Overview

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 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.

Sources: ALPS Fund Services, Inc., Bloomberg, Morningstar, Seafarer.

Portfolio holdings are subject to change.

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 1.05%, 1.15%, and 1.35% of the Fund’s average daily net assets for the Institutional, Investor, and Retail share classes, respectively. This agreement shall continue at least through August 31, 2025.
2. The 12b-1 Fee is included in the Gross Expense Ratio for SFGRX.
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. Calculated as a harmonic average of the underlying portfolio holdings.
5. Based on consensus earnings estimates for next year. Excludes securities for which consensus earnings estimates are not available.
6. © Morningstar, Inc. All rights reserved. The Active Share data is proprietary to Morningstar and/or its content providers; may not be copied or distributed; and is not warranted to be accurate, complete, or timely. Neither Morningstar nor its content providers are responsible for any damages or losses arising from any use of this information. Past performance is no guarantee of future results.

Performance

• Total Returns
• Return Characteristics

Total Returns

As of (Prior Month)

43	NAV / Index Level ()					Annualized					Cumulative	Inception Date	Net Expense Ratio2	Gross Expense Ratio2
		YTD	1 Mo	3 Mo	1 Yr	3 Yr	5 Yr	7 Yr	10 Yr	Since Inception1	Since Inception1

As of (Prior Quarter)

43	NAV / Index Level ()					Annualized					Cumulative	Inception Date	Net Expense Ratio2	Gross Expense Ratio2
		YTD	1 Mo	3 Mo	1 Yr	3 Yr	5 Yr	7 Yr	10 Yr	Since Inception1	Since Inception1

The rates of return are hypothetical and do not represent the returns of any particular investment.

Fund performance is presented in U.S. dollar terms, with U.S. jurisdiction distributions reinvested on a gross (pre-tax) basis. For the Bloomberg and Morningstar indices, performance is calculated to reflect the reinvestment of dividends, capital gains, and other corporate actions net of foreign jurisdiction withholding taxes. 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.

1. “Since Inception” returns for the Bloomberg and Morningstar indices are as of the inception date of the Fund’s Institutional and Investor share classes.
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 1.05%, 1.15%, and 1.35% of the Fund’s average daily net assets for the Institutional, Investor, and Retail share classes, respectively. This agreement shall continue at least through August 31, 2025.
3. Source: Bloomberg Index Services Limited. BLOOMBERG® is a trademark and service mark of Bloomberg Finance L.P. and its affiliates (collectively “Bloomberg”). Bloomberg or Bloomberg’s licensors own all proprietary rights in the Bloomberg Indices. Neither Bloomberg nor Bloomberg’s licensors approves or endorses this material, or guarantees the accuracy or completeness of any information herein, or makes any warranty, express or implied, as to the results to be obtained therefrom and, to the maximum extent allowed by law, neither shall have any liability or responsibility for injury or damages arising in connection therewith.
4. The Seafarer Funds are not sponsored, endorsed, sold, or promoted by Morningstar, Inc. Morningstar, Inc. makes no representation or warranty, express or implied, to the shareholders of the Funds or any member of the public regarding the advisability of investing in the Funds or the ability of the Morningstar Emerging Markets Net Return U.S. Dollar Index to track general equity market performance of emerging markets.
5. 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.
6. © Morningstar, Inc. All rights reserved. The data in the Return Characteristics table is proprietary to Morningstar and/or its content providers; may not be copied or distributed; and is not warranted to be accurate, complete, or timely. Neither Morningstar nor its content providers are responsible for any damages or losses arising from any use of this information. Past performance is no guarantee of future results.

Composition

30-Day SEC Yield: ()

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.

Due to rounding, percentage values may not sum to 100%. Values less than 0.5% may be rounded to 0%.

1. The Fund has two distinct holdings in the stock of Samsung Electronics: a position in the company’s preferred shares and a position in the company’s ordinary common shares. While the two securities are distinct (different prices, different dividends, etc.), if the two securities were aggregated, Samsung Electronics would comprise the second largest holding in the Fund as of 9/30/24.

2. The Growth and Income Fund selects a range of securities by employing distinct research capabilities across three investment styles.

   Style	Characteristics of Holdings
   Balanced	Moderately underappreciated growth	Typically moderately elevated current yield
   Growth	Higher growth potential	Typically lower current yield; sometimes no yield (dividend policy not yet established)
   Value	Lower growth potential	Typically higher current yield; sometimes no yield (dividends canceled under financial stress)

   Please note that the classification of a given security within one of three investment styles (Balanced, Growth, Value) is not driven by observable security characteristics (e.g., price/earnings or price/book ratios, or estimated growth rates) but rather by the specialist Seafarer research team that discovered, researched, and introduced the security to the portfolio. In other words, the provenance of the security's introduction to the portfolio determines its classification rather than any observable characteristics or descriptive statistics. A security's characteristics might change or fluctuate over time, but its “style” will typically remain fixed throughout.

3. Yield = dividend yield for common and preferred stocks and yield to maturity for bonds.
4. Based on consensus earnings estimates for next year.
5. Calculated as a harmonic average of the underlying portfolio holdings.
6. Based on consensus earnings estimates. Excludes securities for which consensus earnings estimates are not available.

Distributions

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

Past performance is no guarantee of future results. There is no guarantee that the Fund will pay or continue to pay distributions.

Portfolio Review

During the third quarter of 2024, the Seafarer Overseas Growth and Income Fund returned 7.25%.¹² The Fund’s benchmark indices, the Bloomberg Emerging Markets Large, Mid, and Small Cap Net Return USD Index and the Morningstar Emerging Markets Net Return USD Index, returned 9.62% and 8.06%, respectively. By way of broader comparison, the S&P 500 Index returned 5.89%.

The Fund began the quarter with a net asset value of $12.13 per share. It paid no distributions during the quarter and finished the quarter with a value of $13.01 per share.³

Performance

The markets’ movements during the third quarter were divided into two distinct periods: all that occurred prior to September 24th, and everything that occurred afterward.

Between the end of June and September 23rd, emerging market equities vacillated, ultimately producing modest gains⁴. The Bloomberg benchmark’s performance during this period was driven by some of the same stocks that had performed well during the preceding two quarters (namely Indian shares, and some semiconductor stocks benefiting from demand for chipsets that enable artificial intelligence (AI)) and also banking stocks (ostensibly, investors favored banking shares based on the perception that falling interest rates would stimulate credit growth and rising earnings). China’s stocks weighed on the Bloomberg benchmark’s returns during the same period, much the same as they had done in the first half of the year.

Everything changed radically on September 24th. China’s central bank (the People’s Bank of China (PBOC)) held a conference to announce a raft of new policies to bolster monetary policy, financial liquidity and credit growth. Pan Gongsheng, the Bank’s Governor, announced that the PBOC would cut interest rates; induce banks to lower mortgage charges; relax other restrictions that hampered transaction activity in housing markets; cut banks’ required reserves to facilitate new lending; and introduce new swap and lending programs to inject liquidity into China’s capital markets.⁵ Investors cheered as the central bank finally appeared ready to combat the deflationary trends that had corroded economic performance over the preceding year.

Two days later, on the 26th, the country’s Politburo — which constitutes the highest echelon of China’s government — held a similar conference to announce a set of policies and fiscal measures intended to stabilize the country’s moribund property markets, restructure problematic government debts, promote private enterprise and stimulate consumption among households. Chinese stocks soared dramatically in response. Investors, desperate for positive news, perceived these two conferences from different portions of China’s officialdom as a signal that China’s leadership was at last resolved to tackle economic stagnation. Between September 23rd and 30th, the CSI 300 Index (a prominent A-share index that combines stocks from the Shanghai and Shenzhen exchanges) rose 25.7%, and the Bloomberg China Equity Index (which includes both A-shares and China stocks listed in Hong Kong) rose 23.5%.⁴ The Fund’s Bloomberg Emerging Markets benchmark rose 7.1% during this week, and finished the quarter up 9.6%, as noted above.⁴

The Growth and Income Fund’s performance was likewise divided into two distinct periods. Between the end of June and September 23rd, the Fund posted steady gains, rising approximately 6.0%.⁴ While I am always reluctant to attribute short-term stock performance to a definitive explanation — there is far too much “noise” in price movements to do so with certainty — it seemed that the Fund’s gains were fueled by performance in corporate earnings. Most of the Fund’s underlying holdings reported strong results at the end of the second quarter, and it seemed stock markets pushed share prices for the Fund’s holdings higher in response. At that point in the quarter, the Fund was handily outperforming its Bloomberg benchmark, up 6.0% and 2.3%, respectively.⁴

Yet after the twin announcements from China on September 24th and 26th, the Bloomberg benchmark rapidly gained and eclipsed the Fund’s performance in the final week of the quarter, finishing up 7.1% for the week, and 9.6% for the quarter, as noted above. Both the Fund and its benchmark profited from their holdings in China, but the benchmark’s greater allocation to China shares ensured its outperformance in the final days of the period.

Though the Fund was eclipsed by its benchmark in a dramatic final week, it was a positive quarter overall, with substantial gains underpinned by a wide variety of the Fund’s holdings. One of the top performing positions was Samsung Biologics (Samsung Bio), a global leader in the contract manufacture of biological therapies. Samsung Bio’s share price rose during the period apparently because of strong earnings and because it had executed successfully a large-scale expansion in its capacity.

Meanwhile, a number of financial services companies also contributed to Fund performance: Singapore Exchange (Singapore’s stock exchange); Bank Central Asia (a leading bank in Indonesia); Sanlam (one of South Africa’s largest insurers, with both life and property and casualty lines); and DBS Group (Singapore’s largest bank, with a burgeoning wealth management business). Those companies’ shares presumably rose due to declining interest rates; but more importantly, all have reported impressive growth and profitability. Indeed, this was the “theme” for the Fund during the quarter, more important than any country or sector-driven effect: earnings performance for most holdings was quite strong.

The primary exception to this theme was Samsung Electronics (SEC), a long-time constituent of the Fund, and one of its largest holdings.⁶ SEC’s results are sharply better in 2024 than the previous year, but this is mainly because 2023 was a poor year, not because profitability in the present year is particularly strong. The company’s semiconductor division has struggled to prove its merit within the rapidly growing niches associated with AI. Though the company has been a dominant producer of chips in the past, some observers fear the company has “lost a step” relative to its competition and might not capture enough of the burgeoning market opportunity. The shares corrected steeply during the quarter as a result. I share this concern, yet at this time I remain confident that the company’s capabilities and operations are strong enough to recover in the coming quarters, and the company should be able to win substantial share in the lucrative market that has so far eluded it. In the meantime, the rest of SEC’s operations remain healthy and profitable – it produces a wide variety of consumer goods and electronics – and the company enjoys enormous financial resources (nearly $61 billion in cash holdings, net of debt, as of quarter end) that it can deploy in its pursuit of AI-linked opportunities. At its current valuation, $278 billion, it remains attractively priced with a good deal of potential to recover, and thus it remains for now a significant holding in the Fund.⁷

Allocation

The Fund added one position and deleted one position during the quarter.

The Fund added a position in Vietnam Dairy Products, otherwise known as “Vinamilk,” Vietnam’s leading dairy and consumer product company. The company is reputed as having developed the formal dairy industry in Vietnam over the past four decades, promoting milk, yogurt and formula products. Historically, the company has managed to secure an outsized market share of the dairy products industry and has enjoyed the lion’s share of the industry’s growth.

However, over the past three years the dairy industry’s growth has decelerated, as the economic repercussions of the global pandemic and inflation have crimped spending among Vietnamese households. Meanwhile the company’s growth has stalled out entirely, as heightened competition has taken a toll. Smaller, nimble upstart companies have vied for wealthier households with innovative, high-end and organic products. Vinamilk’s market share declined marginally as a result, and the company’s shares dropped lower in response.

I have added the company to the portfolio because our research indicates that after a period of stagnation, the company is revising its products, branding and distribution to fend off this heightened competition. If successful, the company should be able to recapture some of the market share it ceded over the past few years — and its growth could accelerate further as the underlying market demand for dairy products recovers as Vietnam’s economy stabilizes. Vinamilk generates exceptional profit margins and cash flow, and the company’s profitability has been reflected in an elevated dividend (valued well above 5% of the company’s share price at the end of the quarter).⁴ Our research suggests that dividend could expand further as the company’s growth gets back on track, and as Vinamilk enters entirely new product categories such as packaged and cured meats.

Meanwhile, the Fund exited one long-held position, Bolsa Mexicana (Bolsa Mex) — Mexico’s leading stock exchange. Bolsa Mex had been a constituent of the Fund for nine years, and over that time, the company had performed remarkably well at diversifying and adapting its business to cope with stagnating equity market listings and volumes in Mexico. Mexico has not seen many new corporate listings in recent years, as successful firms tend to seek listings as depositary receipts in the U.S. Bolsa Mex used its advantages in clearing markets to add ancillary settlement services; and it launched a number of data products for traders, all of which offset weakness in its core business of facilitating equity trading — so much so that it paid a generous and rising dividend over the Fund’s holding period.⁴ However, the company’s growth opportunities seem to have petered out at last, and the Fund had reduced its holding in the stock over the past two years in response, finally exiting during the quarter.

As the Fund entered one position and likewise exited one position, its position count remained stable across the quarter: 52 holdings in total, representing 51 unique corporate issuers (the Fund simultaneously holds the common stock and the preferred stock of Samsung Electronics).

Outlook

At the end of the third quarter, emerging markets were awash with excitement (and a lot of unsubstantiated hype) about China’s stimulus program. As noted above, China’s combined monetary-fiscal stimulus caused stocks in China to skyrocket in a matter of days. Frankly, I do not recall witnessing such a pronounced, broad-based gain unfold in such a short span of time. Yet as I write this commentary a few weeks later, the “stimulus hype” has diminished, and China stocks have retraced a portion of their sudden gains.

Why has the excitement abated? The primary reason is that the Chinese government has mysteriously failed to provide meaningful detail behind most of the fiscal measures announced by the Politburo (by contrast, the PBOC’s monetary and credit measures were relatively detailed and clear). China’s current predicament is that monetary stimulus in the absence of clear fiscal support is ineffective.

Why has China’s government been unable to fill in the details behind its fiscal plans? Officials have offered a number of excuses, suggesting that policymaking is complicated, and that certain byzantine legal processes must be enacted before details can be announced. Such excuses ring hollow: China’s government is organized in a manner that allows for swift action, and historically it has acted decisively when required. Something is different about how China operates today; it is opaquer and more sclerotic than it once was. Investors should tread carefully in the absence of definitive information.

Still, I am optimistic about the stimulus package, however ill-defined it might be. I am optimistic because China’s government appears to understand that combined fiscal and monetary measures are necessary – neither is sufficient alone. Further, I am optimistic because the Politburo’s fiscal measures implicitly acknowledge the severity of the problem. For the past few years, the Xi administration has glossed over economic weakness, ignored liquidity and solvency problems in the banking system, and stifled the private sector. The government’s fiscal measures – vague as they may be – seem to indicate a change in tone, and a frank willingness to tackle such problems, even if the solutions are costly. While I remain skeptical the package is of sufficient scale to return the country to a high rate of growth, I suspect that it will avert the worst kind of economic and financial outcomes. Thus, even though China’s economic trajectory will remain unclear – even if some of the fiscal details are filled in later – the economy should recover a measure of stability and certainty.

For our team at Seafarer, this means that certain prospective investments in China might become feasible. We do not know – and even doubt – that China will recover robust growth. Yet over the past 18 months, we have rejected a handful of prospective investments because we lacked sufficient information about China’s domestic outlook, and how challenged it might become. If China’s stimulus program averts crisis, we will have a degree of certainty about the potential for “downside risk” that we lacked previously, and this might be enough to make some investment candidates more attractive.

In the meantime, as the world waits for more detail on China’s plans, we remain generally satisfied with the portfolio’s construction. Yes, it has been a difficult year for the Fund’s performance relative to benchmark indices. Yet the fundamentals of the underlying holdings appear robust: the Fund’s investment portfolio is on track to produce 14% growth in earnings this year, well above its long-term average of about 5%.⁸ Meanwhile, the Fund’s dividend yield is growing even faster than earnings: the Fund’s dividends appear poised to expand by nearly 17% due to dividend hikes among two-thirds of the portfolio constituents.⁹ The Fund’s holdings are projected to deliver a high rate of earnings growth next year, as well – approximately 15%.⁹

Markets might be fixed on certain “trends” or “themes” in the short term – whether it was AI in the first half of 2024, or China’s stimulus program in the third quarter – we believe what matters most over the long term is “the fundamentals,” whether companies are producing consistent and rising earnings that can be reflected in a consistent dividend to shareholders. We are pleased that the fundamentals for the Fund’s holdings are very healthy, and our experience suggests that stock prices follow the fundamentals over time.

Thank you for entrusting us with your capital and for your patience with us this year. We are privileged to serve as your investment adviser in the emerging markets.

For an overview of China’s stimulus announcements in September and October 2024, please view this Ask Seafarer post by Nicholas Borst: What Does China’s Stimulus Mean for its Economy?

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 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 September 30, 2024, securities mentioned in the portfolio review comprised the following weights in the Seafarer Overseas Growth and Income Fund: Samsung Biologics Co., Ltd. (3.3%), Singapore Exchange, Ltd. (3.1%), Bank Central Asia Tbk PT (2.9%), Sanlam, Ltd. (3.4%), DBS Group Holdings, Ltd. (2.5%), Samsung Electronics Co., Ltd. Pfd. (2.1%), Samsung Electronics Co., Ltd. (2.0%), and Vietnam Dairy Products JSC (1.2%). The Fund did not own shares in Bolsa Mexicana. View the Fund’s Top 10 Holdings. Holdings are subject to change.

Source: ALPS Fund Services, Inc.

Source: Bloomberg Index Services Limited. BLOOMBERG® is a trademark and service mark of Bloomberg Finance L.P. and its affiliates (collectively “Bloomberg”). Bloomberg or Bloomberg’s licensors own all proprietary rights in the Bloomberg Indices. Neither Bloomberg nor Bloomberg’s licensors approves or endorses this material, or guarantees the accuracy or completeness of any information herein, or makes any warranty, express or implied, as to the results to be obtained therefrom and, to the maximum extent allowed by law, neither shall have any liability or responsibility for injury or damages arising in connection therewith.

The Seafarer Funds are not sponsored, endorsed, sold, or promoted by Morningstar, Inc. Morningstar, Inc. makes no representation or warranty, express or implied, to the shareholders of the Funds or any member of the public regarding the advisability of investing in the Funds or the ability of the Morningstar Emerging Markets Net Return U.S. Dollar Index to track general equity market performance of emerging markets.

1. References to the “Fund” pertain to the Fund’s Institutional share class (ticker: SIGIX). The Investor share class (ticker: SFGIX) returned 7.22% during the quarter. The Retail share class (ticker: SFGRX) returned 1.73% between its inception on August 30, 2024 and the end of the quarter. All returns are measured inclusive of Fund distributions paid (in relation to Fund performance) or dividends paid (in relation to index performance), reinvested in full (exclusive of any U.S. taxation) on the pertinent ex-date.
2. 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.
3. The Fund’s Investor Share class began the quarter with a net asset value of $12.05 per share; and it finished the quarter with a value of $12.92 per share. The Fund’s Retail share class launched on August 30, 2024 with a net asset value of $12.70 per share, and it finished the quarter with a value of $12.92 per share.
4. Source: Bloomberg.
5. Woo, Ryan and Gao, Liangping. “China's Central Bank Unveils Most Aggressive Stimulus Since Pandemic.” Reuters, September 24, 2024.
6. The Growth and Income Fund has two distinct holdings in the stock of Samsung Electronics: a position in the company’s preferred shares and a position in the company’s ordinary common shares. While the two securities are distinct (different prices, different dividends, etc.), if the two securities were aggregated, Samsung Electronics would comprise the second largest holding in the Fund as of 9/30/24.
7. Source: Bloomberg. As of September 30, 2024.
8. Earnings forecasts based on consensus estimates available from Bloomberg. Sources: Bloomberg, Seafarer.
9. Sources: Bloomberg, Seafarer.