. accounting records of the
Company; and
* Obtaining contracts/
supporting documentation
for additions and
disposals of holdings in
the investee fund that
took place during the year
ended 31 December 2016,
and agreeing the details
to the accounting records
of the Company, on a
sample basis.
Addressing the risk of management override is a requirement of auditing
standards, and we concluded that this risk is most likely to occur in the risk
areas identified above. As a result, we have not provided separate responses to
the risk of management override, and have instead reflected this consideration
of risk as part of our responses to the specific risks set out above.
The scope of our audit
Tailoring the scope
Our assessment of audit risk, our evaluation of materiality and our allocation
of performance materiality determine our audit scope. Taken together, this
enables us to form an opinion on the financial
Our application of materiality
We apply the concept of materiality in planning and performing the audit, in
evaluating the effect of identified misstatements on the audit and in forming
our audit opinion.
Materiality
"Materiality" is the magnitude of an omission or misstatement that,
individually or in aggregate, could reasonably be expected to influence the
economic decisions of the users of the financial statements.
Materiality provides a basis for determining the nature and extent of our audit
procedures.
We determined materiality for the Company to be US$17.6 million (2015: US$16.7
million) which is approximately 2% (2015: 2%) of net assets. We used net assets
as a basis for determining materiality because the Company's primary
performance measures for internal and external reporting are based on net
assets.
During the course of our audit we reassessed initial materiality and noted no
factors leading us to amend materiality levels from those originally determined
at the audit planning stage.
Performance materiality
"Performance materiality" is the application of materiality at the individual
account or balance level. It is set at an amount to reduce to an appropriately
low level the probability that the aggregate of uncorrected and undetected
misstatements exceeds materiality.
On the basis of our risk assessments, together with our assessment of the
Company's overall control environment our judgment was that performance
materiality was 75% (2015: 75%) of materiality, namely US$13.2 million (2015:
US$12.5 million).
We have set performance materiality at this percentage due to investment
strategy remaining consistent with our previous experience and limited
identification of audit findings in previous periods.
Reporting threshold
An amount below which identified misstatements are considered as being clearly
trivial.
We agreed with the Audit Committee that we would report to them all uncorrected
audit differences in excess of US$0.88million (2015:US$0.84million) which is
set at 5% of planning materiality, as well as differences below that threshold,
that, in our view, warranted reporting on qualitative grounds.
We evaluate any uncorrected misstatements against both the quantitative
measures of materiality discussed above and in light of other relevant
qualitative considerations in forming our opinion.
Scope of the audit of the financial statements
An audit involves obtaining evidence about the amounts and disclosures in the
financial statements sufficient to give reasonable assurance that the financial
statements are free from material misstatement, whether caused by fraud or
error.
This includes an assessment of:
* whether the accounting policies are appropriate to the Company's
circumstances and have been consistently applied and adequately disclosed;
* the reasonableness of significant accounting estimates made by the directors;
and
* the overall presentation of the financial statements.
In addition, we read all the financial and non-financial information in the
annual report to identify material inconsistencies with the audited financial
statements and to identify any information that is apparently materially
incorrect based on, or materially inconsistent with, the knowledge acquired by
us in the course of performing the audit. If we become aware of any apparent
material misstatements or inconsistencies we consider the implication for our
report.
Respective responsibilities of directors and auditor
As explained more fully in the Directors' Responsibilities Statement, the
directors are responsible for the preparation of the financial statements and
for being satisfied that they give a true and fair view. Our responsibility is
to audit and express an opinion on the financial statements in accordance with
applicable law and International Standards on Auditing (UK and Ireland). Those
standards require us to comply with the Auditing Practices Board's Ethical
Standards for Auditors.
This report is made solely to the Company's members, as a body, in accordance
with Section 262 of the Companies (Guernsey) Law, 2008. Our audit work has been
undertaken so that we might state to the Company's members those matters we are
required to state to them in an auditor's report and for no other purpose. To
the fullest extent permitted by law, we do not accept or assume responsibility
to anyone other than the Company and the Company's members as a body, for our
audit work, for this report, or for the opinions we have formed.
Matters on which we are required to report by exception
Under the ISAs (UK and Ireland) We are required to report to We have no
reporting you if, in our opinion, exceptions to
financial and non-financial report.
information in the annual
report is:
* materially inconsistent with
the information in the audited
financial statements; or
* apparently materially
incorrect based on, or
materially inconsistent with,
our knowledge of the Group
acquired in the course of
performing our audit; or
* otherwise misleading.
In particular, we are required
to report whether we have
identified any inconsistencies
between our knowledge acquired
in the course of performing
the audit and the directors'
statement that they consider
the annual report and accounts
taken as a whole is fair,
balanced and understandable
and provides the information
necessary for shareholders to
assess the entity's
performance, business annual
report appropriately addresses
those matters that we
communicated to the audit
committee that we consider
should have been disclosed.
model and strategy; and
whether the annual report
appropriately addresses those
matters that we communicated
to the audit committee that we
consider should have been
disclosed
Listing Rules review requirements We are required to review: We have no
* the directors' statement in exceptions to
relation to going concern, and report.
longer-term viability, and
* the part of the Corporate
Governance Statement relating
to the company's compliance
with the provisions of the UK
Corporate Governance Code
specified for our review.
The Companies (Guernsey) Law, 2008 We are required to report to We have
you if, in our opinion: nothing
* adequate accounting records material to
have not been kept; or add or to
* the financial statements are draw
not in agreement with the attention to.
accounting records and
returns; or
* we have not received the
information and explanations
required for our audit.
ISAs (UK and Ireland) reporting We are required to give a We have
statement as to whether we nothing
have anything material to add material to
or to draw attention to in add
relation to: or to draw
* the directors' confirmation attention to.
in the annual report that they
have carried out a robust
assessment of the principal
risks facing the entity,
including those that would
threaten its business model,
future performance, solvency
or liquidity;
* the disclosures in the
annual report that describe
those risks and explain how
they are being managed or
mitigated;
* the directors' statement in
the financial statements about
whether they considered it
appropriate to adopt the going
concern basis of accounting in
preparing them, and their
identification of any material
uncertainties to the entity's
ability to continue to do so
over a period of at least
twelve months from the date of
approval of the financial
statements; and
* the directors' explanation
in the annual report as to how
they have assessed the
prospects of the entity, over
what period they have done so
and why they consider that
period to be appropriate, and
their statement as to whether
they have a reasonable
expectation that the entity
will be able to continue in
operation and meet its
liabilities as they fall due
over the period of their
assessment, including any
related disclosures drawing
attention to any necessary
qualifications or assumptions.
Christopher James Matthews FCA
for and on behalf of Ernst & Young LLP
Guernsey, Channel Islands
27 April 2017
1. The maintenance and integrity of the Third Point Offshore Investors
Limited web site is the responsibility of the directors; the work carried out
by the auditors does not involve consideration of these matters and,
accordingly, the auditors accept no responsibility for any changes that may
have occurred to the financial statements since they were initially presented
on the website.
2. Legislation in Guernsey governing the preparation and dissemination of
financial statements may differ from legislation in other jurisdictions.
Statements of Assets and Liabilities
As at As at
31 December 2016 31 December
2015
(Stated in United States Dollars) US$ US$
Assets
Investment in Third Point Offshore Fund Ltd at
fair value 879,180,943 835,871,318
(Cost: US$451,424,093 31 December 2015:
US$451,964,939)
Cash 88,845 99,015
Redemption receivable 132,000 174,000
Other assets 16,782 30,260
Total assets 879,418,570 836,174,593
Liabilities
Accrued expenses and other liabilities 118,217 156,305
Directors' fees payable (Note 5) 70,549 66,649
Administration fee payable (Note 4) 43,858 40,894
Total liabilities 232,624 263,848
Net assets 879,185,946 835,910,745
Number of Ordinary Shares in issue (Note 6)
US Dollar Shares 47,500,847 47,655,833
Sterling Shares 2,014,842 1,868,055
Net asset value per Ordinary Share (Notes 8
and 11)
US Dollar Shares $17.63 $16.62
Sterling Shares GBP16.84 GBP15.95
Number of Ordinary B Shares in issue (Note 6)
US Dollar Shares 31,667,254 31,770,577
Sterling Shares 1,343,242 1,245,382
The financial statements were approved by the Board of Directors on 27 April
2017 and signed on its behalf by:
Marc Antoine Autheman
Chairman
Christopher Legge
Director
See accompanying notes and attached Audited Financial Statements of Third Point
Offshore Fund Ltd. and Third Point Offshore Master Fund L.P.
Statements of Operations
For the year For the year
ended ended
31 December 2016 31 December
2015
(Stated in United States Dollars) US$ US$
Realised and unrealised gain/(loss) from
investment transactions allocated from Master
Fund
Net realised gain from securities, derivative
contracts and foreign 18,699,871 17,074,389
currency translations
Net change in unrealised gain/(loss) on
securities, derivative 29,019,101 (34,520,795)
contracts and foreign currency translations
Net gain/(loss) from currencies allocated from 879,489 (839,993)
Master Fund
Total net realised and unrealised gain/(loss)
from investment 48,598,461 (18,286,399)
transactions allocated from Master Fund
Net investment income / (loss) allocated from
Master Fund
Interest income 19,186,554 11,706,015
Dividends, net of withholding taxes of
US$2,264,844 6,307,813 5,318,091
(31 December 2015: US$2,149,987)
Other income 333,666 323,867
Stock borrow fees (419,877) (253,056)
Incentive allocation (Note 2) (6,384,420) (6,342)
Investment Management fee (16,996,235) (17,541,615)
Dividends on securities sold, not yet (768,064) (518,764)
purchased
Interest expense (2,500,010) (1,680,569)
Other expenses (2,896,563) (2,542,826)
Total net investment loss allocated from (4,137,136) (5,195,199)
Master Fund
Company expenses
Administration fee (Note 4) (159,895) (170,079)
Directors' fees (Note 5) (228,783) (267,271)
Other fees (700,217) (761,926)
Expenses paid on behalf of Third Point
Offshore Independent Voting Company Limited (97,229) (121,320)
(Note 4)
Total Company expenses (1,186,124) (1,320,596)
Net loss (5,323,260) (6,515,795)
Net increase/(decrease) in net assets 43,275,201 (24,802,194)
resulting from operations
See accompanying notes and attached Audited Financial Statements of Third Point
Offshore Fund Ltd. and Third Point Offshore Master Fund L.P.
Statements of Changes in Net Assets
For the year For the year
ended ended
31 December 2016 31 December
2015
(Stated in United States Dollars) US$ US$
Increase in net assets resulting from
operations
Net realised gain from securities,
commodities, derivative contracts and foreign 18,699,871 17,074,389
currency translations allocated from Master
Fund
Net change in unrealised gain/(loss) on
securities, derivative contracts and foreign
currency translations allocated from Master 29,019,101 (34,520,795)
Fund
Net gain/(loss) from currencies allocated from 879,489 (839,993)
Master Fund
Total net investment loss allocated from (4,137,136) (5,195,199)
Master Fund
Total Company expenses (1,186,124) (1,320,596)
Net increase/(decrease) in net assets 43,275,201 (24,802,194)
resulting from operations
Net assets at the beginning of the year 835,910,745 860,712,939
Net assets at the end of the year 879,185,946 835,910,745
See accompanying notes and attached Audited Financial Statements of Third Point
Offshore Fund Ltd. and Third Point Offshore Master Fund L.P.
Statements of Cash Flows
For the year For the year
ended ended
31 December 2016 31 December
2015
(Stated in United States Dollars) US$ US$
Cash flows from operating activities (682,827) (938,824)
Operating expenses (224,883) (267,679)
Directors' fees (156,931) (172,917)
Administration fee (97,229) (121,320)
Third Point Offshore Independent Voting 1,151,700 46,855,500
Company Limited¹
Redemption from Master Fund
Cash (outflow)/inflow from operating (10,170) 45,354,760
activities
Cash flows from financing activities
Dividend distribution - (45,347,221)
Net (decrease)/increase in cash (10,170) 7,539
Cash at the beginning of the year 99,015 91,476
Cash at the end of the year 88,845 99,015
¹Third Point Offshore Independent Voting Company Limited consists of Director
Fees, Audit Fee and General Expenses.
See accompanying notes and attached Audited Financial Statements of Third Point
Offshore Fund Ltd. and Third Point Offshore Master Fund L.P.
Notes to the Audited Financial Statements
For the year ended 31 December 2016
1. The Company
Third Point Offshore Investors Limited (the "Company") is an Authorised
closed-ended investment company incorporated in Guernsey on 19 June 2007 for an
unlimited period, with registration number 47161.
2. Organisation
Investment Objective and Policy
The Company's investment objective is to provide its Shareholders with
consistent long term capital appreciation, utilising the investment skills of
the Investment Manager, through investment of all of its capital (net of
short-term working capital requirements) in Class E shares of Third Point
Offshore Fund, Ltd. (the "Master Fund"), an exempted company formed under the
laws of the Cayman Islands on 21 October 1996. The Master Fund's investment
objective is to seek to generate consistent long-term capital appreciation, by
using an event driven, bottom-up, fundamental approach to evaluate various
types of securities throughout companies' capital structures. The Master Fund
is managed by the Investment Manager and the Investment Manager's
implementation of the Master Fund's investment policy is the main driver of the
Company's performance. The Master Partnership invests all of its investable
assets in a corresponding open-end management investment company having the
same investment objective as the Master Partnership.
The Master Fund is a limited partner of Third Point Offshore Master Fund L.P.
(the "Master Partnership"), an exempted limited partnership organised under the
laws of the Cayman Islands, of which Third Point Advisors II L.L.C., an
affiliate of the Investment Manager, is the general partner. Third Point LLC is
the Investment Manager to the Company, the Master Fund and the Master
Partnership. The Master Fund and the Master Partnership share the same
investment objective, strategies and restrictions as described above.
The Audited Financial Statements of the Master Fund and the Audited Financial
Statements of the Master Partnership, should be read alongside the Company's
Annual Report and Audited Financial Statements.
Investment Manager
The Investment Manager is a Limited Liability Company formed on 28 October 1996
under the laws of the State of Delaware. The Investment Manager was appointed
on 27 June 2007 and is responsible for the management and investment of the
Company's assets on a discretionary basis in pursuit of the Company's
investment objective, subject to the control of the Company's Board and certain
borrowing and leveraging restrictions.
The Company does not pay the Investment Manager for its services as the
Investment Manager is paid a management fee of 2 per cent per annum of the
Company's share of the Master Fund's net asset value (the "NAV") and a general
partner incentive allocation of 20 per cent of the Master Fund's NAV growth
("Full Incentive Fee") invested in the Master Partnership, subject to certain
conditions and related adjustments, by the Master Fund. If a particular series
invested in the Master Fund depreciates during any fiscal year and during
subsequent years there is a profit attributable to such series, the series must
recover an amount equal to 2.5 times the amount of depreciation in the prior
years before the Investment Manager is entitled to the Full Incentive Fee.
Until this occurs, the series will be subject to a reduced incentive fee equal
to half of the Full Incentive Fee. The Company was allocated US$6,384,420 (31
December 2015: US$6,342) of incentive fees for the year ended 31 December 2016.
3. Significant Accounting Policies
Basis of Presentation
These Audited Financial Statements have been prepared in accordance with
relevant accounting principles generally accepted in the United States of
America ("US GAAP"). The functional and presentational currency of the Company
is United States Dollars.
Management has determined that the Fund is an investment company in conformity
with US GAAP. Therefore the Fund follows the accounting and reporting guidance
for investment companies in the Financial Accounting Standards Board ("FASB")
Accounting Standards Codification ("ASC") 946, Financial Services - Investment
Companies ("ASC 946").
The following are the significant accounting policies adopted by the Company:
Cash and Cash Equivalents
Cash in the Statements of Assets and Liabilities comprises cash at bank and on
hand. Usually this is short term cash that settles between 0-3 months.
Valuation of Investments
The Company records its investment in the Master Fund at fair value. Fair
values are generally determined utilising the net asset value ("NAV") provided
by, or on behalf of, the underlying Investment Managers of each investment
fund. In accordance with Financial Accounting Standards Board ("FASB")
Accounting Standards Codification ("ASC") Topic 820 "Fair Value Measurement",
fair value is defined as the price the Company would receive upon selling a
security in a timely transaction to an independent buyer in the principal or
most advantageous market of the security. For further information refer to the
Master Partnership's Audited Financial Statements.
The valuation of securities held by the Master Partnership, which the Master
Fund directly invests in, is discussed in the notes to the Master Partnership's
Audited Financial Statements. The net asset value of the Company's investment
in the Master Fund reflects its fair value. At 31 December 2016, the Company's
US Dollar and Sterling shares represented 12.26% and 0.61% (31 December 2015:
10.94% and 0.61%) respectively of the Master Fund's net asset value.
Disclosures for Investments in Certain Entities that Calculate Net Asset Value
per Share (or its equivalent) ("ASU 2015-07"), in which certain investments
measured at fair value using the net asset value per share method (or its
equivalent) as a practical expedient are not required to be categorised in the
fair value hierarchy.
Uncertainty in Income Tax
ASC Topic 740 "Income Taxes" requires the evaluation of tax positions taken or
expected to be taken in the course of preparing the Company's tax returns to
determine whether the tax positions are "more likely- than-not" of being
sustained by the applicable tax authority based on the technical merits of the
position. Tax positions not deemed to meet the more-likely-than-not threshold
would be recorded as a tax benefit or expense in the year of determination.
Management has evaluated the implications of ASC 740 and has determined that it
has not had a material impact on these Audited Financial Statements.
Income and Expenses
The Company records its proportionate share of the Master Fund's income,
expenses and realised and unrealised gains and losses on a monthly basis. In
addition, the Company accrues interest income, to the extent it is expected to
be collected, and other expenses.
Use of Estimates
The preparation of Audited Financial Statements in conformity with US GAAP may
require management to make estimates and assumptions that affect the amounts
and disclosures in the financial statements and accompanying notes. Actual
results could differ from those estimates. Other than what is underlying in the
Master Fund and the Master Partnership, the Company does not use any estimates
in respect of amounts that are material to the Audited Financial Statements.
Foreign Exchange
Investment securities and other assets and liabilities denominated in foreign
currencies are translated into United States Dollars using exchange rates at
the reporting date. Purchases and sales of investments and income and expense
items denominated in foreign currencies are translated into United States
Dollars at the date of such transaction. All foreign currency translation gains
and losses are included in the Statement of Operations.
Recent accounting pronouncements
In August 2014, the FASB issued ASU 2014-15 - Presentation of Financial
Statements - Going Concern (Subtopic 205-40)("ASU 2014-15"). The pronouncement
defined management's responsibility regarding the assessment of the Company's
ability to continue as a going concern, even if the Company's liquidation is
not imminent. Currently, no similar guidance exists for manager representation
of going concern. Under this guidance, during each period on which financial
statements are prepared, management needs to evaluate whether there are
conditions or events that, in the aggregate, raise substantial doubt about the
Company's ability to continue as a going concern within one year after the date
the financial statements are issued. Substantial doubt exists if these
conditions or events indicate that the Company will be unable to meet its
obligations as they become due. If such conditions or events exist, management
should develop a plan to mitigate or alleviate these conditions or events.
Regardless of management's plan to mitigate, certain disclosures must be made
in the financial statements. ASU 2014- 15 is effective for annual periods
ending after 15 December 2016. The Company has adopted the pronouncement in the
current year. Having reassessed the principal risks; the Directors considered
it appropriate to adopt the going concern basis of accounting in preparing the
Audited Financial Statements.
In May 2015, the FASB issued ASU 2015-07, Disclosures for Investments in
Certain Entities that Calculate Net Asset Value per Share (or its equivalent)
("ASU 2015-07"), in which certain investments measured at fair value using the
net asset value per share method (or its equivalent) as a practical expedient
are not required to be categorised in the fair value hierarchy. This guidance
is effective for annual reporting periods, including interim periods, beginning
after 15 December 2016. The Company and the Master Partnership have adopted ASU
2015-07 and accordingly have not levelled applicable positions.
In January 2016, the FASB issued Accounting Standards Update No. 2016-01 (ASU
2016-01) "Financial Instruments-Overall (Subtopic 825-10): Recognition and
Measurement of Financial Assets and Financial Liabilities." ASU 2016-01 amends
various aspects of the recognition, measurement, presentation, and disclosure
for financial instruments. ASU 2016-01 is effective for annual reporting
periods, and interim periods within those years beginning after 15 December
2017. We do not expect that this standard will have a material effect on our
financial statements.
4. Material Agreements
Management and Incentive fees
The Investment Manager was appointed by the Company to invest its assets in
pursuit of the Company's investment objectives and policies. As disclosed in
Note 2, the Investment Manager is remunerated by the Master Fund by way of
management fees and incentive fees.
Administration fees
Under the terms of an Administration Agreement dated 29 June 2007, the Company
appointed Northern Trust International Fund Administration Services (Guernsey)
Limited as Administrator (the "Administrator") and Corporate Secretary.
The Administrator is paid fees based on the NAV of the Company, payable
quarterly in arrears. The fee is at a rate of 2 basis points of the NAV of the
Company for the first GBP500 million of NAV and a rate of 1.5 basis points for
any NAV above GBP500 million. This fee is subject to a minimum of GBP4,250 per
month.
The Administrator is also entitled to an annual corporate governance fee of GBP
30,000 for its company secretarial and compliance activities.
In addition, the Administrator is entitled to be reimbursed out-of-pocket
expenses incurred in the course of carrying out its duties, and may charge
additional fees for certain other services.
Total Administrator expenses during the year amounted to US$159,895 with
US$43,858 outstanding (31 December 2015: US$170,079 with US$40,894
outstanding).
Related Party
The Company has entered into a support and custody agreement with Third Point
Offshore Independent Voting Company Limited ("VoteCo") whereby, in return for
the services provided by VoteCo, the Company will provide VoteCo with funds
from time to time in order to enable VoteCo to meet its obligations as they
fall due. Under this agreement, the Company has also agreed to pay all the
expenses of VoteCo, including the fees of the directors of VoteCo, the fees of
all advisors engaged by the directors of VoteCo and premiums for directors and
officers insurance. The Company has also agreed to indemnify the directors of
VoteCo in respect of all liabilities that they may incur in their capacity as
directors of VoteCo. The expense paid by the Company on behalf of Voteco during
the year is outlined in the Statement of Operations and amounted to US$97,229
(31 December 2015: US$121,320).
5. Directors' Fees
The Chairman is entitled to a fee of GBP60,000 per annum. All other independent
Directors are entitled to receive GBP36,000 per annum with the exception of Mr.
Legge who receives GBP44,000 per annum as the audit committee chairman. Mr.
Targoff has waived his fees. The Directors are also entitled to be reimbursed
for expenses properly incurred in the performance of their duties as Director.
The Directors' fees during the year amounted to US$228,783 with US$70,549
outstanding (31 December 2015:US$267,271 with US$66,649 outstanding).
6. Share Capital
The Company was incorporated with the authority to issue an unlimited number of
Ordinary Shares (the "Shares") with no par value and an unlimited number of
Ordinary B Shares ("B Shares") of no par value. The Shares may be divided into
at least two classes denominated in US Dollar and Sterling.
The Company has issued approximately 40 per cent of the aggregate voting rights
of the Company to VoteCo in the form of B Shares. The B Shares are unlisted and
except for an entitlement to receive a fixed annual dividend at a rate of
0.0000001 pence (Sterling) do not carry any other economic interests and at all
times will represent approximately 40 per cent of the aggregate issued capital
of the Company. The Articles of Association provide that the ratio of issued US
Dollar B Shares to Sterling B Shares shall at all times approximate as closely
as possible the ratio of issued US Dollar Shares to Sterling Shares in the
Company.
US Dollar Shares Sterling
Shares
Number of Ordinary Shares 47,655,833 1,868,055
Shares issued 1 January 2016
Shares Converted
Total shares transferred to share class during 225,301 311,571
the year
Total shares transferred out of share class (380,287) (164,784)
during the year
Shares in issue at end of year 47,500,847 2,014,842
US Dollar Sterling
Shares
Shares US$ US$
Share Capital Account
Share capital account at 1 January 2016 369,431,423 33,311,828
Shares Converted
Total share value transferred to share class 3,731,924 6,673,612
during the year
Total share value transferred out of share (6,673,612) (3,731,924)
class during the year
Share capital account at end of year 366,489,735 36,253,516
US Dollar Shares Sterling
Shares
Number of Ordinary B Shares
Share capital account at 1 January 2016 31,770,577 1,245,382
Shares Converted
Total shares transferred to share class during 150,201 207,715
the year
Total shares transferred out of share class (253,524) (109,855)
during the year
Shares in issue at end of year 31,667,254 1,343,242
In respect of each class of Shares a separate class account has been
established in the books of the Company. An amount equal to the aggregate
proceeds of issue of each Share Class has been credited to the relevant class
account. Any increase or decrease in the NAV of the Master Fund, as calculated
by the Master Fund, is allocated to the relevant class account in the Company
according to the number of shares held by each class.
Each class account is allocated those costs, expenses, losses, dividends,
profits, gains and income which the Directors determine in their sole
discretion relate to a particular class. Expenses which relate to the Company
as a whole rather than specific classes are allocated to each class in the
proportion that its NAV bears to the Company as a whole.
Voting Rights
Ordinary Shares carry the right to vote at general meetings of the Company and
to receive any dividends, attributable to the Ordinary Shares as a class,
declared by the Company and, in a winding-up will be entitled to receive, by
way of capital, any surplus assets of the Company attributable to the Ordinary
Shares as a class in proportion to their holdings remaining after settlement of
any outstanding liabilities of the Company. B Shares also carry the right to
vote at general meetings of the Company but carry no rights to distribution of
profits or in the winding-up of the Company.
As prescribed in the Company's Articles, each Shareholder present at general
meetings of the Company shall, upon a show of hands, have one vote. Upon a
poll, each Shareholder shall, in the case of a separate class meeting, have one
vote in respect of each Share or B Share held and, in the case of a general
meeting of all Shareholders, have one vote in respect of each US Dollar Share
or US Dollar B Share held, and two votes in respect of each Sterling Share or
Sterling B Share held. Fluctuations in currency rates will not affect the
relative voting rights applicable to the Shares and B Shares. In addition all
of the Company's Shareholders have the right to vote on all material changes to
the Company's investment policy.
Repurchase of Shares and Discount Control
The Directors of the Company were granted authority to purchase in the market
up to 14.99 per cent of each class of Shares in issue at the Annual General
Meeting on 22 June 2016, and they intend to seek annual renewal of this
authority from Shareholders. The Directors propose to utilise this share
repurchase authority to address any imbalance between the supply of and demand
for shares. Pursuant to the Director's share repurchase authority, the Company,
through the Master Fund, commenced a share repurchase program in December 2007.
The Shares are being held by the Master Partnership. The Master Partnership's
gains or losses and implied financing costs related to the shares purchased
through the share purchase programme are entirely allocated to the Company's
investment in the Master Fund. The Master Partnership has an ownership of
11.87% of the USD shares outstanding at 31 December 2016 (31 December 2015:
10.66%). In addition, the Company, the Master Fund, the Investment Manager and
its affiliates have the ability to purchase Shares in the after-market at any
time the Shares trade at a discount to NAV. The Master Partnership purchased
600,000 US Dollar Shares during the year ended 31 December 2016.
At 31 December 2016 and 31 December 2015 the Master Partnership held the
following Shares in the Company in the after-market:
Number of Average
Cost
31 December 2016 Currency Shares Cost per Share
US Dollar Shares USD 5,879,753 US$65,025,532 US$11.06
Number of Average
Cost
31 December 2015 Currency Shares Cost per Share
US Dollar Shares USD 5,279,753 US$56,710,193 US$10.74
Further issue of Shares
Under the Articles, the Directors have the power to issue further shares on a
non-pre-emptive basis. If the Directors issue further Shares, the issue price
will not be less than the then-prevailing estimated weekly NAV per Share of the
relevant class of Shares.
Share Conversion Scheme
The Company's Articles incorporate provisions to enable Shareholders of any one
Class of Ordinary Shares to convert all or part of their holding into any other
Currency Class of Ordinary Share on a monthly basis on the following terms:
(1) the right of conversion is exercisable by the said holder giving to the
Company or its authorized agent at least 10 business days notice;
(2) the notice shall specify the number and Currency Class to be converted from
and the Currency Class of Ordinary Shares into which they are to be converted.
(3) the notice shall be submitted either through submission of the relevant
instruction mechanism or through the return of the relevant Ordinary Share
Certificate.
Upon conversion a corresponding number of B Shares will be converted in a
similar manner.
If the aggregate NAV of any Currency Class at any month-end falls below the
equivalent of US$50 million, the Shares of that Class may be converted
compulsorily into Shares of the Currency Class with the greatest aggregate
value in US Dollar terms at the time. Each conversion will be based on NAV
(Note 8) of the share classes to be converted. At this time the Board has no
intention to compulsorily convert the Sterling Shares into US Dollar Shares.
7. Taxation
The Fund is exempt from taxation in Guernsey under the provisions of the Income
Tax (Exempt Bodies) (Guernsey) Ordinance 1989.
8. Calculation of Net Asset Value
The NAV of the Company is equal to the value of its total assets less its total
liabilities. The NAV per Share of each class is calculated by dividing the NAV
of the relevant class account by the number of Ordinary Shares of the relevant
class in issue on that day.
9. Related Party Transactions
At 31 December 2016 other investment funds owned by or affiliated with the
Investment Manager owned 5,630,444 (31 December 2015: 5,630,444) US Dollar
Shares in the Company. Refer to note 4 and note 5 for additional Related Party
Transaction disclosures.
10. Significant Events
There were no significant events during the year.
11. Financial Highlights
The following tables include selected data for a single Ordinary Share of each
of the Ordinary Share classes in issue at the period end and other performance
information derived from the Audited Financial Statements.
US Dollar Sterling
Shares Shares
31 December 31 December
2016 2016
US$ GBP
Per Share Operating Performance
Net Asset Value beginning of the year 16.62 15.95
Income from Operations
Net realised and unrealised gain from investment
transactions allocated from Master Fund¹ 1.12 0.98
Net loss (0.11) (0.09)
Total Return from Operations 1.01 0.89
Net Asset Value, end of the year 17.63 16.84
Total return before incentive fee allocated from 6.81% 6.29%
Master Fund
Incentive allocation from Master Fund (0.73%) (0.71%)
Total return after incentive fee allocated from 6.08% 5.58%
Master Fund
Total return from operations reflects the net return for an investment made at
the beginning of the year and is calculated as the change in the NAV per
Ordinary Share during the year ended 31 December 2016. An individual
Shareholder's return may vary from these returns based on the timing of their
purchases and sales of shares on the market.
US Dollar Sterling
Shares Shares
31 December 31 December
2015 2015
US$ GBP
Per Share Operating Performance
Net Asset Value beginning of the year 17.06 16.43
Income from Operations
Net realised and unrealised loss from investment
transactions allocated from Master Fund¹ (0.31) (0.34)
Net loss (0.13) (0.14)
Total Return from Operations (0.44) (0.48)
Net Asset Value, end of the year 16.62 15.95
Total return before incentive fee allocation (2.58%) (2.91%)
from Master Fund
Incentive allocation from Master Fund 0.00% (0.01%)
Total return after incentive fee allocated from (2.58%) (2.92%)
Master Fund
Total return from operations reflects the net return for an investment made at
the beginning of the year and is calculated as the change in the NAV per
Ordinary Share during the year ended 31 December 2015 and is not annualised. An
individual Shareholder's return may vary from these returns based on the timing
of their purchases and sales of shares on the market.
US Dollar Sterling
Shares Shares
31 December 31 December
2016 2016
US$ GBP
Supplemental data
Net Asset Value, end of the year 837,302,043 33,930,578
Average Net Asset Value, for the year ² 809,147,678 29,903,025
Ratio to average net assets
Operating expenses ³ (2.91%) (2.93%)
Incentive fee allocated from Master Fund (0.76%) (0.64%)
Total operating expense ³ (3.67%) (3.57%)
Net loss (0.63%) (0.51%)
US Dollar Sterling
Shares Shares
31 December 31 December
2015 2015
US$ GBP
Supplemental data
Net Asset Value, end of the year 792,037,489 29,797,104
Average Net Asset Value, for the year ² 819,575,868 32,663,696
Ratio to average net assets
Operating expenses ³ (2.72%) (2.85%)
Incentive fee allocated from Master Fund 0.01% (0.24%)
Total operating expense ³ (2.71%) (3.09%)
Net loss (0.74%) (0.81%)
1. Includes foreign currency translation of profit/(loss) with respect to
Sterling share class.
2. Average Net Asset Value for the year is calculated based on published
monthly estimates of NAV.
3. Operating expenses are Company expenses together with operating expenses
allocated from the Master Fund.
12. Ongoing Charge Calculation
Ongoing charges for the year ended 31 December 2016 and 31 December 2015 have
been prepared in accordance with the AIC recommended methodology. Performance
fees were charged to the Master Fund. In line with AIC guidance, an Ongoing
Charge has been disclosed both including and excluding performance fees. The
Ongoing charges for the year ended 31 December 2016 and 31 December 2015
excluding performance fees and including performance fees are based on Company
expenses and allocated Master Fund expenses outlined below.
(excluding performance fees) 31 December 31 December
2016 2015
US Dollar Shares 2.30% 2.45%
Sterling Shares 2.32% 2.46%
(excluding performance fees) 31 December 31 December
2016 2015
US Dollar Shares 3.05% 2.44%
Sterling Shares 2.95% 2.70%
13. Subsequent Events
An annual distribution equivalent to 4% of the NAV of the Company in respect of
the year to 31 December 2016 was declared on 10 January 2017 amounting to
$35,416,482 (31 December 2015: $Nil) and paid on 14 February 2017.
After due consideration, it was resolved to approve the following director fee
increases with effect from 1 January 2017:
Marc Antoine Autheman - GBP63,000 (increase of GBP3,000)
Chris Legge - GBP46,000 (increase of GBP2,000)
Keith Dorrian - GBP38,000 (increase of GBP2,000)
Chris Fish - GBP38,000 (increase of GBP2,000)
Management and Administration
Directors Christopher Legge*
Marc Antoine Autheman (Chairman)* PO Box 255, Trafalgar Court, Les
Banques,
PO Box 255, Trafalgar Court, Les St Peter Port, Guernsey,
Banques,
St Peter Port, Guernsey, Channel Islands, GY1 3QL.
Channel Islands, GY1 3QL
Keith Dorrian* Joshua L Targoff
PO Box 255, Trafalgar Court, Les PO Box 255, Trafalgar Court, Les
Banques, Banques,
St Peter Port, Guernsey, St Peter Port, Guernsey,
Channel Islands, GY1 3QL. Channel Islands, GY1 3QL.
* These Directors are independent
Christopher Fish*
PO Box 255, Trafalgar Court, Les Banques,
St Peter Port, Guernsey,
Channel Islands, GY1 3QL.
Investment Manager Registered Office
Third Point LLC PO Box 255, Trafalgar Court, Les
Banques,
18th Floor, 390 Park Avenue, St Peter Port, Guernsey,
New York, NY 10022, Channel Islands, GY1 3QL.
United States of America.
Auditors Administrator and Secretary
Ernst & Young LLP Northern Trust International Fund
PO Box 9, Royal Chambers Administration Services (Guernsey)
Limited,
St Julian's Avenue, PO Box 255, Trafalgar Court, Les Banques,
St Peter Port, Guernsey, St Peter Port, Guernsey,
Channel Islands, GY1 4AF. Channel Islands, GY1 3QL.
Legal Advisors (UK Law) Legal Advisors (Guernsey Law)
Herbert Smith Freehills LLP Mourant Ozannes
Exchange House, Primrose Street, PO Box 186, Le Marchant Street,
London, EC2A 2HS, St Peter Port, Guernsey,
United Kingdom. Channel Islands, GY1 4HP.
Legal Advisors (US Law) Receiving Agent
Cravath, Swaine & Moore, LLP Capita Registrars
825 Eighth Avenue, Worldwide Plaza, The Registry,
New York, NY 10019-7475, 34 Beckenham Road,
United States of America. Beckenham, Kent BR3 4TU,
United Kingdom.
Registrar and CREST Service Provider Corporate Broker
Capita Registrars (Guernsey) Limited Jefferies International Limited
2nd Floor, No.1 Le Truchot, Vintners Place,
St Peter Port, Guernsey, 68 Upper Thames Street,
Channel Islands, GY1 1WO. London EC4V 3BJ,
United Kingdom
END
(END) Dow Jones Newswires
April 28, 2017 02:00 ET (06:00 GMT)
1 Year Third Point Chart |
1 Month Third Point Chart |
It looks like you are not logged in. Click the button below to log in and keep track of your recent history.
Support: +44 (0) 203 8794 460 | support@advfn.com
By accessing the services available at ADVFN you are agreeing to be bound by ADVFN's Terms & Conditions
