August 2016

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.

Performanceto31August2016(%)
NAV Size 15yr 10yr 5yr 3yr 2yr 1yr 6mth 3mth 1mth YTD Since Annualised
(USD) (USDm) Launch Return
1
ArisaigAsiaConsumerFund 67.77 2,861.2 +850.5 +216.2 +63.1 +37.9 +19.8 +10.7 +18.0 +7.9 +1.3 +5.1 +910.5 +12.5
ArisaigAfricaConsumerFund 12.32 240.7 (11.7) (38.7) (37.9) (17.0) (2.8) (8.9) (2.1) (11.4) +10.7 +1.1
ArisaigLatamConsumerFund 24.29 291.3 +4.9 (8.3) (11.4) +19.5 +24.3 +9.9 (1.0) +22.0 +6.1 +1.1
ArisaigGlobalEmergingMarkets
2,4 10.37 959.0 (1.0) +4.5 +11.4 +2.7 (0.9) +2.5 +4.1 +1.5
ConsumerFund(BVI)
(EUR/GBP) (EURm)
ArisaigGlobalEmergingMarkets
2,3 92.8
ConsumerFund(UCITS)
4
EURshareclass 12.03 +14.8 +5.3 +9.1 +2.3 (0.7) +0.1 +25.4 +8.9
4
GBPshareclass 12.96 +22.5 +22.1 +18.0 +13.0 +0.4 +14.8 +29.6 +10.2

1ReflectstheperformanceofArisaigAsianSmallCompaniesFundfrom31stDecember1996to21stJanuary2000,ArisaigAsiaFundfrom22ndJanuary2000to31stMarch2010andthereaftertheperformanceof
ArisaigAsiaConsumerFund.
2TheoffshoreversionoftheFundwaslaunchedtothirdpartyinvestorson16thSeptember2013andtheUCITS(EUR)versionon4thNovember2013.TheadditionalGBPshareclassfortheUCITSFundwaslaunched
on16thDecember2013.
3TheEURAUMoftheAGEMCFUCITSreflectsboththeEURandGBPshareclassesoftheFund.
4Performanceismeasuredfromaneffectivelaunchdateof1stJanuary2014forAGEMCFBVI,UCITS(EUR)andUCITS(GBP)forconsistency.

AugustDiaryHighlights
AugustwasaflattishmonthforallofourFunds.TheAsiaFundgained1.3%inthemonthwhiletheGlobalUCITS,GlobalBVI,Latamand
AfricaFundseachsawsmalldeclinesof0.7%,0.9%,1.0%and2.1%,respectively.
IntheGlobalsectionweaddresstherecentinflowsintoemergingmarkets(sofarthisyearUSD20bnhasendedupinETFs,whilst
USD14bnhasflowedoutfromactivemanagers)asinvestorssearchforreturnsgiventhelowyieldscenarioindevelopedmarkets.We
willbediscussinganumberofinvestmentideaswithourregionalteamsatananalystgatheringinLondoninSeptember.
InAsia,ourteamtravelledtoChina,wherethemarginalconsumerisclearlystruggling.Thishasbeenreflectedintheresultsofour
holdings,althoughthelikesofDaliFoodsandFoshanHaitianseemtobedoingbetterthanthemarketoverallonaccountoftheirfocus
onpremiumisationandinnovation.InIndia,ModisgovernmentpasseditsmomentousGSTbill,thefirststepinalongbutvitalprocess.
TheAfricateamhasbeeninZimbabwe,acountrywhichfindsitselfatsomethingofacrossroadsassocialunrestintensifiesthanksto
liquidityconstraintsandrisingunemployment. Wealsocommentonsomeofourholdingsinterimresults,whichingeneralwere
mixedwithMrPricedeliveringpoornumbers,butthelikesofFanMilkandlkerBiskvistrongones.
InLatamwediscussourtravelstoSoPauloandBuenosAireswherethemoodisoneofoptimismasthetwonewpresidentssetabout
implementingtheirreformprogrammes.Amongstothers,wemetwithourtworetailersLojasRennerandRaiaDrogasil(bothcontinue
totakemarketshare)andNatura(acasestudyofanewCEOmakingastrongbrandworkharder).
OurfocusintheESGsectionthismonthispalmoil.Itisestimatedthat80%ofpalmoilfindsitswayintosomeformofconsumer
productandacommitmenttoasustainablesourcingpolicyisbecominganimportantaffirmationforourholdings.

Whatwelookforinourstocks Whatourinvestorscanexpectfromus

Marketleadershipdominantcompaniestendtodobetter; Alignmentofinterestscappedfunds,nosegregated
Scalabilitylargetargetmarkets; portfolios,coinvestment;
Strongmoatsbrands,distribution,innovation; Transparencyholdingsbooklets,monthlyportfolio
LowcapitalintensityhighROCE; summaries,examplesofresearchreports;
Predictabilitycompoundinggrowth; Coverage27analysts;sixresearchoffices;190targetstocks;
Accessmanagementwhowelcomeourinvolvement. Minimaltradingactivemanagementdestroysvalue;
Focusconsumercompaniestendtooutperform,sowe
wontbedoinganythingelse.

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

 August 2016

FundDetails

GeographicAllocation(%)
AACF AFCF ALCF AGEMCF BVI*
India 37.1 Nigeria 16.5 Brazil 40.0 Indiansubcontinent 22.1
China/HongKong 16.4 Ghana 15.0 Mexico 31.1 ASEAN 9.9
Philippines 12.2 SouthAfrica 14.9 Peru 16.6 China 9.8
Vietnam 5.9 Tunisia 11.4 CentralAmerica 5.5 MiddleEastandCentralAsia 7.6
Pakistan 4.2 Egypt 8.4 Ecuador 0.6 ContinentalEurope 5.8
Indonesia 4.0 Turkey 7.4 Brazil 5.5
SouthKorea 2.9 Rwanda 7.4 Others 4.9
Bangladesh 2.0 Tanzania 7.2 OtherLatam 4.5
Kenya 4.2 USA 4.5
Morocco 3.8 SouthAfrica 4.4
IvoryCoast 1.6 SubSaharanAfrica 3.9
Mexico 2.6
UK 1.9
Russia&EasternEurope 1.4
Netcash 11.3 Netcash (0.2) Netcash 3.8 Netcash 9.9
Othernetassets/(liab)

4.0
Othernetassets/(liab)

2.4 Othernetassets/(liab) 2.4
Othernetassets/(liab)

1.3

100 100 100 100

*IndividualcompanyFY15revenuesplitandweightedonAGEMCFBVIcomposition

SectorAllocation(%) Valuations(FY2016)
AACF AFCF ALCF AGEMCF AACF AFCF ALCF AGEMCF
BVI BVI
Food&Beverage 44.3 60.3 51.3 42.4 EV/Sales(x) 2.9 1.8 1.7 3.1
FMCG 19.9 18.1 13.2 34.2 PER(x)* 36.0 21.8 22.8 29.6
Retail 10.2 10.7 29.3 6.6 PERrolling12m(x)** 33.9 20.5 20.9 27.6
FastFood 10.3 8.7 5.6 Yield(%) 1.4 2.8 2.6 1.7
*usingaggregateforecastearningsofallportfoliocompaniesfortheircurrentfinancialyears
**usingaggregate12monthforwardforecastearningsofallportfoliocompaniesirrespectiveof
financialyearend
Valuationmetrics(exceptyield)arecalculatedonthebasisofaweightedharmonicmean

PortfolioConcentration PerformanceMetrics(FY2016)
AACF AFCF ALCF AGEMCF AACF AFCF ALCF AGEMCF
BVI BVI
No.ofholdings 25 22 16 30* ROCE(%) 44 41 24 35
Top10holdings(%) 51.1 67.5 77.3 45.7 Netmargin(%) 11 10 10 12
Top20holdings(%) 79.3 96.4 93.8 72.2 EPSgrowth(%) 12 (1) 11 6
Av.marketcap(USDm) 6,066 1,271 12,475 32,775 EPSgrowthrolling12m(%)* 11 9 12 10

*HoldingsforAGEMCFcountlistedsubsidiarieswithinonebusiness *Reflectsblendedforward12monthEPSgrowth

CompoundAnnualReturns(%)to31August2016 TheArisaigfamilyofFundsareopenendedinvestmentcompaniesdomiciledinthe
AACF AFCF ALCF AGEMCF BVI,MauritiusorIrelandandtheirdailyvaluedNAVsarepublishedintheFinancial
Times and on Bloomberg. The Asia Consumer Fund is listed on the Irish Stock
BVI
Exchange.ThisDiaryisintendedtobefortheinformationofholdersofoneormore
15years 16.2
ofArisaigsFunds.Itisnotintendedtoconstituteinvestmentadviceandshouldnot
10years 12.2 be relied upon as such. Investors should be aware that, as the Funds are also
5years 10.3 (2.5) 1.0 invested in the securities of certain smaller companies as well as those listed in
3years 11.3 (15.0) (2.8) emerging markets, share prices can be more volatile and trading liquidity much
Sinceinception

12.5 1.1 1.1 1.5 lower.

ArisaigPartners(Asia)PteLtd ArisaigPartners(India)PrivateLimited ArisaigPartners(Mauritius)Ltd
69CircularRoad,#0201,Singapore049423 VillarVille,FirstFloor,16P.J.RamchandaniMarg, IFSCourt,TwentyEight,
Tel(65)65323378Fax(65)65326618 Colaba,Mumbai400001,India Cybercity,Ebene,
Tel(91)2222875031Fax(91)2222875030 Mauritius

ArisaigPartnersResearchServices(CapeTown) ArisaigPartners(HK)Limited ArisaigPartnersServiosLtda
26KildareRoad,Newlands Suite520708,52ndFloor,TheCenter AvBorgesdeMedeiros633sala206
CapeTown,7700,SouthAfrica 99QueensRoadCentral,HongKong Leblon,RiodeJaneiroRJ,Brazil22430041
Tel(27)216716680Fax(27)216716679 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
TheGlobalBVIFundwasdown0.9%inAugust,takingreturns
so far this year to 2.5%. The UCITS vehicle fell by 0.7%,
bringingittoaflatpositionyeartodate.
Ourlargestholding,IndianpackagedfoodproducerBritannia,
led the field, rising by 17.7%. Its Turkish equivalent, lker
Biskvi, also did well, up 6.4% (see Africa section). We
welcomedsomethingofabouncebackforEgyptsEditaFood
Industries GDR, which rose by 4.9%, albeit on very thin
volumes. The main detractor from performance this month
was our Korean snack manufacturer, Orion, which fell by a
painful 19.6%. This was the consequence of poor guidance
combined with Q2 results which looked dreadful, but were
not so bad after looking under the hood. We give more
detail on these results in the Asia Diary, setting them in the
contextofexceptionallyweakconsumersentimentinChina.
EmergingMarketFlows
Thedramaticreboundinemergingmarketssincethedogdays
of January and February has been perhaps the major
investmentthemeof2016.Indeed,yeartodatewehaveseen
thefirstnetinflowstoEMequitiessince2012.Thisbegsthe
obviousquestionastowhyourFundhasnotbenefittedtothe
sameextentasmoregenericEMstrategies.Theanswerliesin
the composition of these inflows. Around USD20bn has
flowedintopassiveETFvehicles,whilstactivemanagershave
seenaroundUSD14bninoutflows.
Moreover, much of this capital has been directed towards
Global EM themes (bear in mind even the socalled active
managers in this bracket are often closet indexhuggers).
Takentogether,thismeansthatflowshavedisproportionately
benefitted the highbeta indextype names, particularly
thoseinverybeatendowngeographiesandsectors(Brazilian
banksandenergystocks,forexample).
Withonlyc.2%oftheMSCIEMIndexaccountedforbyGlobal
Fundstocks,itisperhapsunsurprisingthatwehavenotfully
benefitted from this rally. Anecdotally, we understand that
manyinvestorshavesimplyparkedmoneywithlowcost,one
stopshopssuchasETFsasashorttermtacticforplayingthe
EMrecoverywhilsttheytaketimetoconsidermoretargeted
strategiesforhigherqualityexposuretothesemarkets.
Inourview,itseemslikelyforstructuralreasonsthatcapital
will continue to migrate to EMs for the foreseeable future.
Withgrowthstalledinmuchofthedevelopedworld,political
riskhereontherise,andtheliabilitiesassociatedwithageing
populationsincreasing,thequestionofwheretofindreturns
isanextremelypressingonefortheWesternWorld.
3/8 Arisaig Diary We are a CarbonNeutral organisation and a signatory of the UNs Principles of Responsible Investment.
August 2016
We should further consider that the average yield on
developed market sovereign debt is barely 0%, and around
one third of these bonds are destroying capital through
negative yields. Growth is simply absent in the developed
world but it is present in the emerging world, even if it is
rathermoretemperedthanwasthecaseafewyearsago.
Meanwhile,theconsumerspaceisenteringanintriguingnew
phase characterised by the rise of an increasingly
sophisticatedanddiscerningconsumer,atrendacceleratedby
digitalisation powerful drivers of the premiumisation and
market formalisation that propels our businesses up the S
curve.Hencewebelievethatourdominantstaplesnameswill
bewellplacedtoamplifygeneralratesofeconomicgrowthin
EMs, and hence should be longterm beneficiaries of capital
inflows seeking high quality, predictable growth assets.
Compounding earnings growth and supportive capital flows
shouldtakecareofshorttermvaluationmultiplesinourview.
PortfolioStrategyandProcess
Unlike other active EM strategies, the Global Fund has
benefittedfromnetinflowsthisyear,oneofthereasonswhy
we have been able to build a comfortable cash buffer. With
cashavailabletodeploy,weareinthefinalstagesofassessing
by way of updating our 1,300 page Compendium a
handfulofnewadditionstotheFund,aswellasstresstesting
ourassumptionsoncurrentholdings.
OverthepastyeartheGlobalteamhastravelledtoallofour
major markets alongside the regional teams. In September
HugowillattendtwoanalystdaysinLondonwhichwehave
organised for the Latam and Africa teams, followed by a
similareventfortheAsiateaminSingaporeinOctober.These
willprovideanopportunitytodiscusscandidatesforbothour
regionalandtheGlobalFunds.
The basis of our discussions will be a series of deepdive
style reports written on each of these businesses. One such
report, over 100 pages long, has been written by our Latam
teamincollaborationwithDesmond(ourinhouseexperton
digitalandecommerce),andcoverstheonlineretailspace.It
focusses on a particular name in this space we have been
eyeingsinceOctober,andhavemetmanagementfourtimes,
including visits by the Global team last month (see Latam
section).AfinaldecisionwillbemadeonthisinLondon.
Aswellastheabove,ourresearcheffortsoverthepastyear
will most likely culminate in the addition of one or two new
namestotheGlobalFundinthebrandedproductsspace.Itis
probablethatwewillalsoexitacoupleofourmoremarginal,
existingholdingsinordertomakeroom.

ArisaigAsiaConsumerFund
Performance
TheAsiaFundcontinueditspositivetrendinAugustrisingby
1.3%, bringing yeartodate returns to 5.1%. Vinamilk (up
21.2%) and Britannia (up 17.7%) were two of the strongest
performersthismonthafterbothreleasedanotherstrongset
of results. Meanwhile, Orion (down 19.6%) and Universal
Robina (down 5.9%) both saw declines following results
misses(moreonthisbelow).
China
Lindsay,GordonandVatsaljoinedtheChinateamonatripto
Mainland China and Hong Kong. Both the meetings and the
companiesinterimresultsrevealedafurtherdeteriorationin
the underlying economy after an already weak start to the
year. In fact, the sales data that we have compiled from
consumerstaplescompaniessuggeststhatGDPprobablyonly
rosebylowsingledigitsinthefirsthalf;amarkeddropfrom
thedoubledigitgrowthofjustacoupleofyearsago.
In China there is never an easy answer to these trends,
particularlywhenofficialdataconflictswithreality.However,
webelieveittobeprimarilylinkedtothebroadslowdownin
income growth amongst lowincome workers in the country
(i.e. the key marginal consumer). Minimum wage increases
have slowed, or even halted (as is the case in Guangdong)
across most provinces as part of the governments plan to
preserve its advantage in labour costs. Meanwhile, the
rebalancingoftheeconomytowardsservicesisleavingmany
lowskilledlabourerswithlittleinthewayofemployment.
Consumer confidence is clearly being hit and the lack of a
social safety net beneath Chinese consumers amplifies the
adjustment. While this transition takes place, incremental
spending on basic goods in China is likely to remain modest.
Still,opportunitiesremainforcompaniestargetingconsumers
inthemajorcitiesthroughmorevalueaddedofferings.
Foshan Haitian and Dali Foods are responding better than
most to this change, with sales rising by 9% and 6%,
respectively in the first half. Haitian was the standout
performer,deliveringnetprofitgrowthof11%.Itsstrategyof
premiumising and diversifying its sauces product portfolio
continues to bear fruit. Indeed, new product lines grew by
33%.Dalialsopostedadecent8%growthinprofits.Itsenergy
drinksandbiscuitsportfoliocontinuetoimpresswithtopline
growthof71%and9%,respectively.
Orion saw operating profit in its core China business fall by
13% (in local currency). However, this was largely a timing
issue, with a large A&P investment being booked ahead of
several new premium product launches for the second half.
4/8 Arisaig Diary We are a CarbonNeutral organisation and a signatory of the UNs Principles of Responsible Investment.
August 2016
Thesewillbetargetedatbetteroffconsumersinthetoptier
centres,whichshouldensurecontinuedmarketsharegains.
India
Defyingthesceptics,theModigovernmentfinallymanagedto
pass its flagship GST bill in the upper house of Parliament. It
also resisted the ageold temptation of appointing a dovish
governoroftheReserveBankofIndia,insteadoptingforthe
currentdeputy,whohasbeencloselyinvolvedwiththerecent
banking reforms. Although the GST story is still far from
concluded,thesearetwoverypositivestepsforward.
As for our holdings, the recent flurry of first quarter results
was generally solid considering the shortterm consumption
pressuresoutlinedinlastmonthsDiary.Britannialedtheway
inthebiscuitscategorywith8%volumegrowth.Thisislargely
thanks to a transformed innovation department, which has
renovated almost the whole product portfolio over the past
18monthsandcuttheleadtimefornewproducttrialsfrom
twomonthstojusttwodays.
In personal care both Colgate and Marico managed to grow
underlying net profits by around 20%. The former saw
revenues grow by a decent 12%. We believe this uptick in
growth is sustainable, supported by the recent launch of a
herbalAyurvedatoothpaste.Pricedcompetitively,theproduct
has the potential to make big inroads into this fastgrowing
segmentthathaseludedthecompanytodate.
Inretail,Trentmanagedtogrowsalesandnetprofitsby15%
and 60%, respectively. Its core Westside apparel format
registeredsamestoresalesgrowthof8%,comfortablyahead
of its peers. The plan is to expand the store count of this
successful format threefold over the next five years. This
wouldresultinsignificantoperatingleverage.
UniversalRobina(URC)
Burdened by the Vietnam food contamination scandal (now
closed by the authorities), Universal Robina reported a weak
setofthirdquarterresultswithsalesincreasingbyjust2%and
underlyingnetprofit(excludingahedginggain)down6%.The
core branded Philippines business continues to perform very
well8%salesgrowthwasthestrongestinayear.Thatsaid,a
proposedtaxonsugarydrinkswouldhampergrowth.
URC also announced the acquisition of a premium snacks
business: Snack Brands Australia. This deal strengthens its
position in Australasia following the 2014 acquisition of
Griffins Foods but, more importantly, it also adds attractive
premium brands for URC to distribute across its existing
marketsinASEAN.

ArisaigAfricaConsumerFund
Performance
Adversepricemovementsonthefinaldayofthemonthswept
away early gains and shaved 2.1% off the NAV in August.
South African apparel retailer Mr Price (down 23.9%) fell
sharplyfollowingaweakwintertradingupdate.Fearsthatthe
countryswellregardedfinanceministermightbearrestedfor
improprieties when he was tax commissioner worsened the
blowandcausedtheRandtodropby5.7%.
Dairy producer, Juhayna Food Industries, (down 19.5%) also
had a disappointing month as investors anticipate margin
contractionshouldtheEgyptianPounddevalue.Onabrighter
note,GhanaiandairycompanyFanMilk(up8.8%)andTurkish
confectioner lker Biskvi (up 6.4%) both gained after
reportingdoubledigitearningsgrowthinquarterlyresults.
CompanyResults
lkerachievedimpressivelikeforlikevolumegrowthof5%in
its second quarter thanks to particular strength from its
internationaloperations.Streamliningtheproductportfolioto
dispenseoflowmarginofferingsinfavourofpremiumbrands
has boosted operating margins to record levels. Meanwhile,
fellow Turkish holding, hard discounter BM Birleik blamed
economic weakness and rising competition for its sales
shortfallandhashadtorevisedownFY2016toplineguidance
toastillrespectable15%.
Tanzania Breweries grew volumes by 6% in the year ending
March,withstellargrowthintheaffordabilitysegment.Ithas
counteredrivalSerengetiBreweriesnewPilsnerofferingby
introducingawellreceived375mlSafarilagervariantatthe
same price point. Bralirwa on the other hand reported a
collapseinhalfyearearningsmainlyduetoFXlossesonUSD
denominated debt. Our 2016 portfolio EPS growth forecast
hasbeenreducedtominus1%buttherolling12monthfigure
suggestsanaccelerationtoplus9%.
Bralirwa
We have spoken with Heineken on more than one occasion
about our disappointment with Bralirwas operating
performance. Our main concerns are that the Rwandan
subsidiaryhascededmarketsharetooeasilytoSkolineachof
the last five years thanks to a lack of innovation; and has
overspent on its revamp of manufacturing facilities. Large
scale investment has led to higher depreciation costs and
interest expenses, thereby reducing profitability. Heineken
informed us that the machinery in the plant was up to 40
yearsoldandneededreplacing.Furthermore,Rwanda,aquiet
backwater, lacks deep financial markets that could fulfil
Bralirwas borrowing requirements in short, the company
hadnooptionbuttoborrowinUSDollars.
5/8 Arisaig Diary We are a CarbonNeutral organisation and a signatory of the UNs Principles of Responsible Investment.
August 2016
In September, seasoned Heineken employee Victor Madiela
will become MD, thus completing the new senior
management team following the arrivals of new finance and
technical directors. Encouragingly, some quick wins have
alreadybeenearmarkedinabidtoarresttheprofitdeclines.
In addition, a new, affordable product priced at USD0.62
shouldhelptoreclaimsomemarketshare.
MrPrice
Credit regulation changes, unseasonably warm weather,
heavydiscountingbypeersandeconomicweaknesscreateda
perfectstormthatcausedMrPricesresultstofallshort.This
follows soft numbers from our erstwhile holding Truworths
and points to a general slowdown in national retail sales. In
thesameperiodlastyear,MrPricealsounderperformedand
itssharepricewassimilarlypunished.Thisaffordablefashion
offeringhasnotchanged,butthesheersizeofitsderatingis
areminderastowhyretailerssitfurtherdownourportfolio.
Zimbabwe
TheteamspentacoupledaysinHararemeetinganumberof
businesses and assessing the likelihood for political change.
PresidentMugabe(whois92)hasheldpowersinceZimbabwe
become independent in 1980, but demonstrations for his
removal have become louder as the country grapples with a
liquiditycrisisandrisingunemployment.
Since hyperinflation and the adoption of the US Dollar,
ZimbabwehasbeenfeedingAfricaDollarsascapitalcontrols
in neighbouring countries leave traders with the easy option
to cross the border into Zimbabwe to get their hands on US
Dollars before returning home. This bleeding of physical
currency, coupled with dwindling FDI receipts, has prompted
the Zimbabwean Central Bank to announce the rollout of
bondnoteswiththesamefacevalueasthegreenback.
Zimbabweans are rightly sceptical: they fear a return to the
days of hyperinflation, and many are withdrawing their
savings from banks, deepening the crisis. It is clear that the
countryhasreachedanimpasseandthattheonlysolutionis
eitherachangeinpolicyorachangeinpolitics.
SABMillercontrolledbrewery,DeltaCorporation,remainsthe
standout candidate for further accumulation by the Fund,
navigating the challenging macroeconomic backdrop
admirably. Its sorghumbased beer, Chibuku, provides low
incomeconsumerswithanaffordableproductandhashelped
to rapidly formalise alcohol consumption. Despite its excise
freestatus,thecompanyearnshighermarginsonthisthanit
does on mainstream lines. Longer term, Deltas dominance
bodeswellforwhentheeconomyeventuallyturns.

ArisaigLatinAmericaConsumerFund
Performance
TheLatamFundhadarelativelyflatmonth,fallingby1.0%in
August which takes returns so far this year to plus 22.0%.
PriceSmart (up 7.7%) was the best performer after what has
beenarelativelymutedyeartodatefortheCentralAmerican
wholesale club operator. KimberlyClark Mexico also had a
decentmonth,up6.0%.
Followingaterrificruninrecentmonths,whichhasseentheir
share prices rise yeartodate by 106.6% and 85.9%
respectively, two of our Brazilian names Raia Drogasil (down
9.7%)andLojasRenner(down5.7%)pulledbacksomewhatin
August. Top performing stock in 2016 (up 123.2%), M Dias
Branco,however,continuedtorally(up3.6%thismonth).
BrazilandArgentina
James, Hugo and Desmond joined the Latam team for
meetingsinSoPauloandBuenosAiresinAugust.Themood
in both cities was generally positive as the new market
friendly leaders set about implementing their reform
programmes. Whilst Temer and Macri will undoubtedly face
setbacks along the way, the direction of travel, so far, is
encouraging.
In Brazil, the last day of the month saw the concluding vote
against Rousseff fall the right way. Without this distraction,
Temercannowaimtogetthepublicspendingbillpassedthis
year, something which will be an important boost to
confidence. Indeed, Finance Minister Henrique Meirelles
confirmed to us via videoconference that a constitutional
change was the only way to unlink Brazils public spending
from tax revenues and to put a cap in place for the next 20
years.
A tougher test for Temers team will be addressing social
security reform Brazils pension system, for example, is
unviable.Aminimumretirementageof55formenand50for
women is simply too generous. Other reforms for this
administrationtoaddressinthenottoodistantfuturemight
also include labour and tax regimes. In the meantime,
however, the government will look to complete the
privatisationofvariousmotorwaysandairports.
Like Temer in Brazil, in Argentina Macri has surrounded
himself with an experienced, Ivy Leagueeducated cabinet.
The President has moved quickly since taking the helm
energysubsidiesandcurrencycontrolshavebeendismantled;
the longstanding dispute with bondholders has been
resolved;accesstointernationalcapitalmarketsafter15years
of isolation has been regained; and proposals for
infrastructureprojectshavebeentabled.
6/8 Arisaig Diary We are a CarbonNeutral organisation and a signatory of the UNs Principles of Responsible Investment.
August 2016
While Macri is not short of action plans, the priorities are to
reinininflationandattractforeigninvestment.Thehopetoo
from our perspective is that, as confidence increases, more
consumerbusinesseswillcomeoutofthewoodworkandlist
onthecountrysstillshallowstockexchange.
OurmeetingwiththemanagementofRaiaDrogasilreiterated
the powerful growth drivers behind the pharmacy story in
Brazil, particularly with regards to the formalisation and
consolidationofastillhighlyfragmentedspace.Asmentioned
in recent Diaries, Raias results have accelerated in the last
few quarters (whist peers have struggled) as its backend
systemshavebeenstrengthenedanditsstorecounthasbeen
rampedup.
AtLojasRenner,managementbelievetheyareabout40%of
the way through the implementation of their supply chain
restructuring.Stilloperatingafourseasonmodelwithsmaller
offshoot collections, the vision is to move towards an
increasingly granular and complex set of production runs,
similar to Inditex. Also, much thought on the potential
disruptionbyecommerceisgoingon,withRennerlookingto
establishitsownomnichanneloperations.
Discussions of a similar nature were had with Naturas CEO,
RobertoLima,whoacknowledgedthattheBrazilianconsumer
isnowomnichannelandsoNaturaalsooughttobe.Assuch,
the company is evolving into a big datadriven enterprise
withtheobjectiveofmakingbuyingeasierforconsumersand
selling easier for its consultants, with the overriding aim of
regainingmarketshare.
The first step has been to make Natura products available
where Brazilians want to buy them, rather than through
consultantsexclusively:inshort,selfrunNaturastores,direct
toconsumerdigitalsales,pharmacychains,andtheformation
of franchising agreements for thousands of consultantrun
outlets.Thesecondstephasbeentofacilitateconsultantsand
bring them closer to the consumer by providing them with
more detailed, realtime information. In other words,
technologyisnowbeingusedtoleverageNaturasstrengths,
including an excellent brand and one of the most extensive
distributionnetworksinBrazil.
Speaking of technology, in both So Paolo and Buenos Aires
the team also met with the impressive top management of
MercadoLibre, the leading ecommerce company in Latin
America. We will be discussing the prospects for
MercadoLibreaswellasforacoupleofothercandidatesin
greatdetailatouranalystgatheringinSeptemberinorderto
finaliseourduediligenceonpotentialadditionstotheFund.

Environmental,SocialandGovernanceIssues
HazeandPalmOil
This month, the Singapore office has been shrouded in haze
whilst smoke from the annual slash and burn clearance of
Indonesias forests again found its way to our shores. Along
with Malaysia, these two Southeast Asian nations produce
85%oftheworldspalmoilaspristineforestscontinuetogive
waytomorelucrativeplantations.
TheeffectsareunpleasantinSingaporebuttheenvironmental
andsocialimpactonthepeoplewholivenearthehotspots
or the animals whichcall the forest their home are far more
significant. The burning of peat residue, which can smoulder
for days after the forest itself has been cleared, exacerbates
the noxious consequences it is estimated that this practice
accountsfor15%ofglobalgreenhousegasemissions.
Aside from our proximity to it, this issue has been front of
mind for us as investors in consumer companies given that
palm oil is an important raw material for many of our
businesses.Itisakeyingredientineverythingfromshampoo
andlipsticktonoodlesandchocolate.
It is estimated that 80% of palm oil finds its way into some
formofconsumerproductbeitbrandedorunbranded.Itis,
therefore,unsurprisingthataseriesofpowerfulsocialmedia
campaigns have made this a vital issue for our branded
multinational consumer companies to address, particularly
given that the growth of the emerging consumer will drive
futuredemand.
The ubiquitous nature of palm oil and the variety of its
derivatives mean that sustainability labelling, such as Fair
Tradecoffeeorcocoa,hasnotbeenthefocusofcorporate
attention. Instead, the steps that companies are taking are
focusedonensuringtheirbrandequityremainsunimpaired.
OurHoldings
Interest in this topic has been accelerating over the last few
years and today most of the leading multinational consumer
companies have some form of commitment to sustainable
sourcingofpalmoil.
Ofthepalmoilintensivebusinessesinourportfolios,75%of
theGlobalFund(onanNAVweightedbasis)havemadetime
boundpubliccommitmentstomoveto100%sustainablepalm
oil. This includes all of the multinational businesses in which
weareinvested.Thisfigureis71%,70%and97%inourAsia,
AfricaandLatamFunds,respectively.
For those companies that have yet to make such a
commitment,weareconfidentthatthemanagementteams
7/8 Arisaig Diary We are a CarbonNeutral organisation and a signatory of the UNs Principles of Responsible Investment.
August 2016
haveagoodunderstandingoftheimportanceofthisissueand
aremovingintherightdirection.
Indeed, the advisability of sustainable sourcing policies is
increasingallthetime.Abroadcommitmenttosource100%
of palm oil from broadly sustainable sources, which
historicallyincludeoffsetcertifications,hasbeenovertaken
bytracingpalmoilsourcestocertifiedmills.Inordertoassess
thedirectionoftravel,wecapturethisinformationinourESG
reports.
Despitetheselaudablecommitments,however,itisestimated
thattodayonlyaroundafifthofglobalpalmoiliscertifiedas
sustainable. Therefore, whilst it certainly makes sense to
startwithbrandedconsumerbusinesses,otherbusinessmust
also get onboard to underpin a fundamental transformation
of the industry: Unilever despite being one of the largest
global purchasers still buys just less than 3% of the worlds
palmoil.
Suppliers themselves have a critical role to play, not only in
reaching a fragmented group of unbranded buyers who still
makeupthebulkofdemandforpalmoil,butalsoinreaching
other industries such as pharmaceuticals, industrials and
biofuelstheeventualdestinationof25%ofglobalpalmoil.
We take confidence not only in the fact that some of the
worldslargestsuppliershavecommittedto100%sustainable
sourcing (Cargill is aiming for this by 2020), but also that
transgressors are increasingly under financial pressure to
changetheirways.Asanexample,MalaysiasIOI(oneofthe
worlds leading palm oil businesses) has had its credit rating
reviewed after a number of its largest buyers including
Unilever,NestlandMarssuspendedtradingwithit.
Facilitating progress is the increasingly important role that
technology can play in holding the industry, and all of its
players,toaccount.
PRIConference
On this issue, and others, it is notable that the broader
investmentcommunityistakingsustainabilityissuesfarmore
seriously than ever before. As a consequence, management
teamsareincreasinglyaccountabletotheirshareholders,and
theirconsumers,whenitcomestosuchmatters.
This is very much a positive sign of the times. We will be
joiningotherresponsibleinvestorsatthismonthsPrinciples
for Responsible Investment conference in Singapore to
comparenotesonprogressinthesecriticalareas.
 August 2016

MarketandCurrencyPerformance
KeyMarketsLocalCurrencyPerformance(%) KeyCurrenciesPerformancevsUSD(%)
Aug YTD 12mth Aug YTD 12mth
Asia
HongKong 5.2 8.0 10.2 HongKong 0.0 (0.1) (0.1)
China 3.7 (11.1) (1.7) China (0.7) (2.8) (4.5)
Taiwan 1.9 12.8 15.5 Taiwan 0.6 3.5 2.9
SouthKorea 0.9 3.8 6.6 SouthKorea 0.5 5.4 6.1
Indonesia 3.3 19.2 21.7 Indonesia (1.2) 3.9 6.0
Philippines (1.9) 13.8 11.7 Philippines 1.2 0.7 0.5
Malaysia 1.9 1.1 7.3 Malaysia 0.0 5.6 3.1
Singapore (0.2) 1.2 0.3 Singapore (1.6) 4.1 3.7
Thailand 2.3 23.5 15.6 Thailand 0.5 4.0 3.6
Vietnam 4.0 18.7 22.5 Vietnam 0.0 0.8 0.8
India 1.5 10.3 9.9 India 0.0 (1.2) (0.7)
Bangladesh 0.0 (2.2) (5.1) Bangladesh 0.1 0.0 (0.6)
Pakistan 1.8 19.9 15.4 Pakistan 0.1 0.0 (0.5)
SriLanka 2.3 (3.2) (8.1) SriLanka 0.0 (0.8) (7.5)

Africa
Egypt 1.0 15.9 11.7 Egypt 1.2 (10.9) (10.9)
Ghana 0.5 (8.4) (15.2) Ghana (0.4) (3.8) (1.5)
Kenya (8.7) (17.3) (19.1) Kenya 0.1 1.0 2.7
Morocco (0.2) 10.2 5.3 Morocco (0.2) 1.7 (0.5)
Nigeria (1.3) 0.8 (2.2) Nigeria 1.8 (36.6) (36.7)
Rwanda N/A N/A N/A Rwanda (1.6) (7.1) (9.0)
SouthAfrica 0.3 5.9 8.8 SouthAfrica (5.7) 5.2 (9.9)
Tanzania (13.7) 3.5 (0.6) Tanzania 0.0 (1.7) (1.9)
Tunisia 1.3 9.7 0.9 Tunisia 0.4 (7.4) (11.2)
Turkey 0.7 7.9 4.2 Turkey 1.0 (1.4) (1.6)
FrancophoneWestAfrica 0.2 (1.4) 1.1 FrancophoneWestAfrica (0.3) 3.6 (1.6)

LatinAmerica
Argentina (1.0) 34.0 41.8 Argentina 0.5 (13.4) (37.7)
Brazil 1.0 33.6 24.2 Brazil 0.7 22.8 12.2
Chile 0.0 11.9 7.3 Chile (3.6) 4.2 1.8
Colombia 5.6 21.5 13.5 Colombia 3.3 6.8 2.7
Ecuador 1.0 (10.2) (17.0) Ecuador N/A N/A N/A
Mexico 2.1 12.0 10.9 Mexico (0.6) (8.7) (11.3)
Peru (0.5) 53.6 46.3 Peru (1.2) 0.6 (4.6)

Global
Brazil 1.0 33.6 24.2 Brazil 0.7 22.8 12.2
China 3.7 (11.1) (1.7) China (0.7) (2.8) (4.5)
Egypt 1.0 15.9 11.7 Egypt 1.2 (10.9) (10.9)
Euro 1.2 (4.3) (3.9) Euro (0.1) 2.7 (0.4)
HongKong 5.2 8.0 10.2 HongKong 0.0 (0.1) (0.1)
India 1.5 10.3 9.9 India 0.0 (1.2) (0.7)
Indonesia 3.3 19.2 21.7 Indonesia (1.2) 3.9 6.0
Mexico 2.1 12.0 10.9 Mexico (0.6) (8.7) (11.3)
Nigeria (1.3) 0.8 (2.2) Nigeria 1.8 (36.6) (36.7)
Peru (0.5) 53.6 46.3 Peru (1.2) 0.6 (4.6)
Philippines (1.9) 13.8 11.7 Philippines 1.2 0.7 0.5
Russia 1.4 16.1 19.3 Russia 1.0 11.6 (1.2)
SouthAfrica 0.3 5.9 8.8 SouthAfrica (5.7) 5.2 (9.9)
SouthKorea 0.9 3.8 6.6 SouthKorea 0.5 5.4 6.1
Switzerland 0.9 (3.7) (3.7) Switzerland (1.3) 1.8 (1.6)
Turkey 0.7 7.9 4.2 Turkey 1.0 (1.4) (1.6)
UnitedKingdom 1.7 12.2 13.0 UnitedKingdom (0.7) (10.8) (14.4)
UnitedStatesofAmerica 0.1 7.8 12.5 UnitedStatesofAmerica N/A N/A N/A

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