Whitney R. Tilson and Glenn H.

Tongue phone: 212 386 7160

Managing Partners fax: 240 368 0299
www.T2PartnersLLC.com

September 3, 2010

Dear Partner,

Our fund declined 1.5% net in August vs. -4.5% for the S&P 500, -3.9% for the Dow and -6.2%
for the Nasdaq. Year to date, our fund is up 12.3% net vs. -4.6% for the S&P 500, -2.1% for the
Dow and -6.3% for the Nasdaq.

Given our conservative positioning, our fund performed in line with what we’d expect: our long
book was down a bit less than the market and our outperformance was driven by very nice gains
in our short book. On the long side, winners of note included Osteotech, which jumped 68.6%
thanks to a buyout offer from Medtronic, Resource America (17.0%), Liberty Acquisition
Holdings Corp. warrants (13.6%; discussed below), and Wesco (7.0%), the remaining public
float of which is being bought out by Berkshire Hathaway. More than offsetting these gains,
however, were Winn Dixie (-33.1%), Iridium (-16.0%), American Express (-10.7%), BP (-9.5%),
and Microsoft (-9.1%).

On the short side, we profited handsomely from declines among the stocks of the homebuilders
and for-profit education companies. In addition, Ambac fell 34.6% as it spirals toward almost-
certain bankruptcy and Lululemon Athletica dropped 20.8%. Partially offsetting these gains
were Netflix (up 22.4%) and Barnes & Noble (16.7%).

Liberty Acquisition
We have spoken and written frequently in recent months about a number of big-cap, blue-chip
companies we own such as Berkshire Hathaway, ABInBev, Microsoft and Kraft, which make up
a substantial part of our portfolio. We have also written about a number of unusual investments
such as BP, General Growth Properties, and Iridium. In this letter, we’d like to discuss another
off-the-beaten-path investment, Liberty Acquisition Holdings Corp., that has been extremely
profitable for us so far – and why we believe there are more gains to come.

Liberty is a Special Purpose Acquisition Company (SPAC), an asset class about which we wrote
at length in our August 2009 letter. Liberty has announced a merger agreement with Grupo
Prisa, a Spanish media conglomerate with a good business but a bad balance sheet. This
transaction is ideal for both parties: Liberty deploys its cash at an attractive valuation while Prisa
reduces and restructures its debt burden. To read the latest slide presentation and 8-K regarding
this transaction, click here and here.

There are three distinct securities involved:

1) Grupo Prisa (PRS.MC), which ended August at 1.64 euros, or $2.10
2) Liberty warrants (LIAWS), $1.25
3) Liberty stock (LIA), $10.05

145 E. 57th Street, 10th Floor, New York, NY 10022

The interplay among these three securities, all of which we own in our funds, has created the
investment opportunity. Let’s look at each in turn:

Grupo Prisa
Based on our analysis of Prisa’s business, we believe that its stock is meaningfully undervalued,
pro-forma for the transaction, in part, we suspect, due to selling pressure by arbitrageurs who
have been shorting it into the transaction. We believe this shorting pressure is coming to an end,
as the stock no longer seems to be available to borrow (we know this both from inquiries to
brokerage firms and from the fact that our broker would like us to lend out our shares and is
offering us a juicy rebate if we do so).

Liberty warrants
Once the merger is completed, Liberty warrant holders will get 90 cents in cash per warrant plus
0.45 shares of Prisa stock. At current prices, this is approximately $1.85. Thought of another
way, someone purchasing the warrant today for $1.25 will soon receive 90 cents back in cash,
meaning one is paying only 35 cents to buy 0.45 shares of Prisa stock, or 77 cents for each full
share, a 63% discount to the (already undervalued, in our opinion) current share price of $2.10.

Liberty stock
Upon closing, Liberty shareholders will get 1.5 Prisa class A shares, 3.0 Prisa Class B shares,
and 50 cents in cash, equal to $9.95 (4.5 x $2.10 plus the cash). But Liberty shareholders have a
choice if they don’t want to own Prisa stock: Prisa has put in place a $500 million backstop to
buy back Liberty stock at $10.00/share, so any Liberty shareholders can simply sell at this price.

Risk factors
The largest fraction of our investment is the Liberty warrants, but they are not without risk.
Most importantly, while we think the deal is highly likely to close given the aligned incentives
and the $500 million backstop, if it doesn’t, the warrants will likely drop dramatically in price
and probably end up being worthless. The other major risk factor is how Prisa’s stock, which we
will own in size, performs after the merger. We think the underlying business, with a new,
stronger balance sheet, will do well, but in the weeks and perhaps months after the close, the
stock could be volatile because the distribution of shares will initially be to unnatural
shareholders (the original SPAC shareholders). Over time, however, we expect that the stock
will migrate to intrinsic value.

InterOil
We recently filed our 13-F, a quarterly SEC filing in which all firms with assets over $100
million are required to disclose their long positions. In it we disclosed that we owned 10,400
shares of InterOil, which led to some chatter on the message boards that we had changed our
views on the stock. Needless to say, nothing could be further from the truth. We’ve never had
more conviction and InterOil is currently our largest bearish position.

Our 13-F shows that as of 6/30, we owned 1,623 InterOil put contracts (representing a short
position of 162,300 shares of stock), a tiny fraction of which was offset by being long 10,400
shares. Given our large bearish bet, why would we own a few shares on the long side? The
answer is that puts can be quite illiquid, so we simply bought more puts than we wanted and
offset the extra amount by buying some stock, resulting in the desired net exposure. Then, if we

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want to increase or decrease our bearish bet, we can simply buy or sell the stock, which is quite
liquid. (We are also short the stock, which we are not required to disclose in our 13-F.)

We added to our bearish bet recently, after InterOil reported Q2 earnings that reinforced our
investment thesis. The earnings and EBITDA (driven by the refinery operation) are irrelevant
for a company that has a $2.6 billion (not a typo) market cap; what really matters if whether
there is, in fact, the Sierra Madre of oil and gas in the areas being explored by InterOil and, if so,
whether they have the cash to find it, develop it commercially, etc. We think the answer to both
questions is no.

Regarding the former, after more than a decade of drilling, InterOil has no proven or even
probable reserves – just a lot of hype and unfulfilled promises (and more than 200 press
releases).

A common problem with being short promotions like this, however, is that there’s often no
catalyst – companies can issue endless press releases full of exciting “progress” for a long, long
time. Wall Street “analysts” generally cheer on such companies because they need to issue lots
of stock and debt to fund their operations, so they can be lucrative clients (a classic case study is
Allied Capital, which David Einhorn of Greenlight Capital describes in his excellent book,
Fooling Some of the People All of the Time).

InterOil has managed to keep this promotion going for more than a decade, but we think the
game is coming to an end soon because the company is running out of cash. Over the past four
quarters, InterOil has actual lost money (net income of -$1.3 million) and free cash flow is a
staggering negative $181.9 million (cash from operating activities minus “expenditure on oil and
gas properties” and “expenditure on plant and equipment, net of disposals”), broken down as
follows:

Q3 09: -$48.6 million

Q4 09: -$40.7 million
Q1 10: -$28.5 million
Q2 10: -$64.1 million
TOTAL: $181.9 million

In the absence of profits, how is InterOil funding such massively negative cash flows? There are
four answers – InterOil is:

1) Burning through cash: unrestricted cash has declined from $96.4 million a year ago to
$31.7 million as of June 30th;

2) Taking on debt: InterOil’s working capital facility – short-term debt – is up from $4.0
million a year ago to $57.7 million, partly offset by a $9 million decline in a secured
loan;

3) Issuing stock and conversion of debt ($12.8 million over the past 12 months), resulting in
the diluted share count rising 16.1%; and

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 4) Engaging in miscellaneous one-off transactions: “Proceeds from IPI cash calls” ($15.2
million in the first two quarters of 2010), “Proceeds received on sale of exploration
assets” ($13.9 million in Q1), and “Proceeds from Petromin for Elk and Antelope field
development” ($5 million over the past 12 months).

To summarize, InterOil has only $31.7 million remaining in unrestricted cash as of June 30th and
they’ve been burning an average of $45.5 million of cash each quarter for the past year. No
wonder the company entered a short-term $25 million credit facility in early August on
distressed terms: 10% interest (in this environment!), secured by a 2.5% stake in InterOil’s Elk
and Antelope fields. Note that the provider of financing was a very dicey outfit, Clarion Finanz,
and known stock promoter Carlo Civelli (for more on Civelli, click here).

We don’t think InterOil will actually run out of cash – instead, it will have to raise capital on
increasingly onerous terms, which we believe is likely to put the stock under significant pressure.

Conclusion
In their latest Kiplinger’s column, Why We Like BP's Stock and 2 Other Comeback Picks, John
Heins and Whitney shared our analysis of BP, Microsoft and CIT Group.

Thank you for your continued confidence in us and the fund. As always, we welcome your
comments or questions, so please don’t hesitate to call us at (212) 386-7160.

Sincerely yours,

Whitney Tilson and Glenn Tongue

The unaudited return for the T2 Accredited Fund versus major benchmarks (including reinvested
dividends) is:

August Year-to-Date Since Inception

T2 Accredited Fund – gross -1.8% 17.4% 268.5%
T2 Accredited Fund – net -1.5% 12.3% 197.8%
S&P 500 -4.5% -4.6% 4.9%
Dow -3.9% -2.1% 42.2%
NASDAQ -6.2% -6.3% -0.8%
Past performance is not indicative of future results. Please refer to the disclosure section at the end of this letter. The T2
Accredited Fund was launched on 1/1/99. Gains and losses among private placements are only reflected in the returns since
inception.

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 T2 Accredited Fund Performance (Net) Since Inception
200

180

160

140

120

100
(%) 80

60

40

20

0
Feb-99 Oct-99 Jun-00 Feb-01 Oct-01 Jun-02 Feb-03 Oct-03 Jun-04 Feb-05 Oct-05 Jun-06 Feb-07 Oct-07 Jun-08 Feb-09 Oct-09 Jun-10
-20

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T2 Accredited Fund S&P 500

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T2 Accredited Fund, LP (the “Fund”) commenced operations on January 1, 1999. The Fund’s
investment objective is to achieve long-term after-tax capital appreciation commensurate with
moderate risk, primarily by investing with a long-term perspective in a concentrated portfolio of
U.S. stocks. In carrying out the Partnership’s investment objective, the Investment Manager, T2
Partners Management, LLC, seeks to buy stocks at a steep discount to intrinsic value such that
there is low risk of capital loss and significant upside potential. The primary focus of the
Investment Manager is on the long-term fortunes of the companies in the Partnership’s portfolio
or which are otherwise followed by the Investment Manager, relative to the prices of their stocks.

There is no assurance that any securities discussed herein will remain in Fund’s portfolio at the
time you receive this report or that securities sold have not been repurchased. The securities
discussed may not represent the Fund’s entire portfolio and in the aggregate may represent only a
small percentage of an account’s portfolio holdings. It should not be assumed that any of the
securities transactions, holdings or sectors discussed were or will prove to be profitable, or that
the investment recommendations or decisions we make in the future will be profitable or will
equal the investment performance of the securities discussed herein. All recommendations within
the preceding 12 months or applicable period are available upon request.

Performance results shown are for the T2 Accredited Fund, LP and are presented gross and net
of incentive fees. Gross returns reflect the deduction of management fees, brokerage
commissions, administrative expenses, and other operating expenses of the Fund. Gross returns
will be reduced by accrued performance allocation or incentive fees, if any. Gross and net
performance includes the reinvestment of all dividends, interest, and capital gains. Performance
for the most recent month is an estimate.

The fee schedule for the Investment Manager includes a 1.5% annual management fee and a 20%
incentive fee allocation. For periods prior to June 1, 2004, the Investment Manager’s fee
schedule included a 1% annual management fee and a 20% incentive fee allocation, subject to a
10% “hurdle” rate. In practice, the incentive fee is “earned” on an annual, not monthly, basis or
upon a withdrawal from the Fund. Because some investors may have different fee arrangements
and depending on the timing of a specific investment, net performance for an individual investor
may vary from the net performance as stated herein.

The return of the S&P 500 and other indices are included in the presentation. The volatility of
these indices may be materially different from the volatility in the Fund. In addition, the Fund’s
holdings differ significantly from the securities that comprise the indices. The indices have not
been selected to represent appropriate benchmarks to compare an investor’s performance, but
rather are disclosed to allow for comparison of the investor’s performance to that of certain well-
known and widely recognized indices. You cannot invest directly in these indices.

Past results are no guarantee of future results and no representation is made that an investor will
or is likely to achieve results similar to those shown. All investments involve risk including the
loss of principal. This document is confidential and may not be distributed without the consent
of the Investment Manager and does not constitute an offer to sell or the solicitation of an offer
to purchase any security or investment product. Any such offer or solicitation may only be made
by means of delivery of an approved confidential offering memorandum.

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