1212 Avenue of the Americas, 3rd Floor New York, NY 10036 Tel: 212.792.7999 Fax: 212.531.

6153

Report for Quarter Ended December 31, 2011 Dear Partners, This is the quarterly letter for Kerrisdale Partners LP for the quarter ended December 31, 2011. Kerrisdale Partners LP Net of Fees 17.6% 198.3% 66.3% 38.7% 588.0% Barclay Hedge Fund Index(2) 1.7% -5.3% 10.9% 11.5% 17.1%

Q4 2011 2011 2010 2009(1) Since Inception

S&P 500 11.8% 2.1% 15.1% 22.6% 44.0%

(1) 2009 performance only includes 7/1/09 to 12/31/09, due to fund launch date of July 1, 2009. (2) Barclay Hedge Fund Index data as of January 18, 2012.

700.00 600.00 500.00 400.00 300.00 200.00 100.00 0.00

Fund Perform ance

Indexed (6/30/09 = 100)

The fund was up 17.6% in the quarter ended 12/31/11 net of fees, comprised of monthly returns of 10.0%, 5.3% and 1.5% for October, November and December, respectively. In comparison, the S&P 500 was up 11.8% over the quarter, comprised of monthly returns of 10.9%, -0.2% and 1.0%. The Barclay Hedge Fund Index was up 1.7% over the quarter, comprised of monthly returns of 3.5%, -1.3% and -0.3%. Since inception, the fund is up 588.0% net of fees. In comparison, the S&P 500 is up 44.0% and the Barclay Hedge Fund Index is up 17.1% during that time. As in previous quarters, we continued to benefit from the share price declines in U.S.-listed Chinese companies that in our opinion are falsifying their public financial statements. This sector has been an integral contributor to our returns over the past six quarters. Our top five positive contributors were four shorts in Chinese companies that we believe are defrauding investors, and our long position in Aeropostale Inc. Our top five negative contributors were shorts in three Chinese-based companies, as well as long positions in Activision Blizzard Inc. (ATVI) and the gold exchange-traded fund GLD. Our top five negative contributors included ChinaCast Education Corp., which we wrote about in our report here. The ChinaCast saga, most recently the subject of this DealBook article, is still unfolding.

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Kerrisdale P artners LP - Net S&P 500

Apple, Inc. Attractive investment opportunities come in all shapes and sizes. Often, we find ourselves investing in areas we would not have expected to venture into, but which we havent been able to resist after careful analysis. As such, we typically dont expect a top long holding to be one of the largest companies in the world, let alone the second largest company in the world by market capitalization. Yet after examining AAPL, we decided that the stock presented an attractive long opportunity and it comprised one of our largest positions as of year-end. Apple, at todays prices, is an unusual stock. Fuelled by two products that have been around less than a decade, it nearly matches Exxon Mobil as the worlds highest valued business. Yet when looking at its financials and the companys near-term growth outlook, the company is atypically undervalued. It trades at 15x trailing FY 2011 earnings and 12x expected FY 2012 earnings. Yet that excludes the $81bn of cash and marketable securities on the companys balance sheet as of 9/30/11 (and which will probably be more than $90bn when the company reports its 12/31/11 financials). This cash and securities hoard comprises 20% of the companys market capitalization. Netting out the cash and securities, the company trades at 12x trailing FY 2011 earnings and 9x expected FY 2012 earnings. APPL has excellent earnings quality, in that its GAAP income very much approximates the companys cash flow from operations less capital expenditures. Yet despite these low valuation multiples, AAPL is experiencing rapid near-term growth. In the last twelve months, Apple sold 72 million iPhones, 32 million iPads, 43 million iPods, and 17 million computers. Gartner forecasts 2012 sales totaling 119 million iPhones and 48 million iPads, implying 50%-60% growth rates in the companys two largest segments which constituted a combined 60% of FY 2011 sales. On top of this, there are computer sales growing at 20%+, iTunes growing at 30%+, the potential release of an Apple TV, and a more efficient use of Apples huge cash reserves for dividends or repurchases. Fuelling part of the growth is the Asia-Pacific market (i.e. China), which experienced 174% revenue growth from 2010 to 2011. The Asia Pacific region may surpass the Americas in sales during 2012 and comprise more than 30% of the companys FY 2012 sales. The bear case for Apple is that at some point, its products will go out of fashion and/or become surpassed technologically. We recognize this and there is somewhat of a short-term orientation to our investment. But we doubt that such troubles will befall Apple over the next 6-12 months, and currently, Apple is gaining market share because it is the only manufacturer with complete control over how hardware and software are packaged together. On platforms where battery life is of utmost importance, the ability to efficiently design software and hardware that work together is a long-term sustainable competitive advantage that no other manufacturer has. At todays valuation and with the current operating momentum, we have been able to get sufficiently comfortable with making AAPL one of our largest longs.

Sterling Shoes - RIP In November 2010, we prepared a writeup on Sterling Shoes in which we explained why we were long the stock. In October 2011, less than a year later, the company filed for bankruptcy. This is the second time since launching our fund in July 2009 that we have seen a long position file for bankruptcy. In both cases, the companies have operated the same type of business: mediocre retailers with tired products and too many stores. Sterling also had debt, which accelerated its decline. Our other bankrupt retailer was Jennifer Convertibles, and we wrote about our experience in our letter for the third quarter of 2010. It is clear that we need to be more careful investing in struggling retailers with same-store sales declines and deteriorating margins. Sometimes they turn around, but usually they dont. The hidden leverage of operating leases continually catches us unaware.

Kerrisdale Capital Management, LLC

1212 Avenue of the Americas, 3rd Floor |

New York, NY 10036

| Tel: 212.792.7999

| Fax: 212.531.6153

At least, the monetary damage was not especially material because the position had become quite small over time, as we saw the operating metrics continue to deteriorate.

End of Year Remarks We ended the year with a nearly 200% return net to investors, generating positive returns in 11 out of 12 months. We beat the market in each quarter. Since inception, our returns have substantially exceeded the markets returns, and we have outperformed the S&P 500 in 8 of 10 quarters. Out of thirty months since launching the fund, we have had a negative performance in only three of them and generated returns higher than 10% in seven of them. More than anyone, we recognize that our unusually high and consistently positive returns are misleading. First, much of our gains were generated off of a small capital base. We ended the year with approximately $60 million under management. Second, the consistency of our positive returns is an aspect I would have not predicted when launching the fund. We are directional investors, and make most of our returns by predicting whether security prices go up or down, rather than exploiting small discrepancies between them. Directional investing typically lends itself to lumpier returns than those weve seen. We continue to be confident about the investments in our portfolio. Regardless of how the overall market performs, we expect our holdings to fare well over the long-term. Thank you and please dont hesitate to contact me with any questions.

Sincerely, Sahm Adrangi

Disclosure: This is not an offering or the solicitation of an offer to purchase an interest in Kerrisdale Partners LP (the Fund). Any such offer or solicitation will only be made to qualified investors by means of a confidential private placement memorandum and only in those jurisdictions where permitted by law. An investment in the fund is speculative and involves a high degree of risk. Opportunities for withdrawal, redemption and transferability of interests are restricted, so investors may not have access to capital when it is needed. There is no secondary market for the interests and none are expected to develop. The fees and expenses charged in connection with this investment may be higher than the fees and expenses of other investment alternatives and may offset profits. No assurance can be given that the investment objective will be achieved or that an investor will receive a return of all or part of his or her investment. Investment results may vary substantially over any given time period. The performance data represents the performance of the Fund. The results labeled net of fees reflect the deduction of: (i) an annual asset management fee of 1.0%, charged quarterly; (ii) a performance allocation of 15%, taken annually, subject to a high water mark; and (iii) other expenses incurred by the Fund. Results are compared to the performance of the S&P 500 Index for informational purposes only. The Funds investment program does not mirror the S&P 500 Index and the volatility of the Funds investment program may be materially different. The performance figures include the reinvestment of any dividends and other earnings, as appropriate. Past performance is not necessarily indicative of future results. The holdings identified in this letter do not represent all of the securities purchased or sold in the Fund. Performance results in separately managed accounts will be different from the performance results of Kerrisdale Partners LP. Kerrisdale Capital Management, LLC or affiliated entities (Kerrisdale) is not responsible for any liabilities resulting from errors contained in this communication. Kerrisdale will not notify you of any errors that it identifies at a later date.

Kerrisdale Capital Management, LLC

1212 Avenue of the Americas, 3rd Floor |

New York, NY 10036

| Tel: 212.792.7999

| Fax: 212.531.6153