MA RCH 3 1, 2017
Ariel Small/Mid Cap Value
Separate Account
• Value • Deep value • Global
Our patient investment philosophy
John W. Rogers, Jr.
Co-portfolio
manager
Ariel Investments is headquartered in Chicago, Illinois, with offices in New York and Sydney.
We serve individual and institutional investors through our no-load mutual funds and separate
accounts. As of March 31, 2017, firm-wide assets under management are $11.7 billion. Since our
founding in 1983, we have been disciplined, long-term investors. This defining characteristic is the
cornerstone of our investment philosophy, and symbolized by our turtle logo and the firm’s motto,
“Slow and steady wins the race.”
John P. Miller, cfa
Co-portfolio
manager
Patience
Expertise
About the portfolio
We take the long-term view.
We specialize in bottom-up, fundamental research.
The portfolio pursues long-term capital appreciation by
investing in small and mid cap stocks.
Independence
Teamwork
We invest to our convictions, not to
benchmarks.
We work collaboratively with a shared
commitment to excellence.
Portfolio facts
Investment style
Small/mid cap value
Inception
December 31, 2000
Assets
$361.7 million
Average market cap ($ weighted)1
$5.13 billion
Number of holdings
37
One-year turnover
13.91%
Discount to PMV2
–14.6%
Portfolio characteristics*
Ariel
Small/Mid
Cap Value
Russell
2500
Value Index
Forward price/earnings
15.40
18.10
5 yr. estimated earnings growth
10.00
9.40
Interest coverage ratio
6.81
4.70
* Forward price to earnings: returns price divided by earnings.
Uses NTM (next 12 months) earnings for U.S. companies and
fiscal year EPS for non-U.S. companies. 5-year estimated
earnings growth: projected earnings per share growth rate of
the companies invested in by the portfolio. Projected growth
rates are consensus analyst forecasts for companies’ long-term
(typically five years) growth rates; actual earnings growth
rate may differ from projected earnings growth rate. Only
stocks with at least three estimates in the I/B/E/S database
are included; medians are less useful with fewer estimates,
and research coverage may be less current. Interest coverage
ratio (EBIT/interest): returns EBIT (earnings before interest and
tax) divided by interest expense. Uses LTM EBIT and interest
expense for U.S. companies and fiscal year EBIT and interest
expense for non-U.S. companies. Source: BNY Mellon Profile.
Slow and steady wins the race.
Ariel Small/Mid Cap Value Composite performance
(%) as of 03/31/17
Annualized
Quarter
1-year
3-year
5-year
10-year
Since incept.
Gross of fees
+ 7.39
+21.23
+ 11.00
+15.49
+ 8.42
+ 9.77
Net of fees
+ 7.12
+20.03
+ 9.90
+14.34
+ 7.34
+ 8.68
+ 1.62
+23.13
+ 7.55
+12.92
+ 6.79
+ 9.68
+ 3.76
+21.53
+ 7.43
+12.60
+ 7.71
+ 8.76
S&P 500® Index3 + 6.07
+17.17
+ 10.37
+13.30
+ 7.51
+ 5.72
Russell 2500
Value Index3
Russell 2500TM
Index3
TM
Past performance does not guarantee future results. Investing in small and mid cap companies is more
risky and more volatile than investing in large companies. The intrinsic value of the stocks in which the
portfolio invests may never be recognized by the broader market. The portfolio often invests a significant
portion of its assets in companies within the financial services and consumer discretionary sectors and its
performance may suffer if these sectors underperform the overall stock market. Current performance may
be lower or higher than the performance data quoted. Performance results may be preliminary, are net of
transaction costs and reflect the reinvestment of dividends and other earnings. Performance has been reduced
by the amount of the highest fee charged to any client in the Ariel Small/Mid Cap Value Composite during the
performance period. Actual fees may vary depending on, among other things, the applicable fee schedule and
portfolio size. A complete fee schedule is available upon request and may also be found in Ariel Investments,
LLC’s Form ADV, Part 2. Returns are calculated in U.S. dollars.
MARCH 31, 2017
Ariel Small/Mid Cap Value Separate Account
• Value • Deep value • Global
Top ten companies
1.
2.
3.
4.
5.
Lazard Ltd.
KKR & Co. L.P.
Kennametal Inc.
Zebra Technologies Corp.
MSG Networks, Inc.
Sector weightings
Top contributors*
(% of portfolio)
4.9
4.4
4.2
4.1
3.7
6.
7.
8.
9.
10.
Royal Caribbean Cruises Ltd.
Viacom, Inc.
TEGNA, Inc.
CBRE Group, Inc.
Interpublic Group of Cos., Inc.
3.7
3.7
3.4
3.3
3.3
(%)
Ariel
Small/Mid
Cap Value+
Russell
2500
Value Index
9.39
Russell
2500
Index
S&P 500
Index
13.72
13.64
Consumer discretionary
33.17
Financial services
29.1841.2528.2619.45
Producer durables
19.4412.8314.7910.49
Health care
9.89
4.50
11.35
13.78
Technology
2.85
8.35
12.05
19.12
Consumer staples
2.502.122.928.27
Materials & processing
2.40
Energy
0.567.484.386.59
Utilities
0.007.284.465.58
+
6.78
8.06
3.08
Represents percentage of total equity holdings in the representative portfolio.
Market cap exposure
(%)
Russell quintiles
Ariel
Small/Mid
Cap Value
Russell
2500
Value Index
% of
portfolio % return
Viacom, Inc.
3.7
+33.44
Kennametal Inc.
4.2
+26.15
KKR & Co. L.P.
4.4
+19.51
Lazard Ltd.
4.9
+16.04
Royal Caribbean Cruises Ltd.
3.7
+20.19
Detractors*
% of
portfolio % return
Bristow Group Inc.
2.1
– 25.41
Dun & Bradstreet Corp.
1.8
– 10.62
Contango Oil & Gas Co.
0.6
– 21.63
Mattel, Inc.
2.4
– 5.67
Western Union Co.
1.7
– 5.50
* The percentage of portfolio represents the percentage
that each stock comprised in the representative portfolio
as of the end of the period. The return represents the
total return during the quarter of each stock for the period
held in the representative portfolio. The holdings shown
do not represent all of the securities purchased, sold, or
recommended for investors.
Difference
Large capitalization
>$92.84 billion
0.0
0.0
0.0
Medium/large capitalization
$27.05-$92.84 billion
0.0
0.0
0.0
Medium capitalization
$9.09-$27.05 billion
29.5
Medium/small capitalization
$3.37-$9.09 billion
38.7
49.5
– 10.8
Small capitalization
<$3.37 billion
31.8
41.3
– 9.5
9.3 20.2
1
arket capitalization is a dollar-weighted average natural log. Using the natural log of each stock's market capitalization reduces the weight given to the largest companies in
M
a simple averaging process. Source: BNY Mellon.
2
This represents the percentage discount at which the portfolio traded as compared to the portfolio holdings’ private market value (“PMV”) determined by Ariel Investments.
3
T he Russell 2500™ Value Index measures the performance of the small to mid-cap value segment of the U.S. equity universe. It includes those Russell 2500 companies
with lower price-to-book ratios and lower forecasted growth values. The Russell 2500™ Index measures the performance of the small to mid-cap segment of the U.S. equity
universe, commonly referred to as “smid” cap. The Russell 2500 Index is a subset of the Russell 3000® Index. It includes approximately 2,500 of the smallest securities based
on a combination of their market cap and current index membership. Russell® is a trademark of Frank Russell Company, which has not approved and does not accept any
liability for data contained in this communication. The S&P 500® Index is the most widely accepted barometer of large cap U.S. equities. It includes 500 leading companies.
Ariel Investments, LLC is a money management firm headquartered in Chicago, Illinois, with offices in New York and Sydney. Taking a long-term view and applying
independent thinking to our investment decisions, we span the market cap spectrum from micro to large and cover the globe with our international and global offerings. The
Ariel Small/Mid Cap Value Composite seeks long-term capital appreciation by investing in small/mid cap undervalued stocks that show strong potential for growth. The Ariel
Small/Mid Cap Value Composite differs from its benchmark, the Russell 2500 Value Index, with fewer holdings concentrated in fewer sectors.
800.725.014 0 | A RI ELI N V EST M EN TS.C O M
ARIELSMID — SAFACT (POD) ©03/17