Seafarer®

Pursuing Lasting Progress in Emerging Markets

Seafarer Overseas Growth and Income Fund

Overview

Effective September 30, 2016, the Seafarer Overseas Growth and Income Fund closed to most new investors. View the Message to Shareholders.

Factsheet Prospectus Annual Report

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, convertible bonds, and fixed-income securities.

The Fund seeks to offer investors a relatively stable means of participating in a portion of developing countries’ growth prospects, while providing some downside protection compared to a portfolio that invests only in the common stocks of those countries.

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
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
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 this or any 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 (excluding brokerage expenses, interest expenses, taxes and extraordinary expenses) to and of the Fund’s average daily net assets for the Investor and Institutional share classes, respectively. This agreement is in effect through .
  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

Factsheet Historical Fund Data

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 (excluding brokerage expenses, interest expenses, taxes and extraordinary expenses) to and of the Fund’s average daily net assets for the Investor and Institutional share classes, respectively. This agreement is in effect through .
  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 this or any 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 this or any index.

Composition

Factsheet Historical Fund Data

Holdings Portfolio Composition

Top 10 Holdings as of

Holding Sector Country Issuer Mkt Cap ($B) Yield1 Price/ Book Price/ Earnings2 EPS Growth2

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 / Earnings78 EPS Growth78
Region # of Holdings3 Fund +/− vs. Index5 Avg Mkt Cap ($B)6 Gross Yield7 Price / Book7 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 / Earnings78 EPS Growth78
Sector # of Holdings3 Fund +/− vs. Index5 Avg Mkt Cap ($B)6 Gross Yield7 Price / Book7 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 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. Index5

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. Yield = dividend yield for common and preferred stocks and yield to maturity for bonds.
  2. Based on consensus earnings estimates for next year.
  3. Excludes short-term government bonds; includes medium- and long-term government bonds.
  4. Excludes all government bonds.
  5. 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.
  6. Weighted Average Market Capitalization of Issuer.
  7. Calculated as a harmonic average of the underlying portfolio holdings.
  8. Based on consensus earnings estimates. Excludes securities for which consensus earnings estimates are not available.

Distributions

On ex-date June 21, 2018, the mid-year distributions per share were $0.11186 for SFGIX (Investor Class) and $0.11406 for SIGIX (Institutional Class).

For further information, see the Historical Distributions section below.

2018 Distribution Dates

Distribution frequency: Semi-annual

Please note: future dates are subject to change.


Record Date
Ex, Pay and
Reinvest Date
Mid-year Distribution 6/20/18 6/21/18
Year-end Distribution 12/12/18 12/13/18

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.

Should you have any questions, please contact Shareholder Services at (855) 732-9220 (Mon–Fri 9am–8pm ET).

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 ReviewFirst Quarter 2018

Portfolio Review Portfolio Review Archives

During the first quarter of 2018, the Seafarer Overseas Growth and Income Fund returned -0.22%.1 The Fund’s benchmark, the MSCI Emerging Markets Total Return Index, rose 1.47%. By way of broader comparison, the S&P 500 Index lost -0.76%.

The Fund began the quarter with a net asset value of $13.63 per share. It paid no distributions during the quarter and finished the period with a value of $13.60 per share.2

Performance

A brief glance at the performance of the Fund (-0.22%) and its index (1.47%) for the quarter might suggest the quarter was a relatively subdued one. Reality was quite different: pronounced volatility characterized the entire period. By January 26th, the index surged upward 9.94%, only to collapse to a negative return of -1.27% by February 9th. The index then surged forward again, rising 5.91% year-to-date by March 13th, only to fall backward a second time, finishing the quarter up 1.47%. Amid this uncertain environment, the Fund experienced modestly less volatility, but it ultimately finished lower than the index, and failed to cover itself in any sort of glory.

From my perspective, the performance of the Fund was unsatisfactory. I want to stipulate that three months is far too short a period to meaningfully assess the performance of an investment strategy (indeed, I believe the minimum period is three years, and longer horizons are even better). Still, the Fund’s performance was exasperating, especially because we correctly guessed that market conditions were far more precarious than was widely believed. At the outset of the year, most prognosticators espoused glowing views on stocks, especially those of the emerging markets. The pronounced volatility that followed laid bare the glib nature of those rosy forecasts. Still, despite my attempt to position the Fund defensively, it failed to dampen the volatility that reverberated through the quarter. I had the right idea, but the wrong execution.

What happened? At the risk of over-analyzing a very short period, the Fund’s performance hung on individual stocks rather than the market’s broader gyrations. During the quarter, six of the Fund’s holdings declined by more than 10%. Four of those six holdings had allocations above 2% – in other words, a portfolio weight large enough to ensure that each had an acute impact on the Fund’s performance. Two of those stocks declined from prices at year-end that were near all-time highs (Sun Pharma Advanced, a pharmaceutical company, and Balkrishna, a maker of tires for commercial vehicles, both based in India), and thus perhaps their pronounced declines signify only a short-term correction in valuation (indeed, Balkrishna has already recovered its losses as of April 2018).

However, the other four stocks (Richter Gedeon of Hungary, Ser Education of Brazil, Hengan of China, and Astra International of Indonesia) experienced stock-specific events that dragged their shares sharply lower during the quarter. Three of the four (Ser, Hengan and Astra) simply presented financial results that were meaningfully below the apparent expectation of most investors; for this, the three saw their share prices drop dramatically. This sort of event – revenues or profits falling below “consensus expectations” (a nebulous term) – can cause stock prices to jerk lower in the short-run.

What seems to be different about the present climate is that expectations for all stocks, everywhere, are so high; the consequence is that, even if a company produces acceptable results, indicative of profitability and growth, the stock price can still suffer because reality fails to meet hyperbolic expectation. I think the wide gap between expectation (rapid, widespread, dramatically-accelerating growth) and reality (steady, decent but not explosive growth, with plenty of short-term hiccups) is problematic – and I will return to this idea in the Outlook section below. For the time being, though, Ser, Hengan and Astra remain in the portfolio because we expect the present difficulties to resolve over the next year or so, and because we believe the stock prices have over-reacted to transitory problems.

The situation at Richter Gedeon (a global pharmaceutical company based in Hungary) is somewhat different. For background, the company is a relatively recent addition to the Fund, as it was added during the second quarter of 2017. I added the position to the portfolio for many reasons, but chief among them was the company’s impressive operating history and global reach, combined with an attractive and broad-based portfolio of pharmaceutical therapies. In my view, the company was conservatively but astutely managed, and while the price of the shares was higher than is common for the Fund’s growth and income strategy, it was still within an acceptable range, given the company’s potential for growth.

The company’s progress came to an abrupt halt in early January, when Richter disclosed that prescriptions of one of its key reproductive health therapies, marketed variously as “Fibristal” and “Esmya,” would be restricted until the European Medicines Agency (Europe’s chief pharmaceutical regulator) could complete a review. The drug is suspected to cause or contribute to liver damage in some patients. Four instances of liver damage have been reported; the drug has been in wide use since 2012, and the company estimates that it has been prescribed to 670,000 patients since that time.3 Between the end of December and the end of March, Richter declined about 20% in U.S. dollar terms, largely in response to the news of the restriction, and because Richter’s management chose to write off most of the capitalized research and development expenditures associated with the drug. The stock’s price decline constituted the most substantial drag on the Fund’s performance during the quarter.

There is no doubt that the suspension of Esmya from the market constitutes a substantial setback for Richter. Without offering a formal opinion, the drug was probably responsible for 20% to 25% of Richter’s capitalization prior to the regulatory action. Certainly, we thought that Esmya was a key part of Richter’s portfolio, as it and other reproductive health therapies could unlock the company’s potential to expand across the globe, especially in the U.S. and China (these two countries together account for a relatively small, but growing portion of the company’s sales). The market’s response has been to swiftly wipe out most of the value that might have been attributed to the drug.

My current intent is for the Fund to retain Richter while we learn whether Esmya will be permanently discontinued, or whether the drug’s value can be salvaged after the regulator’s review. At this stage, I think the stock’s price largely ignores most positive outcomes, whereas the drug’s long use and historical efficacy suggests that there is some reasonable basis to wait. Wisely, the company’s management has adopted a conservative accounting treatment, writing off most of the drug, even as the company continues to represent the drug’s efficacy within the review. Even in the absence of Esmya, Richter has proven itself a very capable, well-managed company; its fate has been swung lower by this event, but it is by no means determined by it, as the company has a well-diversified and economically attractive portfolio. We will watch events at the company carefully, but the combination of its operational strength and depressed valuation demand patience.

Allocation

During the quarter, the Fund did not add or delete any investment holdings, though a number of positions were re-sized.4 In particular: the Fund substantially reduced its holdings in both Infosys (a global software company based in India) and Sanlam (an insurance company based in South Africa). These two positions have long been among the Fund’s largest; my intention was to harvest some of the gains associated with the two investments, which have been quite successful for the Fund. Both positions had appreciated such that they occupied outsized weightings, each representing well over 6% of the Fund at their peak weightings. Given the current environment, I thought it prudent to reduce the capital invested in each. Infosys has been held since nearly the Fund’s inception, and Sanlam since the middle of 2014. I intend to continue to hold both positions for the foreseeable future, retaining meaningful but reduced allocations (both are now below 5% of the Fund).

Two notable positions that grew across the quarter are both domiciled within South Korea: Hyundai Mobis and Orion Corporation. The former saw its shares initially dip, based on the anticipation of disappointing results for the fourth quarter of 2017; but its shares then rallied sharply, as the controlling shareholder (the Chung family) announced a group restructuring. The Chung’s plan has since been publicly countered by a global activist investor, Elliott Management. Mobis currently constitutes the single largest position within the Fund. Orion’s weighting grew from circa 2.5% at the outset of the quarter to approximately 3.5% due to a combination of additional capital and appreciation.

Near the end of 2017, and in anticipation of another bout of volatility in the emerging markets, I attempted to steer the Fund towards a more “defensive” allocation at the margin. Though the Fund’s performance was disappointing in this regard, I do not intend to make any major changes in the Fund’s course, at least for the moment. Throughout my career, I have been constantly reminded that the shrewdest, cheapest and best course of action is to do nothing, except adopt a very watchful and aware sort of patience.

Outlook

As discussed above, I believe there is a substantial gap between the expectation for earnings growth and the underlying reality. Personally, I think this gap is the primary cause of the pronounced volatility that the emerging markets have experienced in 2018. Other factors have contributed to be sure, though: the prospect of global “trade wars” and uncertain international economic policy; global security concerns stemming from North Korea, Iran and Syria; and unstable liquidity conditions in China.

Consensus estimates for the current year call for over 15% growth from the MSCI Emerging Markets Index constituents.5 While this outcome might be possible, it certainly does not fit with the reality that I have observed thus far in 2018, which is littered with companies that have grown at a basic rate, but which have fallen short of lofty expectations. Certain sectors (e.g. Chinese internet stocks) continue to produce much faster growth; yet even there, the growth appears to be decelerating rather than accelerating, and the underlying quality of the earnings is suspect. Ultimately, I will be very pleased if the companies in the portfolio produce 9% growth collectively, and I imagine that it will be difficult (though not impossible) for the overall market to produce much better. I still believe stock markets are on precarious footing, and much like last quarter, I would counsel prudence and caution. My advice is to harbor low expectations for growth, to avoid overpayment based on bloated assumptions, and to de-emphasize markets that could suffer from an acute deterioration in liquidity.

However, there is one “silver lining” for the emerging markets, one that has taken on even greater relevance than in past quarters: the prospect that the financial markets and economies of the developing world might exhibit “decoupled” characteristics from that of the developed world, for better or worse. I will not belabor the point much here, as I have discussed the topic in several preceding commentaries (including the third quarter 2017 portfolio review), and I will do so again in a forthcoming video that will be published on the Seafarer website. However, I would note that China’s leadership and policy-making seems predicated upon this very idea: I have not before observed such willingness from China’s authorities to embark on an independent economic path, assuming that the U.S. no longer wishes to engage in open trade and commerce. This new but unsurprising turn in the direction of China’s policy bespeaks a confidence in the future and a resolution to achieve much greater economic independence.

Only time will tell whether the country will be successful, but China’s determination is unmistakable. If so, the prospect of “decoupling” will rise, and the potential diversification benefit from the emerging markets could become meaningful.

Thank you for your interest in Seafarer, and for entrusting us with your capital.

Andrew Foster Seafarer Capital Partners, LLC
  • 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 March 31, 2018, Sun Pharma Advanced Research Co., Ltd. comprised 1.6% of the Seafarer Overseas Growth and Income Fund, Balkrishna Industries, Ltd. comprised 0.5% of the Fund, Richter Gedeon Nyrt comprised 3.8% of the Fund, Ser Educacional comprised 1.1% of the Fund, Hengan International Group Co., Ltd. comprised 2.8% of the Fund, Astra International Tbk PT comprised 3.6% of the Fund, Infosys Ltd. ADR comprised 4.2% of the Fund, Infosys, Ltd. comprised 0.6% of the Fund, Sanlam Ltd. comprised 3.9% of the Fund, Hyundai Mobis Co., Ltd. comprised 6.9% of the Fund, and Orion Corporation comprised 3.5% of the Fund. The Fund had no economic interest in Elliott Management. 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 -0.22% during the quarter.
  2. The Fund’s Investor share class began the quarter with a net asset value of $13.59 per share; it finished the quarter with a value of $13.56 per share.
  3. Hungary’s Richter Says No Link Seen Between Esmya Drug and Liver Damage, Reuters, 4 December 2017.
  4. The statement that “the Fund did not add or delete any investment holdings” intentionally omits bonds that matured or were added to the Fund’s “sovereign bond program.” Since late 2016, the Fund has invested a portion of its liquidity in a series of short-term emerging markets government or government agency bonds, most of which are denominated in U.S. dollars, and which are intended to function as a basic “bond ladder.” This sleeve of the Fund’s portfolio is known within Seafarer as the “sovereign bond program,” and it was first introduced in the Fund’s portfolio review for the first quarter of 2017.
  5. Pedro Martins, “Emerging Markets Equity Strategy,” JP Morgan, 26 April 2018.