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)
25 April 2019
FULL YEAR RESULTS
FOR THE TWELVE MONTHS ENDED 31 DECEMBER
2018
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 2018.
Financial Highlights (as at 31
December 2018, unless otherwise stated)
- Returns for USD class of (10.9%)
Ticker |
Tranche |
NAV
FY18 |
NAV
FY17 |
Return |
TPOU |
USD
Class $ |
$17.24 |
$20.25 |
(10.9%) |
- The Company’s Net Asset Value (“NAV”) decreased 19.78% to
$813.6 million (FY17:$1,014.4 million)
Portfolio Performance of the Master
Fund
- The net investment results for the year were driven by losses
in equity long positions, which declined along with markets during
the Fourth Quarter. Single name short positions muted some of these
losses however this portfolio’s size was modest compared to overall
long exposures.
- Structured credit securities were profitable and corporate
credit securities detracted modestly from overall results.
Outlook
- The Investment Manager maintains an opportunistic approach to
investing across the capital structure, with a research-intensive
approach to identifying catalysts for change in global
markets.
- The Investment Manager is focused on four strategies where it
believes it has a competitive advantage in markets: activist and
governance-focused investments; credit securities; short selling;
and identifying emerging compounder securities. Each of these areas
of focus is expected to further increase in size.
- The Investment Manager has continued to invest in expanding its
team, recently adding capital markets and risk expertise, and
formally creating an activist and governance research team.
Steve Bates, Chairman of Third
Point Offshore Investors Limited, commented: “I am encouraged
by the positive initiatives enacted by the Investment Manager
following the fund’s fourth down year in its nearly 25-year life,
and believe its strategy is well-suited to these markets. The
Investment Manager’s present approach has generated an 9.8%
increase in NAV in the first three months of 2019.”
“The Board and Investment Manager recognise the Company’s
persistent share discount to NAV, which remains too high. This is a
primary area of focus for the Board in the coming year, and we
remain fully committed to ensuring the market rating better
reflects the true value of the Company, as well as delivering
long-term value for all shareholders.”
Enquiries:
Third
Point Offshore Investors
Investor Relations |
+1 212 715 6707 |
Greenbrook Communications |
+44 (0)20
7952 2000 |
|
|
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 one share class (LSE:TPOU).
Chairman’s Statement
Dear Shareholder,
I am pleased to present the Twelfth Annual Report for Third
Point Offshore Investors (“the Company”/ “TPOIL”).
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.
I was delighted to have been named Non-Executive Chairman of the
Company in February 2019 and this is
therefore my first statement to you. The returns to investors for
the year were disappointing, as explained later, but the Manager
has responded to this by refining parts of the investment process
to reflect changes in the structure of markets, and by resourcing
these initiatives with high quality personnel. There is a greater
wariness of market volatility as a result of the influence of
algorithmic and ETF trading, and this presents both a threat to
market stability and an opportunity for the Master Partnership to
be a provider of liquidity when a dislocation occurs. A greater
degree of caution is evident in the portfolio structure than was
the case during much of 2018, and this gives the Company the
ability to benefit from episodes of volatility that the Manager
sees lying in wait. I am very supportive of Third Point’s ability
to create long-term shareholder value and believe that the investor
will be well served by a high-quality team which invests globally
across the capital structure and takes a research intensive
approach to identifying catalysts for change.
An area of concern for your Board has been the level of the
discount to net asset value, which remains stubbornly high. This
will be a major focus for the Board in the year ahead, and I look
forward to engaging with both Third Point and with shareholders to
ensure the market rating more properly reflects the intrinsic value
of the Company. Before my arrival, the Company’s Board of Directors
and Third Point LLC (the “Investment Manager”) undertook a number
of corporate actions throughout 2018, with the aim of addressing
some governance concerns and removing structural obstacles to
reducing the discount. These included:
1) Fee Structure: As announced by
the Board on 28 December 2018, the
Company’s annual management fee was reduced to 1.25% (from 2%)
effective 1 January 2019 following a
transfer into a new share class in the Master Fund and to reflect
the Company’s size and longevity as an investor in the Master Fund.
Further, because the Master Fund carries a modified high watermark
provision as it relates to the performance fee, the Company will
bear a reduced 10% performance fee on all gains in the Master Fund
until the Master Fund’s returns increase by approximately 35% since
31 December 2018.
2) Transfer to Premium Listing on
the London Stock Exchange: The Company was admitted to the Premium
Official List Segment (“Premium Listing”) of the London Stock
Exchange (“LSE”) on 10 September
2018. Following the Premium Listing, TPOIL was approved for
inclusion in the FTSE UK All Share Index effective 24 December 2018. The Directors expect that such
inclusion will likely improve liquidity for secondary market
trading in the Shares on the LSE, and also improve demand for the
shares by appealing to a wider group of potential buyers.
3) Improved Communications: The
Investment Manager has committed to enhanced communications
regarding the Company and the underlying Master Fund portfolio
through a variety of new initiatives including a more comprehensive
Company website (www.thirdpointoffshore.com), more frequent
engagement with Company shareholders, senior investment team
presence in London, and regular
portfolio updates. I plan to work closely with the Board and the
Investment Manager to maintain a constant dialogue with Company
shareholders as well.
4) Share Buyback Programme: As
announced by the Board on 5 December
2018, the Company has been engaged in a share repurchase
programme (the “Programme”) with the intention of further improving
the Company’s rating. From December
2018 to the date of these financial statements, the Net
Asset Value ("NAV") uplift due to share buybacks was 15 cents per share. A monthly summary of
repurchase activity related to the Programme is available on the
Company’s website.
5) Updated Capital Allocation
Policy: In Q1 2018, the Board reviewed the Company’s capital
allocation policy and determined that the dividend policy
established in 2012 is not aligned with the Company’s corporate
structure or the Investment Manager’s strategy. As such, the
dividend policy was discontinued in favour of the share buyback
programme. Shares bought back will either be held in Treasury or
can be cancelled at the discretion of the Board. In either event,
purchases at the current level of discount have a significant
positive effect on net asset value. The previous buyback approach
led to the Master Fund holding shares in the Company, and it was
felt that this created some confusion, leading to the more
conventional approach now in place. As part of this change, the
Board repurchased and cancelled 5% of the Company’s outstanding
shares held by the Master Fund, resulting in a concurrent uplift to
the NAV per share of approximately 19
cents.
6) Conversion of
Sterling-denominated Share Class: Finally, effective 27 June 2018, the previously existing
Sterling-denominated class shares was converted into the U.S.
Dollar-denominated class shares in an effort to afford the U.S.
Dollar class shareholders greater liquidity. The Conversion was in
accordance with the provision in the Company’s Articles of
Incorporation granting the directors the discretionary right to
convert any class with a net asset value of less than $50 million.
As I mentioned, the results for the year were disappointing,
with particular weakness visible in the fourth quarter. For the
year ended 31 December 2018, the NAV
per share performance decreased by (10.9%) for the U.S. Dollar
share class. Performance was driven primarily by losses in core
equity long positions against a challenging broader market
environment and a significant rise in market volatility. I am happy
to report that for the first three months of 2019, the NAV has
increased by 9.8%. I am encouraged by the changes the Investment
Manager enacted toward year-end including a deleveraging across the
portfolio, a reduction in net equity exposures, and a focus on
increasing the short equity portfolio. Please refer to the
Investment Manager’s Statement for additional details regarding
2018 performance and portfolio repositioning in 2019. I encourage
all shareholders to review the portfolio commentary available on
the Company website as well.
My fellow Directors and I are available to meet with
shareholders at any time and very much welcome a dialogue. I look
forward to connecting with many of you in the months ahead.
Steve
Bates
24 April 2019
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 2018, “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 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 was
admitted to the Premium Official List Segment (“Premium Listing”)
of the London Stock Exchange (“LSE”) on 10
September 2018.
The Company is a member of the Association of Investment
Companies (“AIC”).
Investment Objective and Policy
The Company’s investment objective was 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
investing capital in securities and other instruments in select
asset classes, sectors, and geographies, by taking long and short
positions. 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 identifies opportunities by combining a
fundamental approach to single security analysis with a reasoned
view on global, political and economic events that shapes portfolio
construction and drives risk management.
The Investment Manager seeks market and economic dislocations
and supplements its analysis with considerations of managing
overall exposures across specific asset classes, sectors, and
geographies by evaluating sizing, concentration, factor risk, and
beta, among other considerations. The resulting portfolio expresses
the Investment Manager’s best ideas for generating alpha and its
tolerance for risk given global market conditions. The Investment
Manager is opportunistic and often seeks a catalyst that will
unlock value or alter the lens through which the greater market
values a particular investment. The Investment Manager applies
aspects of this framework to its decision-making process, and this
approach informs the timing and risk of each investment.
As of January 1, 2019, the Company
transferred substantially all of its holding into a newly-created
share class of the Master Fund. The new share class will be subject
to a 25% quarterly redemption gate. The Company will plan to redeem
an appropriate amount each quarter to account for planned share
buybacks and Company fees and expenses. The new share class will
attract a lower management fee and the Company will also qualify
for an additional reduction of management fee applicable to it
based on its size and longevity as an investor in the Master Fund.
As a result, the Company’s management fee in the newly created
share class will be reduced from 2.0% to 1.25% per annum commencing
on 1 January 2019.
Results and Dividends
The results for the year are set out in the Statements of
Operations. As disclosed in the announcement dated 1 March 2018, the Board, after consultation with
major shareholders, resolved that the Dividend Policy should be
discontinued with immediate effect and therefore there are no
dividends due in respect of the calendar year 2018. On 5 January 2018, an annual distribution was
declared equivalent to 4% of the NAV of the Company in respect of
the year to 31 December 2017,
amounting to $0.81 per US Dollar
Share and £0.77 per Sterling Share
and paid on 16 February 2018.
Stated Capital
Share Capital Conversions took place during the year ended
31 December 2018. A summary and the
number of shares in issue at the year-end are disclosed in Note 6
to the Audited Financial Statements.
All Sterling shares were compulsorily converted to the US Dollar
class as of 1 July 2018.
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;
- Discount to the NAV;
- Share price; and
- Ongoing charges.
Directors
The Directors of the Company during the year (with the exception of
Mr. Autheman who resigned from the Board of Directors on
12 September 2018) and to the date of
this report are as listed on these Audited Financial
Statements.
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 2018 (31 December 2017: Christopher Legge and Keith Dorrian held 4,500 and 2,500 U.S. Dollar shares respectively). 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:
https://www.theaic.co.uk/sites/default/files/hidden-files/AICCodeofCorporateGovernanceJUL16_0.pdf.
In July 2018, the FRC released a
revised Corporate Governance Code which will become effective
1 January 2019. The AIC also updated
its Code effective 1 January 2019 and
because its 2019 Code closely reflects the principles and
provisions of the 2019 FRC Code the AIC Guide has been withdrawn.
The Directors are currently evaluating the impact this will have on
the Company.
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
whistle- blowing 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-April-2016.pdf.
The Board on an annual basis, ensures that service providers have
appropriate whistleblowing, AML, disaster recovery and risk
monitoring policies in place.
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 six 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 |
Steve Bates |
Non-Executive
Chairman |
Yes |
5 February 2019 |
Rupert Dorey |
Non-Executive
Director |
Yes |
5 February 2019 |
Keith Dorrian |
Non-Executive
Director |
Yes |
19 June 2007 |
Christopher Legge |
Non-Executive
Director |
Yes |
19 June 2007 |
Joshua L Targoff |
Non-Executive
Director |
No |
29 May 2009 |
Claire Whittet |
Non-Executive
Director |
Yes |
27 April 2017 |
As required by the AIC Code, every Director that has completed
over nine years service on the Board must be subject to annual
re-election by the Shareholders. Christopher Legge who has served for over nine
years on the Board will be required to offer himself for
re-election at the next Annual General Meeting (“AGM”).
Keith Dorrian is not going to stand
for re-election at the next AGM.
Directors may 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 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 “Corporate Secretary”).
The Board requires to be supplied in a timely manner with
information by the Investment Manager, the Administrator, and the
Corporate 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, the
Independent Directors and Mr. Targoff (treated for the purposes of
the AIC Code as a Non-Independent Director) may retire at each AGM
(Principle 3 – AIC Code).
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 Board have
implemented a policy whereby a predesignated Director puts
himself/herself up for re-election to the Board at each AGM. This
policy is intended to address the balance of views and experience
on the Board, and to comply with the AIC Code which requires that
every Director that has completed over nine years service on the
Board must be subject to annual re-election by the Shareholders.
The revised UK Corporate Governance Code, effective 1 January 2019, will require that all Directors
be subject to annual re-election.
The Board 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. 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.
Keith Dorrian is not going to stand
for re-election at the next AGM and the Board recommends electing
the other Directors who are standing for re-election.
Following the resignation of the previous Chairman in
September 2018, Claire Whittet was appointed Interim Chair and
the Board engaged the services of a specialist recruitment firm to
assist in the appointment of a new Chair. Steve Bates was appointed Chairman of the Board
on 5th February 2019. In addition, in
view of Keith Dorrian’s decision not to stand for re-election in
2019, the Board interviewed a number of candidates which culminated
in Rupert Dorey joining the Board on
5 February 2019.
Directors’ Biographies
Marc Antoine Autheman
Marc Antoine Autheman, is a resident of France. He has over 39 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. Mr. Autheman resigned from
the Board of Directors on 12 September
2018.
Steve Bates
Mr. Bates has over 38 years’ experience in the investment industry.
He began his career in 1980 with James
Capel & Co. as an analyst covering US markets. From 1984
to 2003, he worked for JP Morgan and its predecessor Flemings where
he was responsible for establishing and managing a range of
Emerging Markets businesses and investment activities across
regions. Since then, Mr. Bates has been Chief Investment Officer
for GuardCap Asset Management Limited and its predecessor company.
He is currently Chairman of both VinaCapital Vietnam Opportunities
Fund and of BMO Capital & Income Investment Trust and is a Non-
Executive Director of Biotech Growth Trust, all of which are listed
on the London Stock Exchange. Mr. Bates holds a law degree from
Cambridge University and is a CFA
charterholder.
Rupert Dorey
Mr Dorey has 35 years of experience in financial markets. Mr Dorey
was at CSFB for 17 years from 1988 to 2005 where he specialised in
credit related products, including derivative instruments where his
expertise was principally in the areas of debt distribution,
origination and trading, covering all types of debt from investment
grade to high yield and distressed debt. He held a number of
positions at CSFB, including establishing CSFB’s high yield debt
distribution business in Europe,
fixed income credit product coordinator for European offices and
head of UK Credit and Rates Sales. Since 2005 he has been acting in
a Non-Executive Directorship capacity for a number of Hedge Funds,
Private Equity & Infrastructure Funds, for both listed and
unlisted vehicles. He is former President of the Guernsey Chamber
of Commerce and is a member of the Institute of Directors. Rupert
has extensive experience as both Director and Chairman of exchange
listed and unlisted funds, chairing 9 of the funds, seven of which
have been listed and 2 of which are FTSE 250 companies. He has
served on boards with 18 different managers, including Apollo,
Aviva, M&G, Partners Group, Cinven, Neuberger Berman and
Harbourvest.
Keith Dorrian
Keith Dorrian, is a Guernsey
resident and has over 44 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 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.
Claire Whittet
Claire Whittet is a Chartered
Banker. She is a Guernsey resident and has 40 years’ experience in
the banking industry. After gaining an MA in Geography from
Edinburgh University, she joined the
Bank of Scotland where she
remained until moving to Guernsey in 1996. In the intervening
period she was involved in a wide variety of credit transactions
including commercial and corporate finance. She joined Bank of
Bermuda in Guernsey becoming
Global Head of Private Client Credit and moved to Rothschild &
Co Bank International Ltd as Director of Lending in 2003.
She was latterly Co-Head and Managing Director and since
May 2016 has been a Non-Executive
Director of the bank. She is a Non-Executive Director of a number
of listed and unlisted funds, is a Member of the Chartered
Institute of Bankers in Scotland,
the Insurance Institute and holds the Institute of Directors
Diploma in Company Direction.
Cross Directorships
Mr. Legge and Mrs. Whittet are also both Directors of another
listed Fund. The Board believes that this does not create a
conflict or affect their independence.
A number of the directors are Non-Executive Directors of other
listed funds. The Board notes that none of these funds are trading
companies and confirms that all Non-Executive Directors of the
Company have sufficient time and commitment (as evidenced by their
attendance and participation at meetings) to devote to this
Company.
Meeting Attendance Records
The table below lists Directors’ attendance at meetings during the
year.
|
Scheduled Board |
Audit
Committee |
|
Meetings |
Meetings |
|
Attended (max 4) |
Attended (max 3) |
Marc Antoine Autheman
¹ |
3 of
3 |
2 of
2 |
Christopher Legge |
4 of
4 |
3 of
3 |
Keith Dorrian 2 |
4 of
4 |
1 of
1 |
Joshua L Targoff
3, 4 |
4 of
4 |
N/A |
Claire Whittet |
4 of
4 |
3 of
3 |
1 Mr.
Autheman resigned from the Board of Directors on 12 September 2018.
2 Mr. Dorrian is not going to
stand for re-election at the next AGM on 3
July 2019.
3 Mr. Targoff is not a member of the Audit Committee.
4 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.
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 Board has a female director
and therefore 16.67% diversity. This will become 20% following Mr.
Dorrian’s resignation at the next AGM on 3
July 2019.
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.
The Board has resolved to form a Management Engagement Committee
which will meet at least annually and will review the performance
of the Company’s service providers. The first meeting will be held
in 2019.
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 this Annual Report.
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 defines 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. It is
intended to consider having an independent review carried out in
2020.
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 period under review and
up to the date of approval of the Audited 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 (“the
Corporate Broker”) and there is regular communication between the
Directors and Corporate Broker to identify potential significant
changes in the shareholder base;
- Discount to the NAV. The Board monitors the discount to the NAV
on a regular basis and continually maintains regular contact with
the Investment Manager when necessary. In addition, the Investment
Manager, Corporate Broker and, when considered necessary, the Board
of Directors, maintain regular contact with the significant
Shareholders in the Company. The Board made updates in May 2018 to the Company’s share repurchase
programme, outlined in Note 6, and dividend policy. Following the
final dividend payment of $38,397,151
and $2,231,249 on USD Shares and
Sterling Shares respectively on 16 February
2018 with respect to the year ended 31 December 2017, the Board elected to stop
dividend payments, cancelled 5% of the Company’s outstanding shares
held by the Master Fund and adopted a more traditional share
repurchase and cancellation practice. In addition, the Board
intends to cancel the remaining shares held by the Master fund in
2019 and has committed not to sell any held shares unless the share
price is at or above the NAV. On 5 December
2018, the Board announced the implementation of a share
buyback programme, with share purchases being made through the
market at prices below the then prevailing NAV per share. As part
of this programme, 318,657 shares were repurchased during
December 2018 at an average cost per
share of $14.07.
- 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; and
- Cyber Security Risk. The Company is exposed to risk arising
from a successful cyber-attack through its service providers. The
Company requests of its service providers that they have
appropriate safeguards in place to mitigate the risk of
cyber-attacks (including minimising the adverse consequences
arising from any such attack), that they provide regular updates to
the Board on cyber security, and conduct ongoing monitoring of
industry developments in this area.
Viability Statement
In accordance with provision C.2.2 of the UK Corporate Governance
Code, published by the Financial Reporting Council in April 2016 (“The Code”), the Directors have
assessed the prospects of the Company over the three year period to
31 December 2021. 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 Company’s investment objective was 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.
As of January 1, 2019, the Company
transferred substantially all of its holding into a newly-created
share class of the Master Fund. The new share class is subject to a
25% quarterly redemption gate. The Company will plan to redeem an
appropriate amount each quarter to account for planned share
buybacks and Company fees and expenses. 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
2021.
Going Concern
During 2018, 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 the
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
All Sterling shares were compulsorily converted to the US Dollar
class as of 1 July 2018.
In August 2018, the Company
proposed to transfer the listing category of its Ordinary Shares
from a standard listing to a premium listing (closed-ended
investment fund) under Chapter 15 of the Listing Rules. This
transfer took effect in September
2018, as a result of the passing of the resolutions at the
extraordinary general meeting of the Company on 31 August 2018.
The Company was admitted to the Premium Official List Segment
(“Premium Listing”) of the London Stock Exchange (“LSE”) on
10 September 2018. In December 2018, the Premium Listing enabled TPOIL
to be included in the FTSE UK Index series.
Marc Antoine Autheman resigned from the Board of Directors on
12 September 2018.
Significant Events After Year End
The FRC and AIC have revised their corporate governance codes,
which became effective 1 January
2019. The Directors are currently evaluating the impact this
will have on the Company.
As of January 1, 2019, the Company
transferred substantially all of its holding into a newly-created
share class of the Master Fund. The new share class will be subject
to a 25% quarterly redemption gate. The Company will plan to redeem
an appropriate amount each quarter to account for planned share
buybacks and Company fees and expenses. The new share class will
attract a lower management fee and the Company will also qualify
for an additional reduction of management fee applicable to it
based on its size and longevity as an investor in the Master Fund.
As a result, the Company’s management fee will be reduced from 2.0%
to 1.25% per annum commencing on 1 January
2019.
For the period 1 January 2019 to
23 April 2019, 1,596,777 shares have
been repurchased and cancelled at an average cost per share of
$14.48.
Steve Bates was appointed as
Chairman on 5 February 2019.
Rupert Dorey was appointed as a
Director on 5 February 2019.
On 11 February 2019, Christopher Legge purchased 2,000 shares in
Third Point Offshore Investors Limited taking his total holding to
6,500 shares.
On 13 February 2019, Rosemary Dorey (spouse of Rupert Dorey, non-executive director of the
Company) purchased 5,151 shares in Third Point Offshore Investors
Limited taking their combined total holding to 12,000 shares.
On 4 March 2019, Claire Whittet beneficially purchased 2,500
shares in Third Point Offshore Investors Limited.
There were no other events subsequent to the year-end which, in
the opinion of the Directors, may have an impact on the Audited
Annual Financial Statements for the period ended 31 December 2018.
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 eleventh Annual
General Meeting was held on 28 June
2018 with all proposed resolutions being passed by the
Shareholders.
International Tax Reporting
For the purposes of the US Foreign Account Tax Compliance Act, the
Company is registered with the US Internal Revenue Services (“IRS”)
as a Guernsey reporting Foreign Financial Institution (“FFI”),
received a Global Intermediary Identification Number and 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 Board has taken the necessary action to ensure that the
Company is compliant with Guernsey regulations and guidance in this
regard.
Criminal Finances Act 2017
In respect of the UK Criminal Finances Act 2017 which has
introduced a new corporate criminal offence (“CCO”) of ‘failing to
take reasonable steps to prevent the facilitation of tax evasion’,
the Board confirms that it is committed to zero tolerance towards
the criminal facilitation of tax evasion.
The Board also keeps under review developments involving other
social, environmental and regulatory matters, such as Modern
Slavery and the General Data Protection Regulation (“GDPR”), and
will report on those to the extent they are considered relevant to
the Company’s operations.
Significant Shareholdings
As at 24 April 2019, 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 |
7,595,053 |
16.58% |
Goldman Sachs Securities (Nominees)
Limited |
6,119,550 |
13.36% |
Chase Nominees Limited |
5,287,293 |
11.54% |
HSBC Global Custody Nominee
(UK) |
2,727,442 |
5.95% |
Morgan Stanley & Co.
Incorporated |
2,663,617 |
5.81% |
Smith & Willamson Nominees
Limited |
2,383,069 |
5.20% |
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/she
ought to have taken as a Director to make himself/herself 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:
Steve Bates
Chairman
Christopher Legge
Director
24 April 2019
Disclosure of Directorships in Public
Listed Companies
The following summarises the Directors’ directorships in public
companies:
Company Name |
Exchange |
Steve Bates |
|
VinaCapital Vietnam Opportunity Fund
Limited |
London |
BMO Capital & Income Investment
Trust plc |
London |
Biotech Growth Trust |
London |
Magna Umbrella Fund |
Ireland |
|
|
Rupert Dorey |
|
NB Global Floating Rate Income Fund
Limited |
London |
AP Alternative Assets, L.P. |
Euronext |
|
|
Keith Dorrian |
|
MasterCapital Fund Limited |
Ireland |
|
|
Christopher Legge |
|
Ashmore Global Opportunities
Limited |
London |
John Laing Environmental Assets
Group Limited |
London |
NB Distressed Debt Investment Fund
Limited |
London |
Sherborne Investors (Guernsey) B
Limited |
London |
Sherborne Investors (Guernsey) C
Limited |
London |
TwentyFour Select Monthly Income
Fund Limited |
London |
|
|
Claire Whittet |
|
BH Macro Limited |
London |
Eurocastle Investment Limited |
Euronext |
International Public Partners
Limited |
London |
Riverstone Energy Limited |
London |
TwentyFour Select Monthly Income
Fund Limited |
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
accounting principles generally accepted in the United States of America. Guernsey Company
Law requires the Directors to prepare Financial Statements for each
financial period 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.
Steve Bates
Chairman
Christopher Legge
Director
24 April 2019
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 AGM.
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
The fees payable by the Company in respect of each of the
Directors who served during 2018 and 2017, were as follows:
|
2018 |
2017 |
|
£ |
£ |
Marc Antoine
Autheman1 |
44,272 |
63,000 |
Christopher F L Legge (Audit
Committee Chairman) |
46,000 |
46,000 |
Keith Dorrian |
38,000 |
38,000 |
Christopher N Fish2 |
– |
19,000 |
Claire Whittet3 |
45,5514 |
25,806 |
Joshua L Targoff5 |
– |
– |
|
|
|
Total |
173,823 |
191,806 |
|
|
|
USD equivalent |
US$241,529 |
US$276,211 |
1 Mr. Autheman resigned from the Board of Directors on
12 September 2018.
2 Mr. Fish resigned
from the Board of
Directors on 21
June 2017.
3 Ms. Whittet was appointed to the Board of Directors on
27 April 2017.
4 Ms. Whittet was appointed Interim Chair with effect
from 12 September 2018, therefore,
her director fees were increased from
£38,000 per annum to £63,000 per annum.
5 As a non-independent Director and as a 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:
Steve Bates
Chairman
Christopher Legge
Director
24 April 2019
Report of the Audit Committee
We present the Audit Committee (the “Committee”) Report for the
year ended 31 December 2018, 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 Claire Whittet and Rupert Dorey who was appointed on 5 February 2019. The Committee operates within
clearly defined terms of reference and comprises all the Directors
except the Investment Manager’s representative.
The Committee Terms of Reference indicates that appointments to
the 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 Audit
Committee |
Next Date for
Review |
Chris Legge |
June 19, 2007 |
– 17 April
20131
– 18 April 2016
– April 2019 |
Marc-Antoine Autheman2 |
June 21, 2007 |
– 17 April
20131
– 18 April 2016
– N/A |
Keith Dorrian3 |
June 19, 2007 |
– 17 April
20131
– 18 April 2016
– N/A |
Claire Whittet |
April 27, 2017 |
– April 2020 |
Rupert
Dorey4 |
February 5, 2019 |
– April 2020 |
1 Date specific tenure introduced on 17 April 2013.
2 Mr. Autheman resigned on 12
September 2018.
3 Mr. Dorrian resigned on 18 April
2018.
4 Mr. Dorey was appointed on 5
February 2019.
The Committee conducts formal meetings at least three times a
year. The table sets out the number of Committee meetings held
during the year ended 31 December
2018 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 in the United States of America 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.
Non-audit fees were paid to Ernst and Young LLP during the year
in respect of the interim review of the Company’s condensed
accounts to 30 June 2018 and for work
associated with the Premium Listing. 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 2018 is reasonable.
The Financial Statements of the Master Fund for the year ended
31 December 2018 were audited by
Ernst & Young who issued an unmodified audit opinion dated
24 April 2019.
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.
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 point of substantial conclusion of
the 2018 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 non-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 2018 and 31
December 2017.
|
2018
(£) |
2017 (£) |
Total |
Total |
Audit
Services |
40,000 |
38,885 |
Interim review |
41,160 |
41,460 |
Reporting
Accountant |
82,500 |
— |
Non-audit
Services |
123,660 |
41,460 |
The independence of Ernst & Young LLP is in the Committee’s
opinion not compromised by Ernst & Young performing the interim
review and work associated with the Premium Listing.
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
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.
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, 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 Company is not required to apply the EU Directive as it is
not an EU Public Interest Entity (“PIE”), due to being incorporated
in Guernsey. However, the Audit Partner rotates every 5 years.
Christopher Legge
Audit Committee Chairman
24 April 2019
Investment Manager’s Review
Performance
Summary1 |
|
USD Class |
31-December-2018 |
31-December-2017 |
%
Return2 |
Share Price |
14.00 |
17.29 |
(14.3%) |
Net asset value per
share |
17.24 |
20.25 |
(10.9%) |
Premium/(discount) |
(18.8%) |
(14.6%) |
|
- For the period 1 January 2018
to 31 December 2018.
Calculation includes dividends paid up to the year ended
31 December 2018.
Strategy Performance
For the twelve months ended 31 December
2018, the net asset value per share performance decreased by
(10.9%) for the U.S. Dollar share class. Highlights for 2018
performance are listed below. Please refer to the Company’s website
(www.thirdpointoffshore.com) for more detailed commentary from the
Investment Manager via shareholder letters and the Company’s
overview presentation.
2018 was the fourth year in a 24-year history during which the
Investment Manager sustained a loss of over 1% in a calendar year
and only the second double digit decline in the firm’s history.
Third Point was disappointed with the results but took the
opportunity to learn from mistakes, reflect on competitive
advantages, and adjust the portfolio.
A significant portion of the negative results for 2018 were
attributable to excess unhedged long cyclical investments and one
large risk arbitrage position related to a merger that failed to
close. The Investment Manager maintained too much long exposure
heading into the fourth quarter which drove a portfolio decline
during the market sell-offs in October and December. While the
Investment Manager’s single name equity short positions and
structured credit portfolios performed well, exposures to the
assets classes were insufficient to offset the losses in core
equity long positions.
As of 31 December 2018, the top
five single issuer positions in the portfolio were Baxter
International Inc., Nestle´ SA, Campbell Soup Co., United
Technologies Corp., and DowDuPont Inc., excluding any positions
deemed confidential.
Risk Outlook
The Investment Manager significantly reduced net equity exposure
heading into 2019 with a belief that more moderate positioning is
appropriate for the market environment. The Manager expects
volatility to re-emerge following a sharp rally during the first
two months of the year and plans to be well positioned to be
providers of liquidity during any future market dislocations across
both equity and credit markets. Event-driven, catalyst-oriented
investing across asset classes remains core for the Investment
Manager. As such, Third Point has renewed focus on several core
areas in which the Manager has generated significant alpha over the
firm’s history including activism or constructivism, identifying
mispriced intrinsic value securities, single name short selling,
and opportunistic investing across the capital structure, including
credit.
At 31 December 2018, exposure in
the Investment Manager’s portfolio is summarized below. Please
refer to www.thirdpointoffshore.com for an updated portfolio
exposure breakdown or reach out to ir@thirdpoint.com for additional
information.
Exposure
Breakdown 1 |
|
Exposure |
|
Long/Short
Equity |
Long |
Short |
Net |
Consumer |
18.9% |
(4.3%) |
14.6% |
Energy &
Utilities |
2.4% |
0.0% |
2.4% |
Financials |
9.8% |
(2.1%) |
7.7% |
Healthcare |
17.1% |
(1.7%) |
15.4% |
Industrials &
Commodities |
17.2% |
(8.8%) |
8.4% |
TMT |
3.5% |
(6.3%) |
(2.8%) |
Market Hedges |
4.1% |
(6.7%) |
(2.6%) |
Total L/S
Equity |
73.0% |
(29.9%) |
43.1% |
Credit |
|
|
|
Distressed |
2.0% |
0.0% |
2.0% |
Government |
1.8% |
0.0% |
1.8% |
Performing |
4.5% |
(1.8%) |
2.7% |
ABS |
14.2% |
(3.6%) |
10.6% |
Total
Credit |
22.5% |
(5.4%) |
17.1% |
Other |
|
|
|
Risk Arbitrage |
2.1% |
(1.0%) |
1.1% |
Macro 2 |
0.0% |
0.0% |
0.0% |
Privates |
9.8% |
0.0% |
9.8% |
Currency ³ |
0.0% |
0.0% |
0.0% |
Total
Other |
11.9% |
(1.0%) |
10.9% |
1 Relates to the Third Point Offshore
Master Fund L.P. Exposures are categorized in a manner consistent
with the Investment Manager’s classifications for portfolio and
risk management purposes.
2 Rates and FX excluded.
* Gains and losses attributable to FX
price movements on portfolio positions vs USD.
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.
Independent Auditor’s Report
to the members of Third Point Offshore Investors Limited
Opinion
We have audited the financial statements of Third Point Offshore
Investors Limited (the “Company”) for the year ended 31 December 2018, which comprise the Statement of
Assets and Liabilities, the Statement of Operations, the Statement
of Changes in Net Assets, the Statement of Cash Flows and the
related notes 1 to 13, including a summary of significant
accounting policies. 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.
In our opinion, the financial
statements:
- give a true and fair view of the state of the Company’s affairs
as at 31 December 2018 and of its
results for the year then ended;
- have been properly prepared in accordance with accounting
principles generally accepted in the
United States of America; and
- have been properly prepared in accordance with the requirements
of the Companies (Guernsey) Law, 2008.
Basis for opinion
We conducted our audit in accordance with International
Standards on Auditing (UK) (“ISAs (UK)”) and applicable law. Our
responsibilities under those standards are further described in the
“Auditor’s responsibilities for the audit of the financial
statements” section of our report below. We are independent of the
Company in accordance with the ethical requirements that are
relevant to our audit of the financial statements in the UK,
including the FRC’s Ethical Standard as applied to listed entities,
and we have fulfilled our other ethical responsibilities in
accordance with these requirements.
We believe that the audit evidence we have obtained is
sufficient and appropriate to provide a basis for our opinion.
Conclusions relating to principal
risks, going concern and viability statement
We have nothing to report in respect of the following
information in the annual report, in relation to which the ISAs
(UK) require us to report to you whether we have anything material
to add or draw attention to:
- the disclosures in the annual report that describe the
principal risks and explain how they are being managed or
mitigated;
- the directors’ confirmation 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 directors’ statement in the annual report 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;
- whether the directors’ statement in relation to going concern
required under the Listing Rules is materially inconsistent with
our knowledge obtained in the audit; or
- 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.
Overview of our audit approach
Key audit matters |
· Investment Valuation
· Investment Existence and
Ownership |
Audit scope |
· We performed an audit of the
complete financial information of the Company for the year ended 31
December 20187.
· 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$16.3 million which represents 2% of net
assets. |
Key audit matters
Key audit matters are those matters that, in our professional
judgment, were of most significance in our audit of the financial
statements of the current period and include the most significant
assessed risks of material misstatement (whether or not due to
fraud) that we identified. These matters included those which had
the greatest effect on: the overall audit strategy, the allocation
of resources in the audit; and directing the efforts of the
engagement team. These matters were addressed in the context of our
audit of the financial statements as a whole, and in our opinion
thereon, and we do not provide a separate opinion on these
matters.
Risk |
Our response to
the risk |
Key observations
communicated to the Audit Committee |
Valuation of investments (US$803m, PY comparative
US$1,014m)
Refer to the Report of the Audit Committee; Accounting policies
The investments held are measured at fair value through profit or
loss, and their fair value is determined by reference to the
published NAV per share of the investee fund, as calculated by its
independent Administrator. The valuation risk considers the risk of
an error in the application of the published NAV per share,
obtained from the independent Administrator of the investee fund,
when calculating the fair value of the Company’s investments, as
well as the effect on valuation of any gating/ suspension of
redemptions by the investee fund. |
Our
response comprised of substantive audit testing of investment
valuation, including:
· Agreeing the valuation
per share of the Company’s investments in the investee fund to the
NAV per share of the investee fund published by its independent
Administrator;
· Agreeing the valuation
per share of the Company’s investments in the investee fund to the
NAV per share of the investee fund per its audited financial
statements for the year ended 31 December 2018, which were approved
on 19 March 2019; and
· Reviewing the
subscriptions and redemptions schedule of the investee fund around
the year-end date to assess the liquidity of the Company’s
investments in the investee fund |
We
confirmed there were no matters identified during our audit work on
valuation of investments that we wanted to bring to the attention
of the Audit Committee. |
Investment existence and ownership
(US$803m, PY comparative US$1,014m)
Refer to the Report of the Audit Committee; Accounting policies
Risk that the investments presented in the financial statements do
not exist or the Company does not have the rights to cash flows
derived from them. Failure to obtain good title exposes the Company
to significant risk of loss. |
Our
response comprised performance of substantive audit testing of
investment existence and ownership including:
· Obtaining a
confirmation, as at 31 December 2018, of the Company’s holdings in
the investee fund into which the Company invests, from the
independent Administrator of the investee fund, and agreeing it to
the accounting records of the Company; and
· Obtaining supporting
documentation for all additions and disposals of holdings in the
investee fund that took place during the year ended 31 December
2018, and agreeing the details to the accounting records of the
Company. |
We
confirmed there were no matters identified during our audit work on
existence and ownership of investments that we wanted to bring to
the attention of the Audit Committee. |
An overview of 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
statements.
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 omissions or misstatements
that, individually or in the 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$16.3 million (2017: US$20.3 million), which is approximately 2%
(2017: 2%) of net assets. We believe that net assets provides us
with an appropriate basis for audit materiality as it is a key
published performance measure and is a key metric used by
management in assessing and reporting on overall performance.
During the course of our audit, we reassessed initial
materiality and noted no matters leading us to amend the basis of
materiality (2% of net assets).
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
judgement was that performance materiality was 75% (2017: 75%) of
our planning materiality, namely US$12.2
million (2017: US$15.2
million). We have set performance materiality at this
percentage because we have considered the likelihood of
misstatements to be low. We have considered both quantitative and
qualitative factors when determining the expected level of detected
misstatements and setting the performance materiality at this
level.
Reporting threshold
The reporting threshold is 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$0.8 million (2017: US$1.02 million), which is set at 5% (2017: 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.
Other information
The other information comprises the information included in the
annual report, other than the financial statements and our
auditor’s report thereon. The directors are responsible for the
other information.
Our opinion on the financial statements does not cover the other
information and, except to the extent otherwise explicitly stated
in this report, we do not express any form of assurance conclusion
thereon.
In connection with our audit of the financial statements, our
responsibility is to read the other information and, in doing so,
consider whether the other information is materially inconsistent
with the financial statements or our knowledge obtained in the
audit or otherwise appears to be materially misstated. If we
identify such material inconsistencies or apparent material
misstatements, we are required to determine whether there is a
material misstatement in the financial statements or a material
misstatement of the other information. If, based on the work we
have performed, we conclude that there is a material misstatement
of the other information, we are required to report that fact.
We have nothing to report in this regard.
In this context, we also have nothing to report in regard to our
responsibility to specifically address the following items in the
other information and to report as uncorrected material
misstatements of the other information where we conclude that those
items meet the following conditions:
- Fair, balanced and understandable – the statement given
by the directors that they consider the annual report and financial
statements taken as a whole is fair, balanced and understandable
and provides the information necessary for shareholders to assess
the Company’s performance, business model and strategy, is
materially inconsistent with our knowledge obtained in the audit;
or
- Audit committee reporting – the section describing the
work of the audit committee does not appropriately address matters
communicated by us to the audit committee is materially
inconsistent with our knowledge obtained in the audit; or
- Directors’ statement of compliance with the UK Corporate
Governance Code – the parts of the directors’ statement
relating to the Company’s compliance with the UK Corporate
Governance Code containing provisions specified for review by the
auditor in accordance with Listing Rule 9.8.10R(2) do not properly
disclose a departure from a relevant provision of the UK Corporate
Governance Code.
Matters on which we are required to
report by exception
We have nothing to report in respect of the following matters in
relation to which the Companies (Guernsey) Law, 2008 requires us to
report to you if, in our opinion:
- proper accounting records have not been kept by the Company;
or
- the financial statements are not in agreement with the
Company’s accounting records and returns; or
- we have not received all the information and explanations we
require for our audit.
Responsibilities of directors
As explained more fully in the ‘Statement of Directors’
responsibilities’, the directors are responsible for the
preparation of the financial statements and for being satisfied
that they give a true and fair view, and for such internal control
as the directors determine is necessary to enable the preparation
of financial statements that are free from material misstatement,
whether due to fraud or error.
In preparing the financial statements, the directors are
responsible for assessing the Company’s ability to continue as a
going concern, disclosing, as applicable, matters related to going
concern and using the going concern basis of accounting unless the
directors either intend to liquidate the Company or to cease
operations, or have no realistic alternative but to do so.
Auditor’s responsibilities for the audit of the financial
statements
Our objectives are to obtain reasonable assurance about whether the
financial statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue an
auditor’s report that includes our opinion. Reasonable assurance is
a high level of assurance, but is not a guarantee that an audit
conducted in accordance with ISAs (UK) will always detect a
material misstatement when it exists. Misstatements can arise from
fraud or error and are considered material if, individually or in
the aggregate, they could reasonably be expected to influence the
economic decisions of users taken on the basis of these financial
statements.
A further description of our responsibilities for the audit of
the financial statements is located on the Financial Reporting
Council’s website at
https://www.frc.org.uk/auditorsresponsibilities. This description
forms part of our auditor’s report.
Use of report
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.
David Robert John Moore, ACA
for and on behalf of Ernst & Young LLP Guernsey, Channel Islands
24 April 2019
Notes:
1.
The maintenance and integrity of Third Point Offshore Investors
Limited’s 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 web site.
2.
Legislation in the 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
2018 |
31 December
2017 |
(Stated in United States
Dollars) |
US$ |
US$ |
Assets |
|
|
Investment in Third Point Offshore
Fund Ltd at fair value (Cost: US$398,942,647; 31 December 2017:
US$435,246,919) |
803,148,852 |
1,014,421,855 |
Cash |
117,979 |
16,816 |
Due from broker |
520,662 |
– |
Redemption receivable |
10,130,000 |
156,500 |
Other assets |
18,933 |
19,171 |
Total assets |
813,936,426 |
1,014,614,342 |
|
|
|
|
|
|
Liabilities |
|
|
Accrued expenses and other
liabilities |
258,425 |
171,480 |
Administration fee payable (Note
4) |
41,974 |
50,261 |
Total liabilities |
300,399 |
221,741 |
|
|
|
Net assets |
813,636,027 |
1,014,392,601 |
|
|
|
Number of Ordinary Shares in
issue (Note 6) |
|
|
US Dollar Shares |
47,186,130 |
47,403,915 |
Sterling Shares |
– |
2,093,352 |
|
|
|
Net asset value per Ordinary
Share (Notes 8 and 11) |
|
|
US Dollar Shares |
$17.24 |
$20.25 |
Sterling Shares |
– |
£19.21 |
|
|
|
Number of Ordinary B Shares in
issue (Note 6) |
|
|
US Dollar Shares |
31,457,421 |
31,602,630 |
Sterling Shares |
– |
1,395,582 |
The financial statements were approved by the Board of Directors
on 24 April 2019 and signed on its
behalf by:
Steve
Bates
Chairman
Christopher
Legge
Director
See accompanying notes and attached Audited Financial
Statements of Third Point Offshore Fund Ltd. and Third Point
Offshore Master Fund L.P.
Statements of Operations
|
For the year
ended |
For the year
ended |
|
31 December
2018 |
31 December
2017 |
(Stated in United States
Dollars) |
US$ |
US$ |
Realised and unrealised gain from
investment transactions allocated from Master Fund |
|
|
Net realised gain from
securities, derivative contracts and foreign
currency translations |
36,297,228 |
111,085,131 |
Net change in unrealised (loss)/gain
on securities, derivative contracts and foreign currency
translations |
(146,195,764) |
107,642,579 |
Net gain/(loss) from currencies
allocated from Master Fund |
724,671 |
(45,804) |
Total net realised and unrealised
(loss)/gain from investment transactions allocated from Master
Fund |
(109,173,865) |
218,681,906 |
|
|
|
|
|
|
Net investment loss allocated
from Master Fund |
|
|
Interest income |
14,743,524 |
18,377,507 |
Dividends, net of withholding taxes
of US$2,157,699; (31 December 2017: US$1,919,445) |
7,792,842 |
5,327,309 |
Other income |
2,058,865 |
566,339 |
Incentive allocation (Note 2) |
(430,284) |
(41,956,498) |
Stock borrow fees |
(131,767) |
(126,485) |
Investment Management fee |
(19,188,088) |
(19,197,634) |
Dividends on securities sold, not
yet purchased |
(2,904,501) |
(2,227,379) |
Interest expense |
(2,433,936) |
(1,255,149) |
Other expenses |
(4,053,795) |
(6,276,501) |
Total net investment loss
allocated from Master Fund |
(4,547,140) |
(46,768,491) |
|
|
|
|
|
|
Company expenses |
|
|
Administration fee (Note 4) |
(166,306) |
(178,848) |
Directors’ fees (Note 5) |
(241,529) |
(276,211) |
Other fees1 |
(1,948,125) |
(746,242) |
Expenses paid on behalf of Third
Point Offshore Independent Voting Company Limited2 (Note
4) |
(96,687) |
(88,977) |
Total Company expenses |
(2,452,647) |
(1,290,278) |
Net loss |
(6,999,787) |
(48,058,769) |
Net (decrease)/increase in net
assets resulting from operations |
(116,173,652) |
170,623,137 |
1 The increase in other fees is due to the costs associated
with the Premium Listing.
2 Third Point Offshore Independent Voting Company Limited
consists of Director Fees, Audit Fee and General Expenses.
See accompanying notes and attached Audited Financial
Statements of Third Point Offshore Fund Ltd. and Third Point
Offshore Master Fund L.P.
Statements of Changes in Net
Assets
|
For the year
ended |
For the year
ended |
|
31 December
2018 |
31 December
2017 |
(Stated in United States
Dollars) |
US$ |
US$ |
(Decrease)/increase in net assets
resulting from operations |
|
|
Net realised gain from securities,
commodities, derivative contracts and foreign currency translations
allocated from Master Fund |
36,297,228 |
111,085,131 |
Net change in unrealised (loss)/gain
on securities, derivative contracts and foreign currency
translations allocated from Master Fund |
(146,195,764) |
107,642,579 |
Net gain/(loss) from currencies
allocated from Master Fund |
724,671 |
(45,804) |
Total net investment loss allocated
from Master Fund |
(4,547,140) |
(46,768,491) |
Total Company expenses |
(2,452,647) |
(1,290,278) |
Net (decrease)/increase in net
assets resulting from operations |
(116,173,652) |
170,623,137 |
Decrease in net assets resulting
from capital share transactions |
|
|
Dividend distribution |
(40,603,431) |
(35,416,482) |
Share buyback |
(4,479,491) |
- |
Share redemptions |
(39,500,000) |
- |
Total net assets at the beginning
of the year |
1,014,392,601 |
879,185,946 |
Total net assets at the end of
the year |
813,636,027 |
1,014,392,601 |
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
ended |
For the year
ended |
|
31 December
2018 |
31 December
2017 |
(Stated in United States
Dollars) |
US$ |
US$ |
Cash flows from operating
activities |
|
|
Operating expenses |
(1,857,084) |
(719,865) |
Directors’ fees |
(241,529) |
(346,760) |
Administration fee |
(174,593) |
(172,445) |
Third Point Offshore Independent
Voting Company Limited¹ |
(96,687) |
(88,977) |
Redemption from Master Fund |
43,074,487 |
36,672,500 |
|
|
|
Cash inflow from operating
activities |
40,704,594 |
35,344,453 |
|
|
|
Cash flows from financing
activities |
|
|
Dividend distribution |
(40,603,431) |
(35,416,482) |
|
|
|
Net increase/(decrease) in
cash |
101,163 |
(72,029) |
Cash at the beginning of the
year |
16,816 |
88,845 |
Cash at the end of the
year |
117,979 |
16,816 |
¹ Third Point Offshore Independent
Voting Company Limited consists of Director Fees, Audit Fee and
General Expenses.
|
For the year
ended |
For the year
ended |
|
31 December
2018 |
31 December
2017 |
(Stated in United States
Dollars) |
US$ |
US$ |
Supplemental disclosure of
noncash transactions from: |
|
|
|
|
|
Operating activities |
|
|
Redemption from Master Fund |
43,979,491 |
- |
|
|
|
Financing activities |
|
|
Share buyback |
(4,479,491) |
- |
Share redemptions |
(39,500,000) |
- |
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
2018
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 was 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 investing capital in
securities and other instruments in select asset classes, sectors
and geographies, by taking long and short positions. 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 Fund
invests all of its investable capital in Third Point Offshore
Master Fund L.P. (the “Master Partnership”) a corresponding
open-ended investment partnership having the same investment
objective as the Master Fund.
The Master Fund is a limited partner of 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 Audited 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 29 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.
In the year ended 31 December
2018, the Company paid to the Investment Manager at the
level of the Master Partnership a fixed management fee of 2 percent
per annum and a general partner incentive allocation of 20 percent
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 of 10%. The Company was
allocated US$430,284 (31 December 2017: US$41,956,498) of incentive fees for the year
ended 31 December 2018.
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 presentation currency of the Company is
United States Dollars.
Management has determined that the Company is an investment
company in conformity with US GAAP. Therefore the Company 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 and for the
Statement of Cash Flows comprises cash at bank and on hand.
Broker cash
Due from broker includes cash balances held at the Company's
clearing broker as of 31 December
2018. The Company clears all of its securities transactions
through a major international securities firm, UBS, pursuant to
agreements between the Company and prime broker.
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
2018, the Company’s US Dollar and Sterling shares
represented 13.30% and 0.00% (31 December
2017: 12.83% and 0.73%) respectively of the Master Fund’s
NAV. All Sterling shares were compulsorily converted to the US
Dollar class as of 1 July 2018.
The Company has adopted ASU 2015-07, Disclosures for Investments
in Certain Entities that calculate Net Asset Value per Share (or
its equivalent) (“ASU 201-07”) , 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. Accordingly the Company
has not levelled applicable positions.
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 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 material estimates
in respect of 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
We have evaluated all accounting standards updates issued by the
FASB, one of the accounting standards updates will have a material
impact on the Audited Annual Financial Statements.
In November 2016, the FASB issued
ASU 2016-18, Statement of Cash Flows (Topic 230) – Restricted
Cash. ASU 2016-18 clarifies the presentation of restricted cash
in the Statement of Cash Flows by requiring the amounts described
as restricted cash be included with cash and cash equivalents when
reconciling the beginning of period and end of period total amounts
shown on the Statement of Cash Flows. If cash and cash equivalents
and restricted cash are presented separately in the Statement of
Assets and Liabilities, a reconciliation of these separate line
items to the total cash amount included in the Statement of Cash
Flows will be required either in the footnotes or on the face of
the Statement of Cash Flows. The guidance is effective for the
Company on January 1, 2019. Early
adoption is permitted. The Company is currently evaluating the
implications of ASU 2016-18 and its impact on the 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 Partnership 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 £500 million of NAV
and a rate of
1.5 basis points for any NAV above £500 million. This fee is
subject to a minimum of £4,250 per month. The Administrator is also
entitled to an annual corporate governance fee of £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$166,306 with US$41,974 outstanding (31
December 2017: US$178,848 with
US$50,261 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$96,687 (31
December 2017: US$88,977). As
at 31 December 2018 expenses accrued
by the Company on behalf of VoteCo amounted to US$19,855 (31 December
2017: US$16,679).
5. Directors’ Fees
The Chairman is entitled to a fee of £63,000 per annum. All other
independent Directors are entitled to receive £38,000 per annum
with the exception of Mr. Legge who receives £46,000 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$241,529 with US$nil outstanding (31 December 2017: US$276,211 with US$nil outstanding).
6. Stated 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. All Sterling shares were compulsorily converted to
the US Dollar class as of 1 July
2018.
|
US Dollar
Shares |
Sterling
Shares |
Number of Ordinary
Shares |
|
|
Shares issued 1 January 2018 |
47,403,915 |
2,093,352 |
Shares
Converted/Cancelled |
|
|
Total shares transferred to share
class during the year |
2,738,686 |
104,177 |
Total shares transferred out of
share class during the year |
(137,814) |
(2,197,529) |
Total shares cancelled during the
year |
(2,818,657) |
– |
Shares in issue at end of
year |
47,186,130 |
– |
|
US Dollar |
Sterling
Shares |
|
Shares US$ |
US$ |
Stated Capital Account |
|
|
Stated capital account at 1 January
2018 |
364,699,309 |
38,002,424 |
Shares
Converted/Cancelled |
|
|
Total share value transferred to
share class during the year |
53,721,723 |
2,734,850 |
Total share value transferred out of
share class during the year |
(2,734,850) |
(40,737,274) |
Total share value cancelled during
the year |
(43,982,856) |
– |
Stated Capital account at end of
year |
371,703,326 |
– |
Retained earnings |
441,932,701 |
– |
|
US Dollar
Shares |
Sterling
Shares |
Number of Ordinary B
Shares |
|
|
Shares in issue as at 1 January
2018 |
31,602,630 |
1,395,582 |
Shares
Converted/Cancelled |
|
|
Total shares transferred to share
class during the year |
1,825,872 |
69,452 |
Total shares transferred out of
share class during the year |
(91,877) |
(1,465,034) |
Total shares cancelled during the
year |
(1,879,204) |
– |
Shares in issue at end of
year |
31,457,421 |
– |
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. 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 percent of each class of Shares in issue at
the Annual General Meeting on 28 June
2018, and they intend to seek annual renewal of this
authority from Shareholders. The Directors have utilised this share
repurchase authority by introducing a new mechanism that will
hopefully enhance future capital growth. Pursuant to the Director’s
share repurchase authority, the Company, through the Master Fund,
commenced a share repurchase program in 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 7.16% of the USD shares outstanding at 31 December 2018 (31
December 2017: 11.88%). Following the final dividend payment
of $38,397,151 and $2,231,249 on USD Shares and Sterling Shares
respectively on 16 February 2018 with
respect to the year ended 31 December
2017, the Board elected to stop dividend payments, cancelled
5% of the Company’s outstanding shares held by the Master Fund and
adopted a more traditional share repurchase and cancellation
practice. In addition, the Board intends to cancel the remaining
shares held by the Master fund in 2019, subject to the support of
Master Fund profits, and has committed not to sell any held shares
unless the share price is at or above the NAV. On 5 December 2018, the Board announced the
implementation of a share buyback programme, with share purchases
being made through the market at prices below the then prevailing
NAV per share. As part of this programme, 318,657 shares were
repurchased and cancelled during December
2018 at an average cost per share of $14.07.
At 31 December 2018 and
31 December 2017 the Master
Partnership held the following Shares in the Company in the
after-market:
|
|
Number |
|
Average
Cost |
31 December 2018 |
Currency |
of Shares |
Cost |
per Share |
US Dollar Shares |
USD |
3,379,753 |
US$38,286,262 |
US$11.33 |
|
|
Number |
|
Average
Cost |
31 December 2017 |
Currency |
of Shares |
Cost |
per Share |
US Dollar Shares |
USD |
5,879,753 |
US$65,025,532 |
US$11.06 |
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 authorised 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.
During the year ended 31 December
2018, the Company compulsorily converted all Sterling shares
to US Dollar shares and discontinued the Sterling share class.
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 2018 other investment
funds owned by or affiliated with the Investment Manager owned
5,630,444 (31 December 2017:
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
All Sterling shares were compulsorily converted to the US Dollar
class as of 1 July 2018.
In August 2018, the Company
proposed to transfer the listing category of its Ordinary Shares
from a standard listing to a premium listing (closed-ended
investment fund) under Chapter 15 of the Listing Rules. This
transfer took effect in September
2018, as a result of passing the resolutions at the
extraordinary general meeting of the Company on 31 August 2018.
The Company was admitted to the Premium Official List Segment
(“Premium Listing”) of the London Stock Exchange (“LSE”) on
10 September 2018. In December 2018, the Premium Listing enabled TPOIL
to be included in the FTSE UK Index series.
Marc Antoine Autheman resigned from the Board of Directors on
12 September 2018.
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 year
end and other performance information derived from the Audited
Financial Statements.
|
US Dollar
Shares |
Sterling
Shares |
|
31 December
2018 |
30 June
20181 |
|
US$ |
£ |
Per Share Operating
Performance |
|
|
Net Asset Value beginning of the
year |
20.25 |
19.21 |
Income from Operations |
|
|
Net realised and unrealised
(loss)/gain from investment transactions allocated from Master Fund
2 |
(2.38) |
0.12 |
Net loss |
(0.05) |
(0.14) |
Total Return from
Operations |
(2.43) |
(0.02) |
Share redemption accretion |
0.19 |
– |
Share buyback accretion |
0.04 |
– |
Distribution Paid |
(0.81) |
(0.77) |
Net Asset Value, end of the
year/conversion date |
17.24 |
18.42 |
Total return before incentive fee
allocated from Master Fund |
(10.82%) |
0.09% |
Incentive allocation from Master
Fund |
(0.04%) |
(0.19%) |
Total return after incentive fee
allocated from Master Fund |
(10.86%) |
(0.10%) |
1 All Sterling shares were compulsorily converted to
the US Dollar class as of 1 July
2018.
2 Includes foreign currency translation of profit/(loss)
with respect to Sterling share class.
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 2018 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
Shares |
Sterling
Shares |
|
31 December
2017 |
31 December
2017 |
|
US$ |
£ |
Per Share Operating
Performance |
|
|
Net Asset Value beginning of the
year |
17.63 |
16.84 |
Income from Operations |
|
|
Net realised and
unrealised gain from investment
transactions allocated from Master Fund¹ |
4.29 |
3.91 |
Net loss |
(0.96) |
(0.87) |
Total Return from
Operations |
3.33 |
3.04 |
Distribution Paid |
(0.71) |
(0.67) |
Net Asset Value, end of the
year |
20.25 |
19.21 |
Total return before incentive fee
allocated from Master Fund |
23.65% |
22.92% |
Incentive allocation from Master
Fund |
(4.76%) |
(4.87%) |
Total return after incentive fee
allocated from Master Fund |
18.89% |
18.05% |
1 Includes foreign currency translation of
profit/(loss) with respect to Sterling share class.
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 2017 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
Shares |
Sterling
Shares |
|
31 December
2018 |
31 December
2018 |
|
US$ |
£ |
Supplemental data |
|
|
Net Asset Value, end of the
year |
813,636,027 |
– |
Average Net Asset Value, for the
year ² |
920,184,764 |
37,499,484 |
Ratio to average net
assets |
|
|
Operating expenses ³ |
(3.30%) |
(1.61%) |
Incentive fee allocated from Master
Fund |
(0.03%) |
(0.22%) |
Total operating expense ³ |
(3.33%) |
(1.83%) |
Net loss |
(0.73%) |
(0.57%) |
|
US Dollar
Shares |
Sterling
Shares |
|
31 December
2017 |
31 December
2017 |
|
US$ |
£ |
Supplemental data |
|
|
Net Asset Value, end of the
year |
960,047,757 |
40,204,316 |
Average Net Asset Value, for the
year ² |
896,450,229 |
39,106,196 |
Ratio to average net
assets |
|
|
Operating expenses ³ |
(3.21%) |
(3.22%) |
Incentive fee allocated from Master
Fund |
(4.45%) |
(4.33%) |
Total operating expense ³ |
(7.66%) |
(7.55%) |
Net loss |
(5.09%) |
(5.00%) |
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 2018 and 31 December
2017 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 year ended 31 December
2018 and 31 December 2017
excluding performance fees and including performance fees are based
on Company expenses and allocated Master Fund expenses outlined
below.
(excluding performance
fees) |
31 December
2018 |
31 December
2017 |
US Dollar Shares |
2.82% |
2.85% |
Sterling Shares |
1.86% |
2.94% |
(including performance
fees) |
31 December
2018 |
31 December
2017 |
US Dollar Shares |
2.87% |
7.30% |
Sterling Shares |
2.08% |
7.27% |
* All Sterling shares were compulsorily converted to the US
Dollar class as of 1 July 2018.
13. Subsequent Events
As of January 1, 2019, the Company
transferred substantially all of its holding into a newly-created
share class of the Master Fund. The new share class will be subject
to a 25% quarterly redemption gate. The Company will plan to redeem
an appropriate amount each quarter to account for planned share
buybacks and Company fees and expenses. The new share class will
attract a lower management fee and the Company will also qualify
for an additional reduction of management fee applicable to it
based on its size and longevity as an investor in the Master Fund.
As a result, the Company’s management fee will be reduced from 2.0%
to 1.25% per annum.
For the period 1 January 2019 to
23 April 2019, 1,596,777 shares have
been repurchased and cancelled at an average cost per share of
$14.48.
Steve Bates was appointed as
Chairman on 5 February 2019.
Rupert Dorey was appointed as a
Director on 5 February 2019.
On 11 February 2019, Christopher Legge purchased 2,000 shares in
Third Point Offshore Investors Limited taking his total holding to
6,500 shares.
On 13 February 2019, Rosemary Dorey (spouse of Rupert Dorey, non-executive director of the
Company) purchased 5,151 shares in Third Point Offshore Investors
Limited taking their combined total holding to 12,000 shares.
On 4 March 2019, Claire Whittet beneficially purchased 2,500
shares in Third Point Offshore Investors Limited.
There were no other events subsequent to the year-end which, in the
opinion of the Directors, may have an impact on the Audited Annual
Financial Statements for the year ended 31
December 2018.
Management and Administration
Directors
Marc-Antoine Autheman*1
PO Box 255, Trafalgar Court, Les Banques,
Port, Guernsey,
Channel Islands, GY1 3QL. |
Christopher Legge*
PO Box 255, Trafalgar Court, Les Banques, St Peter
St Peter Port, Guernsey,
Channel Islands, GY1 3QL. |
Steve
Bates (Chairman)*2
PO Box 255, Trafalgar Court, Les Banques,
Port, Guernsey,
Channel Islands, GY1 3QL. |
Joshua
L Targoff
PO Box 255, Trafalgar Court, Les Banques, St Peter
St Peter Port, Guernsey,
Channel Islands, GY1 3QL. |
Rupert
Dorey*2
PO Box 255, Trafalgar Court, Les Banques,
Port, Guernsey,
Channel Islands, GY1 3QL.
K |
Claire
Whittet*
PO Box 255, Trafalgar Court, Les Banques, St Peter
St Peter Port, Guernsey,
Channel Islands, GY1 3QL. |
Keith
Dorrian*
PO Box 255, Trafalgar Court, Les Banques,
St Peter Port, Guernsey,
Channel Islands, GY1 3QL. |
*
These Directors are independent
1 Resigned 12 September 2018.
2 Appointed 5 February 2019. |
Investment Manager
Third Point LLC
18th Floor, 390 Park Avenue,
New York, NY 10022,
United States of America. |
Registered Office
PO Box 255, Trafalgar Court, Les Banques,
St Peter Port, Guernsey,
Channel Islands, GY1 3QL. |
Auditors
Ernst & Young LLP
PO Box 9, Royal Chambers
St Julian’s Avenue,
St Peter Port, Guernsey,
Channel Islands, GY1 4AF. |
Administrator and Secretary
Northern Trust International Fund
Administration Services (Guernsey) Limited,
PO Box 255, Trafalgar Court, Les Banques,
St Peter Port, Guernsey,
Channel Islands, GY1 3QL. |
Legal
Advisors (UK Law)
Herbert Smith Freehills LLP
Exchange House, Primrose Street,
London, EC2A 2HS,
United Kingdom. |
Legal
Advisors (Guernsey Law)
Mourant Ozannes
PO Box 186, Le Marchant Street,
St Peter Port, Guernsey,
Channel Islands, GY1 4HP. |
Legal
Advisors (US Law)
Cravath, Swaine & Moore, LLP
825 Eighth Avenue,
New York, NY 10019-7475,
United States of America. |
Receiving Agent
Link Market Services Limited
(formerly Capita Registrars)
The Registry,
34 Beckenham Road,
Beckenham, Kent BR3 4TU,
United Kingdom |
.Registrar and CREST Service Provider
Link Market Services (Guernsey) Limited
(formerly Capita Registrars (Guernsey) Limited),
2nd Floor, No.1 Le Truchot,
St Peter Port, Guernsey,
Channel Islands, GY1 IWO. |
Corporate Brokers
Jefferies International Limited
Vintners Place,
68 Upper Thames Street,
London EC4V 3BJ,
United Kingdom. |
Kepler
Partners LLP
9/10 Savile Row,
London W1S 3PF,
United Kingdom. |