Seafarer®

Pursuing Lasting Progress in Emerging Markets

Glossary

Active Share

a measure of a portfolio’s deviation from a benchmark index, where a value of 0% indicates that a portfolio is a perfect replica of the index, and a value of 100% indicates that a portfolio is entirely different than the index. More specifically, this statistic adds up the difference in weight of every security in the index versus the portfolio, and divides the total by 2 to arrive at a value. Active Share is calculated as follows:

½ N i=1 | wfund,i windex,i |

where w = security weight.

Alpha

the excess return of a security or portfolio after controlling for systematic (market-based) risk, where risk is defined as the variance in returns of the overall market, or a proxy index. The formula that describes alpha is

Ri = a + b (Rm) + ε

where Ri = the return of the security or portfolio in question, a = alpha, b = beta, Rm = return of the market (or proxy index), and ε = an error term.

American Depository Receipt (ADR)
receipt for the shares of a foreign-based corporation held by a U.S. bank. The receipt usually entitles the shareholder to all dividends (excluding withholding) and capital gains. ADRs are denominated in U.S. dollars. Instead of buying shares of a foreign-based company in an overseas market, Americans can buy shares in the U.S. in the form of an ADR. ADRs help to reduce administration and duty costs that would otherwise be levied on each transaction.
Animal Spirits
the term British economist John Maynard Keynes used in his 1936 book The General Theory of Employment, Interest and Money to describe the human spirit and drive that prompt individuals to engage in certain (sometimes irrational) economic activities and behaviors.
Annualized Change in Consumer Price Index (CPI)
the annualized change of the monthly consumer price index. Consumer Price Index is defined as a measure of the average change over time in the prices paid by urban consumers for a market basket of consumer goods and services. (Source: Bureau of Labor Statistics)
ASEAN (Association of Southeast Asian Nations)
a geo-political and economic organization of ten countries located in Southeast Asia, which was formed on August 8, 1967 by Indonesia, Malaysia, Philippines, Singapore and Thailand. Since then, membership has expanded to include Brunei, Myanmar, Cambodia, Laos, and Vietnam. The purpose of ASEAN is to accelerate economic growth, social progress, and cultural development in the region and to promote regional peace and stability. (Source: ASEAN)
Asset Intensity
a measure of the investment required in operating assets (e.g., capital expenditure) to produce a dollar of revenue.
Balance Sheet Liquidity
a company’s assets that can be readily converted into cash within a reasonable amount of time and under normal market conditions.
Bankruptcy
state of insolvency by an individual or organization, i.e. an inability to pay debt. (Source: Barron’s Dictionary of Finance and Investment Terms, 1995)
Basis Point
a basis point is one-hundredth of one percent, or 0.01%. One percent = 100 basis points and likewise, one half of 1 percent = 50 basis points. Bond traders and brokers regularly use basis points (commonly referred to as “bps”) to state concise differences in bond yields.
Beta
the systematic risk (variance) of a security or portfolio measured relative to the market as a whole (or a proxy index). A beta of 1 indicates the security or portfolio co-varied directly with the overall market (or the proxy index).
Bin Intervals
a method of sorting data in a histogram. Bin intervals divide a range of values into a series of intervals.
Bloomberg Composite Rating
a composite of bond ratings from four ratings agencies: DBRS, Fitch, Moody’s and Standard & Poor’s. (Source: Bloomberg)
Book Value
the value of an asset as represented in the accounts of a balance sheet. An asset’s book value is typically determined by the original cost of the asset, less any depreciation, amortization or impairment costs applied against the asset. The book value of a firm is typically determined by the value of the firm’s assets, less its liabilities. In theory, shareholders would be entitled to the firm’s book value if the company’s balance sheet was liquidated.
Breakup Value
the aggregate value of a company if each of its parts operated independently, less net liabilities.
BRICs
an acronym that refers to the four largest emerging market countries – Brazil, Russia, India, and China.
Build-Lease-Transfer
a public private partnership model in which a private organization designs, finances and builds a facility on leased public land. The private organization operates the facility for the duration of the lease and then transfers ownership to a public organization.
Business Processing Outsourcing (BPO)
a subset of outsourcing that involves the contracting of the operations and responsibilities of a specific business process to a third-party service provider.
Capital Expenditures
the outlay of money to acquire or improve capital assets such as buildings and machinery. Unlike ordinary expenses, which are typically expensed in the period in which they are incurred, capital expenditures do not pass through the income statement on a real-time basis. Instead, expenditures to purchase or maintain a given asset are “capitalized” as assets on the balance sheet; then those same assets are “depreciated” over time, according to accounting standards that dicatate the useful life of said assets.
Cash Flow Yield
cash flow generated by an asset during an accounting period divided by the price of said asset.
Chaebols
business conglomerate structures that originated in South Korea in the 1960s, creating global multinationals with huge international operations. The word "chaebol" means "business family" or "monopoly" in Korean. The chaebol structure can encompass a single large company or several groups of companies. Each chaebol is owned, controlled or managed by the same family dynasty, generally that of the group's founder.
China’s Five-Year Plans
a series of five-year social and economic development initiatives established by the Communist Party of China through the plenary sessions of the Central Committee and national congresses. The Communist Party plays a leading role in establishing the foundations and principles of Chinese socialism, mapping strategies for economic development, setting growth targets, and launching reforms.
Chinese A-Shares

a class of securitized common stock in Chinese companies, traded exclusively on Chinese stock exchanges (i.e., Shanghai and Shenzhen), and denominated in renminbi, China’s currency. Historically, the renminbi has been subject to strict controls, such that foreign (i.e., non-Chinese) investors were not able to obtain or use the currency for financial purposes (i.e. savings or investment). Because of this constraint on the currency, A-shares have historically been inaccessible to foreign investors, de facto: foreigners could not legally obtain renminbi for investment purposes, and therefore they could not fund any purchase of A-shares. Over the past decade, China has liberalized the use of the renminbi for investment purposes, allowing selected, large foreign institutions to apply for “Qualified Foreign Institutional Investor” (QFII) status. Foreign institutions granted QFII status can legally purchase renminbi under a quota scheme, and that renminbi can be used to fund the purchase of A-shares and other financial assets within China. More recently, China has launched a program known as the “Stock Connect,” or colloquially, the “through train;” this program allows foreign investors to purchase selected A-shares on the Shanghai or Shenzhen exchanges, regardless of their QFII status.

A-shares are not to be confused with H-shares (Chinese companies incorporated in China, but listed in Hong Kong) and ordinary Hong Kong-listed companies of Chinese origin (Hong Kong incorporated, and Hong Kong-listed, but with substantial economic ties to mainland China). H-shares and Hong Kong-listed companies are available for investment by foreign (non-mainland China) investors; ironically, H-shares are not necessarily available to domestic Chinese parties, who can only invest in Hong Kong via a regulated scheme called “Qualified Domestic Institutional Investor” (QDII).

If a Seafarer Fund is invested in Chinese A-Shares, please note the following: 1) any reduction or elimination of access to A-Shares could have a material adverse effect on the ability of the Fund to achieve its investment objective; and 2) uncertainties regarding China’s laws governing taxation of income and gains from investments in A-Shares could result in unexpected tax liabilities for the Fund, which could adversely impact Fund returns.

Compound Annual Growth Rate (CAGR)
the mean annual growth rate of an investment over a specified period of time longer than one year.
Concession
right, usually granted by a government entity, to use property for a specific purpose over a specific time horizon. (Source: Seafarer and Barron’s Dictionary of Finance and Investment Terms, 1995)
Consumer Price Index (CPI)
a measure of the average change over time in the prices paid by urban consumers for a market basket of consumer goods and services. (Source: Bureau of Labor Statistics)
Conversion Price
the dollar value at which convertible bonds, debentures, or preferred stock can be converted into common stock, as announced when the convertible is issued. (Source: Barron’s Dictionary of Finance and Investment Terms, 1995)
Correlation
statistical measure of the degree to which the movements of two variables are related.
Cost Curve
a standard microeconomic graph that maps the quantity of production versus the cost of production.
Cost of Capital
the rate of return that a business could earn if it chose another investment with equivalent risk – in other words, the opportunity cost of the funds employed in the context of a given investment decision. (Source: Seafarer and Barron’s Dictionary of Finance and Investment Terms, 1995)
Cost of Funding
the cost an entity must incur to obtain capital.
Currency Risk
the risk that currency depreciation will negatively affect the value of one's assets, investments, and the related interest and dividend payment streams. In particular, this risk applies to securities denominated in a foreign currency.
Currency Peg
an exchange rate that is fixed, or pegged, to another single currency or to a basket of currencies.
Current Account
the difference between a nation’s savings and its investment. The current account is an important indicator of an economy's health. It is defined as the sum of the balance of trade (goods and services exports less imports), net income from abroad, and net current transfers. A positive current account balance indicates that the nation is a net lender to the rest of the world, while a negative current account balance indicates that it is a net borrower from the rest of the world. A current account surplus increases a nation’s net foreign assets by the amount of the surplus, and a current account deficit decreases it by that amount.
Current Account Surplus
a positive difference between a nation’s savings and investment. A current account surplus indicates that a nation is a net lender to the rest of the world, in contrast to a current account deficit, which indicates that it is a net borrower.
Cyclical Downturn
in economics, a regularly occurring cycle of economic contraction.
Cyclical Expansion
in economics, a regularly occurring cycle of economic expansion.
Cyclically Adjusted Price to Earnings Ratio (CAPE)
a valuation measure defined as price divided by average inflation-adjusted earnings from the previous ten years. CAPE is calculated using a long-term earnings average in order to reduce the volatility of short-term earnings and medium-term business cycles, and therefore provide a more accurate measure of long-term earning power. CAPE is also known as Shiller P/E.
Dead Cat Bounce
a brief recovery in the price of a security that has been declining and is poised to decline further.
Decoupling
the divergence of asset class returns from their expected or normal pattern of correlation.
Deleveraging
the act of repaying debt, or the act of becoming less reliant on debt. (Sources: Seafarer and Barron’s Dictionary of Finance and Investment Terms, 1995)
Depreciation
a method of allocating the cost of a tangible asset over its useful life. Businesses depreciate long-term assets for both tax and accounting purposes.
Derivatives
a contract whose value is based on the performance of an underlying financial asset, index, or other investment.
Dilution
the effect on earnings per share and book value per share of the issuance of new shares, conversion of convertible securities, or exercise of warrants and stock options. Normally, dilution results in reduced earnings per share and book value.
Discount Rate
a financing rate that measures the prospective time value of money; it can also account for the risk or uncertainty associated with future cash flows. The discount rate is typically used in a discounted cash flow analysis to determine the present value of future cash flows: one dollar of cash flow further in the future (i.e., five years hence) is deemed to be worth less, in present-day terms, than one dollar of cash flow that is nearer in the future (i.e., three years hence); both of these future cash flows are deemed to be worth less still than one dollar of cash flows at the present time. The discount rate is applied to each future cash flow in order to make it comparable (financially equivalent) to a present-day cash flow, controlling for time, risk and uncertainty.
Distribution Yield
a measure of the sum of the Fund's income distributions during the trailing 380 days divided by the previous month's NAV (adjusted upward for any capital gains distributed over the same time period).
Dividend Yield (Trailing 12-Mo)
a measure of the sum of the dividends paid per share during the trailing 12 months divided by the current share price.
Down Market Capture (DMC)
a measure of the average extent to which a fund declined with its benchmark index, conditional upon months during which the index declined. A measurement of 100% indicates the fund declined in perfect tandem with the index.
Earnings Per Share (EPS)
the portion of a company’s profit allocated to each outstanding share of common stock. The figure is calculated after paying taxes and after paying preferred shareholders and bondholders. Earnings per share serves as an indicator of a company's profitability.
Earnings Per Share Growth (EPS Growth)
forecast growth rate of earnings per common share, based on consensus earnings estimates, expressed as a percentage.
EBIT

an acronym that refers to “Earnings Before Interest and Taxes.” It is calculated as follows:

EBIT = Operating Revenues Operating Expenses (excluding interest and taxes).

EBIT is sometimes referred to as “operating earnings” or “operating profit,” and it is often used as a basic measure of a company’s “core” profitability. EBIT cancels the effect of different capital structures on profitability: differing capital structures can give rise to differing levels of financial income and expense, and taxation. By referring to EBIT in lieu of net profits, investors might be in better position to gauge a firm’s “core” profitability, and to make cross-company comparisons.

EBITDA

an acronym that refers to “Earnings Before Interest, Taxes, Depreciation and Amortization.” It is calculated as follows:

EBITDA = Operating Revenues Operating Expenses (excluding interest, taxes, depreciation and amortization).

EBITDA is used as a very rough proxy for a company’s ability to produce gross cash flow (cash flow itself being a proxy for a company’s profitability). Analysts often utilize EBITDA because it is easy to calculate, and because it is fairly comparable from one company to another. EBITDA is a very superficial, basic measure, and consequently it might not always serve as an accurate guide to a company’s long-term profitability; however, one of its chief benefits is that it precludes many of the accounting and financial decisions that a company’s management might utilize to influence (or even distort) ordinary operating profits.

EBIT Margin
a measurement of a company's operating profitability. It is calculated as EBIT (Earnings Before Interest and Taxes) divided by operating revenues.
Enterprise Value (EV)
the aggregate value of a company as an enterprise. Enterprise value is equivalent to the sum of the capitalization of the company’s debt and its equity, less cash and cash equivalents. Enterprise value measures how much a potential acquirer would pay to take over the company.
Equity Float
the number of shares of a company that are outstanding and available for trading by the public. (Source: Barron’s Dictionary of Finance and Investment Terms, 1995)
Excess Return
investment returns from a security or portfolio that exceed a benchmark or index after controlling for systemic risk (beta). Excess returns are often used as a measure of the value added by a portfolio or investment manager, or the manager's ability to "beat the market.” Also known as alpha.
FANG
an acronym that refers to four prominent technology stocks in the U.S. market – Facebook, Amazon, Netflix, and Google (now Alphabet, Inc.) – that represent the growth and gains of the internet industry.
Financial Theory
the study of the various ways by which businesses raise capital and deploy it in various economic projects, how individuals and entities invest capital, and the risks associated with such activities.
Foreign Direct Investment (FDI)
investment in domestic businesses by foreign citizens.
Foreign Exchange (FX)
the exchange of one currency for another, or the conversion of one currency into another currency.
Foreign Ownership Limits (FOL)
the percentage share of companies’ equity capital that non-residents are allowed to hold. These limits are typically set by a regulator or arm of the government.
Fragile Five
a phrase used to describe the currencies of Brazil, India, Indonesia, South Africa and Turkey. The five were deemed susceptible to currency weakness for various reasons, mainly due to presumed dependency on foreign funding for their economic growth. The phrase was first coined by a currency analyst at Morgan Stanley in August of 2013. (Source: FX Pulse, Morgan Stanley Global Currency Research Team, August 1, 2013)
Free Cash Flow
operating cash flow minus capital expenditures.
Free Cash Flow Yield
a basic evaluation measure for a stock that examines the ratio of free cash flow per share to the share price. Some investors regard free cash flow (which takes into account capital expenditures and other ongoing costs a business incurs to keep itself running) as a more accurate representation of the returns shareholders receive from owning a business, and thus prefer free cash flow yield as a valuation metric over earnings yield.
Frontier Markets
countries with investable stock markets that are less established than those in the emerging markets. Frontier markets generally have lower market capitalizations and liquidity than the more developed emerging markets.
Fundamental Research
analysis of a company’s operations, financial condition and competitive status in order to estimate its market value, or in order to forecast its future financial or operating performance.
Fungible Operating Assets
operating assets that are mutually interchangeable.
GMO LLC
a privately held investment management company founded by British investor, Jeremy Grantham.
Gordon Growth Model
the Gordon growth model relates the value of a stock to its expected dividends in the next time period, using the cost of equity and the expected growth rate in dividends.
Gross Domestic Product (GDP)
a macroeconomic measure of the value of a country’s economic output. GDP includes only those goods and services produced domestically; it excludes goods and services produced abroad, even if such goods and services are produced by factors of production (i.e. companies) owned by the country in question.
Gross Domestic Product (GDP) Per Capita
a macroeconomic measure of the value of a country’s economic output, divided by the population of the same country. See “Gross Domestic Product (GDP)” for additional information.
Gross Portfolio Yield
gross yield for the underlying portfolio, estimated based on the dividend yield for common and preferred stocks and yield to maturity for bonds. This measure of yield does not account for offsetting Fund expenses and other costs, and consequently it should not be construed as the yield that an investor in the Fund would receive.
Guanxi
a Chinese term used to describe business or social relationships that may result in the exchange of favors or connections that are beneficial for the parties involved.
Harmonic Average
a harmonic average is the reciprocal of the arithmetic mean of the reciprocals. Harmonic averages are generally preferable to weighted averages or other techniques when measuring the fundamental characteristics (e.g., earnings per share, book value per share) of a portfolio of securities. For more information, see the presentation Index Calculation Primer, by Roger J. Bos, CFA, Senior Index Analyst at Standard & Poor's, 17 July 2000.
Hot Money
the term is most commonly used in financial markets to refer to the flow of funds (or capital) from one country to another in order to earn a short-term profit on interest rate differences and/or anticipated exchange rate shifts. These speculative capital flows are called “hot money” because they can move quickly in and out of markets, and often lead to market instability. (Source: Congressional Research Service Report for Congress, “China’s Hot Money Problems,” July 21, 2008)
Hukou System
the household registration system in China. Under this system a household registration record officially identifies a person as a resident of an area. Hukou defines a household’s civil, economic and legal rights within a given local municipality. It confers access (or lack thereof) to various government services, health care, education, housing and employment. If a family attempts to move from the countryside to the city, it will not necessarily be entitled to such services in the new urban residence because the family’s hukou remains tied to the original rural home. Ongoing reforms to the hukou system affect the pace of urbanization, the social fairness in the society, and the breadth and stability of growth within China.
Hyperinflation
hyperinflation occurs when a country experiences very high, accelerating, and possibly “unstoppable” rates of inflation. In such a condition, the general price level within an economy rapidly increases as the currency loses real value.
Interest Cover Ratio
the ratio of cash flow before payment of interest and income taxes to interest on bonds and other contractual debt.
Interest Rate Liberalization
the relaxation of regulations or rules that constrain banks and other financial institutions in their decisions to set interest rates. China has been engaged in interest rate liberalization since roughly 2010, when the central bank of that country began to give local banks greater freedom to set various lending and deposit rates.
International Geary-Khamis Dollar (1990)
a hypothetical unit of currency that has the same purchasing power parity that the U.S. dollar had in the United States in 1990. The Geary–Khamis Dollar, also known as the International Dollar, measures the worth of a local currency unit within the country's borders. It is used to make comparisons both between countries and over time. The year 1990 is often used as a benchmark year for comparisons that run through time. Comparing per capita gross domestic product (GDP) of various countries in Geary–Khamis Dollars, rather than based simply on exchange rates, provides a more valid measure to compare standards of living. The Geary–Khamis Dollar was proposed by Roy C. Geary in 1958 and developed by Salem Hanna Khamis between 1970 and 1972.
International Monetary Fund (IMF)
an organization of countries whose primary purpose is to ensure the stability of the international monetary system—the system of exchange rates and international payments that enables countries (and their citizens) to transact with each other. Created in 1945, the IMF is governed by and accountable to the countries that make up its near-global membership.
Intrinsic Value
the fair value of an asset (such as a company) based on a comprehensive estimate of all aspects of the asset, including both tangible and intangible factors. An asset’s intrinsic value may differ from its current market value. Typically, the intrinsic value of an asset cannot be observed with absolute certainty; often, it must be estimated with some error. As a consequence, it is possible for various market participants to hold differing perceptions of an asset’s intrinsic value. Value investors use a variety of analytical techniques in order to estimate the intrinsic value of securities in hopes of finding investments where the true value of the asset exceeds its current market value.
Leverage
the amount of debt capital used to finance a firm’s assets, usually considered or measured in relation to the firm’s equity capital.
Leverage Ratio
any one of several financial measurements that calculates how much of a company’s capital is in the form of debt (loans), or that assesses the ability of a company to meet its financial obligations.
Liquidation Value
the residual worth of a business upon its liquidation. Liquidation value is arrived at only after all assets are liquidated (i.e. sold, or otherwise converted to cash), and after all debts are paid off with the resulting proceeds. A company’s liquidation value may differ from its book value if the assets and liabilities are liquidated at values that differ from the accounting values carried on the company’s books.
Liquidity
the ability to buy or sell an asset readily and with reasonable volumes without affecting the asset’s price. (Sources: Seafarer and Barron’s Dictionary of Finance and Investment Terms, 1995)
Liquidity Trap
a situation in which short-term nominal interest rates are zero. In this case, many argue, increasing money in circulation has no effect on either output or prices. The liquidity trap is originally a Keynesian idea and was contrasted with the quantity theory of money, which maintains that prices and output are, roughly speaking, proportional to the money supply. (Source: New York Fed White Paper, “Liquidity Trap”)
Macroeconomics
analysis of a nation’s economy as a whole, using such aggregate data as price levels, unemployment, inflation and industrial output. (Source: Barron’s Dictionary of Finance and Investment Terms, 1995)
Market Capitalization
the value of a corporation as determined by the market price of its issued and outstanding common stock. It is calculated by multiplying the number of outstanding shares by the current market price of a share. (Source: Barron’s Dictionary of Finance and Investment Terms, 1995)
Market Capitalization of the Portfolio Median Dollar

Note: This statistic pertains only to portfolio holdings issued by publicly-listed corporate entities (i.e. it excludes cash, government bonds, and other asset classes not associated with corporate issuers).

In order to represent the Fund’s “median market capitalization,” Seafarer has chosen to present the capitalization of the holding associated with the median dollar in the portfolio rather than the capitalization of the median holding within the portfolio.

Some investors view the market capitalization of a company’s common stock as a general proxy for the liquidity of the company’s shares. Similarly, investors like to understand the market capitalizations of the holdings within a given portfolio of securities, as that information may provide insight into the liquidity available to the fund as a whole. Typically, fund investors study either the “weighted average market capitalization” or the “market capitalization of the median holding” as a means to quickly digest such information.

We prefer to display an alternative statistic – the market capitalization of the portfolio median dollar – because we believe it offers a more accurate representation of the liquidity available in the underlying portfolio.

To calculate this value, we rank the portfolio’s holdings by market capitalization, from largest to smallest. We then determine where the portfolio’s median dollar lies – i.e., the mid point of the portfolio, where half of the portfolio’s value is invested in larger companies, and half in smaller companies. Once that median dollar has been determined, we present the market capitalization of the company associated with it.

To see how this statistic is composed in practice, please see the example below.

CompanyWeightMarket Cap
A5% 100.0
B10% 30.0
C10% 10.0
D10% 7.0
E10% 4.0
F35% 2.0
G20% 1.0
 
Weighted average market capitalization:11.0
Market capitalization of the median holding:7.0
Market capitalization of the portfolio median dollar:2.0
Mergers and Acquisitions (M&A)
the consolidation of companies or assets. A merger is a combination of two companies to form a new company, while an acquisition is the purchase of one company by another in which no new company is formed.
Modern Portfolio Theory
a theory, first developed by Professor Harry Markowitz, of how risk-averse investors can construct portfolios to optimize or maximize expected return based on a given level of market risk (defined as variance in returns). The theory emphasizes that risk is an inherent part of higher reward; and also that an asset's risk and return should not be assessed by itself, but by how it contributes to a portfolio's overall risk and return.
Modified Duration
a measure of the sensitivity of a bond's price (the present value of its cash flows) to interest rate movements.
Moral Hazard
a situation where one party to a transaction has a financial incentive to incur extra risk because that party knows (or reasonably guesses) that its counterparty will incur the costs or burdens of such extra risks.
MSCI All Country World Index (ACWI)
a market capitalization weighted index designed to provide a broad measure of equity market performance throughout the world. The index is comprised of equities from both developed and emerging markets. It is not possible to invest directly in this or any index.
MSCI China Index
a free float-adjusted equity index that tracks large and mid capitalization companies across China H-shares, B-shares, Red chips and P chips. The Index does not include China A-shares. The Index represents common stock in Chinese companies that is available for investment by foreign (non-mainland China) investors. Index code: GDUETCF. It is not possible to invest directly in this or any index. (Source: MSCI and Bloomberg)
MSCI Emerging Markets Currency Index
an index that tracks the performance of emerging market currencies relative to the U.S. dollar.  The Currency Index measures the total returns of the currencies of countries in the corresponding MSCI equity index (i.e. MSCI Emerging Markets Index). Index code: MXEF0CX0. It is not possible to invest directly in this or any index.
MSCI Emerging Markets USD Total Return Index
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.
Net Asset Value (NAV)
a fund's net asset value per share; for an open-end mutual fund, the net asset value is equivalent to the fund's price per share. A fund's net asset value per share is calculated by summing the fund's assets (including portfolio securities and cash), netting off the fund's liabilities, and then dividing the residual balance by the number of fund shares outstanding.
Net Profit Margin
a ratio of profitability calculated as net income divided by revenues. It measures how much of each dollar earned by the company is translated into profits.
Nonfinancial Debt
the aggregate of debt owed by governments, households, and companies not in the financial sector.
North American Free Trade Agreement (NAFTA)
a comprehensive trade agreement established among the North American countries of Canada, Mexico, and the United States in 1994.
Operating Assets
the working assets that generate cash flow for a business.
Operating Cash Flow (OCF)

a measure of the cash generated by a company’s normal business operations. There are multiple means to calculate operating cash flow, but the “indirect method” can be summarized as follows:

OCF = Net Income + Non-Cash Expenses (Depreciation, Amortization) + Losses on Sales of Assets – Gains on Sales of Assets + Changes in Working Capital
Option Adjusted Spread (OAS)
a measurement of the spread of a fixed-income security rate and the risk-free rate of return, which is adjusted to take into account an embedded option.
Organization for Economic Co-operation and Development (OECD)
an intergovernmental economic organization that promotes policies to improve the economic and social well-being of people around the world. The OECD's origins date back to 1960, when 18 European countries plus the United States and Canada joined forces to create an organization dedicated to economic development. A list of the current OECD member countries is available at www.oecd.org.
Over the Counter (OTC)
a security that is not listed and traded on an organized exchange. In an over the counter market, securities transactions may be conducted through a dealer network. (Source: Barron’s Dictionary of Finance and Investment Terms, 1995)
Portfolio Turnover
a measure of how frequently assets within a portfolio are bought and sold. Measured as the lesser of long-term purchase costs or sales proceeds divided by the average monthly market value of long-term securities.
Price Discovery
a free market process by which consenting buyers and sellers discover the price at which they agree to exchange an asset.
Price to Book Value (P/BV) Ratio
the market price of a company’s common shares, divided by the company’s book value per share.
Price to Earnings (P/E) Ratio
the market price of a company’s common shares divided by the earnings per common share. The Price to Earnings ratio may use the earnings per common share reported for the prior year or forecast for this year or next year (based on consensus earnings estimates). (Source: Barron’s Dictionary of Finance and Investment Terms, 1995)
Privatization
a process of converting a publicly operated enterprise (i.e., government owned and operated) into a privately owned and operated entity. (Source: Barron’s Dictionary of Finance and Investment Terms, 1995)
Public Debt
the total financial obligations owed by all governmental bodies of a nation.
Public Private Partnerships
a government service or private business venture that is funded and operated through a partnership of government and one or more private sector companies.
Purchasing Power Parity (PPP)
currency conversion rates that both convert to a common currency and equalize the purchasing power of different currencies. In other words, they eliminate the differences in price levels between countries in the process of conversion. (Source: OECD)
Qualified Foreign Institutional Investor (QFII)
a program that permits certain licensed global international investors to participate in China’s renminbi-based mainland stock exchanges.
Quantitative Easing
the attempt by a central bank to inject more money into the economy and to keep long-term interest rates low through the purchase of large amounts of assets, often held by financial institutions. (Source: MITnews, “Explained: Quantitative Easing,” August 17, 2010)
Real Monetary Unit
a unit of value, tied to a specific currency (i.e. U.S. dollars), adjusted for price changes that result solely from inflation or deflation (as opposed to price changes that might arise from variation in the underlying quality or quantity of the good or service produced). Real monetary units are often indexed relative to the purchasing power associated with a currency unit in a given base year (i.e., the purchasing power associated with $1 in 1990). For an example of a real monetary unit, see International Geary-Khamis Dollar.
Renminbi (RMB)
the official currency of the People’s Republic of China. The name literally means "people's currency." The yuan (sign: ¥) is the basic unit of the renminbi, but is also used to refer to the Chinese currency generally, especially in international contexts.
Replacement Value
the cost to replace an older asset with another of similar productivity at present-day prices. (Source: Barron’s Dictionary of Finance and Investment Terms, 1995)
Retained Earnings
net profits kept to accumulate in a business after dividends are paid.
Return on Assets (ROA)
the ratio of annual net income to average total assets of a business during a financial year. Return on assets is one means to measure efficiency of a business in using its assets to generate net income. It is an indicator that simultaneously conveys productivity and profitability.
Return on Equity (ROE)

the amount of net income returned as a percentage of shareholders equity. Return on equity measures a company's profitability by revealing how much profit the company generates with the money shareholders have invested.

Return on equity is calculated as follows:

Return on Equity = Net Income / Shareholder's Equity
Return on Invested Capital (ROIC)
the amount, expressed as a percentage, earned on a company’s total capital – its common and preferred stock equity plus its long-term funded debt – calculated by dividing total capital into earnings before interest, taxes and dividends. (Source: Barron’s Dictionary of Finance and Investment Terms, 1995)
Risk-free Rate of Return
the theoretical rate of return of an investment with zero risk. The risk-free rate represents the interest an investor would expect from an absolutely risk-free investment over a specified period of time. In theory, the risk-free rate is the minimum return an investor expects for any investment because he will not accept additional risk unless the potential rate of return is greater than the risk-free rate. In practice, however, the risk-free rate does not exist because even the safest investments carry a very small amount of risk. Thus, the interest rate on a three-month U.S. Treasury bill is often used as the risk-free rate for U.S.-based investors.
R-Squared (R²)
a measure of the variance in the return of a security or portfolio that can be explained by movements in the overall market (or a proxy index). An R² of 1 indicates that the market’s (or index’s) movements entirely explain the variance in returns of the security or portfolio in question. An R² of zero indicates that the market’s movements explain no portion of the variance in returns of the security or portfolio.
Russell 2000 Index
an index that measures the performance of the small-cap segment of the U.S. equity universe. It includes the 2,000 smallest companies in the Russell 3000 Index. It is not possible to invest directly in this or any index.
S&P 500 Total Return Index
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.
Shadow Banks
financial intermediaries that conduct maturity, credit, and liquidity transformation without explicit access to central bank liquidity or public sector credit guarantees. Examples of shadow banks include finance companies, asset-backed commercial paper conduits, structured investment vehicles (SIVs), credit hedge funds, money market mutual funds, securities lenders, limited-purpose finance companies, and government-sponsored enterprises. (Source: Federal Reserve Bank of New York Staff Report, “Shadow Banking,” July 2010, revised February 2012)
Shanghai A-Share Index
a capitalization-weighted index that tracks the daily price performance of all A-shares and B-shares listed on the Shanghai Stock Exchange. Also known as the Shanghai Stock Exchange Composite Index. Index code: SHCOMP. It is not possible to invest directly in this or any index. (Source: Bloomberg)
Shanghai-Hong Kong Stock Connect
a trading link launched in 2014 that allows offshore, non-domestic-Chinese investors and entities to invest in certain Chinese-listed stocks (known as “A-shares”) that previously were inaccessible to such offshore investors.  Investment in A-shares via the Shanghai-Hong Kong Stock Connect occurs through a special mechanism that was designed and implemented by the Hong Kong Stock Exchange.
Sharpe Ratio
a ratio developed by Nobel Laureate William Sharpe to measure risk-adjusted performance. The Sharpe ratio is calculated by subtracting the risk-free rate - such as that of the 10-year U.S. Treasury bond - from the rate of return of a portfolio and dividing the result by the standard deviation of the portfolio returns. The higher a portfolio’s Sharpe ratio, the better the portfolio’s returns have been relative to the risk it has taken on. Because it uses standard deviation, the Sharpe ratio can be used to compare risk-adjusted returns across all fund categories.
Shenzhen A-Share Index
a capitalization-weighted index that tracks the stock performance of all A-shares and B-shares listed on the Shenzhen Stock Exchange. Also known as the Shenzhen Stock Exchange Composite Index. Index code: SZCOMP. It is not possible to invest directly in this or any index. (Source: Bloomberg)
Short Selling
the practice of borrowing securities in order to sell them shortly thereafter. The short seller’s intention is to speculate on a subsequent decline in the price of the security. The short seller might profit by repurchasing the same securities (“covering”) at a lower price, and then returning those securities to the original lender. Conversely, the short seller will incur a loss in the event that the price of a shorted instrument should rise prior to repurchase.
Special Drawing Rights (SDR)
an international reserve asset created by the International Monetary Fund in 1969 to supplement its member countries’ official reserves. SDRs can be exchanged for freely usable currencies. As of October 1, 2016, the value of the SDR is based on a basket of five major currencies — the U.S. dollar, Euro, Chinese renminbi, Japanese yen, and pound sterling.
Standard Deviation (Std Dev)
a measure of the dispersion of a set of data from its mean (i.e. spread of data). The more widely spread the data are, the higher the deviation. Standard deviation is calculated as the square root of variance. Standard deviation is applied to the annual rate of return of an investment to measure the investment's volatility. Standard deviation is also known as historical volatility and is sometimes used by investors as a gauge for the amount of expected volatility.
Stagflation
a term coined by economists in the 1970s to describe the previously unprecedented combination of slow economic growth and high unemployment (stagnation) with rising prices (inflation). (Source: Barron’s Dictionary of Finance and Investment Terms, 1995)
State-owned Enterprise (SOE)
a legal entity that is created by the government in order to participate in commercial activities on the government's behalf. A state-owned enterprise can be either wholly or partially owned by a government.
Statistical Theory
the practice or science of collecting and analyzing numerical data in large quantities, especially for the purpose of inferring proportions in a whole from those in a representative sample. The Central Limit Theorem (CLT) is a critical theorem within the general body of statistics. The CLT states that, given certain conditions, the arithmetic mean of a sufficiently large number of iterates of independent random variables, each with a well-defined expected value and well-defined variance, will be approximately normally distributed, regardless of the underlying distribution.
Stock Market Capitalization Per Capita
the total market value of all publicly listed stocks in a given country, divided by the population of that country.
Supply Chain Management
the active management of the flow of goods and services from point of origin to point of consumption. Supply chain management involves efficiently coordinating and integrating the process both within and among companies.
Tenor
the length of time until a loan or a bond is due. For example, a loan is taken out with a two year tenor. After one year passes, the tenor of the loan is one year.
10-Year US $ Rate (benchmark issuance)
the yield on the benchmark 10 year USD denominated sovereign issuance; a good proxy for the borrowing costs of a nation.
30-Day SEC Yield
a standard yield calculation developed by the Securities and Exchange Commission (SEC). It represents net investment income earned by the Fund over a 30-day period, expressed as an annual percentage rate based on the Fund’s share price at the end of the 30-day period. The 30-Day Yield should be regarded as an estimate of the Fund’s rate of investment income, and it may not equal the Fund’s actual income distribution rate.
Total Return Rate
when measuring performance of an investment or index, the total return includes interest, dividends, distributions and capital gains realized over a given period of time.
Trademark Value
the worth generated from a distinctive name, symbol, motto, or emblem that identifies a product, service or firm. (Source: Barron’s Dictionary of Finance and Investment Terms, 1995)
Treasury Yield
the return on investment, expressed as a percentage, on the U.S. government's debt obligations (bonds, notes and bills). In other words, the Treasury yield is the interest rate the U.S. government pays to borrow money for different lengths of time.
Up Market Capture (UMC)
a measure of the average extent to which a fund rose with its benchmark index, conditional upon months during which the index rose. A measurement of 100% indicates the fund rose in perfect tandem with the index.
Value Trap
a potentially attractive investment within the guidelines of value investing but one with mitigating (and often unforeseen) factors that may negatively impact its expected performance.
Weighted Average Market Capitalization of Issuer
the average market capitalization of issuers of Fund holdings, weighted in proportion to their percentage of net assets in the Fund.
Working Capital (WC)
funds invested in a company’s cash, accounts receivable, inventory and other current assets, minus current liabilities. (Source: Barron’s Dictionary of Finance and Investment Terms, 1995)
Yield to Maturity (YTM)
a concept used to determine the rate of return an investor will receive if a long-term, interest-bearing investment, such as a bond, is held to its maturity date. It takes into account purchase price, redemption value, time to maturity, coupon yield, and the time between interest payments. Recognizing time value of money, it is the discount rate at which the present value to all future payments would equal the present price of the bond, also known as internal rate of return. (Source: Barron’s Dictionary of Finance and Investment Terms, 1995)