RNs Dear Limited Partner, WESTERN STANDARD PARTNERS, LP May 1, 2012 Performance for the month of April 2012 was +1.9% net of fees.' The index most comparable to Western Standard Partners, LP (the "partnership") is the Russell 2000, which was -1.5% for the month. ae a. 2 2.0% 1.0% 0.0% -1.0% -2.0% April 2012 Western Standard ■ April 2012 L9% Russell 2000 -1.5% 10.7% - 500 -0.6% 11.9% Year to Date 8.2% Return Since Nov 1, 2008 175.0% 140.0% 105.0% 70.0% 35.0% 0.0% Cumulative Return 1 Western Standard 155.6% 30.8% Russell 2000 ■ Cumulative 59.7% 14.3% MS00 55.9% 13.5% Annualized April 2012 Focus of Western Standard The most significant investments of the partnership in April were: • Increased exposure to common equities —The partnership added 4 new positions and increased our ownership of 15 existing positions. We reduced our position size in 9 common equities and fully exited 5 common equities. Common equities represent 89.0% of partnership capital at month-end; 42.6% are common equity investments with no catalyst, while 46.4% are common equity investments with a catalyst. • Decreased exposure to short positions — The partnership initiated 5 new short sales, increased our position size in 7 short sales, decreased our position size in 4 short sales, and fully covered 8 short sales. • Decreased exposure to bonds —The partnership decreased 1 bond position. The partnership is focused on increasing both long and short positions in small cap stocks. Historically, small cap stocks have displayed significant volatility. As the partnership invests a larger percentage of capital in volatile assets, the volatility of monthly returns will similarly increase. Current Portfolio Construction At month-end, the partnership had gross exposure of 126.8% and net exposure of 73.5%. Similar to prior months, the level of net exposure appears very high but this is principally the result of the partnership's 9.8% position in lo