Seafarer®

Pursuing Lasting Progress in Emerging Markets®

Seafarer Overseas Growth and Income Fund

Overview

Effective November 19, 2018, the Fund’s Institutional Class (SIGIX) is available for purchase by all investors. The Fund’s Investor Class (SFGIX) is closed to most new investors. View the Message to Shareholders.

Investment Objective

The Fund seeks to provide long-term capital appreciation along with some current income; it also seeks to mitigate adverse volatility in returns.

Strategy

The Fund invests primarily in the securities of companies located in developing countries. The Fund invests in several asset classes including dividend-paying common stocks, preferred stocks, and fixed-income securities.

The Fund seeks to offer investors a relatively stable means of participating in developing countries’ growth prospects, while attempting to mitigate adverse volatility in returns. 

Share Classes

Investor Institutional
Ticker SFGIX SIGIX
CUSIP
NAV
30-Day SEC Yield
Fund Distribution Yield
Gross Expense Ratio2
Load
12b-1 Fee
Minimum Initial Investment – Regular Account
Minimum Initial Investment – Automatic Investment Plan3
Minimum Initial Investment – Retirement Account
Minimum Subsequent Investment

Underlying Portfolio Holdings

Holdings4
Unique Corporate Issuers5
% of Net Assets in Top 10 Holdings
Weighted Average Market Cap
Market Cap of Portfolio Median Dollar
Gross Portfolio Yield6
Price / Book Value6
Price / Earnings67
Earnings Per Share Growth67
   
All performance is in U.S. dollars with gross (pre-tax) dividends and/or distributions reinvested. The performance data quoted represents past performance and does not guarantee future results. Future returns may be lower or higher. The investment return and principal value will fluctuate so that an investor's shares, when redeemed, may be worth more or less than the original cost.

Geographic Focus

Developing countries including, but not limited to:

Africa
Botswana
Ghana
Kenya
Mauritius
Morocco
Nigeria
Tunisia
South Africa
Zimbabwe
East and South Asia
Bangladesh
China
India
Indonesia
Malaysia
Pakistan
Philippines
South Korea
Sri Lanka
Taiwan
Thailand
Vietnam
Emerging Europe
Bosnia and Herzegovina
Bulgaria
Croatia
Czech Republic
Estonia
Georgia
Greece
Hungary
Lithuania
Kazakhstan
Poland
Romania
Russia
Serbia
Slovenia
Turkey
Ukraine
Latin America
Argentina
Brazil
Chile
Colombia
Jamaica
Mexico
Peru
Trinidad and Tobago
Middle East
Bahrain
Egypt
Jordan
Kuwait
Lebanon
Oman
Palestine
Qatar
Saudi Arabia
United Arab Emirates

Select developed countries with significant economic and financial linkages to developing countries, including Australia, Hong Kong, Ireland, Israel, Japan, New Zealand, Singapore, and United Kingdom.

Sources: ALPS Fund Services, Inc., Bloomberg, Seafarer.
Portfolio holdings are subject to change.
  1. The MSCI Emerging Markets Total Return Index, Standard (Large+Mid Cap) Core, Gross (dividends reinvested), USD is a free float-adjusted market capitalization index designed to measure equity market performance of emerging markets. Index code: GDUEEGF. It is not possible to invest directly in an index.
  2. Seafarer Capital Partners, LLC has agreed contractually to waive and/or reimburse fees or expenses in order to limit Total Annual Fund Operating Expenses After Fee Waiver / Expense Reimbursements (inclusive of acquired fund fees and expenses, and exclusive of brokerage expenses, interest expenses, taxes and extraordinary expenses) to 1.15% and 1.05% of the Fund’s average daily net assets for the Investor and Institutional share classes, respectively. This agreement is in effect through August 31, 2020.
  3. Shareholders who sign up for an Automatic Investment Plan can request a waiver of the Institutional Class investment minimum. View the waiver program criteria.
  4. Excludes short-term government bonds; includes medium- and long-term government bonds.
  5. Excludes all government bonds.
  6. Calculated as a harmonic average of the underlying portfolio holdings.
  7. Based on consensus earnings estimates for next year. Excludes securities for which consensus earnings estimates are not available.

Performance

Total Returns

As of (Prior Month)

2 NAV / Index Level () Annualized Cumulative Inception Date Net Expense Ratio1 Gross Expense Ratio1
YTD 1 Mo 3 Mo 1 Yr 3 Yr 5 Yr Since Inception Since Inception

As of (Prior Quarter)

2 NAV / Index Level () Annualized Cumulative Inception Date Net Expense Ratio1 Gross Expense Ratio1
YTD 1 Mo 3 Mo 1 Yr 3 Yr 5 Yr Since Inception Since Inception
Growth of a $10,000 Investment Since Inception
The rates of return are hypothetical and do not represent the returns of any particular investment.
All performance is in U.S. dollars with gross (pre-tax) dividends and/or distributions reinvested. The performance data quoted represents past performance and does not guarantee future results. Future returns may be lower or higher. The investment return and principal value will fluctuate so that an investor's shares, when redeemed, may be worth more or less than the original cost.
Source: ALPS Fund Services, Inc.

Return Characteristics as of

Relative to the MSCI Emerging Markets Total Return Index2 except where noted.

3 years Since Inception3
Alpha
Beta
R-squared
R-squared vs. S&P 500 Index4
Upside Capture Ratio
Downside Capture Ratio
Source: Morningstar.
  1. Seafarer Capital Partners, LLC has agreed contractually to waive and/or reimburse fees or expenses in order to limit Total Annual Fund Operating Expenses After Fee Waiver / Expense Reimbursements (inclusive of acquired fund fees and expenses, and exclusive of brokerage expenses, interest expenses, taxes and extraordinary expenses) to 1.15% and 1.05% of the Fund’s average daily net assets for the Investor and Institutional share classes, respectively. This agreement is in effect through August 31, 2020.
  2. The MSCI Emerging Markets Total Return Index, Standard (Large+Mid Cap) Core, Gross (dividends reinvested), USD is a free float-adjusted market capitalization index designed to measure equity market performance of emerging markets. Index code: GDUEEGF. It is not possible to invest directly in an index.
  3. As of 3/1/12.  The Fund’s inception date is 2/15/12 but Morningstar data is only available as of the beginning of the following month.
  4. The S&P 500 Total Return Index is a stock market index based on the market capitalizations of 500 large companies with common stock listed on the NYSE or NASDAQ. It is not possible to invest directly in an index.

Composition

Holdings Portfolio Composition

Top 10 Holdings as of

Holding Sector Country Portfolio Component1 Issuer Mkt Cap ($B) Yield2 Price/ Book Price/ Earnings3 EPS Growth3
Portfolio holdings are subject to change.
Sources: ALPS Fund Services, Inc., Bloomberg, Seafarer.

View all Holdings

Portfolio Composition by Region as of

All Holdings ADRs, Common & Preferred Equities Only
% Net Assets Price / Earnings89 EPS Growth89
Region # of Holdings4 Fund +/− vs. Index6 Avg Mkt Cap ($B)7 Gross Yield8 Price / Book8 Prior Year This Year Next Year This Year Next Year
Sources: ALPS Fund Services, Inc., Bloomberg, Seafarer.

Portfolio Composition by Sector as of

All Holdings ADRs, Common & Preferred Equities Only
% Net Assets Price / Earnings89 EPS Growth89
Sector # of Holdings4 Fund +/− vs. Index6 Avg Mkt Cap ($B)7 Gross Yield8 Price / Book8 Prior Year This Year Next Year This Year Next Year
Sources: ALPS Fund Services, Inc., Bloomberg, Seafarer.
30-Day SEC Yield: SFGIX ; SIGIX ()
The performance data quoted represents past performance and does not guarantee future results. Future returns may be lower or higher. The investment return and principal value will fluctuate so that an investor's shares, when redeemed, may be worth more or less than the original cost. View the Fund’s most recent month-end performance.

Portfolio Composition by Component as of

Portfolio Component1 % Net Assets
Source: Seafarer.

Portfolio Composition by Asset Class as of

Asset Class % Net Assets
Source: ALPS Fund Services, Inc.

Portfolio Composition by Market Capitalization as of

Market Capitalization % Net Assets +/− vs. Index6
Sources: ALPS Fund Services, Inc., Seafarer.
Due to rounding, percentage values may not sum to 100%. Values less than 0.5% may be rounded to 0%.
  1. Core Holdings: moderately underappreciated growth; moderately elevated current yield. Growth Holdings: higher growth potential; lower current yield. Value Holdings: lower growth potential; higher current yield.
  2. Yield = dividend yield for common and preferred stocks and yield to maturity for bonds.
  3. Based on consensus earnings estimates for next year.
  4. Excludes short-term government bonds; includes medium- and long-term government bonds.
  5. Excludes all government bonds.
  6. The MSCI Emerging Markets Total Return Index, Standard (Large+Mid Cap) Core, Gross (dividends reinvested), USD is a free float-adjusted market capitalization index designed to measure equity market performance of emerging markets. Index code: GDUEEGF. It is not possible to invest directly in an index.
  7. Weighted Average Market Capitalization of Issuer.
  8. Calculated as a harmonic average of the underlying portfolio holdings.
  9. Based on consensus earnings estimates. Excludes securities for which consensus earnings estimates are not available.

Distributions

2020 Distribution Dates

Distribution frequency: Semi-annual

Please note: future dates are subject to change.


Record Date
Ex, Pay and
Reinvest Date
Mid-year Distribution 6/24/20 6/25/20
Year-end Distribution 12/09/20 12/10/20

To be notified of distribution estimates, sign up for Seafarer email updates.

Historical Distributions

Ex, Pay and
Reinvest Date
Reinvest
NAV
Ordinary
Income
Short Term
Capital Gains
Long Term
Capital Gains
Total Distrib.
Per Share
Cumulative Distrib.
Per Share Since Inception
SFGIX (Investor Class)
SIGIX (Institutional Class)

For more information on the Fund’s distribution policies, please see the “Dividends and Distributions” section of the Prospectus.

Foreign Source Income

The Seafarer Overseas Growth and Income Fund has elected to pass through to shareholders the foreign taxes paid on income earned from foreign investments. These foreign taxes are reported in Box 7 of Form 1099-DIV. As a shareholder in the Fund, you may be able to claim a tax credit or an itemized deduction on your federal tax return for the amount of taxes paid to foreign countries. Please consult your tax adviser.

Year Foreign Source Income
(as a % of Box 1a on Form 1099-DIV)
Past performance is no guarantee of future results. There is no guarantee that the Fund will pay or continue to pay distributions.

Portfolio Review

Seafarer Overseas Growth and Income Fund

Portfolio ReviewFourth Quarter 2019

Dear Shareholders: I offer my sincere apology that I am tardy in publishing this portfolio review. The first six weeks of 2020 have been eventful, and regretfully, I allowed myself to be distracted in my regular communication to you. While I cannot rectify the situation now, I can offer a more current Outlook section, one that addresses some events in the current calendar quarter. Please accept my apology, and read onward for the portfolio review.


During the fourth quarter of 2019, the Seafarer Overseas Growth and Income Fund returned 9.15%.1 The Fund’s benchmark, the MSCI Emerging Markets Total Return Index, returned 11.93%. By way of broader comparison, the S&P 500 Index gained 9.07%.

The Fund began the quarter with a net asset value of $11.43 per share. During the quarter, the Fund paid a distribution of approximately $0.132 per share. This payment brought the cumulative distribution, as measured from the Fund’s inception, to $2.993 per share.2 The Fund finished the period with a value of $12.34 per share.3

During the calendar year, the Fund returned 23.19%, whereas the benchmark index returned 18.88%.4

[Please note: this portfolio review encompasses only the fourth quarter of 2019, and does not offer a thorough discussion of the entire calendar year. The Fund operates on a fiscal year that concludes April 30; as such, Seafarer offers comprehensive performance reviews for the Fund’s annual and semi-annual periods, which are published in the Fund’s Shareholder Reports in late June and December, respectively. Previous Shareholder Reports are available in the Archives.]

Performance

Attributing short-term performance in the stock market to a conclusive source is fraught with error: most short-term price movements, whether up or down, are random events, indiscernible from “noise.” However, in the fourth quarter of 2019, the performance of both the Growth and Income Fund and its benchmark index appeared to have a definitive and common origin: on December 13, the U.S. and China publicly intimated agreement on “Phase 1” of a trade deal intended to rectify their most pressing trade disputes. Though the official agreement was not executed until mid-January, the mere anticipation of basic normalization in trade relations was enough to send equities across the emerging markets surging. The benchmark index vaulted 6.53% during the last three weeks of the year – a period during which stock market activity is typically muted.5

In my view, markets responded in a visceral manner not because of the merit of the deal itself – most thorny issues between the U.S. and China went unresolved – but rather because the agreement’s negotiation was drawn out for such a lengthy and public period that it became a facile “event” around which speculators engaged in short-term trading activity.

Within China, the agreement took on an inflated, trumped-up importance. The Chinese economy decelerated during 2019, and while lackluster trade with the U.S. was an extenuating factor, it was not a dominant one. Yet China’s leadership was happy to use the recalcitrance of U.S. trade negotiators as a political foil, blaming the U.S. for designs to hamper China’s economic progress and international standing, thereby defraying blame for the domestic economy’s tepid performance. Beyond China, the agreement arguably held greater import: the economic output of many developing nations now hinges more upon exports to China than the U.S., and therefore China’s overall economic health and trade balances matter mightily. Thus, the agreement was met with applause by stock investors despite its rudimentary nature.

During the surge at year end, large capitalization growth stocks performed best, with semiconductor stocks, Chinese financial stocks, and Chinese internet stocks dominating the index’s performance. Likewise, the Fund saw gains from similar sources: Samsung Electronics and Taiwan Semiconductor (semiconductor companies from South Korea and Taiwan, respectively) and Alibaba Group (China internet) spurred performance. However, the Fund saw notable gains among a few other positions, divergent from the index: Qualicorp (a mid-sized, Brazil-based insurance broker), Richter Gedeon (a mid-sized, Hungary-based pharmaceutical firm) and Moneta Money Bank (a Czech bank) all made notable contributions to the Fund’s positive performance.

Allocation

During the fourth quarter of 2019, Seafarer parted ways with one of the Fund’s portfolio managers, Ms. Inbok Song. I wish Ms. Song well in her career.

After Ms. Song’s departure, I announced an intention to undertake a transition in the positions that were formerly under Ms. Song’s management. The transition has two major stages: first, certain holdings would be exited summarily before December 31, 2019. Second, all remaining holdings would be placed under review to re-affirm their suitability for the Fund, with an intention to complete the review within the first quarter of 2020, or shortly thereafter. The first stage is complete; the second stage is presently underway.

During the closing months of the year, the Fund exited the following positions:

  • Aspeed (a small-capitalization computer component maker based in Taiwan)
  • China International Travel Services (a large purveyor of travel services to the Chinese public)
  • Container Corporation (an India-based railway freight company)
  • Foshan Haitian (a China-based maker of condiments and other edibles)
  • Leeno (a Korea-based maker of precision components used in semiconductor manufacturing).

The Fund added two new positions during the quarter: Innocean Worldwide, a Korea-based advertising agency known for its successful automotive advertisements, and Bizlink, a small-cap Taiwan-based firm that develops and manufactures advanced electronic couplers for uses ranging from personal computers to electronic vehicles. Both firms have cash-rich balance sheets, resilient cash flows, steady growth opportunities and stable dividends.

Lastly, the Fund added to its holding in Alibaba Group, raising the position from a 2% weighting to a 5% weighting.

Outlook

In the first weeks of January, reports began to surface of a new viral infection in China, emanating from the metropolis of Wuhan in Hubei province. The virus, officially known as COVID-19, has circulated well beyond Wuhan, beyond China, to nearly every corner of the globe. At the time of this writing, much is still unknown about the virus: its precise origin, mode of transmission, incubation period, pathology, lethality, effective protocols for treatment, and vaccination. Any major predictions about the virus or its human and economic toll are facile. Still, one thing is known with certainty: the heroic efforts of China’s overwhelmed medical professionals – particularly those in Hubei – have procured precious time for the world to prepare for the disease to emerge on a broader, global scale. May their efforts not be in vain.

Markets are unsettled: during a few short weeks in late January and early February, the Fund’s benchmark swooned dramatically, and then recovered most of its losses, as if the virus’s initial, downward impact was exaggerated. Understandably, investors want to know the impact of COVID-19 on China’s economy, on its stock market, and on emerging market equities and currencies more broadly. Unfortunately, I have no reliable answer, as the health, economic and financial consequences of the virus are unknowable at present and may not be known for many more months at the earliest. I would dissuade you from accepting any advice that claims to know otherwise, as the virus’s unknown path will undoubtedly catalyze unpredictable, intertwining events.

While I cannot predict the impact of the virus, I will offer two comments for those that wish to draw meaning from the crisis.

First: I suspect that President Xi’s administration in China will remain under great duress, as this event has tested the government’s credibility. China’s government is not directly culpable for the emergence of the virus, though lax enforcement regarding food sanitation may have played a role. Rather, I note the large and growing number of dissatisfactory events that now litter China’s political landscape: a tepid economy; grandiose, failed and expensive Belt and Road projects; unsettled trade and political frictions with the U.S.; a rampant swine disease that has devastated China’s pig herds, rendering a staple protein unaffordable; violent protests that have shattered the stability of Hong Kong; a stiff political rebuke in Taiwan; and now a medical system that is revealed to be severely underequipped for crisis, with hospitals built overnight in a late, hollow gesture to compensate for decades of underinvestment in health care. It was only a few months ago that sophisticated missiles were paraded down Chang’an Avenue in Beijing, promoted as a symbol of the nation’s burgeoning might and international standing. COVID-19 has undermined that narrative. China’s present leadership has accumulated extraordinary power and privilege, unrivaled since the days of Mao. Yet I suspect the number of conflagrations burning in China’s political landscape can only undermine the administration’s credibility, which may in turn lead to restlessness in China.

Second: I wonder whether the current work stoppage in China might trigger a payments crisis. For the better part of the past decade, ill-informed U.S. hedge fund managers have stoked fears over China’s banking system and property markets. Both are rickety, but neither was likely to trigger a broad-based collapse (though I endorse the view that either might exacerbate a crisis, once initiated by another source). Rather, I have long suspected a different source of weakness would be more likely to trigger financial weakness: China’s incredibly over-stretched and dysfunctional corporate payments system.

For reasons unique to the country’s financial markets, China’s companies sit on mountains of “receivables” – effectively, “I.O.U.s,” where services are rendered but not paid for until a much later date. Likewise, companies have voluminous amounts of payables – promises to pay their vendors and suppliers, once they are paid by their own customers. These chains of non-payment – from company to company, vendor to supplier – place an overwhelming strain on the flow of liquidity through the Chinese economy. The origin of the problem is complicated, but it usually stems from large state-owned enterprises (SOE) that are unwilling or unable to pay their vendors on time. Smaller companies, keen to earn business from large, well-connected companies, are all too ready to extend short-term credit to their SOE customers in order to make a sale, and thus begins a chain of deferred payments, one that eventually stretches to the extreme. Developments in capital markets over the past few years have alleviated this strain slightly, though risks remain acute in my view.

I suspect that the current cessation of work could place further strain on this already fragile system of deferred payments, possibly inducing a liquidity crunch. This in turn could trigger a broader seizure in China’s banking sector, which could induce broader consequences. So far, China’s central bank has injected nearly US$200 billion of liquidity into China’s financial system, presumably to avert exactly this problem. Markets are still calm, and there is no sign of crisis yet. Still, investors should remain on guard until economic conditions normalize, paying attention to any companies with outsized balances of accounts receivable and payable.

Thank you for entrusting us with your capital. We are honored to serve as your investment adviser in the emerging markets.

Andrew Foster,
Paul Espinosa,
The performance data quoted represents past performance and does not guarantee future results. Future returns may be lower or higher. The investment return and principal value will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than the original cost. View the Fund’s most recent month-end performance.
The MSCI Emerging Markets Total Return Index, Standard (Large+Mid Cap) Core, Gross (dividends reinvested), USD is a free float-adjusted market capitalization index designed to measure equity market performance of emerging markets. Index code: GDUEEGF.
The S&P 500 Total Return Index is a stock market index based on the market capitalizations of 500 large companies with common stock listed on the NYSE or NASDAQ.
It is not possible to invest directly in an index.
The views and information discussed in this commentary are as of the date of publication, are subject to change, and may not reflect Seafarer’s current views. The views expressed represent an assessment of market conditions at a specific point in time, are opinions only and should not be relied upon as investment advice regarding a particular investment or markets in general. Such information does not constitute a recommendation to buy or sell specific securities or investment vehicles. It should not be assumed that any investment will be profitable or will equal the performance of the portfolios or any securities or any sectors mentioned herein. The subject matter contained herein has been derived from several sources believed to be reliable and accurate at the time of compilation. Seafarer does not accept any liability for losses either direct or consequential caused by the use of this information.
As of December 31, 2019, Alibaba Group Holding, Ltd. comprised 4.8% of the Seafarer Overseas Growth and Income Fund, Samsung Electronics Co., Ltd. comprised 4.8% of the Fund, Taiwan Semiconductor Manufacturing Co., Ltd. comprised 2.4% of the Fund, Qualicorp Consultoria e Corretora de Seguros SA comprised 3.2% of the Fund, Richter Gedeon Nyrt comprised 3.4% of the Fund, Moneta Money Bank AS comprised 1.7% of the Fund, Innocean Worldwide, Inc. comprised 0.5% of the Fund, and Bizlink Holding, Inc. comprised 1.4% of the Fund. The Fund did not own shares in ASPEED Technology, Inc., China International Travel Service Corp., Ltd., Container Corp. of India, Ltd., Foshan Haitian Flavouring & Food Co., Ltd., or LEENO Industrial, Inc. View the Fund’s Top 10 Holdings. Holdings are subject to change.
  1. References to the “Fund” pertain to the Fund’s Institutional share class (ticker: SIGIX). The Investor share class (ticker: SFGIX) returned 9.05% during the quarter.
  2. The Fund’s inception date is February 15, 2012.
  3. The Fund’s Investor share class began the quarter with a net asset value of $11.38 per share; it paid a distribution of approximately $0.126 per share during the quarter; and it finished the quarter with a value of $12.28 per share.
  4. The Fund’s Investor share class returned 23.00% during the calendar year.
  5. Performance for the MSCI Emerging Markets Total Return Index measured between 12/10/19 and 12/31/19. Source: Bloomberg.