Second Quarter Review | July 19, 2010

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Markets turned hostile in Q2 on the back of sovereign default threats in the Eurozone and
concerns of a slowdown in China. Fortunately, as highlighted in our Q1 letter, we were
cognizant of these potential risks and took down long exposure and added protection to the
portfolio. We ended the quarter up approximately 1.87% (+9.08% estimated net YTD
composite through June 30) despite an -11.4% decline in the S&P 500 and a -9.6% decline
in the Eurostoxx index.

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Some of our winners for the quarter included our short European exposure and our
investments in Chrysler, Barneys and Citigroup. With regard to Chrysler, our first lien debt
was repaid at 101 and a portion of our 2nd lien debt was repaid as well. We expect to be
taken out of our entire position by the end of the year.

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Istithmar, the equity sponsor of the Barneys LBO, infused additional capital into the retailer
in Q2 and the Barneys term loan continues to receive cash interest payments. While we
marked our mezzanine piece down at the end of 2008, the majority of our investment is in
the term loan which is in a senior position in the capital structure.
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We sold our entire Citigroup common equity position in Q2. This is still an interesting
leveraged play on worldwide economic recovery, but given the appreciation of the stock
price and our renewed concerns about GDP growth and the ramifications of financial reform,
we decided to liquidate this investment. Other financial positions fared less well in Q2. We
tendered some of our position in RBS hybrid preferreds back to the company but the
remainder of that position along with other related names such as Lloyds and
Commerzbank struggled. At quarter end RBS hybrid preferreds were trading at
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approximately 45% of par. At this level we believe there is solid upside potential.

Our investment in structured credit was also trimmed back in Q2 as prices reached levels
where forward yields were too low relative to risk to warrant maintaining these positions.
At the peak, the Fund had approximately 14% in structured credit but by quarter end, the
position size has been reduced to approximately 3% of the portfolio.
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The European banks are currently undergoing stress testing. Although there is a high
likelihood that the majority of banks will pass the tests, we remain concerned about the
funding capabilities of the European banking system. On average, European banks have
loans equaling 135% of core deposits as opposed to US and Asian banks where deposits
exceed their loans. This European bank reliance on wholesale funding leaves the sector
vulnerable to a liquidity crisis if markets were to lose confidence. We calculate that the
banks of the peripheral European countries (Portugal, Ireland, Italy, Greece and Spain) owe
nearly €€700 billion through interbank debt to the banks of predominantly European
countries. With bank assets representing on average 3.5x the economic output of Europe,
the potential bailout of an individual sovereign’’s banks could be very expensive. The most
 likely way to avoid a restructuring of the European peripheral countries is for massive
quantitative easing by the ECB.

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As a result of these concerns and appreciation in many of our investments, we decided to
cut back risk in the portfolio, ending Q2 with a 36% cash and cash equivalent position. This
will provide dry powder to deploy in various credit and equity special situations.

Additionally, as the markets fell during the quarter, volatility increased. This helped our

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hedges which are almost all ““long volatility”” positions. The challenge, however, is that
these same hedges are more expensive to hold going forward. One hedge that worked
against us, however, was our position in Japan. The Yen continues to be viewed as a safe
haven currency and appreciates during market selloffs. Likewise, Japanese Government
Bonds (JGBs) have rallied to very low yields. Our thesis is based on Japan’’s difficult fiscal

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position and sluggish economy. The potential payoff profile is very compelling should we
prove to be correct.

The markets remain highly correlated. This challenging investing environment has
persisted since late 2007. Arguably this is not the ideal environment for a typical hedge
fund model. We don’’t endeavor to be typical. High correlation markets lend themselves to
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different opportunities, ones we believe we are well positioned to capture. Nimbleness,
asset allocation and portfolio positioning become paramount during such periods and our
relative performance in May and June reflect this.

Personnel Update

On the personnel front, we are pleased to announce that we have hired a Chief Risk Officer
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whose primary responsibilities will be to work on the overall strategy, policies, and limit
structures (tolerance) for the management of risk across the organization. He will work
closely with the Investment Committee to assist with the identification and management of
portfolio risk, and on implementing hedges and risk mitigation strategies.

New Fund Term Options

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Per our letter dated July 15, 2010, we are offering our investors a new investor level gate
liquidity option. Additionally, commencing October 1, 2010, we will be offering new
tranches of shares with reduced fees to any investor having an aggregate investment
amount in Perry Partners in excess of $275 million. In the event that you would like
additional detail, please contact our Marketing and Investor Relations team at
investorrelations@perrycap.com.

Past performance is not a guarantee of future results. There can be no assurance that these or comparable returns will be
achieved by Perry Partners’’ investments, either individually or in the aggregate. All returns shown above reflect the
reinvestment of dividends and interest and the deduction of all fees and expenses. Although we believe that the
performance goals set out in this letter are realistic, it is possible that they will not be achieved and that you could even
lose a substantial portion of your investment. The information contained in this letter represents neither an offer to sell

***For more hedge fund letters, click here to visit MarketFolly.com ***
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 nor a solicitation of an offer to buy any securities. Securities in this fund will only be offered through a current offering
memorandum and appropriate subscription documents. Copies of the offering memorandum may be obtained from
Investor Relations (investorrelations@perrycap.com) in our New York office and will be made available upon request.

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Offers will not be made in any jurisdiction in which the making of an offer or the acceptance thereof would not be in
compliance with the laws of such jurisdiction. Investors should read the Confidential Private Offering Memorandum
carefully, especially the ““Risk Factors”” section, before making a decision to invest in Perry Partners. Additional
information is available through our password protected website (www.perrycap.com).

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 Estimate Exposure Report | June 30, 2010

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Performance Attribution by Strategy MTD QTD YTD Performance (estimate)
Total Fund Composite S&P 500
Equities North America -0.02% 0.32% 1.54%
Latin America / Other -0.01% -0.01% -0.02% MTD 0.20% -5.23%
Europe -0.21% 0.22% 0.57% QTD 1.87% -11.43%
Asia 0.12% 0.35% 0.42% YTD 9.08% -6.65%
-0.12% 0.88% 2.51%

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Initial Growth of $1
Arbitrage / North America -0.02% -0.07% 0.28% (10/1/1993 through 6/30/2010)
Hard Catalyst Latin America / Other 0.00% 0.00% 0.00%
$8
Europe 0.00% -0.15% -0.13% $7
Asia 0.00% -0.09% -0.09%
$6
-0.02% -0.31% 0.06%

$4
Corporate Credit North America 0.15% 0.08% 2.66% $3

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Latin America / Other 0.00% 0.00% 0.01% $2
$2
Europe -0.47% -1.28% 0.45%
Asia -0.06% -0.27% 0.03%
$0
-0.38% -1.47% 3.15% Perry Intl 1
S&P 500 90 Day T-Bill

Structured Credit North America 0.12% 0.30% 0.92%

Latin America / Other 0.00% 0.00% 0.00% Assets Under Management (estimate)
Europe 0.00% 0.03% 0.02%
Asia 0.00% 0.00% 0.00% Perry Partners LP $1,617 mm
0.12% 0.33% 0.94% Perry Partners International $4,942 mm
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Other Vehicles* $1,148 mm
Credit Derivatives / North America 0.06% 0.39% 0.36% Total Firm AUM $7,707 mm
Tail Risk Latin America / Other -0.09% -0.07% -0.08%
Europe 0.33% 1.69% 1.61%
*Includes Perry Real Estate Fund, Perry Private Opportunities Fund, Perry GRF,
Asia -0.16% -0.06% -0.18% Perry CTRPF and a Separately Managed Account
0.14% 1.95% 1.71%

Private Equity / Illiquid North America 0.10% 0.19% 0.61% Top Long Positions
Latin America / Other 0.00% -0.02% -0.20% Position 1 15.77%
Europe 0.16% 0.12% -0.07% Position 2 4.54%
Asia -0.01% -0.04% 0.07% Position 3 4.12%
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0.25% 0.25% 0.41% Position 4 4.01%

Position 5 3.05%
Legacy Side Pocket 0.21% 0.24% 0.30% No other positions greater than 3%

Total Performance Attribution (estimate) 0.20% 1.87% 9.08% Top Short Positions
Performance attribution relates to the total fund composite return Position 1 -12.33%
Position 2 -8.47%
Perry Partners International Statistics (Since Inception) Position 3 -4.29%
Perry Partners International Benchmark (S&P 500) Position 4 -3.49%
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Annualized ROR 12.25% 6.96%

Standard Deviation 7.32% 15.49% No other positions greater than 3%
Sharpe Ratio 1.17 0.21
Correlation 0.53 1.00 Unaudited Non-Side Pocket
Beta 0.25 1.00 FAS 157 Breakdown (6/30/10)
Annualized Returns in -0.47% -16.52% Assets Liabilities
Negative S&P 500 Months
Level I 50.77% 77.35%
Level II 36.89% 19.55%
Level III 12.34% 3.10%
 Estimate Exposure Report | June 30, 2010

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Number of
Portfolio Exposure by Strategy Long Short Equity Portfolio Liquidity
Strategies 1

Equities North America 18.77% -10.40% 16 % portfolio < 5 days 76%

Latin America / Other 0.12% 0.00% 1 % portfolio 5-10 days 8%
Europe 2.49% -2.56% 4 % portfolio 10-25 days 12%
Asia 2.56% -2.43% 7 % portfolio >25 days 4%

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23.94% -15.39% 28 *Based on average trading volume of the flagship funds (reflects
the delta adjusted MV for all equity and equity linked positions
Arbitrage / North America 1.93% -0.13% 4 that trade on an exchange)
Hard Catalyst Latin America / Other 0.00% 0.00% 0
Europe 0.00% 0.00% 0
Asia 0.00% 0.00% 0
1.93% -0.13% 4

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Corporate Credit North America 10.05% -0.15% 9
Latin America / Other 0.00% 0.00% 0
Europe 10.29% 0.00% 8
Asia 2.49% -0.17% 4
22.83% -0.32% 21

Structured Credit2 North America 3.04% -4.34% 4

Latin America / Other 0.00% 0.00% 0
Europe 0.00% -0.45% 1
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Asia 0.00% 0.00% 0
3.04% -4.79% 5

Credit Derivatives3 / North America 0.68% -0.99% 3

Tail Risk4 Latin America / Other 0.03% 0.00% 1
Europe 3.50% -32.62% 7
Asia 19.84% -16.65% 8
24.05% -50.26% 19

Private Equity / Illiquid North America 2.84% 0.00% 8

Debt / Real Estate5 Latin America / Other 0.39% 0.00% 2
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Europe 2.43% 0.00% 4

Asia 0.46% -0.06% 2
6.12% -0.06% 16

Legacy Side Pocket5 3.75% 0.00%

Total Portfolio Exposure 85.66% -70.95% 93

Notes
The fund maintains an 10% position in Treasury money market funds which it considers to be cash & cash equivalents and are therefore excluded from the above analysis.
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For purposes of this report, long equity options are valued off of premium, short equity options at delta adjusted notional value and option combinations, where the
exposure is limited to the difference in strike prices, are adjusted to reflect the net delta exposure.
1
The strategy count includes only those strategies that are at least 15 basis points of the portfolio.
2
Included in this strategy are CDS on CMBS indices representing a short notional 4.13% of capital.
3
Please note this is a non risk-adjusted notionalized number which cost the fund approximately $23 million annually to maintain. In addition, this report does not reflect the
market value of those positions in which the firm is both the buyer and seller of protection on the same reference obligation even if such positions are held at different
counterparties.
4
This strategy includes a net delta adjusted short currency position representing a notional 22% of capital, which is excluded from the above analysis. Net currency option
premiums at risk include exposure to the Swiss Franc, Chinese Renminbi, Euro, Australian Dollar and Japanese Yen and may not be directly against the US Dollar.
5
Third party investments comprise roughly 2% of the Private Equity / Illiquid Debt / Real Estate and Legacy Side Pocket strategies.