Mangrove Fund& HFRX GL2 5(102 Prior Month (October 201611•+ +1 1.7" t).6' -1.8% Year to Date (2016)4 +49.1% +0.8% +5.9% Trailing Twelve Months4 +49.2% -1.3% +4.5% Since Inception (April 2010)4 +439.4% +0.6% +108.9% Dear Partners: The Funds had a gain in the month of October 2016 of 11.7%. At month-end, the portfolio's gross exposure was 196% and its net exposure was +1%.s Our performance in October was due to substantial gains from both long and short investments. The rate-of-return oriented portfolio also had small gains from stressed credit and capital structure arbitrage investments which were partially offset by small losses from arbitrage and liquidation investments. We are clearly very pleased by our recent performance, but it is obviously unsustainable. Rather than include our normal discussion of an observation or perspective on the economy or market, we think it would be helpful to reflect upon our performance over the past eight months. In order to keep this letter subway-ride length, we will defer market and economic commentary until next month after the election. There should then be plenty to discuss. Regarding our recent performance, we believe it is important to emphasize to our partners that our portfolio construction is likely to result in some highly volatile months. When we construct our portfolio, we try to select both long and short investments that will be profitable on an individual investment level and we use our aggregate short exposure to reduce market risk. Importantly, we do not construct our short portfolio to reduce the idiosyncratic or industry risk of our long investments. Because each of our investments is chosen to produce its own profits, it is possible for both sides of our portfolio to make gains or losses in a given period. While this can be spectacular, as was the case last month, it can also result in substantial losses if we get the investments on both sides of our portfolio wrong. Even though w