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SICAV

Emerging Europe Equity Fund

High-conviction fund invested in developing Europe.

ISIN LU0382934197 WKN A0RCF0

3YR Return Annualised
(View Total Returns)

Total Assets
(EUR)

7.14%
€7.6m

1YR Return
(View Total Returns)

Manager Tenure

12.52%
4yrs

Information Ratio
(5 Years)

Tracking Error
(5 Years)

-0.25
6.14%

Inception Date 11-Nov-2008

Performance figures calculated in EUR

Other Literature

30-Sep-2019 - Ulle Adamson, Portfolio Manager,
We maintain a long-term investment horizon and exposure to well-managed companies that we believe can generate solid, superior earnings growth over time. In Russia, we have confidence in the domestic companies that we own due to their specific market positioning or niche growth categories, while previous market weakness in the export sector has created some attractive buying opportunities. The improving commitment of state companies to the government’s desired pay-out ratio also provides solid dividend support for the market.
Ulle Adamson
Ulle Adamson, Portfolio Manager

Ulle Adamson is a portfolio manager in the Equity Division at T. Rowe Price. She is the portfolio manager for the Emerging Europe Equity Strategy. Ms. Adamson is a vice president and an Investment Advisory Committee member of the Emerging Markets Equity Strategy and Emerging Markets Discovery Equity Strategy. She is a vice president of T. Rowe Price Group, Inc. and T. Rowe Price International Ltd.

 

Strategy

Investment Objective

To increase the value of its shares, over the long term, through growth in the value of its investments. The fund invests mainly in a diversified portfolio of stocks of companies in the developing countries of Europe.

Investment Approach

  • Employ fundamental analysis to identify companies with sustainable above-market earnings growth rates.
  • Focus on franchise strength, management team quality, free cash flow, and financing/balance sheet structure.
  • Verify relative valuation appeal versus both local market and region.
  • Apply negative screening for macroeconomic and political factors to temper bottom-up enthusiasm for specific securities.

Portfolio Construction

  • Typically 30 - 60 stock portfolio.
  • Individual positions typically range from 0.50% to 10.00% — average position size of 2.00% to 3.00%.
  • Country and sector weights unconstrained.
  • Reserves typically range from 0% to 5%.

Performance (Class I)

Annualised Performance

  1 YR 3 YR
Annualised
5 YR
Annualised
10 YR
Annualised
Since Manager Inception
Annualised
Fund % 12.52% 7.14% 2.73% 3.41% 4.97%
Indicative Benchmark % 16.67% 11.83% 4.29% 4.15% 5.76%
Excess Return % -4.15% -4.69% -1.56% -0.74% -0.79%

Inception Date 11-Nov-2008

Manager Inception Date 31-Mar-2015

Indicative Benchmark: MSCI Emerging Markets Europe 10/40 Index Net

Data as of  30-Sep-2019

  1 YR 3 YR
Annualised
5 YR
Annualised
10 YR
Annualised
Fund % 12.52% 7.14% 2.73% 3.41%
Indicative Benchmark % 16.67% 11.83% 4.29% 4.15%
Excess Return % -4.15% -4.69% -1.56% -0.74%

Inception Date 11-Nov-2008

Indicative Benchmark: MSCI Emerging Markets Europe 10/40 Index Net

Data as of  30-Sep-2019

Performance figures calculated in EUR

Recent Performance

  Month to DateData as of 15-Oct-2019 Quarter to DateData as of 15-Oct-2019 Year to DateData as of 15-Oct-2019 1 MonthData as of 30-Sep-2019 3 MonthsData as of 30-Sep-2019
Fund % -1.76% -1.76% 17.93% 1.64% 0.39%
Indicative Benchmark % -1.22% -1.22% 20.21% 4.48% 1.81%
Excess Return % -0.54% -0.54% -2.28% -2.84% -1.42%

Inception Date 11-Nov-2008

Indicative Benchmark: MSCI Emerging Markets Europe 10/40 Index Net

Indicative Benchmark: MSCI Emerging Markets Europe 10/40 Index Net

Performance figures calculated in EUR

Past performance is not a reliable indicator of future performance.  Source for fund performance: T. Rowe Price. Fund performance is calculated using the official NAV with dividends reinvested, if any. The value of an investment and any income from it can go down as well as up. Investors may get back less than the amount invested. It will be affected by changes in the exchange rate between the base currency of the fund and the subscription currency, if different. Sales charges (up to a maximum of 5% for the A Class), taxes and other locally applied costs have not been deducted and if applicable, they will reduce the performance figures. 

Where the base currency of the fund differs from the share class currency, exchange rate movements may affect returns.

Returns shown with reinvestment of dividends after the deduction of withholding taxes. 

Effective 1 July 2018, the "net" version of the indicative benchmark replaced the "gross" version of the indicative benchmark. The "net" version of the indicative benchmark assumes the reinvestment of dividends after the deduction of withholding taxes applicable to the country where the dividend is paid; as such, the returns of the new benchmark are more representative of the returns experienced by investors in foreign issuers. Historical benchmark performance has been restated accordingly. 

30-Sep-2019 - Ulle Adamson, Portfolio Manager,
The MSCI Emerging Europe 10/40 Index gained ground in September in euro terms, with investor sentiment boosted by growing hopes of a resolution in U.S.-China trade relations. In an about turn from the previous month, Turkey was by far the strongest individual market. Turkish assets were supported not only by the improved global sentiment but also by supportive domestic economic data (including better-than-expected GDP and indications of slowing inflation). Enthusiasm was further bolstered by a substantial 325 basis point cut in the one-week repo auction rate by the country’s central bank, with the monetary policy committee acknowledging an improvement in the outlook for inflation. Against this backdrop, the portfolio’s significant underweights to Turkey held back relative returns. Stock selection within our Russian holdings also dragged on performance over the month. In particular, shares in Mail.Ru and Yandex continued to come under pressure following draft legislation, which proposes limiting foreign ownership in Russian information technology (IT) companies. These negatives were partially offset by good stock selection within Hungary as well as by our beneficial underweight to Poland.

Holdings

Total
Holdings
42
Largest Holding Gazprom 9.14% Was (30-Jun-2019) 8.24%
Other View Full Holdings Quarterly data as of 30-Sep-2019
Top 10 Holdings 60.26% View Top 10 Holdings Monthly data as of 30-Sep-2019

Largest Top Contributor^

Gazprom OAO
By 2.72%
% of fund 9.05%

Largest Top Detractor^

Mail.Ru
By -2.29%
% of fund 6.73%

^Absolute

Quarterly Data as of 30-Sep-2019

Top Purchase

Tatneft PJSC
4.45%
Was (30-Jun-2019) 0.92%

Top Sale

Novatek PJSC
6.20%
Was (30-Jun-2019) 7.18%

Quarterly Data as of 30-Sep-2019

31-Dec-2018 - Ulle Adamson, Portfolio Manager,

While the factors driving these markets are divergent (for example, the price of oil is important for Russia, while domestic politics is a key influence in Turkey), we maintain a long-term investment horizon and exposure to well-managed companies that we believe can generate solid, superior earnings growth over time. In our view, current valuations in the emerging Europe region are compelling, and our highly detailed research is helping us to identify a number of companies that we think have strong fundamentals; overall, it remains the region with the lowest valuations within the emerging markets universe.

We retain a marginal underweight to Russia, although this market continues to account for our largest position in absolute terms. We continue to have a large underweight to Turkey. We raised our underweight to Poland over the quarter. In terms of frontier market exposure, we retain positions in Romania and Georgia and increased our position in Kazakhstan. We sold out of our small position in Lithuania and opened a small position in Slovenia.

We Believe The Russian Economy Is Stabilizing And That Valuations Look Attractive

The Russian authorities have maintained tight fiscal and monetary policies and have adjusted the government budget to reflect revised oil price assumptions; we believe that this leaves the economy in a significantly more stable and defensive position. Overall, we believe that, assuming there is no severe deterioration in the picture on U.S. sanctions and the geopolitical environment, we may see a more stable backdrop in Russia, with the potential for a higher structural gross domestic product (GDP) growth rate from 2020 onward.

The Russian equity market continues to be attractively valued, in our view, and a number of good-quality companies are trading at substantial discounts to their fair value due to sanctions concerns. We are finding good stock-specific opportunities among internet and banking names, while selected energy and mining stocks offer high dividend yields. We retain a small underweight to this market, although it continues to account for the portfolio's largest position in absolute terms.

During the quarter, we decreased our position in Russian food retailers; we eliminated our holding in Lenta and reduced our position in X5. We have concerns about the potential for tougher competition for these companies and are finding better investment opportunities elsewhere. We topped up our position in internet company Yandex. Speculation that Sberbank was looking to take a significant stake in the company weighed on the shares; we view this speculation as unfounded and took advantage of the weaker share price to increase our position in the name.

We Are Expecting Challenging Macro Conditions In Turkey But Have Identified A Few Stock Opportunities

We retain a large underweight to Turkey. The level of U.S. dollar-denominated debt here remains problematic, in our view, and we believe the country needs to go through a difficult period of adjustment. We expect economic conditions in Turkey to weaken against this background. Having said that, we have identified a few stock-specific opportunities in this market. For example, we hold food retailer BIM, which we view as a relatively defensive business. The company also remains well placed to gain market share.

Economic Backdrop In Central And Eastern Europe Remains Generally Benign, In Our View

Economic conditions in central and Eastern Europe (CEE) remain healthy. The region's economies are generally performing well, with low levels of unemployment and continuing wage growth. Inflation is also low, and as a result, we would expect the pace of monetary policy tightening to be slow.

Poland accounts for our largest position among the CEE markets in absolute terms, although we increased the size of our underweight due to stock-specific factors. The portfolio also retains a substantial position in Romania (this market is not included in the portfolio's benchmark index, however, as it is classified as a frontier market), while we also have exposure to markets including Hungary and the Czech Republic.

In Poland, we eliminated our holding in PZU Group (a Polish state-owned financial services firm) during the quarter as we have a lower level of conviction in the stock. We also reduced our position in residential and commercial property company Dom Development; while we believe it offers an attractive level of dividend yield, the stock has a relatively low level of liquidity. In Romania, one of our largest holdings is in banking name BRD, which has a strong domestic franchise and which we expect to benefit from continued healthy domestic GDP growth. We trimmed our holding over the quarter, however, with a view to managing the position size.

Portfolio Has Off-Index Exposure To Several Frontier Markets Due To Growth And Diversification Benefits

The portfolio has off-benchmark exposure to a number of frontier markets including Kazakhstan, Georgia, and Croatia (as well as Romania, as mentioned above), as we believe these markets offer long-term growth potential and diversification benefits.

Over the period, we increased our position in Kazakhstan, where we purchased a holding in uranium producer Kazatomprom. The firm is a low-cost operator, and while uranium sentiment remains low, we believe that there may be scope for the price to rise over time. We expect the company to generate a high level of free cash flow and dividend yield.

We also eliminated a small position in Lithuania and opened a small position in Slovenia during the period for stock-specific reasons. We switched out of Lithuanian banking stock Siauliu Bankas and into Slovenian bank Nova Ljubljanska. We believe the latter has a substantially more attractive valuation and more near- and medium-term catalysts, as the bank has the potential to write back provisions and return to growth; also, in our view, the dividend yield is significantly more supportive.

Sectors

Total
Sectors
10
Largest Sector Financials 30.67% Was (31-Aug-2019) 30.90%
Other View complete Sector Diversification

Monthly Data as of 30-Sep-2019

Indicative Benchmark: MSCI Emerging Markets Europe 10/40 Index

Top Contributor^

Materials
Net Contribution 0.66%
Sector
-0.07%
Selection 0.73%

Top Detractor^

Communication Services
Net Contribution -1.24%
Sector
-0.19%
Selection
-1.05%

^Relative

Quarterly Data as of 30-Sep-2019

Largest Overweight

Communication Services
By8.59%
Fund 14.07%
Indicative Benchmark 5.48%

Largest Underweight

Energy
By-9.53%
Fund 30.66%
Indicative Benchmark 40.19%

Monthly Data as of 30-Sep-2019

30-Sep-2019 - Ulle Adamson, Portfolio Manager,
We made no significant changes to sector positioning over the course of September. The portfolio’s main sector relative overweights remain communication services and, to a lesser extent, IT, and financials. By contrast, we are underweight to both energy and materials. Within the consumer discretionary space, we added to our position in a children’s goods retailer in Greece, giving the portfolio more exposure to the country’s consumer recovery theme. Unemployment continues to fall in Greece and the new government is making a lot of effort to attract new investment into the country. GDP growth is also expected to improve noticeably next year.

Countries

Total
Countries
12
Largest Country Russia 60.66% Was (31-Aug-2019) 59.91%
Other View complete Country Diversification

Monthly Data as of 30-Sep-2019

Indicative Benchmark: MSCI Emerging Markets Europe 10/40 Index

Top Contributor^

Poland
Net Contribution 0.91%
Country
0.95%
Selection -0.04%

Top Detractor^

Russia
Net Contribution -1.75%
Country
0.02%
Selection
-1.77%

^Relative

Quarterly Data as of 30-Sep-2019

Largest Overweight

Kazakhstan
By4.76%
Fund 4.76%
Indicative Benchmark 0.00%

Largest Underweight

Poland
By-8.86%
Fund 8.68%
Indicative Benchmark 17.54%

Monthly Data as of 30-Sep-2019

30-Sep-2019 - Ulle Adamson, Portfolio Manager,
Our largest overweight position remains Kazakhstan while notable underweights include Poland, Turkey, and Greece. The largest absolute position is Russia, although we are only modestly overweight relative to the benchmark. In September, we moved to close our underweight position in a large Russian oil and gas company. In our view, the company has plenty of potential to either increase dividends or launch a share buyback programme. If that were to happen, it would provide a considerable lift to the stock price. This follows pressure on Russian state-owned enterprises to improve their corporate governance and return to shareholders.

Team (As of 31-Aug-2019)

Ulle Adamson

Ulle Adamson is a portfolio manager in the Equity Division at T. Rowe Price. She is the portfolio manager for the Emerging Europe Equity Strategy. Ms. Adamson is a vice president and an Investment Advisory Committee member of the Emerging Markets Equity Strategy and Emerging Markets Discovery Equity Strategy. She is a vice president of T. Rowe Price Group, Inc. and T. Rowe Price International Ltd.

Ms. Adamson has 16 years of investment experience, all of which have been at T. Rowe Price. She joined the firm in 2002.

Ms. Adamson earned an M.A. in digital media studies from Sussex University and a B.Sc. in economics and business administration from the Stockholm School of Economics in Riga. She also has earned the Chartered Financial Analyst designation. Ms. Adamson is fluent in Estonian and English and also speaks Russian and Portuguese.

  • Fund manager
    since
    2015
  • Years at
    T. Rowe Price
    16
  • Years investment
    experience
    16
Nick Beecroft

Nicholas Beecroft is a portfolio specialist in the Equity Division at T. Rowe Price, representing the firm's global equity strategies. He is a vice president of T. Rowe Price Group, Inc. and T. Rowe Price International Ltd.

Mr. Beecroft has 18 years of investment experience, 14 of which have been with T. Rowe Price. He joined the firm in London in 2005 and spent many years working with our emerging markets equity team. Mr. Beecroft has been based in Hong Kong since 2011. Prior to joining T. Rowe Price, he was an investment analyst at Mercer Investment Consulting.

Mr. Beecroft earned a B.A, with honours, in contemporary European studies from the University of Southampton. He also has earned the Chartered Financial Analyst designation.

  • Years at
    T. Rowe Price
    14
  • Years investment
    experience
    18
Kanwal Masood

Kanwal Masood is a portfolio specialist in the Equity Division at T. Rowe Price, covering the Middle East and Africa Equity and Emerging Europe Equity Strategies. She is an associate vice president of T. Rowe Price International Ltd.

Ms. Masood has 10 years of investment experience, all of which have been with T. Rowe Price. She joined the firm in 2007, covering the global and regional emerging market equity strategies as a portfolio analyst. Prior to joining T. Rowe Price, she was a product specialist at the London Stock Exchange.

Ms. Masood earned a B.Sc. with honours in mathematics and computer science from King's College London.

  • Years at
    T. Rowe Price
    12
  • Years investment
    experience
    12

Fee Schedule

Share Class Minimum Initial Investment and Holding Amount Minimum Subsequent Investment Minimum Redemption Amount Sales Charge (up to) Investment Management Fee (up to) Ongoing Charges
Class A €15,000 €100 €100 5.00% 190 basis points 2.07%
Class I €2,500,000 €100,000 €0 0.00% 100 basis points 1.10%

Please note that the Ongoing Charges figure is inclusive of the Investment Management Fee and is charged per annum.

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GIPS® Information

T. Rowe Price ("TRP") claims compliance with the Global Investment Performance Standards (GIPS®). TRP has been independently verified for the twenty one- year period ended June 30, 2017 by KPMG LLP. The verification report is available upon request. Verification assesses whether (1) the firm has complied with all the composite construction requirements of the GIPS standards on a firm-wide basis and (2) the firm's policies and procedures are designed to calculate and present performance in compliance with the GIPS standards. Verification does not ensure the accuracy of any specific composite presentation.

TRP is a U.S. investment management firm with various investment advisers registered with the U.S. Securities and Exchange Commission, the U.K. Financial Conduct Authority, and other regulatory bodies in various countries and holds itself out as such to potential clients for GIPS purposes. TRP further defines itself under GIPS as a discretionary investment manager providing services primarily to institutional clients with regard to various mandates, which include U.S, international, and global strategies but excluding the services of the Private Asset Management group.

A complete list and description of all of the Firm's composites and/or a presentation that adheres to the GIPS® standards are available upon request. Additional information regarding the firm's policies and procedures for calculating and reporting performance results is available upon request

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