June 8, 2009Dear Pershing Square Investor:The Pershing Square funds’ outperformed the major market indexes for the first quarter of 2009and for the year to date as set forth below:

Portfolio Update

The first five months of this year were among the most productive periods of Pershing Square asmeasured by accomplishment rather than hours worked. Over the last few months, there wasalmost always something material going on at Pershing Square about which we would have likedto have written, but often could not because of confidentiality or strategic reasons. Unfortunately,we have to assume that each of our communications becomes available publicly so we can onlyshare in writing what we are willing to share with the public at large. Since time was aparticularly scarce resource over the last few months and because I do not delegate the writing of our quarterly letters, I deferred writing to you until we had some closure with respect tosignificant investments that we were either buying or selling, or with respect to material

Past performance is not necessarily indicative of future results. Please see the additional disclaimers and notes to performance results at the endof this letter.

2developments with respect to current holdings. Let me bring you up to date on these situations.

Target Corporation

While we lost the vote, we achieved many of the objectives we identified prior to launching theproxy contest. Our principal objectives included: (1) catalyzing Target to exit the credit andfunding risk associated with its credit card operation, (2) highlighting the undervaluation of thecompany, (3) improving the company’s governance and board composition, and (4) attemptingto make Target a more open and responsive company.In the first few weeks of the contest on its proxy road show, Target management stated that itwould revisit its initial credit card transaction and would be supportive of a more completecredit-risk and funding-transfer solution. While these statements from management took someof the wind out of the sails of our proxy contest (some holders felt that they did not need ournominees on the board in light of the company’s apparent commitment to act on our previoussuggestions), our goal in the proxy contest was not principally to add directors to the board, butrather to increase the long-term value of our stake in the company.We invested approximately seventeen cents per Target share owned by the funds plus significanttime and energy to run the proxy contest. Over the course of the election, Target stock increasedabout $14 per share, vastly outperforming its principal competitors – Wal-Mart and Kohl’s – andthe retail index over the same period. As a result of the contest, we believe that shareholdervalue will be materially enhanced by the company’s new thinking about a credit card transactionalong the lines of our original proposal to the company in mid 2007. We also believe that theproxy contest further energized management and the board who will likely work that much morediligently to address the company’s operating under-achievements and governance shortfalls thatwe highlighted during the contest.While we knew it would be a significant achievement to win the contest, we underestimated thedifficulty of a so-called dissident shareholder getting board seats in a company with a successfullong-term track record. The principal impediments to our success included the lack of auniversal proxy card and the fact that proxy voting is not anonymous. While many of theshareholders wished to vote for some of our nominees – Jim Donald and I received a low 20spercentage of the vote according to Target – in order to do so shareholders had to give up theirright to vote for some of the company’s nominees (they could only vote on the company’s proxycard or our card, not both) and risk their relationship with company management.We are strongly of the view that while boards are better today than they were a decade ago, theycontinue to be far from optimal. Many directors depend on the income they receive from servingon boards and, as a result, are reluctant to challenge management on strategy, risk-taking, orcompensation. Often, there are business, social, and or charitable connections among thedirectors that reduce their independence or willingness to speak up. Many CEOs prefer directorswith no experience in a company’s principal lines of business because it makes it more difficultfor them to challenge the CEO. Often times, as is the case with Target, board member termsextend well beyond the period where they can continue to bring fresh perspectives to the board.

3While the principal objective of the Target proxy contest was to maximize the value of ourinvestment in Target, we believe the follow-on impact of the contest will lead to boardgovernance improvements at other companies as boards examine their practices to determinewhether they are at risk to shareholder scrutiny and potential future challenges.We continue to believe that Target stock offers an attractive potential reward for the risk of ownership at current prices, particularly in light of the motivational impact on the company of the recent proxy contest. As a result, we anticipate that, subject to capital additions andredemptions, Target will remain a longer-term holding for the funds. We, of course, maintainthe flexibility, as we do with most of our other holdings, to redeploy some or all of the capital wehave invested depending on future developments at the company and in our portfolio, and basedupon our continual assessment of Target’s relative attractiveness compared to other opportunitiesthat we identify in the future.By next proxy season, we expect that the new SEC-mandated rules will materially reduce thecost of a proxy contest and level the playing field between incumbent boards and shareholdernominees. If made law, these changes will herald a new era in improved and more shareholder-responsive boards. More efficient proxy access will put us and others in a position to moreeasily to replace directors at Target or other companies that do not live up to commitments theyhave made to their owners.

Borders Group

At this year’s annual investor meeting in January, I predicted that Borders would either be thebest performing stock on the New York Stock Exchange or the worst. Fortunately for us, year-to-date it appears to be the former as Borders stock has appreciated 985%. The appreciation of the stock can largely be attributed to the change in management that took effect at the beginningof the year and the business progress this team has made since that time. As you likely know, aformer Pershing Square investment team member, Mick McGuire, became non-executivechairman of Borders. Mick found Ron Marshall, a world-class retail turnaround executive, andthe board hired him as CEO. Ron has done a superb job in a short period of time to begin toright the ship. Since Ron joined the board, the company has significantly cut costs, reducedcapital expenditures and investment in inventory while improving working capital managementand in-store margins. Sales have continued to decline, but appear to have stabilized at a lowerlevel than last year.We have an economic interest in Borders of approximately 40% of shares outstanding includingcommon stock, warrants, and total return swaps. We received 14.7 million warrants originallystruck at $7.00 per share in connection with a $42.5 million loan we made to the company inMarch of 2008 and our commitment to purchase Borders’ foreign subsidiaries in certaincircumstances. Our commitment to purchase these subsidiaries could only be exercised at aprice we believed to be materially below the fair value of these foreign subsidiaries and wassubject to a no-material-adverse-change condition.Effective March 30, 2009, we agreed to extend our $42.5 million loan to the company for anadditional year. In exchange for this extension, our commitment to purchase the foreign