Below is a copy of Dan Loeb’s Q4 letter to shareholders. Stay tuned for analysis shortly.

Dan Loeb Fourth Quarter 2014 Investor Letter

Review and Outlook
Dan Loeb
Dan Loeb

Since the financial crisis, managing volatility and risk has proven to be almost as important as good stock-picking in generating investment returns. Last year emphasized this lesson, as investors struggled to cope with five drawdowns of greater than 3.9% in the SPX followed by swift rebounds within weeks. Third Point’s mediocre 2014 results, +5.7% in Offshore and +6.8% in Ultra, were due to a combination of poor trading during market volatility and bad judgment in exiting positions for reasons ranging from “overstaying our welcome” to impatience seeing our thesis through in choppy markets. Fortunately, there were bright spots in structured finance and enough winners in equity and government credit to help us eke out a mid-single digit return for our investors. Already, 2015 has been marked by increasing volatility, prompting a banker friend (hat tip to Jimmy L.) to characterize this as a “haunted house market” where a new scary event lurks around each corner. Out of this year’s 25 trading days, 22 have had intra-day moves in the market of more than 1%. Haunted house scares so far this year have included: 1) signs of lower growth across the globe despite falling oil prices; 2) the depegging of the Swiss Franc, which caused an overnight 15% move; 3) declining currencies from Japan to Europe putting pressure on US companies’ earnings and competitive position; 4) a disconnect between when the Fed expects to raise rates and what the market is forecasting; 5) the rise of populism and theanti-austerity left in Europe which has underscored how fragile the “union” of this fragmented continent is today; 6) Russian incursions into the Ukraine; 7) chaos in the Middle East; 8) a surprising lack of leadership on the international stage by the United States and an apparent unwillingness to take decisive action to promote democracy abroad; and 9) a seeming decline in government respect for rule of law, shown by numerous executive actions, confiscations of property, and use of various departments — ranging from the IRS to the Treasury — to intimidate citizens and interfere with legal commerce. In this environment, we are investing in companies with solid cash flow and consistent growth. The markets remain favorable for constructive engagement with management teams to improve capital allocation, streamline operations, and drive shareholder value, particularly in large cap companies which have not had to engage with shareholders in the
[drizzle]past. We are looking to add exposure during market dislocations. After a lackluster year for credit in 2014, we are starting to see value in energy-related names and potential opportunities to reload our portfolio. We have also lowered our gross and net exposures this year. Despite recognizing that volatility had increased last year, in hindsight, our net exposures remained too high for too long due to conviction in our long stock picks and a small short book. This portfolio posturing meant that, for the first time since 2008, we were harmed rather than helped by the market’s five significant drawdowns, missing out on the chance to purchase securities cheaply during periods of panic. These missed opportunities undermined mostly successful stock picking and uniformly favorable resolutions of our constructivist campaigns. While we obviously believe our top positions will be worth more in the long run, we expect a fair amount of volatility in the interim. Avoiding dramatic downside in individual names and sizeable losses during inevitable sell-offs will be key to succeeding in this market and navigating successfully through the haunted hallways of 2015. Select Portfolio Positions Equity Position: Amgen Our biggest winner in 2014 was our equity position in the biotechnology company Amgen. In our last letter and at the Robin Hood Investment Conference, we highlighted Amgen as a hidden value situation where investor skepticism in three areas – R&D productivity, operating efficiency, and capital allocation – had obscured the company’s fundamental value. …………….. Equity Position: FANUC During the fourth quarter we invested in Fanuc (the “Company”), the leading factory automation and robotics company in the world with a market capitalization of $33 billion and an enterprise value of $25 billion. Based in Japan and spun out of Fujitsu in the 1970’s, Fanuc is a unique company with a long history of being the best and fastest to market in everything it does. Its visionary founder describes the Company’s mission as “walking the narrow path,” which refers to its relentless focus on producing only a limited number of products that are technically superior with the lowest possible cost structure. This targeted innovation combined with a strong emphasis on reliability and service has made virtually all of Fanuc’s products blockbusters. While serving completely different, cyclical markets, Fanuc reminds us of Apple in its product approach. In its core Factory Automation division, Fanuc has capitalized on structural growth in automation by creating a huge moat in Computerized Numerical Control (“CNC”) systems and servo motors. It has become the global standard for machine tool control software and motors with a worldwide market share of 60%. The Company has built a global service/aftermarket support organization that is unrivaled by competitors in a business where switching costs are high. The division’s revenue correlates closely to Japanese machine tool orders, which are on the rise for multiple reasons including strong demand from the US and a depreciating yen. Additionally, Chinese factory automation is a substantial growth opportunity as rising wages, low productivity, and quality issues force companies in the region to automate. To get a sense of the opportunity: China’s CNC penetration rate of 30% today equals Japan’s levels 40 years ago. Fanuc is expanding CNC capacity by 40% in the next twelve months to meet these higher demand levels. Fanuc’s Robots division has achieved a cumulative sales growth of 60% in the past two years, capitalizing on a robust opportunity set across all major economies. In China, automotive industry robot density is still at less than 15% of the levels seen in Japan, while general industry robot density is at less than 5% of Japan’s. In Japan, capital equipment replacement demand, some re-shoring of manufacturing and labor shortages are creating multiple drivers for robot demand. The resurgence in US manufacturing is also providing strong demand, as automotive and general industry customers are increasing orders for lifting, picking, welding, painting, and dispensing robots. Virtually every large manufacturing footprint expansion in North America – from Airbus to Ford to Tesla – is taking place with Fanuc’s robots. Fanuc’s internal development of low cost full artificial vision systems and collaborative robots makes it best positioned to drive adoption in industries that have traditionally been unable to automate. We think that these innovations will double the size of the Robots division in only a few years. ……………… Greece Update In 2014, Greece’s economy started to improve modestly after a long malaise. This progress proved to be too little too late for Greece’s

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