riP The Mangrove Partners Fund, The Mangrove Partners Fund, L.P.' HFRX Global Hedge Fund Index' S&P 5002 (dividends reinvested) Prior Month (August 2012)3 +4.0% +0.5% +2.3% Quarter to Date (Q3 2012)3 +11.3% +1.1% +3.7% Year to Date (2012) 3 +24.1% +2.3% +13.5% Trailing Twelve Months3 +33.1% -1.3% +18.0% Since Inception (April 2010) 3 +162.4% -3.5% +26.5% Note: MI returns for The Mangrove Partners Fund, LP. shown net of all fees to investors September 7, 2012 Dear Partners: Our net return for the month of August 2012 was a gain of +4.0%. During this period, the fund maintained its high gross and low net exposures, with approximately 171% gross exposure and, in the long/short portion of the portfolio, +2% net exposure at month end." We are increasingly concerned that the prices of many assets reflect broad-based complacency. Notably, volatility has dropped and credit spreads have narrowed. We believe investors are no longer being adequately compensated for many of the risks they are taking and we therefore sold all of our performing credit that was trading above par. We have also taken steps to hedge market risk in our rate of return-focused strategies through the use of derivatives. While these steps may reduce the pain we experience in a sell-off, they are unlikely to fully protect us. Current market sentiment strikes us as absurd and unsustainable. It appears to place an inordinate amount of faith in Fed Chairman Bernanke and ECB President Draghi. Yet history makes plain the folly of believing a single person or institution is omniscient about the economy or even that a single central banker can effectively stave off an economic contraction. To the contrary, the evidence would suggest that excessive meddling and jawboning is ultimately counterproductive. Alan Greenspan (the "Maestro") attempted to avoid the pain of the Asian crisis by inflating a stock market bubble. He then created a housing bubble to alleviate the hangover f