25 S. Huron St.

Suite 2A
Aristides Capital LLC Toledo, Ohio 43604
tel (419) 708-9773
General Partner to Aristides Fund LP and Aristides Fund QP, LP
fax (844) 533-0471

Previously the main sources of wealth were material assets such as gold mines, wheat fields, and oil wells. Today the
main source of wealth is knowledge. And whereas you can conquer oil fields through war, you cannot acquire
knowledge that way. Hence as knowledge became the most important economic resource, the profitability of war
declined and wars became increasingly restricted to those parts of the worldsuch as the Middle East and Central
Africawhere the economies are still old-fashioned material-based economies.

In 1998 it made sense for Rwanda to seize and loot the rich coltan mines of neighbouring Congo, because this ore was in
high demand for the manufacture of mobile phones and laptops, and Congo held 80 percent of the worlds coltan
reserves. Rwanda earned $240 million annually from the looted coltan. For poor Rwanda, that was a lot of money. In
contrast, it would have made no sense for China to invade California and seize Silicon Valley, for even if the Chinese
could somehow prevail on the battlefield, there would be no silicon mines to loot in Silicon Valley. Instead, the Chinese
have earned billions of dollars from cooperating with hi-tech giants such as Apple and Microsoft, buying their software
and manufacturing their products. What Rwanda earned from an entire year of looting Congolese coltan, the Chinese
earn from a single day of peaceful commerce.

- Yuval Noah Harari, Homo Deus: A Brief History of Tomorrow

4 February 2017
Dear Partners,

For January, Aristides Fund LP gained approximately 0.84% while Aristides Fund QP, LP gained
1.03%. Since inception, August 15, 2008, Aristides Fund LP is up 316.74% or 18.28% annualized. 1 As of 1
February, assets under management are $75.1 million, with $60.4 million of that in Aristides Fund LP, and
the remainder in Aristides Fund QP, LP.

On a dollar-weighted basis across the two funds, we added approximately 49 +/- 19 basis points of alpha
last month.

I feel oddly disconnected with the general confidence reflected in the broad market these days.
Much like the beginning of the Obama administration, the Trump administration brings a large set of
policy unknowns, which convey tail risk (both down and up) to the equity market. In Obamas case, we
had a black community organizer with zero business experience, market expectations for liberal policy,
and a tremendously washed out equity market that had experienced unprecedented outflows from equity
mutual funds and exchange-traded products. With Trump, we have a billionaire commercial real estate
developer/businessman with Republicans controlling both houses of Congress, market expectations for
deregulation and lowering of taxes, along with recent massive equity ETF inflows, and a stock market
essentially at all-time highs.

We all tend to be somewhat blinded by confirmation bias and affinity bias. The stock of a New
York-based firm is likely to become a high-flier more quickly than an equally profitable new company in
Topeka. Most of the people who lost money to Madoff were Jews. And most of the capital in the equity
market is managed by middle-aged, somewhat conservative, white guys.

When the fire alarm goes off in your office building, what do you do? Most people tend to look at
the other people around them, to see what they are doing. If everyone else just goes back to work, it is
likely you will also just go back to work. If people start to leave, you will probably leave. Its like in college

1
These data are preliminary and unofficial, and are net of fees and expenses, including accrued pro forma incentive allocation. Official figures will be reflected in
statements from Perennial. Performance of partners accounts will vary depending the timing of investments. Alpha calculations reflect a beta of 0.2, which is
consistent with our historical observed beta.
where if a couple of folks stand outside of a closed classroom door, the other folks who come behind them
will assume it is locked, and wait for someone to unlock it. Im the odd bird who cant resist just trying to
twist the knob anyway, even if I am the 14th person to arrive.

Its no secret that Im not a fan of President Donald Trump. Because he is the President of the
United States I want him to succeed, from a policy perspective. Id actually be very happy to see him re-
elected in 2020 if it was because of successful policy and not because we were engaged in a major war or
because people come to be brainwashed by a propaganda campaign. I am trying my best not to let my
personal opinion of the President influence my view of the U.S. macroeconomy, but it is hard. For so many
fund managers, where you sit determines where you stand. Kyle Bass lives in Texas and enjoys shooting
varmints on his ranch; he is sanguine right now. Ray Dalio lives in Connecticut, and seemed to realize this
week that foreign policy actually has some connection to the economy; he is less bullish about Trump than
he was a few weeks ago. Everyone has an opinion. And most of the opinions are formed by whatever is
within a meter of ones own nose; I asked a broker yesterday what he was hearing from his clients, and he
started talking about how happy he was about the Fiduciary Rule and Consumer Financial Protection
Bureau getting rolled back, and then his own IRA fees.

Since Trumps election, other than one brief trade on election night, we hadnt really tilted our total
net exposure one way or the other because of him. But it seems like it might be time for that to change, and
on Thursday, we tweaked our net exposure down from 26% to 23%, via a short in the Russell 2000 Index
ETF.

In the first two weeks of the Trump presidency, instead of getting the best parts of Trump, and the
best parts of Bannon, and the best parts of the Republican leadership, instead of there being some sort of
thoughtfulness and synergy, where meaningful conversation cancels out most of the bad ideas or the rash
moves, and sensible policy prevails, what has actually emerged has been nearly the opposite.

Take Steve Bannon, the Presidents chief adviser, for example. Bannon believes that the force for
good in the world is an enlightened form of capitalism tightly combined with Judeo-Christian beliefs. This
good is under assault from state-sponsored crony capitalism, from a kind of libertarian capitalism (a
Marxist caricature of capitalism, in which people are treated as commodities), from atheists, secularists,
from elites and globalists, and most notably, from the new Caliphate, which we are we are in the early
phases of a global war with. Islam, in Bannons public comments, is not ever similarly placed as Judaism
and Christianity as a major world monotheistic religion, but is only discussed as an ideology, for example
the ideology of expansionist Islam.

Now, lets compare Steve Bannons stated belief system with the things Republicans did in the last
week: ban travelers and U.S. permanent residents from seven predominantly Muslim nations (Bannon
approves), eliminate the fiduciary rule for financial advisors (crony capitalism), allow coal companies to
dump pollution in streams (crony capitalism), allow oil and natural gas companies to make undisclosed
payments to foreign governments (crony capitalism), make it easier for mentally ill people to buy guns
(libertarian capitalism). Literally, only the worst, most objectionable parts of Steve Bannons agenda are
actually getting done.

I am somewhat at a loss as to how Americans are currently demonstrably more afraid of terror
attacks than they are of gun violence (this has been shown in reputable polling), in spite of gun violence
being greater than 50-fold (5,000 percent) more of an actual threat. I am also at a loss as to how Americans
fear crime from immigrants, who have been shown to commit less crime than non-immigrants. And I am
likewise at a loss that people are scared of men and women who literally risked their lives to translate for
and to help our soldiers in Iraq, so scared that they dont want to let them into our country, even after two
years of vetting. It doesnt make rational sense. But it does make sense in the realm of confirmation bias, if
one is constantly exposed to anecdote upon anecdote that paints a picture, an untrue picture, that we live
each day under an existential threat of radical Islamic terror, and that we dont know anything about
these people who want to come live here. The administration is constantly fomenting this fear, both with
ridiculousness such as Kellyanne Conways Bowling Green massacre, and with choices about what facts
they do and not consider worthy of attention. For example, Trump quickly and repeatedly condemned the
radical Islamic terrorist who threatened the Louvre with a machete, while saying nothing about the
slaughter of six Muslims by a Christian white extremist in Quebec this week. Trumps recent immigration
order even included a provision to publish a weekly comprehensive list of crimes committed by non-
citizens.

These actions, aside leading us towards an unwinnable perpetual war against 1.6 billion people,
strike at the very heart of the American economy. The number one correlate of long-term economic growth
is educational attainment. In the United States, we have experienced unprecedented prosperity in spite of a
fairly middling K-12 educational system, because we have the best university system in the world, attract
many of the worlds top students to our colleges and universities, and keep many of those graduates
employed here, in many job-creating enterprises. We also have immigrant-visa programs that attract high-
skilled labor from other countries, helping to power our most successful businesses, and in turn creating
more jobs. Sergei Brin, Andy Grove, Jerry Yang, Elon Musk, Do Won Chang, Vinod Dham, and other
immigrants have created tens of millions of American jobs.

The number of students, professors, physicians, and engineers affected by the recent ban of
travelers from seven predominantly Muslim countries is relatively small, but it speaks to a growing sense
that immigrants of all stripes, or at least non-white/non-Judeo-Christian immigrants are less welcome here.
It has been reported that certain agency heads advised President Trump against including green card
holders (U.S. permanent residents) in the recent ban, but Steve Bannon prevailed over their objections. This
is the same Bannon who believes there are too many Asian and South Asian executives in Silicon Valley,
and the same Bannon that, when Trump expressed in a radio interview that we should try to keep the best
and brightest students from around the world as citizens after they have studied here, did not agree. The
result of Trumps presidency thus far is that the rest of the world is starting to view us as unwelcoming.
My father-in-law, a typical Right-leaning, family values, middle-class Hindu engineer, in Hyderabad,
India, doesnt usually talk politics when he calls his daughter, but this week he couldnt resist commenting
on the crazy stuff Trump was doing and hoping that Americans speak out against it. This cannot be good
for foreign student enrollment in U.S. universities.

We dont know what the Federal budget is going to look like yet, but there are strong rumors that
the Presidents advisers are using a blueprint from the Heritage Foundation which would largely gut non-
defense spending by nearly 40% in several large categories. If that happens, its highly likely that there will
be large cuts to the funding of scientific grants which now sustain Americas global lead in basic science
research.

If, as has been rumored, visa programs change such that Apple, Google, Facebook, Microsoft, First
Solar, and other advanced technology companies will no longer be able to hire sufficient talent in the
United States, these companies will be forced to hire incrementally more staff in other locations, or to
outsource work to companies outside of our borders.

Direct investment in U.S. has benefited tremendously from the fact that we have such strong
institutions, world-leading intellectual capital, and a reasonable and welcoming immigration policy.
Capital goes where it is treated best. Tax rates are certainly a huge part of that equation as well, but its
important to remember that effective U.S. corporate income taxes are already in-line with other large
developed nations around the world. Theres only so much room to lower them, and lowering them in a
revenue neutral fashion (while closing loopholes) is only a very small net positive catalyst for the economy.
Most people are only going to want to put their capital here if they feel welcome here.

So, long story short, Im quite wary of the political influence on the U.S. economy right now, and
stock market prices (and recent asset flows) suggest there is a pretty good amount of optimism already
baked into valuations. We are likely to proceed with caution until our countrys representatives can figure
out what the hell is going on, to quote our President. Kidding, but not kidding. I am not sold on a bearish
view; anything as complicated as running the country is a learning process, and hopefully our strong
institutions, including the judiciary and business leaders, can help the President put things on a more
 constructive path going forward. Narcissistic Personality Disorder, though, is a really big challenge for a
guy who has to look out for 319 million people who are not himself.

Also, you should probably know that we spend almost all of our time working on bottoms up, one
company at a time, investment ideas, not top down macroeconomic thinking, especially now, when it is
earnings season. But, this letter was more fun to write than one that describes the selection process behind
a bunch of new small positions, most of which will have a short holding period anyway. I hope it was more
fun to read.

Thank you, as always, for your partnership. Have a kind February.

Christopher M. Brown
Managing Member, Aristides Capital LLC

Aristides Funds January Performance Attribution

Strategy/Category Gain or Loss (gross basis points) # of Positions
Event Driven +15 19
Fundamental Community Bank +53 20
Fundamental Other +7 49
Hedges & Broad Index 0 5
Arbitrage +8 9
Single Name Shorts +11 19
Fixed Income +21 2

Top January Aristides Funds Winners & Losers (% represents gross % gain/loss as entirety of Funds)
Winners Losers
+0.32% long Amazon.com, Inc. common stock -0.29% bearish Tesla Motors Inc. options
+0.28% long a community bank common stock -0.22% long TRC Companies, Inc. common stock
+0.25% short Workhorse Group Inc. common stock -0.21% holding company arbitrage
+0.13% long W&T Offshore Sr. Unsec. bonds net of short -0.17% long Tower International, Inc. common stock
common stock -0.14% long Psychmedics Corp. common stock
+0.13% long Verso Corp common stock

This document is confidential and intended solely for the addressee. This document may not be published or distributed without the written consent
of Aristides Capital LLC and does not constitute an offer to sell or the solicitation of an offer to purchase any security or investment product. Any
such offer of solicitation may only be made by means of delivery of an approved confidential offering memorandum.
Any investor who subscribes, or proposes to subscribe, for an investment in Aristides Fund LP (the Fund) must be able to bear the risks involved
and must meet the Funds suitability requirements. No assurance can be given that the Funds investment objectives will be achieved. Investments
in the Fund are speculative and involve a substantial degree of risk. The Fund may engage speculative investment practices that may increase the
risk of investment loss. Past results of the Fund are not necessarily indicative of future performance, and the Funds performance may be volatile.
An investment in the Fund should be deemed highly illiquid. There is no secondary market for an investors interest in the Fund and none should be
expected to develop. There are significant restrictions on transferring interests in the Fund. Neither the Fund nor Aristides Capital LLC are
required to provide periodic pricing or valuation information to investors with respect to its individual investments. Additionally, the Fund is not
subject to the same regulatory requirements as a mutual fund, including the SECs registration and disclosure requirements. The Fund is subject to
various other risk factors and conflicts of interest that are fully disclosed in the Funds offering memoranda and subscription documents.
Market indexes are included in this report only as reference reflecting general market results during the period. The Fund may trade in securities
that are not represented by such market indexes and may have long or short concentrations in a number of securities and in asset classes not
included in such indexes. Accordingly, no representation is made that the performance or volatility of the Fund will track or otherwise reflect any
particular index. The index information has been obtained from sources believed to be reliable, but we do not represent that it is accurate or
complete, and it should not be relied upon as such. The Fund and Aristides Capital LLC expressly disclaim any liability, including incidental or
consequential damages arising from errors or omissions in connection with the inclusion of any index in this publication. Performance results are
net of all fees and expenses, and are unaudited after December 31, 2015.