THIRD POINT OFFSHORE THIRD POINT INVESTORS LIMITED ... · We conducted our audit in accordance with auditing standards generally accepted in the United States of ... United Arab Emirates:

THIRD POINT OFFSHORE INVESTORS LIMITED

THIRD POINT OFFSHORE FUND, LTD.

FINANCIAL STATEMENTSYear Ended December 31, 2007

With Report of Independent Auditors

Contents

01 Report of Independent Auditors02 Statement of Assets and Liabilities03 Condensed Schedule of Investments14 Statement of Operations15 Statement of Changes in Net Assets16 Statement of Cash Flows17 Notes to Financial Statements

Report of Independent Auditors

To the Board of Directors and Shareholders of Third Point Offshore Fund, Ltd.

We have audited the accompanying statement of assets and liabilities of Third Point Offshore Fund, Ltd.(the “Fund”), including the condensed schedule of investments, as of December 31, 2007, and therelated statements of operations, changes in net assets and cash flows for the year then ended. Thesefinancial statements are the responsibility of the Fund’s management. Our responsibility is to express anopinion on these financial statements based on our audit.

We conducted our audit in accordance with auditing standards generally accepted in the United States ofAmerica. Those standards require that we plan and perform the audit to obtain reasonable assuranceabout whether the financial statements are free of material misstatement. We were not engaged to performan audit of the Fund’s internal control over financial reporting. Our audit included consideration ofinternal control over financial reporting as a basis for designing audit procedures that are appropriate inthe circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Fund’sinternal control over financial reporting. Accordingly, we express no such opinion. An audit also includesexamining, on a test basis, evidence supporting the amounts and disclosures in the financial statements,assessing the accounting principles used and significant estimates made by management, and evaluatingthe overall financial statement presentation. We believe that our audit provides a reasonable basis for ouropinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, thefinancial position of Third Point Offshore Fund, Ltd. at December 31, 2007, and the results of itsoperations, the changes in its net assets and its cash flows for the year then ended in conformity withaccounting principles generally accepted in the United States of America.

March 28, 2008

REPORT OF INDEPENDENT AUDITORS THIRD POINT OFFSHORE FUND, LTD. FINANCIAL STATEMENTS 2007 1

Suite 640162 Forum LaneCamana BayP.O. Box 510Grand Cayman KY1-1106

Phone: (345) 949-8444Fax: (345) 949-8529Fax: (345) 949-8004

(Stated in United States Dollars) $

AssetsCash 54,058,449Investments in securities, at fair value (cost $3,586,713,643) 3,746,732,991Due from brokers 2,021,989,680Net unrealized gain on derivative contracts 405,034,644Interest and dividends receivable 4,691,402Net unrealized gain on forward currency contracts 770,964Other assets 422,411Total assets 6,233,700,541

LiabilitiesSecurities sold, not yet purchased, at fair value (proceeds $1,806,129,796) 1,702,288,881Due to brokers 320,650,472Shareholder redemptions payable 266,629,482Shareholder subscriptions received in advance 52,020,000Deferred compensation payable 397,925,134Incentive fee payable 51,242,479Interest and dividends payable 3,389,233Accrued expenses 4,398,666Total liabilities 2,798,544,347

Commitments (See Note 10)Net assets 3,435,156,194

Net asset value per share – See Note 7See accompanying notes.

2 THIRD POINT OFFSHORE FUND LTD, FINANCIAL STATEMENTS 2007 STATEMENT OF ASSETS AND LIABILITIES

Statement of Assets and LiabilitiesDecember 31, 2007

Fair Percentage ofValue Net Assets

(Stated in United States Dollars) Shares $ %

Investments in SecuritiesEquity SecuritiesUnited States:

Alternate Energy 14,709,103 0.43Auto Parts and Equipment 16,459,324 0.48Auto-Cars 148,829,000 4.33Banks 30,670,696 0.89Broadcast Service/Program 73,948,744 2.15Building-Maintenance and Service 146,100 0.00Casino and Hotels 98,900,007 2.88Chemicals 31,459,370 0.92Data Processing/Management:

MasterCard Inc. 895,900 192,797,680 5.61Distribution/Wholesale 19,176,344 0.56Drug Delivery Systems 23,838,393 0.69E-Marketing 398,105 0.01Finance 109,480,419 3.19Forestry 25,949,106 0.76Independent Power Producers 71,575,076 2.08Index Funds 67,446,901 1.96Instruments-Scientific 12,882,816 0.38Insurance 9,740,545 0.28Investment Companies 5,573,134 0.16Lasers-Systems/Components 23,019,274 0.67Machinery 31,023,437 0.90Medical 4,372,400 0.13Medical Equipment 8,213,760 0.24Non-Ferrous Metals 29,473,496 0.86Oil and Gas 307,296,408 8.95Other 45,532 0.00Paper and Related Products 52,681,030 1.53Pharmaceuticals 27,128,507 0.79Power Convention/Supply Equipment 10,204,568 0.30Reinsurance 8,718,400 0.25Retail-Apparel/Shoe 14,137,175 0.41Retail-Discount 103,587,511 3.02Retail-Regional Department Store 24,090,984 0.70Retail-Restaurants 29,683,032 0.87Sector Fund-Energy 16,149,200 0.47

CONDENSED SCHEDULE OF INVESTMENTS THIRD POINT OFFSHORE FUND, LTD. FINANCIAL STATEMENTS 2007 3

Condensed Schedule of InvestmentsDecember 31, 2007


(Stated in United States Dollars) Shares $ %

Investments in Securities (continued)Equity Securities (continued)United States (continued):

Semiconductor Component-Integration Circuit:Cypress Semiconductor 5,129,100 184,801,473 5.38Other 55,085,616 1.60

Total Semiconductor Component-Integration Circuit 239,887,089 6.98Software 79,681,110 2.32Special Purpose Entity 30,278,836 0.88Specified Purpose Acquisition 177,926,766 5.18Steel Producers 19,809,216 0.58Technology 5,107,415 0.15Telecommunications 44,184,538 1.29Therapeutics 99,023,565 2.88Transportation 3,833,960 0.11

Total United States (cost $2,350,097,390) 2,343,538,072 68.22

Bermuda:Engineering/Research and Development Services 12,545,677 0.37Medical Products 9,593,214 0.28Property/Casualty Insurance 12,706,800 0.37

Total Bermuda (cost $25,867,887) 34,845,691 1.02

Brazil:Banks 16,421,124 0.48Finance 12,569,601 0.36

Total Brazil (cost $28,599,229) 28,990,725 0.84

Canada:Advertising Services 837,593 0.02Airlines 52,075,572 1.52Coal 4,730,583 0.14Diamonds/Precious Stones 6,997,373 0.20Diversified Minerals 2,508,332 0.07Metal 21,860,217 0.64Non-Ferrous Metals 29,408,819 0.86Pharmaceuticals 6,145,585 0.18

Total Canada (cost $132,067,245) 124,564,074 3.63

4 THIRD POINT OFFSHORE FUND, LTD. FINANCIAL STATEMENTS 2007 CONDENSED SCHEDULE OF INVESTMENTS

Condensed Schedule of Investments continuedDecember 31, 2007


(Stated in United States Dollars) $ %

Investments in Securities (continued)Equity Securities (continued)Cayman Islands:

Multimedia 1,797,600 0.05Reinsurance 9,887,724 0.29

Total Cayman Islands (cost $10,359,362) 11,685,324 0.34

Germany:Auto-Cars 70,453,303 2.05Building and Construction-Miscellaneous 39,929,825 1.16Computers-Memory Devices 5,421,130 0.16Diversified Manufacturing Operations 130,189,289 3.79Finance 158,758,398 4.62Retail-Building Products 11,546,503 0.34Rubber-Tires 55,017,616 1.60

Total Germany (cost $407,192,772) 471,316,064 13.72

Hong Kong:Real Estate Investment Trusts (cost $25,344,607) 30,963,367 0.90

India:Banks 11,961,750 0.35Building and Construction-Miscellaneous 9,010,483 0.26Diversified Financial Services 49,707,079 1.45Electric-Integrated 61,161,859 1.78Steel-Producers 14,168,129 0.41

Total India (cost $83,190,067) 146,009,300 4.25

Italy:Banks 67,589,815 1.97Pharmaceuticals 5,885,376 0.17

Total Italy (cost $78,629,719) 73,475,191 2.14

Netherlands:Applications Software 45,980,873 1.34Data Processing/Management 30,154,134 0.88Electronic Components-Semiconductors 4,156,207 0.12

Total Netherlands (cost $83,284,857) 80,291,214 2.34




Investments in Securities (continued)Equity Securities (continued)Norway:

Seismic Data Collection 2,391,772 0.07Transport-Marine 13,799,912 0.40

Total Norway (cost $11,992,783) 16,191,684 0.47

Spain:Diversified Financial Services (cost $25,441,547) 25,520,394 0.74

Sweden:Diversified Financial Services (cost $14,399,314) 14,268,278 0.41

United Arab Emirates:Banks 22,372,777 0.65Real Estate 4,460,981 0.13

Total United Arab Emirates (cost $20,635,129) 26,833,758 0.78

Virgin Islands, British:Oil and Gas (cost $7,719,473) 7,506,103 0.22

Total Equity Securities (cost $3,304,821,381) 3,435,999,239 100.02

Investments in FundsUnited States:

Funds (cost $98,425,951) 113,268,195 3.30

United Kingdom:Funds (cost $36,851,320) 34,244,181 1.00

Total Investments in Funds (cost $135,277,271) 147,512,376 4.30

Bank DebtUnited States:

Auto-Cars 42,626,320 1.25Auto Parts and Equipment 25,223,679 0.73Bank 629,679 0.02Building-Residential/Commercial 15,282,366 0.44Chemicals 1,054,000 0.03Pharmaceuticals 21,825,191 0.64

Total United States 106,641,235 3.11Total Bank Debt (cost $103,555,784) 106,641,235 3.11





Investments in Securities (continued)Fixed Income SecuritiesUnited States:

Auto Parts and Equipment 18,066,896 0.52Finance 753,595 0.02Metal Processors and Fabrication 13,228,620 0.39Retail-Apparel/Shoe 2,383,200 0.07Telecommunications 6,985,110 0.20

Total United States (cost $33,879,031) 41,417,421 1.20Total Fixed Income Securities (cost $33,879,031) 41,417,421 1.20

Equity Call OptionsUnited States:

Data Processing/Management 7,457,522 0.21Enterprise Software/Services 359,792 0.01Oil and Gas 643,560 0.02

Total United States (cost $3,117,256) 8,460,874 0.24

Germany:Auto-Cars (cost $2,799,640) 613,950 0.02

Total Equity Call Options (cost $5,916,896) 9,074,824 0.26

Equity Put OptionsUnited States:

Insurance 1,273,605 0.04Medical Equipment 388,220 0.01Telecommunications 215,800 0.01Therapeutics 496,995 0.01

Total United States (cost $2,083,549) 2,374,620 0.07

Canada:Banks (cost $1,179,731) 3,713,276 0.11

Total Equity Put Options (cost $3,263,280) 6,087,896 0.18Total Investments in Securities (cost $3,586,713,643) 3,746,732,991 109.07




Securities Sold, not yet PurchasedEquity SecuritiesUnited States:

Advertising Services 2,429,568 0.07Alternative Energy 13,864,566 0.40Apparel Manufacturers 9,208,276 0.27Applications Software 8,356,577 0.24Audio/Video Products 2,495,632 0.07Auto Parts and Equipment 6,398,052 0.19Auto-Cars 6,389,125 0.19Banks 24,069,983 0.70Batteries/Battery Systems 6,058,882 0.18Beverages-Non-alcoholic 1,517,760 0.04Building Products-Air and Heating 8,967,430 0.26Building-Maintenance and Service 1,640,200 0.05Cable TV 12,078,944 0.35Casino and Hotels 11,707,325 0.34Chemicals-Fibers 11,810,685 0.34Commercial Services 23,488,198 0.68Commodities 12,994,100 0.38Computers-Integrated Systems 1,730,078 0.05Computers-Peripheral Equipment 13,498,615 0.39Consulting Services 4,574,586 0.13Consumer Products 9,525,262 0.28Cosmetics and Toiletries 390,864 0.01Data Processing/Management 14,134,400 0.41Diagnostic Equipment 10,688,560 0.31Distribution/Wholesale 11,895,890 0.35E-Commerce/Products 18,649,318 0.54Electronic Components 193,748,341 5.64Electronic Measure Instruments 3,903,984 0.11Electronic Security Devices 1,213,056 0.04Engineering Research and Development Services 4,881,620 0.14Enterprise Software/Services 23,494,490 0.68Environment Monitoring and Detection 14,606,592 0.43Filtration/Separation Products 4,503,498 0.13Finance 153,603,219 4.47Food-Dairy Products 1,914,094 0.06Golf 4,941,405 0.14Human Resources 13,867,534 0.40Index Funds 267,151,459 7.78





Securities Sold, not yet Purchased (continued)Equity Securities (continued)United States (continued):

Insurance 33,009,297 0.96Internet Content 1,804,408 0.05Internet Infrastructure Software 3,093,339 0.09Intimate Apparel 9,201,120 0.27Investment Companies 54,831,390 1.60Lasers-Systems/Components 2,487,287 0.07Machinery-Pumps 14,825,754 0.43Medical Equipment 80,448,963 2.34Medical Information Systems 24,386,955 0.71Medical-Biomedical/Genetics 5,578,434 0.16Medical-Outpatient/Home Medical 8,083,432 0.24Motorcycle 21,439,890 0.63Networking Products 23,092,204 0.67Non-Ferrous Metals 9,572,879 0.28Oil and Gas 30,496,603 0.89Pharmaceuticals 13,181,777 0.38Photo Equipment and Supplies 6,934,977 0.20Physical Practice Management 14,308,200 0.42Publishing-Newspapers 3,418,289 0.10Real Estate 11,821,279 0.35Real Estate Investment Trusts 210,031 0.01Retail-Apparel/Shoe 12,099,514 0.35Retail-Appliances 4,607,723 0.13Retail-Computer Equipment 14,396,720 0.42Retail-Discount 20,281,706 0.59Retail-Regional Department Store 7,776,840 0.23Retail-Restaurants 39,809,234 1.16Retail-Sporting Goods 1,819,692 0.05Retirement/Aged Care 7,477,512 0.22Telecommunications 29,763,391 0.87Textile-Home Furnishings 11,234,400 0.33Tools-Hand Held 6,080,445 0.18Transport-Services 21,024,304 0.61

Total United States (proceeds $1,581,303,662) 1,484,990,157 43.23

Australia:Building and Construction-Miscellaneous 3,471,416 0.10




Securities Sold, not yet Purchased (continued)Equity Securities (continued)Australia (continued):

Finance 8,978,530 0.26Investment Companies 7,133,234 0.21

Total Australia (proceeds $17,932,131) 19,583,180 0.57

Belgium:Banks (proceeds $18,563,577) 19,225,610 0.56

Bermuda:Agricultural Operations 12,036,794 0.35Printing-Commercial 10,995,310 0.32Transportation 6,554,800 0.19

Total Bermuda (proceeds $26,018,796) 29,586,904 0.86

Canada:Commercial Banks Non-US 64,144,775 1.87Gold Mining 3,237,708 0.09

Total Canada (proceeds $79,063,539) 67,382,483 1.96

Cayman Islands:Alternative Energy 5,278,500 0.16Electronic Components-Semiconductors 3,424,428 0.10Electronic Measuring Instruments 3,763,600 0.11Insurance 12,315,888 0.36Multimedia 3,204,000 0.09Oil and Gas 6,250,006 0.18Real Estate 7,512,466 0.22

Total Cayman Islands (proceeds $43,360,779) 41,748,888 1.22

Netherlands:Commercial Services 3,437,289 0.10Semiconductor Equipment 4,167,828 0.12

Total Netherlands (proceeds $7,452,525) 7,605,117 0.22

Switzerland:Pharmaceuticals 16,911,668 0.49Medical Products 4,907,746 0.14

Total Switzerland (proceeds $21,689,074) 21,819,414 0.63Total Equity Securities (proceeds $1,795,384,083) 1,691,941,753 49.25





Securities Sold, not yet Purchased (continued)Fixed Income SecuritiesUnited States:

Reinsurance (proceeds $7,193,668) 8,057,016 0.23

Equity Put OptionsUnited States:

Data Processing/Management (proceeds $1,600,834) 13,590 0.00

Canada:Commercial Banks Non-US (proceeds $265,587) 642,815 0.02

Germany :Auto-Cars/Light Trucks (proceeds $1,203,704) 1,399,225 0.04

Total Equity Put Options (proceeds $3,070,125) 2,055,630 0.06

Equity Call OptionsUnited States:

Electronic Components-Miscellaneous 1,602 0.00Financial Guarantee Insurance 232,880 0.01

Total United States (proceeds $481,920) 234,482 0.01Total Equity Call Options (proceeds $481,920) 234,482 0.01Securities Sold, not yet Purchased (proceeds $1,806,129,796) 1,702,288,881 49.55


Unrealized Percentage ofGain/(Loss) Net Assets


Derivative ContractsContracts for Differences – Long ContractsUnited States:

Alternate Energy 3,914,866 0.11Medical-Drugs (28,024,680) (0.81)Oil Company-Exploration and Production (34,048,500) (0.99)Pipelines (3,077,020) (0.09)

Total United States (61,235,334) (1.78)

Europe:Building and Construction-Miscellaneous (9,059,955) (0.26)

Germany:Auto-Cars/Light Trucks 10,097,864 0.29Finance-Other Services 37,145,989 1.08

Total Germany 47,243,853 1.37

India:Diversified Financial Services 72,182,509 2.10Electric-Integrated 3,950,317 0.11

Total India 76,132,826 2.21

Malaysia:Cellular Telecom 17,357,580 0.51Diversified Operations 1,093,680 0.03Office Supplies and Forms 222,836 0.01

Total Malaysia 18,674,096 0.55

United Arab Emirates:Real Estate Operations/Development 463,698 0.01

Total Contracts for Differences – Long Contracts 72,219,184 2.10

Contracts for Differences – Short ContractsUnited States:

Alternate Energy (1,624,727) (0.05)Index Funds (1,732,262) (0.05)Sector Funds-Energy (851,673) (0.02)

Total United States (4,208,662) (0.12)



Unrealized Percentage ofGain/(Loss) Net Assets

(Stated in United States Dollars) Notional $ %

Derivative Contracts (continued)Contracts for Differences – Short Contracts (continued)Germany:

Index Funds (3,602,574) (0.11)Total Contracts for Differences – Short Contracts (7,811,236) (0.23)

FuturesGermany:

Index Funds (439,484) (0.01)

Credit Default Swap Contracts – Protection PurchasedUnited States:

Finance-Mortgage Loan/Banker 75,193,939 2.18Financial Guarantee Insurance 18,786,307 0.55Index Funds 36,638,016 1.07Multi-Line Insurance (4,288,180) (0.12)Reinsurance (257,667) (0.01)

Total Credit Default Swap Contracts – Protection Purchased 126,072,415 3.67

Total Return Swap Contracts – Long ContractsUnited States:

Index FundsABX.HE.BBB.06-1, 1.54%, 07/25/2045 319,944,100 212,283,798 6.18ABX.HE.A.06-1, 0.54%, 07/25/2045 6,958,000 2,709,967 0.08

Total Index Funds 214,993,765 6.26Net Unrealized Gain on Derivative Contracts 405,034,644 11.79

Foreign Currency Forward ContractsUnited Kingdom Pounds (1,796,833) (0.05)Euros 2,567,797 0.07

Net Unrealized Gain on Foreign Currency Forward Contracts 770,964 0.02See accompanying notes.



Realized and unrealized gain/(loss) from investment transactionsNet realized gain from securities, derivative contracts and currency transactions 639,862,614Net change in unrealized appreciation on securities positions (307,731,199)Net change in unrealized appreciation on foreign forward currency and derivative

contracts 394,121,867Net gain from currencies 225,335Net realized and unrealized gain from investment transactions 726,478,617

Investment IncomeInterest 50,873,096Dividends, net of withholding taxes of $11,846,392 31,176,755Stock loan fees 37,742,240Other income 1,152,172Total investment income 120,944,263

ExpensesIncentive fee 114,908,987Management fee 66,853,544Interest 70,228,890Appreciation of deferred compensation 65,944,851Dividends on securities sold, not yet purchased 36,603,506Stock borrow fees 31,412,747Administrative and professional fees 6,742,757Other expenses 9,261,103Total expenses 401,956,385Net investment loss (281,012,122)Net increase in net assets resulting from operations 445,466,495See accompanying notes.

14 THIRD POINT OFFSHORE FUND, LTD. FINANCIAL STATEMENTS 2007 STATEMENT OF OPERATIONS

Statement of OperationsYear ended December 31, 2007


Increase in net assets resulting from operationsNet realized gain from securities, derivative contracts and currency transactions 639,862,614Net change in unrealized depreciation on securities positions (307,731,199)Net change in unrealized appreciation on forward currency and derivative contracts 394,121,867Net gain from currencies 225,335Net investment loss (281,012,122)Net increase in net assets resulting from operations 445,466,495

Increase in net assets resulting from capital share transactionsClass C Shares issued 2,397,717Class D Shares issued 2,000,000Class E Shares issued 865,151,883Class F Shares issued 159,279,500Class H Shares issued 50,000,000Class J Shares issued 54,865,000Class K Shares issued 15,080,000Class L Shares issued 2,600,000Class M Shares issued 33,975,000Class A Shares redeemed (605,375)Class B Shares redeemed (1,149,471)Class C Shares redeemed (20,140,204)Class D Shares redeemed (202,618,020)Class E Shares redeemed (154,264,228)Class F Shares redeemed (244,984,237)Class J Shares redeemed (18,937)Class K Shares redeemed (17,545,684)Class M Shares redeemed (25,567,768)Class S Shares redeemed (993,422)Net increase in net assets resulting from capital share transactions 517,461,754

Net increase in net assets 962,928,249Net assets at the beginning of year 2,472,227,945Net assets at the end of year 3,435,156,194See accompanying notes.

STATEMENT OF CHANGES IN NET ASSETS THIRD POINT OFFSHORE FUND, LTD. FINANCIAL STATEMENTS 2007 15

Statement of Changes in Net AssetsYear ended December 31, 2007


Cash flows from operating activitiesNet increase in net assets resulting from operations 445,466,495Adjustments to reconcile net increase in net assets to net cash used in operating activities:Purchases of investment securities (10,969,175,142)Proceeds from disposition of investment securities 11,350,067,277Purchases of investment securities to cover short sales (4,995,609,550)Proceeds from short sales of investment securities 5,602,191,745Net change in unrealized appreciation on forward currency

contracts and derivative contracts (394,121,867)Increase in due from brokers (1,357,355,796)Increase in interest and dividends receivable (3,065,637)Decrease in other assets 1,181,405Decrease in due to brokers (135,332,430)Increase in deferred compensation payable 126,973,818Increase in incentive fee payable 39,193,030Increase in interest and dividends payable 2,477,304Increase in accrued expenses 3,372,313Net change in unrealized appreciation on securities positions 307,731,199Net realized gain from securities, derivative contracts and currency transactions (639,862,614)Net cash used in operating activities (615,868,450)

Cash flows from financing activitiesProceeds from issuance of shares 1,199,947,100Payments for redemption of shares (568,057,560)Net cash provided by financing activities 631,889,540

Net increase in cash 16,021,090Cash at beginning of year 38,037,359Cash at end of year 54,058,449

Supplemental disclosure of cash flow informationCash paid during the year for interest 70,326,613See accompanying notes.

16 THIRD POINT OFFSHORE FUND, LTD. FINANCIAL STATEMENTS 2007 STATEMENT OF CASH FLOWS

Statement of Cash FlowsYear ended December 31, 2007

1. OrganizationThird Point Offshore Fund, Ltd. (the “Fund”) was incorporated under the laws of the Cayman Islands onOctober 21, 1996, commenced operations on December 1, 1996 and is registered under the CaymanIslands Mutual Funds Law. The Fund was formed to trade and invest primarily in equity and debt securitiesof U.S. and foreign companies.

Third Point L.L.C. (the “Investment Manager”) is the Investment Manager to the Fund. International FundServices (Ireland) Limited acts as the administrator (the “Administrator”) and transfer agent to the Fund.

2. Significant Accounting PoliciesThe Fund’s financial statements have been prepared in accordance with accounting principles generallyaccepted in the United States of America and are expressed in United States dollars. The following is asummary of the significant accounting and reporting policies:

Securities listed on a national securities exchange or quoted on NASDAQ are valued at their last sales priceas of the last business day of the year. Listed securities with no reported sales on such date and over-the-counter securities are valued at their last closing bid price if held long by the Fund and last closing ask priceif held short by the Fund. Additionally, securities valued at approximately $266,894,000, representingapproximately 7.12% of investments in securities, and approximately $8,863,000, representingapproximately 0.52% of securities sold, not yet purchased are valued based on dealer quotes or otherquoted market prices for similar securities. Private placement securities are not registered for public saleand are carried at an estimated fair value at the end of the period, as determined by the InvestmentManager. Factors considered by the Investment Manager in determining fair value include cost, the type ofinvestment, subsequent purchases of the same or similar investments by the Fund or other investors and thecurrent financial position and operating results of the portfolio company. Due to the inherent uncertaintyof valuation for these investments, the estimate of fair value for its interest in these investments may differfrom the values that would have been used had a ready market existed for the investment, and thedifference could be material. At December 31, 2007 the Fund had approximately $240,580,000 ofinvestments fair valued by the Investment Manager, representing approximately 6.42% of investments insecurities. The resulting unrealized gains and losses are reflected in the statement of operations.

Derivatives are recorded at fair value. The Fund values exchange-traded derivative contracts at their lastsales price on the exchange where it is primarily traded. Over-the-counter (“OTC”) derivatives, whichinclude swap and forward currency contracts, are valued at independent values when available; otherwise,fair values are obtained from counterparty quotes that are based on pricing models that consider the timevalue of money, volatility, and the current market and contractual prices of the underlying financialinstruments.

The Investment Manager, in consultation with the board of directors of the Fund, values the Fund’sinvestments in other investment funds at fair value, which is an amount equal to the sum of the capitalaccounts in the investment funds generally determined from financial information provided by theinvestment managers of the investment funds. The resulting net gains or losses are reflected in the statementof operations.

The Fund records securities transactions and related income and expense on a trade-date basis. Realizedgains and losses are determined using cost calculated on a specific identification basis. Dividends arerecorded on the ex-dividend date. Interest is recorded on the accrual basis.

Assets and liabilities denominated in foreign currencies are translated at the closing rates of exchange atDecember 31, 2007. Transactions during the year are translated at the rate of exchange prevailing on thedate of the transaction. Foreign currency transaction and translation gains and losses are included in thestatement of operations.

NOTES TO FINANCIAL STATEMENTS THIRD POINT OFFSHORE FUND, LTD. FINANCIAL STATEMENTS 2007 17

Notes to Financial Statements Year ended December 31, 2007

The preparation of financial statements in conformity with accounting principles generally accepted in theUnited States of America (“GAAP”) may require management to make estimates and assumptions thataffect the amounts and disclosures in the financial statements and accompanying notes. Actual results coulddiffer from these estimates.

The fair value of the Fund’s assets and liabilities, which qualify as financial instruments under Statement ofFinancial Accounting Standards No. 107, Disclosures about Fair Value of Financial Instruments,approximates the carrying amounts presented in the statement of assets and liabilities.

The Fund is exempt from all forms of taxation in the Cayman Islands, including income, capital gains andwithholding taxes. In jurisdictions other than the Cayman Islands, in some cases foreign taxes will bewithheld at source on dividends and certain interest received by the Fund. Capital gains derived by the Fundin such jurisdictions generally will be exempt from foreign income or withholding taxes at the source.

On July 13, 2006, the Financial Accounting Standards Board (“FASB”) released FASB InterpretationNo. 48, Accounting for Uncertainty in Income Taxes (“FIN 48”). FIN 48 provides guidance for howuncertain tax positions should be recognized, measured, presented and disclosed in the financial statements.FIN 48 requires the evaluation of tax positions taken or expected to be taken in the course of preparingthe Fund’s tax returns to determine whether the tax positions are “more-likely-than-not” of being sustainedby the applicable tax authority. Tax positions not deemed to meet a “more-likely-than-not” thresholdwould be recorded as a tax expense in the current year. Adoption of FIN 48 is now required for non-publicentities for fiscal years beginning after December 15, 2007 and is to be applied to all open tax years as ofthe effective date. At this time, management is evaluating the implications of FIN 48 and its impact to thefinancial statements has not yet been determined.

In September 2006, the FASB issued Statement on Financial Accounting Standards No. 157, Fair ValueMeasurements (“FAS 157”). This standard clarifies the definition of fair value for financial reporting,establishes a framework for measuring fair value and requires additional disclosures about the use of fairvalue measurements. FAS 157 is effective for financial statements issued for fiscal years beginning afterNovember 15, 2007 and interim periods within those fiscal years. As of December 31, 2007, the InvestmentManager does not believe the adoption of FAS 157 will impact the amounts reported in the financialstatements, however, in the future, additional disclosures will be required about the inputs used to developthe measurements of fair value and the effect of certain of the measurements reported in the statement ofoperations for a fiscal period.

3. Due to/from BrokersDue from brokers includes cash balances with the Fund’s clearing brokers and amounts receivable forsecurities transactions that have not settled at December 31, 2007. The cash at brokers is primarily relatedto excess univested balances, securities sold, but not yet purchased, and collateral posted for over-the-counter contracts. Securities sold, but not yet purchased are collateralized by certain of the Fund’sinvestments in securities. At December 31, 2007, the due from brokers balance in the statement of assetsand liabilities includes collateral of $54,452,684. Due to brokers consists primarily of cash and foreigncurrency balances owed, cash collateral due to the Fund’s clearing brokers, and the amounts payable forsecurities transactions that have not yet settled at December 31, 2007. Margin debt balances, if any, arecollateralized by certain of the Fund’s securities and cash held by the brokers. Margin interest is paid eitherat the daily broker call rate or based on LIBOR or the Federal funds rate.

4. Related Party TransactionsPursuant to the investment management agreement, the Fund pays the Investment Manager a managementfee equal to 2% per annum of the net asset value of the Class A, B, C, D, E, F, and H shares, 2.5% perannum of the net asset value of the J and K Class Shares, and 3% per annum of the net asset value of the

18 THIRD POINT OFFSHORE FUND, LTD. FINANCIAL STATEMENTS 2007 NOTES TO FINANCIAL STATEMENTS

Notes to Financial Statements continuedYear ended December 31, 2007

2. Significant Accounting Policies (continued)

L and M Class Shares, as of the beginning of each month before the accrual of any incentive fee. Anyportion of the management fee attributable to a shareholder’s Class S shares will be debited against the netasset value of the corresponding class of shares from which such Class S shares had been issued. If ashareholder holds Class S shares, but no longer owns Class A, B, C, D, E, F, H, J, K, L, and M shares, themanagement fee will accrue and not be paid until there is a realization or deemed realization event of thespecial investment attributable to such Class S shares. For purposes of calculating the management fee,special investments are valued at cost or, if a special investment is designated as such after its acquisition,at fair value as of the date of determination. No management fee will be assessed on a special investmentthat the Investment Manager determines to have suffered a permanent impairment that reduces its value tozero. For the year ended December 31, 2007, the management fee was $66,853,544.

The Fund pays an incentive fee equal to 20% of the annual increase in the aggregate net asset value of eachseries of Class A, B, C, D, E, F, and H shares and 25% of the annual increase in the aggregate net assetvalue of each series for class J, K, L and M shares (each the “Full Incentive Fee”). For purposes ofdetermining the increase in the aggregate net asset value, appreciation or depreciation from realized (ordeemed realized) Special Investments (as defined in Note 7) will be included. The incentive fee is accruedmonthly and payable at the end of each fiscal year. The incentive fee is calculated in a manner which ensuresthat appropriate adjustments are made in order to accommodate the inflows and outflows of capital duringthe course of each fiscal year resulting from shareholder subscriptions and redemptions. If a particularseries has a loss chargeable to it during any fiscal year and during subsequent years there is a profitattributable to such series, the series must recover an amount equal to 2.5 times the amount of the losschargeable in the prior years before the Investment Manager is entitled to the full incentive fee. Until thisoccurs, the series will be subject to a reduced incentive fee equal to half of the Full Incentive Fee. For theyear ended December 31, 2007, the incentive fee was $114,908,987.

Pursuant to the provisions of a deferred incentive fee agreement (the “Deferred Fee Agreement”), theInvestment Manager may elect to defer the receipt of all or a portion of the incentive fee, if any, earned withrespect to a particular fiscal year, and may elect to have a portion or all of the deferred fee invested in eitherthe same manner as the Fund’s assets, or in another manner approved by the Fund. Any incentive fee deferralelection made for any fiscal year will remain in effect for subsequent years unless and until the InvestmentManager elects to change such deferral election. The value of such deferred amounts constitutes a liabilityof the Fund to the Investment Manager. Any amounts invested under the provisions of the Deferred FeeAgreement continue for all purposes to be part of the general assets of the Fund, and the Investment Managerhas no property interest in any of such assets. For the year ended December 31, 2007, the InvestmentManager has elected to defer $63,666,507, or approximately 55%, of its 2007 incentive fee.

Daniel S. Loeb is a director of the Fund and the managing member of the Investment Manager. Mr. Loebwaived his right to director’s fees for the year ending December 31, 2007.

Third Point Loan LLC (“Loan LLC”) serves as a nominee of the Fund and other investment managementclients of the Investment Manager (collectively the “Beneficial Owners”) for certain investments. Loan LLChas appointed the Investment Manager as its true and lawful agent and attorney. At December 31, 2007,Fund investments of $100,395,734 are registered in the name of Loan LLC and are included in investmentsin securities in the statement of assets and liabilities.

The Fund has purchased shares of Third Point Resources Ltd. (“Resources”), with a value of $10,358,640.Resources has the same Investment Manager as the Fund. During the year ended December 31, 2007,Resources made distributions of $4,174,175 to the Fund. The fair value of the Fund’s investment inResources at December 31, 2007 is $1,279,624 and is included in investments in securities in the statementof assets and liabilities. No management fee or incentive fee was charged to the Fund’s investment inResources.


4. Related Party Transactions (continued)

The Fund entered into equity swap contracts with two investment funds with the same Investment Manageras the Fund. For the year ended December 31, 2007, the Fund had a net loss of $36,358,989 on these swapcontracts. At December 31, 2007, the aggregate unrealized loss on these swap contracts was $34,946,701.

The Fund has entered into a partnership with three other investment funds managed by the InvestmentManager in order to invest in certain securities. As of December 31, 2007, the Fund’s investment in thepartnership was valued at $60,185,015 with an unrealized gain of $710,301. The partnership does notcharge the Fund management or incentive fees.

As of December 31, 2007, the Fund held shares of Third Point Offshore Investors, Ltd. (“ListCo”), anentity that is managed by the Investment Manager and is also an investor in the Fund. As part of ListCo’sshare buy-back program, the Fund has the ability to purchase shares in the after-market any time thatListco’s shares trade at a discount to ListCo’s net asset value. At December 31, 2007, the Fund owned100,000 US Dollar Shares and 111,000 Euro Shares in ListCo with an aggregate market value ofapproximately $2,388,000 and an unrealized gain of $50,416. In addition, at December 31, 2007, theFund also owns 3,451,370 US Dollar Shares in ListCo with a market value of approximately $31,856,000and an unrealized loss of $2,657,555 in connection with the Fund’s Deferred Fee Agreement.

5. Administration FeeThe Fund has entered into an administrative services agreement with International Fund Services (Ireland)Limited. In accordance with the terms of this agreement, the administrator provides certain specified fundaccounting and administration, trade support and transfer agent services. For the year ended December 31,2007, the administrator received a fee of $3,032,132 based on the month end net assets of the Fund and isincluded in administrative and professional fees on the statement of operations.

6. New IssuesThe Fund may invest, directly or indirectly, in equity securities in initial public offerings deemed “newissues” under Rule 2790 of the National Association of Securities Dealers, Inc. (“NASD”) Rules of FairPractice. “New issues” are defined as any initial public offering of an equity, regardless of whether suchsecurity is trading at a premium in the secondary market. NASD members generally may not sell “newissues” to an account, in which certain persons or entities designated as restricted persons have beneficialinterest.

7. Share CapitalThe Fund has an authorized share capital consisting of $2,000,000 divided into 200,000,000 participatingshares of $0.01 each. The Fund issues a separate series of shares to those investors who purchase shares asof the first business day of each month. A different series of shares is issued in order to equitably reflect thediffering incentive fees attributable to each series because of the differing issue dates throughout the fiscalyear. Shares are offered in series at a purchase price of $100 per share. At December 31, 2007, there were12 outstanding classes (each, a “Class”) of shares: Class A, Class B, Class C, Class D, Class E, Class F, ClassH, Class J, Class K, Class L, Class M and Class S, and within each class there is one or more separate series.Each share is equal to every other share of the same series with respect to earnings, assets, dividends andvoting privileges. Class A, Class B, Class C and Class D shares are no longer being offered.

Class B, D, F, M and K shares will generally not participate in profits and losses from “new issues”. ClassA, B, L and M shares have monthly redemption rights; Class C, D, J and K shares have quarterlyredemption rights; Class E, F and H shares have annual redemption rights without any redemption fee andquarterly redemption rights subject to a 3% redemption fee payable to the Fund. All of these redemptionsrights are subject to an overall limit, at the discretion of the Fund’s Board of Directors, of aggregateredemptions in any calendar quarter of 20% of the Fund’s NAV (excluding assets attributable to Class Sshares) as of the first day of such calendar quarter.



4. Related Party Transactions (continued)

The Board of Directors has the right to create additional classes, series and sub-series for an investor as itdetermines appropriate in its sole discretion.

Each series of a Class will have equal rights and privileges with each other series of that Class.

As part of its investment program, the Fund may acquire assets or securities through direct investments orprivate placements that the Investment Manager believes either lack a readily ascertainable market valueor should be held until the resolution of a special event or circumstance (“Special Investments”). EachSpecial Investment will be represented by a series of Class S shares. Class A, B, C, D, E, F, H, J, K, L, andM shares will be automatically exchanged by way of redemption and issuance of a series of Class S sharesat the time a Special Investment is made. Capital invested in Class S shares is generally not available forredemption or distribution, subject to board of directors’ approval, until the respective special investmentis realized or deemed realized. Upon the realization or deemed realization of a particular SpecialInvestment, the Class S shares attributable to such Special Investment will be redeemed and exchanged backthrough the issuance of new shares of the original series from which the Class S shares had been exchanged.If a shareholder redeems less than all of its Class A, B, C, D, E, F, H, J, K, L, and M shares in a seriesassociated with a Special Investment, the shareholder will be issued a separate series of shares of that class.At December 31, 2007, the fair value of Special Investments is $156,207,865, of which $23,143,789 isattributable to investments pursuant to the Deferred Fee Agreement.

If at the end of a fiscal year, a series of a class of shares is charged a Full Incentive Fee, the shares of suchseries may be redesignated and converted on the first business day following the end of the fiscal year intothe first series of such class at the prevailing net asset value of such series. No redesignation or conversionshall occur with respect to a series of a class if at the end of a fiscal year such series has not been chargeda Full Incentive Fee or any shares of such series have been exchanged for Class S Shares that are stilloutstanding. These exchanges are detailed in the following share capital schedule.

Shares Shares Shares Net Asset ValueOutstanding at Redesignated Shares Shares Shares Outstanding at Per Share at

January 1, 2007 January 1, 2007 Exchanged Issued Redeemed December 31, 2007 December 31, 2007$

Class A, Series 1 121,699 – (9,606) – (38) 112,055 295.86

Class B, Series 1 8,505 – (5,746) – – 2,759 288.52

Class C, Series 1 500,575 – (301,981) – (34,291) 164,303 295.89

Class D, Series 1 666,843 – (334,640) – (78,632) 253,571 288.52

Class E, Series 1 135,857 – (50,212) – (3) 85,642 160.46

Class F, Series 1 851,968 – (214,583) – (323,469) 313,916 158.44

Class H, Series 1 – – – 500,000 – 500,000 102.24

Class J, Series 1 – – (15,056) 184,220 (61) 169,103 116.36

Class K, Series 1 447,465 – (303,655) – (109,382) 34,428 125.53

Class L, Series 1 – – – 21,500 – 21,500 112.26

Class M, Series 1 50,000 – – – – 50,000 115.36

Class S, Series 1 100,427 – (58,786) – (8,164) 33,477 93.27

Class A, Series 2 490,016 – (331) – (2,046) 487,639 295.88

Class B, Series 2 4,289 – (337) – (859) 3,093 288.48

Class E, Series 2 2,377,263 2,181,024 (1,610,091) 108,637 (944,282) 2,112,551 157.40

Class F, Series 2 2,752,476 1,792,335 (434,552) 64,164 (1,122,000) 3,052,423 155.44

Class J, Series 2 – – (732) 8,960 (3) 8,225 111.90

Class K, Series 2 – – – 1,200 – 1,200 111.39

Class L, Series 2 – – – 4,500 – 4,500 106.18

Class M, Series 2 30,000 702,617 25,317 18,851 (126,216) 650,569 122.40


7. Share Capital (continued)

Class S, Series 2 – – 9,736 – (4,938) 4,798 93.35

Class A, Series 3 8,942 – 21 – – 8,963 295.23

Class B, Series 3 5,456 – – – (5,456) – –

Class D, Series 3 – – 97,956 – (31,752) 66,204 288.53

Class E, Series 3 58,500 (58,500) (174,500) 287,300 (5,000) 107,800 113.11

Class F, Series 3 120,137 (120,137) (57,208) 88,000 – 30,792 112.56

Class J, Series 3 – – (3,533) 43,230 (14) 39,683 112.63

Class K, Series 3 – – – 51,800 (30,200) 21,600 112.14

Class M, Series 3 45,000 (45,000) – 20,000 (20,000) – –

Class A, Series 4 69,223 – (5,458) – (22) 63,743 295.85

Class B, Series 4 – – 1,630 – (3) 1,627 288.47

Class C, Series 4 24,472 – (1,934) – (8) 22,530 295.85

Class E, Series 4 298,500 (298,500) (170,000) 252,000 – 82,000 113.85

Class F, Series 4 257,000 (257,000) (90,000) 197,750 – 107,750 113.34

Class J, Series 4 – – (7,009) 85,760 (29) 78,722 108.25

Class K, Series 4 – – – 43,300 – 43,300 101.70

Class M, Series 4 12,000 (12,000) – 20,000 (20,000) – –

Class B, Series 5 – – 406 – – 406 288.53

Class C, Series 5 – – 6 – – 6 122.13

Class D, Series 5 377,481 – (95,269) – (95,512) 186,700 288.50

Class E, Series 5 390,113 (390,113) 60,000 218,470 (261,260) 17,210 109.12

Class F, Series 5 154,541 (154,541) – 73,000 (65,000) 8,000 108.72

Class J, Series 5 – – (1,940) 23,740 (8) 21,792 106.03

Class K, Series 5 – – (4,454) 54,500 (18) 50,028 100.56

Class M, Series 5 212,500 (212,500) – – – – –

Class S, Series 5 – – 6 – – 6 93.09

Class B, Series 6 – – 3,427 – (1) 3,426 288.53

Class C, Series 6 86,162 – (6,877) – (26) 79,259 290.60

Class D, Series 6 58,560 – 180 – (58,740) – –

Class E, Series 6 303,720 (303,720) (497,500) 523,845 – 26,345 106.71

Class F, Series 6 304,960 (304,960) (24,464) 189,850 (2,000) 163,386 106.36

Class J, Series 6 – – (7,971) 97,530 (32) 89,527 100.37

Class K, Series 6 – – 278,839 – (37,463) 241,376 125.54

Class M, Series 6 86,825 – (86,825) – – – –

Class S, Series 6 – – 27 – – 27 93.31

Class C, Series 7 49,749 – 106 – (27,258) 22,597 295.87

Class E, Series 7 209,137 (209,137) (81,317) 1,012,310 (265) 930,728 100.63

Class F, Series 7 265,307 (265,307) (296,791) 575,695 – 278,904 100.39

Class J, Series 7 – – (1,537) 18,810 (6) 17,267 101.84

Class K, Series 7 – – 27,732 – (10) 27,722 112.15






Class C, Series 8 7,769 – (620) – (2) 7,147 295.89

Class D, Series 8 3,995 – (219) – (3,776) – –

Class E, Series 8 2,775 (2,775) (138,500) 213,870 – 75,370 102.17

Class F, Series 8 87,550 (87,550) 24,196 – (24,196) – –

Class J, Series 8 – – (3,595) 43,990 (15) 40,380 100.69

Class M, Series 8 166,152 – (166,152) – – – –

Class C, Series 9 7,899 – (630) – (2) 7,267 290.52

Class D, Series 9 1,692 – – – (1,692) – –

Class E, Series 9 116,700 (116,700) (191,833) 3,641,755 (6,346) 3,443,576 99.36

Class F, Series 9 202,000 (202,000) 124,455 – (8) 124,447 158.41

Class J, Series 9 – – (1,152) 14,100 (5) 12,943 108.63

Class M, Series 9 124,965 – – – – 124,965 282.23

Class C, Series 10 6,056 – – – (6,056) – –

Class E, Series 10 271,350 (271,350) 62,873 417,449 (780) 479,542 95.96

Class F, Series 10 133,588 – (11,276) – (10) 122,302 128.05

Class J, Series 10 – – – 28,310 – 28,310 101.82

Class M, Series 10 63,579 (63,579) 2,371 – – 2,371 281.96

Class C, Series 11 2,552 – (145) – (708) 1,699 295.86

Class D, Series 11 15,419 – 34 – (1,513) 13,940 288.52

Class E, Series 11 160,000 (160,000) (297,442) 1,173,571 (1,716) 874,413 104.92

Class F, Series 11 110,205 (110,205) (37,000) 92,200 – 55,200 102.02

Class M, Series 11 123,733 (123,733) 40,333 – (9) 40,324 281.90

Class C, Series 12 631 – – – – 631 290.46

Class E, Series 12 59,174 (59,174) (10,706) 141,000 (35) 130,259 100.90

Class F, Series 12 34,010 – 85 – (1) 34,094 127.13

Class M, Series 12 41,995 – (41,995) – – – –

Class C, Series 13 2,251 – 17 – – 2,268 290.14

Class D, Series 13 9,308 – (743) – (8,565) – –

Class E, Series 13 10,000 (10,000) (160,000) 161,000 – 1,000 109.34

Class F, Series 13 150,677 (150,677) (2,500) 154,000 – 151,500 100.77

Class M, Series 13 66,295 (66,295) 83,963 – – 83,963 282.19

Class C, Series 14 5,563 – 12 – – 5,575 290.39

Class E, Series 14 314,500 (314,500) (27,448) 269,448 – 242,000 106.80

Class F, Series 14 21,630 (21,630) (35,000) 38,750 – 3,750 106.71

Class M, Series 14 145,197 – 308 – (7) 145,498 116.87

Class C, Series 15 – – 1,919 – (1) 1,918 295.85

Class E, Series 15 254,928 (254,928) – 150,500 – 150,500 102.01

Class F, Series 15 7,122 – (544) – (3) 6,575 158.34

Class M, Series 15 – – 2,478 – – 2,478 282.04





Class C, Series 16 – – (1,960) 23,977 (6) 22,011 117.93

Class D, Series 16 38,501 – 87 – (1,853) 36,735 288.51

Class E, Series 16 – – – 44,000 – 44,000 101.16

Class F, Series 16 390,021 – 819 – (719) 390,121 134.24

Class C, Series 17 – – 218,282 – – 218,282 109.12

Class D, Series 17 75,468 – (75,468) – – – –

Class E, Series 17 9,915 – 21 – – 9,936 159.53

Class F, Series 17 5,700 – 40 – (1) 5,739 158.35

Class M, Series 17 – – 1,309 – (1,309) – –

Class C, Series 18 – – 20,780 – (7) 20,773 295.87

Class D, Series 18 40,452 – 115 – (2) 40,565 288.48

Class E, Series 18 130,000 (130,000) 46,367 – (15) 46,352 160.47

Class F, Series 18 9,918 (9,918) 9,690 50,750 (9,690) 50,750 101.99

Class M, Series 18 – – 36,104 – (16,484) 19,620 282.20

Class C, Series 19 – – 6,717 – (2) 6,715 295.84

Class D, Series 19 10,386 – – – (10,386) – –

Class E, Series 19 4,958 – 10 – – 4,968 159.53

Class F, Series 19 86,035 (86,035) 16,010 – (16,010) – –

Class M, Series 19 – – – 222,000 (10,000) 212,000 101.51

Class C, Series 20 – – 6,035 – (2) 6,033 295.94

Class D, Series 20 38,857 – 106 – (38,963) – –

Class E, Series 20 118,982 – 248 – (4) 119,226 159.53

Class F, Series 20 – – – 47,800 – 47,800 101.16

Class M, Series 20 – – 243,981 – – 243,981 100.41

Class C, Series 21 – – 2,667 – (2,667) – –

Class D, Series 21 18,265 – 53 – (18,318) – –

Class E, Series 21 14,873 – 31 – – 14,904 159.53

Class F, Series 21 – – 37,408 – (18,254) 19,154 158.45

Class M, Series 21 – – – 57,750 – 57,750 100.41

Class C, Series 22 – – 2,169 – (1) 2,168 295.84

Class D, Series 22 11,125 – 33 – (11,158) – –

Class E, Series 22 90,000 (90,000) 70,720 – (21) 70,699 157.41

Class F, Series 22 332,300 (332,300) 390,523 – (109,992) 280,531 155.45

Class M, Series 22 – – 983 – – 983 281.83

Class C, Series 23 – – 233,563 – (8) 233,555 295.87

Class D, Series 23 58,168 – (3,851) – (39,669) 14,648 288.48

Class E, Series 23 30,573 (30,573) 1,318,828 – (64,313) 1,254,515 157.41

Class F, Series 23 50,000 (50,000) 64,279 – (19) 64,260 112.57






Class M, Series 23 – – 19,441 – (6) 19,435 281.82

Class D, Series 24 10,727 – – – (10,727) – –

Class E, Series 24 11,490 (11,490) 96,148 – (2) 96,146 157.40

Class F, Series 24 30,000 (30,000) 82,645 – (24) 82,621 113.34

Class M, Series 24 – – 21,460 – (7) 21,453 281.82

Class D, Series 25 29,859 – 87 – (29,946) – –

Class E, Series 25 3,469 (3,469) 160,239 – (47) 160,192 113.12

Class F, Series 25 20,000 (20,000) 59,688 – (17) 59,671 108.72

Class M, Series 25 – – 660 – – 660 281.84

Class D, Series 26 17,782 – 52 – (17,834) – –

Class E, Series 26 – – 156,107 – (45) 156,062 113.85

Class F, Series 26 23,980 (23,980) 28,926 – (8) 28,918 106.36

Class D, Series 27 61,287 – 167 – (61,454) – –

Class E, Series 27 – – 239,908 – (70) 239,838 109.13

Class F, Series 27 – – 33,976 – (10) 33,966 102.02

Class D, Series 28 458 – (37) – (421) – –

Class E, Series 28 – – 456,841 – (133) 456,708 106.71

Class F, Series 28 – – 2,296 – (1) 2,295 100.77

Class D, Series 29 41,998 – 118 – (42,116) – –

Class E, Series 29 – – 127,181 – (37) 127,144 102.17

Class F, Series 29 – – 32,140 – (9) 32,131 106.73

Class E, Series 30 – – 146,924 – (43) 146,881 109.34

Class F, Series 30 – – 279,614 – (81) 279,533 100.39

Class E, Series 31 – – 25,205 – (7) 25,198 106.80

Class D, Series 32 17,268 – – – – 17,268 124.64

Class D, Series 33 9,913 – – – (9,913) – –

Class D, Series 34 4,562 – 13 – – 4,575 288.42

Class D, Series 35 14,296 – 48 – (1) 14,343 288.47

Class D, Series 38 75,060 118,042 – – (60,387) 132,715 125.56

Class D, Series 39 – – – – – – –

Class D, Series 40 2,021 – – – (2,021) – –





Class D, Series 41 6,584 (6,584) – – – – –

Class D, Series 42 20,424 – (1,596) – (7) 18,821 288.46

Class D, Series 44 13,193 (13,193) – – – – –

Class D, Series 45 6,116 (6,116) – – – – –

Class D, Series 46 – – – – – – –

Class D, Series 47 14,277 (14,277) – – – – –

Class D, Series 48 19,723 (19,723) – – – – –

Class D, Series 50 37,580 – 92 – (29,824) 7,848 288.51

Class D, Series 51 6,550 (6,550) – – – – –

Class D, Series 52 1 (1) – – – – –

Class D, Series 55 924 – 4 – – 928 288.45

Class D, Series 56 – – 72,356 – (9,256) 63,100 288.51

Class D, Series 57 – – 3,277 – (3,277) – –

Class D, Series 58 – – 14,798 – (5) 14,793 288.53

Class D, Series 59 – – 37,353 – (1) 37,352 288.52

Class D, Series 60 – – 2,805 – (2,805) – –

Class D, Series 61 – – 10,664 – (10,146) 518 287.32

Class D, Series 62 – – 1,696 – – 1,696 288.48

Class D, Series 63 – – 8,006 – – 8,006 288.49

Class D, Series 64 – – 17,446 – (1) 17,445 288.51

Class D, Series 65 – – 41,820 – (17,541) 24,279 288.49

Class D, Series 66 – – 4,811 – (2) 4,809 288.47

Class D, Series 67 – – – 20,000 – 20,000 108.73






Class D, Series 68 – – 2,701 – (2,701) – –

Class D, Series 69 – – 1,886 – (155) 1,731 288.58

Class D, Series 70 – – 1,772 – (1,772) – –

Class D, Series 71 – – 67,124 – (35,640) 31,484 288.57

Class D, Series 72 – – 1,195 – – 1,195 288.59

Class D, Series 73 – – 39,271 – – 39,271 100.39

Class D, Series 74 – – 1,555 – (1) 1,554 288.53

Class S, Illiquid Series 1 – – 19,665 – – 19,665 92.27

Class S, Illiquid Series 2 – – 3,013 – – 3,013 91.85

Class S, Chrysler 1 – – 22,156 – – 22,156 99.67

Class S, Chrysler 2 – – 6,595 – – 6,595 99.67

Class S, Chrysler 3 – – 1,187,938 – – 1,187,938 100.00





8. Financial Instruments with Off-Balance Sheet Risk or Concentrations of Credit RiskIn the normal course of its business, the Fund trades various financial instruments and enters into variousinvestment activities with off-balance sheet risk. These financial instruments include securities sold, not yetpurchased, forward currency contracts, credit default swaps, index swaps, total return swaps and contractsfor differences. Generally, these financial instruments represent future commitments to purchase or sellother financial instruments at specific terms at specified future dates. Each of these financial instrumentscontains varying degrees of off-balance sheet risk whereby changes in the market values of the securitiesunderlying the financial instruments or fluctuations in interest rates and index values may exceed theamounts recognized in the statement of assets and liabilities.

Securities sold, not yet purchased represent obligations of the Fund to deliver the specified security at thecontracted price and, thereby, create a liability to purchase the security in the market at prevailing prices.Accordingly, these transactions result in off-balance sheet risk as the Fund’s satisfaction of the obligationsmay exceed the amount recognized in the statement of assets and liabilities.

Substantially all securities transactions of the Fund are cleared by several major U.S. securities firmspursuant to a customer agreement. At December 31, 2007, substantially all of the investments in securities,securities sold, not yet purchased and due from brokers are positions with and amounts due from thesebrokers. The Fund had substantially all such individual counterparty concentration with these brokers.

Forward contracts expose the Fund to credit, market and liquidity risks. Credit risk arises from thepotential inability of counterparties to perform under the terms of the contract. The Fund is exposed tomarket risk to the extent that adverse changes occur in the exchange rate of the underlying foreign currency.Liquidity risk represents the possibility that the Fund may not be able to rapidly adjust the size of itsforward position in times of high volatility and financial stress at a reasonable price.

The Fund enters into total return swaps, contracts for differences and index swaps that involve theexchange by the Fund with another party of their respective commitments to pay or receive from thecounterparty a net amount based on the change in market value of a particular equity or index and aspecified notional holding. The use of these contracts exposes the Fund to market risks equivalent toactually holding securities of the notional value but typically involve little capital commitment relative tothe exposure achieved. The gains or losses of the Fund may therefore be magnified on the capitalcommitment. Entering into total return swaps, contracts for differences and index swaps involves the riskof dealing with counterparties and their abilities to meet the terms of the contracts.

Credit default swap contracts entered into by the Fund typically represent the exchange by the Fund witha counterparty of a commitment to provide a level of credit protection for a commitment to pay interest ata fixed rate based on the potential risk of default of the relevant underlying issuers. The Fund purchasescredit default swaps in order to effectively obtain short credit exposure to particular issuers. With regardto credit default swap protection purchased, the Fund is at risk for its commitment to pay interest at a fixedrate according to the terms of the respective contracts.

The Fund’s exposure to credit risk associated with counterparty non-performance on forward, swap andOTC option contracts is limited to the net unrealized gains by counterpart inherent in such contracts whichare recognized in the statement of assets and liabilities. At December 31, 2007, this amount was$447,476,060.

The Fund is also engaged in writing option contracts. The premium received by the Fund upon writing anoption contract is recorded as a liability, marked to market on a daily basis and is included in securitiessold, not yet purchased in the statement of assets and liabilities. In writing an option, the Fund bears the



market risk of an unfavorable change in the financial instrument underlying the written option. Exercise ofan option written by the Fund could result in the Fund selling or buying a financial instrument at a pricedifferent from the current market value.

9. Derivative ContractsIn the normal course of business, the Fund enters into derivative contracts (“Derivatives”). The Derivativesthat the Fund invests in are primarily equity options, rights, warrants, forward currency contracts, creditdefault, index and total return swap contracts and contracts for differences. Typically, Derivatives serve asa component of the Fund’s investment strategy and are utilized primarily to structure the portfolio, orindividual investments, to economically match the investment objective of the Fund. Market values ofDerivatives are determined by using quoted market prices when available; otherwise fair values are basedon pricing models that consider the time value of money, volatility, and the current market and contractualprices of underlying financial instruments.

10. CommitmentsLoan and other participation interests purchased by the Fund such as bank debt may include revolvingcredit arrangements or other financing commitments obligating the Fund to advance additional amountson demand. At December 31, 2007, the Fund had unfunded capital commitments of $48,027,892.

11. IndemnificationsThe Fund enters into contracts that contain a variety of indemnifications and warranties. The Fund’smaximum exposure under these arrangements is unknown, as this would involve future claims that may bemade against the Fund that have not yet occurred. However, the Fund has not had prior claims or lossespursuant to these contracts and expects the risk of loss to be remote. Thus, no amounts have been accruedrelated to such indemnifications.


8. Financial Instruments with Off-Balance Sheet Risk or Concentrations of Credit Risk (continued)

12. Financial HighlightsThe following represents the per share operating performance of the Fund, ratios to average net assets andtotal return information for the year ended December 31, 2007:

Class A, Class B, Class C, Class D, Class E,Series 1 Series 1 Series 1 Series 1 Series 1

Per share operating performance

Net asset value at beginning of period $250.95 $245.93 $250.95 $245.93 $136.10

Income from investment operations:

Net realized and unrealized gain from investments 64.57 61.44 64.57 61.44 35.00

Net investment loss (19.66) (18.85) (19.63) (18.85) (10.64)

Total from investment operations 44.91 42.59 44.94 42.59 24.36

Net asset value at the end of the year $295.86 $288.52 $295.89 $288.52 $160.46

Total return before incentive fee 22.41% 21.67% 22.41% 21.67% 22.40%

Incentive fee (4.51%) (4.35%) (4.50%) (4.35%) (4.50%)

Total return after incentive fee 17.90% 17.32% 17.91% 17.32% 17.90%

Ratios to average net assets

Total expenses before incentive fee (6.53%) (6.51%) (6.52%) (6.51%) (6.51%)

Incentive fee (4.02%) (3.89%) (4.02%) (3.88%) (4.01%)

Total expenses (10.55%) (10.40%) (10.54%) (10.39%) (10.52%)

Net investment loss (7.00%) (6.84%) (6.98%) (6.83%) (6.96%)



12. Financial Highlights (continued)

Class F, Class H, Class J, Class K, Class L, Class M,Series 1 Series 1 Series 1 Series 1 Series 1 Series 1

Per share operating performance

Net asset value at beginning of period $135.05 $100.00 $100.00 $108.39 $100.00 $100.00

Income from investment operations:

Net realized and unrealized gain from investments 33.74 4.25 25.69 27.04 20.07 24.89

Net investment loss (10.35) (2.01) (9.33) (9.90) (7.81) (9.53)

Total from investment operations 23.39 2.24 16.36 17.14 12.26 15.36

Net asset value at the end of the year $158.44 $102.24 $116.36 $125.53 $112.26 $115.36

Total return before incentive fee 21.67% 2.80% 21.81% 21.08% 16.35% 20.48%

Incentive fee (4.35%) (0.56%) (5.45%) (5.27%) (4.09%) (5.12%)

Total return after incentive fee 17.32% 2.24% 16.36% 15.81% 12.26% 15.36%

Ratios to average net assets

Total expenses before incentive fee (6.52%) (3.02%) (7.06%) (7.19%) (6.46%) (7.56%)

Incentive fee (3.89%) (0.56%) (4.91%) (5.20%) (3.74%) (4.62%)

Total expenses (10.41%) (3.58%) (11.97%) (12.39%) (10.20%) (12.18%)

Net investment loss (6.84%) (2.03%) (8.40%) (8.67%) (7.16%) (8.60%)

Total return is calculated for shareholders in the initial series of each common share class. The total returnand ratios to average net assets of other series in the same share class may vary from these returns basedon participation in “new issues” and the timing of capital subscriptions and redemptions. The initialinvestment in Class H Series 1, Class J Series 1, and Class L Series 1 was on July 1, 2007, January 1,2007, and March 1, 2007, respectively. The operating performance and ratios for Class H Series 1, ClassJ Series 1, and Class L Series 1 have not been annualized.

13. Subsequent EventsEffective January 1, 2008, the Fund recorded subscriptions of $54,495,000, of which $52,020,000 wasreceived prior to January 1, 2008. In addition, the Investment Manager redeemed $152,877,941attributable to the Deferred Fee Arrangement on January 1, 2008.


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32 THIRD POINT OFFSHORE FUND, LTD. FINANCIAL STATEMENTS 2007

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