Whitney Tilson T2 Partners October09

145 E. 57th Street, 10

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Floor, New York, NY 10022

Whitney R. Tilson and Glenn H. Tongue phone: 212 386 7160 Managing Partners fax: 240 368 0299www.T2PartnersLLC.com

November 1, 2009Dear Partner,Our fund declined 2.5% gross and 2.1% net in October vs. -1.8% for the S&P 500, +0.1% for theDow and -3.6% for the Nasdaq. Year to date, our fund is up 32.7% gross and 26.2% net vs.17.1% for the S&P 500, 13.7% for the Dow and 30.5% for the Nasdaq. If the year ended withthese numbers, it would be our best year ever and nearly all of our investors would earn 31.4%net, reflecting the benefit of the high-water mark.It was an ugly month for our long portfolio, as there were no winners of note and many losers.Double-digit percentage decliners included Ambassadors International (-43.7%), Borders Group(-37.6%), Iridium warrants (-30.0%), Iridium (-22.0%), Resource America (-19.8%),Wendy’s/Arby’s Group (-16.5%), General Growth Properties (-15.9%), Winn-Dixie (-15.5%),Huntsman (-12.7%) and Yahoo! (-10.7%).So how were we only down 2.1% during the month? Our short book, which had dampened ourreturns during the big market rally from March through September, finally worked and helpedcushion last month’s downturn. Winners of note among our shorts included MBIA (-47.7%),Conn’s (-44.1%), PMI Group (-43.1%), MGIC (-41.8%), CIT Group (-40.5%), Palm (-33.5%),Pre-Paid Legal Services (-22.2%), Regions Financial (-22.1%), Zions Bancorporation (-21.1%),Garmin (-19.8%), Pulte Homes (-18.0%), Dineequity (-14.5%), Bank of America (-13.8%),Research in Motion (-13.2%), Lennar (-11.6%), Toll Brothers (-11.4%), Alliance Data Systems(-10.0%) and the iShares Dow Jones U.S. Home Construction Index (-9.5%).

CIT Group

In last month’s letter we wrote the following about CIT Group:

“[The] stock strangely bounced as it announced a debt exchange offer which, if unsuccessful, willlead to a bankruptcy filing. In either case, the equity will essentially be wiped out. We’veprofitably shorted CIT in the past so, like MBIA, this is the gift that keeps on giving.”

We shorted all we could during the month and will likely earn a total of approximately onepercentage point of return as CIT filed for bankruptcy this afternoon. Our only regret is that wecouldn’t short more, as it was difficult to get the borrow.

Berkshire Hathaway

Under Warren Buffett’s direction, Berkshire's performance has been nothing short of remarkableover the past two years. His disciplined capital retention looked overly conservative for manyyears, but when the crisis hit there were few buyers and waves of panicked sellers, so he wasable to deploy tens of billions of dollars in some terrific businesses, on highly favorable terms.

Thus, ironically, while Berkshire’s stock is down 30.1% since the beginning of 2008 (-31.8% in2008 and up 2.5% this year), the company’s intrinsic value has actually risen.Berkshire Hathaway reports earnings on Friday and we are confident that it will be a blowoutquarter. Operating earnings of the wholly owned businesses will be mixed: the largestbusinesses, insurance and utilities, probably held up well, but businesses exposed to theconsumer likely did poorly so, in aggregate, earnings should be around $1.0 billion. In addition,investment income should add another $1.2 billion.The truly exciting news is in Berkshire’s investment portfolio, which we calculate grew by over$8 billion in the quarter. This gain was driven by stock appreciation as well as gains in warrants(mostly Goldman Sachs) and the conversion feature in the Swiss Re fixed income investment.Another contributor was the Chinese company, BYD, a $230 million investment that is nowworth over $2 billion. Finally, the equity put contracts generated another roughly $1 billion of gains.In total we expect that Berkshire’s book value grew by approximately $9 billion (after taxes), orapproximately $6,000 per A share. This represents an 8% gain in book value for the quarter,resulting in book value of $80,000 per share, an all-time high for Berkshire. We believe thecompany has never been worth more. We believe Berkshire’s intrinsic value is approximately$135,000/share, a 36% premium to today’s price of $99,000.We believe Berkshire is safe, cheap, growing nicely and has a near-term catalyst (the quarterlyearnings), so that’s why it’s among our largest positions.

Our Presentation at the Value Investing Congress

At the Value Investing Congress on Tuesday, October 20

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, we presented our latest work on thehousing/economic crisis and shared our best long and short investment ideas: Iridium and thehomebuilders, respectively. Attached are the slides we presented.Regarding the former, we think Iridium is a very good business, will be able to grow at a highrate for many years, and the stock, at around 4x EV/EBITDA, is a steal. As for homebuilders(many of the specific stocks are noted on the previous page), we think the national housinginventory overhang today totals nearly 10

million

homes, almost two years supply, and thisnumber is still growing every month. Needless to say, therefore, we see little need for any newhomes, which simply exacerbate the already severe excess inventory problem. We believe thatthe fundamentals for homebuilders are dreadful and will remain so for years, yet the stocks haveroughly doubled since March based on the belief (mistaken, we think) that the housing marketand housing prices have bottomed. When investors realize this is not the case – likely within thenext few months – we see substantial downside in these stocks.

Tax Estimates

As we do every year, we asked our bookkeeper to prepare tax estimates for the fund reflectingrealized gains and losses as well as interest and dividend income through September 30

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. Whileevery investor’s report will be different, the estimates show modest short-term realized gains,which are more than offset by somewhat larger long-term realized losses. In other words,despite our fund’s substantial gains this year, it had net realized losses through September 30

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Overall we expect 2009 to be a very tax efficient year. To receive your individualized taxestimates, simply call or email Kelli at (212) 386-7160 orKAlires@T2PartnersLLC.com.

Conclusion

Thank you for your continued confidence in us and the fund. As always, we welcome yourcomments or questions, so please don’t hesitate to call us at (212) 386-7160.Sincerely yours,Whitney Tilson and Glenn TongueThe unaudited return for the T2 Accredited Fund versus major benchmarks (including reinvesteddividends) is:October Year-to-Date Since InceptionT2 Accredited Fund – gross -2.5% 32.7% 203.2%T2 Accredited Fund – net -2.1% 26.2% 147.3%S&P 500 -1.8% 17.1% 1.8%Wilshire 4500 -5.9% 23.1% 19.6%Dow 0.1% 13.7% 34.6%NASDAQ -3.6% 30.5% -4.6%

Past performance is not indicative of future results. Please refer to the disclosure section at the end of this letter. The T2Accredited Fund was launched on 1/1/99. Gains and losses among private placements are only reflected in the returns sinceinception.

T2 Accredited Fund Performance (Net) Since Inception

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