| Current Price: | $9.80 as of 03/10/10 |
| Daily Change: | +0.05 +0.51% |
| YTD Return: | 4.26% |
The Value of a $10,000 Investment as of December 31, 2009
| Ticker Symbol: | ARFFX |
| CUSIP: | 04035F107 |
| Ariel Mutual Fund #: | 2222 |
| Total Net Assets: | $37.8 million as of 12/31/2009 |
| Net Expense Ratio: | 1.25%* as of 9/30/09
|
| Gross Expense Ratio: | 1.87%* as of 9/30/09 |
| Investment Minimum: | $1,000 initial; $50 subsequent; waived min. with automatic investment program |
| Sales Charge: | None |
*Ariel Investments, LLC, the Adviser to the Funds, is contractually obligated to waive fees or reimburse expenses in order to limit Ariel Focus Fund's total annual operating expenses to 1.25% of net assets through the end of the fiscal year ending September 30, 2011. After that date, there is no assurance that such expenses will be limited.
Ariel Focus Fund is a non-diversified fund and therefore may be subject to greater volatility than a more diversified investment.
Investing in equity stocks is risky and subject to the volatility of the markets.
Performance data quoted represents past performance. Past performance does not guarantee future results. All performance assumes reinvestment of dividends and capital gains. The investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted. For standardized performance data and performance data current to the most recent month-end, click here.
Ariel Focus Fund received a four-star Overall Morningstar Rating™ as of 02/28/10 out of 1,115 large value funds. Ariel Focus Fund was rated four stars among 1,115 domestic large value funds for the three-year period ended 02/28/10.
For each fund with at least a three-year history, Morningstar calculates a Morningstar Rating™ based on a Morningstar Risk-Adjusted Return measure that accounts for variation in a fund's monthly performance (including the effects of sales charges, loads and redemption fees), placing more emphasis on downward variations and rewarding consistent performance. These ratings change monthly. The top 10% of funds in an investment category receive five stars, the next 22.5% receive four stars, the next 35% receive three stars, the next 22.5% receive two stars, and the bottom 10% receive one star. The Overall Morningstar Rating for a fund is derived from a weighted average of the performance figures associated with its three-, five- and ten-year (if applicable) Morningstar Ratings. Morningstar does not guarantee the accuracy of this information.
© 2010 Morningstar, Inc. All Rights Reserved. The information contained herein: (1) is proprietary to Morningstar and/or its content providers; (2) may not be copied or distributed; and (3) is not warranted to be accurate, complete or timely. Neither Morningstar nor its content providers are responsible for any damages or losses arising from any use of this information.
For definitions of terms used, see Glossary.
ANNOUNCEMENTS
PORTFOLIO MANAGERS
INVESTMENT OBJECTIVE
CATEGORY
INVESTMENT STYLE
INCEPTION DATE
FUND DOCUMENTS
FUND RANKINGS
Ariel Focus Fund Performance as of February 28, 2010
| Inception date: June 30, 2005 | Annualized | |||||
| One Month | Three Months | Year To Date | One Year | Three Years | Since Inception | |
|---|---|---|---|---|---|---|
| Ariel Focus Fund | 1.95% | 1.35% | -0.11% | 66.82% | -5.19% | -0.11% |
| Russell 1000® Value Index | 3.16% | 2.03% | 0.26% | 56.49% | -8.79% | -0.72% |
| Russell 1000® Index | 3.30% | 2.00% | -0.42% | 55.32% | -5.54% | 0.60% |
| S&P 500 Index | 3.10% | 1.31% | -0.61% | 53.62% | -5.67% | 0.34% |
Ariel Focus Fund Performance as of December 31, 2009
| Inception date: June 30, 2005 | Annualized | |||||
| One Month | Three Months | Year To Date | One Year | Three Years | Since Inception | |
|---|---|---|---|---|---|---|
| Ariel Focus Fund | 1.46% | 7.34% | 33.46% | 33.46% | -5.48% | -0.10% |
| Russell 1000® Value Index | 1.77% | 4.21% | 19.69% | 19.69% | -8.96% | -0.80% |
| Russell 1000® Index | 2.43% | 6.07% | 28.43% | 28.43% | -5.36% | 0.71% |
| S&P 500 Index | 1.93% | 6.04% | 26.46% | 26.46% | -5.63% | 0.49% |
| Net Expense Ratio: | 1.25%* as of 9/30/09
|
| Gross Expense Ratio: | 1.87%* as of 9/30/09
|
Assumes reinvestment of dividends and capital gains.
*Ariel Investments, LLC, the Adviser to the Funds, is contractually obligated to waive fees or reimburse expenses in order to limit Ariel Focus Fund's total annual operating expenses to 1.25% of net assets through the end of the fiscal year ending September 30, 2011. After that date, there is no assurance that such expenses will be limited.
Ariel Focus Fund is a non-diversified fund and therefore may be subject to greater volatility than a more diversified investment.
Investing in equity stocks is risky and subject to the volatility of the markets.
Performance data quoted represents past performance. All performance assumes the reinvestment of dividends and capital gains. Past performance does not guarantee future results. The investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted.
The Russell 1000® Value Index measures the performance of those Russell 1000 companies with lower price-to-book ratios and lower forecasted growth values. As of September 30, 2009, this index had an average market capitalization of $29.4 billion based on a dollar-weighting of all holdings.
The Russell 1000® Index measures the performance of the 1000 largest companies in the Russell 3000 Index, which represents approximately 90% of the U.S. market. As of September 30, 2009, this index had an average market capitalization of $31.2 billion based on a dollar-weighting of all holdings.
The Standard & Poor's 500 Index is a broad market weighted index dominated by blue-chip stocks.
Investors should consider carefully the investment objectives, risks, and charges and expenses before investing. For a current prospectus which contains this and other information about the funds offered by Ariel Investment Trust, call us at 800-292-7435 or click here. Please read the prospectus carefully before investing. Distributed by Ariel Distributors, LLC.
The Value of a $10,000 Investment as of December 31, 2009
Morningstar Fund Ratings as of February 28, 2010
Ariel Focus Fund |
Overall Rating |
 |
Ariel Focus Fund received a four-star Overall Morningstar Rating™ as of 02/28/10 out of 1,115 large value funds. Ariel Focus Fund was rated four stars among 1,115 domestic large value funds for the three-year period ended 02/28/10.
For each fund with at least a three-year history, Morningstar calculates a Morningstar Rating™ based on a Morningstar Risk-Adjusted Return measure that accounts for variation in a fund's monthly performance (including the effects of sales charges, loads and redemption fees), placing more emphasis on downward variations and rewarding consistent performance. These ratings change monthly. The top 10% of funds in an investment category receive five stars, the next 22.5% receive four stars, the next 35% receive three stars, the next 22.5% receive two stars, and the bottom 10% receive one star. The Overall Morningstar Rating for a fund is derived from a weighted average of the performance figures associated with its three-, five- and ten-year (if applicable) Morningstar Ratings. Morningstar does not guarantee the accuracy of this information.
© 2010 Morningstar, Inc. All Rights Reserved. The information contained herein: (1) is proprietary to Morningstar and/or its content providers; (2) may not be copied or distributed; and (3) is not warranted to be accurate, complete or timely. Neither Morningstar nor its content providers are responsible for any damages or losses arising from any use of this information.
Top Ten Equity Holdings as of December 31, 2009
| SECURITY DESCRIPTION | % of Net Assets | |
|---|---|---|
| 1. | Johnson & Johnson | 6.2 |
| 2. | Accenture plc | 5.6 |
| 3. | Omnicom Group Inc. | 5.1 |
| 4. | Berkshire Hathaway Inc., Class B | 4.9 |
| 5. | Tyco Intl Ltd. | 4.9 |
| 6. | AFLAC Inc. | 4.9 |
| 7. | Exxon Mobil Corp. | 4.8 |
| 8. | Dell Inc. | 4.7 |
| 9. | Apollo Group, Inc. | 4.7 |
| 10. | International Business Machines Corp. | 4.5 |
| Grand Total 50.3% |
Portfolio Composition (%) as of December 31, 2009
| Ariel Focus Fund | Russell 1000 Value | Russell 1000 | S&P 500 | |
|---|---|---|---|---|
| Financial Services | 21.5% | 24.2% | 15.4% | 15.3% |
| Consumer Discretionary | 21.1 | 10.5 | 12.2 | 11.6 |
| Producer Durables | 21.0 | 10.7 | 10.6 | 10.4 |
| Health Care | 18.0 | 9.1 | 12.5 | 12.6 |
| Technology | 9.4 | 4.6 | 17.8 | 18.2 |
| Energy | 9.0 | 18.4 | 11.4 | 11.6 |
| Utilities | 0.0 | 12.7 | 6.8 | 6.6 |
| Materials and Processing | 0.0 | 4.3 | 4.3 | 3.9 |
| Consumer Staples | 0.0 | 5.4 | 9.2 | 9.8 |
|
* Represents percentage of total equity holdings in the portfolio The Russell 1000® Value Index measures the performance of large-sized, value-oriented companies with lower price-to-earnings ratios. The Russell 1000® Index measures the performance of larger companies. The S&P 500 Index is a broad market-weighted index dominated by blue chip stocks. |
||||
| Equity: | 98.2% |
| Cash, Assets & Other Liabilities: | 1.8% |
Portfolio Characteristics (%) as of December 31, 2009
| Ariel Focus Fund | Russell 1000 Value | Russell 1000 | S&P 500 | |
|---|---|---|---|---|
| Average Market Capitalization | $41.46 | $30.11 | $33.13 | $43.80 |
| Median Market Capitalization | 29.7 | 3.9 | 4.2 | 9.0 |
| Number of Holdings | 23 | 679 | 965 | 500 |
| Wall Street Analysts Per Stock | 16 | 17 | 19 | 20 |
| Turnover (%) | 54.5 | n/a | n/a | n/a |
| P/E (forward) | 13.8 | 13.9 | 15.1 | 15.1 |
| Beta (vs. Russell 3000 Index) | 0.81 | 1.05 | 0.97 | 0.94 |
| Price/Book | 2.4 | 1.6 | 2.2 | 2.2 |
| Dividend Yield (%) | 1.6 | 2.2 | 1.9 | 1.9 |
| Return on Equity (5 year) (%) | 24.2 | 16.4 | 20.2 | 20.8 |
| EPS Growth (forward) (%) | 11.6 | 7.2 | 9.8 | 9.6 |
|
The Russell 1000® Value Index measures the performance of large-sized, value-oriented companies with lower price-to-earnings ratios. The Russell 1000® Index measures the performance of larger companies. The S&P 500 Index is a broad market-weighted index dominated by blue chip stocks.
|
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Schedule of Holdings as of December 31, 2009
| Shares | Security Description | CUSIP | Ticker | Original Cost | Current Value | % of Net Assets |
|---|---|---|---|---|---|---|
| 36,400 | Johnson & Johnson | 478160104 | JNJ | 2,195,656 | 2,344,524 | 6.2 |
| 50,700 | Accenture plc | G1151C101 | ACN | 1,339,776 | 2,104,050 | 5.6 |
| 49,600 | Omnicom Group Inc. | 681919106 | OMC | 2,048,518 | 1,941,840 | 5.1 |
| 565 | Berkshire Hathaway Inc., Class B | 084670207 | BRK.B | 1,667,423 | 1,856,590 | 4.9 |
| 51,675 | Tyco Intl Ltd. | H89128104 | TYC | 1,883,183 | 1,843,764 | 4.9 |
| 39,600 | AFLAC Inc. | 001055102 | AFL | 1,621,040 | 1,831,500 | 4.9 |
| 26,300 | Exxon Mobil Corp. | 30231G102 | XOM | 1,940,214 | 1,793,397 | 4.8 |
| 124,000 | Dell Inc. | 24702R101 | DELL | 2,403,457 | 1,780,640 | 4.7 |
| 29,100 | Apollo Group, Inc. | 037604105 | APOL | 1,843,642 | 1,762,878 | 4.7 |
| 13,100 | International Business Machines Corp. | 459200101 | IBM | 1,186,119 | 1,714,790 | 4.5 |
| 57,050 | Morgan Stanley | 617446448 | MS | 1,691,357 | 1,688,680 | 4.5 |
| 51,900 | Walt Disney Co. | 254687106 | DIS | 1,393,306 | 1,673,775 | 4.4 |
| 44,800 | Merck & Co., Inc. | 58933Y105 | MRK | 1,209,311 | 1,636,992 | 4.3 |
| 25,700 | Hess Corp. | 42809H107 | HES | 1,381,326 | 1,554,850 | 4.1 |
| 20,100 | Lockheed Martin Corp. | 539830109 | LMT | 1,500,245 | 1,514,535 | 4.0 |
| 31,475 | Covidien plc | G2554F105 | COV | 1,110,016 | 1,507,337 | 4.0 |
| 48,000 | Bank of New York Mellon Corp. | 064058100 | BK | 1,291,864 | 1,342,560 | 3.6 |
| 40,900 | Carnival Corp. & plc | 143658300 | CCL | 1,562,840 | 1,296,121 | 3.4 |
| 29,900 | JPMorgan Chase & Co. | 46625H100 | JPM | 1,186,580 | 1,245,933 | 3.3 |
| 20,200 | Baxter Intl Inc. | 071813109 | BAX | 1,099,031 | 1,185,336 | 3.1 |
| 27,800 | Hewitt Associates, Inc., Class A | 42822Q100 | HEW | 1,057,324 | 1,174,828 | 3.1 |
| 34,500 | Waste Management, Inc. | 94106L109 | WM | 850,446 | 1,166,445 | 3.1 |
| 13,600 | Toyota Motor Corp., ADR | 892331307 | TM | 1,194,610 | 1,144,576 | 3.0 |
| 481,530 | Fixed Income Clearing Corporation | 85748R009 | 481,530 | 481,530 | 1.3 | |
| Other Assets and Liabilities | 206,271 | 0.5 | ||||
| Grand Total | $35,138,814 | $37,793,742 | 100.0% | |||
Investment Objective
Our mutual funds pursue long-term capital appreciation. The Funds invest for appreciation, not income and seek common stocks whose underlying value should increase over time. Any dividend and interest income the Funds earn is incidental to their fundamental objective. The Funds’ Adviser cannot guarantee any Fund will achieve capital appreciation in every circumstance, but we are dedicated to that objective.
Investment Strategy and Approach
Ariel Focus Fund seeks long-term capital appreciation by investing primarily in common stocks of companies with market capitalizations in excess of $10 billion measured at the time of purchase. The Fund invests in undervalued companies that show strong potential for growth. To capture anticipated growth, the Fund holds investments for a relatively long period of time – generally five years.
Our Approach to Investing
Our patient approach focuses on the long term, allowing us to take advantage of great buying opportunities that arise from Wall Street’s excessive focus on the short term.
We invest in quality companies where we have expertise and we only buy when they are selling at excellent values.
Quality
- We seek to invest in quality companies with: high barriers to entry; sustainable competitive advantages; and fundamentals that allow for double-digit cash earnings growth.
- We seek to invest with quality management teams who: clearly articulate and execute a strategy; have deployed capital wisely; and have attracted and retained highly qualified people.
- We seek to invest in companies with improving prospects for quality financials including the ability to ultimately demonstrate: high returns on capital; strong balance sheets; and low reinvestment requirements.
Expertise
- Our demand for depth over breadth creates a concentrated portfolio of well-researched stocks.
- Our expansive scuttlebutt network of third-party contacts, including customers, suppliers, and competitors, strengthens our due diligence.
- Our voracious reading of trade publications, newspapers, press releases, company financials and other corporate communications are critical to our decision making and fosters a culture of continuous learning.
Value
- As value investors, we make opportunistic purchases when great companies are temporarily out of favor.
- As Warren Buffett disciples, we find companies that are undiscovered, under-followed, or under a cloud.
- As disciplined investors, we seek to invest in companies when they are trading at a low valuation relative to potential earnings (p/e less than 13x forward cash earnings) and/or a low valuation relative to intrinsic worth (40% discount to private market value—PMV).
The Investment Process: A Focus On Independent Research
Uncovering Value
Ariel’s proprietary research process begins with the usual Wall Street sources – financial analysts’ reports, press releases and company financials. Digging deeper, we review more than 150 newspapers, trade periodicals and technical journals. In this way, we believe we can uncover outstanding opportunities that others may have missed.
We apply the same intensive research once we have identified a candidate for investment. We comb through the company’s financial history and analyze its prospects. We develop independent long-range financial projections and detail the risks.
A network of independent, third-party contacts reveals the invaluable insights of customers, suppliers, competitors and industry insiders, as well as other investment managers.
We also independently assess key executives. We believe the character and quality of a company’s management weighs at least as heavily as any other factor in determining its success. We believe the skill of the management team will help the company overcome unforeseen obstacles. In addition, the team’s contacts and experience may alert the company to emerging opportunities.
A portfolio consisting exclusively of stocks in these companies is highly select: Ariel Fund and Ariel Appreciation Fund generally contain no more than 50 stocks each; Ariel Focus Fund will generally own 20 stocks.
A Long-term View
Ariel believes the market will ultimately reward the companies in which we invest, and we give them the time such recognition requires, generally five years and sometimes even longer. This long-term approach means that the Funds typically have low rates of turnover*.
Each time a fund turns over a holding (e.g., sells one stock to buy another), it incurs transaction charges that negatively impact investment returns – the higher the turnover rate, the more negative the impact of the transaction costs. High turnover rates can reduce investment performance while low turnover rates can enhance it. A low rate of turnover can offer yet another advantage because it may defer a fund’s taxable capital gains.
We sell stocks when we believe they are fully valued or when our reasons for purchase no longer apply. We define fully valued to be our assessment of full valuation relative to potential earnings, which includes a price-to-earnings ratio of more than 20 times next year’s earnings and full valuation relative to intrinsic worth (i.e., a 0% discount to our private market value). We also may sell a stock when there is a major change in the competitive landscape, a substantial shift in company fundamentals or a loss of faith in management’s abilities.
Foreign Securities
Ariel Focus Fund may invest up to 20% of its net assets in foreign securities, as classified by the Adviser. Investments in foreign securities may be made through the purchase of individual securities on recognized exchanges and developed over-the-counter markets, or through American Depository Receipts (“ADRs”) or Global Depository Receipts (“GDRs”) covering such securities. The Funds expect to invest in foreign securities mainly through ADRs or GDRs.
The value of foreign securities may be affected by changes in exchange rates, as well as other factors that affect securities prices. There generally is less information publicly available about foreign securities and foreign securities markets, and there may be less government regulation and supervision of foreign issuers and foreign securities markets. Foreign securities and markets also may be affected by political and economic instabilities and may be more volatile and less liquid than domestic securities and markets. The Funds have not invested in, and do not currently expect to invest in, “emerging” foreign market securities.
Cash Positions
At times we may maintain larger than normal cash positions in a Fund. However, cash positions in a Fund are generally not held for defensive purposes, but are maintained while we search for compelling investments.
Definitions
Undervalued
Institutional investors consider a stock undervalued when it trades at a price below what they think the business is worth. The concept is relative. Investors might judge a stock undervalued on the basis of price to earnings ratio: they pay less for a dollar of corporate earnings when they buy a particular stock than they would if they bought another stock. Or they might judge a stock undervalued on the basis of the ratio of the value of its assets to the value of its market capitalization: they pay less for a dollar of assets by buying one stock than they would if they bought another stock.
Turnover
Turnover is an indication of how long a fund typically holds the stocks it purchases. A turnover rate of 100% implies that a fund changes its entire investment portfolio every year. As a product of our long-term investment strategy, turnover rates for the Ariel Fund and Ariel Appreciation Fund have been historically low (i.e., less than 50%).
Portfolio Snapshot
Portfolio Snapshots offer monthly and quarterly commentary on the performance of our Funds.
Additional Commentary
For commentary on all of our mutual funds, including Fund Updates, the quarterly letters from our Portfolio Managers and a selection of spotlights on typical Fund holdings, visit our main Commentary area.
Quarterly Portfolio Manager Commentary
This quarterly letter offers a performance update as well as our thoughts on the economy and our perspectives on investing.
Open the latest Ariel Focus Fund Quarterly Letter