EFTA00307543.pdf

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 low-risk credit and 1.0% position in arbitrage securities. The partnership's beta-adjusted net exposure is 31.3%. Beta is a measure of correlation to the market and therefore our correlation is low. 1 EFTA00307543 The partnership cannot predict the moves of the market so exposure is managed to be close to zero. The partnership generates returns through security selection. Minimizing exposure to the market is part of the partnership's approach to risk management. April 2012 Average 150.0% 125.0% 100.0% 75.0% 50.0% 25.0% 0.0% Long Short Net Gross 150.0% 125.0% 100.0% 75.0% 50.0% 25.0% 0.0% April 2012 Month End 1 1 Long Short Net Gross In May, the focus of Western Standard will be to search for under-valued small cap common equities, additional arbitrage investments, and over-valued stocks to sell short. Investment Highlight Asia Satellite Telecommunications ("1135 HK") is Asia's premier owner and operator of satellites serving 50 countries in the Asia Pacific region and covering two-thirds of the world's population. 1135 HK is one of two satellite operators with a license to serve the fast growing and restricted Chinese market, providing 1135 HK significant returns on its invested capital. The partnership searches for companies with competitive moats and, as a result of 1135 HK's significant regulatory advantage, invested in the company at an average cost of HKD $16.80 per share. Established in February 1988, 1135 HK has four satellites in prime geostationary positions orbiting the Asian landmass and two more satellites in construction. The company is —74% owned by a joint-venture between CITIC, the state-owned investment company of the People's Republic of China, and General Electric Company. In April 2007, both CITIC and General Electric offered to take the company private at HKD $18.30 per share, but the U.S. State Department refused to approve the deal given the sensitive nature of the technology in the company's satellites. As a result of the failed 2007 takeover, 1135 HK was left undervalued and thinly traded. While most investors ignored 1135 HK, the partnership was happy owning an oligopolistic business with high returns on invested capital and a steady and growing dividend payment. Since 2007, both CITIC and General Electric have focused on creating long-term value and 1135 HK's fundamentals have improved significantly due to increased demand for satellite services in emerging markets. This increased performance led to another takeover attempt announced on April 2, 2012, from the company's management at HKD $22.00 per share, 31% above our average cost of HKD $16.80 per share. Learning its lessons from the past, the company worked diligently with both the Chinese and U.S. State Department before proposing the management buyout so we expect a quick deal close. Operational Highlights The partnership publishes this letter before the month-end return is finalized by HedgeCount, LLC. Therefore, the estimated return is likely to differ slightly from the final return due to timing of interest, dividends, short rebates, expenses, etc. Historical finalized monthly returns are included in the footnote. 2 EFTA00307544 Limited partners are welcome to stop by the office at anytime. Investor inquiries and feedback are always welcome. Limited partners may add additional capital to their account at the start of each month. I can be reached at (310) 829-0903. Thank you for the trust you have placed in me with your investment. It is an honor and a responsibility I take very seriously. Very truly yours, Eric D. Andersen Portfolio Manager Western Standard Partners, LP 3 EFTA00307545 Subscriptions: Minimum Investment: Liquidity: Lockup: Fees: Investment Manager: General Partner: Prime Brokers: Introducing Broker: Auditor: Law Firm: Fund Administrator: For further information, please contact: Monthly 5250,000 (may be waived by GPI Redemption quarterly, with 90 days notice None 1.5% Management fee, 20% Performance fee, with a high watermark Western Standard LLC Eric D. Andersen JP Morgan Clearing Corp, and Goldman Sachs Clearing and Execution Services, Merlin Securities Spicer Jeffries LIP Paul Hastings LIP HedgeCount, LLC Western Standard LLC 1507 Berkeley Street, Suite 7 Santa Monica, CA 90404 USA Tel:(310)829-0903 Fax: (866) 665-9520 'Percentage indicated is an estimated fund return and was calculated by taking the net income of the fund after management fee and estimated performance allocation and dividing by the beginning capital. Reflects fee structure of 1.5% management fee and 20.0% performance allocation. Historical finalized monthly returns: 2012 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Y1D 2.30% 2.02% 1.68% &2% 2011 3.34% 1.17% 2.95% 2.94% 1.41% 6.83% 0.45% -0.81% -3.87% 2.46% -0.09% 1.68% 19.7% 2010 3.55% 3.24% 2.62% 8.08% -1.58% 0.93% 2.92% 1.48% 0.91% -1.48% 1.14% 6.22% 31.4% 2009 2.35% 1.00% 3.47% 5.98% 4.31% 5.56% 3.42% 2.53% 4.09% 0.65% 0.93% 2.75% 43.8% n 0.20% 4.30% 4.5% LPs that do not meet the qualified client status have a different fee structure and therefore a different net return. Please see NAV from HedgeCount, LLC or contact Eric Andersen at (310) 829-0903. Returns presented for Russell 2000 and 500 include dividend reinvestment. Disclaimer: This document is confidential and intended solely for the recipient. It may not be reproduced or redistributed without the prior written consent of Western Standard 11C. This is not an offering or the solicitation of an offer to purchase an interest. Any such offer or solicitation will be made to qualified investors only by means of a final offering memorandum and only in those jurisdictions where permitted by law. An investment in the fund is speculative and involves a high degree of risk. Past performance return is not a guarantee for future returns. Investors are urged to consult a professional advisor regarding the possible economic, tax, legal or other consequences of entering into any investments or transactions described herein. 4 EFTA00307546