Seafarer Funds - Seafarer Overseas Growth and Income Fund

Glossary

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)

Basis point: a basis point is one one-hundredth of a percentage point (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. The Federal Reserve Board likes to use bps when referring to changes in the federal funds rate. (Source: FINRA)

Free cash flow: operating cash flow minus capital expenditures.

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)

Earnings Per Share Growth (EPS Growth): forecast growth rate of earnings per common share this year (or, if noted, next year), expressed as a percentage.

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.

Distribution Yield (Trailing 12-Mo): a measure of the sum of the Fund's income distributions during the trailing 12 months divided by the previous month's NAV (adjusted upward for any capital gains distributed over the same time period).

Gross Domestic Product (GDP): the value of total output actually produced in the whole economy over some period of time, usually a year, although quarterly data is also available. (Source: Richard G. Lipsey, Positive Economics, 1995)

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 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.

GMO LLC: a privately held investment management company founded by British investor, Jeremy Grantham.

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)

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”)

Market Capitalization of Portfolio Median

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 – 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.

Company	Weight	Market Cap
A	5%	100.0
B	10%	30.0
C	10%	10.0
D	10%	7.0
E	10%	4.0
F	35%	2.0
G	20%	1.0


Weighted average market capitalization:	11.0
Market capitalization of the median holding:	7.0
Market capitalization of the portfolio median:	2.0

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.

Price to Book Value (P/B) Ratio: the value of a company’s common shares, divided by the company’s book value. (Source: Stickney & Weil, Financial Accounting, Eighth Edition)

Price to Earnings (P/E) Ratio: the market price of a company’s common shares divided by the earnings per common share as forecast for this year. Alternatively, if noted, the Price to Earnings ratio may use the earnings per common share reported for the prior year or forecast for next year. (Source: Barron’s Dictionary of Finance and Investment Terms, 1995)

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)

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)

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.

Turnover: a measure of how frequently assets within a fund 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.

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.

Yield to Maturity (YTM): 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)