November 2015

ArisaigPartnersisanindependentinvestmentmanagementcompanyfoundedin1996.Ourfocusisondominantconsumersector
businessesinemergingmarkets.WerunanAsiaConsumerFund,anAfricaConsumerFund,aLatinAmericaConsumerFundanda
Global Emerging Markets Consumer Fund. In addition to our head office in Singapore, we have research offices in Hong Kong,
Mumbai,CapeTown,RiodeJaneiroandtheUK.

Performanceto30November2015(%)
NAV Size 15yr 10yr 5yr 3yr 2yr 1yr 6mth 3mth 1mth YTD Since Annualised
(USD) (USDm) Launch Return
1
ArisaigAsiaConsumerFund 63.85 2,884.2 +861.6 +239.4 +71.5 +23.5 +20.7 +7.6 (4.1) +4.3 +0.6 +5.7 +852.0 +12.6
ArisaigAfricaConsumerFund 13.78 374.3 (2.8) (25.1) (38.4) (24.0) (12.3) (7.2) (4.3) (24.9) +23.8 +2.4
ArisaigLatamConsumerFund 20.43 266.3 (28.3) (24.6) (19.3) (9.4) +0.5 (2.8) (14.8) (10.7) (2.3)
ArisaigGlobalEmergingMarkets
2,4 10.23 857.4 (2.4) (5.2) +3.1 (1.6) (0.4) +2.7 +1.4
ConsumerFund(BVI)
(EUR/GBP) (EURm)
ArisaigGlobalEmergingMarkets
2,3 100.7
ConsumerFund(UCITS)
4
EURshareclass 12.43 +13.0 (1.3) +8.8 +2.8 +12.2 +29.6 +14.5
4
GBPshareclass 11.14 +0.0 (4.4) +5.0 +0.9 +1.6 +11.4 +5.8

1ReflectstheperformanceofArisaigAsianSmallCompaniesFundfrom31stDecember1996to21stJanuary2000,ArisaigAsiaFundfrom22ndJanuary2000to31stMarch2010andthereaftertheperformanceof
ArisaigAsiaConsumerFund.
2 th th
TheoffshoreversionoftheFundwaslaunchedtothirdpartyinvestorson16 September2013andtheUCITS(EUR)versionon4 November2013.TheadditionalGBPshareclassfortheUCITSFundwaslaunched
on16thDecember2013.
3
TheEURAUMoftheAGEMCFUCITSreflectsboththeEURandGBPshareclassesoftheFund.
4Performanceismeasuredfromaneffectivelaunchdateof1stJanuary2014forAGEMCFBVI,UCITS(EUR)andUCITS(GBP)forconsistency.

NovemberDiaryHighlights
PerformancewasmixedinNovemberwiththeAsiaFund(up0.6%)andGlobalUCITSFund(up2.8%)stayinginpositiveterritory,whilst
GlobalBVI(down1.6%),Latam(down2.8%)andAfrica(down4.3%)allregistereddeclines.
ThismonthwehostedourthirdbiennialConsumerSymposiuminCapeTownprecededbyatriptoLagos.Almost50investorswerein
attendancetohearpresentationsfromsevenholdings,otherAfricanconsumernames,macroeconomicexperts,aswellasourown
analysts.TheGlobal,AfricaandESGdiariessharesomeofthekeytakeawaysforthosewhowereunabletoattend.
Speakers described the huge longterm opportunities in a continent still at the bottom of the Scurve but making rapid strides in
development.Asthecurrentdownturnconfirms,progresswillnotbeinastraightline,butweownsomeexceptionallyhighquality
businessesinAfricawhicharestillinvestingconfidentlyforthefuture.Manyareevenburgeoningmultinationals;andthevastpotential
isabundantlycleartomoreestablishedMNCssuchasNestl,UnileverandIndiasGodrejConsumer.
InAsiaweintroducetwonewinvestments,bothfoodcompanies:OlympicinBangladeshandDaliinChina.MakingwayisChinese
hypermarketgroup,SunArt,which,despitebeingwellmanaged,isnotimmunetothestructuralchallengesfacingbigboxretailers.
The Latam section discusses InRetails promising move into the discount segment, a sounder strategy for conquering informal
competitorsthanitsexistingmainstreamsupermarkets.WealsohailtheadditionofArgentinatothegrowinglistofLatinAmerican
countriestohaverenouncedpopulistleftwingregimes,whichhavebeenpartandparceloftheregionsselfdefeatingpoliticsinthe
earlypartofthiscentury.

Whatwelookforinourstocks Whatourinvestorscanexpectfromus

Marketleadershipdominantcompaniestendtodobetter; Alignmentofinterestscappedfunds,nosegregated
Scalabilitylargetargetmarkets; portfolios,coinvestment;
Strongmoatsbrands,distribution,innovation; Transparencyholdingsbooklets,monthlyportfolio
LowcapitalintensityhighROCE; summaries,examplesofresearchreports;
Predictabilitycompoundinggrowth; Coverage26analysts;fiveresearchoffices;190target
Accessmanagementwhowelcomeourinvolvement. stocks;
Minimaltradingactivemanagementdestroysvalue;
Focusconsumercompaniestendtooutperform,sowe
wontbedoinganythingelse.

1/8 Arisaig Diary We are a CarbonNeutral organisation and a signatory of the UNs Principles of Responsible Investment.

 November 2015

FundDetails

GeographicAllocation(%)
AACF AFCF ALCF AGEMCF
BVI*
India 47.8 Nigeria 20.1 Mexico 37.6 Indiansubcontinent 23.0
China/HongKong 19.6 Morocco 13.8 Brazil 25.0 ASEAN 10.7
Philippines 14.2 SouthAfrica 12.6 Peru 23.0 China 10.5
SouthKorea 4.8 Ghana 11.2 CentralAmerica 7.7 MiddleEastandCentralAsia 9.1
Pakistan 4.4 Egypt 7.2 Chile 4.1 OtherLatam 7.1
Vietnam 3.8 Turkey 6.7 Ecuador 1.9 ContinentalEurope 6.3
Indonesia 3.1 Kenya 6.6 SubSaharanAfrica 6.3
Bangladesh 1.4 Tunisia 6.5 SouthAfrica 4.7
Rwanda 6.4 USA 4.6
Tanzania 5.4 Brazil 4.4
IvoryCoast 1.0 Russia&EasternEurope 4.3
Others 3.9
Netcash 0.4 Netcash 0.8 Netcash 0.6 Mexico 2.9
Othernetassets/(liab)

0.5

Othernetassets/(liab)

1.7 Othernetassets/(liab) 0.1 UK

2.3

100 100 100 100

*IndividualcompanyFY14revenuesplitandweightedonAGEMCFBVIcomposition

SectorAllocation(%) Valuations(FY2015)
AACF AFCF ALCF AGEMCF AACF AFCF ALCF AGEMCF
BVI BVI
Food&Beverage 53.7 62.0 59.1 50.8 EV/Sales(x) 2.8 2.0 1.4 2.9
FMCG 21.8 15.2 9.3 31.3 PER(x)* 37.6 30.3 19.6 30.3
Retail 12.5 13.4 30.9 10.3 PERrolling12m(x)** 34.3 27.1 17.4 27.7
FastFood 11.1 6.9 5.7 Yield(%) 1.2 2.1 3.0 1.6

*usingaggregateforecastearningsofallportfoliocompaniesfortheircurrentfinancialyears
**usingaggregate12monthforwardforecastearningsofallportfoliocompaniesirrespectiveof
financialyearend
Valuationmetrics(exceptyield)arecalculatedonthebasisofaweightedharmonicmean

PortfolioConcentration PerformanceMetrics(FY2015)
AACF AFCF ALCF AGEMCF AACF AFCF ALCF AGEMCF
BVI BVI
No.ofholdings 28 23 17 33* ROCE(%) 41 30 23 32
Top10holdings(%) 57.0 64.5 72.0 46.4 Netmargin(%) 11 9 10 11
Top20holdings(%) 88.5 95.0 99.3 74.4 EPSgrowth(%) 15 14 12 10
Av.marketcap(USDm) 5,373 1,512 10,158 30,480 EPSgrowthrolling12m(%)* 13 14 14 12

*HoldingsforAGEMCFcountlistedsubsidiarieswithinonebusiness *Reflectsblendedforward12monthEPSgrowth

CompoundAnnualReturns(%)to30November2015
15years
10years
5years
3years
Sinceinception
ArisaigPartners(Asia)PteLtd
69CircularRoad,#0201,Singapore049423
Tel(65)65323378Fax(65)65326618
ArisaigPartnersResearchServices(CapeTown)
26KildareRoad,Newlands
CapeTown,7700,SouthAfrica
Tel(27)216716680Fax(27)216716679
The Arisaig family of Funds are openended investment companies domiciled in the
BVI, Mauritius or Ireland and their daily valued NAVs are published in the Financial
AACF AFCF ALCF AGEMCF Times and on Bloomberg. The Asia Consumer Fund is listed on the Irish Stock
BVI Exchange.ThisDiaryisintendedtobefortheinformationofholdersofoneormore
16.3 ofArisaigsFunds.Itisnotintendedtoconstituteinvestmentadviceandshouldnot
berelieduponassuch.Investorsshouldbeawarethat,astheFundsarealsoinvested
13.0
in the securities of certain smaller companies as well as those listed in emerging
11.4 (0.6) markets,sharepricescanbemorevolatileandtradingliquiditymuchlower.
7.3 (9.2) (10.5)
12.6 2.4 (2.3) 1.4
ArisaigPartners(India)PrivateLimited ArisaigPartners(Mauritius)Ltd
VillarVille,FirstFloor,16P.J.RamchandaniMarg, IFSCourt,TwentyEight,
Colaba,Mumbai400001,India Cybercity,Ebene,
Tel(91)2222875031Fax(91)2222875030 Mauritius
ArisaigPartners(HK)Limited ArisaigPartnersServiosLtda
Suite4701,47thFloor,TheCenter AvBorgesdeMedeiros633sala206
99QueensRoadCentral,HongKong Leblon,RiodeJaneiroRJ,Brazil22430041
Tel(852)28506335Fax(852)28506355 Tel(55)2135917076Fax(55)2135910018

Forallenquiriespleasecontactinvestorrelations@arisaig.com.sgorcall(65)65323378.Websitewww.arisaigpartners.com.ArtworkcourtesyofthelateSophieMacpherson.

2/8 Arisaig Diary We are a CarbonNeutral organisation and a signatory of the UNs Principles of Responsible Investment.


ArisaigGlobalEmergingMarketsConsumerFund
Performance
The BVI Global Fund ended November down 1.6% for the
month,whiletheUCITSvehiclerose2.8%.Thisbringsyearto
datereturnstominus0.4%andplus12.2%respectively.
Themajorityofourstocksfell,butweweremosthurtbyour
largest holding, Britannia, which dropped 11.1% on no
particularnews.Meanwhile,Orionbouncedback17.1%after
a resurgence in China results in Q3 (see Asia section). This
stockhashadarockyyear,butisnowup6.4%yeartodate.
TheGlobalFundbecameacornerstoneinvestorattheIPOof
DaliFoodsinNovember.Thisisdiscussedinmoredetailinthe
Asiasectionofthediary.
ArisaigSymposiumRisingMultinationals
In November we hosted our third Symposium, this event
taking place in Africa, split over two legs in Lagos and Cape
Town.Wewerejoinedbysevenofourholdingstogetherwith
almost50ofourinvestorsrepresenting40%ofourtotalfirm
AUM. 16 of our analysts also gave presentations. One of the
key themes of the Symposium was the rise of EM regional
champions such as lker, Godrej and Edita, all MNCs ofthe
Future in the Global Fund. Such businesses are the core of
theFund,accountingforaroundhalfofourportfolio.
Thesestilladolescentcompaniesareallimmenselyambitious.
Theiruniquelyemergingmarketskillsets,suchasdistribution
ininformalretail,canbecarriedintoneighbouringdeveloping
markets as each looks to internationalise its operations.
Anotherstrongmessagewasthattheinnovationcycleofthe
MNCs of the Future is speeding up. They are beginning to
compete at the premium end of the market, defying the old
paradigmofbeingsimplylowcostproducers.
These companies are typically more nimble than their larger
multinationalcounterparts,meaningtheirspeedtomarketon
newlaunches(aswellaspricing,brandcommunicationetc.)is
usuallysuperiortothatoftheirdevelopedworldrivals.
All that being said, Nestl Nigeria provided a pertinent
reminder of the formidable strengths of the established
MNCs. Whilst these may be more ponderous organisations,
often slowed by bureaucracy and process, they benefit from
huge global research and development spending; a host of
strong brands; and great corporate culture. We have often
heard that Unilever is consistently one of the preferred
graduate employers in emerging market countries, giving it
recurrent access to a great pool of human capital. Some EM
operations, such as China and India, have even become for
Unilevernetexportersoftalent.
3/8 Arisaig Diary We are a CarbonNeutral organisation and a signatory of the UNs Principles of Responsible Investment.
November 2015
UnileverInvestorDays
This month Hugo and Steven attended the Unilever investor
daysinManilaandSingapore,wheretheyjoinedfieldtripsto
consumers homes and to various sales channels. They also
had the opportunity to meet senior management. The
overarching impression was of the quality of Unilevers
people, and the strength and coherence of the corporate
culture. This is perhaps the prime example of how putting
sustainability at the heart of a business model can create
competitive advantage by energising the organisation with a
sense of shared purpose, as well as driving valueadding
productdevelopmentandbrandpositioning(seeESGsection).
SouthEast Asia is one of Unilevers strongest markets, the
companyholdingnumberonepositionsin85%ofitsbusiness
here. The region is at the forefront of business model
innovationsthatarebeingrolledoutglobally,illustratinghow
emerging markets are increasingly influential within
multinational groups. ZeroBased Budgeting (ZBB) was
originallyintroducedinThailandasanexpediencyinresponse
to recent political unrest in the country, but proved so
successful that it is now being adopted more widely.
Combinedwithsomeothereffortsoncosts,ZBBcouldcreate
savingsofEUR1bnayearfrom2018.
A second innovation we were shown in the Philippines was
Unilevers new sales management system Leveredge, a
tabletbasedplatformwhichgivesmanagementgranulardata
on distributors and the sales force. This is being rolled out
globally and should prove a powerful tool in serving the
complextraditionalretailchannel.
ChiefMarketingandCommunicationsOfficerKeithWeedgave
a fascinating presentation containing a digital advert that
couldhave100,000differentpermutationsdependingonthe
observerscharacteristics.Healsonotedthat,usingbigdata
Unilever could correctly predict 97% of new hair trends. In a
personal care industry where ecommerce and social media
have opened the doors to niche new entrants, this better
understandingofconsumersisarguablyonemeansbywhich
majorbrandownerscansustainstrongmoats.
Beiersdorf
Beiersdorf posted an uptick in sales growth in Q3, coupled
withimprovingmargins.However,thisresulthidadivergence
between the better performing consumer business and the
more cyclical Tesa industrial adhesives segment (which
accounts for around 20% of operating profit). Still, the
strength of the core Nivea brand, from which about 60% of
thecompanyssalesarederived,providesaplatformforvery
promisinglongtermgrowth.

ArisaigAsiaConsumerFund
Performance
NovemberwasarelativelycalmmonthfortheAsiaFundwith
theNAVclosingup0.6%.Thisbringstheyeartodatereturns
to 5.7%. The positive performance during the month was
driven by strong contributions from Future Retail (up 38.4%)
andOrion(up17.1%)onstrongresultsinChinaseebelow.
India
TherulingBJPssecondconsecutivelossinstateelections,this
timeinBihar,sapsfurthermomentumfromtheModiwave
ahead of the winter session of parliament. However, while
political intransigence will likely disrupt progress on GST and
land rights, there have been important developments taking
placeawayfromtheheadlines.Theseincludeacrackdownon
corruption, improved fiscal discipline, infrastructure projects
andemploymentgrowth.
Thatsaid,itincreasinglylookslikeModiwillneedtosecurea
second term to see through the more significant structural
reforms.Apossibleenablerhereisthetransformationofthe
public subsidy mechanism from a cash system (pilfered by
corrupt middlemen) to a direct bank transfer. This could be
Modissilverbulletinthebuilduptothenextelection.
Our Indian holdings continue to report good quarterly
numbers. Britannia was once again the star with second
quarter sales and net profit increasing by 12% and 49%
respectively.RetailersTrentandFutureRetailalsosawsame
storesalesadvancestronglyduringthequarter.
MeanwhileresultsatMaricoandNestlIndiaweremixed:the
former saw top line growth slow due to deflationary pricing
(although still able to grow profit by 27%), while the latter
continuedtoexperiencethefalloutfromtheMagginoodle
recall. With the ban now overturned and products returning
toshelves(andsellingfast)theworstshouldbebehindus.
AnOlympicsizedOpportunityinBangladesh
Over the last few months, the Asia Fund has accumulated a
position in Bangladeshs number one biscuit player, Olympic
Industries. We are particularly encouraged by the deep
thinkingculturewithinthecompanyithasstudiedindetail
the success of overseas peers such as Britannia, Orion and
URC as well as its metricsdriven approach to capital
allocation. It is still a relatively modestsized business at
USD103m in revenue, but is growing fast with sales
compoundingat30%overthelastfiveyears.
Thereisavastrunwayforfurthergrowthahead.Bangladesh
sitsrightatthebottomofthebiscuitsSCurveconsumption
percapitaisjustUSD1peryear.
4/8 Arisaig Diary We are a CarbonNeutral organisation and a signatory of the UNs Principles of Responsible Investment.
November 2015
ThisisaroundathirdofneighbouringIndiaandafractionof
the world average of USD13. With the biscuit market still
largely informal and highly fragmented, Olympic is perfectly
placed to expedite the transition towards greater branded
consumptionitalreadyhasaleadingmarketshareof22%.
China:OneInOneOut
November saw both the Asia and Global Funds become
cornerstoneinvestorsintheIPOofDaliFoods,aleadingfood
and beverage player in China. Prior to taking up the offer,
membersoftheAsiaandGlobalteammetwithmanagement
andtouredthefacilitiesonfiveseparateoccasions.
Foundedin1993andbasedinFujianprovince,Dalihasgrown
rapidlytobecomeasizeablenationalplayer(revenueinFY14
was USD2.3bn). Crucial to its success has been a superior
understandingoflocalconsumertastes.Indeed,innovationis
atthecoreofDalisalesofproductslaunchedwithinthelast
twoyearsare18%ofthegrouptotal.
Going forward we expect beverages (currently 43% of sales)
to be the major growth driver courtesy of Dalis exposure to
the fastgrowing subcategories of energy drinks and plant
basedbeverages.Thisshouldensurethetoplinecontinuesto
growaheadofthemarket.
Heading the other way is Sun Art, the leading hypermarket
operator in China. As highlighted during our Africa
Symposium, we have become wary of mainstream big box
groceryretailers.Theyareincreasinglybeingoutcompetedin
terms of price (by discounters), convenience (small format),
assortment(online)andquality(premium/organic).
SunArthasnotbeenimmunetothis,inparticularduetothe
unprecedented rise of ecommerce in China. Although it is
making strides towards creating its own online business, we
believeitisstillmanyyearsawayfromdeliveringanyreturns
here. Importantly, it has failed to integrate this with the
offline business to create an omnichannel proposition a
criticalsuccessfactorhighlightedinourrecentcasestudy.
OrionResults
Orionsrecentresultsgavemoretocheer,withlocalcurrency
salesinitscoreChinamarketreboundingafteratoughsecond
quartertoriseby13%annually.Thiswassupportedbygreater
A&Pinvestment,apositivesignalofintentfrommanagement.
Inordertocapitaliseontheincreasinglyaspirationaltastesof
Chinese consumers, the company plans to launch its
successful premium confectionery ranges from Korea in the
first half of 2016. This should provide further support for
revenuegrowthaswellasenhancingmargins.

ArisaigAfricaConsumerFund
Performance
Against the backdrop of our Symposium and its message of
long term optimism, November proved another unrewarding
monthfortheFundwiththeNAVpersharedecliningby4.3%.
Thistakesouryeartodateperformancetominus25.0%.
Currenciesonceagainplayedasignificantrole.TheCFAFranc
(minus 5.0%), South African Rand (minus 4.6%) and Tunisian
Dinar (minus 4.0%) all lost further ground to the Dollar. The
Rand,whichisnowdown20.3%yeartodate,hasreactedto
deteriorating economic conditions in South Africa and the
potentialprospectofaratingsdowngrade.
From a share price perspective the largest detractors were
Heineken subsidiaries Bralirwa (down 24.7% on tiny volume)
and Nigerian Breweries (down 11.5%). The former has had a
dire year primarily due to weak results which included an
accidental overstatement of inventories. The latter has, like
most Nigerian stocks, not escaped the current economic
downturn.
CapeTownSymposium
InCapeTownwewerejoinedbyseniorrepresentativesfrom
five of our Africa Fund holdings: BM Birleik, East African
Breweries, Edita, Nestl Nigeria and lker Biskvi. We also
heard from the South African Dominos Pizza and Starbucks
masterfranchisee,TasteHoldings;GrantPattison,theformer
CEO of Massmart; Unilever Africa; and Godrej Consumers
Africansubsidiary,DarlingHairCare,whichwediscussinthe
ESGsection.
We also hosted a morning session on the topic of Africa
RisinginwhichwewereledbytheexCentralBankGovernor
ofNigeriaandcurrentEmirofKano,LamidoSanusi;aswellas
Xan Smiley, editoratlarge and former Africa Editor of The
Economist.
The message from our attending holdings was broadly
consistent with what we have been communicating in our
Diaries over the past 18 months. Although current operating
conditionsareverytough,ourcompaniesareinvestingforthe
futureandremainfirmlyfocusedonthecompellinglongterm
opportunity.
InthisregionconsumersremainatthebottomoftheScurve
across virtually all categories and are especially sensitive to
small changes in disposable income. Perhaps the best
illustration of this was East African Breweries reminder of
how Kenyan consumers reacted to the implementation of
excisetaxontheSenatorKegvaluebeerbrandvolumesin
thissegmentfellby90%.
5/8 Arisaig Diary We are a CarbonNeutral organisation and a signatory of the UNs Principles of Responsible Investment.
November 2015
Importantly, as Francis and Desmond highlighted in their
presentation on Why Eat, Drink, Wear, Wash, Shop? And is
thistherightstrategyforAfrica?,theevidencesuggeststhat
aconsumerorientedstrategylooksjustasappropriateforthis
region as it does for Asia and Latam. Over the last ten years
dominantconsumerbusinesseshavedeliveredconsistentEPS
growthunderpinnedbystrongreturnsoncapital.
Therecanhoweverbelittledoubtthatglobalenthusiasmfor
the Africa Rising narrative has placed too many shortterm
expectationsonaregionthatremainsfragileindevelopment
terms. As we heard from our guest speakers, current
economic conditions are being further exacerbated by social
andreligioustensionsinthenorthofthecontinent.
LagosLeg
Preceding the main event in Cape Town, a smaller group of
ourinvestorsaccompaniedTorquil,FrancisandAlaninLagos
to hear presentations from a wide range of industry
professionalsfromtheconsumersector,aswellastheprivate
equity,agricultural,andinfrastructuralspheres.
The mood on the ground in Nigeria remains cautiously
positive,despitethefactthattheeconomyisclearlystruggling
andmayeventipintorecession.Afurtherdevaluationofthe
Nairaisalsoalmostcertainlyonthecards.Wewouldwelcome
thisasitshouldbreakthepresentcapitalflowparalysis.
Supporting the optimism is a change of leadership that is
spearheadingabadlyneededanticorruptiondrive;concerted
military engagement against Boko Haram; and a complete
shakeout of the ineffective ministries that have been
hampering the country both bureaucratically and financially.
In the last week we have seen President Buhari present to
globalleadersattheenergysummitonthedesperateneedto
rejuvenatethedesertifiedLakeChad,atopicaboutwhichwe
have written before and which has caused significant
socioeconomicdamagetothenorthernpopulationofNigeria.
ChangingoftheGuard
KevinHedderwick,CEOofourSouthAfricanfastfoodholding,
FamousBrands,hasannouncedthathewillbesteppingback
inthenewyear,tobereplacedbythewellregardedcurrent
Chief Executive of Food Services, Darren Hele. This was an
expectedmove.
OverhisimpressivetenureKevinhasoverseenanincreasein
market capitalisation from R105m to the current R14bn.
Darren is a highly competent operator who is familiar to us
havingbeenwiththebusinesssince2003.

ArisaigLatinAmericaConsumerFund
Performance
TheLatamFundwasdown2.8%inNovember,takingyearto
date performance to minus 14.8%. Once again USD strength
was a major headwind, with all Latam currencies in the red.
Forus was the only stock to post a significant local currency
sharepricedecline(minus10.0%)asitsufferedslowingsales
acrossitsAndeanmarkets.
PriceSmart was a key positive contributor this month, rising
8.4% after reporting good October sales and announcing the
openingofits38thstore.InRetailgained11.2%havingposted
healthythirdquarterresults.
9M15ResultsSummary
Allofourholdingshavenowpublishedthirdquarternumbers.
At the threequarter mark for the year, our portfolio has
achieved weighted average sales growth of 11% and EBITDA
growthof16%.EPSgrowthiscurrentlyrunningat9%.
Performance from the two thirds of the portfolio in Mexico
andBrazilremainsstrong.Ourholdingsinthesetwomarkets
achievedearningsgrowthof18%.NumbersfromtheAndean
regionwereweakerinfact,ifweexcludeonlyAlicorpfrom
our portfolio calculations, EPS growth climbs to 13%. As we
mentioned last month, we expect deleveraging and an easy
comparisonbasefromthisyeartodriverapidearningsgrowth
forourPeruvianstocksin2016.Ourthreeholdingsheretrade
atanaverageEV/EBITDA(16)ofjust8.5xandPERof16.1x.
InRetail
LikeitscompatriotAlicorp,InRetailhasbeenheavilyaffected
by nonoperating losses in recent quarters but is now
beginning to generate healthy net income and cash flows to
accompanyitsconsistentgrowthinoperatingprofit.
InRetailisathreepartretailconglomerate.Arguablythejewel
in its crown is its pharmacy chain Inkafarma totally
dominant with its lowprice approach; and exceptionally
profitable thanks to its cheap, flexible store layouts, efficient
distributionandstrongprivatelabel.Weareleastenthusiastic
about the shopping malls division, which has delivered rapid
EBITDAgrowthbutholdsaheftyassetbase,depressingROCE.
Until now, our assessment of the supermarkets business has
beensomewhereinbetween.Theopportunitytoconsolidate
thePeruviangroceryretailmarket,stillatleast70%informal,
is perhaps the most attractive in Latin America. But despite
InRetailsoutperformancewithinthemodernretailsector,we
have remained unconvinced by the use of mainstream
supermarkets with a highlow pricing model as the vehicle
withwhichtotakedemandawayfrominformalplayers.
6/8 Arisaig Diary We are a CarbonNeutral organisation and a signatory of the UNs Principles of Responsible Investment.
November 2015
Encouragingly, the company has now launched a compact
discountformat(Mass)modelledonourAfricaholdingBM
Birleik. Unlike InRetails existing supermarkets, Mass will be
abletodefeatmomandpopstoresonprice.Itsreducedunit
sizeallowsittoadapttosmallerinnercitylocations(inwhich
Inkafarmaalreadyholdsconsiderableexpertise),importantin
a market facing severe constraints on real estate and where
themajorityofconsumersdonothaveacar.
These developments are as yet unnoticed by the market,
despitetheopeningof20Massstoresthisyearandplansfor
50 more (as well as a dedicated DC) in 2016. Importantly,
InRetail has stolen a march on competitors Cencosud,
constrained by its stretched balance sheet; and Falabella,
whichisinsteadtriallingamuchlargersoftdiscountformat.
ArgentinaANewCycleBeginsinLatam
The Argentinian elections ended this month with a win for
centreright candidate Mauricio Macri, extending the wider
regional shift away from the populist presidents who have
dominated Latin American politics over the last decade.
Mexico elected a centreright president in 2012, Peru will
followsuitnextyearandBrazilshouldjointhepartyby2018.
ArgentinaiscryingoutforchangeandMacrihaspromisedto
end unsustainable energy subsidies; remove investment
stifling export taxes and currency controls; and renegotiate
with holdout creditors. Simply adopting orthodox and
transparent economic metrics will help restore credibility
giventhefarcicaldatareleasedunderthecurrentregime.
There is, however, reason to be cautious in the shortterm.
Macris narrow victory margin and his lack of support in
Congress suggest that reforms may only materialise after
much wrangling and compromise. Fiscal adjustments and a
sharpcurrencydevaluationarelikelytoprovokeasignificant
spikeininflationfollowedbyrisingrealinterestrates.
Our portfolio has limited indirect exposure to Argentina and
weexpectdevaluationtoreduceitsrevenuecontributionnext
year.Wearehopeful,however,thatfrom2017onwardsthis
largemarketcanturnfromheadacheintoopportunity.
We are evaluating two additional investments which have
greaterArgentinanexposure.Thereislittleinthewayoflisted
domestic consumer plays, but in the new businessfriendly
environment, indigenous companies may begin to look more
favourably on using the stock market to finance new
investment.Therearesomestrongconsumernames,suchas
theconfectionerygroupArcor,whichwouldfitthebillforour
Fundshouldtheydecidetogopublic.

Environmental,SocialandGovernanceIssues
MakingSustainableLivingCommonplace
It felt entirely appropriate that we welcomed James Todd,
CFO of Unilever Africa, to our Symposium to discuss the
companys approach to sustainability on the continent.
BeyondJamessregionalexpertiseandthefactthatwethink
UnileversSustainableLivingPlan(SLP)istheleadingstrategy
of its kind, Unilever was actually Rebeccas first port of call
whenwekickedoffourESGresearchsomefiveyearsago.
Jamess presentation brought to life the benefits of aligning
Unilevers sustainability objectives to its core business
strategy. This comes as second nature to Unilever, which
developeditsfirstbrandedproductcalledSunlightSoapto
rid Victorian England of cholera by making cleanliness
commonplace.
In Africa, a continent where Unilever built its first factory in
1911,itistheLifebuoysoapbrandthatistargetingdiarrheal
disease which, according to the World Health Organisation,
can be halved by proper handwashing. Promotional dollars
usually focused only on driving revenue growth can also
deliver significant social benefits if channelled into school
basedhandwashingcampaigns.
By looking at its business through the lens of sustainability,
Unilever continues to scale up its social impact and reap
businessbenefits.InGhanaacostefficient,multibrandchild
health and wellness programme has brought Lifebuoy
alongsidePepsodent(oralhealth)andfortifiedBlueBand
(micronutrients)intoalocalinitiativecalledGrowFMthat
aims to improve health and hygiene habits in one million
children.
SustainablegrowthhasalwaysbeenthegoalforPaulPolman
(CEO)andheusedUnileversFY14resultsbriefingearlierthis
yeartostressthatsustainablebrandsgrewtwiceasquicklyas
otherbrandsovertheprevious12months.Musictoourears.
FancyaCuppa?
To mitigate the impact of selling more, Unilever has had to
makeasignificantcommitmenttothesustainablesourcingof
itsrawmaterialsandthroughitssizeandscaleitisstartingto
changewholeindustries.
JameshasseenthisfirsthandontheteafarmsofKenyaand
Tanzania, which supply 10% of the tea used in its Lipton,
PG Tips and Brooke Bond brands. Back in 2007, Unilever
becamethefirstmajorteacompanytocommittosustainably
sourcing tea on a large scale and has since made the
commitmentthat100% of its tea will be sustainably sourced
by2020.
7/8 Arisaig Diary We are a CarbonNeutral organisation and a signatory of the UNs Principles of Responsible Investment.
November 2015
Given that Unilevers fragmented agricultural supplier base
comprises 750,000 small holders, there has been a strong
focusonidentifyingtherightpartners.Atagovernmentlevel,
Unilever has signed publicprivate partnership agreements in
Tanzania,aswellasinVietnamandYunnanprovinceinChina.
Meanwhile nongovernment agencies have been critical in
developingreputableandindependentcertificationprocesses
toclassifywhatissustainable.
Darling
Rebecca followed James Todd with a presentation which
stressed the growing impact of millennials, an increasingly
important consumer class that is twice as likely to check on
sustainability credentials before making a purchase. We
expect this group of consumers, the youngest of whom are
justleavingschool,tomakesustainabilitymoreofabusiness
imperative than ever before. Rebecca also turned her
attentiontohowourMNCsoftheFuturearedrawingfrom
years of communitybased work and multigenerational
thinkingtocreatemoreformalsustainabilitystrategies.
LikeUnilever,GodrejConsumerhasidentifiedthreekeygoals
todeliveronby2020.TwoofthesearesimilartoUnileverin
being focused on environmental and product innovation
objectivesbut Godrejs Good & Green strategy reflects the
importanceofemploymentasanissueinIndia.
Pointingtothefactthatonly13%ofIndias600millionpeople
under25areemployable,Godrejhassetthegoaloftraining
one million rural and urban youth in skilled employment. In
India, Saloni, an initiative with a local beauty salon chain,
will train 50,000 beauticians over the next three years with
businessbenefitseasytoidentifygivenGodrejsstableofHPC
products.
Following his insightful multimedia presentation, Aaron
Radomsky (MD) took us to visit hair salons in Cape Towns
Langa Township to see how Godrejs Darling hair extensions
business is leveraging the entrepreneurial spirit of women
salonownerstoimprovetheirdistributionreach.Inthesame
way that Hindustan Unilever has used a micro
entrepreneurship model to empower a network of 70,000
ShaktiAmmastodistributeitsproductsinIndia,Godrejhas
aFidelityprogrammethatisworkingdirectlywithsalons.
Itfundssomeoftheinitialsetupcostsforsalonsinreturnfor
instorebrandingandwordofmouthadvertising,whilstlocal
academies provide training and support for young people
wantingtogetintotheindustry.Proofagain,ifweneededit,
that doing good and good business are one and the same
thing,ifyougetyourstrategyrightattheoutset.
 November 2015

MarketandCurrencyPerformance
KeyMarketsLocalCurrencyPerformance(%) KeyCurrenciesPerformancevsUSD(%)
Nov YTD 12mth Nov YTD 12mth
Asia
HongKong (2.7) (3.7) (5.2) HongKong 0.0 0.0 0.0
China 1.9 8.2 30.5 China (1.3) (3.0) (4.0)
Taiwan (2.7) (7.1) (5.9) Taiwan (0.3) (3.2) (5.3)
SouthKorea (1.8) 4.1 2.0 SouthKorea (1.5) (5.8) (4.3)
Indonesia (0.1) (13.4) (12.0) Indonesia (1.2) (10.5) (11.9)
Philippines (2.9) (2.5) (3.3) Philippines (0.8) (5.3) (4.9)
Malaysia 0.5 (2.5) (5.3) Malaysia 1.0 (17.9) (20.6)
Singapore (4.7) (12.4) (11.9) Singapore (0.7) (6.1) (7.5)
Thailand (2.4) (6.6) (12.2) Thailand (0.5) (8.1) (8.3)
Vietnam (5.6) 8.8 5.3 Vietnam (0.7) (4.9) (4.9)
India (1.9) (3.6) (7.6) India (2.1) (5.4) (7.0)
Bangladesh 0.4 (5.8) (4.0) Bangladesh (2.1) (1.9) (2.4)
Pakistan (4.9) 1.6 5.0 Pakistan 0.0 (4.7) (3.4)
SriLanka (1.6) (3.1) (1.0) SriLanka (1.5) (8.4) (8.5)

Africa
Egypt (14.5) (31.0) (35.0) Egypt 2.5 (8.6) (8.7)
Ghana (1.9) (12.1) (12.3) Ghana (1.0) (15.6) (16.0)
Kenya 3.8 (18.0) (18.6) Kenya (0.2) (11.4) (11.9)
Morocco 1.9 (2.2) (5.3) Morocco (2.3) (9.9) (12.1)
Nigeria (6.0) (17.7) (17.4) Nigeria 0.0 (7.8) (10.2)
Rwanda N/A N/A N/A Rwanda (2.2) (9.1) (8.4)
SouthAfrica (3.9) 7.1 6.9 SouthAfrica (4.6) (20.3) (23.7)
Tanzania (0.8) (3.7) (6.4) Tanzania 0.2 (20.0) (19.6)
Tunisia (3.2) (0.9) 1.4 Tunisia (4.0) (10.0) (11.0)
Turkey (4.5) (8.5) (8.6) Turkey 0.0 (19.8) (23.8)
FrancophoneWestAfrica 0.7 21.1 28.1 FrancophoneWestAfrica (5.0) (14.2) (16.5)

LatinAmerica
Argentina 4.1 51.2 32.3 Argentina (1.8) (12.6) (12.0)
Brazil (1.6) (9.8) (17.5) Brazil (0.3) (31.3) (33.7)
Chile (4.5) (5.1) (8.4) Chile (2.8) (14.7) (14.5)
Colombia (8.5) (24.1) (24.6) Colombia (7.9) (24.5) (29.5)
Ecuador (1.9) (9.3) (8.8) Ecuador N/A N/A N/A
Mexico (2.3) 2.5 0.1 Mexico (0.6) (11.1) (16.1)
Peru (3.0) (30.9) (32.3) Peru (2.6) (11.7) (13.4)

Global
Brazil (1.6) (9.8) (17.5) Brazil (0.3) (31.3) (33.7)
China 1.9 8.2 30.5 China (1.3) (3.0) (4.0)
Egypt (14.5) (31.0) (35.0) Egypt 2.5 (8.6) (8.7)
Euro 2.7 14.9 11.4 Euro (4.1) (12.8) (15.2)
HongKong (2.7) (3.7) (5.2) HongKong 0.0 0.0 0.0
India (1.9) (3.6) (7.6) India (2.1) (5.4) (7.0)
Indonesia (0.1) (13.4) (12.0) Indonesia (1.2) (10.5) (11.9)
Mexico (2.3) 2.5 0.1 Mexico (0.6) (11.1) (16.1)
Nigeria (6.0) (17.7) (17.4) Nigeria 0.0 (7.8) (10.2)
Peru (3.0) (30.9) (32.3) Peru (2.6) (11.7) (13.4)
Philippines (2.9) (2.5) (3.3) Philippines (0.8) (5.3) (4.9)
Russia 3.5 32.2 21.7 Russia (3.7) (8.5) (25.5)
SouthAfrica (3.9) 7.1 6.9 SouthAfrica (4.6) (20.3) (23.7)
SouthKorea (1.8) 4.1 2.0 SouthKorea (1.5) (5.8) (4.3)
Switzerland 0.6 3.2 1.3 Switzerland (3.9) (3.3) (6.1)
Turkey (4.5) (8.5) (8.6) Turkey 0.0 (19.8) (23.8)
UnitedKingdom 0.3 0.3 (1.9) UnitedKingdom (2.6) (3.5) (4.0)

8/8 Arisaig Diary We are a CarbonNeutral organisation and a signatory of the UNs Principles of Responsible Investment.