Whitney R. Tilson and Glenn H.

Tongue phone: 212 386 7160

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

October 1, 2010

Dear Partner,

Our fund rose 1.7% net in September vs. 8.9% for the S&P 500, 7.8% for the Dow and 12.1%
for the Nasdaq. Year to date, our fund is up 14.1% net vs. 3.9% for the S&P 500, 5.6% for the
Dow and 5.0% for the Nasdaq.

Had you told us at the beginning of the month that our fund would rise 1.7%, we‟d have taken it
in a heartbeat – and we remain very pleased with our fund‟s outperformance this year.
Nevertheless, having our short book move against us so much and therefore trailing the market
by such a large margin in September is annoying – but nothing more than that. It was only three
months ago, in June, when we outperformed the market by nearly 10 percentage points (+4.5%
vs. -5.2%), so it‟s important not to read too much into any one month. Our goal is superior
returns over multi-year time periods, on both an absolute and relative basis, so month-to-month
volatility is just noise that we ignore – other than to take advantage of the opportunities presented
by other investors‟ manic behavior. A high degree of market volatility is the friend of true value
investors, so we welcome it.

Our long book had a great month, rising even more than the market. Winners of note included
dELiA*s (up 36.5%), Liberty Acquisition Holdings Corp. warrants (30.4%; discussed in last
month‟s letter), BP (18.2%), AB InBev (13.0%), Resource America (11.6%), CIT Group
(11.3%), General Growth Properties (10.9%), and a new position, ADP, discussed below (8.9%).
The only major position that declined was Iridium (-1.4%; discussed below).

It was ugly for us on the short side – not surprising since it was the best September for the S&P
500 since 1939. The homebuilders and for-profit education companies, which have been very
profitable shorts for us this year, bounced a bit (a dead-cat bounce, in our opinion). Also hurting
us were DineEquity (+40.9%), Lululemon Athletica (36.0%), Netflix (29.2%), OpenTable
(27.9%) and InterOil (16.5%).

Our investment thesis for each of these short positions hasn‟t changed, so in general we allowed
them to become a larger percentage of our portfolio as they rose since we now believe the risk-
reward equation is even more attractive. That said, we are carefully monitoring each one to
make sure that we haven‟t made a mistake and to manage risk, which we do both by trimming a
position if it becomes too large (no matter how strong our conviction is) and also by using puts,
when we believe there is a near-term catalyst.

Overview
Normally when stocks rocket upwards, the driver is unexpected, positive economic news –
which leaves us scratching our heads because the news in September was more of the same

The GM Building, 767 Fifth Avenue, 18th Floor, New York, NY 10153
mixed bag, with some areas of slight strength and others of continued weakness. In particular,
the U.S. housing market, which has been a very good leading indicator for both the economy and
the stock market, remains deeply distressed – and we think it‟s going to get even worse in the
near future. The weakest season for home sales (winter) is upon us and we think housing prices
could fall 5-7% nationally in the next six months, barring significant new government
intervention.

We discussed our big-picture views at length two months ago in our July letter (user name:
tilson; password: funds), so we won‟t repeat ourselves here, other than to say that we continue to
think that the most likely scenario over the next 2-7 years is a “muddle-through” economy with
weak GDP growth (1-2%), unemployment remaining high (7-9%), and continued government
deficits. Under this scenario, the stock market would likely compound at 2-5%.

If you‟re interested in reading more, we‟ve attached insightful letters by two wise men, Bill
Gross and Jeremy Grantham (see Appendix A and Appendix B). Here‟s an excerpt from Gross‟s
letter:

Investors are faced with 2.5% yielding bonds and stocks staring straight into new normal real
growth rates of 2% or less. There is no 8% there for pension funds. There are no stocks for the
long run at 12% returns.

And here‟s the opening paragraph of the excerpt from Grantham‟s letter:

The idea behind “seven lean years” is that it is unrealistic to expect to overcome the several
problems facing most developed countries, including the U.S., in fewer than several years. The
purpose of this section is to review the negatives that are likely to hamper the global developed
economy, especially from the viewpoint of how much time may be involved.

We always hesitate to write about our big-picture views because we don‟t want you to think
we‟ve abandoned our bottoms-up stock and industry analysis that has been (and always will be)
the core of what we do. We do, however, adjust our portfolio positioning based on our view of
valuations and broad economic fundamentals. Our net long exposure has ranged over the past
two years from a low of 20% earlier this year (90% long, 70% short) to 90% in early March 2009
(120% long, 30% short), and today we are closer to the more conservative end of that spectrum
at 40% net long (100% long, 60% short).

Now let‟s turn to our favorite topic, individual stocks:

Iridium
After bottoming in February at $6.36, Iridium‟s stock went on a tear, rising more than 70% to
$10.87 in July, but has been weak recently, closing September at $8.54. We are not aware of any
change in the company‟s fundamentals that would explain this decline, but we have heard some
talk about the competitive threat posed by Inmarsat‟s new IsatPhone Pro so we wanted to share a
report that Iridium commissioned comparing Inmarsat‟s phone with Iridium‟s. You can read the
entire 14-page report here and a summary is attached in Appendix C. Here‟s the key paragraph:

In Frost & Sullivan‟s testing and analysis, the Iridium 9555 satellite phone was found to be a
superior device to the Inmarsat IsatPhone Pro in all locations. Iridium‟s satellite network also

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 offered better coverage, including the ability to use a satellite phone in Anchorage, Alaska, where
the Inmarsat phone was inoperable. The Iridium phone provided better call quality, and was faster
to find the satellite network and make a call. The Iridium phone offered the ability to receive an
incoming call with the antenna down - something the Inmarsat phone could not do. The Iridium
phone also offered the ability to use the phone as a modem for a laptop for email or Web access.
However, the Inmarsat IsatPhone Pro was less expensive than the Iridium 9555 and also had
lower per minute usage charges.

Because the report was commissioned by Iridium, we of course take it with a grain of salt, but
our own research leads us to believe that it is correct. We continue to believe that Iridium has
bright future prospects and that the stock is deeply undervalued, so it remains among our largest
positions.

ADP
We recently added another high-quality blue-chip stock, Automatic Data Processing (ADP), to
our portfolio. ADP‟s core business is payroll processing and we believe that it is one of the
world‟s great companies. It is more than four times the size of its nearest competitor and there
are very high switching costs for its customers, so ADP has fabulous 20% operating margins and
unlevered returns on equity in the mid-20% range. It is such a pillar of financial strength that it
is one of only four companies left that still have the highest AAA credit rating (we happen to
own the other three, Microsoft, Exxon Mobil and Johnson & Johnson, though only the former in
any size). Finally, ADP has excellent management and is very shareholder friendly, returning
cash to shareholders via a healthy 3.2% dividend and share repurchases (17% of shares have
been retired in the past five years).

So what‟s not to like? Two things: 1) Growth has disappeared (EPS in FY 2010, which ended on
June 30th, declined 9% from the previous year, and the company only expects 1-3% revenue and
EPS growth in FY 2011); and 2) The stock doesn‟t appear particularly cheap, trading at 17.4x
trailing EPS.

ADP historically has been a solid growth story – in the 13 years through FY 2009, for example,
earnings per share grew 245% (10.0% annually) – so what happened? In short, ADP has been
hit recently by two macroeconomic factors: high unemployment (meaning fewer paychecks
being processed) and low interest rates, which reduce ADP‟s earnings from its float.

Float? ADP isn‟t an insurance company, so why does it have float? Allow us to explain: as a
payroll processor, ADP collects cash from its customers and then issues paychecks, makes
deposits in retirement accounts, and transfers funds for taxes. All of this happens quickly, but at
any given time, ADP is sitting on more than $18 billion of cash, on which it can earn interest (it
appears as a liability on the balance sheet under “Client funds obligations”, offset by an asset
called “Funds held for clients”). Each dollar that comes in goes out very quickly, but is replaced
with another dollar, so this is, in effect, perpetual (and growing) float.

Of course ADP invests these funds very conservatively – this isn‟t long-term float like much of
Berkshire Hathaway‟s that can be invested in stocks – so ADP‟s earnings from this float are
highly dependent on short-term interest rates. Today, one-month Treasuries are paying a
microscopic 0.15% vs. 5.05% only 38 months ago on August 1, 2007 (my, how the world has
changed!).

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Of course ADP isn‟t investing all of its float in one-month Treasuries – it‟s laddered such that
the company generated $543 million of revenues in FY 2010 from “Interest on funds held for
clients.” ADP‟s float averaged $17.1 billion in FY 2010, so it earned a 3.2% return. Imagine
that interest rates rise 300 basis points over time to more normal (although still low) levels – this
would translate into an extra $540 million in pre-tax profits for ADP, boosting earnings by nearly
30%. In addition, someday employers in this country will begin to hire again, which will also
fuel ADP‟s growth. For both of these reasons, we think ADP‟s earnings are depressed right
now, making the stock cheaper than it appears.

While we think robust economic growth and a rise in interest rates is unlikely in the near term,
when the economy eventually recovers, ADP should have turbocharged earnings growth. We
are prepared to be patient, collecting a healthy dividend, because we believe the stock is worth at
least $60, more than 40% above current levels, in even a remotely normal economic
environment.

Quarterly Conference Call

We will be hosting our Q3 conference call from 1:00-2:30pm EST on Tuesday, October 26th.
The call-in number is (712) 432-1601 and the access code is 1023274#. As always, we will
make a recording of the call available to you shortly afterward.

Conclusion
In their latest Kiplinger’s column, Know When to Bail on Your Stock Picks, John Heins and
Whitney share some tips on when to sell a stock, using AB InBev, Microsoft and BP as case
studies.

We are moving to new offices in mid-October in the GM Building (above the Apple Store) on
767 Fifth Avenue, 18th Floor, New York, NY 10153. Our phone numbers will remain
unchanged.

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

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

September Q3 Year-to-Date Since Inception

T2 Accredited Fund – gross 2.0% 4.4% 17.6% 275.9%
T2 Accredited Fund – net 1.7% 3.6% 14.1% 203.7%
S&P 500 8.9% 11.3% 3.9% 14.2%
Dow 7.8% 11.1% 5.6% 53.4%
NASDAQ 12.1% 12.5% 5.0% 11.2%
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.

T2 Accredited Fund Performance (Net) Since Inception

220
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
-40

T2 Accredited Fund S&P 500

-5-
Appendix A: Bill Gross’s October 2010 Letter
Investment Outlook
William H. Gross | October 2010
www.pimco.com/Pages/StanDruckenmillerisLeaving.aspx?WT.svl=hero_IO

Stan Druckenmiller is Leaving

 The New Normal has a new set of rules. What once pumped asset prices and favored the
production of paper, as opposed to things, is now in retrograde.
 The hard cold reality from Stan Druckenmiller‟s “old normal” is that prosperity and
overconsumption was driven by asset inflation that in turn was leverage and interest rate
correlated.
 Investors are faced with 2.5% yielding bonds and stocks staring straight into new normal
real growth rates of 2% or less. There is no 8% there for pension funds. There are no
stocks for the long run at 12% returns.

So the hedgies are in retreat and, in some cases, on the run. Ken Griffin at Citadel is considering
cutting fees, and Stan Druckenmiller at Duquesne/ex-Soros is packing his bags for the golf
course. Frustrated at his inability to replicate the accustomed 30% annualized returns that his
business model and expertise produced over the past several decades, Stan is throwing in the
towel. Who‟s to blame him? I don‟t. I respect him, not only for his financial wizardry, but his
philanthropy which includes not only writing big checks, but spending lots of time with personal
causes such as the Harlem Children‟s Zone. And at 57, he‟s certainly learned how to smell more
roses, pick more daisies, and replace more divots than yours truly has at the advancing age of 66.
So way to go Stan. Enjoy.

But his departure and Mr. Griffin‟s price-cutting are more than personal anecdotes. They are
reflective of a broader trend in the capital markets, one which saw the availability of cheap
financing drive asset prices to unsustainable heights during the dotcom and housing bubble of the
past decade, and then suffered the slings and arrows of a liquidity crisis in 2008 to date.
Similarly, liquidity at a discount drove lots of other successful business models over the past 25
years: housing, commercial real estate, investment banking, goodness – dare I say, investment
management – but for them, its destination is more likely to be a semi-permanent rest stop than a
freeway. The New Normal has a new set of rules. What once pumped asset prices and favored
the production of paper, as opposed to things, is now in retrograde. Leverage and deregulation
are fading from the horizon and their polar opposites are in the ascendant. Some characterize it in
biblical terms – seven fat years to be followed by seven years of lean. Others like Michael Moore
and Oliver Stone describe it in terms of social justice – greed no longer is good. And the hedgies
– well, they just take their ball and go home. What, after all, is the use of competing if you can‟t
play by the old rules?

Whoever‟s slant or side you choose to take in this transition from the old to the “new” normal,
the unmistakable fact is that future investment returns will be far lower than historical averages.
If a levered Druckenmiller, Soros, or Griffin could deliver double-digit returns in the past, then a
less levered hedge fund community with a lower yielding menu will likely resign themselves to a
high single-digit future. If a “stocks for the long run” Jeremy Siegel grew used to historically

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“validated” 9 to 10% returns from stocks prior to writing his bestseller in the late 1990s, then the
experience of the last decade should at least temper his confidence that the “market” will deliver
any sort of magical high single-digit return over the long-term future. And, if bond investors
believe that the resplendent and abundant capital gains of the past 25 years will be duplicated
from yield levels of 2 to 3% – well, they just haven‟t been to Japan, have they?

There are all sizes and shapes of “investors” out there who have not correctly visualized the
lower return world of the New Normal. The New York Times just last week described the
previous balancing act that pension funds – both corporate and state-oriented – are now
attempting to perform. Their article describes their predicament as the “illusion of savings,” a
condition which features the assumption that asset returns on their investment portfolios will
average 8% over the long-term future. No matter that returns for the past 10 years have averaged
3%. They remain stuck on the notion that the 25-year history shown in Chart 1 is the appropriate
measure. Sort of a stocks for the long run parody in pension space one would assume. Yet
commonsense would only conclude that a 60/40 allocation of stocks and bonds would require
nearly a 12% return from stocks in order to get there. The last time I checked, the investment
grade bond market yielded only 2.5% and a combination of the two classic asset classes would
require 12% from stocks to hit the magical 8% pool ball. That requires a really long cue stick
dear reader, or what they call a “bridge” in pool hall parlance. Best of luck.

The predicament, of course, is mimicked by all institutions with underfunded liability

structures – insurance companies, Social Security, and perhaps least acknowledged or
respected, households. If a family is expecting to earn a high single-digit return on their 401(k)
to fund retirement, or a similar result from their personal account to pay for college, there will
likely not be enough in the piggy bank at time‟s end to pay the bills. If stocks are required to do
the heavy lifting because of rather anemic bond yields, it should be acknowledged that bond
yields are rather anemic because of extremely low new normal expectations for growth and
inflation in developed economies. Even the wildest bulls on Wall Street and worldwide bourses
would be hard-pressed to manufacture 12% equity returns from nominal GDP growth of 2 to 3%.
The hard cold reality from Stan Druckenmiller’s “old normal” is that prosperity and
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overconsumption was driven by asset inflation that in turn was leverage and interest rate
correlated. With deleveraging the fashion du jour, and yields about as low as they are going
to go, prosperity requires another foundation.

What might that be? Well, let me be the first to acknowledge that the best route to prosperity is
the good old-fashioned route (no, not the dated Paine Webber road map utilizing hoped for paper
gains of 12%+) but good old-fashioned investment in production. If we are to EARN IT – the
best way is to utilize technology and elbow grease to make products that the rest of the world
wants to buy. Perhaps we can, but it would take a long time and an increase in political courage
not seen since Ronald Reagan or FDR.

What is more likely is a policy resort to reflation on a multitude of policy fronts: low
interest rates and quantitative easing from the Federal Reserve, near double-digit deficits
as a percentage of GDP from Washington. What the U.S. economy needs to do in order to
return to the “old” normal is to recreate nominal GDP growth of 5%, the majority of which likely
comes from inflation. Inflation is the classic “coin shaving” technique of government since the
Roman Empire. In modern parlance, you print money faster than required, pray that the private
sector will spend it to generate investment and consumption, and then worry about the
consequences in a later decade. Ditto for deficits and fiscal policy. It‟s that prayer, however,
which the financial markets are now doubting, resembling circumstances which in part are
reminiscent of the lost decades in Japan since the early 1990s. If the private sector – through
undue caution and braking demographic influences –refuses to take the bait, the reflationary trap
will never snap shut.

Investors will likely not know whether the mouse has grabbed for the cheese for several years
forward. In the meantime, they are faced with 2.5% yielding bonds and stocks staring
straight into new normal real growth rates of 2% or less. There is no 8% there for pension
funds. There are no stocks for the long run at 12% returns. And the most likely
consequence of stimulative government policies that strain to get us there will be a
declining dollar and a lower standard of living. Stan Druckenmiller is leaving, and with good
reason. A future of low investment returns, and a heap of trouble for those expecting more, is
what lies ahead.

William H. Gross
Managing Director

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Appendix B: Excerpt from Jeremy Grantham’s July 2010 Letter
The entire letter is posted at: www.gmo.com/websitecontent/JGLetter_SummerEssays_2Q10.pdf

“Seven Lean Years” Revisited

The idea behind “seven lean years” is that it is unrealistic to expect to overcome the several
problems facing most developed countries, including the U.S., in fewer than several years. The
purpose of this section is to review the negatives that are likely to hamper the global developed
economy, especially from the viewpoint of how much time may be involved.

First, one of the causes of the financial crisis was the over-indebtedness of consumers in certain
countries, including the U.S., the U.K., and several European countries. As of today, although
they have stopped increasing consumer debt – which itself is unprecedented and has eaten into
consumption – the total improvement in personal debt levels is still minimal. It would take at
least seven years of steady reduction to reach a more normal level. Anything more rapid than this
would make it nearly impossible for the economy to grow anywhere near its normal rate or,
perhaps, at all.

There is in the situation today a nerve-wracking creative tension. At one extreme, massive
stimulus induces government debt to rise to levels that cause a real problem in servicing the debt
– interest and repayment – or at least a crisis of confidence. At the other extreme, a draconian
attempt to hold debt levels while the economy is still fragile runs the risk of causing a severe
secondary economic decline. Deciding which horn of this dilemma to favor will probably prove
to be the central economic policy choice of our time. I am sympathetic to those in power. This is
not an easy choice. My guess, though, is that the best course is less debt reduction now and a
longer, slower reduction later. Overdoing it now may well cause an economic setback for an
already tender and vulnerable global economy that might easily be enough to more than undo all
of the benefits of debt reduction. Indeed, with a weaker economy leading to lower government
income, it might sadly cause debt levels to rise after all. This need for time to cure all ills is one
reason why I picked a seven-lean-year recovery over a more normal and rapid one. The bad
news, though, is that in the end, by hook or by crook, debt levels must be lowered at every level,
especially governmental. There is almost no way that this process will be pleasant or quick.

Second, and the most immediately frightening aspect of the seven-lean-year scenario, is that
although the credit crisis was caused by too much credit on too sloppy a basis, the cure was to
increase aggregate debt by flooding economies with government debt. Dangerously excessive
financial system debt was moved across, with additions, to become dangerously excessive
government debt, with levels of debt to GDP not seen outside of major wars, and seldom then.
Increasingly the “cure” seems more like a stay of execution. With bank crises, there is the
backstop of the central government. For minor countries, the IMF may be a net help, but for
major countries in trouble, the IMF seems outgunned and, if several major countries have a debt
crisis simultaneously, the IMF is clearly irrelevant.

Third, we have lost a series of artificial stimuli that came out of the steady increases in debt
levels and the related asset bubbles. For example, the artificial lift to consumers‟ attitudes
resulting from steadily rising house prices is unlikely to return soon. In fact, some further price

-9-
decline in house prices in the U.S. is probably more than a 50/50 bet, and in the U.K. and
Australia is nearly certain. For sure, that feeling of supreme confidence – counting on the
inevitability of further steady rises in house prices, which was baked into average U.S. opinion
by 2006 (including Bernanke‟s, unfortunately) – is long gone. The direct shot in the arm to the
economy from the rise in economic activity from an abnormally high rate of home construction
and the services associated with an abnormally high turnover rate of existing houses (more
realtors, etc.) is also a distant memory here. So the stimulus from rising prices has gone, and
stock prices, although they have made a strong recovery everywhere in the developed world, are
still way down from their highs of 10 years ago and, notably in the U.S., are still overpriced.
Both the market and house price declines have also reduced confidence in the nest eggs that
people felt they could count on for retirement as well as a little more spending on the way there.
Now consumers are readjusting to a greater need to save and, perhaps unfortunately, a greater
need to work longer. Unprecedentedly, they are paying down some consumer debt. These
changed attitudes will surely last for years.

Fourth, although the financial system has passed its point of maximum stress in the U.S., very
bad things may lie ahead in Europe. And the leverage in the system and the chances of further
write-downs (yet more housing defaults and private equity write-downs, for example) leave
banks undercapitalized and reluctant to lend. Any more shoes dropping here or in Europe, or
elsewhere for that matter, will tend to keep them nervous. The growth in the total U.S. GDP
caused by previous rapid increases in the size of the financial sector has also disappeared, and
with any luck will stay disappeared, for it was not healthy growth in my opinion.

Fifth, the runaway costs in the public sector, particularly at the state and city levels, where
average salaries and pensions ran far above private sector equivalents in a mere 15 years (why,
that would make a good report by itself!), have run into a brick wall of reduced taxes. State and
other municipalities are incredibly dependent on real estate taxes, which are down over 30%
from falling real estate prices and defaults, and also on capital gains rates, which have been hit
by falling asset prices generally. Their legal need to stay balanced is leading to painful cost
cutting, which in turn puts pressure on an economy that is coming to the end of much of the
stimulus. With many of the artificial stimuli of the „90s and 2000s gone, their revenues are
unlikely to bounce back in one or two years, and a double-dip in the economy or new asset price
declines would move their recovery back further.

Sixth, unemployment is high and will also suffer from the loss of those kickers related to asset
bubbles. The U.S. economy appears to have an oddly hard time producing enough jobs to get
ahead of the natural yearly increases in the workforce. (At least for a while, one long-term
economic drag – slowing longer-term growth of the U.S. labor force – becomes an intermediate-
term help in reducing unemployment, but beyond five years, it too will work to reduce GDP
growth, as it has already done in the last 10 years.) Needless to say, unemployment works to
keep consumer confidence and, hence, corporate willingness to invest, below normal.

Seventh, another longer-term problem for the global economy is trade imbalances. The U.S. in
particular cannot continue to run large trade imbalances. In a world growing nervous about the
quality of sovereign debt – even that of the U.S. – domestic sovereign debt levels have exploded.
The added complication and threat to the dollar from accumulating foreign debts just adds risk
and doubts to the system. This is similar to the accumulating surpluses of the Chinese.

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Imbalances destabilize the system. The trick, though, is to reduce these imbalances so that the
process does not reduce global growth. This necessary rebalancing will not be quick or easy.

Eighth, there is a related but different problem with the euro: incompetent management in Spain,
Greece, Portugal, Ireland, and Italy allowed the local competitiveness of their manufactured
goods to become 20% or more uncompetitive with those of Germany. It was never going to be
an easy matter to head this process off, and doing so would have taken some tough actions with
uncomfortable short-term consequences. But they could see the problem building up like
clockwork at about 2% to 3% a year, year after year. This did not result from the banking crisis,
and it was never going to be easy to solve with a fixed currency. The difficulty was implicit in
the structure of the euro from the beginning. Indeed, my friend and former partner, Paul
Woolley,1 believed, and let everyone know it, that from day one this was a fatal flaw nearly
certain to bring the euro down under stress. But one might have hoped for better evasive action
or better survival instincts.

Greece in particular has two largely independent problems. First, it has approximately 22%
overpriced labor (complete with 14 months‟ salary and retirement in one‟s 50s), which can only
be cured by reducing their pay by 22%. This would be tough for any government that does not
have an exceptionally well-established social contract – a commitment from individuals that they
have obligations to help the whole society to prosper or, in this case, muddle through. The
Greeks probably do not have it. Perhaps the U.S. does not either. Would we take being told that
ordinary workers would have to earn 22% less when there are so many other people to blame for
our current problems? The Japanese, in contrast, probably do, but may well have other offsetting
disadvantages.

The second problem for the Greeks is that they have accumulated too many government debts
relative to their ability to pay and, as the doubts rise, so do the rates they must pay such that their
ability to pay falls and the doubts rise further. Temporary bailouts are postponements of a
necessary restructuring. Should the system get out of control, there is the problem of the Greek
debt that is stuffed into other European banks. (My colleague, Edward Chancellor, is writing on
this topic.) I merely want to make the point that these twin Greek problems, which affect, to
varying intensity, the other PIGS, have become an intrinsic part of the “seven lean years,” more
or less guaranteeing slower than normal GDP growth and a long workout period.

Ninth, the general rising levels of sovereign debt and the particular problems facing the euro bloc
and Japan are leading to the systematic loss of confidence in our faith-based currencies. It is
becoming a fragile system that will increasingly limit governments‟ choices in terms of dealing
with low growth and excessive credit.

Finally, and possibly most important of all, on a long horizon there is a very long-term problem
that will overlap with the seven-year workout and make the period even tougher: widespread
over-commitments to pensions and health benefits, which is covered in the next section.

1
Paul Woolley started a center for the study of “Capital Market Dysfunctionality” at the London School of
Economics.
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Appendix V: Frost & Sullivan Report
Frost & Sullivan Evaluates Features and Performance of Satellite Phones
Date Published: 21 Sep 2010

Iridium Proves Its Value

MOUNTAIN VIEW, Calif. – September 21, 2010 – Individuals and organizations routinely
require global, 24x7 access to communications even when a wireless network or a wireline
phone isn‟t available. These users include emergency first responders, maritime users, remote
oil and gas workers, disaster recovery personnel, military and government agents, and countless
others.

In an effort to provide satellite phone users with information on two of the handset products
currently available in the market, and provide an independent evaluation of their service quality,
Frost & Sullivan conducted an exhaustive study of the differences between satellite phone
devices and services and detailed those in a report published September 21, 2010. Frost &
Sullivan‟s intent is to aid those end users and decision makers responsible for purchasing,
deploying, or using personal satellite communications devices.

Frost & Sullivan found it valuable to compare the features and performance of the latest industry
model, Inmarsat‟s IsatPhone Pro, with those of the market leader and industry standard, the
Iridium 9555™ satellite phone. Frost & Sullivan also compared Iridium‟s network of 66 low-
Earth orbit satellites to that of Inmarsat‟s constellation of three geosynchronous orbit satellites.
Both qualitative and quantitative analyses were conducted.

For the qualitative portion of this analysis, the following features for each phone were evaluated:

1. Size and weight

2. Keyboard
3. Display
4. Antenna
5. Battery use and charge life
6. Battery charger
7. Construction and overall feel

For the quantitative section of the analysis, test locations were selected in order to understand the
variations in performance referenced in the FAQ section on an Inmarsat reseller website. These
locations included Anchorage, Alaska; Fort Lauderdale, Florida and Fort McMurray, Canada.

In Frost & Sullivan‟s testing and analysis, the Iridium 9555 satellite phone was found to be a
superior device to the Inmarsat IsatPhone Pro in all locations. Iridium‟s satellite network also
offered better coverage, including the ability to use a satellite phone in Anchorage, Alaska,
where the Inmarsat phone was inoperable. The Iridium phone provided better call quality, and
was faster to find the satellite network and make a call. The Iridium phone offered the ability to
receive an incoming call with the antenna down - something the Inmarsat phone could not do.
The Iridium phone also offered the ability to use the phone as a modem for a laptop for email or

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Web access. However, the Inmarsat IsatPhone Pro was less expensive than the Iridium 9555 and
also had lower per minute usage charges.

“Frost & Sullivan recommends that heavy users of satellite phones, and first responders who rely
on satellite phones for emergency communications, select the Iridium phone and service,”
advises James Brehm, Frost & Sullivan senior consultant and project leader. “We believe that
Iridium is a proven and reliable service that works well in all locations and, therefore, justifies
the added premium for the hardware and service.”

If you are interested in receiving a copy of the satellite phone comparison report, please send an
e-mail to Jake Wengroff, Global Director, Corporate Communications, at
jake.wengroff@frost.com with the following information: your full name, company name, title,
company telephone number, company e-mail address, city, state, and country.

About Frost & Sullivan

Frost & Sullivan, the Growth Partnership Company, enables clients to accelerate growth and
achieve best-in-class positions in growth, innovation and leadership. The company‟s Growth
Partnership Service provides the CEO and the CEO‟s Growth Team with disciplined research
and best-practice models to drive the generation, evaluation, and implementation of powerful
growth strategies. Frost & Sullivan leverages over 45 years of experience in partnering with
Global 1000 companies, emerging businesses and the investment community from 40 offices on
six continents. To join our Growth Partnership, please visit http://www.frost.com.

Contact:
Jake Wengroff
210.247.3806
jake.wengroff@frost.com

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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
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