Dear Partner:

We’re pleased to report that in the 4th quarter of 2017, Dane Capital Management (the “Fund”) returned over 19.2%i , net of fees and expenses, resulting in the Fund generating a 50.2% return for the year, net of fees and expenses.

We run a concentrated, value-oriented portfolio and our goal is always to have good months and good quarters. However, as we’ve stated, both when results have been disappointing or strong, Dane’s performance should be judged over years and not months or quarters. We remain confident that our disciplined process of investing in well-positioned, strong, undervalued, frequently unknown or underfollowed companies, with aligned managements, will result in superior outcomes.

We have been running a significantly net long portfolio (approximately 90%) to which some of our more hedged friends have asked, “What happens when the market turns down?” Dane is not making a long market bet. It’s simply our belief that at our Fund’s current asset size we can identify underfollowed opportunities that we believe have a strong margin of safety, and may return multiples of purchase price, while shorts are limited to a maximum 100% profit.

Moreover, we have observed over the past 3+ years that the Fund has relatively little market correlation. While it’s a small data set, we can report that with the market at new highs in 2018, the Fund is down a few percent. If we were short a set of popular shorts, we’d very well be down far more. If we’re patient, we believe our investments will work out. That said, when we find a compelling short we will not refrain from going short.

The full letter is below:

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