Fact Sheet Sample

• Inception Date January 9, 2008
• Asset Size US$ 74.9 million
• Firm Asset US$ 650 million
• Base Currency USD
• Structure US Master with Caymanbased offshore feeder fund
• Subscriptions/Redemptions Monthly liquidity with no lock-up
• Fee Structure 1.25% management fee and a 10% incentive fee with a 5% hurdle rate subject to a high water mark
• Minimum Investment 1,000,000 USD
• Administrator Mitsubishi UFJ Fund Services (Cayman Islands)
• Custodian State Street Corp.
• Auditor Ernst & Young
• Legal Counsel Sadis and Goldberg (NY)
  Maples and Calder (Cayman Islands)

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IS Partner Latin American Fund

The IS Partner Latin American Fund invests regionally across the diverse equity markets of Latin America without a bias towards any one country. The IS Partner investment team uses a value approach where their analytical work and experience in the region can add the most value. The Fund’s long-term, bottom-up investment style generally tilts the portfolio towards strong business franchises that are domestically focused and well-positioned to benefit from Latin America’s secular consumer growth story. The independent approach of the investment team results in a relatively concentrated portfolio that can have significantly different country and sector exposures than the MSCI Latin American Index.

Historical Monthly Performance

Cumulative Performance

Fund Performance

Country Attribution

	Brazil	Mexico	Colombia	Peru	Chile	Panama
ISLAF Country Average Monthly Weightings:	41.9%	26.7%	11.8%	9.0%	1.3%	8.3%
MSCI LatAm Index Country Average Monthly Weightings:	56.8%	27.3%	3.5%	3.0%	9.4%	N/A
Country Monthly Performance:

Position Attribution: Top and Bottom Three Contributors this Month

Performance Notes

The Fund was originally launched as the IS Partner Latin American Small Cap Fund on January 9, 2008. The mandate of the Fund was expanded to include Latin American large cap stocks on May 1, 2011 and the Fund name was changed to the IS Partner Latin American Fund. Fund performance figures are presented net of all fees.

Market Performance

Portfolio Manager Commentary

The Latin American markets, as proxied by the MSCI Latin American Index, appreciated 0.9% during the month of December, to cap off a positive year for Latin America which appreciated 31.0% in 2016. In general, 2016 was a positive year for global markets with the MSCI World Index, which proxies the performance of the developed markets, appreciating 7.5% and the Emerging Markets Index appreciating 11.2%. The outperformance of the Latin American markets was overdue, as investors have castigated the region over the past few years as a result of the economic problems experienced by Brazil, the biggest market in the region, as well as their concern that the large declines in global commodity prices would send the economies of the region in a downward trajectory. In this latter respect, we believe that investors have overestimated the effect of commodities to the region. While the large fall in commodity prices is a negative factor for Latin American economies, in countries such as Mexico, Chile, Peru and Colombia, their economic growth slowed down moderately to the 2 to 3% GDP growth levels, which although a significant decline from the 4 to 5% growth levels of a few years ago, is not the economic disaster that we would argue was priced in by the significant fall in their stock markets and currencies. The real economic pain was felt in countries such as Brazil, which experienced its second year of negative 3.0%+ GDP contraction, and Argentina, whose GDP fell 2.0% in 2016, because their governments mismanaged their economies via non-sustainable fiscal spending sprees, and not because the fall in commodity prices. The good news is that in both of these countries, the administrations and their political parties that had been in power for over ten years, have been replaced with pragmatic leaders that have begun to reverse the crippling, non-sustainable populist policies of their predecessors with pragmatic economic policies that are laying the foundation for a return to economic growth.

It is important to point out that although the Latin American market’s appreciation of 31.0% made it the best performing regional market in the world, this over performance was merely a bounce back from what we consider to be highly oversold levels at the beginning of 2016. In Chart A you can see the large underperformance since 2007 that the Latin American markets have experienced compared to the US market and even the Asian component of the Emerging Markets. As investors began to sense that the Latin American economies were not going to experience an economic dive from sinking commodity prices, and as they saw the reversal in Brazil’s economic management, the Latin American market finally began to make an upward turn in the beginning of 2016. However, the market is still 32% below from where it was a little over two years ago and 42% lower than its all-time high back in May of 2008. Given the still low levels of valuations we continue to see in the region, and in particular in the positions in the portfolio, we remain optimistic in the improving Latin American economic landscape and the growth opportunities available to our portfolio positions.

During 2016 the portfolio appreciated of 52.9%, significantly outdistancing the Latin American market’s positive performance. As bottom-up stock pickers, we were pleased that the portfolio’s outperformance was not driven by an over weighting to the best performing countries (as can be seen on page 1, we were significantly underweighted to the Brazilian market, which was the best performing Latin American country), but was instead a result of the significant appreciation of some of the large positions in the portfolio. To begin with, our best performing position was in Copa, an airline company based out of Panama, which is a country that is not included in the Latin American index. Although we are generally cautious about investing in airline companies due to their highly competitive and capex heavy nature of the industry, we believe Copa has a unique advantage due to their franchise strength in the less competitive markets of Central America and Caribbean. Copa appreciated 93.9% during the year and although we sold some of the position as the valuations rose, we were able to increase the position during periods when the share price declined for what we considered to be short term concerns. We continue to be positive in the franchise value of Copa and it’s growth opportunity going forward.

In spite of the Mexican market’s glum year (it was the only negative performing Latin American market for the year with a decline of 9.2%), the portfolio contained two important Mexican positions that were significant positive performers. One was Ternium, which appreciated 103.9% in 2016, and is a steel maker focused on producing steel for the Mexican car industry. We believe the market had improperly discounted Ternium along with the global steel industry, as a steel maker dependent on steel prices without properly taking into account the company’s high profitability and growing client base. As investors began to reward the company’s stock price for its operational and financial strengths, we sold some of the position, but continue to have a moderate holding in the company due to it still high Free Cash Flow yield of 15%. In addition, Cemex, the largest cement company in Mexico, appreciated 52.2% during the year. Investors began the year concerned with the company’s relatively high US debt load. What we believe they underestimated, was Cemex’ focus to reduce this debt load from its increasingly profitable cement business in the Americas as construction bounced back in its markets. Cemex continues to be a major holding in our portfolio as we remain positive that the company will continue to further reduce its debt load as an increase in construction will continue to benefit the industry.

Given the Mexican market’s negative performance for the year, the portfolio also held the two worst performing positions in our portfolio. Vesta, a provider of custom warehouses to the growing manufacturing sector in Mexico, fell 18.6% in 2016 and Banorte, the largest domestically owned bank in Mexico, fell 7.7%. Although we are acutely aware that US President-elect Trump has spewed some very negative rhetoric over the NAFTA treaty and US companies moving jobs to Mexico, we feel the decline in these two companies was overdone and we increased their position as their price moved down. We have no special insight on how President Trump will behave towards Mexico when he comes into office. However, we do believe that the Mexican economy is solid and improving in the long term. As such, if a further fall in the country’s market provides us with the opportunity to buy Mexican companies that have strong business franchises, and in particular in those industries which would not be directly affected by a potential slowdown in trade with the US, we will not hesitate to invest in those companies.

Brazil was the best performing market in 2016 with an appreciation of 66.2% and since it currently accounts for 58% of the Latin American index, it was almost solely responsible for the appreciation of the Latin American market (the Latin American ex-Brazil Index only appreciated 1.0% in 2016). The portfolio had two Brazilian positions which were significant drivers for portfolio’s performance. One was Itau, one of the principal banks in Brazil, which appreciated 83.7%. Itau’s share price had fallen approximately 60% up until the beginning 2016 as a result of investor concern that non-performing loans (“NPLs”) would skyrocket as the Brazilian economy slumped. While the bank’s NPLs did increase, they have thus far been within a tolerable range that has allowed the bank to continue earning high ROEs around 20% . We expect the bank’s strong financial posture will allow the bank to continue withstanding Brazil’s weak economic condition and feel with its attractive P/E valuation of approximately 10x that the bank shares remain an undervalued investment opportunity. The other strong performer was Localiza, which is the country’s leading car rental company, whose shares appreciated 66.2% in 2016. Up until 2016, Localiza shares had been declining as a concern that a weak Brazilian economy would be particularly negative to the company as some of its competitors increased their effort to gain market share. During 2016 the share reversed course and appreciated as investors became less negative on Brazil and it became clear that the growth of Localiza’s competitors came mainly from smaller competitors and not Localiza. Although we have reduced the portfolio’s position in Localiza as its valuation increased, we remain optimistic in the company’s business franchise and strong growth potential. The portfolio also had two Brazilian positions, Randon, a truck parts and trailer maker, and Valid, a driver license and credit card manufacturer, which were among the most negative drivers for the portfolio. Both of these are positions were built during the year and their share prices have been moderately negative since their purchase. As smaller cap companies these companies have not recently benefited from the improved sentiment regarding Brazil, but we believe they will respond as investors see their eventual improvements in earnings. On the macro side, while we certainly agree that the Brazilian economy is being much better managed under the new administration, the resultant economic turnaround will take time and be bumpy. As such, we continue to believe that the Brazilian economy faces the most difficult economic challenge of any of the major Latin American countries, and as a result, we will only increase the portfolio’s exposure to Brazil when we can find those choice franchise companies we seek to invest in when they trade a valuation discount to their Latin American peers.