Partnership Letter 2021

Principled Capital Members,

It has been awhile since I last reached out to you all and want to update you on the status of the fund and other details.

Logistics: I am in the process of preparing K1 tax documents for all partners and may be reaching out to you for info so I can prepare those. Do not file your own personal tax returns until you have received a K1 from me. I will shoot to have these to you by the end of the month.

Performance Summary: Aug 31st to Dec 31st 2021 (unaudited)

S&P 500 (SPX): +4.5%

Nasdaq (COMP): +2.7%

Principled Capital LLC: -14.9%

The fund became fully funded on August 31st and since then has been fully deployed into the market. Since inception and the close of 2021, the fund has underperformed relative to both the S&P 500 and Nasdaq by approx 20% and 17% respectively.

I understand this is not the news any investor wants to hear as the year draws to a close but it is important to remember the time horizon on which Principled Capital is placing it's sights.

We believe an investment can be seen as having 2 components, intrinsic value and market value. The intrinsic value of an investment is defined as it's objective value to the world for the entire lifetime of its existence. When looking at a business, if you could know all of the future income a business will generate for the rest of its life and add it all together you would arrive at its objective value. For example, if you had a lemonade stand that you knew would make you $10 every year for 10 years, then you could value that business at exactly $100. (this assumes no risk free rate or inflation rate).

The market value of an investment is its perceived value to the world by all market participants at a singular point in time. Since the future is unknown, investors all try to predict the value of a business which is reflected in its market price. The fundamental principle we believe is that the intrinsic value and the market price are not always the same, that sometimes the market predicts the value of a business to be much higher than its intrinsic value or much lower. When we feel the market is pricing a business lower than its intrinsic value, that is when Principled Capital chooses to buy.

We seek to find investments priced below their intrinsic value and purchase them at these discounted prices. In the short term the price of any business fluctuates wildly in the market but in the long term the fundamental strengths of a business will prevail. At Principled Capital we believe we continue to hold high quality businesses purchased below their intrinsic value regardless of how their market prices have moved thus far in the short term. We do not believe in holding a large number of diversified mediocre businesses but rather a small set of rare and high quality businesses. As a result you can expect us to underperform the market when the market is performing poorly, and over perform the market when the market is performing well.

I am very grateful for the trust you place in me to continue managing your hard earned savings and will continue to do our very best to allocate the funds capital in the best way possible for both the absolute returns of the fund and society at large.

Feel free to reach out to me any time if you have questions or concerns.

Thanks!

Paul Holtfrerich

Managing Partner of Principled Capital LLC