First Quarter 2009 Investor Letter

April 28, 2009Dear Investor:Third Point Partners, Partners Qualified, Offshore, and Ultra Funds returned -2.4%, -2.4%,-2.3% and -3.0% respectively for the first quarter of 2009. The S & P 500 returned -11.0%for the quarter. Assets under management at April 1, 2009 were $1.8 billion.

First Quarter Results

The first quarter of the year was dominated by the free-fall of the equity markets, whichreached a bottom on March 9, when the S&P closed at 676. What better way to mark amarket trough than the day the “Oracle of Omaha”, Warren Buffet, declared in an interviewthat “the economy has fallen off a cliff”?Two days later, in my previous quarterly letter, I warned you to “brace for impact” as, atthe time, I saw no quick exit from these economic difficulties, and had positioned theportfolio to protect it from continued economic destruction. These were extraordinarytimes, and I took positions that reflected my general concern that things would getconsiderably worse before they got better. These positions included an assortment of single name short positions in European and US financial institutions, which we have beenclosely following for some time. As a natural extension of our diligence on certainEuropean banks and the distressing lessons we learned during the past year about howweakening banks impact economies, governments and their taxpayers, we also took onsome European CDS positions where we were betting on the default or widening of spreadsof specific nations due to their bank exposure. Thanks to this defensive posture, weminimized volatility during this period and ended the quarter down only slightly in a veryugly tape.While these extraordinary circumstances were reflected by a net short portfolio for thequarter, we are consistently hunting for good longs. We believe we have found one inPHH Corp. I described the investment thesis for this financial company in January’sInvestor Meeting, and I am happy to report that the thesis continues to prove accurate. Wehave added to our positions in both PHH debt and equity at opportune times, and to date itis our single most profitable name of the year.We also have several risk arbitrage positions. Our position in the merger of Pfizer’sacquisition of Wyeth is very straight-forward and is expected to generate an approximately20% IRR (assuming the deal closes as expected) in 6 months. We believe the reason for

2the wide spread is simply that at over $60 billion, the market capitalization of Wyeth is toobig for the arbitrage community to absorb, thus creating the opportunity. Another arbitrageinvolving the conversion of Citigroup preferred shares into common shares has turned outto be more complicated. We instituted the original trade at a 30-35% spread, and thebalance between 8-10%. Unfortunately, a delay in timing and skyrocketing borrowingcosts will erode much of our anticipated profit in the trade. We expect to see moreopportunities in this area as restructurings create more movement in markets.

Investment Outlook

In recent weeks, we have become less pessimistic about the state of the economy. Itappears that steps taken by the Obama administration have averted a worst case scenario, atleast for the near term. This is not to say that all is well with the global economy. I amparticularly concerned about the massive deficits being rung up and the free passes beinghanded out to some of the bad actors in the financial crisis. Nevertheless, I am heartenedby the favorable economic and industrial data, but only time will tell.Accordingly, we have repositioned the portfolio and have covered or reduced a significantnumber of our short positions, particularly in financial stocks. We have also closed out allof our “doomsday”, “fat tail risk” trades (including gold-related investments), which servedtheir purpose of keeping us alive to fight another day. We are completely focused on ourcore areas of expertise: event-driven and special situations, short selling, high yield anddistressed debt.It is astonishing how many attractive opportunities we are able to find in these areas, evenafter the market’s rally. We are still in the midst of building many of these positions andthus are hesitant to mention them, but one early winner in this effort was a timely purchaseof the shares of Sun Microsystems, a classic busted takeover deal, which we entered on thethesis that someone would scoop up this gem of a company even if IBM couldn’t come upwith enough cash for a deal. Shortly after we established a position, Oracle announced acash takeover of Sun, and we are significantly in the money on the trade.We have also built up numerous distressed debt stakes, which are cheap and have definednear-term catalysts. We are happy to discuss these positions on the phone with you, butdue to the increasingly public nature of these letters, it would be imprudent to share thespecifics with our competitors at this time.

Business and Personnel

As our assets have fallen, we have sought to properly size the firm on the business sidewithout weakening the infrastructure that we have worked so hard to build. We have madesmall cuts to our accounting, operations, technology and administrative staff. Obviously,we will continue to assess ourselves over time, but I have witnessed how crucial having a

3best-in-class team is to the overall success of the firm, and thus maintaining thisinfrastructure is a priority for me.We have added a new employee to the distressed debt team, Keri Anisgarten. Keri comesto us by way of Eos Partners and DB Zwirn, and received a B.S. in Operations Researchfrom Columbia University in 2004. I believe her expertise in credit, focusing on mortgagesand financials, will give us valuable insight into opportunities in these massively dislocatedmarkets.As most of you are aware, we did not throw down gates, create an SPV, or restrict fundredemptions in any way when these practices were becoming prevalent in the FourthQuarter. All of our redemptions were paid in a timely manner in cash. As a result of thispolicy, we received more than our fair share of redemptions, since many of our competitorsdid limit liquidity in some shape or form, but I stand as convinced as I did at the outset thatthis was the proper course of action. While taking redemption limitation measures may nothave violated the letter of contractual agreements, in many cases I believe it violates thespirit of an industry that marketed itself on easy liquidity for its investors. We have alwaysactively managed our portfolio to make sure we are able to meet our contractualobligations. I am heartened that the rate of redemptions is declining significantly, and wehave received renewed interest from investors who are not only familiar with our 14-yeartrack record of approximately 20% IRR, but are also pleased with how we treated ourinvestors in the most troubling of times.As a reminder, existing investors have been offered the opportunity to add money that willbe subject to their current high watermark. We have also instituted a new two-year shareclass that offers lower fees in exchange for the longer lock-up. We are available to discussboth of these opportunities with you further.As always, I thank you for your loyalty and please feel free to contact the IR department orme directly by telephone or atdloeb@thirdpoint.comwith questions or thoughts. I alwayshave time to discuss the fund with my partners.Sincerely,Daniel S. Loeb