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GIPS® Information

T. Rowe Price ("TRP") claims compliance with the Global Investment Performance Standards (GIPS®) and has prepared and presented this report in compliance with the GIPS standards. T. Rowe Price has been independently verified for the twenty four-year period ended June 30, 2020, by KPMG LLP. The verification report is available upon request. A firm that claims compliance with the GIPS standards must establish policies and procedures for complying with all the applicable requirements of the GIPS standards. Verification provides assurance on whether the firm’s policies and procedures related to composite and pooled fund maintenance, as well as the calculation, presentation, and distribution of performance, have been designed in compliance with the GIPS standards and have been implemented on a firm-wide basis. Verification does not provide assurance on the accuracy of any specific performance report.

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SICAV

Emerging Markets Discovery Equity Fund

Formerly Emerging Markets Value Equity Fund

Utilises a contrarian approach to invest in undervalued emerging markets companies positioned to benefit from a re-rating thesis for change.

ISIN LU1244138340 Bloomberg TREMVEI:LX

3YR Return Annualised
(View Total Returns)

Total Assets
(USD)

8.75%
$177.6m

1YR Return
(View Total Returns)

Manager Tenure

59.18%
5yrs

Information Ratio
(5 Years)

Tracking Error
(5 Years)

0.08
6.06%

Inception Date 14-Sep-2015

Performance figures calculated in USD

31-Jan-2020 - Ernest Yeung, Portfolio Manager,
The coronavirus outbreak will likely weigh on emerging markets in the short term but we remain constructive about the medium- to long-term outlook. We believe economic activity will normalise and market volatility will ease with signs that the outbreak has been contained, aided by the Chinese government’s measures to support its economy. The “forgotten” stocks we own should keep pace with the broader market even as we see divergence between growth and value stocks.
Ernest C.  Yeung
Ernest C. Yeung, Portfolio Manager

Ernest Yeung is a portfolio manager for the Emerging Markets Discovery Equity Strategy at T. Rowe Price. He was the co-portfolio manager for the International Small-Cap Equity Strategies from 2009 to 2014. Mr. Yeung is a vice president of T. Rowe Price Group, Inc. and T. Rowe Price Hong Kong Limited.

Click for Manager Outlook
 

Strategy

Manager's Outlook

We remain constructive towards EM equities. As markets continue to price in the recovery period from the coronavirus pandemic, we believe this will continue to provide a favorable backdrop for value investing, barring any resurgence that may trigger harsh lockdowns. We continue to identify the cyclical winners and companies with idiosyncratic improvements that are likely to outperform as we emerge from the crisis.

We believe value can sustain its good recent performance provided economic growth continues to improve, helped by a shift in the deployment of stimulus measures by governments. In our view, governments are changing their stimulus efforts, veering away from traditional quantitative easing, and instead targeting the consumer directly. This structural change in stimulus policies should result in a more visible multiplier effect, which should benefit beaten down sectors and value stocks. We are closely monitoring stimulus efforts around the world and the acceleration in consumer demand amid tightness in supply among industries as they could bring further earnings surprises.

In addition to the stimulus efforts, we expect that the cyclical recovery in EM will be supported by household savings, the return of corporate capital expenditure and strong corporate fundamentals.

We think that the chances of accelerating inflation are high following the stimulus measures, but we think EM countries are better positioned because they have not overspent on fiscal and monetary measures. Hence, EM countries may be less stressed than their developed world counterparts.

On the geopolitical front, we remain watchful of the economic policies that the Biden administration is embarking upon. U.S. fiscal policy will have an impact on the value of the U.S. dollar against other currencies, which in turn has a considerable bearing on the performance of EM stock markets.

We continue to harness the deep insights and resources of our robust global research platform. It provides us with an information edge that is crucial in helping us to identify "forgotten" EM companies with solid improvement potential and limited downside risk.�

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 widely diversified portfolio of stocks of emerging market companies.

Investment Approach

  • Aim to exploit the valuation anomalies that arise across the diverse and inefficient emerging market opportunity set.
  • Employ a contrarian approach using fundamental research, quantitative screen and industry contacts to identify companies that are out of favour, undervalued and that offer an attractive risk and reward profile.
  • Minimize the risk of value traps by focusing on companies offering yield or a book value anchor to the valuation, and where we have identified re-rating thesis that can lead to an expansion in valuation over time.
  • Risk management is an integral part of the portfolio construction process.
  • Environmental, social and governance ("ESG") factors with particular focus on those considered most likely to have a material impact on the performance of the holdings or potential holdings in the funds’ portfolio are assessed. These ESG factors, which are incorporated into the investment process alongside financials, valuation, macro-economics and other factors, are components of the investment decision. Consequently, ESG factors are not the sole driver of an investment decision but are instead one of several important inputs considered during investment analysis.

Portfolio Construction

  • Typically 50-80 stock portfolio
  • Expected 4-8% tracking error
  • Individual position typically 0.5% to 5%, position sized by prospective risks
  • Country ranges +/-10% absolute deviation from the benchmark
  • Sector ranges +/-15% absolute deviation from the benchmark
  • Reserves are normally less than 5%, max 10%

Performance (Class I)

Annualised Performance

  1 YR 3 YR
Annualised
5 YR
Annualised
Since Inception
Annualised
Since Manager Inception
Annualised
Fund % 59.18% 8.75% 14.33% 12.33% 12.33%
Indicative Benchmark % 51.00% 9.65% 13.88% 12.26% 12.26%
Excess Return % 8.18% -0.90% 0.45% 0.07% 0.07%

Inception Date 14-Sep-2015

Manager Inception Date 14-Sep-2015

Indicative Benchmark: MSCI Emerging Markets Index Net

Data as of 31-May-2021

Performance figures calculated in USD

  1 YR 3 YR
Annualised
5 YR
Annualised
Since Inception
Annualised
Fund % 68.11% 6.27% 12.45% 11.91%
Indicative Benchmark % 58.39% 6.48% 12.07% 11.69%
Excess Return % 9.72% -0.21% 0.38% 0.22%

Inception Date 14-Sep-2015

Indicative Benchmark: MSCI Emerging Markets Index Net

Data as of 31-Mar-2021

Performance figures calculated in USD

Recent Performance

  Month to DateData as of 11-Jun-2021 Quarter to DateData as of 11-Jun-2021 Year to DateData as of 11-Jun-2021 1 MonthData as of 31-May-2021 3 MonthsData as of 31-May-2021
Fund % 0.93% 5.04% 14.02% 2.97% 5.66%
Indicative Benchmark % 0.51% 5.40% 7.81% 2.32% 3.28%
Excess Return % 0.42% -0.36% 6.21% 0.65% 2.38%

Inception Date 14-Sep-2015

Indicative Benchmark: MSCI Emerging Markets Index Net

Indicative Benchmark: MSCI Emerging Markets Index Net

Performance figures calculated in USD

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.

Index 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. 

31-May-2021 - Ernest Yeung, Portfolio Manager,
EM equities advanced in May and outperformed the MSCI World Index. The improving global economic outlook and a weaker U.S. dollar helped gains, offsetting inflation concerns. Within the fund, stock selection in Brazil contributed the most to the outperformance. Shares of Banco BTG Pactual outperformed following strong results. We believe the bank is executing well its decision to diversify into asset and wealth management businesses that have more predictable earnings. Our overweight allocation and stock choices in Hungary added further value. Owning OTP Bank, Hungary’s leading bank with a dominant retail franchise in the country, worked well for the fund. Its shares outperformed with the acquisition of Nova KBM, the second-biggest bank in Slovenia in terms of market share. We view the acquisition as incrementally positive. In contrast, stock selection in China hampered returns. Shares of JOYY, one of the largest video live streaming platforms in China, fell following sharp gains in the first quarter. In February, JOYY completed the sale of its domestic video live streaming business to Baidu, a dominant search engine in China, which is expected to turn its focus on international live streaming and short video.

Holdings

Total
Holdings
66
Largest Holding Samsung Electronics 5.23% Was (31-Dec-2020) 6.33%
Other View Full Holdings Quarterly data as of  31-Mar-2021
Top 10 Holdings 26.46% View Top 10 Holdings Monthly data as of  31-May-2021

Largest Top Contributor^

Hon Hai Precision Industry
By 0.32%
% of fund 2.73%

Largest Top Detractor^

Samsung Electronics
By -3.21%
% of fund 5.19%

^Absolute

Quarterly Data as of 31-Mar-2021

Top Purchase

Samsung Electronics
5.19%
Was (31-Dec-2020) 6.33%

Top Sale

Baidu
2.15%
Was (31-Dec-2020) 2.63%

Quarterly Data as of 31-Mar-2021

31-Mar-2021 - Ernest Yeung, Portfolio Manager,

We believe we are well positioned to benefit from a post-pandemic reflationary environment. We stand to gain from a market rotation away from technology and "stay-at-home" stocks that led the narrow market rally last year to those companies that will do well out of economies reopening. We found new investment opportunities within financials, where we have a substantial exposure.

In the quarter, we continued to position the portfolio in" forgotten" stocks particularly those that have undertaken "self-help" measures or those with restructuring stories that will enable them to thrive in a post-pandemic world.

The pandemic has prompted management teams of companies in EM to become more proactive in their restructuring efforts - cutting costs, selling assets, shifting capacity, and changing product mix.� Our research has enabled us to find opportunities among these companies.

We reduced our exposure to deep cyclical stocks, which we bought in the third quarter of 2020 to capture opportunities following the extreme divergence between value stocks and growth-oriented securities.

From a sector perspective, the portfolio had relative high exposure to industrials, financials, and materials in the quarter. At the country level, we had sizeable positions in Russia and Mexico, viewed as value markets with good exposure to commodities. In the quarter, however, we reduced our allocation to Brazil as the potential return of populist policies may hurt the prospects of the stocks we own. China remains our biggest absolute country position, but we have reduced our allocation as we locked in gains from old-economy Chinese stocks that have fared well over the last six months.

Despite the gains in value stocks, we believe there are still ample opportunities in EM for us to identify pockets of "forgotten" stocks with asymmetrical risk-return profiles, where fundamental changes or operational improvements may drive a rerating, while at the same there is potential downside support from strong balance sheets and healthy dividends.

Financials

We have a significant exposure to financials in absolute terms. Overall, the banking system in EM had exhibited an orderly response to the challenges posed by the pandemic. �We own EM banks that have good franchises and strong balance sheets while still fitting our investment framework. In the quarter, we purchased shares of well-managed banks which have yet to rerate. The portfolio also moved away from deep value cyclicals and hence our new positions in old-economy stocks such as banks.

  • We invested in Firstrand, one of the largest South African banks by assets with a comprehensive range of banking services. About 80% of its normalized earnings are from South Africa and the rest from the UK and the rest of Africa. We view Firstrand as one of the highest quality banks in EM and believe that its superior return-on-equity compared to its peers is sustainable in the medium term.
  • We preferred Firstrand to Sanlam, one of South Africa's largest insurers, which we exited in the quarter. The bulk of Sanlam's profits are generated in South Africa although the company has invested surplus capital in offshore mergers and acquisitions in Botswana, Malaysia, and India. We eliminated Sanlam as the company has started its investment cycle into IT systems and its new chief executive officer appears not to be fitting in with the existing management team.
  • We bought shares of the Bank of the Philippine Islands (BPI), a well-managed lender with a strong deposit franchise, that has been trading at a substantial discount versus its history. It has earmarked the most COVID-related provisioning and its digital transformation augurs well for the bank. The Philippines' equity market is the worst-performing in the Asia ex-Japan region in the quarter and has hardly participated in the gains brought about by a "COVID-off" market environment as the country struggles from protracted social distancing measures and a delayed vaccine rollout. However, we think the recovery will come through given the country's resilient economy with a young population.

Communication Services

We reduced our holdings in communication services where we have a modest absolute allocation. Given our preference for "forgotten" stocks with asymmetric risk/return profiles, we do not own the popular social media platforms as well as any media and entertainment stocks. Instead, we increased our position in cyclicals that will benefit from a "COVID-off", possibly higher interest rate market environment

  • In this space, our focus is on mostly interactive media stocks that were once out-of-favor due to company specific issues but now have potential further share price upside following self-help measures. For example, we like Baidu, which has undergone cost cuts and restructuring.
  • We sold our shares in PLDT, a leading telecommunications provider in the Philippines, as our investment thesis has played out. The company has increased its market share in the mobile business, a development that the market underappreciated, and increased its lead in broadband. In the Philippines, we switched our investments from a telecommunications company to a bank amid the "COVID-off" environment.

Consumer Discretionary

The portfolio has a sizeable exposure to the consumer discretionary in absolute terms. While we believe that consumer spending will increase as economies recover from the coronavirus, we expect that reopening of borders and the return of travel demand may vary across EM.

  • We eliminated Paradise, one of South Korea's largest casino operators that is heavily reliant on the reopening of international borders. We think Asia may lag other regions in the reopening of borders and South Korea in particular has been slow in securing vaccine volumes.

Industrials and Business Services

We have a relatively high exposure to industrials and business services. Within the sector, we favor machinery stocks with resilient free cash flow which may benefit from the pick-up in demand for container ships, infrastructure and mining projects as the pandemic dissipates. We own shares that will benefit from China's plans to accelerate renewable energy projects and stocks that will likely gain from the Indian commercial vehicle cycle recovery.

We hold transport infrastructure stocks such as toll road operators with strong cash generative businesses that are well-placed to benefit from a recovery in traffic and new projects.

  • We exited CCR, Brazil's largest infrastructure operator, which weakened relative returns in the quarter as shares lagged despite news that it won airport concessions in the center and south of Brazil. While we believe that CCR is well-placed to benefit from Brazil's structural needs for transport infrastructure in the medium to longer term, but it has disappointed us on the renewal of key concessions. We decided to eliminate the stock ahead of Brazil's general election next year which could bring more political uncertainty.

Consumer Staples

Consumer staples, where we have a modest exposure, was an area of opportunity for us. We own companies with idiosyncratic, stock-specific stories such as a Brazilian food producer with a deleveraging and restructuring story and a Chinese beer maker with an increased focus on profits and efficiency efforts. We have a core holding in a South Korean cosmetics company that we believe will benefit from the reopening of borders. It has also showed better revenue trends from its China business on the back of ecommerce sales.

  • We purchased shares of GRUMA, the world's largest corn flour and tortilla producer with operations mainly in the U.S. and Mexico. While the current elevated corn and wheat prices may affect the company's profitability, we think the effect is transitory. We like its highly resilient and cash-generative business with good profitability. Mexico-listed GRUMA is a hedge to a weaker Mexican peso as over 70% of its business comes from the U.S. and European Union.

Sectors

Total
Sectors
11
Largest Sector Financials 23.51% Was (30-Apr-2021) 22.28%
Other View complete Sector Diversification

Monthly Data as of 31-May-2021

Indicative Benchmark: MSCI Emerging Markets Index

Top Contributor^

Consumer Discretionary
Net Contribution 1.94%
Sector
0.43%
Selection 1.50%

Top Detractor^

Real Estate
Net Contribution -0.10%
Sector
-0.03%
Selection
-0.07%

^Relative

Quarterly Data as of 31-Mar-2021

Largest Overweight

Financials
By5.19%
Fund 23.51%
Indicative Benchmark 18.32%

Largest Underweight

Information Technology
By-7.70%
Fund 12.69%
Indicative Benchmark 20.39%

Monthly Data as of 31-May-2021

31-May-2021 - Ernest Yeung, Portfolio Manager,
We have a significant exposure to financials in absolute terms. Overall, the banking system in EM had exhibited an orderly response to the pandemic. We own EM banks that have good franchises and strong balance sheets. The selloff in financials earlier this year allowed us to upgrade to some quality names in China and India. For example, we have positions in well-managed banks which have yet to rerate. This includes South Africa’s FirstRand, one of the highest quality banks in EM, and the Bank of the Philippine Islands, a lender with a strong deposit franchise.

Countries

Total
Countries
18
Largest Country China 35.13% Was (30-Apr-2021) 35.53%
Other View complete Country Diversification

Monthly Data as of 31-May-2021

Indicative Benchmark: MSCI Emerging Markets Index

Top Contributor^

China
Net Contribution 3.72%
Country
0.27%
Selection 3.45%

Top Detractor^

Brazil
Net Contribution -0.37%
Country
-0.23%
Selection
-0.14%

^Relative

Quarterly Data as of 31-Mar-2021

Largest Overweight

Mexico
By3.42%
Fund 5.19%
Indicative Benchmark 1.77%

Largest Underweight

Taiwan
By-9.79%
Fund 3.96%
Indicative Benchmark 13.75%

Monthly Data as of 31-May-2021

31-May-2021 - Ernest Yeung, Portfolio Manager,
We are underweight in Brazil, which has been dragged down by domestic political concerns, worries about monetary policy tightening, a coronavirus variant, and a slow vaccination programme. Brazil was the first major economy to increase interest rates this year. We believe that the Brazilian market has lost its downside anchor as the authorities have failed to retain fiscal discipline. We are concerned about the currency downside risk and hence, took profits in some of our holdings such as an oil producer in the country.

Team (As of 10-Jun-2021)

Ernest C.  Yeung

Ernest Yeung is a portfolio manager for the Emerging Markets Discovery Equity Strategy at T. Rowe Price. He was the co-portfolio manager for the International Small-Cap Equity Strategies from 2009 to 2014. Mr. Yeung is a vice president of T. Rowe Price Group, Inc. and T. Rowe Price Hong Kong Limited.

Mr. Yeung has 17 years of investment experience, 15 of which have been with T. Rowe Price. Prior to joining the firm in 2003, he was an analyst with HSBC Asset Management in London.

Mr. Yeung earned an M.A., with honours, in economics from Cambridge University. He also has earned the Chartered Financial Analyst designation and the Investment Management Certificate. 

  • Fund manager
    since
    2015
  • Years at
    T. Rowe Price
    18
  • Years investment
    experience
    20
Nick Beecroft, CFA

Nick Beecroft is the APAC head of the Investment Specialist Group and a portfolio specialist in the Equity Division. He also is a vice president of T. Rowe Price Group, Inc., and T. Rowe Price International Ltd.

Nick’s investment experience began in 2001, and he has been with T. Rowe Price since 2005, beginning in the Equity Division. Prior to this, Nick was employed by Mercer Investment Consulting as an investment analyst.

Nick earned a B.A., with honors, in contemporary European studies from the University of Southampton. He also has earned the Chartered Financial Analyst® designation.

CFA® and Chartered Financial Analyst® are registered trademarks owned by CFA Institute.

  • Years at
    T. Rowe Price
    16
  • Years investment
    experience
    20

Fee Schedule

Share Class Minimum Initial Investment and Holding Amount (USD) Minimum Subsequent Investment (USD) Minimum Redemption Amount (USD) Sales Charge (up to) Investment Management Fee (up to) Ongoing Charges
Class A $1,000 $100 $100 5.00% 190 basis points 2.07%
Class I $2,500,000 $100,000 $0 0.00% 100 basis points 1.10%
Class Q $1,000 $100 $100 0.00% 100 basis points 1.17%

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