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Second Quarter Review | July 19, 2010

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. 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. 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. 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 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. 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

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likely way to avoid a restructuring of the European peripheral countries is for massive quantitative easing by the ECB. 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 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 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 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 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 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

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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. 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

MTD QTD YTD

Total Fund Composite S&P 500Equities 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%

North America -0.02% -0.07% 0.28%Latin America / Other 0.00% 0.00% 0.00%Europe 0.00% -0.15% -0.13%Asia 0.00% -0.09% -0.09%

-0.02% -0.31% 0.06%

Corporate Credit North America 0.15% 0.08% 2.66%Latin America / Other 0.00% 0.00% 0.01%Europe -0.47% -1.28% 0.45%Asia -0.06% -0.27% 0.03%

-0.38% -1.47% 3.15%

Structured Credit North America 0.12% 0.30% 0.92%Latin America / Other 0.00% 0.00% 0.00%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 mmOther Vehicles* $1,148 mm

North America 0.06% 0.39% 0.36% Total Firm AUM $7,707 mmLatin America / Other -0.09% -0.07% -0.08%Europe 0.33% 1.69% 1.61%Asia -0.16% -0.06% -0.18%

0.14% 1.95% 1.71%

Private Equity / Illiquid North America 0.10% 0.19% 0.61%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%

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%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%Annualized ROR 12.25% 6.96%Standard Deviation 7.32% 15.49% No other positions greater than 3%

Sharpe Ratio 1.17 0.21Correlation 0.53 1.00Beta 0.25 1.00

-0.47% -16.52% Assets Liabilities

Level I 50.77% 77.35%Level II 36.89% 19.55%Level III 12.34% 3.10%

Performance Attribution by Strategy Performance (estimate)

Arbitrage /Hard Catalyst

Credit Derivatives /Tail Risk

Assets Under Management (estimate)

Initial Growth of $1(10/1/1993 through 6/30/2010)

*Includes Perry Real Estate Fund, Perry Private Opportunities Fund, Perry GRF, Perry CTRPF and a Separately Managed Account

Annualized Returns in Negative S&P 500 Months

Top Long Positions

Top Short Positions

Unaudited Non-Side PocketFAS 157 Breakdown (6/30/10)

$7

$3

$2

$0

$2

$4

$6

$8

1Perry Intl S&P 500 90 Day T-Bill

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Estimate Exposure Report | June 30, 2010

Long ShortNumber of

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%

23.94% -15.39% 28

North America 1.93% -0.13% 4Latin America / Other 0.00% 0.00% 0Europe 0.00% 0.00% 0Asia 0.00% 0.00% 0

1.93% -0.13% 4

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

22.83% -0.32% 21

Structured Credit2 North America 3.04% -4.34% 4Latin America / Other 0.00% 0.00% 0Europe 0.00% -0.45% 1Asia 0.00% 0.00% 0

3.04% -4.79% 5

North America 0.68% -0.99% 3

Latin America / Other 0.03% 0.00% 1Europe 3.50% -32.62% 7Asia 19.84% -16.65% 8

24.05% -50.26% 19

North America 2.84% 0.00% 8Latin America / Other 0.39% 0.00% 2Europe 2.43% 0.00% 4Asia 0.46% -0.06% 2

6.12% -0.06% 16

Legacy Side Pocket53.75% 0.00%

Total Portfolio Exposure 85.66% -70.95% 93

NotesThe 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.

Credit Derivatives3 /

Tail Risk4

Arbitrage /Hard Catalyst

Portfolio Exposure by Strategy Equity Portfolio Liquidity

*Based on average trading volume of the flagship funds (reflects the delta adjusted MV for all equity and equity linked positions that trade on an exchange)

Private Equity / Illiquid

Debt / Real Estate5

5 Third party investments comprise roughly 2% of the Private Equity / Illiquid Debt / Real Estate and Legacy Side Pocket strategies.

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 theexposure 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.

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.

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 themarket 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.