Seafarer Overseas Growth & Income Fund Inv Cl · NASDAQ:SFGIX
Seafarer Overseas Growth & Income Fund Inv Cl — Seafarer Capital Partners — Shareholder Conference Call (June 2014)
30 slides from Seafarer Overseas Growth & Income Fund Inv Cl's conference presentation, Jun 26, 2014
Slide 1: Shareholder Conference Call
Shareholder Conference Call Seafarer Capital Partners, LLC 26 June 2014
Slide 2: Disclosures
Disclosures ALPS Distributors, Inc. is the distributor for the Seafarer Overseas Growth and Income Fund. Michelle Foster and Kate Jaquet are Registered Representatives of ALPS Distributors, Inc. This material must be accompanied or preceded by a prospectus. View the Fund’s prospectus at www.seafarer
Slide 3: Agenda
Agenda 1. Fund Retrospective 2. Confronting China’s Great Wall of Worry 3. A Cross Section of the Seafarer Fund 4. Question and Answer Session 2
Slide 4: Fund Retrospective – The Past Six Months
Fund Retrospective – The Past Six Months Seafarer Overseas Growth and Income Fund! SIGIX Net Asset Value (NAV)! $12.50! (2/15/12 - 6/25/14)! 4th Distribution! 5th Distribution! 40.5¢!! 7.5¢!! $12.00! 2nd Distribution! 8.7¢!! $11.50! $40 million $11.00! 1st Expense AUM! Reduction! Launch:! $75 millio
Slide 5: Monthly Performance
Monthly Performance As of 31 May 2014 Total Return Total Return Since Inception NAV / Net Inception Index Level 1 Mo 3 Mo YTD 1 Yr Annualized Cumulative Expense Date (5/31/14) Ratio1 SFGIX (Investor Class) $11.75 1.47% 6.24% 3.52% 3.87% 10.04% 24.49% 2/15/12 1.40% SIGIX (Institutional Class) $11.76
Slide 6: Quarterly Performance
Quarterly Performance As of 31 March 2014 Total Return Total Return Since Inception NAV / Net Inception Index Level 1 Mo 3 Mo YTD 1 Yr Annualized Cumulative Expense Date (3/31/14) Ratio1 SFGIX (Investor Class) $11.42 3.25% 0.62% 0.62% 2.33% 9.39% 21.00% 2/15/12 1.40% SIGIX (Institutional Class) $11.
Slide 7: Agenda
Agenda 1. Fund Retrospective 2. Confronting China’s Great Wall of Worry 3. A Cross Section of the Seafarer Fund 4. Question and Answer Session 6
Slide 8: Obvious Bricks in the Great Wall of Worry
Obvious Bricks in the Great Wall of Worry “Bricks” in the What are most people Why are the worst fears unlikely to be realized? What does Seafarer think is most likely to happen instead? Wall worried about? • Non-performing loans (NPLs) are a small proportion of the banks’ • NPLs to rise at a rapid,
Slide 9: Shadow Banks: Relatively Small, Manageable?
Shadow Banks: Relatively Small, Manageable? Shadow Banks Shadow Bank Credit & Liabili5es As a Percentage of Total Broad Money Liabili5es Source: DSG Asia. Data from 2002 to 2014. 8
Slide 10: Shadow Banks ≈ Alternate Financial Channels
Shadow Banks ≈ Alternate Financial Channels Shadow Banks Absolute)Size)and)Rela1ve)Scale)of)Financial)Markets) China)vs.)U.S.) China&1&USD&$&TL& US&1&USD&$&TL& China%A%%%GDP% US%A%%%GDP% $7.6&& $18.7&& $38.0&& $4.8&& $36.0&& $10.7&& $3.7&& $3.4&& $1.2&& $0.4&& 240%% 230%% 128%% 118%% 48%% 44%% 41%%
Slide 11: The Cost of Private Sector Demands
with its own caveats (more discussion later). This state-dominated system overnment to exercise effective financial repression for three decades, old savings at low cost to facilitate a super-charged fixed asset investment The ofPrivate er, this model Sector financial Demands repression Capital now
Slide 12: Households Unlikely to Bust, But Strains Elsewhere
Households Unlikely to Bust, But Strains Elsewhere Real Estate Consolidated China Na5onal Balance Sheet Urban Residen5al Property Market Gross)Floorspace) Market)Value) Liabilities?to? 1 2 Sector Area)(GFA) BL)of)SQM RMB)TL Liabilities RMB)TL Market?Value Amount)purchased,) Households owned 8.5 49.7
Slide 13: Developers Under Pressure
Developers Under Pressure Real Estate Chinese Developers’ Debt Service Requirements Debt Debt%Service Minimum%Sales%Required%to%Service%Debt Debt%service 2.4 RMB%TL Domestic%bank%loans%&%mortgages 4.9 RMB%TL Avg%price%/%GFA 5,850 RMB%/%sqm Shadow%banks%&%off%balance%sheet 2.7 RMB%TL Weighted%avg%int
Slide 14: Overlooked Bricks in the Wall
Overlooked Bricks in the Wall “Overlooked bricks” What might go wrong? What does Seafarer think is most likely to happen? • Precariously stretched payment terms, across most industries • No clear resolution in sight in China – accounts receivable have swelled to worrisome • This may be a deliberate
Slide 15: Stretched Vendor Credit, Poor Cashflow
Stretched Vendor Credit, Poor Cashflow Payments System Days of Sales Receivable (DSR) All Listed Chinese Companies* (12/08 -‐ 3/14) Unweighted Average Weighted Average -‐ Market Cap 120 100 80 60 40 20 Dec-‐08 Dec-‐09 Dec-‐10 Dec-‐11 Dec-‐12 Dec-‐13 * Excludes companies for which there was i
Slide 16: Foreign Borrowing Rising, Slowly But Steadily
Foreign Borrowing Rising, Slowly But Steadily Currency Vola5lity China's Foreign Currency Balance Sheet InternaFonal claims = gross internaFonal securiFes outstanding + net bank borrowing [leP scale] Foreign reserves [leP scale] (Foreign reserves -‐ internaFonal claims) / GDP [right scale] 5,000 50
Slide 17: Peering Over the Wall of Worry
Peering Over the Wall of Worry Reforms Launched Under the Xi Administration • A substantial (but unfortunately not exhaustive) anti-corruption drive • Liberalization of the local currency and interest rates (“backdoor” reforms of the domestic banking sector) • Recapitalization of the domestic bankin
Slide 18: Agenda
Agenda 1. Fund Retrospective 2. Confronting China’s Great Wall of Worry 3. A Cross Section of the Seafarer Fund 4. Question and Answer Session 17
Slide 19: The Core Composition of the Fund
The Core Composition of the Fund Growth vs. Yield Holdings In the Seafarer Fund -‐ Excluding Outliers 7% Rela5ve Size of Bubble = Porcolio Weight (as of 5/31/14) 6% Linear Regression Fit MSCI Emerging Market Index 5% Seafarer Fund (Last 12 Months) Dividend Yield 4% 3% 2% 1% 0% -‐20% -‐10% 0% 10%
Slide 20: The Core Composition of the Fund
The Core Composition of the Fund Growth vs. Yield Holdings In the Seafarer Fund -‐ Excluding Outliers 7% Rela5ve Size of Bubble = Porcolio Weight (as of 5/31/14) 6% Linear Regression Fit MSCI Emerging Market Index 5% Seafarer Fund Recently Added Holdings Recently Deleted Holdings (Last 12 Months) D
Slide 21: The Core Composition of the Fund
The Core Composition of the Fund Growth vs. Yield Holdings In the Seafarer Fund -‐ Excluding Outliers 7% Rela5ve Size of Bubble = Porcolio Weight (as of 5/31/14) 6% Linear Regression Fit MSCI Emerging Market Index 5% Seafarer Fund (Last 12 Months) Dividend Yield 4% 3% 2% Samsung Electronics Preferr
Slide 22: The Core Composition of the Fund
The Core Composition of the Fund Growth vs. Yield Holdings In the Seafarer Fund -‐ Excluding Outliers 7% Rela5ve Size of Bubble = Porcolio Weight (as of 5/31/14) 6% Linear Regression Fit MSCI Emerging Market Index 5% Seafarer Fund Polska Grupa Energetyczna, S.A. (Last 12 Months) Dividend Yield 4% 3
Slide 23: The Core Composition of the Fund
The Core Composition of the Fund Growth vs. Yield Holdings In the Seafarer Fund -‐ Excluding Outliers 7% Rela5ve Size of Bubble = Porcolio Weight (as of 5/31/14) 6% Singapore Linear Regression Fit MSCI Emerging Market Index Telecom 5% Seafarer Fund (Last 12 Months) Dividend Yield 4% Core of Growth
Slide 24: The Research Process At Work
The Research Process At Work Success Rate: Contribu5on of Holdings to Performance As Measured During Holding Period Seafarer&Overseas&Growth&and&Income&Fund& MSCI%Emerging%Market%Index% (2/15/12&;&5/31/14)& (2/29/12%7%5/31/14)% Posi-ve!Contribu-on!to!Return! Zero!Contribu-on!to!Return! Nega-ve!Contr
Slide 25: Performance and Turnover
Performance and Turnover Seafarer Overseas Growth and Income Fund Performance of Holdings Contribu5on to Fund Return During Holding Period (2/15/12 -‐ 5/31/14) Held Sold 40 35 30 Number of Holdings 25 20 15 10 5 -‐ <-‐2.5% -‐2.5% to -‐2% -‐2% to -‐1.5% -‐1.5% to -‐1% -‐1% to -‐0.5% -‐0.5
Slide 26: Agenda
Agenda 1. Fund Retrospective 2. Confronting China’s Great Wall of Worry 3. A Cross Section of the Seafarer Fund 4. Question and Answer Session 25
Slide 27: Question and Answer Session
Question and Answer Session To submit a question, visit seafarerfunds.com, and select the “Submit a Question” link on the homepage. 26
Slide 28: Glossary
Glossary AUM Assets under management. Broad Money Refers to the most inclusive definition of the money supply. This measure includes more than just physical money such as currency and coins (also termed narrow money). It generally includes demand deposits at commercial banks, and any money held in e
Slide 29: Glossary, continued
Glossary, continued Legal person shares Legal person shares (sometimes called “C” shares) are special, restricted shares in Chinese state owned enterprises and joint-stock companies. Such shares are restricted to specific authorized holders (i.e. other government companies or institutions, or specif
Slide 30: seafarerfunds.com
s e a f a r e r f u n d s . c o m SEA000293 06/30/15
Seafarer Capital Partners — Shareholder Conference Call (June 2014) on 6ix