Dear Fellow Shareholder: As you know, stocks continued a massive global rally this quarter. So we are happy to report a quarter of strong absolute performance and solid relative results. During the quarter, Ariel International Fund gained +11.03%, versus the MSCI EAFE Index, which returned +11.61%. Additionally, Ariel Global Fund rose +8.49%, topping the MSCI ACWI Index, which advanced +8.02%.
For the one-year period ending September 30, 2013, Ariel International Fund returned +28.11% versus +24.29% for the MSCI EAFE Index. Over the same period, Ariel Global Fund advanced +28.84% compared to the MSCI ACWI Index, which gained +18.37%. For both funds, the top contributing sector was information technology, while the top detracting sector was telecommunication services. For Ariel International Fund, on a stock specific basis, top contributors were Nokia Corp. and Roche Holding AG, gaining +158.31% and +49.23%, respectively. Detractors included NTT DoComo, Inc. and Nintendo Co., Ltd., sliding -2.20% and -9.83%, respectively. Top contributors for Ariel Global Fund were Nokia Corp. and Gilead Sciences, Inc. returning +155.49% and +89.48%, respectively. Detractors included NTT DoComo, Inc., returning -5.47%, and Mobistar SA, falling -19.63%, respectively. Turning to philosophy and process, as we have mentioned before, we are true bottom-up stock pickers, but oftentimes market pressures bearing down on an area cause us to dive into that part of the market to find bargains. In our second-quarter 2013 letter, we explored how this tactic drove a significant weighting in Japanese stocks that worked very well and quite quickly. Mind you, we did not "bet" on Japan, but rather used the market's pessimism toward its overall economy in order to initiate positions in thriving multinationals that happened to be headquartered in Japan. Continue Reading »